Infomedia Annual Report 2006

Plain-text annual report

Infomedia Annual Report 06 s t n e t n o C Contents Results at a Glance Chairman’s Letter Company Profile History CEO Report CFO Report Directors’ Report Independence Declaration Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Audit Report Corporate Governance Statement Additional Information Corporate Directory 01 02 04 05 06 10 12 24 25 26 27 28 29 82 83 84 96 97 © 2006 Infomedia Ltd. All rights reserved worldwide. This document may not be reproduced in whole or in part without the express written permission of infomedia Ltd. a G l a n c e R e s u l t s a t ‘04 20.69 ‘05 6.35 ‘06 18.15 Results at a Glance1 Sales Revenue (in $ millions) ‘04 69.57 ‘03 61.81 NPAT (in $ millions) ‘03 18.33 ‘02 43.85 ‘05 59.14 ‘02 13.41 ‘01 12.83 ‘06 55.58 ‘03 30.63 ‘00 7.66 EBITDA (in $ millions) ‘04 35.68 ‘05 27.00 ‘02 20.88 ‘01 19.96 ‘06 28.10 ‘00 12.64 EPC Subscriptions ‘01 34.45 ‘00 21.08 55,000 44,000 33,000 22,000 11,000 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 1 Chart data for FY2006 and FY2005 prepared under Australian equivalents to International Financing Reporting Standards (AIFRS). Chart data for FY2004 and prior ﬁnancial years prepared under Australian Generally Accepted Accounting Principles (AGAAP). infomedia.com.au 01 s ’ n a m r i a h C r e t t e L “...we will reap the beneﬁ ts of new and organic growth in our subscription product lines. I am conﬁ dent our teams around the world will build upon our good qualities and strengthen our relationships with users and licensors alike...” Dear Fellow Shareholders, This year I believe investors have rediscovered the fundamental strengths of the Infomedia business model – mission critical subscription based products that yield strong recurring revenue; vertically integrated infrastructure Product Subscriptions that yields compound proﬁ t margins; In addition, by reviewing and right-sizing all Company leading edge product development that delivers new productivity innovations to a familiar customer base; and a management team which creates shareholder value by increasing value for all stakeholders. divisions, management and staff, led by our CEO, Mr Gary Martin, we successfully established our important North American operation without a substantial increase in operating costs. You can also read in his CEO Report of the many other positive outcomes for the Company, including new data licences that bode well for our growth and sustainability. This renewed recognition resulted in a 29% year-on-year growth in market capitalisation. Shareholders have witnessed time and again the Company’s ability to bounce back from The North American process also triggered the growth of our ﬁ nancial operations infrastructure from being domestic to being global in its nature and capabilities. The new system and procedures cyclical and market changes which in allow for the direct account management of nearly the short term have challenged growth, 20,000 customers worldwide, in their own language but have never halted its underlying and currency. This is a commendable achievement positive momentum. performed by our whole ﬁ nancial team, and headed The Company’s FY2006 ﬁ nancial results and operational performance bear this out. Total recurring revenue subscriptions increased by 4.3%, normalised proﬁ t after tax increased by 7%, and even sales revenue would have increased but for conversion of our signiﬁ cant export revenues at higher Australian dollar rates over the by our CFO, Mr Peter Adams. As discussed at our last Annual General Meeting, your Board embarked upon a fresh approach to its capital management strategy, one which would ﬁ rstly increase the return on assets employed in the business by releasing shareholder equity and franking credits that were held in non-core capital assets such as the Company’s real estate holdings, previous year. Normal year-on-year and secondly lifting the dividend payout policy by franked dividends increased by 18% approximately 60% to a payout range of 75% – 85%. from 3.4¢ to 4.0¢. Management completed a proﬁ table campaign infomedia.com.au 02 L e t t e r C h a i r m a n ’ s during the ﬁnancial year that concluded in the sale especially in terms of timing and the and leaseback transaction of our Frenchs Forest effects of world events, looking back headquarters for $23 million, which not only realised it’s fair to say that the Company does $2.4 million in net proﬁt, but enabled a signiﬁcant what it says it will do. That is due in release of shareholder funds. Two special fully no small part to the vision, integrity, franked dividends of 3.5¢ each have been declared and dedication of the Company’s and paid to shareholders since this policy change leadership and staff and to the trust was implemented. Despite the change, your Board expressed in your act of ownership. and management have continued to investigate core acquisition opportunities throughout the year. No doubt FY2007 will continue to present challenges of a similar nature I would also like to take a moment to bring to to those that we have seen in the past; your attention the good and professional work the that’s in the nature of being in a valued Committee Chairpersons of your Board have done market. However, we will reap the during the past year to ensure Infomedia Ltd is a beneﬁts of new and organic growth in model of good corporate governance. You’ll see in this our subscription product lines. I am Annual Report the signiﬁcant expansion of corporate conﬁdent our teams around the world governance disclosure that comes about through the will build upon our good qualities and leadership of Mr Geoff Henderson, Chairman of the strengthen our relationships with users Corporate Governance Committee. As Chairperson of and licensors alike as they continue to the Remuneration & Nomination Committee, Ms Fran identify and develop current and new Hernon has diligently led the updating, benchmarking market opportunities. and harmonisation of all key policies involving executive management and Board performance evaluation and remuneration. Also, Mr Andrew Moffat’s leadership of the Audit & Risk Committee is reﬂected in the honest and transparent working relationships between the Company’s auditors, management and the Committee. Risk assessments are regularly considered and evaluated. It would also be appropriate to acknowledge, at this point, long standing Non-executive Director, Mr Myer Herszberg, for the contribution he brings as a member of these committees as well as to the Board as a whole. For these reasons and for its overall performance, which you will read about herein, you will see why I continue to view Infomedia as a good investment for both growth and yield. I look forward to seeing you at the Annual General Meeting and commend this Annual Report to you. For many years in this Report, I have expressed my views on the future of our Company. And here again, Richard David Graham I reiterate my view that the future of Infomedia is Chairman of the Board positive. While projecting the future is always risky, infomedia.com.au 03 y n a p m o C e l i f o r P Company Profile Infomedia Ltd is a leading provider of information solutions to the post-sale parts and service sector of the global automotive industry. The Company’s automotive products are subscribed to by over 49,000 users from franchised dealers and independent auto dealers and independent auto trade repairers. Infomedia’s Microcat® electronic parts catalogues, or EPCs, enable dealers to perform the critical function of quickly and accurately identifying for sale replacement auto parts manufactured by the world’s leading auto manufacturers – often referred to as “genuine” or Original Equipment (OE) replacement parts. Infomedia also provides other high-value, complementary products to the dealer and trade repairer market, including its Superservice MenusTM for quick and accurate service quotations and other parts and service related data products. The Company is also utilising its proprietary technology and process expertise to introduce EPCs into other complex parts and service dependent industries, including the whitegoods industry with its PartFinder® brand EPC. The Company’s products are used every day by dealership staff in over 160 countries and in 28 languages and have a PC based user/client interface. There are thousands of parts in an average car and a signiﬁcant portion of the manufacturers’ parts data will change on a monthly basis. An ongoing monthly subscription with Infomedia ensures that dealers receive and access the very latest parts information on CD-ROM, DVD-ROM or via the Internet. The Company’s proprietary production systems, which have been developed and continuously evolved and improved for 16 years, provide the solid foundation that makes Microcat and its other products so reliable in terms of content quality, operational performance and speed of delivery. infomedia.com.au 04 i H s t o r y History infomedia.com.au 05 t r o p e R O E C “The inclusion of Kia in Infomedia’s automotive manufacturer line up brings to 15 the number of automakers who depend on one of the Company’s systems for their parts interpretation needs.” The Year in Review It is with pleasure that I provide to you this update on your Company’s achievements and activities during the 2006 ﬁ nancial year. Key highlights from the last 12 months include: Successful establishment of the Company’s North America operation Creation of a focussed and dynamic Global Business Development team Renewal of a number of the Company’s key data contracts Successful launch of Microcat® Electronic Parts Catalogue (EPC) into new segment of the automotive industry Kia Motors chose Infomedia as their new global EPC solution partner Further expansion of the Company’s leading edge product, Microcat® LIVE™ Continued rapid expansion of Superservice Menus™ through Europe IFM North America Up, Running and Making Scores During the year, the Company moved to direct representation in the North American market. Prior to the establishment of the IFM North America operation, the Company’s activities (including sales, marketing and customer support) were performed by third parties. The move to direct representation has been received favourably by customers and automakers alike. Employing Infomedia staff in the region has allowed the Company to deepen its understanding of customers’ requirements and respond swiftly to opportunities to offer further products and services from the Company’s line-up. Led by Vice-President Mr Mark Kujacznski, the team in North America is to be commended on the smooth transition. This has given the Company a solid foundation with which to continue the growth in the United States, Canada and the Latin and South American markets. Global Business Development Team Delivers Results The new Global Business Development team was established from separately managed regional teams to give further momentum to the Company’s growth strategies in the short and long term. The team has actively pursued new data contracts and also sought out opportunities for expansion of both existing and new products and market segments. Led by David Hawkins, the team was successful in securing a multi year agreement with Mazda Motor Corporation, and also Isuzu Motors America. In addition, existing contracts with Daihatsu, Electrolux, General Motors Holden, Honda Australia, Hyundai and Mitsubishi Australia were extended for a further term. infomedia.com.au 06 C E O R e p o r t Towards the end of the year, the team secured a Rollout of Microcat LIVE for Mazda signiﬁ cant win when they secured a three year agreement to supply Kia Motors dealers around the world with the Microcat EPC. The inclusion of Kia in Infomedia’s automotive manufacturer line up brings to 15 the number of automakers who rely on one of the Company’s systems for their parts interpretation needs. After much anticipation, Microcat LIVE for Mazda was launched to dealers in Japan during the year. Japanese Ford dealers have been using the Microcat system since it was ﬁ rst introduced in Japan in 1999. With many Ford dealers also servicing Mazda built vehicles, The Microcat EPC replaces an existing in-house Microcat LIVE for Mazda allows them solution and the Company is conﬁ dent that the to use one system for all of their parts product will support Kia parts dealers in growing sales needs. In keeping with Mazda their businesses and improving efﬁ ciency, as it does Corporation’s reputation for high for more than 47,000 users worldwide. quality vehicles, Infomedia assembled a dedicated team who worked closely Microcat Drives into Truck Segment with Isuzu with the key Mazda personnel to deliver This year, the Company made its successful move into a high quality, high performance the pure truck segment of the automotive industry. EPC product. With the launch of Microcat for Isuzu, the applicability of the Company’s parts selling technology and interpretation system was demonstrated for the ﬁ rst time in a segment outside of the passenger vehicle segment. The successful launch and subscription take up of the product has proven again that the Expansion of Superservice Menus through Europe Superservice Menus has continued its positive forward momentum by demonstrating improved proﬁ tability combination of functionality, competitive pricing and for service departments through ﬂ exible contract terms is an attractive proposition consistent and accurate service for industry stakeholders. quotations. In the past ﬁ nancial year, Infomedia now supplies Microcat for Isuzu Trucks infomedia.com.au 07 t r o p e R O E C “The strong development work performed during the past ﬁ nancial year has delivered to the global sales force, market ready, leading edge technology solutions across the product portfolio.” the product has been successfully Company now supplies Superservice Menus for eight launched to an additional three automotive manufacturers in various regions. automotive manufacturers, beginning with Subaru UK. Towards the end The Year Ahead of the ﬁ nancial year, Superservice Management is buoyant about the growth prospects Menus was also delivered to Cadillac for the Company and the great products in the year Corvette Europe dealers and Daihatsu ahead. The strong development work performed dealers in Germany. In all instances, the implementation was aided by a close working relationship between Infomedia and each manufacturer. This partnership approach is critical during the past ﬁ nancial year has delivered to the global sales force, market ready, leading edge technology solutions across the product portfolio. Further Expansion of Superservice Menus in ensuring the product is suitably The rapid rise of Superservice Menus during FY2006 customised for each national market. is expected to continue through FY2007. The 158% rise this past ﬁ nancial year was testimony to the Superservice Menus also continued genuine beneﬁ ts the system delivers to users in its positive growth performance within the Australian market. Dealership service departments are enjoying the beneﬁ ts of using Superservice Menus’ leading edge service quotation system and processes. Sales to Daihatsu, Ford, Holden, Hyundai, Mitsubishi service workshops. The Company has a strong pipeline for adding further manufacturers and also strong sales momentum for the current eight manufacturers in production today. Microcat MARKET Extending Reach to Other Complementary Segments and Toyota dealers experienced solid Microcat® MARKET™ is an online parts ordering growth during the ﬁ nancial year. The system that provides 24/7 Internet connectivity Infomedia’s Product Integration Workﬂ ow infomedia.com.au 08 �� C E O R e p o r t Andrew Pattinson Managing Director – IFM Europe Michael Roach General Manager – EPC and Data Management between independent auto trade repairers and their Managing Director, Mr Andrew genuine parts dealers. As a result of outstanding Pattinson, continues to lead the development work during the year, the system team in IFM Europe. The Company’s continues to evolve for new releases to automotive European subsidiary has completed a customers in both Australian and European markets. stellar year of new product launches Today the system is used by Toyota Australia dealers for all of the Company’s systems. and is soon to be released to other Australian franchises. Within Europe, the system is used today by Ford and Toyota dealers and will soon be utilised by Daihatsu dealers throughout Germany. A Company of Strength FY2006 was a year where the management and staff of Infomedia continued to grow as individuals and as quality global leaders. The development teams located in Sydney and Melbourne designed, constructed and delivered new releases of our market leading technologies and continued to research and develop new process improvement tools for the Company’s increasing global footprint of customers. This solid platform allows the Company to expand its online solutions through the delivery of information utilising web services which allow for a wider range of integration possibilities. General Manager Mr Michael Roach and his team have Mr Pattinson’s leadership in the European market has delivered record results, in particular for sales of Superservice Menus. This region will continue to grow revenue and proﬁ ts for the Company through current and new product sales. I would also like to commend your Company’s Chief Financial Ofﬁ cer, Mr Peter Adams, for his leadership this past year. Peter and his team have successfully implemented a new enterprise accounting and customer management system. In addition to this, the team successfully integrated the newly established North American office, including thousands of additional customers into the debtor portfolio. You will read more about the Company’s solid ﬁ nancial performance further strengthened customer relationships around within the CFO Report. the globe and identiﬁ ed further platforms for growth in FY2007 and beyond. I look forward to another successful year ahead for your Company. Mark Kujacznski Vice President – IFM North America Mr Roach is supported by his dedicated team of managers and staff. In particular, the operational management of Mr Michael Foster and Mr Peter Petrovski has improved production processes while at the same time reducing costs. Their efforts have directly translated to leaner, more efﬁ cient processes Gary Martin that will yield results within FY2007 and future periods. Chief Executive Ofﬁ cer infomedia.com.au 09 t r o p e R O F C “Superservice Menus continued its positive growth path during the 2006 ﬁ nancial year with a 158% increase to 1,671 subscribers.” In the ﬁ rst year of reporting under the A fully franked ﬁ nal dividend of two point one cents new Australian equivalents to (2.1¢) was payable to shareholders of record at 22 International Financial Reporting September 2006. This, combined with the earlier Standards (AIFRS), the Company achieved sales revenue of $55.6 million and net proﬁ t after tax of $18.1 million. The Company’s results were enhanced by the sale and leaseback interim dividend declared in February, brings the total franked dividend for the year to four cents (4.0¢) and represents a payout ratio of 79% of normalised proﬁ t after tax. of the Frenchs Forest corporate It was announced at the 2005 Annual General Meeting headquarters, which occurred on 30 (AGM) the Board’s intention to realise non-core June 2006. Gross proceeds for the assets such as the Company’s real estate holdings transaction were $23 million, with a net proﬁ t on sale of $2.4 million. After taking into account taxation and other