Global Blood Therapeutics Annual Report 2010

FY2010 Annual Report · Global Blood Therapeutics

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GBST Holdings Limited
Annual Report 2010

ANNUAL REPORT 2010

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

Auditor’s Independence Declaration

Financial Statements

Directors’ Declaration

Independent Auditor’s Report

Additional Information

Directors’ Report

Corporate Directory

Notice of AGM

GBST Holdings Limited (GBST) will hold its Annual General Meeting at 11.30 am (Brisbane Time) on the
21st of October 2010 at the ofﬁ ce of McCullough Robertson, Level 11, Central Plaza Two, 66 Eagle Street, Brisbane.

GBST HOLDINGS LIMITED ABN 85 010 488 874

The year in review

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Operating Revenue is net of COGS

Per 2010 Directors’ Report

GBST regained momentum and earnings increased as the effects
of the global ﬁ nancial crisis abated and conﬁ dence returned to the
ﬁ nancial services industry

Australian Broker Services revenues grew, supported by new client
wins and strong interest in the introduction of the next-generation
Syn platform to Australia and the new front ofﬁ ce solutions

While higher than expected research and development costs in the
Global Broker Services division led to a small loss, clients are now
‘live’ using Syn to process trades in Europe and a rapidly growing
number of Asian countries and a return to proﬁ tability is anticipated
in FY2011

The Wealth Management division won signiﬁ cant new clients in the
United Kingdom, where regulatory reform is driving transformation
of the ﬁ nancial services industry

GBST’s new retail front ofﬁ ce solution, which enables the company
to provide a more all-encompassing stockbroker platform, is now
being rolled out to all retail broker clients

Dividend payments resumed, and a fully franked dividend
of two cents per share will be paid on 30 September 2010

ANNUAL REPORT 2010
ANNUAL REPORT 2009
ANNUAL REPORT 2009

Chairman’s and
Managing Director’s report

Our markets are evolving, driven by increased
complexity and sophistication, global connectivity
and regulatory change. Convergence has led to
ﬁ nancial services ﬁ rms re-evaluating their market
strategies, creating opportunities for your company.

Mr John Puttick - Chairman

On behalf of the Directors of GBST, it gives us great pleasure
to present GBST’s ﬁ fth annual report to shareholders.

FY2010 was a year in which we re-established momentum
and emerged from the global ﬁ nancial crisis well placed to
take advantage of a growing ﬁ nancial services market.

GBST is a leader in ﬁ nancial technology, and our software
and infrastructure platforms support major institutional
banks and asset managers across Asia, Australia and
Europe. We have three divisions: 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 digital media and data
services for ﬁ nancial institutions.

Our business model is to earn recurring revenue through
participating in or having exposure to ﬁ nancial services
transaction processing, asset administration and asset
values.

After a difﬁ cult FY2009, conﬁ dence has returned to the
ﬁ nancial sector and, we believe, the present market
environment is conducive to GBST’s continued growth.
Our markets are evolving, driven by increased complexity
and sophistication, global connectivity and regulatory
change. Convergence has led to ﬁ nancial services ﬁ rms
re-evaluating their market strategies, creating opportunities
for your company.

Financial technology leadership

Developing robust platforms is one of GBST’s strengths.
Our focus on quality and innovation has ensured that, even
in hard times, our clients were supported by products and a
team they could trust. This strengthened GBST’s reputation
for technology leadership.

In Australia, the proportion of equities transactions cleared
by the GBST Shares platform is expected to grow beyond
the 47 per cent of ASX traded volume processed this year;
and GBST’s DCA platform processes over 70 per cent of
derivatives volumes. In Australia and the UK, our wealth
management platform, GBST Composer, administers more
than $250 billion in assets.

In FY2010, we maintained a consistent research and
development expenditure of $5.7 million. We were very
pleased with the progress made in major projects:

• GBST clients are now processing trades using our next-

generation back-ofﬁ ce platform, Syn , in a rapidly growing
number of Asian countries and in Europe;

• Work to introduce the Syn platform in Australia in FY2012

has encouraged new sales of Shares;

• Rollout of GBST’s new front ofﬁ ce solution to retail broker

clients should be completed in FY2011;

• Composer’s enhancement to provide tailored private

banking and private wealth solutions;

• Development of a prototype portfolio administration

solution using Composer and Shares to provide a retail
broking platform.

GBST HOLDINGS LIMITED ABN 85 010 488 874

We are excited by the opportunities arising from
GBST’s new front ofﬁ ce product, which offers our
clients a consolidated client view and new reporting
and data mining capabilities. This bolsters our
offering and is expected to broaden the number
of clients that access a full range of our services.

Mr Stephen Lake - Managing Director & Chief Executive Ofﬁ cer

This progress validates our decision to protect GBST’s
high-quality skills base during the ﬁ nancial crisis. Our staff
have substantial experience of ﬁ nancial markets, with the
necessary domain knowledge and expertise to support our
clients and continue to develop our products. Their skills
ensure that we are always close to our clients, and that we
understand their needs and opportunities.

Financial overview

Operating revenue was up 9 per cent to $67.7 million and
operating EBITDA was up 26 per cent to $16.9 million,
compared to the prior year. This reﬂ ected stronger
second half performance.

The company reduced debt signiﬁ cantly, with senior debt
of $20.4 million at 30 June 2010 compared to $33.1 million
at 30 June 2009, following capital raisings of $5.0 million in
August 2009 and repayments from cash ﬂ ow. Debt facilities
were renewed for three years to 2013. Long-term borrowings
include a $10.0 million loan which may be converted
to equity.

Non-cash charges of $6.7 million for amortisation and of
$5.7 million for impairment of intangible assets led to a
net loss.

Your Directors are conﬁ dent of GBST’s FY2011 prospects
and, believing that shareholders should beneﬁ t from its
strong cash ﬂ ow, declared a ﬁ nal fully franked dividend of
2 cents per share.

Impairment charge

The Syn platform’s functionality and products were not as
advanced as GBST had been led to believe when Coexis
was acquired and, as a result, research and development
costs were higher than anticipated. This resulted in an
impairment charge of $5.5 million and the company is
considering its legal options.

Operations

Broker Services

GBST’s Australian Broker Services business grew market
share during the year, reﬂ ecting higher levels of retail trading.
While markets are yet to recover fully, activity remains above
FY2009 levels.

Revenue increased 7 per cent to $30.1 million, with more
than 90 per cent of operating revenue comprising annuity
income. Operating EBITDA was $11.7 million, up 14 per cent.
Better operational efﬁ ciency and tight control of discretionary
spending contributed to an EBITDA margin improvement of
8 per cent to 38 per cent.

GBST Shares connects ﬁ nancial participants to an extensive
network of ﬁ nancial products and services that manage
equity transactions, third-party clearing and margin lending
and supports a wide range of ﬁ nancial instruments.

Established clients’ renewal of long-term contracts reﬂ ects
market enthusiasm for the anticipated introduction of the
Syn platform to Australia. Its features for corporate actions,
standard settlement instructions and multi-asset processing
are well ahead of competing products, and initial purchase
commitments have already been received.

ANNUAL REPORT 2010

Chairman’s and
Managing Director’s report
continued

The third-party clearing market continues to consolidate as
ASX regulatory changes have effectively increased in-house
clearing costs. Here, GBST is well placed to offer potential
clients the beneﬁ ts of economies of scale.

While we have acknowledged technology leadership in
stockbrokers’ back- and middle-ofﬁ ces, our front-ofﬁ ce
services are less widespread. We are excited by the
opportunities arising from GBST’s new front ofﬁ ce product,
which offers our clients a consolidated client view and new
reporting and data mining capabilities. This bolsters our
offering and is expected to broaden the number of clients
that access a full range of our services. Installation at clients
will be mostly complete by the end of FY2011.

Another important innovation is our move to a common
technology stack to unify and modernise the appearance
of our products. This demonstrates the success of our
2008 acquisition of the GBST Financial Services division’s
web developer Emu Design, which contributed to the
attractiveness of products.

Global Broker Services

GBST’s Global Broker Services division was founded in 2008
with the acquisition of Coexis. This provided the technology
platform, Syn , that will underpin our future development.

While it was disappointing that higher than expected
research and development costs led to a loss for the year,
substantial progress was made to improve the product and
the division is expected to return to proﬁ tability in FY2011.

A new management structure was implemented, and former
Chief Financial Ofﬁ cer Patrick Salis took over leadership
to introduce GBST’s methodologies, attitudes and culture.
The revenue model has been refocused from one-off
licence sales revenue and consulting to a more annually-
based product income. Research and development
previously funded by clients is now being funded by GBST
to accelerate product development. A greater proportion
of annuity income is expected in future years as our client
base expands.

The division maintains a strong pipeline of potential new
business in Asia, where many investment banks are
evaluating the beneﬁ ts of new technology to transform their
services. We are encouraged by the ﬁ rst commitments in
Japan for Syn , which recognises its potential as a pan-
Asian solution.

Over the next few years we will focus on strengthening
distribution networks to capitalise on opportunities in
Asia and Europe more rapidly.

Wealth Management

GBST Wealth Management performed well in Australia where
it has an established market, achieving a near-20 per cent
increase in both revenue and EBITDA. This improvement
was attributable to new contracts and broader use of our
ﬂ agship Composer platform. In Australia, more than 75 per
cent of revenue is annuity income. Our UK business gained
good momentum, winning two new clients and establishing
prospects.

Revenue for the year was $22.8 million, down 3 per cent,
and operating EBITDA was $5.5 million, up 49 per cent.

The UK savings industry is in the midst of structural change
driven by the Financial Services Authority’s 2006 Retail
Distribution Review (RDR). Similar to Australia’s Cooper
Review, a key regulatory requirement is the move by
independent ﬁ nancial advisers away from commission-
based systems.

Under the RDR, it is estimated that assets and savings of up
to £3 trillion will be transitioned from the old-world systems
of traditional life companies to new-world systems such as
wrap platforms, which are expected to play a signiﬁ cant role
in the long-term savings and investment industry. However,
so far only £100 billion has moved.

Retail investment platforms, such as those developed by our
clients using Composer, provide a central hub for investors
to access a range of investment products, and allow for
consolidation of client information and asset reporting.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Our UK commercial prospects are signiﬁ cant, and two major
new implementations are scheduled to ‘go live’ in FY2011.
Strong revenue growth is expected from new business in
this market.

In addition, initial marketing in Asia has achieved promising
levels of interest.

The majority of research and development for Composer
is complete, and enhancements are being developed for
specialised products. One example is Composer Life, which
helps clients to administer insurance records and adapt for
changes in commission structures. Also, work is continuing
on a portfolio administration solution combining Composer
and Shares.

Financial Services

We are pleased to report that GBST Financial Services
achieved a maiden proﬁ t after two years. Operating revenue
was $2.6 million, up more than 100 per cent, and operating
EBITDA was $0.03 million.

The division develops specialised tools and data products
for the ﬁ nancial services industry. Thirty-eight ﬁ nancial
institutions now use its ﬁ nancial calculators and its data
content contributes to GBST’s new front ofﬁ ce solutions.

The division’s web developer Emu Design has successfully
developed a new user interface for all GBST front ofﬁ ce
products. The redevelopment of the Syn user interface
is expected to be complete in FY2011.

The division’s earnings include two month’s contribution
from an index data and performance attribution business.
These products enable calculation of after-tax performance
of portfolios and index benchmarking for more than
35 companies. It is a high-margin business with good
prospects for growth.

Corporate and social responsibility

We value our staff and aim to provide a supportive
environment which motivates and engages them. Ways we
acknowledge their contribution to the community include
matching the value of staff donations to tax deductable
charities, and by donating cash to the charities of their
choice in recognition of their voluntary work.

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.

Our performance is due to the efforts of all GBST’s
employees. We congratulate management and staff around
the world for everything that we have achieved in FY2010.

Outlook

While markets remain patchy, GBST anticipates proﬁ tability
and continued revenue growth in all divisions. Your directors
are optimistic about the future, based on a strong pipeline of
potential new business that is much more advanced than the
previous year and greater conﬁ dence amongst our clients.

We look forward to addressing the challenges and
opportunities for our business in FY2011 and beyond.

Dr John Puttick
Chairman

Mr Stephen Lake
Managing Director
& Chief Executive Ofﬁ cer

ANNUAL REPORT 2010

GBST Executive Team

Stephen Lake

Managing Director and Chief
Executive Officer

Mr 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, he
was Chief General Manager of Financial
Markets at Adelaide Bank Limited.
Stephen was Managing Director of BZW’s
Capital Market’s Division Australia and
also Managing Director of the Fixed
Interest Division at BZW (Asia) Ltd.
Stephen is a Member of the Nominations
and Remuneration Committee.

Chris Mallios

Chief Financial Officer

Chris joined GBST on 30 August 2010
as Chief Financial Ofﬁ cer. Chris has
extensive ﬁ nancial and global commercial
experience spanning 18 years gained in
the services, technology, engineering,
contracting and manufacturing industry
sectors. Most recently, he was Head of
Finance – Asia Paciﬁ c for Tyco Electronics
responsible for ﬁ nance, strategic
planning, mergers and acquisitions
and corporate services with operations
throughout Japan, South Korea and
China. Chris has also held other senior
management ﬁ nancial roles during his
13 years with Tyco International.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Chris holds a Bachelor of Arts and
Masters of Commerce from the University
of New South Wales and is a member of
CPA Australia.

Robert De Dominicis

Chief Executive, GBST Wealth
Management

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.

Denis Orrock

Chief Executive, GBST Broker
Services and GBST Financial
Services

Denis joined GBST in May 2008 and
manages the Broker Services and
Financial Services divisions. 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.

Patrick Salis

Chief Executive, Global Broker
Services

Patrick was appointed Chief Executive,
Global Broker Services in March 2010,
having joined GBST in October 2007 as
Chief Financial Ofﬁ cer. Previously, Patrick
held senior ﬁ nancial roles in the ﬁ nancial
services industry, most recently as Chief
Financial Ofﬁ cer of Virgin Money Australia
Limited. He 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 Officer

Isabel was appointed as Chief
Technology Ofﬁ cer in March 2008.
Isabel has over 18 years experience in
software development and has been a
member of GBST’s Wealth Management
Division (formerly InfoComp) for 16 years,
where she acted in a similar capacity
since 2000. Isabel holds a Bachelor of
Computing Science from the University
of Wollongong.