transactional costs, the net impact was to increase reported earnings by $1.6 million. to facilitate a release of built up shareholder value. As a result of the recent sale and leaseback of the Frenchs Forest corporate headquarters, a further fully franked special dividend of three point ﬁ ve cents (3.5¢) was payable to shareholders of record at 22 September 2006. This payment, taken together After excluding the beneﬁ t of the sale with the ﬁ rst special dividend paid in December 2005, and leaseback transaction, proﬁ t after brings the total special dividend distribution since tax from normal operations increased the last AGM to seven cents (7.0¢). by 7% to $16.5 million, which is at the higher end of the guidance provided earlier this year. The increase in proﬁ t was achieved through a combination of cost control, lower depreciation The Company may make a further franked special dividend payment during the ﬁ rst half of the 2007 ﬁ nancial year. Such a payment will be dependent upon further analysis of factors including remaining franking and taxation benefits. While total credits, cash reserves and residual retained earnings. Company subscriptions grew by 4.3% over the previous ﬁ nancial year, sales revenue declined by 6% as a result of a stronger Australian dollar. Cash ﬂ ows from operations remain strong, with $19.0 million in cash generation. Total dividend payments to shareholders over the 2006 ﬁ nancial year amounted to $23.1 million. Notwithstanding these returns, the balance sheet remains in a strong Electronic Parts Catalogue subscription numbers grew by 2.1% to 47,718 over the year. The ﬁ rst half of the year saw the successful transitioning from a third party distributor in North America to direct representation. More recently, the Company has renewed data licences with Hyundai and signed a signiﬁ cant agreement with Kia Motors. Along with the other renewals and agreements during FY2006, the Company expects stronger growth of EPC subscriptions during the upcoming ﬁ nancial year. position, with $26.0 million cash on As anticipated, Superservice Menus™ continued hand at 30 June 2006. its positive growth path during the 2006 ﬁ nancial infomedia.com.au 10 C F O R e p o r t year with a 158% increase to 1,671 subscriptions. system, coupled together with the Providing the system now for eight franchises in Company’s highly skilled accounting Europe and Asia Paciﬁ c, the Company expects to and technology staff, has enhanced begin sales throughout the Americas market during communication with customers and the upcoming year. The Company expects similar facilitated collections from the widely growth rates to those experienced during FY2006. distributed customer base in both On the cost side, the establishment of the Company’s new North American ofﬁ ce in August 2005 was the key driver for the budgeted head count increase of 13% to ﬁ nish the year at 230. The new ofﬁ ce multiple currencies and languages. This is exempliﬁ ed in the debtors days sales measurement, which at 30 June sat at a pleasing 44 days. effectively replaced the variable cost of a third party In summary, it is anticipated the distributor. Research and development expenditure 2007 outlook will be characterised for the Company was $4.5 million and reﬂ ects the by growth from new markets for both continuing commitment to developing innovative EPC and Superservice Menus leading edge technology products. products. This revenue growth, coupled It should be noted that the Company’s operating costs will increase in 2007 as the result of the sale and leaseback transaction through the introduction of corporate headquarter lease expenditure and the absence of rental income from an adjacent site to the headquarters. with the Company’s strong balance sheet, should facilitate the continuation of healthy shareholder returns into the future. It was encouraging to realise the beneﬁ ts during the year of the Company’s new enterprise accounting Peter Adams and customer management system. This new Chief Financial Ofﬁ cer Superservice Menus subscription growth infomedia.com.au 11 ’ s r o t c e r i D t r o p e R DIRECTORS’ REPORT Your Directors submit their Report for the year ended 30 June 2006. DIRECTORS The names and details of the Directors of the Company in ofﬁce during the ﬁnancial year and until the date of this Report are: Names, Qualiﬁcations, Experience and Special Responsibilities Richard Graham Chairman Mr Richard Graham has held senior management positions in the American and Australian computer industry since 1977. Mr Graham co-founded the Company in 1988 and was its Chairman and CEO until his retirement in 2004. Since he retired as CEO Mr Graham has continued as Non-executive Chairman. Myer Herszberg Non-executive Director Myer Herszberg has been a Director of Infomedia since 1992. Mr Herszberg is the founder of Melbourne’s Denman Audio chain and has extensive consumer electronics experience. He was active in bringing home computers to Australia in the early 1980s and has also brought many other leading edge electronic products to Australia. He also has extensive experience in the commercial property market, and is active in a number of community service organisations. Mr Herszberg serves on the Company’s Audit & Risk, Corporate Governance, and Remuneration & Nomination Committees. Mr Herszberg was last re-elected to the Board in October 2005. Frances Hernon Non-executive Director (Chairman of Remuneration & Nomination Committee) Frances Hernon was appointed to the Infomedia Board of Directors on 19 June 2000. Ms Hernon has extensive experience in media, publishing, marketing and technology. She has held senior editorial positions at News Ltd and Murdoch Magazines and was General Manager, Harrison Communications, Director of Publicity at Channel Ten, Managing Editor of the NRMA’s member magazine The Open Road, Manager, Business Communications for NRMA, and Senior Account Manager, Group IT&T for the Insurance Australia Group (IAG). Ms Hernon is currently Corporate Affairs Manager for Nestlé Australia Ltd. She also serves on Infomedia’s Corporate Governance Committee. Ms Hernon was last re-elected to the Board in October 2004. Geoffrey Henderson Non-executive Director (Chairman of Corporate Governance Committee) Geoffrey Henderson was appointed to the Infomedia Board of Directors on 25 February 2003. Mr Henderson is a qualiﬁed accountant and has had an extensive career, spanning positions in Australia, New Zealand, Europe and North America. He worked in a number of ﬁnancial positions for Olympic Tyres in Melbourne for eight years and then for the Ford Motor Company for 30 years. During his time with Ford, Mr Henderson worked not only in the Finance Division, but also held senior positions in the Supply and Parts and Service Divisions. Immediately prior to his retirement from Ford, Mr Henderson headed up the company’s Asia Paciﬁc Parts and Service operation, which covered Ford’s parts and service activities in 12 countries including Japan, South Africa, China, India and Australia. Mr Henderson also serves on Infomedia’s Audit & Risk Committee. Mr Henderson was elected to the Board in October 2004. infomedia.com.au 12 R e p o r t D i r e c t o r s ’ Gary Martin Chief Executive Ofﬁcer Gary Martin was promoted to the position of Chief Executive Ofﬁcer on 1 January 2005. Mr Martin has extensive experience in the automotive industry. He has been with Infomedia since 1998, when he joined the Company as International Sales Manager. Mr Martin was appointed as General Manager, Electronic Catalogues Division in August 2001. Prior to joining Infomedia, he had 12 years of experience at automotive dealerships, including as General Manager, Parts and Accessories of a large multi-franchised dealership group. In his time with Ford dealers, Mr Martin was awarded the Ford Management Excellence Award in four consecutive years and participated on various Automaker committees. Mr Martin was elected to the Board in October 2004. Andrew Moffat Non-executive Director (Chairman of Audit & Risk Committee) Andrew Moffat was appointed to the Infomedia Board of Directors on 31 March 2005. Mr Moffat has more than 20 years of corporate and investment banking experience and is the sole principal of Cowoso Capital Pty Ltd, a company providing strategic corporate advisory services. Prior to establishing Cowoso Capital Pty Ltd, Andrew was a Director of Equity Capital Markets & Advisory for BNP Paribas Equities (Australia) Limited where he took principal responsibility for mergers and acquisition advisory services and a range of equity capital raising mandates including placements, initial public offerings, rights issues and dividend reinvestment plan underwritings. Andrew’s corporate banking experience was gained whilst working in the United Kingdom and Australia with Standard Chartered Bank Group, National Westminster Banking Group and BNP Paribas. Mr Moffat was elected to the Board in October 2005. COMPANY SECRETARY Nick Georges General Counsel & Company Secretary Nick Georges is a qualiﬁed lawyer, admitted to the Supreme Courts of Victoria in 1991 and New South Wales in 1999. Prior to joining Infomedia and becoming its General Counsel & Company Secretary in 1999, Mr Georges worked in general practice as a solicitor in Victoria before moving to Sydney to take up an executive role with Altium Limited (previously known as Protel International Pty Ltd), where he obtained extensive experience in the information technology industry. Mr Georges acted as alternate Director for Mr Herszberg at one Board meeting during the year. infomedia.com.au 13 ’ s r o t c e r i D t r o p e R Interests in the shares and options of the Company and related bodies corporate As at the date of this report, the interests of the Directors in the shares and options of the Company were: Infomedia Ltd Ordinary