GBST Board of Directors

John Puttick

Non-Executive Chairman

Dr John Puttick is the founder and
Chairman of GBST and has forty years
experience in the IT industry, twenty ﬁ ve
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 at the School
of Information Technology and Electrical
Engineering 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 Officer

Stephen was Managing Director of BZW’s
Capital Market’s Division Australia and
also Managing Director of the Fixed
Interest Division at BZW (Asia) Ltd.
Stephen is a Member of the Nominations
and Remuneration Committee.

Allan Brackin

Independent Non-Executive Director

Mr 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 co-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
as Chairman of NSW Cardiovascular
Research Network and is Chairman
of IT software Company Emagine Pty
Ltd. Allan is Chairman of GBST’s Audit
and Risk Management Committee and
is a member of the Nominations and
Remuneration Committee.

Joakim Sundell

Non-Executive Director

Mr 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

Mr 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 2010

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 2010.

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

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. monitor the implementation and execution of strategy

ii. a framework for the identification of candidates for
appointment to the Board and their selection

and performance against financial targets and

iii. a framework for individual performance review and

iii. oversee the performance of executive management

evaluation

and generally to take and fulfil an effective leadership
role in relation to the Company.

iv. proper training to be made available to Directors both at

the time of their appointment and on an on-going basis

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

ii. oversight of the Company including its control and

accountability system

iii. appointment and removal of the Chief Executive

v. basic procedures for meetings of the Board and its

committees – frequency, agenda, minutes and private
discussion of management issues among non-
executive Directors

vi. ethical standards and values – formalised in a 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

Officer and the Company Secretary

viii. communications with shareholders and the market.

iv. reviewing and overseeing systems of risk management
and internal compliance and control, codes of ethics
and conduct, and legal and statutory compliance

v. monitoring senior management’s performance and

implementation of strategy; and

vi. approving and monitoring financial and other reporting

and the operation of committees.

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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Audit and Risk Management Committee

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. Dr John Puttick

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.

internal control framework including management
information systems

iii. corporate risk assessment and compliance with

internal controls

iv. internal audit function and management processes

supporting external reporting

review of financial statements and other financial
information distributed externally

vi. review of the effectiveness of the audit function

vii. review of the performance and independence of the

external auditors

viii. review of the external audit function to ensure prompt
remedial action by management, where appropriate,
in relation to any deficiency in or breakdown of controls

ix. assessing the adequacy of external reporting for the

needs of shareholders and

x. monitoring compliance with the Company’s code

of ethics.

c. Meetings are held at least four times each year. A broad
agenda is laid down for each regular meeting according
to an annual cycle. The committee invites the external
auditors to attend each of its meetings.

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.

c. 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
last financial year the Board engaged in discussions which
led to the restructure of the committee’s schedule so that
the committee would be called to meet at least at set times
each year. As part of that restructure it was determined
that David Adams, a Non-Executive Director would chair
the committee. 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 2010

Corporate Governance Statement continued

GBST Board Assessment against the Guidelines

Principle 6 – Respect the rights of shareholders

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 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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

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 Management 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 Board
has restructured the committee to have an independent
director as Chairman. 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.

Directors’ Report

The Directors of GBST Holdings Limited (‘GBST’) submit
herewith the consolidated financial report for the year ended
30 June 2010 and the audit report thereon.

Directors

The names of the Directors of the Company in office during
the year and to the date of this report are:

Name

Dr John F Puttick

Mr David C Adams

Mr Allan J Brackin

Mr Stephen M L Lake

Mr Joakim J Sundell

Principal Activities

Date of Appointment

January 1984

April 2008

April 2005

September 2001

July 2001

The principal activities of GBST during the year, were:

(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;

(cid:129) provision of funds administration and registry software

for the wealth management industry in Australia and the
United Kingdom; and

(cid:129) provision of independent market-leading financial product

data and related services to financial advisers and
institutions in Australia.

No significant changes in the nature of these activities
occurred during the year.

Operating Result and Dividend

The consolidated loss after income tax for the financial year
amounted to $2.41 million (2009: $2.13 million profit). The
current year loss includes an amount of $5.53 million for
the impairment of goodwill on business acquisitions. A full
explanation of the impairment is included in the notes to the
financial statements.

There were no dividends paid during the year.

The directors have recommended a final dividend of 2.0
cents per share to be paid to the holders of fully paid
ordinary shares. The dividend will be 100% franked at 30%
corporate tax rate and will be paid on 30 September 2010.

Review of Operations

The consolidated Group operates in the following four
business segments:

(cid:129) GBST Australia Broker Services provides client

accounting and securities transaction technology. Capital
market participants such as banks, clearing houses,

custodians, fund managers, margin lenders, institutional
and retail stockbrokers use GBST’s specialist market
access and transaction solutions to process over 50% of
ASX volume trade.

(cid:129) GBST Global Broker Services 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.

(cid:129) GBST Wealth Management provides funds

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) GBST 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 Emu Design.

Profitability

Reported EBITDA

Reported EBITDA for the strategic business segments
and the Group as a whole is derived from profit/loss from
operations before attributing to income taxes and profit/loss
from financial activities (EBIT). This measure is additionally
adjusted for depreciation, amortisation and impairment
losses to calculate Reported EBITDA. It should be noted
that GBST Holdings Limited’s definition of EBITDA may differ
from that used by other companies. Reported EBITDA is an
important indicator used by Key Management Personnel of
GBST Holdings Limited to manage the operating activities of
the individual business segments and the Group as a whole.

Operating EBITDA

GBST Holdings Limited defines operating EBITDA as
profit/loss from operations depreciation, amortisation
and impairment losses and before the effect of any non-
operational expenses. GBST Holdings Limited uses
Operating EBITDA as an internal performance indicator for
the management of its operational business segments; and
to allow better evaluation of business segment activities and
comparison over reporting periods.

ANNUAL REPORT 2010

Directors’ Report continued

Group Results

Group operating revenue

EBITDAR*

R&D expenditure

Operating EBITDA

Non-operating expenses

Reported EBITDA

Net finance costs

Depreciation

Amortisation

Impairment of assets

NET (LOSS)/PROFIT BEFORE TAX

Income tax (expense)/benefit

PROFIT AFTER TAX

BASIC EPS (CENTS)

CASH NPAT**

CASH EPS (CENTS)

FULL YEAR TO 30 JUNE

2009
$‘000

%
Change

2010
$‘000

67,648

22,576

5,719

16,857

61,924

18,910

5,539

13,371

(500)

(680)

16,357

12,691

(3,527)

(1,046)

(6,702)

(5,658)

(576)

(1,829)

(2,405)

(3.68)

9,955

15.23

(2,711)

(1,071)

(5,745)

(1,138)

2,026

103

2,129

3.90

9,012

16.52

(2)

397

(128)

(213)

(194)

(8)

* EBITDAR = profit before interest, tax, depreciation, amortisation, impairment and research and development expenditure.
** CASH NPAT = profit after tax; after removing amortisation and impairment expenditure.

The consolidated loss before income tax for the financial
year amounted to $576 thousand (2009: $2.03 million profit).
Revenue before interest and other income was $67.65 million
(2009: $61.92 million).

The consolidated entity generated cash flows from operations
of $8.43 million (2009: $18.62 million) after the payment
of income taxes of $1.77 million (2009: $1.58 million).

During the financial year, factors impacting the profitability
of the consolidated entity were:

(cid:129) Impairment testing of cash generating units (CGU)

determined that the carrying amount of the Global Broker
Services CGU was higher than its recoverable amount
and an impairment loss of $5.50 million was recognised
against goodwill attributed to that CGU.

(cid:129) Decline in the value of the 15.43% shareholding in
Razor Risk Technologies Limited (ASX Code: RZR)
(formerly IT&e Limited) has been taken into account,
in accordance with AASB 139. At 30 June 2010 the
fair value of the investment shareholding in Razor Risk
Technologies resulted in an impairment of the asset
of $525 thousand of which $131 thousand is recorded
in profit and loss and the remaining $394 thousand
reduced the Financial Asset Reserve in equity. The
current carrying value of the investment is $1.10 million.

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST Australian Broker Services

FY2010
$000’s

FY2009
$000’s

%
Change

Revenue

30,153

28,276

Operating EBITDA

11,726

10,293

Non-operating expenses

(365)

(341)

Reported EBITDA

11,361

9,952

Australian Broker Services’ solid revenue growth was
underpinned by new client wins and increased trading
activity. A significant driver has been the rising cost to
stockbrokers of ASX regulatory capital changes. These
have increased the attractiveness of GBST’s third-party
clearing services, particularly to new market entrants,
as GBST has a dominant market share.

GBST’s new Front Office solution commenced user
acceptance testing in June, and installation is scheduled to
be largely complete by the end of FY2011. The introduction
of the Syn platform to Australia has underpinned new
sales of GBST Shares, with very strong interest from new
and existing clients. The first commitments to purchase
Syn in Australia have been received and rollout of the
new platform is expected to begin in FY2012.

GBST Shares’ improved scalability enabled management of
350,000 trades per day per client in April 2010, and this has
increased since then to one million trades. A new reporting
framework will improve the attractiveness of GBST Shares for
customers and is scheduled for implementation in FY2011.

GBST Global Broker Services

In the UK, implementation commenced for two major clients
in FY2010 and these platforms are expected to go ‘live’ in
Q3 FY2011. UK regulatory change continued to drive sales.

Marketing of Wealth Management products has begun
in Asia and has received promising levels of interest from
potential clients.

FY2010
$000’s

FY2009*
$000’s

%
Change

GBST Financial Services

Revenue

12,142

8,912

Operating EBITDA

Non-operating expenses

Reported EBITDA

(403)

(97)

(500)

–

(511)

(610)

* FY2009 includes six months’ results only, as the business was

purchased in December 2008.

Revenue remains reliant on new implementations, and
professional services contributed 62% of divisional income
during the year. The proportion of recurring fixed licence and
support fees (38%) is expected to increase as the business
matures.

Post-acquisition R&D costs for the core Syn platform were
higher than expected, and led to a loss for the division.
During the year, Global Broker Services’ first full-European
client went ‘live’ and Asian clients are now using Syn to
execute and process trades in twelve Asian countries. The
division is expected to return to profitability in FY2011.

GBST Wealth Management

FY2010
$000’s

FY2009
$000’s

%
Change

Revenue

2,581

1,251

Operating EBITDA

Non-operating expenses

Reported EBITDA

(25)

(716)

(72)

(788)

106

104

101

The Financial Services division achieved profitability in
FY2010, two years after commencement in May 2008.
Revenue has increased as customer numbers for GBST’s
calculators grow. The division’s in-house web design firm,
Emu Design, which has developed the new user interface
across GBST’s products, benefitted from access to GBST
clients, and was awarded two first prizes for major retail
client websites during the year.

The division’s performance includes two months’ contribution
from GBST’s index data and performance attribution business
which serves over thirty funds management and investment
advisory organisations in Australia. This is a high-margin
business with strong growth prospects.

FY2010
$000’s

FY2009
$000’s

%
Change

Financial Position

Revenue

22,772

23,485

Operating EBITDA

5,503

3,696

Non-operating expenses

(13)

(267)

Reported EBITDA

5,490

3,429

(3)

Wealth Management recorded lower revenue in the year
due to the loss of a client in the prior comparative year
(HY2010 $10.65 million; pcp HY2009 $14.50 million),
but recorded significantly improved performance
in the second half of the year.

In Australia, the Wealth Management division implemented
Composer for two new clients in FY2010, replacing
competitors’ products. The division’s membership
management product, Unison, signed two new clients and is
undergoing development to improve its useability. A portfolio
administration solution prototype has been developed using
GBST Composer and GBST Shares’ technology to provide
a solution for retail broking and private banking.

The net assets of the Group increased by $562 thousand
during the year to $44.21 million at 30 June 2010 as a
result of improved operating performance of the Group
and cash proceeds from shares issues raising $4.58 million.
Net borrowing repayments of $9.75 million on Senior Debt
occurred, reducing Senior Debt to $20.43 million from
$33.10 million in 2009.

The Group has a net current asset deficiency at 30 June
2010 of $9.19 million (30 June 2009: $20.77 million).
$5.37 million in current liabilities represents payments
received in advance from clients for work to be completed
pursuant to client agreements in future periods and as such
does not represent a future cash outflow. Current senior loan
repayments of $6.00 million are payable in fixed quarterly
instalments over the next twelve months. $7.39 million
(AUD facility) of the non-current senior loan repayments
are payable in fixed quarterly instalments and $7.04 million
(GBP facility) is payable by 30 June 2013. The repayments

ANNUAL REPORT 2010

Directors’ Report continued

will be funded by earnings generated over that period.
The Group is in a position to pay its debts as and when
they become payable.

No other significant changes in the state of affairs of the
Company occurred during the financial year, other than
those disclosed in the report.

The Senior Debt is provided by the National Australia Bank
and the current facility was renewed for a three year term
maturing on 30 June 2013. At the balance sheet date the
Total Operating Leverage is below 2.25 to 1, Interest Cover
is above 2.25 to 1 and Equity Ratio is above 50%, and all
banking covenants have been met for the period.

The operating business performance has improved
significantly over the last twelve months and the debt
serviceability and debt cover ratios are improving
consistently. All divisions within GBST have secured new
clients and each has a strong sales pipeline. The earnings
outlook of the business is strong and continues to improve.

Signiﬁ cant Changes in State of Affairs

During the year financing activities included:

(cid:129) the issue of 8,212,936 new shares (a); and

(cid:129) the issue of 10,526,316 new options to Crown

Financial Pty Ltd (b).

a. The Company successfully completed a capital raising
in August 2009 and raised $4.58 million cash that was
used to repay Senior debt.

b. The $10.00 million subordinated debt facility provided
by Crown Financial Pty Ltd has been extended to
February 2012 with an option to convert to equity. Crown
Financial Pty Ltd is an entity related to Mr J Sundell who
is a Company Director and Crown Financial Pty Ltd is a
major shareholder. Interest is payable at a rate of 10%
p.a. The Company entered into an agreement with Crown
Financial Pty Ltd on 26 August 2009, to issue Crown with
10,526,316 options over ordinary shares in GBST at an
exercise price of 95 cents per option (Placement Options).
Each Placement Option may be converted at any time until
the expiry date. The Placement Options will lapse upon
repayment of the loan.

c. The Company renewed the banking facilities with the

National Australia Bank on 25 June 2010, where the AUD
senior bank facility of $13.39 million and GBP senior bank
facility of £4.00 million GBP expire on 30 June 2013, with
quarterly principal repayments of $1.50 million for the AUD
facility and interest only payments for the GBP facility.
The Company may elect to repay early.

During the year the Company issued 600,000 new executive
options (refer Note 33) and 18,770 employee options
were exercised.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Subsequent Events

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.

Future Developments, Prospects and
Business Strategies

GBST anticipates continued EBITDA and revenue growth
in all divisions in 2011. The Group is well positioned to
increase market share internationally, particularly in the
UK where its Wealth Management products have strong
prospects, and in Asia where the Global Services division
has good opportunities. The Company is actively pursuing
opportunities to expand its sources of revenue from the
delivery of technology to the financial services industry
and 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. Whilst the Company
looks for possible strategic and synergistic acquisitions,
no significant acquisitions are anticipated.

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.

Environmental Issues

There are no significant environmental regulations applying
to the Group.

Information on Directors

John Puttick Non-Executive Chairman

Dr John Puttick is the founder and Chairman of GBST
and has forty years experience in the IT industry, twenty
five 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 at the School of Information Technology
and Electrical Engineering 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

7,057,760 Ordinary Shares of GBST Holdings Limited
are held by Dr Puttick and associated entities.

Joakim is a Member of the Nominations and
Remuneration Committee.

Interest in Shares and Options

17,306,610 Ordinary Shares and 10,526,316 Options
of GBST Holdings Limited are held by Mr Sundell’s
associated entities.

Stephen Lake Managing Director and Chief Executive
Officer

Mr Stephen Lake joined GBST in September 2001 after
an extensive career in the capital markets industry in
Australia, the United Kingdom and Asia. Stephen became
a shareholder of GBST and was appointed Chief Executive
Officer in 2001. Prior to joining GBST, he was Chief General
Manager of Financial Markets at Adelaide Bank Limited.
Stephen was Managing Director of BZW’s Capital Market’s
Division Australia and also Managing Director of the Fixed
Interest Division at BZW (Asia) Ltd. Stephen is a Member
of the Nominations and Remuneration Committee.

Interest in Shares and Options

4,309,116 Ordinary Shares of GBST Holdings Limited
are held by Mr Lake.

Allan Brackin Independent Non-Executive Director

Mr 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
co-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 as Chairman of NSW Cardiovascular
Research Network and is Chairman of IT software Company
Emagine Pty Ltd. 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 are
held by Mr Brackin’s associated entities.

Joakim Sundell Non-Executive Director

Mr 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).

David Adams Independent Non-Executive Director

Mr 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.

Company Secretary

Mr David M 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.

Directors’ Meetings

The number of Directors’ meetings (including meetings of
committees of Directors) and number of meetings attended
by each of the Directors of the Company during the financial
year are:

DIRECTORS’
MEETINGS

AUDIT AND RISK
COMMITTEE

Number
eligible to
attend

Number
attended

Number
eligible to
attend

Number
attended

–

Directors’
Names

J Puttick

D Adams

A Brackin

S Lake

J Sundell

* 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.

ANNUAL REPORT 2010

Directors’ Report continued

Remuneration Report

The information provided in the remuneration report relates
to the Group for the year ended 30 June 2010 and has been
audited as required by section 308(3C) of the Corporations
Act 2001.

The remuneration report is set out under the following
main headings:

a. Remuneration Policies and Practices

b. Company Performance and Remuneration

c. Service Agreements

d. Details of Remuneration

a. 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:
annual fixed remuneration, short term incentives and
long term incentives. Executives are offered longer term
incentives through an Employee Share Option Plan which
seeks to align the Executives’ performance with the interests
of shareholders.

The performance of Executives is considered annually
against agreed performance objectives relating to both
individual performance goals and contribution to the
achievement of broader Company objectives. Executive
remuneration packages are reviewed annually by
reference to the Company’s economic performance,
Executive performance and comparative information
from industry sectors.

Remuneration paid to Directors and Executives is valued
at the cost to the Company and expensed. The Company
operates an Employee Option Scheme, comprising of two
sub-schemes, being an Exempt Options Scheme for staff
generally and a Deferred Options Scheme for select staff
and eligible Directors. Options are valued using a Black-
Scholes model and Trinomial Lattice option pricing models
which includes variables such as time, volatility, risk and

GBST HOLDINGS LIMITED ABN 85 010 488 874

return. The value of equity based remuneration under the
Deferred Option Scheme is recognised as an employee
benefits expense.

Remuneration Principles

(cid:129) The Company will use competitive remuneration packages

to attract, motivate and retain talented Executives.

(cid:129) The employees will be rewarded for sustained

and sustainable improvement in the performance
of the Company.

(cid:129) Directors and Senior Executives are encouraged to make

investments in the Company in accordance with the
Company’s share trading guidelines.

(cid:129) 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 with the aim
to benchmark against other similar roles situated in other
similar companies listed on the Australian Stock exchange
within similar industry sectors.

Remuneration Structure – Non-Executive Directors

Non-executive Directors are paid fixed annual remuneration
as set out in letters of appointment. Reviews of each
individual Director and Directors as a whole occur annually.
Non-executive Directors may make investments in the
Company in accordance with the Company’s share trading
guidelines but they do not participate in the Employee Share
Ownership Plan. GBST does not operate a scheme for
retirement benefits to Directors.

Remuneration Structure – Senior Executives

Three elements make up the Company’s remuneration
structure for Senior Executives.

(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)
and superannuation contributions, reviewed annually based
on performance and market data, responsibility, experience
and geographic location.

Short Term Incentive Remuneration (STI)

Long Term Incentive Remuneration (LTI)

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) Align the interests of the Executives and staff with those

of shareholders;

(cid:129) Provide participants with the opportunity to be rewarded
with at risk remuneration where superior performance
outcomes are achieved over the measurement period; and

(cid:129) 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 may entitle an
Executive to a cash bonus.

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 may 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.

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.

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.

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 33 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
twelve months and lapse if unexercised in thirty-six months.
The second tranche of 30% vest and may be exercised after
twenty-four months and lapse if unexercised in forty-eight
months. The third tranche of 50% vest and may be exercised
after thirty-six months and lapse if unexercised after
sixty months. On cessation of employment all unvested
options lapse.

On 17 May 2010, 600,000 options were issued to select
Executive employees. The exercise price for each
option is $1.05.

These deferred options may be exercised after nineteen
months and lapse if unexercised in forty-three months.
On cessation of employment all unvested options lapse.

ANNUAL REPORT 2010

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

Continued
Employment until

Financial Performance hurdle

24 October 2007

24 October 2008

If normalised EPS CAGR for 2008 compared to 2007 is:

Tranche 1
(20%)*

Tranche 2
(30%)*

Tranche 3
(50%)*

(cid:129) Less than 10%: no options vest

(cid:129) Equal to 10%: 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) 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) Less than 10%: no options vest

(cid:129) Equal to 10%: 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) 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) Less than 10%: no options vest

(cid:129) Equal to 10%: 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) Equal to or greater than 20%: 100% vesting.

17 May 2010

15 December 2011

If Group EBITDA for FY11 is:

* 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.

(cid:129) 50% above Group EBITDA on FY 09 adjusted for the number of shares on issue

EPS – Earnings per share
CAGR – Compound average growth rate

b. 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
Year on Year Growth

Net profit/(loss) before tax
Year on Year Growth

Closing share price
Dividends paid (cents)

2007

$11.4m
26%

$11.4m
31%

$4.00
9.0

2008

2009

2010

$18.3m
60%

$ 9.8m
(14%)

$1.89
11.5

$12.7m
(34%)

$2.0m
(80%)

$0.67
5.5

$16.4m
29%

$.6m
(70%)

$0.98
–

GBST HOLDINGS LIMITED ABN 85 010 488 874

c. 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 agreement, the agreement
is expressed to be an open ended appointment 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 2011 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.

d. Details of Remuneration

The remuneration for each Director and Executive Officer (Key Management Personnel) of the consolidated entity receiving the
highest remuneration during the respective financial year was as follows:

SHORT-TERM BENEFITS

POST
EMPLOYMENT
BENEFITS

TERMINATION
BENEFITS

OTHER
LONG-TERM
BENEFITS

SHARE
-BASED
PAYMENT

Base salary
& fees
$

Bonus
$

Other
$

Super
annuation
$

Leave
entitlement
$

Equity
options
$

Performance
Related
%

Options
Based
%

Total
$

2010

Directors

J Puttick

D Adams

A Brackin

S Lake

J Sundell

95,000

55,046

60,000

–

590,000 100,000

60,000

–

4,954

–

61,896

–

66,850

11,502

22,777

29,908

22,846

22,320

TOTAL DIRECTORS

860,046 100,000

Executives

R De Dominicis

D Orrock

P Salis

I Sanchez

S Shah (Executive
until 29/03/10)

392,959

253,077

– 18,917

–

297,308 35,000

253,846

223,201

–

TOTAL EXECUTIVES 1,420,391 35,000 18,917

109,353

GROUP TOTAL

2,280,437 135,000 18,917

176,203

2009

Directors

J Puttick

D Adams

A Brackin

S Lake

J Sundell

95,000

55,046

60,000

590,000

60,000

TOTAL DIRECTORS

860,046

–

4,954

–

53,100

–

58,054

–

95,000

60,000

–

751,896

13.3

60,000

–

– 1,026,896

2,044 425,422

2,044 277,898

3,065 365,280

5,109

281,801

– 245,522

12,262 1,595,923

12,262 2,622,819

–

95,000

60,000

643,100

60,000

–

918,100

–

0.5

0.7

0.8

1.8

–

0.5

0.7

10.4

1.8

–

ANNUAL REPORT 2010

Directors’ Report continued

POST
EMPLOYMENT
BENEFITS

TERMINATION
BENEFITS

OTHER
LONG-TERM
BENEFITS

SHARE
-BASED
PAYMENT

SHORT-TERM BENEFITS

Base salary
& fees
$

Bonus
$

Other
$

Leave
entitlement
$

Equity
options
$

Performance
Related
%

Options
Based
%

Total
$

Super
annuation
$

34,505

20,700

23,841

22,477

19,727

3,553

124,803

182,857

–

53,846

1,765

–

417,899

250,700

288,745

252,477

216,996

90,457

– 1,517,274

– 2,435,374

–

2009

Executives

R De Dominicis

D Orrock

P Salis

I Sanchez

S Shah (appointed
09/12/08)

K Sprott (resigned
06/02/09)

383,394

230,000

264,904

230,000

197,269

31,293

TOTAL EXECUTIVES 1,336,860

GROUP TOTAL

2,196,906

Shareholdings

The number of shares in the Company held (directly, indirectly or beneficially) during the financial years by Key Management
Personnel, including their related parties, are set out below.

2010

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

TOTAL EXECUTIVES

GROUP TOTAL

Balance at
01/07/09

Received as
Compensation

Options
exercised

Net Change

Other (i)

Balance at
30/06/10

7,307,760

–

311,943

3,751,423

15,768,148

27,139,274

1,780,996

–

523,596

2,304,592

29,443,866

–

(250,000)

7,057,760

––

–

311,943

557,693

4,309,116

1,538,462

17,306,610

1,846,155

28,985,429

230,769

2,011,765

––

16,135

––

(523,596)

–

(276,692)

2,027,900

1,569,463

31,013,329

GBST HOLDINGS LIMITED ABN 85 010 488 874

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

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.

Names and positions held of Group and Company Key Management Personnel in office at any time during the financial year
were:

Key Management Personnel

Position

J Puttick

D Adams

A Brackin

S Lake

J Sundell

Director (Non-executive Chairman)

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

Option Holdings

Chief Executive Broker and Financial Services

Chief Financial Officer

Chief Technology Officer

Chief Executive Global Broker Services (Position held until 29 March 2010)

Options issued as part of Remuneration for the Year Ended 30 June 2010

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 vesting date.

ANNUAL REPORT 2010

Directors’ Report continued

Options Granted
as Part of
Remuneration
$

Total
Remuneration
represented by
Options
%

Options
Exercised and
sold
$

Options
Lapsed/Forfeited
($)

Granted Number
#

–

100,000

150,000

250,000

–

600,000

–

2,044

3,065

5,109

–

12,262

–

0.5

0.7

0.8

1.8

–

Total
$

–

2,044

3,065

5,109

–

12,262

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

TOTAL EXECUTIVES

GROUP TOTAL

Options granted as remuneration to Key Management Personnel in the year ended 30 June 2010:

Vested
Number
#

Granted
Number (i)
#

Grant Date

Average Value
per Option
at Grant Date
$

Exercise
Price
$

First
Exercise
Date

Last
Exercise
Date

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

TOTAL EXECUTIVES

GROUP TOTAL

i Options granted in current year.

–

100,000

150,000

250,000

–

600,000

17.05.10

–

0.39

–

1.05

–

15.12.11

15.12.13

–

Details of the total holdings of options granted as remuneration in previous financial years are set out in Note 31 in the financial
statements. Details of these options are set out in Note 33 in the financial statements.

Shares issued on exercise of compensation options

There were no options exercised during the 30 June 2010 financial year that were granted as compensation in previous financial
years as remuneration to Key Management Personnel.

GBST HOLDINGS LIMITED ABN 85 010 488 874

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
01/07/09

Granted as
Compensation

Options
Exercised or
Sold

Options
Cancelled/
Forfeited

Other

Balance
30/06/10

Total Vested
30/06/10

Total
Exercisable
30/06/10

Total
Unexercisable
30/06/10

2010

Directors

J Puttick

D Adams

A Brackin

S Lake

J Sundell

–

500,000

–

(500,000)

–

– 10,526,316

–

– 10,526,316 10,526,316

– 10,526,316 (500,000) 10,526,316 10,526,316 10,526,316

–

TOTAL DIRECTORS

500,000

Executives

R De Dominicis

D Orrock

P Salis

I Sanchez

–

100,000

150,000

–

250,000

TOTAL EXECUTIVES

100,000

600,000

–

100,000

250,000

700,000

–

100,000

250,000

700,000

GROUP TOTAL

600,000

– 10,526,316 (500,000) 11,226,316 10,526,316 10,526,316

700,000

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.