Shares fully paid Options over Ordinary Shares Wiser Equity Pty Limited Yarragene Pty Limited Wiser Centre Pty Limited Richard Graham Gary Martin Frances Hernon Geoffrey Henderson Andrew Moffat 100,277,501 39,421,599 1,000,000 926,559 74,257 5,000 - - - - - - 1,000,000 - - - Richard Graham is the sole Director and beneﬁ cial shareholder of Wiser Equity Pty Limited (formerly “Wiser Laboratory Pty Limited”). Richard Graham is a Director of Wiser Centre Pty Limited, trustee for the Wiser Centre Pty Ltd Superannuation Fund. Myer Herszberg is a Director and major shareholder of Yarragene Pty Limited. Directorships of other publicly listed entities During the past three years, Andrew Moffat has been the non-executive chairman of Paciﬁ c Star Network Limited. He is also a non-executive Director of Cash Converters International Limited since February 2006. PRINCIPAL ACTIVITIES Infomedia Ltd is a company limited by shares that is incorporated and domiciled in Australia. The principal activities during the year of entities within the consolidated entity were: developer and supplier of electronic parts catalogues and service quoting systems for the automotive industry globally; information management, analysis and creation for the domestic automotive and oil industries; and the provision of dealer management systems for the automotive industry. There have been no signiﬁ cant changes in the nature of those activities during the year. EMPLOYEES The company employed 230 (2005: 203) full time employees as at 30 June 2006. infomedia.com.au 14 R e p o r t D i r e c t o r s ’ DIVIDENDS Final dividends recommended: On ordinary shares – ﬁ nal – fully franked On ordinary shares – special – fully franked Dividends paid in the year: Cents $’000 2.10 3.50 6,835 11,391 On ordinary shares – 2006 interim – fully franked On ordinary shares – special – fully franked 1.90 3.50 6,184 11,391 Final for the 2005 year: On ordinary shares – as recommended in the 2005 report 1.70 5,533 NET TANGIBLE ASSETS PER SECURITY The Company’s net tangible assets per security are as follows: Net tangible assets per share at 30 June 2006 Net tangible assets per share at 30 June 2005 Cents 7.5 10.0 REVIEW AND RESULTS OF OPERATIONS The following table presents sales revenue and proﬁ t after tax after excluding non-recurring signiﬁ cant items: Sales revenue Reported proﬁ t after tax Adjustments: Sale and leaseback transaction after tax Signiﬁ cant items in FY2005 (refer Note 3(viii) in notes) Proﬁ t after tax excluding sale and leaseback transaction and signiﬁ cant items CONSOLIDATED 2006 $’000 55,577 2005 $’000 59,137 18,146 6,347 (1,616) - 16,530 - 9,108 15,455 The Company achieved a 186% increase in reported earnings over the equivalent prior year to $18,146,000. The Company’s ﬁ nancial results were enhanced by the sale and leaseback of the Frenchs Forest corporate headquarters, which occurred on 30 June 2006. Gross proceeds for the transaction were $23,000,000, with a net proﬁ t on sale of $2,432,000. After taking into account taxation and other transactional costs, the net impact was to increase reported earnings by $1,616,000. After excluding the beneﬁ t of the sale and leaseback transaction, proﬁ t after tax from normal operations increased by 7% to $16,530,000. This increase in proﬁ t was achieved through a infomedia.com.au 15 ’ s r o t c e r i D t r o p e R combination of cost control, lower depreciation and taxation beneﬁts. Sales revenue declined by 6%, primarily as a result of adverse movements in currency exchange rates. Electronic Parts Catalogue subscription numbers grew by 2.1% to 47,718 over the year. Superservice Menus subscription numbers grew by 158% to 1,671 over the year. The Company successfully commenced its own distributor operations in North America during the year. Cash ﬂows from operations remain strong with $19,029,000 in cash generation. Total dividend payments to shareholders over the 2006 ﬁnancial year amounted to $23,108,000. Notwithstanding these returns, the balance sheet remains in a strong position with $26,021,000 cash on hand at 30 June 2006. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no signiﬁcant change in the state of affairs of the Company since the last Directors’ Report. SIGNIFICANT EVENTS AFTER THE BALANCE DATE There has been no matter or circumstance that has arisen since the end of the ﬁnancial year that has signiﬁcantly affected the operations of the Company, the results of those operations, or the state of affairs of the Company. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Directors anticipate stronger growth from the Electronic Parts Catalogue (EPC) subscriber base with a focus on new markets including Isuzu, Kia and Mazda. It is anticipated that further changes in the EPC competitive landscape could provide further opportunity for growth over the next 12 to 24 months. The outlook for Superservice Menus remains strong, with a ﬁrm pipeline for 2007. It is anticipated that similar Superservice Menus growth rates to the 2006 year will continue over the coming year, with growth anticipated both locally and abroad. As the bulk of the Company’s revenues are export in nature, the Company’s results can be inﬂuenced either favourably or unfavourably by movements in currency exchange rates. Refer Notes 30 and 31 for more information. ENVIRONMENTAL REGULATION AND PERFORMANCE The Company is not subject to any particular or signiﬁcant environmental regulation under a law of the Commonwealth of Australia or of a State or Territory. SHARE OPTIONS Unissued Shares At the date of this Report, there were 1,950,000 unissued ordinary shares under options. Refer to Note 23 of the ﬁnancial statements for further details of the options outstanding. infomedia.com.au 16 R e p o r t D i r e c t o r s ’ Shares Issued as a Result of the Exercise of Options There were no options exercised by the employees during the year ended 30 June 2006. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the year the Company paid a premium in relation to insuring Directors and other ofﬁcers against liability incurred in their capacity as a Director or ofﬁcer of the Company. The insurance contract speciﬁcally prohibits the disclosure of the nature of the policy and amount of premium paid. REMUNERATION REPORT This report outlines the remuneration arrangements in place for Directors and executives of the Company. Compensation Philosophy The performance of the Company depends upon the quality of its Directors and executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and executives. To this end, the Company embodies the following principles in its compensation framework: Provide competitive rewards to attract high calibre executives. Link executive rewards to shareholder value. Establish appropriate performance hurdles in relation to variable executive compensation. Remuneration Committee The Remuneration & Nomination Committee (Remuneration Committee) of the Board of Directors is responsible for recommending to the Board the Company’s remuneration and compensation policy arrangements for all Key Management Personnel. The Remuneration Committee assesses the appropriateness of the nature and amount of these emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder beneﬁt from the retention of a high quality board and executive team. Compensation Structure In accordance with best practice corporate governance recommendations, the structure of non- executive Director and senior executive compensation is separate and distinct. Non-executive Director Compensation Objective The Board seeks to set aggregate compensation at a level which provides the Company with the ability to attract and retain Directors of appropriate calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non- executive Directors shall be determined from time to time by a general meeting. An amount infomedia.com.au 17 ’ s r o t c e r i D t r o p e R not exceeding the amount determined is then available between the Directors as appropriate (for the year ending 30 June 2006, Non-executive Directors’ compensation totalled $311,489). The latest determination was at the Annual General Meeting held on 30 October 2002, when shareholders approved a maximum aggregate compensation of $450,000 per year. The Board has historically considered the advice from external consultants, as well as the fees paid to non-executive Directors of comparable companies when undertaking a review process. Senior Executive and Executive Director Compensation Objective The Company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the Company and so as to: reward executives for Company and individual performance against targets set by reference to appropriate benchmarks; align the interests of executives with those of shareholders; link reward with the strategic goals and performance of the Company; and ensure total compensation is competitive by market standards. Structure In determining the level and make-up of executive compensation, the Remuneration Committee engages an external consultant from time to time to provide independent advice in the form of a written report detailing market levels of compensation for comparable executive roles. Compensation consists of the following key elements: - Fixed Compensation - Variable Compensation - Short Term Incentive (STI); and - Long Term Incentive (LTI). The actual proportion of ﬁxed compensation and variable compensation (potential short term and long term incentives) is established for Key Management Personnel (excluding the CEO and non-executive Directors) by the CEO in conjunction with the Remuneration Committee, and in the case of the CEO, by the Chairman of the Board in conjunction with the Remuneration Committee. Other executive salaries are determined by the CEO with reference to market conditions. Fixed Compensation Objective The level of ﬁxed