Balance
01/07/08

Granted as
Compensation

Options
Exercised or
Sold

Options
Cancelled/
Forfeited

Other

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

–

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

–

(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

ANNUAL REPORT 2010

Directors’ Report continued

Indemnifying Directors and Ofﬁ cers

Proceedings on behalf of Company

During the financial year, the Company paid a premium to
insure the Directors and Officers of the Group. The terms of
the insurance contract prevent additional disclosure.

In addition, the Company has entered into a Deed of
Indemnity which ensures the Directors and Officers of the
Group will incur no monetary loss as a result of defending
the actions taken against them as Directors and Officers.

The Company is not aware of any liability that has arisen
under these indemnities at the date of the report.

Options

The Company established the GBST Employee Option Plan
on 9 March 2005.

The $10 million subordinated debt facility provided by Crown
Financial Pty Ltd has been extended to February 2012 with
an option to convert to equity. The Company entered into
an agreement with Crown Financial Pty Ltd, to issue Crown
with 10,526,316 options over ordinary shares in GBST at an
exercise price of 95 cents per option (Placement Options).
Each Placement Option may be converted at any time until
the expiry date. The Placement Options will lapse upon
repayment of the loan.

The number of options over ordinary shares outstanding at
30 June 2010 are as follows:

Grant Date

25.07.07

24.10.07

26.08.09

17.05.10

Exercise
Date

24.07.10

23.10.10

26.08.09

15.12.11

Exercise
Price

$0.00

$3.92

Number

29,358

100,000

$0.95

10,526,316

$1.05

600,000

11,255,674

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 and Risk Committee, is satisfied that the provision of
non-audit services during the year is compatible with the
general standard of independence for Auditors imposed by
the Corporations Act 2001.

Refer to Note 24 in the financial report for details of non-audit
service fees.

Lead Auditor’s Independence Declaration

The lead Auditor’s independence declaration for the year
ended 30 June 2010 has been received and can be found
on the page following this Directors’ report, and forms part of
the Directors’ report.

Rounding

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 18,770 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

Grant Date

09.03.05

25.07.07

Number

1,332

17,438

18,770

No further employee shares or options have been issued
since 30 June 2010.

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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Mr S M L Lake
Managing Director and Chief Executive Officer

Dated at Brisbane this 27th day of August 2010

Auditor’s Independence Declaration

ANNUAL REPORT 2010

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2010

Revenue

Other income

Product delivery and support expenses

Cost of third party product sold

Property and equipment expenses

Corporate and administrative expenses

Other expenses - impairment of goodwill

RESULTS FROM OPERATING ACTIVITIES

Finance costs

Finance income

Net finance costs

(LOSS)/PROFIT BEFORE INCOME TAX

Income tax (expense)/benefit

(LOSS)/PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY

Other comprehensive income

Exchange differences arising on translation of foreign operations

Net gain on hedge of net investment in foreign operations

Net change in fair value of available-for-sale financial assets

OTHER COMPREHENSIVE (LOSS) FOR THE PERIOD, NET OF INCOME TAX

TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD

Earnings per share

Basic earnings per share (cents)

Diluted earnings per share (cents)

GBST GROUP

Note

30 Jun 2010
$’000

30 Jun 2009
$’000

67,648

755

(44,017)

(2,582)

(7,136)

(6,190)

(5,527)

2,951

(3,542)

(3,527)

(576)

(1,829)

(2,405)

(4,492)

1,992

(394)

(2,894)

(5,299)

(3.68)

61,924

720

(42,486)

(2,402)

(6,993)

(5,438)

5,325

(3,408)

109

(3,299)

2,026

103

2,129

(3,487)

1,770

394

(1,323)

806

3.90

The accompanying notes are all an integral part of these consolidated financial statements.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Consolidated Statement of Financial Position

AS AT 30 JUNE 2010

CURRENT ASSETS
Cash and cash equivalents

Trade and other receivables

Inventories

Other assets

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS
Financial assets

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

Provisions

Unearned income

Liabilities on business acquisition

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES
Trade and other payables

Loans from related parties

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

Note

30 Jun 2010
$’000

30 Jun 2009
$’000

1,707

12,845

712

892

16,156

1,096

2,949

77,069

3,709

84,845

101,001

3,962

9,593

1,821

3,043

5,373

1,474

25,348

136

9,628

14,987

5,267

1,398

–

31,446

56,794

44,207

37,102

(3,472)

10,577

44,207

2,314

9,498

370

1,389

13,571

1,622

3,102

93,443

3,335

180

101,682

115,253

4,625

10,000

7,946

486

2,343

4,927

4,009

34,336

457

–

27,516

7,056

1,552

111

580

37,272

71,608

43,645

31,819

(1,156)

12,982

43,645

The accompanying notes are all an integral part of these consolidated financial statements.

ANNUAL REPORT 2010

Consolidated Statements
of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2010

GBST Group

Issued
Capital
$’000

Retained
Earnings
$’000

Foreign

Currency
Translation (a)

$’000

Financial
Asset
Reserve (b)
$’000

Equity
Remuneration

Loan
Conversion

Reserve (c)
$’000

Reserve (d)
$’000

Total
$’000

–

(54)

111

–

39,368

2,129

(3,487)

1,770

394

(1,323)

806

(2,880)

6,266

–

3,471

43,645

Balance at 1 July 2008

25,499

13,733

Total comprehensive income for the period

Profit for the year

–

2,129

Other comprehensive income

Translation of foreign controlled
subsidiary

Effect of hedge of net investment
in foreign operation

Net change in fair value of available-
for-sale financial assets, net of tax

TOTAL OTHER COMPREHENSIVE
LOSS

TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD

Transactions with owners, recorded
directly in equity

Contributions by and distributions
to owners

–

(3,487)

1,770

–

(1,717)

–

2,129

(1,717)

Dividends paid (Note 7)

–

(2,880)

Share based payments–exempt
shares

Share based payments–options

Share Issues (net of costs)

Transfer to/from ordinary capital

TOTAL CONTRIBUTIONS BY AND
DISTRIBUTIONS TO OWNERS

TOTAL TRANSACTIONS WITH
OWNERS

–

6,266

–

6,320

(2,880)

6,320

(2,880)

–

394

–

BALANCE AT 30 JUNE 2009

31,819

12,982

(1,661)

394

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST Group

Issued
Capital
$’000

Retained
Earnings
$’000

Foreign

Currency
Translation (a)

$’000

Financial
Asset
Reserve (b)
$’000

Equity
Remuneration

Loan
Conversion

Reserve (c)
$’000

Reserve (d)
$’000

Balance at 1 July 2009

31,819

12,982

(1,661)

394

111

Total comprehensive income for the period

Loss for the year

–

(2,405)

–

Other comprehensive income

Translation of foreign controlled
subsidiary

Effect of hedge of net investment
in foreign operation

Net change in fair value of available-
for-sale financial assets, net of tax

TOTAL OTHER COMPREHENSIVE
LOSS

TOTAL COMPREHENSIVE LOSS
FOR THE PERIOD

Transactions with owners, recorded
directly in equity

Contributions by and distributions
to owners

Dividends paid (Note 7)

Share based payments–exempt
shares

Share based payments–options

Share Issues (net of costs)

Fair value conversion option

Transfer to/from ordinary capital

TOTAL CONTRIBUTIONS BY AND
DISTRIBUTIONS TO OWNERS

TOTAL TRANSACTIONS WITH
OWNERS

–

5,215

–

5,283

–

(4,492)

1,992

–

(394)

(2,500)

(394)

(2,405)

(2,500)

(394)

–

(68)

128

Total
$’000

43,645

(2,405)

(4,492)

1,992

(394)

(2,894)

(5,299)

–

5,215

561

–

5,861

44,207

–

561

–

561

BALANCE AT 30 JUNE 2010

37,102

10,577

(4,161)

a. 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.
The hedge instrument is GBP denominated debt drawn under the Group’s bank debt facility. The objective of drawing GBP debt under the Group’s
bank debt facility, is to use it as a ‘natural hedge’ to offset changes to the fair value of the net tangible assets (NTA) of this foreign subsidiary due to
fluctuations in the AUD/GBP spot rate. Assessment of the hedge effectiveness is achieved by confirming that the GBP denominated net asset carrying
amount exceeds the face value of the debt. For the period ending 30 June 2010 the hedge is effective.
b. The financial assets reserve records the revaluation of financial assets, classified as available for sale.
c. 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.

d. The conversion reserve contains the equity impacts of the Crown renegotiation explained in Note 16.

The accompanying notes are all an integral part of these consolidated financial statements.

ANNUAL REPORT 2010

Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 30 JUNE 2010

GBST GROUP

Note

30 Jun 2010
$’000

30 Jun 2009
$’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers

Payments to suppliers and employees

Interest income

Sundry income

Finance costs paid

Income tax paid

NET CASH PROVIDED BY OPERATING ACTIVITIES

27(a)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of plant & equipment

Purchase of plant & equipment

Purchase of software intangibles

Deferred consideration payment for acquisitions

Acquisition of businesses (net of cash acquired)

Proceeds from other entity receivables

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance leases

Proceeds from issue of ordinary shares

Costs of share issue

Proceeds from borrowings

Repayment of borrowings

Dividends paid

27(d)

NET CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of the financial year

CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR

27(b)

71,075

(58,822)

755

(2,820)

(1,770)

8,433

–

(1,105)

(1,471)

(1,817)

–

(4,393)

(179)

4,578

(336)

8,748

(18,498)

–

(5,687)

(1,647)

471

(1,176)

74,695

(51,906)

109

681

(3,382)

(1,577)

18,620

(1,103)

(1,184)

–

(39,032)

(41,262)

(153)

–

53,497

(27,480)

(2,880)

22,984

342

129

471

The balance for the purpose of the statement comprises cash and cash equivalents as well as bank overdrafts (see Note 16).

The accompanying notes are all an integral part of these consolidated financial statements.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010

Note 1. Reporting Entity

GBST Holdings Limited (the “Company”) is the Group’s
parent Company. 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 (together referred
to as the “Group” and individually as the “Group entities”).

Note 2. Basis of Preparation

Statement of compliance

The financial report is a general purpose financial report
prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards
(AASBs), 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.

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.

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.

Use of estimates and judgments

The Directors evaluate estimates and judgments
incorporated into the financial report based on historical
knowledge and best available current information.

Estimates assume a reasonable expectation of future
events and are based on current trends and economic data,
obtained both externally and within the Group. Actual results
may differ from these estimates. The key estimates and
judgements made in this financial report concern:

(cid:129) classification of financial liabilities;

(cid:129) fair valuing convertible note instrument (Note 16);

(cid:129) revenue recognition;

(cid:129) capitalisation of internally generated assets (Note 13);

(cid:129) impairment testing of the consolidated entity’s cash-

generating units containing goodwill (Note 13);

(cid:129) share based payments (Note 33) and

(cid:129) utilisation of tax losses (Note 17).

Current ratio

The net assets of the Group increased by $562 thousand
during the year to $44.21 million at 30 June 2010 as a
result of improved operating performance of the Group and
cash proceeds from shares issues raising $4.58 million.
Net borrowing repayments of $9.75 million on Senior Debt
occurred, reducing Senior Debt to $20.43 million from
$33.10 million in 2009.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 2. Basis of Preparation continued

Changes in accounting policies

Starting as of 1 July 2009, due to changes in accounting
standards the Group has adopted the new pronouncements
within its accounting policies in the following areas:

When the Group acquires a business, it assesses the
financial assets and liabilities assumed for appropriate
classification and designation in accordance with the
contractual terms, economic conditions, the Group’s
operating or accounting policies and other pertinent
conditions as at the acquisition date.

(cid:129) accounting for business combinations;

(cid:129) accounting for borrowing costs;

(cid:129) determination and presentation of operating segments;

(cid:129) presentation of financial statements.

Note 3. Signiﬁ cant Accounting Policies

Basis 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 25 of the
financial statements. All controlled entities have a 30 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
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 are consistent with those
adopted by the parent entity.

This consolidated financial report was authorised for issue in
accordance with a resolution of Directors on 27 August 2010.

Business combinations

Business combinations are accounted for using the
acquisition method. The consideration transferred in a
business combination is measured at fair value, which is
calculated as the sum of the acquisition date fair values of
the assets transferred by the acquirer, the liabilities incurred
by the acquirer to former owners of the acquiree and the
equity issued by the acquirer. Acquisition-related costs are
expensed as incurred.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Any contingent consideration to be transferred by the
acquirer will be recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability
will be recognised in either in profit or loss or in other
comprehensive income as applicable. If the contingent
consideration is classified as equity, it shall not be
remeasured.

Income tax

The income tax expense (benefit) for the year comprises
current income tax expense (benefit) and deferred tax
expense (benefit).

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 (benefit) 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 as 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 cannot
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 statement of financial position and their tax
values applying under tax consolidation.

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. 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 statement of financial position.

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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 3. Signiﬁ cant Accounting Policies
continued

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 utilisation 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 amounts of all fixed assets including
capitalised lease assets, are 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

10–67% Straight-Line

Leased plant, equipment

10–40% Straight-Line

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 from a business combination and or
separately

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.

Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains and losses
are included in profit or loss.

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.

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.

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

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

GBST HOLDINGS LIMITED ABN 85 010 488 874

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.

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.

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.

Borrowing costs

Borrowing costs directly attributable to the acquisition or
production of a qualifying asset (i.e. an asset that necessarily
takes a substantial period of time to get ready for its intended
use or sale) are capitalised as part of the cost of the asset.
All other borrowing costs are expensed in the period they
occur. Borrowing costs consist of interest and other costs
that the entity incurs in connection with the borrowing
of funds.

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.

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 or
market prices (if actively traded).

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 profiles.

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 of disposal. 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 generate 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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 3. Signiﬁ cant Accounting Policies
continued

An impairment loss is recognised if the carrying amount of
an asset exceeds its recoverable amount. Impairment losses
are recognised in profit or loss.

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, initial measurement and derecognition

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.

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
profit or loss.

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.

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.

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.

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.

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 reporting period end. 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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

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 option pricing model or a Trinomial Lattice
option pricing model which incorporate 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. The major business activities
recognised revenue as follows:

Implementation and consulting services revenue

Revenue from a contract to provide implementation and
consulting services is recognised by reference to the
percentage of completion of the contract. The percentage
of completion of the contract is determined by reference to
the proportion of work performed (costs incurred to date) to
estimated total work performed (total contract costs). When
the percentage of completion cannot be estimated reliably,
contract revenue is recognised only to the extent of the
contract costs incurred that are likely to be recovered. An
expected loss on a contract is recognised immediately in the
Statement of Comprehensive Income at inception.

Project services revenue

Revenue received in advance for long-term project
development 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 reporting 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 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 at inception.

Software license fee revenue

Sale of goods

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.

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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 3. Signiﬁ cant Accounting Policies
continued

Grants

Government grants are recognised initially as deferred
income at fair value when there is reasonable assurance
that they will be received and that the Group will comply
with the conditions associated with the grant. Grants
that compensate the Group for expenses incurred are
recognised in profit or loss as other income on a systematic
basis in the same periods in which the expenses are
recognised. Grants that compensate the Group for the cost
of an asset are recognised in profit or loss on a systematic
basis over the useful life of the asset.

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, Directors and related parties.

Segment reporting

The Group has applied AASB 8 ‘Operating Segments’
and AASB 2008-3 ‘Amendments to Australian Accounting
Standards arising from AASB 8’ with effect from 1 July 2009.
AASB 8 requires operating segments to be identified on the
basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision maker
in order to allocate resources to segment and to assess its
performance. Application of AASB 8 has not resulted in a
change to the Group’s reportable segments.

GBST HOLDINGS LIMITED ABN 85 010 488 874

An operating segment is a component of the Group that
engages in business activities from which it may earn
revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating
results are regularly reviewed by the Group’s CEO to make
decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial
information is available.

Inter-segment pricing is determined on an arm’s length
basis.

Segment results, assets and liabilities that are reported to the
CEO include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis.

Foreign currency transactions and balances

Transactions 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 profit or loss, 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 profit
or loss.

Group companies

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 statement of financial
position. These differences are recognised in profit
or loss 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.

Presentation of financial statements

The Group applies revised AASB 101 Presentation of
Financial Statements (2007), which became effective as
of 1 January 2009. As a result, the Group presents in the
consolidated statement of changes in equity all owner
changes in equity, whereas all non-owner changes in
equity are presented in the consolidated statement of
comprehensive income.

Comparative information has been re-presented so that
it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation
aspects, there is no impact on earnings per share.

New standards and interpretations not yet adopted

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 2010, but have not
been applied preparing this financial report:

(cid:129) AASB 9 Financial Instruments includes requirements for
the classification and measurement of financial assets
resulting from the first part of Phase 1 of the project to
replace AASB 139 Financial Instruments: Recognition and
Measurement.

AASB 9 will become mandatory for the Group’s 30 June
2014 financial statements. Retrospective application
is generally required, although there are exceptions,
particularly if the entity adopts the standard for the year
ended 30 June 2012 or earlier. The Group has not yet
determined the potential effect of the standard.

(cid:129) AASB 124 Related Party Disclosures (revised December

2009) simplifies and clarifies the intended meaning of the
definition of a related party. The amendments, which will
become mandatory for Group’s 30 June 2012 financial
statements, are not expected to have any impact on the
financial statements.

(cid:129) AASB 2009-5 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 2011 financial
statements, are not expected to have a significant impact
on the financial statements.

(cid:129) AASB 2009-8 Amendments to Australian Accounting

Standards - Group Cash-settled Share-based Payment
Transactions resolves diversity in practice regarding
the attribution of cash-settled share-based payments
between different entities within a group. As a result of the
amendments AI 8 Scope of AASB 2 and AI 11 AASB 2 -
Group and Treasury Share Transactions will be withdrawn
from the application date. The amendments, which
become mandatory for the Group’s 30 June 2011 financial
statements, are not expected to have a significant impact
on the financial statements.

(cid:129) AASB 2009-10 Amendments to Australian Accounting
Standards - Classification of Rights Issue [AASB 132]
(October 2010) clarify that rights, options or warrants
to acquire a fixed number of an entity’s own equity
instruments for a fixed amount in any currency are
equity instruments if the entity offers the rights, options
or warrants pro-rata to all existing owners of the same
class of its own non-derivative equity instruments. The
amendments, which will become mandatory for the
Group’s 30 June 2011 financial statements, are not
expected to have any impact on the financial statements.

(cid:129) IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments addresses the accounting by an entity when
the terms of a financial liability are renegotiated and result
in the entity issuing equity instruments to a creditor of
the entity to extinguish all or part of the financial liability.
IFRIC 19 will become mandatory for the Group’s 30 June
2011 financial statements, with retrospective application
required. The Group has not yet determined the potential
effect of the interpretation.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 4. Revenue

a. 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

Note 5. Proﬁ t for the Year

Profit before income tax expense includes the following items of revenue and expense:

a. Other expenses:

Cost of third party product sold

Operating lease rentals

Research & developments costs

b. Depreciation & amortisation:

Depreciation of plant & equipment

Amortisation of tangible & intangible leased assets

Amortisation of intangibles (excluding leased assets)

c. Employee benefits expense:

Monetary based expense

Share based payments expense

d. Finance costs:

Foreign currency losses

Interest paid to external entities

Interest paid to director related entities

Finance lease charges

Facility fees

e. Finance income

Other entities

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

64,045

3,603

67,648

–

755

58,414

3,510

61,924

701

720

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

2,582

2,409

5,719

1,046

6,604

7,748

33,667

33,752

1,209

1,026

1,217

3,542

2,402

2,512

5,539

1,071

5,662

6,816

32,289

32,374

273

1,542

600

960

3,408

109

Note 5. Proﬁ t for the Year continued

f. Significant items:

The following signiﬁ cant expense items are relevant in explaining the ﬁ nancial performance:

Impairment charge on investment in listed shares

Impairment of goodwill

Impairment of intangible assets

Impairment charge on customer contract intangible

Termination payments to employees

Note 6. Income Tax Expense

Current tax

Deferred tax (Note 17 (c) (i))

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:

(Loss)/profit before tax

Prima facie tax (receivable)/payable at 30%

Adjust for tax effect of:

Amortisation of customer contracts

Impairment charge on investment in listed shares (i)

Impairment charge to goodwill for business acquisitions (ii)

Research & development expenditure claim

Capital Investment Allowance

Over provision in respect of prior years

Recognition of previously unrecognised tax losses

Tax losses carried back (Note 17)

Current year losses for which no deferred tax asset was recognised (Note 17)

Other non-allowable items (net)

UK share based payment treatment

Effect of different tax rates of subsidiaries operating in other jurisdictions

Income tax expense/(benefit) attributable to entity

Weighted average effective tax rates:

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

131

5,527

–

187

5,845

394

–

492

252

680

1,818

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

3,342

(1,315)

(198)

1,829

(576)

(173)

465

1,650

(333)

(8)

(105)

(93)

–

584

142

(380)

1,829

(318%)

1,606

(1,180)

(529)

(103)

2,026

608

551

118

–

(452)

(47)

(509)

–

(1,003)

655

(54)

–

(103)

(5%)

The 313% increase compared to 2009 in the weighted average effective consolidated tax rate has resulted primarily from the
non-allowable impairment on investments and that in 2009 tax losses were carried back from an acquired subsidiary $1.00 million.

i. The consolidated group 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.

ii. The consolidated group have not brought to account a deferred tax asset relating to the tax benefit on the impairment of goodwill on business

acquisitions due to the uncertainty of realisation of this capital loss.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 7. Dividends

Provision for dividend on ordinary shares

Dividend paid in the period:

Nil interim fully franked ordinary dividend (2009: 1.5 cents)

Nil 2009 final fully franked ordinary dividend (2008: 4 cents)

NET DIVIDEND PAID

Dividend franking account:

30% franking credits available to shareholders of GBST
Holdings Limited for subsequent financial years

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

–

867

2,013

2,880

10,680

8,027

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 8. Cash and Cash Equivalents

Cash at bank and on hand

Bank overdraft used for cash management purposes

CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS

Note 9. Trade and Other Receivables

Current

Trade receivables

Other amounts receivable

Note 10. Inventories

Current - at cost

Inventory on hand

Work in progress

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

1,707

(2,883)

(1,176)

2,314

(1,843)

471

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

12,671

174

12,845

9,358

140

9,498

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

695

712

355

370

Note 11. Financial Assets

Non-Current

Investment in listed shares at fair value (a)

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

1,096

1,622

a. At 30 June 2010 the fair value of the investment shareholding in Razor Risk Technologies (formerly IT&e Limited) resulted in an impairment of the asset

of $525 thousand of which $131 thousand is recorded in profit and loss and the remaining $394 thousand reduced the Financial Asset Reserve in equity.
The current carrying value of the investment is $1.10 million.

Note 12. Plant and Equipment

Owned plant and equipment at cost

Provision for depreciation

NET CARRYING VALUE

Leased plant and equipment at cost

Provision for amortisation

NET CARRYING VALUE

TOTAL PLANT AND EQUIPMENT

a. Movement in Plant and Equipment

GBST Group

Year ended 30 June 2009

Balance at 1 July 2008

Additions

Additions through the acquisition of controlled entities

Disposals

Depreciation expense

Effect of movements in exchange rates

Balance at 30 June 2009

Year ended 30 June 2010

Balance at 1 July 2009

Additions

Disposals

Depreciation expense

Effect of movements in exchange rates

Balance at 30 June 2010

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

9,807

(7,207)

2,600

506

(157)

349

2,949

9,668

(6,804)

2,864

313

(75)

238

3,102

Owned
$’000

Leased
$’000

Total
$’000

2,357

1,103

533

(20)

(1,071)

(38)

2,864

912

(38)

(1,046)

(92)

2,600

161

145

–

(68)

–

238

193

–

(82)

–

349

2,518

1,248

533

(20)

(1,139)

(38)

3,102

1,105

(38)

(1,128)

(92)

2,949

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 13. Intangible Assets

At Cost

Software systems

Accumulated amortisation

NET CARRYING VALUE

Customer contracts

Accumulated amortisation

NET CARRYING VALUE

Goodwill

NET CARRYING VALUE

Leased software at cost

Accumulated amortisation

NET CARRYING VALUE

TOTAL INTANGIBLES

a. Movement in Intangibles

GBST Group

Year ended 30 June 2009

Balance at 1 July 2008

Additions

Additions through the acquisition of controlled
entities

Remeasurement of contingent consideration

Disposals

Write down

Amortisation charge

Effect of movements in exchange rates

Balance at 30 June 2009

Year ended 30 June 2010

Balance at 1 July 2009

Additions

Additions through internal development

Disposals

Write down

Amortisation charge

Effect of movements in exchange rates

Balance at 30 June 2010

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

37,310

(9,867)

27,443

12,681

(5,997)

6,684

42,937

(34)

39,321

(6,915)

32,406

13,487

(3,570)

9,917

51,098

(17)

77,069

93,443

Goodwill
$ ‘000

31,588

–

25,949

(4,695)

–

(1,744)

51,098

Software
Systems
$ ‘000

Customer
Contracts
$ ‘000

15,433

1,184

6,750

–

21,394

6,168

–

(252)

(2,280)

(469)

9,917

–

(492)

(3,382)

(1,731)

32,406

656

1,053

–

(4,066)

(2,606)

27,443

9,917

51,098

–

(2,538)

(695)

6,684

–

(5,500)

–

(2,661)

42,937

Leased
Software
$ ‘000

–

(15)

–

(1)

–

(16)

–

Total
$ ‘000

53,808

1,184

53,511

(4,695)

–

(744)

(5,677)

(3,944)

93,443

656

1,053

(1)

(5,500)

(6,620)

(5,962)

77,069

Intangible assets, other than goodwill, have finite useful lives. The current amortisation charges for intangible assets are included
within the Product Delivery and Support expense line in the Statement of Comprehensive Income. Goodwill has an infinite life.

The effect of movements in exchange rates represent the period to period foreign currency translation of assets denominated
in Great British Pounds.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 13. Intangible Assets continued

Impairment Disclosures

Intangible assets are reviewed for impairment where there are indicators that the carrying amount may not be recoverable.

Goodwill is allocated to each Cash Generating Unit (CGU) based on the group’s reporting segments presented below:

Australian Broker Services segment

Wealth Management segment

Global Broker Services (Coexis) - see Note 27(d)

Financial Services segment (Emu) - see Note 27(d)

Total Goodwill

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

3,350

28,238

10,463

886

42,937

3,350

28,238

18,624

886

51,098

The recoverable amount of goodwill has been assessed using value-in-use calculations for each CGU using discounted cash
flow projections based on actual operating results, business unit budgets and five-year strategic plans approved by the Board
and updated where appropriate.

For the financial year ending 2011, Management has used the 2011 financial budget approved by the Board. For future financial
years forecast projections or the current business strategic plans have been used. The assumptions are generally consistent
with past performance or are based upon the Group ’s view of future market activity. The key assumptions used for value-in-use
calculations consider growth and discount rates. Growth rates used are determined by considering factors such as industry and
sector expectations, the markets in which the CGU operates, the size of the business, and past performance.

The Global Broker Services CGU segment recorded a loss for the year ended 30 June 2010 indicating that the carrying amounts
of the intangible assets may have been impaired. Accordingly the subsidiary entity has recognised a provision for impairment
of $5.50 million (2009: nil) in relation to the CGU. The recoverable amount of the CGU was determined using the value-in-use
calculations based on the present value of cash flow projections of Global Broker Services over five years. In preparing the
projections, Management used the 2011 budgets and a growth rate thereafter of 11% per annum for revenue, 5% per annum
for costs, long term growth rate of 3% and a post-tax discount rate of 14.53% (pre-tax discount rate of 20%). Based on sensitivity
analysis conducted on key cash flow drivers a 1% movement of these key variables increases the impairment ranging by
$1.5 million to $2.5 million.