compensation is set so as to provide a base level of compensation which is both appropriate to the position and competitive in the market. Fixed compensation is reviewed periodically by the CEO in conjunction with the Remuneration Committee for Key Management Personnel (excluding the CEO and non-executive Directors), and in the case of the CEO, by the Chairman of the Board in conjunction with the Remuneration Committee. All other executive infomedia.com.au 18 R e p o r t D i r e c t o r s ’ positions are reviewed periodically by the CEO. As noted above, the Committee has access to external advice independent of management. Structure Executives are given the opportunity to receive their ﬁxed (primary) compensation in a variety of forms, including cash or other designated employee expenditure such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. Variable Compensation – Short Term Incentive (STI) Objective The objective of short term compensation is to link the achievement of both individual performance and Company performance with the compensation received by the executive. Structure The structure of short term compensation is a cash bonus dependent upon a combination of individual performance objectives and Company objectives being met. This reﬂects the Company wide practice of ‘Performance Planning & Review’ (PPR) procedures. Individual performance objectives centre on key focus areas. Company objectives include achieving budgetary targets that are set at the commencement of the ﬁnancial year (adjusted where necessary for currency ﬂuctuations). These performance conditions were chosen, in the case of individual performance objectives, to promote and maintain the individual’s focus on their own contribution to the Company’s strategic objectives through individual achievement in key result areas (KRAs) which include, for example, ‘leadership’, ‘decision making’, ‘results’ and ‘risk management’. In the case of Company objectives, budgetary performance conditions were chosen to promote and maintain a collaborative, Company wide focus on the achievement of those targets. In assessing whether an individual performance condition has been satisﬁed, pre-agreed key performance indicators (KPIs) are used. In assessing whether Company objectives have been satisﬁed, Board level pre-determined budgetary targets are used. These methods have been chosen to create clear and measurable performance targets. Variable Compensation – Long Term Incentive (LTI) Objective The objective of the LTI plan is to reward executives in a manner which aligns this element of compensation with the creation of shareholder wealth. As such LTI, grants are made to executives, who are able to inﬂuence the generation of shareholder wealth and thus have a direct impact on the Company’s performance against the relevant long term performance hurdle. Structure The structure of long term compensation is in the form of share options pursuant to the employee option and employee share plans. Performance hurdles have been introduced for all share options infomedia.com.au 19 ’ s r o t c e r i D t r o p e R issued after 31 December 2004 and are determined upon grant of those share options. These hurdles typically relate to the Company’s share price reaching or exceeding a particular level. These methods were chosen to create clear and measurable performance expectations. Speciﬁ ed Directors and Five Highest Remunerated Speciﬁ ed Executives for the Year Ended 30 June 2006 and 30 June 2005 Short term Post employment Share based payments Long term Total Total performance related Salary and fees Bonus Non monetary beneﬁ ts Superannuation Options Employee share plan Other $ % 2006 Financial Year: Directors: Richard Graham 118,019 - Gary Martin 280,000 63,000 Myer Herszberg Geoffrey Henderson Frances Hernon Andrew Moffat Executives: 42,000 42,000 42,000 42,000 Andrew Pattinson 305,523 - - - - - Peter Adams 190,742 38,000 Nick Georges 170,290 12,500 Michael Roach 153,558 14,000 - - - - - - 14,537 - - - Mark Kujacznski 170,186 - 9,589 10,350 24,445 3,780 3,780 3,780 3,780 27,497 17,167 15,326 13,820 - - 51,232 - - - - - 17,742 13,050 6,286 - - - - - - - 1,000 1,000 1,000 1,000 - - 3,267 - - - - 5,092 2,225 1,987 2,559 - 128,369 421,944 45,780 45,780 45,780 45,780 353,649 266,876 214,153 191,223 179,775 1,556,318 127,500 24,126 123,725 88,310 4,000 15,130 1,939,109 2005 Financial Year: Directors: Richard Graham1 257,751 100,000 37,982 Andrew Pattinson 331,069 - Gary Martin 247,436 35,200 Myer Herszberg Geoffrey Henderson Frances Hernon Barry Ford Andrew Moffat Executives: Guy Bryant2 Peter Adams Nick Georges Michael Roach Damon Fieldgate 42,000 42,000 42,000 31,338 10,823 232,191 192,548 155,543 135,742 131,238 - - - - - - - - - - - - 10,000 32,800 10,000 10,000 10,957 3,548 - - - - 13,815 29,796 24,445 3,780 3,780 3,780 2,997 974 16,676 19,255 13,910 11,705 11,617 - 30,997 30,997 - 1,000 1,000 3,200 5,518 2,887 - - - - - 30,364 4,793 30,997 3,196 - - - - - - 2,000 2,000 2,000 2,000 2,000 - - - - - 2,159 2,246 1,815 2,262 2,187 412,748 398,380 341,965 45,780 45,780 45,780 34,335 11,797 296,938 253,642 214,265 164,905 157,999 1,851,679 208,957 41,530 156,530 131,344 12,000 22,274 2,424,314 1. Salary and fees for Richard Graham includes $120,118 of leave entitlements paid upon resignation as Chief Executive Ofﬁ cer effective 31 December 2004. 2. Salary and fees for Guy Bryant includes $45,500 in termination beneﬁ ts in 2005. infomedia.com.au 20 - 27% - - - - - 21% 12% 11% - 24% 8% 19% - - - - - 14% 15% 19% 8% 7% R e p o r t D i r e c t o r s ’ Compensation by Category: Key Management Personnel CONSOLIDATED INFOMEDIA LTD 2006 $ 2005 $ 2006 $ 2005 $ 1,707,944 2,056,666 1,040,551 1,579,855 123,725 15,130 - 92,310 156,530 22,274 45,500 143,344 82,408 7,479 - 84,024 115,029 14,494 45,500 106,151 1,939,109 2,424,314 1,214,462 1,861,029 Short term Post employment Other long term Termination beneﬁ ts Share based payments Contract for Services The table and notes below summarise current executive employment contracts with the Company as at the date of this Report: Commencement date Notice period Notice period per latest contract Duration – Company - Executive Gary Martin 1 January 2005 Andrew Pattinson 5 April 2004 Nick Georges 1 January 2005 Peter Adams 1 January 2005 Michael Roach 1 January 2005 Mark Kujacznski 22 August 2005 3 years 3 years 3 years 3 years 3 years 3 years 6 months* 3 months 6 months* 6 months* 3 months 3 months 6 months 3 months 6 months 6 months 3 months 3 months The Company may terminate each of the contracts at any time without notice if serious misconduct has occurred. Options that have not yet vested upon termination will be forfeited. * In the event of redundancy, in addition to six months notice, the Company will provide the individual with a severance payment equivalent to three weeks’ base salary for each completed year of continuous service with the Company provided however, that the minimum severance payment will be 26 weeks’ base salary and the maximum severance payment will not exceed 52 weeks’ base salary. Compensation Options: Granted and Vested during the Year During the ﬁ nancial year options were granted as equity compensation beneﬁ ts under the long term incentive plan to certain Key Management Personnel as disclosed below. No share options have been granted to the non-executive members of the Board of Directors under this scheme. The options were issued free of charge. Each option entitles the holder to subscribe for one fully paid ordinary share in the Company at an exercise price equal to the strike price of the shares on the date of grant. The options vest at various hurdle rates dependent upon the share price of the Company. If this increase is not met by the last available exercise date, the options are forfeited. The contractual life of each option granted is up to three years. infomedia.com.au 21 ’ s r o t c e r i D t r o p e R Vested Granted Terms and conditions for each grant 30 June 2006 Number Number Grant date Fair value per option at grant date (cents) Exercise price per option (cents) Expiry date First exercise date Last exercise date Directors Gary Martin 333,333 1,000,000 27 Oct 2005 8.4 50.0 5 Feb 2008 5 Jan 2006 5 Feb 2008 Executives Peter Adams Nick Georges 83,333 83,333 250,000 250,000 8 Jul 2005 6 Oct 2005 Michael Roach - 200,000 16 Dec 2005 499,999 1,700,000 There were no options granted in the 2005 Financial Year. There were no options granted in the 2005 Financial Year. 10.3 8.1 8.9 50.0 48.0 49.0 5 Feb 2008 5 Jan 2006 5 Feb 2008 5 Feb 2008 5 Jan 2006 5 Feb 2008 16 Jan 2009 16 Dec 2005 16 Jan 2009 Shares Issued on Exercise of Compensation Options (Consolidated) No options were exercised during the year by Key Management Personnel. Option Holdings of Key Management Personnel (Consolidated) Balance at beginning of period Granted as compensation Options exercised Net change other Balance at end of period Vested at 30 June 2006 30 June 2006 1 July 2005 30 June 2006 Total Not exercisable Exercisable Directors Gary Martin Executives Peter Adams Nick Georges Michael Roach - - - - - 1,000,000 250,000 250,000 200,000 1,700,000 - - - - - - - - - - 1,000,000 1,000,000 666,667 333,333 250,000 250,000 200,000 250,000 250,000 200,000 166,667 166,667 200,000 83,333 83,333 - 1,700,000 1,700,000 1,200,001 499,999 DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows: Directors’ meetings Committee meetings Audit & Risk Corporate Governance Remuneration & Nomination Number of meetings held: Number of meetings attended: Richard Graham Gary Martin Geoffrey Henderson Myer Herszberg Frances Hernon Andrew Moffat Nick Georges (Alternate) 12 12 11 12 11 10 12 1 infomedia.com.au 22 4 - - 4 2 - 4 - 4 - - 4 3 4 - - 2 - - - 2 2 2 - R e p o r t D i r e c t o r s ’ ROUNDING The amounts contained in this Report and in the ﬁnancial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies. CORPORATE GOVERNANCE In recognising the need for high standards of corporate behaviour and accountability, the Directors of Infomedia Ltd support and have adhered to the principles of good corporate governance. The Company’s corporate governance statement is after the independent audit report. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES The Directors received an auditor’s independence declaration from the auditor of the Company. This declaration can be found on the following page. NON-AUDIT SERVICES Ernst & Young did not provide any non-audit services during the financial year ended 30 June 2006. Signed in accordance with a resolution of the Directors. Richard David Graham Chairman of the Board Sydney, 23 August 2006 infomedia.com.au 23 e c n e d n e p e d n I n o i t a r a l c e D Auditor’s Independence Declaration to the Directors of Infomedia Ltd In relation to our audit of the ﬁ nancial report of Infomedia Ltd for the ﬁ nancial year ended 30 June 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young J K Haydon Partner Sydney Date: 23 August 2006 Liability limited by a scheme approved under Professional Standards Legislation infomedia.com.au 24 S t a t e m e n t I n c o m e INCOME STATEMENT YEAR ENDED 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD Sales revenue Rental revenue Finance revenue Revenue Cost of sales Gross proﬁ t Other income Employee beneﬁ ts expense Depreciation and amortisation Decrement in value of non-current assets Finance costs Legal costs incurred in enforcement of contractual rights Non-cancellable surplus lease space on other locations Operating lease rental Foreign currency exchange loss Other expenses Proﬁ t before income tax Income tax expense Proﬁ t after income tax Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Dividends per share – ordinary (cents per share) Dividends per share – special (cents per share) 2006 $’000 46,112 - 1,164 47,276 (13,436) 33,840 677 (6,851) (2,689) - (197) - - (912) - (5,302) 18,566 (4,866) 13,700 2005 $’000 52,628 - 1,216 53,844 (14,541) 39,303 2,489 (8,703) (4,041) (12,782) (97) (1,227) (178) (1,162) (426) (4,548) 8,628 (2,917) 5,711 2006 $’000 55,577 646 268 56,491 (17,472) 39,019 2,892 (8,009) (3,355) - (197) - - (534) - (5,002) 24,814 (6,668) 18,146 5.58 5.57 4.00 7.00 3(i) 3(ii) 3(iii) 3(iv) 3(v) 4 5 5 6 6 2005 $’000 59,137 618 272 60,027 (17,404) 42,623 2,682 (9,914) (4,669) (12,782) (97) (1,227) (178) (667) (450) (5,600) 9,721 (3,374) 6,347 1.95 1.95 3.40 - infomedia.com.au 25 t e e h S e c n a l a B BALANCE SHEET AT 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 26,021 6,751 84 544 229 2005 $’000 10,821 6,042 88 540 - 2006 $’000 25,089 4,409 71 448 229 2005 $’000 8,803 4,607 44 434 - 33,629 17,491 30,246 13,888 - 804 4,066 17,375 1,790 24,035 57,664 3,974 500 2,711 3,451 816 11,452 2,339 2,062 4,401 15,853 41,811 17,488 1,010 23,313 41,811 - 1,260 22,582 13,656 988 38,486 55,977 3,640 - 1,971 1,215 810 7,636 534 1,338 1,872 9,508 46,469 17,488 706 28,275 46,469 451 1,052 3,402 12,754 1,592 19,251 49,497 2,988 500 2,001 3,126 405 9,020 2,187 1,576 3,763 12,783 36,714 17,488 976 18,250 36,714 22,043 1,507 5,263 9,683 779 39,275 53,163 2,994 - 1,294 1,080 367 5,735 460 1,097 1,557 7,292 45,871 17,488 725 27,658 45,871 7 8 31 9 10 12 13 4 15 16 17 18 19 4 20 20 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepayments Derivatives TOTAL CURRENT ASSETS NON-CURRENT ASSETS Intercompany Other ﬁ nancial assets Property, plant and equipment Intangible assets and goodwill Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest bearing loans and borrowings Provisions Income tax payable Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained proﬁ ts TOTAL EQUITY infomedia.com.au 26 S t a t e m e n t C a s h F l o w CASH FLOW STATEMENT YEAR ENDED 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Borrowing costs Income tax paid NET CASH FLOWS FROM OPERATING ACTIVITIES 21 (a) CASH FLOWS FROM INVESTING ACTIVITIES 2006 $’000 54,522 (31,036) 268 (197) (4,528) 19,029 2005 $’000 64,097 (38,065) 272 (97) (6,332) 19,875 2006 $’000 46,229 (23,556) 1,164 (197) (4,528) 19,112 2005 $’000 48,754 (23,518) 1,216 (97) (6,332) 20,023 Acquisition of property, plant and equipment (1,625) (1,801) (1,121) (1,679) 3(vi) 3(vi) Proceeds from sale of property, plant and equipment including property held for resale Non refundable payment for capital works Purchase of intellectual property Purchase of shares in controlled entity NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Repayment of loan from controlled entity Dividends paid on ordinary shares 6 NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES 23,000 (500) (2,096) - 18,779 8,000 (7,500) - (23,108) (22,608) 1,734 - - - (67) 1,000 (5,173) - (11,701) (15,874) 1,750 - (2,096) (1) (1,468) 8,000 (7,500) 21,250 (23,108) (1,358) - - - - (1,679) 1,000 (5,173) - (11,701) (15,874) NET INCREASE IN CASH HELD 15,200 3,934 16,286 2,470 Add opening cash brought forward 10,821 6,887 8,803 6,333 CLOSING CASH CARRIED FORWARD 21 (b) 26,021 10,821 25,089 8,803 infomedia.com.au 27 f o t n e m e t a t S y t i u q E n i s e g n a h C STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 June 2006 CONSOLIDATED Contributed equity Retained earnings Other reserves Total At 1 July 2005 Currency translation differences Proﬁ t for the year Cost of share based payments Equity dividends At 30 June 2006 $’000 17,488 - - - - 17,488 $’000 28,275 - 18,146 - (23,108) 23,313 $’000 706 53 - 251 - 1,010 $’000 46,469 53 18,146 251 (23,108) 41,811 YEAR ENDED 30 June 2005 CONSOLIDATED Contributed equity Retained earnings Other reserves Total At 1 July 2004 Currency translation differences Proﬁ t for the year Cost of share based payments Equity dividends At 30 June 2005 $’000 17,488 - - - - 17,488 $’000 33,629 - 6,347 - (11,701) 28,275 $’000 404 (28) - 330 - 706 YEAR ENDED 30 June 2006 INFOMEDIA LTD At 1 July 2005 Proﬁ t for the year Cost of share based payments Equity dividends At 30 June 2006 Contributed equity Retained earnings Other reserves $’000 17,488 - - - 17,488 $’000 27,658 13,700 - (23,108) 18,250 $’000 725 - 251 - 976 YEAR ENDED 30 June 2005 INFOMEDIA LTD $’000 51,521 (28) 6,347 330 (11,701) 46,469 Total $’000 45,871 13,700 251 (23,108) 36,714 Contributed equity Retained earnings Other reserves Total $’000 17,488 - - - 17,488 $’000 33,648 5,711 - (11,701) 27,658 $’000 395 - 330 - 725 $’000 51,531 5,711 330 (11,701) 45,871 At 1 July 2004 Proﬁ t for the year Cost of share based payments Equity dividends At 30 June 2005 infomedia.com.au 28 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s NOTES TO THE FINANCIAL STATEMENTS 30 June 2006 1. CORPORATE INFORMATION The ﬁnancial report of Infomedia Ltd for the year ended 30 June 2006 was authorised for issue in accordance with a resolution of the Directors on 23 August 2006. Infomedia Ltd is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The nature of the operations and principal activities of the Company are described in the Directors’ Report. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The ﬁnancial report is a general-purpose ﬁnancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The ﬁnancial report has also been prepared on a historical cost basis, except for derivative ﬁnancial instruments that have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair values attributable to the risks that are being hedged. (b) Statement of compliance The ﬁnancial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the ﬁnancial report, comprising the ﬁnancial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). This is the ﬁrst annual ﬁnancial report prepared based on AIFRS and comparatives for the year ended 30 June 2005 have been restated accordingly except for the adoption of AASB 132: Financial Instruments: Disclosure and Presentation and AASB 139: Financial Instruments: Recognition and Measurement. Reconciliations of AIFRS equity and proﬁt for 30 June 2005 to the balances reported in the 30 June 2005 ﬁnancial report are detailed in Note 25. The following Australian Accounting Standards have recently been issued or amended and are applicable to the Company in future periods but are not yet effective and have not been adopted for the annual reporting year ended 30 June 2006: infomedia.com.au 29 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i AASB/UIG Amendment Affected Standard(s) Nature of change to accounting policy Application date of standard* Application date for Company 2005-1 2005-4 AASB 139: Financial Instruments: Recognition and Measurement AASB 139: Financial Instruments: Recognition and Measurement, AASB 132: Financial Instruments: Disclosure and Presentation, AASB 1: First-time Adoption of AIFRS, AASB 1023: General Insurance Contracts and AASB 1038: Life Insurance Contracts 2005-6 AASB 3: Business Combinations 2005-9 2005-10 AASB 4: Insurance Contracts, AASB 1023: General Insurance Contracts, AASB 139: Financial Instruments: Recognition and Measurement and AASB 132: Financial Instruments: Disclosure and Presentation AASB 132: Financial Instruments: Disclosure and Presentation, AASB 101: Presentation of Financial Statements, AASB 114: Segment Reporting, AASB 117: Leases, AASB 133: Earnings per Share, AASB 139: Financial Instruments: Recognition and Measurement, AASB 1: First-time Adoption of AIFRS, AASB 4: Insurance Contracts, AASB 1023: General Insurance Contracts and AASB 1038: Life Insurance Contracts No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. 1 January 2006 1 July 2006 1 January 2006 1 July 2006 1 January 2006 1 July 2006 1 January 2006 1 July 2006 1 January 2007 1 July 2007 2006-1 AASB 121: The Effects of Change in Foreign Currency Rates New standard AASB 7: Financial Instruments: Disclosures UIG4 UIG8 UIG9 UIG 4: Determining whether an Arrangement contains a Lease UIG 8: Scope of AASB 2 UIG 9: Reassessment of Embedded Derivatives No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. 