All other CGU ’s were tested for impairment based upon a similar approach outlined above. Revenue growth rates of 5% were
used for the Australian Broker Services and Financial Services CGU s, whilst a range of revenue growth rates were used for the
rapidly expanding Wealth Management CGU ranging from 5% to 100% depending on the CGU service offering. Costs growth
rates of 5% per annum, long term growth rates of 3% per annum and a post-tax discount rate of 10.67% (pre-tax discount rate of
14%) were applied to all of these CGU’ s. Based on sensitivity analysis Management believe that any reasonable possible change
in the respective key assumptions would not have a material impact on the recoverable amount of the carrying value of the CGU’s.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 14. Other Assets

Current

Prepaid expenditure

Non-Current

Prepaid expenditure

Note 15. Trade and Other Payables

Current (unsecured)

Trade payables & accruals

Non-Current (unsecured)

Trade payables & accruals

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

892

1,389

180

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

3,962

136

4,625

457

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 16. Financial Liabilities

Loan from Related Parties

Current

Accrued interest on loan from Director related entity (secured)

Loan from Director related entity (secured)(a)

Other Financial Liabilities

Current

Bank overdraft (secured)(b)

Senior bank facility (secured)(b)

Senior bank facility GBP (secured)(b)

Commercial loan facility (secured)(b)

Finance lease liability (Note 23)

Loan from Related Parties

Non-Current

Loan from Director related entity (secured)(a)

Other Financial Liabilities

Non-Current

Senior bank facility (secured)(b)

Senior bank facility GBP (secured)(b)

Commercial loan facility (secured)(b)

Finance lease liability (Note 23)

TOTAL SECURED LIABILITIES

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

–

2,883

6,000

–

495

215

9,593

9,628

7,394

7,040

383

170

14,987

33,823

–

10,000

1,843

2,700

3,080

147

176

7,946

–

15,000

12,320

–

196

27,516

45,090

a. The loan from a Director related entity and a major shareholder is sub–ordinated debt provided by Crown Financial Pty Ltd (“Crown”). Interest is payable
at a rate of 10% p.a. The Company entered into an agreement with Crown Financial Pty Ltd on 26 August 2009, to issue Crown with 10,526,316 options
over ordinary shares in GBST at an exercise price of 95 cents per option (Placement Options).

The effective consideration for the issue of the Placement Options has been Crown agreeing to extend the expiry date of its current $10.00 million loan
facility from 1 January 2010 to February 2012. Each Placement Option may be converted at any time until the expiry date. The Placement Options will
lapse upon repayment of the loan.

This equity conversion feature effectively transforms the loan into a convertible note. Under Australian Accounting Standards this is regarded as a

significant modification which is accounted for as an extinguishment of the old loan and recognition of the new convertible note.

The excess of the fair value of the ‘convertible note’ instrument over the carrying value of the original loan is recorded in equity because Crown is

deemed to act in their capacity as shareholder. The equity component of the convertible note is also recorded in equity, giving a net impact on reserves
of $561 thousand, being the difference between the original loan at carrying value and the new debt component (loan) fair valued using a comparable
rate charged for similar loans, which was determined to be 13.5%. The new loan is therefore recorded at a value below its principal amount but will
unwind this discount over the term as interest expense.

b. The bank overdraft, senior bank facility, senior bank facility GBP 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 company renewed the banking facilities
on 25 June 2010, where the senior bank facility and senior bank facility GBP expire on 30 June 2013, with quarterly principal repayments of $1.50 million
for the senior bank facility and interest only payments for the GBP facility. Additional payments may be made against facilities without incurring penalties.
Interest rates under the facility are variable. At 30 June the interest rate for the senior bank facility was 7.65% p.a. and for the senior bank facility
GBP 4.33% p.a.

In respect of the bank facilities, totalling $24.82 million at 30 June 2010, the company met all covenant requirements. The carrying amount of group
non-current assets secured is $84.85 million.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 17. Tax

a. Liabilities

Current

Income tax

Non-Current

Deferred tax liability comprises:

Tax allowances relating to plant and equipment

Tax allowances relating to intangibles

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. Net Movement

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

1,821

486

5,229

5,267

504

3,001

124

3,709

6,995

7,056

588

2,463

284

–

3,335

The overall movement in the net deferred tax account is as follows:

Opening balance

(3,721)

2,660

Recoupment of temporary differences not previously taken up

Additions through capital raising

Additions through the acquisition of controlled entities

Charged to income statement

Foreign currency 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 plant and equipment and intangibles

Opening balance

Recoupment of temporary differences not previously taken up

Additions through the acquisition of controlled entities

Charged to income statement

Foreign currency translation

CLOSING BALANCE

(83)

101

–

1,315

849

(19)

(1,558)

7,056

–

(839)

(968)

5,267

–

(8,251)

1,180

737

(47)

(3,721)

176

–

8,251

(633)

(737)

7,056

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 17. Tax continued

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

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

Recoupment of temporary differences not previously taken up

Charged to income statement

CLOSING BALANCE

Other Items

Opening balance

Recoupment of temporary differences not previously taken up

Charged to income statement

Foreign currency translation

CLOSING BALANCE

Transaction costs on equity issue

Opening balance

Recoupment of temporary differences not previously taken up

Additions through capital raising

Charged directly to equity

CLOSING BALANCE

Unused tax losses

Opening balance

Charged to income statement

Translation

CLOSING BALANCE

b. Total deferred tax assets not brought to account as at reporting period end:

– tax losses: operating losses

– tax losses: capital losses

2,463

(40)

578

3,001

284

(23)

(102)

(35)

124

–

(2)

101

(19)

588

–

(84)

504

1,239

2,166

2,140

–

323

2,463

–

224

–

284

–

(47)

–

588

–

588

655

461

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 18. Provisions

Current

Employee benefits

Make Good(a)

Non-Current

Employee benefits

Make Good(a)

GBST Group

Balance at the beginning of the year

Additional provisions

Amounts used

Unused amounts reversed

BALANCE AT 30 JUNE 2010

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

2,997

3,043

869

529

1,398

Employee
benefits
$’000

3,317

3,007

(2,389)

(69)

3,866

Make Good
$’000

578

–

(32)

575

2,343

–

2,343

974

578

1,552

Total
$’000

3,895

3,036

(2,389)

(101)

4,441

a. In accordance with rental premises lease agreements across the Group, GBST must restore the leased premises to its original condition at the end of the

lease terms. Expiration dates range from 2010 to 2015.

Note 19. Unearned Income

Current

Revenue received in advance for software usage and support services

Non–Current

Revenue received in advance for software usage and support services

Note 20. Liabilities On Business Acquisition

Current

Amount owing to vendors in respect of acquisition

Non–Current

Amount owing to vendors in respect of acquisition

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

5,373

4,927

111

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

1,474

–

4,009

580

Note 21. Issued Capital

66,032,789 (2009: 57,819,853) fully paid ordinary shares

Movements in issued capital:

Opening balance

*Various dates

Employee zero exercise options scheme

Share issues during the year:

1 October 2008

Acquisition of Emu

9 December 2008

Acquisition of Coexis

7 August 2009

Share Purchase Plan Share Issue

28 August 2009

Placement Share Issue

28 August 2009

Deferred consideration – InfoComp

August 2009

Transaction Costs

Recognition of Deferred Tax on Capital Raising Expenses

9 December 2009

Deferred consideration – Coexis

Ordinary Shares

Opening balance

Share issues during the year:

1 October 2008

Acquisition of Emu

9 December 2008

Acquisition of Coexis

7 August 2009

Share Purchase Plan Share Issue

28 August 2009

Placement Share Issue

28 August 2009

Deferred consideration – InfoComp

9 December 2009

Deferred consideration – Coexis

*Various dates

Employee zero exercise options scheme

Employee exempt options scheme

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

37,102

31,819

25,499

–

814

3,764

450

(336)

100

423

250

6,016

–

37,102

31,819

No.

57,819,853

50,296,733

–

171,939

7,336,007

1,251,641

6,190,195

292,500

459,830

17,438

1,332

–

13,842

1,332

66,032,789

57,819,853

* There were numerous share issues during the year as employees exercised their respective options during the year.

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 or par value in respect of its issued shares.

Options
For details on employee and placement options over ordinary shares, see Note 33 and Note 16(a) respectively.

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.

The group’s capital includes ordinary share capital, reserves and retained earnings, bank facilities, other financial liabilities;
supported by financial assets.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 21. Issued Capital continued

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 2010 year, the group paid no dividends (2009: $2.88 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 current gearing ratio (net debt/total debt and equity) of 43% (2009: 50%) is within the target range of between 30% and 50%.
The gearing ratios for the year ended 30 June 2010 and 30 June 2009 are as follows:

Total borrowings

Less: cash and cash equivalents

Net debt

Total equity

TOTAL DEBT AND EQUITY

Gearing ratio

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

34,662

1,707

32,955

44,207

77,162

43%

45,462

2,314

43,148

43,645

86,793

50%

The group is not subject to any externally imposed capital requirements, other than the facility covenants set out in Note 16.

Note 22. Reserves

Equity remuneration reserve

Foreign currency translation reserve

Financial asset reserve

Loan from director related entity conversion reserve

Note 23. Capital, Leasing And Other Commitments

a. Finance Leasing Commitments

Payable on leases:

Not later than one year

Later than one year but not later than five years

Later than five years

Less future finance charges

TOTAL LIABILITY

Lease liabilities are included in the Statement of Financial Position as:

Current (Note 16)

Non-current (Note 16)

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

128

(4,161)

–

561

(3,472)

111

(1,661)

394

–

(1,156)

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

238

191

–

429

(44)

385

215

170

385

202

205

–

407

(35)

372

176

196

372

Finance leases relate to items of plant and equipment and have options to acquire the items on termination.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 23. Capital, Leasing And Other Commitments continued

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

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

2,177

4,942

–

7,119

2,912

5,980

–

8,892

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.

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 24. 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

Overseas KPMG firms

Taxation services

Other Auditors

Other assurance services

Taxation services

549

–

549

–

GBST GROUP

30 Jun 2010
$

30 Jun 2009
$

263,862

222,542

–

53,046

52,091

24,663

341,571

–

274,633

41,028

121,891

15,215

3,636

22,443

204,213

24,500

82,620

–

107,120

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 25. Other Group Entities

a. Controlled Entities Consolidated

Group Entity

GBST Pty Ltd*

Emu Design (Qld) Pty Ltd*

GBST ESOP Pty Ltd*

GBST Ltd

GBST Australia Pty Ltd*

Subsidiaries of GBST Ltd:

Coexis Inc

Coexis Software Ltd

Subsidiaries of GBST Australia Pty Ltd:

GBST Hong Kong Limited

GBST Registry Solutions Pty Ltd*

GBST Wealth Management Pty Ltd*

Subsidiaries of GBST Wealth Management Pty Ltd:

InfoComp UK Limited

GBST UK Holdings Limited

Subsidiaries of GBST UK Holdings Ltd:

GBST Hosting Limited

GBST Wealth Management Limited

Country of Incorporation

Percentage Owned

Australia

100% (June 2009: 100%)

United Kingdom

100% (June 2009: 100%)

Australia

100% (June 2009: 100%)

United States of America

100% (June 2009: 100%)

United Kingdom

100% (June 2009: 100%)

Hong Kong

100% (June 2009: 100%)

Australia

100% (June 2009: 100%)

United Kingdom

95.9% (June 2009: 95.9%)

United Kingdom

100% (June 2009: 100%)

United Kingdom

100% (June 2009: 100%)

United Kingdom

100% (June 2009: 100%)

* Pursuant to ASIC Class Order 98/1418 these wholly-owned controlled entities are relieved from the Corporations Act 2001 requirements for preparation,

audit and lodgement of financial reports and Directors’ Report.

b. Deed of Cross Guarantee

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.

A consolidated statement of comprehensive income and consolidated statement of financial position, 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 2010 is set out as follows:

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 25. Other Group Entities continued

Financial information in relation to:

i. Statement Of Comprehensive Income

Revenue

Other income

RESULTS FROM OPERATING ACTIVITIES

Finance costs

Finance income

Net finance costs

Profit before income tax

Income tax expense

(Loss)/profit after income tax

(LOSS)/PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY

Other comprehensive income

TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD

ii Retained Earnings

Retained profits at the beginning of the year

Profit after income tax

Dividends provided for or paid

RETAINED EARNINGS AT END OF THE YEAR

iii Statement Of Financial Position

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

CLOSED GROUP AND PARTIES
TO DEED OF CROSS GUARANTEE

30 Jun 2010
$’000

30 Jun 2009
$’000

51,678

4,668

(3,492)

(3,478)

1,190

(2,232)

(1,042)

(394)

(1,436)

11,541

(1,042)

–

10,499

292

7,734

708

533

9,267

10,109

1,096

2,210

48,252

28,553

2,654

92,896

102,163

49,903

126

5,968

(2,959)

(2,871)

3,098

(773)

2,325

394

2,719

12,096

2,325

(2,880)

11,541

1,535

6,825

270

941

9,571

3,009

1,622

2,466

51,357

42,039

2,502

180

103,175

112,746

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 25. Other Group Entities continued

CURRENT LIABILITIES

Trade and other payables

Loans from related parties

Financial liabilities

Current tax liabilities

Provisions

Unearned income

Liabilities on business acquisition

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES

Trade and other payables

Loans from related parties

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

Note 26. Financing Arrangements

Financing facilities(a)

Amount utilised

UNUSED CREDIT FACILITIES

CLOSED GROUP AND PARTIES
TO DEED OF CROSS GUARANTEE

30 Jun 2010
$’000

30 Jun 2009
$’000

1,937

9,593

1,749

3,043

4,677

1,474

2,674

10,000

7,946

294

2,343

4,320

4,009

22,555

31,586

136

9,628

14,987

5,230

1,307

–

31,318

53,873

48,290

37,102

689

10,499

48,290

457

–

27,516

7,056

1,491

111

580

37,211

68,797

43,949

31,819

589

11,541

43,949

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

37,134

(35,340)

1,794

50,011

(44,016)

5,995

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 and interest rates under the facility are variable. Additional payments may be
made against facilities without incurring penalties. The bank loans comprise of a senior bank facility with quarterly principal repayments, an interest only
senior bank facility Great British Pounds (GBP) and commercial loan facility which has monthly principal repayments. 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 to 48 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 February 2012. The terms of the loan including interest rates are on arm’s length terms. Interest is payable at a rate of 10% p.a.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 27. Cash Flow Information

a. Reconciliation of Net Cash provided by Operating Activities to Profit after Income Tax

GBST GROUP

(Loss)/profit after income tax

Non-cash flows in operating profit:

Depreciation and amortisation

Write down of intangible 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

Change in intangibles (internal costs)

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

CASH FLOW FROM OPERATIONS

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 Statement of Financial Position as follows:

Cash at bank (Note 8)

Bank overdraft (Note 16)

c. Non-cash Financing Activities

30 Jun 2010
$’000

(2,405)

7,748

5,527

131

1,201

655

(238)

365

(342)

(2,163)

1,335

(4,015)

546

8,433

1,707

(2,883)

(1,176)

30 Jun 2009
$’000

2,129

6,816

252

886

(39)

13,166

(255)

–

203

372

(1,483)

(1,969)

(1,423)

(120)

18,620

2,314

(1,843)

471

During the 2010 financial year the group acquired plant and equipment and software with an aggregate value of $193 thousand
(2009: $145 thousand) by means of finance leases; $1.36 million (2009: $294 thousand) by means of equipment loans.