1 January 2006 1 July 2006 1 January 2007 1 July 2007 1 January 2006 1 July 2006 1 May 2006 1 July 2006 1 June 2006 1 July 2006 * Application date is for the annual reporting periods beginning on or after the date shown in the above table. infomedia.com.au 30 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Basis of consolidation The consolidated ﬁnancial statements comprise the ﬁnancial statements of Infomedia Ltd and its subsidiaries (‘the Company’). The ﬁnancial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised proﬁts arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company. Where there is loss of control of a subsidiary, the consolidated ﬁnancial statements include the results for the part of the reporting period during which Infomedia Ltd has control. (d) Signiﬁcant accounting judgements, estimates and assumptions Signiﬁcant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment of goodwill The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indeﬁnite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indeﬁnite useful lives are discussed in Note 14. Share based payment transactions The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, using the assumptions detailed in Note 23. (e) Foreign currencies Translation of foreign currency transactions Transactions in foreign currencies of the Company are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the Company that are outstanding at the balance date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the reporting period. infomedia.com.au 31 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Derivative ﬁnancial instruments The Company uses derivative ﬁnancial instruments such as foreign currency contracts to hedge its risks associated with foreign currency ﬂuctuations. Such derivative ﬁnancial instruments are stated at fair value. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity proﬁles. For the purposes of hedge accounting, hedges are classiﬁed as cash ﬂow hedges where they hedge exposure to variability in cash ﬂows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. For cash ﬂow hedges, the gains or losses that are recognised in equity are transferred to the income statement in the same reporting period in which the hedged ﬁrm commitment affects the net proﬁt and loss, for example when the future sale actually occurs. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to net proﬁt or loss for the reporting period. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualiﬁes for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net proﬁt or loss for the reporting period. Translation of ﬁnancial reports of overseas operations Both the functional and presentation currency of Infomedia Ltd and its Australian subsidiaries is Australian dollars (A$). All differences in the consolidated ﬁnancial report are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. The functional currency of the overseas subsidiaries is as follows: IFM Europe Ltd Euros IFM North America Inc United States Dollars (USD) As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Infomedia Ltd at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period. The exchange differences arising on the retranslation are taken directly to a separate component of equity. infomedia.com.au 32 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Cash and cash equivalents Cash on hand and in banks and short term deposits are stated at nominal values. For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, and money market investments readily convertible to cash within three months, net of outstanding bank overdrafts. (g) Trade and other receivables The Company has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139 from 1 July 2005. Outlined below are the relevant accounting policies for trade and other receivables applicable for the years ended 30 June 2006 and 30 June 2005. Accounting policies applicable for the year ended 30 June 2006 Trade receivables, which generally have 30-60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identiﬁed. Accounting policies applicable for the year ended 30 June 2005 Trade receivables were recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts was made when collection of the full amount was no longer probable. Bad debts were written off as incurred. (h) Investments and other ﬁnancial assets The Company has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139 from 1 July 2005. Outlined below are the relevant accounting policies for investments and other ﬁnancial assets applicable for the years ended 30 June 2006 and 30 June 2005. Accounting policies applicable for the year ended 30 June 2006 Financial assets in the scope of AASB 139: Financial Instruments: Recognition and Measurement are classiﬁed as either ﬁnancial assets at fair value through proﬁt or loss, loans and receivables, held-to-maturity investments or available-for-sale investments, as appropriate. For the Company the relevant category is listed 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. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in proﬁt or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Accounting policies applicable for the year ended 30 June 2005 All non-current investments are held at the lower of cost and recoverable amount. infomedia.com.au 33 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: Raw materials – purchase cost on a ﬁrst-in-ﬁrst-out basis. (j) Goodwill Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Company’s interest in the net fair value of the acquiree’s identiﬁable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash generating units, or groups of cash generating units, that are expected to beneﬁt from the synergies of the combination, irrespective of whether other assets or liabilities of the Company are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: represents the lowest level within the Company at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the Company’s primary or the Company’s secondary reporting format determined in accordance with AASB 114: Segment Reporting. Impairment is determined by assessing the recoverable amount of the cash generating unit (group of cash generating units), to which the goodwill relates. When the recoverable amount of the cash generating unit (group of cash generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash generating unit (group of cash generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. infomedia.com.au 34 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against proﬁts in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either ﬁnite or indeﬁnite. Intangible assets with ﬁnite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a ﬁnite useful life is reviewed at least at each ﬁnancial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic beneﬁts embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with ﬁnite lives is recognised in proﬁt or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indeﬁnite useful lives are tested for impairment annually, either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indeﬁnite life is reviewed each reporting period to determine whether indeﬁnite life assessment continues to be supportable. If not, the change in the useful life assessment from indeﬁnite to ﬁnite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. Research and development costs Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic beneﬁts, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected beneﬁts from the related project. The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use, or more frequently when an indication of impairment arises during the reporting period. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in proﬁt or loss when the asset is derecognised. infomedia.com.au 35 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inﬂows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset or cash generating unit is considered impaired and is written down to its recoverable amount. 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. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed (with the exception of goodwill) only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in proﬁt or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (m) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Land and buildings are measured at cost less accumulated depreciation on buildings and less any impairment losses recognised. infomedia.com.au 36 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Major depreciation periods are: 2006 2005 Freehold buildings: 40 years 40 years Leasehold improvements: 5 to 20 years 5 to 20 years Other plant and equipment: 3 to 15 years 3 to 15 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each ﬁnancial year end. (i) Impairment The carrying values of property, plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of property, plant and equipment is the higher of fair value less costs to sell and value in use. 