During the year the following ordinary shares were issued as non-cash consideration:

– Employee zero exercise options scheme

– Employee exempt options scheme

These items are not reflected in the Statement of Cash Flows.

Number

17,438

1,332

Issue Price

$3.9000

$0.7505

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 27. Cash Flow Information continued

d. Acquisition of business

In the prior comparative year 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

30 Jun 2010
$’000

30 Jun 2009
$’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 $4.20 million which have been subsequently remeasured to zero,

in year ended 30 June 2009.

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

30 Jun 2010
$’000

30 Jun 2009
$’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.

A loss of $130 thousand is included in the consolidated statement of comprehensive income for the year 30 June 2009.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 27. Cash Flow Information continued

In the prior comparative year 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

30 Jun 2010
$’000

30 Jun 2009
$’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,

in year ended 30 June 2009.

Assets and liabilities acquired at acquisition date:

Property, plant and equipment

Cash

Trade and other receivables

Payables and provisions

Goodwill

TOTAL

GBST GROUP

30 Jun 2010
$’000

30 Jun 2009
$’000

–

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.

A loss before tax amounting to $422 thousand is included in the consolidated statement of comprehensive income for the year
30 June 2009.

Had the results of Emu and Coexis been consolidated for the full 2009 year, consolidated revenue would have been $71.32 million
and consolidated profit before tax $2.61 million for the year 30 June 2009.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 28. Operating Segments

The Group has four reportable segments, as described below, which are the Group’s strategic business units. The strategic
business units offer different products and services, and are managed separately because they require different technology and
marketing strategies. For each of the strategic business units, the CEO reviews internal management reports on a monthly basis.
The following summary describes the operations in each of the Group’s reportable segments:

Australian Broker Services 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.

Wealth Management 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. Wealth Management 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. It also provides web design, development and usability services.

Global Broker Services 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.

Reportable Segments

AUSTRALIAN
BROKER
SERVICES

WEALTH
MANAGEMENT

FINANCIAL
SERVICES

GLOBAL
BROKER
SERVICES

ELIMINATIONS

GBST GROUP

30 Jun
2010
$’000

30 Jun
2009
$’000

30 Jun
2010
$’000

30 Jun
2009
$’000

30 Jun
2010
$’000

30 Jun
2009
$’000

30 Jun
2010
$’000

30 Jun
2009
$’000

30 Jun
2010
$’000

30 Jun
2009
$’000

30 Jun
2010
$’000

30 Jun
2009
$’000

Revenue

Sales to external customers

30,153 28,276

22,772 23,485

2,581

1,251

12,142

8,912

Other income from external customers

Inter-segment revenues

–

109

–

258

267

644

–

595

121

–

– 67,648 61,924

–

755

720

(258)

(388)

–

TOTAL SEGMENT REVENUE

30,155 28,321

22,881 23,512

2,839

1,571

12,786

9,628

(258)

(388) 68,403 62,644

9,824

8,044

1,925

(442)

(54)

(792)

(8,744) (1,485)

–

2,951

5,325

SEGMENT RESULT FROM
OPERATING ACTIVITIES

Net finance costs

(Loss)/profit before income tax

Income tax (expense)/benefit

(LOSS)/PROFIT AFTER INCOME
TAX

Other material non-cash items:

Depreciation and amortisation of
segment assets

1,191

1,139

3,592

3,602

Other non-cash segment expenses

217

973

CAPITAL EXPENDITURE

1,891

1,801

513

252

445

SEGMENT TOTAL ASSETS

14,189 13,363

52,771 55,016

SEGMENT TOTAL LIABILITIES

7,902 12,908

19,028 23,356

GBST HOLDINGS LIMITED ABN 85 010 488 874

(3,527) (3,299)

(576) 2,026

(1,829)

103

(2,405)

2,129

532

239

2,907

2,016

–

5,501

–

1,084

386 44,469

690

33,509 46,184

365

29,625 34,979

–

7,748

6,816

5,746

1,225

2,814 47,799

– 101,001 115,253

– 56,794 71,608

Note 28. Operating Segments continued

Geographical Location:

Australia

United Kingdom

SEGMENT REVENUES FROM
EXTERNAL CUSTOMERS

CARRYING AMOUNT OF SEGMENT
NON-CURRENT ASSETS

30 Jun 2010
$’000

30 Jun 2009
$’000

30 Jun 2010
$’000

30 Jun 2009
$’000

50,203

17,445

67,648

54,765

7,159

61,924

54,892

29,953

84,845

58,126

43,556

101,682

Information about Geographical Areas

The consolidated group’s business segments are located in Australia with Wealth Management and Global Broker Services
having operations in the United Kingdom.

The Australian Broker Services division has a customer in New Zealand and customers in South East Asia from sales
to Australian entities.

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.

Intersegment Transfers

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.

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since the prior
reporting period.

Note 29. 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 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 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 have overall responsibility for the establishment and oversight of 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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 29. Financial Risk Management continued

The Board of Directors meet on a regular basis to analyse
financial risk exposure and to evaluate treasury management
strategies in the context of current 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 present is to manage interest cost using a combination
of fixed and variable rate debt.

Australian Variable Interest Rate Risk

At reporting period, the Group had the following mix of
financial assets and liabilities exposed to Australian variable
interest rate risk.

GBST GROUP

Financial assets

Cash

Financial liabilities

Bank overdraft

Bank loan

2010
$’000

279

2,883

14,273

17,156

2009
$’000

1,533

1,280

17,847

19,127

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.

Great British Pound variable interest rate risk

At reporting period, the Group had the following mix
of financial assets and liabilities exposed to Great British
Pound variable interest rate risk.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Financial assets

Cash

Financial liabilities

Bank overdraft

Bank loan

GBST GROUP

2010
$’000

1,264

–

7,040

2009
$’000

779

563

15,400

15,963

Foreign Currency 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 $2.67 million (2009: $2.77 million)
and payables and loans of $7.88 million (2009: $17.79 million).

At balance sheet date the Group had exposure to movements
in the exchange rate for United States of America Dollars in
cash and receivables of $1.70 million (2009: $638 thousand)
and payables of $Nil (2009: $129 thousand).

At balance sheet date the Group had exposure to
movements in the exchange rate for Euros in cash and
receivables of $688 thousand (2009: $Nil) and payables
of $Nil (2009: $Nil).

Share Price Risk

The Group have an investment in an ASX listed Company,
Razor Risk Technologies Limited (formerly IT&e Limited),
(see Note 11). This is a long term shareholding, however
exposure exists to movements in the market price.

c. Liquidity Risk

Liquidity risk is the risk that 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
Group’s reputation.

Note 29. Financial Risk Management continued

c. Liquidity Risk continued

The Group’s objective is to maintain a balance between
continuity of funding and flexibility through the use of
overdrafts, loans and finance leases. Liquidity risk is
managed by monitoring forecasted business performance
including cash flows, the collection of trade receivables,
payment of trade payables and maintaining adequate
borrowing facilities. In addition, the Group forecasts
bank covenant compliance and completes a compliance
certificate to the National Australia Bank on a quarterly basis.

d. Credit Risk

The maximum exposure of credit risk at balance date,
excluding the value of any collateral or other security, 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 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.

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 25 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 27% (2009: 29%) of the Group’s
revenue is derived from five customers providing financial
services. All Australian clients satisfy the minimum core
capital requirements of the ASX.

Trade debtor terms range between fourteen to thirty days.
Included in the Group’s trade receivable balance are debtors
with a carrying amount of $3.67 million (2009: $3.09 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 sixty-eight days (2009: eighty-five days).

The aging of the Group’s receivables at the reporting date was:

2010

2009

Gross
$’000

Impairment
$’000

Gross
$’000

Impairment
$’000

Not past due

Past due 0–30 days

Past due 30–120 days

Past due more than 121 days

9,002

2,273

1,063

368

12,706

–

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

6,268

1,585

1,241

735

9,829

–

471

GBST GROUP CARRYING
AMOUNT

2010
$’000

1,707

12,845

1,096

15,648

2009
$’000

2,314

9,498

1,622

13,434

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 29. Financial Risk Management continued

The maximum exposure to credit risk for trade and other receivables at reporting date by geographic region was:

Australia

United Kingdom

United States of America

e. Financial Instruments

GBST GROUP CARRYING
AMOUNT

2010
$’000

8,691

2,574

1,580

12,845

2009
$’000

6,521

2,352

625

9,498

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.

0-1 YEARS

1-2 YEARS

2-5 YEARS

OVER 5 YEARS

TOTAL

2010
$’000

2009
$’000

2010
$’000

2009
$’000

2010
$’000

2009
$’000

2010
$’000

2009
$’000

2010
$’000

2009
$’000

GBST Group

FINANCIAL ASSETS

Cash(i)

1,707

2,314

Trade and other receivables

12,845

9,498

Available for sale financial assets

1,096

1,622

TOTAL FINANCIAL ASSETS

15,648 13,434

FINANCIAL LIABILITIES

–

Bank loan and overdraft(i)

9,379

7,770

6,382 27,320

8,434

Loan from Director related entity

82 10,000

9,628

Lease facilities(ii)

Liabilities on acquisition

Trade & other payables

238

202

1,474

4,009

3,962

4,625

–

136

–

184

580

320

–

115

–

TOTAL FINANCIAL LIABILITIES

15,135 26,606

16,222 28,404

8,549

i. These items have variable interest rates.
ii. These items have fixed interest rates. All other items are non-interest bearing.

–

137

158

–

1,707

2,314

12,845

9,498

1,096

1,622

15,648 13,434

24,195 35,090

9,710 10,000

429

407

1,474

4,589

4,098

5,082

39,906 55,168

ii. Net Fair Values

The fair value of investments traded on active liquid markets are 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 or 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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 29. Financial Risk Management continued

e. Financial Instruments continued

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

2010

2009

Carrying
Amount
$’000

Net Fair
Value
$’000

Carrying
Amount
$’000

Net Fair
Value
$’000

1,707

12,845

1,096

15,648

4,098

33,905

385

1,474

1,707

12,845

1,096

15,648

4,098

33,842

385

1,474

39,862

39,799

2,314

9,498

1,622

2,314

9,498

1,622

13,434

5,082

45,090

372

4,589

55,133

5,082

44,684

372

4,589

54,727

Fair values are materially in line with carrying values. A discount rate of 7.33% (2009: 7.15%) has been applied to all non-current
borrowings to determine fair value.

Fair Value Hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as
follows:

(cid:129) Level 1: quotes prices (unadjusted) in active markets for identical assets or liabilities

(cid:129) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices)

(cid:129) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

2010

Available-for-sale financial assets

2009

Available-for-sale financial assets

iii. Sensitivity Analysis

Level 1
$’000

Level 2
$’000

Level 3
$’000

Total
$’000

1,096

1,622

–

1,096

1,622

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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 29. Financial Risk Management continued

Interest rate sensitivity analysis

At 30 June 2010, 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:

GBST GROUP

Increase/(decrease) in profit

Increase in interest rate by 1%

Decrease in interest rate by 1%

Foreign currency risk sensitivity analysis

2010
$’000

(338)

338

2009
$’000

(451)

451

At 30 June 2010, the effect on profit and equity as a result of changes in the value of the Australian Dollar (AUD) to the Great
British Pound (GBP), with all other variables remaining constant is as follows:

GBST GROUP

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%

2010
$’000

(6)

211

(211)

2009
$’000

(27)

233

(233)

At 30 June 2010, the effect on profit and equity as a result of changes in the value of the Australian Dollar (AUD) to the United
States of America Dollar (USD), with all other variables remaining constant is as follows:

GBST GROUP

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%

2010
$’000

2009
$’000

197

(161)

197

(161)

(70)

At 30 June 2010, the effect on profit and equity as a result of changes in the value of the Australian Dollar to the Euro, with all other
variables remaining constant is as follows:

GBST GROUP

Increase/(decrease) in profit

Improvement in AUD to EUR by 10%

Decline in AUD to EUR by 10%

Change in Equity

Improvement in AUD to EUR by 10%

Decline in AUD to EUR by 10%

GBST HOLDINGS LIMITED ABN 85 010 488 874

2010
$’000

2009
$’000

(63)

–

Note 29. Financial Risk Management continued

Price risk

At 30 June 2010 the net effect on profit and equity of a 1 cent (40%) change in share price in the Group’s listed investment,
with all other variables remaining constant is $438 thousand up/down (2009: $438 thousand up/down). Current share price
of the Group’s listed investment is 2.5 cents, resulting in a maximum exposure to the Group of $1.10 million.

Note 30. Contingent Liabilities

As at 30 June 2010, 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.

Note 31. Key Management Personnel Disclosures

a. Names and positions held of Group Key Management Personnel in office at any time during the financial year were:

Key Management Personnel

Position

J Puttick

D Adams

A Brackin

S Lake

J Sundell

Director (Non-executive Chairman)

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

Chief Executive Broker and Financial Services

Chief Financial Officer

Chief Technology Officer

Chief Executive Global Broker Services (Position held until 29 March 2010)

b. Key Management Personnel Compensation

Short-term employee benefits

Post-employment benefits

Other long-term benefits

Termination benefits

Share-based payments

GBST GROUP

2010
$

2009
$

2,434,354

2,196,906

176,203

182,857

–

12,262

1,765

53,846

–

2,622,819

2,435,374

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.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 31. 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.

2010

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

TOTAL EXECUTIVES

GROUP TOTAL

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
01/07/09

Received as
Compensation

Options
exercised

Net Change
Other (i)

Balance at
30/06/10

7,307,760

–

311,943

3,751,423

15,768,148

27,139,274

1,780,996

–

523,596

2,304,592

29,443,866

–

(250,000)

7,057,760

––

–

311,943

557,693

4,309,116

1,538,462

17,306,610

1,846,155

28,985,429

230,769

2,011,765

––

16,135

––

(523,596)

–

(276,692)

2,027,900

1,569,463

31,013,329

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

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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

2010

Directors

J Puttick

D Adams

A Brackin

S Lake

J Sundell

Note 31. 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
01/07/09

Granted as
Compensation

Options
Exercised or
Sold

Options
Cancelled/
Forfeited

Other

Balance
30/06/10

Total Vested
30/06/10

Total
Exercisable
30/06/10

Total
Unexercisable
30/06/10

–

500,000

–

(500,000)

–

– 10,526,316

–

– 10,526,316 10,526,316

– 10,526,316 (500,000) 10,526,316 10,526,316 10,526,316

–

TOTAL DIRECTORS 500,000

Executives

R De Dominicis

D Orrock

P Salis

I Sanchez

–

100,000

150,000

–

250,000

TOTAL EXECUTIVES 100,000

600,000

–

100,000

250,000

700,000

–

100,000

250,000

700,000

GROUP TOTAL

600,000

– 10,526,316 (500,000) 11,226,316 10,526,316 10,526,316

700,000

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.

Balance
01/07/08

Granted as
Compensation

Options
Exercised or
Sold

Options
Cancelled/
Forfeited

Other

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

–

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

–

(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

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 32. 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 31 and the Remuneration Report.

Consultancy fees paid to Mr A Brackin.

Occupancy fees paid to entities of which Mr R De Dominicis has a beneficial interest.

Deferred consideration was paid on InfoComp acquisition to Mr R De Dominicis
and associates.

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.

67,693 ordinary shares were issued on 10 December 2009 as part of the deferred
consideration payable on Coexis acquisition to Mr S Shah and associates.

GBST GROUP

2010
$

5,000

337,319

2009
$

–

285,216

250,000

–

1,026,035

250,000

599,580

62,278

–

Maximum deferred consideration payable on Coexis acquisition to Mr S Shah and associates.
Nil ordinary shares to be issued (2009: 255,861).

62,848

350,715

b. Transactions with Controlled Entities

Note 33. Share Based Payments

Details of transactions & balances with controlled entities
are set out in Note 25.

c. A loan existed at 30 June 2010 with Crown Financial
Pty Ltd, of which Mr Sundell is a Director

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 was executed. The loan’s term were 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.

Refer to further discussion at Note 16.

To assist in the attraction, retention and motivation of
employees, the Company operates the following share based
payment plans.

(cid:129) Exempt Option Scheme

(cid:129) Deferred Option Scheme

(cid:129) Exempt Share Scheme

(cid:129) Zero Exercise Price Option Scheme

Exempt Options Scheme

Under this Scheme on 9 March 2005 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 three years, subject to cessation of employment.
No share options were granted during the year under this
scheme (2009: nil), 1,332 were exercised and 21,312 expired
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.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 33. Share Based Payments continued

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 48,719 options were outstanding. The ZEPOs are
divided into three tranches. The first tranche of 20% vest
and may be exercised after twelve months and lapse if
unexercised in thirty-six months. The second tranche of 30%
vest and may be exercised after twenty-four months and
lapse if unexercised in forty-eight months. The third tranche
of 50% vest and may be exercised after thirty-six months
and lapse if unexercised after sixty months. During the year
17,438 options were exercised, 1,923 options were forfeited
and 29,358 options remain outstanding at balance date. On
cessation of employment all unvested options lapse. Current
year expense for ZEPOs was $46 thousand included in share
based payment expense.

At the Company’s 2007 Annual General Meeting the issue of
these ZEPOs was ratified and the Zero Exercise Price Option
Scheme was approved by shareholders.

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 twelve
months and lapse if unexercised in thirty-six months. The
second tranche of 30% vest and may be exercised after
twenty-four months and lapse if unexercised in forty-eight
months. The third tranche of 50% vest and may be exercised
after thirty-six months and lapse if unexercised after sixty
months. On cessation of employment all unvested options
lapse. Current year expense for these deferred options was
$2 thousand included in share based payment expense.

On 17 May 2010, 600,000 options were issued to select
Executive employees. The exercise price for each option is
$1.05. The options vest in nineteen months after the date of
grant. The options have a term of forty-three months from
the date of grant. On cessation of employment all unvested
options lapse.

In addition to continuity of employment, the vesting of
options is conditional upon the Company meeting certain
financial performance measures. Current year expense for
these deferred options was $12 thousand included in share
based payment expense.

Exempt Shares Scheme

Under this Scheme 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 three 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 scheme was approved by
shareholders. Current year expense for exempt shares was
$25 thousand included in share based payment expense.

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 33. Share Based Payments 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

Continued
Employment until

Financial Performance hurdle

24 October 2007

24 October 2008

If normalised EPS CAGR for 2008 compared to 2007 is:

Tranche 1
(20%)*

(cid:129) Less than 10%: no options vest

(cid:129) Equal to 10% : 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) Equal to or greater than 20%: 100% vesting.

Tranche 2
(30%)*

24 October 2009

If normalised EPS CAGR for the combined 2008 and 2009, compared to 2007 is:
(cid:129) Less than 10%: no options vest

(cid:129) Equal to 10% : 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) Equal to or greater than 20%: 100% vesting.

Tranche 3
(50%)*

24 October 2010

If normalised EPS CAGR for the combined 2008, 2009 and 2010, compared to 2007 is:
(cid:129) Less than 10%: no options vest

(cid:129) Equal to 10% : 33.33% of options vest

(cid:129) Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100%

(cid:129) Equal to or greater than 20%: 100% vesting.

17 May 2010

15 December 2011 If Group EBITDA for FY11 is:

(cid:129) 50% above Group EBITDA on FY 09 adjusted for the number of shares on issue

* If the performance condition for Tranche 1 is not met at the first exercise date, then 50 percent of those options lapse and 50 percent 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 percent of those options lapse and
50 percent 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 granted on the 17 May 2010 date has been determined by the Board and based on the external
valuation advice. The valuation has been made using a Trinomial Lattice option pricing model using standard option pricing
inputs such as the share price $0.90, the exercise price of $1.05, expected volatility of 80 percent, expected dividends of
5.55 percent, a term of nineteen months and a risk-free interest rate of 5.05 percent.

GBST HOLDINGS LIMITED ABN 85 010 488 874

Note 33. Share Based Payments continued

The following table illustrates the number, 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 2010
Number

671,363

600,000

1,923

18,770

521,312

729,358

1,795

Jun 2010
WAEP

$3.45

$1.05

$0.00

$3.69

$1.40

$0.00

Jun 2009
Number

1,002,178

–

215,641

15,174

100,000

671,363

24,181

Jun 2009
WAEP

$3.21

–

$3.58

$0.00

$1.25

$3.45

$0.00

The options outstanding at 30 June 2010 had a weighted average nil exercise price and a weighted average remaining
contractual life of fifteen 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 Schemes are $1.05
to $3.92 in respect of options outstanding at 30 June 2010.

The expense recognised in profit or loss in relation to share-based payments is disclosed in Note 5.

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 34. Earnings Per Share

Basic earnings per share (cents)

Diluted earnings per share (cents)

a. Reconciliation of earnings to net (loss) or profit

Net Loss/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

2010

(3.68)

$’000

(2,405)

2009

3.90

$’000

2,129

Weighted average number of ordinary shares outstanding during the year used
in calculation of basic EPS

65,371,747

54,535,390

Weighted average number of options outstanding or exercised during the year (i)

8,881,759

67,455

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING
DURING THE YEAR USED IN CALCULATION OF DILUTIVE EPS

74,253,507

54,602,845

i. Options issued by the Company 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 33 and Note 16 (a)).

ANNUAL REPORT 2010

Notes to and forming part of the
Consolidated Financial Statements

FOR THE YEAR ENDED 30 JUNE 2010 CONTINUED

Note 35. Subsequent Events

The financial report was authorised for issue on 27 August 2010 by the Board of Directors.

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 36. Parent Entity Disclosures

As at, and throughout the financial year ending 30 June 2010 the parent company of the Group was GBST Holdings Limited.

RESULTS OF THE PARENT ENTITY

Profit for the Period

Other comprehensive (loss)/income

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

FINANCIAL POSITION OF THE PARENT ENTITY AT YEAR END

Current Assets

TOTAL ASSETS

Current Liabilities

TOTAL LIABILITIES

TOTAL EQUITY OF THE PARENT ENTITY COMPRISING OF:

Issued capital

Equity remuneration reserve

Financial asset reserve

Loan from director related entity conversion reserve

Retained earnings

GBST HOLDINGS

30 Jun 2010
$’000

30 Jun 2009
$’000

(15,642)

(394)

(16,036)

4,676

132,477

18,323

91,982

8,932

394

9,326

4,709

143,120

26,608

92,450

37,102

31,819

128

–

561

2,704

40,495

111

394

–

18,346

50,670

Parent Entity Contingencies

The Directors are of the opinion that no provisions are required in respect of parent entity contingencies.

Contingent Liabilities not Considered Remote

The parent entity has guaranteed, to an unrelated party, the performance of a subsidiary in relation to a contract for the supply
of software and services.

Parent Entity 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

GBST HOLDINGS LIMITED ABN 85 010 488 874

516

–

516

–

Note 36. Parent Entity Disclosures continued

Note 37. Company Details

Guarantees

Property Leases

In accordance with property lease requirements, the
company has provided bank guarantees to the lessors.

Lending Facilities

The Groups’ lending facilities are supported by guarantees
from its subsidiaries.

Performance Guarantees

The parent entity provides certain guarantees in relation
to subsidiary performance of contract.

Parent Entity Guarantees in Respect of Debts
of its Subsidiaries

The parent entity has entered into a Deed of Cross
Guarantee with the effect that the Company guarantees
debts in respect of its subsidiaries.

Further details of the Deed of Cross Guarantee and the
subsidiaries subject to the deed, are disclosed in Note 25.

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

ANNUAL REPORT 2010

Directors’ Declaration

1. In the opinion of the Directors of GBST Holdings Limited (‘the Company’):

a. the consolidated financial statements and Notes 1 to 37 and the Remuneration report in the Directors’ report, set out on

pages 16 to 23, are in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance for the financial year

ended on that date; and

ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations

Regulations 2001; and

b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable.

2. There are reasonable grounds to believe that the Company and the Group entities identified in Note 25 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.

3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive

Officer and Chief Financial Officer for the financial year ended 30 June 2010.

4. The Directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compliance with

International Financial Reporting Standards.

Signed in accordance with a resolution of the Directors:

Dr J F Puttick
Chairman

Mr S M L Lake
Managing Director and Chief Executive Officer

Dated at Brisbane this 27th day of August 2010

GBST HOLDINGS LIMITED ABN 85 010 488 874

Independent Auditor’s Report

TO THE MEMBERS OF GBST HOLDINGS LIMITED

ANNUAL REPORT 2010

Independent Auditor’s Report

TO THE MEMBERS OF GBST HOLDINGS LIMITED CONTINUED

GBST HOLDINGS LIMITED ABN 85 010 488 874

Additional Information

Shareholding Information as at 31 August 2010

a. Distribution of Shareholders

Category (size of holding)

1 to 1,000

1,001 to 5,000

5,001 to 10,000

10,001 to 100,0000

100,001 and over

TOTAL

b. The number of shareholdings in less than marketable parcels is 186

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

238

304

159

186

938

Number
ordinary

16,264,148

9,075,430

7,056,760

4,350,544

The company only has ordinary shares on issue. There are 66,060,933 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

Rank Name

CROWN FINANCIAL PTY LTD

RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED

MR JOHN FRANCIS PUTTICK

STEPHEN MAURICE LINTON LAKE

NATIONAL NOMINEES LIMITED

DEKACROFT PTY LTD

TERENCE JOHN WILLIAMS

SMITH HAMILTON LIMITED

MR JOAKIM SUNDELL + MRS SHARA SUNDELL

10 COGENT NOMINEES PTY LIMITED

THREE CROWNS INVESTMENTS PTY LIMITED

BERISLAV BECAREVIC + IVANKA BECAREVIC

BARRY BECAREVIC

KEY IP LTD

ROBERT DEDOMINICIS

RAYMOND TUBMAN

TIMENOW PTY LTD

18 WANGARUKA HOLDINGS PTY LTD

BOND STREET CUSTODIANS LIMITED

20 RJAE PTY LTD

Total Units

14754464

8541142

4421020

4344116

3314576

2635740

2301224

2048582

1563462

868172

863684

751553

722408

721417

707839

703594

590332

% IC

22.33

12.93

6.69

6.58

5.02

3.99

3.48

3.10

2.37

1.31

1.14

1.09

1.07

0.89

ANNUAL REPORT 2010

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
31 August 2010

Ordinary fully paid shares escrowed until
9 December 2010

1,645,061

7,336,007

Unquoted Securities

A total of 700,513 options are on issue to 5 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

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

GBST HOLDINGS LIMITED ABN 85 010 488 874

GBST has three divisions:

Contents

The Year in Review

Chairman’s and Managing Director’s Report

Executive Team

Board of Directors

Corporate Governance Statement

Auditor’s Independence Declaration

Financial Statements

Directors’ Declaration

Independent Auditor’s Report

Additional Information

Directors’ Report

Corporate Directory

Notice of AGM

www.gbst.com

GBST HOLDINGS LIMITED ABN 85 010 488 874

Designed and produced by FCR.com.au
Designed and produced by FCR.com.au

GBST Holdings Limited
Annual Report 2010

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