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 an asset that does not generate largely independent cash inﬂows, recoverable amount is determined for the cash generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cash generating units exceeds its estimated recoverable amount. The asset or cash generating unit is then written down to its recoverable amount. (ii) Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic beneﬁts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in proﬁt or loss in the year the asset is derecognised. (n) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulﬁlment of the arrangement is dependent on the use of a speciﬁc asset or assets and the arrangement conveys a right to use the asset. infomedia.com.au 37 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Company as a lessee Operating lease payments are recognised as an expense in the income statement on a straight- line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense. (ii) Company as a lessor Leases in which the Company retains substantially all the risks and beneﬁts of ownership of the leased asset are classiﬁed as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income (i.e. on a straight-line basis). (o) Trade and other payables The Company has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139 from 1 July 2005. Outlined below are the relevant accounting policies for trade and other payables applicable for the years ended 30 June 2006 and 30 June 2005. Accounting policies applicable for the year ended 30 June 2006 Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the ﬁnancial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. Accounting policies applicable for the year ended 30 June 2005 Trade payables and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. (p) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash ﬂows at a pre-tax rate that reﬂects current market assessments of the time value of money and, where appropriate, the risks speciﬁc to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. infomedia.com.au 38 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q) Deferred revenue Certain contracts allow annual subscriptions to be invoiced in advance. The components of revenue relating to the subscription period beyond balance date are recorded as a liability. (r) Interest bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in proﬁt or loss when the liabilities are derecognised. (s) Contributed equity Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (t) Revenue recognition Revenue is recognised to the extent that it is probable that the economic beneﬁts will ﬂow to the entity and the revenue can be reliably measured. The following speciﬁc recognition criteria must also be met before revenue is recognised: Subscriptions Subscription revenue is recognised when the copyright article has passed to the buyer with related support revenue being recognised over the service period. Where the copyright article and related support revenue are inseparable, then the revenue is recognised over the service period. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. (u) Cost of sales Cost of sales includes the direct cost of raw materials, direct salary and wages, and agency costs associated with the manufacture and distribution of the product. (v) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. infomedia.com.au 39 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for ﬁnancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting proﬁt nor taxable proﬁt or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry- forward of unused tax assets and unused tax losses, to the extent that it is probable thattaxable proﬁt will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁt nor taxable proﬁt or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable proﬁt will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufﬁcient taxable proﬁt will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable proﬁt will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in proﬁt or loss. infomedia.com.au 40 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. (w) Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except: when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash ﬂows are included in the Cash Flow Statement on a gross basis and the GST component of cash ﬂows arising from investing and ﬁnancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁed as operating cash ﬂows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (x) Employee leave beneﬁts (i) Wages, salaries and annual leave Liabilities for wages and salaries, including non-monetary beneﬁts, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee beneﬁts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash ﬂows. infomedia.com.au 41 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (y) Share based payment transactions The Company provides beneﬁts to employees in the form of share based payment transactions, whereby employees render services in exchange for shares or options over shares (equity- settled transactions). There are currently two plans in place to provide these beneﬁts: (i) the Employee Share Plan (ESP); and (ii) the Employee Option Plan (EOP). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Infomedia Ltd (‘market conditions’). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulﬁlled, ending on the date on which the relevant employees become fully entitled to the option (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reﬂects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met, as the effect of these conditions is included in the determination of fair value at grant date. Where the terms of an equity-settled option are modiﬁed, as a minimum an expense is recognised as if the terms had not been modiﬁed. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modiﬁcation, as measured at the date of modiﬁcation. Where an equity-settled option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the option is recognised immediately. However, if a new option is substituted for the cancelled option, and designated as a replacement option on the date that it is granted, the cancelled and new option are treated as if they were a modiﬁcation of the original option, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reﬂected as additional share dilution in the computation of earnings per share. The Company has applied the exemptions of AASB 1: First-time Adoption of Australian Equivalents to International Financial Reporting Standards in respect of equity-settled options and has applied AASB 2: Share based Payments only to equity instruments granted after 7 November 2002 that had not vested on or before 1 January 2005. infomedia.com.au 42 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (z) Earnings per share Basic earnings per share is determined by dividing the proﬁt attributed to members of the parent after related income tax expense by the weighted average number of ordinary shares outstanding during the ﬁnancial year. Diluted earnings per share is calculated as net proﬁt attributable to members, adjusted for: cost of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. infomedia.com.au 43 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 3. REVENUE AND EXPENSES (i) Cost of sales Direct wages Other Total cost of sales (ii) Other income 2006 $’000 10,922 6,550 17,472 Net gain on disposal of property, plant and equipment including iiiproperty held for resale 3(vi) 2,432 Unrealised gain on forward foreign currency exchange contracts Fair value change on derivatives Proceeds from settlement of legal claim Total other income (iii) Employee beneﬁ t expense Salaries and wages (including on-costs) 31 3(viii) Redundancies and associated costs 3(viii) Share based payment expense Total employee beneﬁ t expense (iv) Depreciation and amortisation Depreciation of non-current assets: - Buildings - Leasehold improvements - Ofﬁ ce equipment - Furniture and ﬁ ttings - Plant and equipment Total depreciation of non-current assets Amortisation of non-current assets - Intellectual property - Deferred development costs Total amortisation of non-current assets Total depreciation and amortisation (v) Decrement in value of non-current assets - Development - Goodwill - Intellectual property Total decrement in value of non-current assets 3(viii) infomedia.com.au 44 231 229 - 2,892 7,758 - 251 8,009 333 531 1,135 55 389 2,443 283 629 912 3,355 - - - - 2005 $’000 7,832 9,572 17,404 193 - - 2,489 2,682 9,109 475 330 9,914 345 495 998 46 354 2,238 1,702 729 2,431 4,669 812 381 11,589 12,782 2006 $’000 6,009 7,427 13,436 194 254 229 - 677 6,600 - 251 6,851 - 487 1,006 44 389 1,926 134 629 763 2,689 - - - - 2005 $’000 6,377 8,164 14,541 - - - 2,489 2,489 7,898 475 330 8,703 - 455 908 43 354 1,760 1,552 729 2,281 4,041 812 381 11,589 12,782 N o t e s t o t h e i F n a n c a l i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2006 $’000 2005 $’000 S t a t e m e n t s 3. REVENUE AND EXPENSES (CONTINUED) (vi) Proﬁ t on sale of assets Gross proceeds from the sale of property, plant and equipment Gross proceeds from the sale of property held for resale Non-refundable payment for capital works Net proceeds from the sale of assets Net book value of assets disposed: Freehold land and buildings Leasehold improvements Ofﬁ ce equipment Furniture and ﬁ ttings Property held for resale Net book value of assets disposed Gross proﬁ t on sale of assets 12 12 12 12 Non-cancellable surplus lease space and other non recoverable lease incentives on corporate headquarters Net proﬁ t on sale of assets (vii) Research & development costs Total research & development costs incurred during the period Less: development costs deferred 13 Net research and development costs expensed (viii) Net signiﬁ cant items Signiﬁ cant items charged to proﬁ t before income tax: Decrement in value of non-current assets Legal costs incurred in enforcement of contractual rights Redundancies and associated costs Non-cancellable surplus lease space Less: Signiﬁ cant items credited to proﬁ t: Proceeds from settlement of legal claims Net signiﬁ cant items charged to proﬁ t before tax Tax effect on signiﬁ cant items Net signiﬁ cant items charged to proﬁ t after tax 23,000 - (500) 22,500 (16,644) (1,309) (29) (218) - (18,200) 4,300 (1,868) 2,432 4,510 (2,221) 2,289 - - - - - - - - - 1,734 - 1,734 - - - - (1,541) (1,541) 193 - 193 3,482 (1,490) 1,992 12,782 1,227 475 178 (2,489) 12,173 (3,065) 9,108 1,750 - 1,750 - (1,309) (29) (218) - (1,556) 194 - 194 3,680 (1,424) 2,256 - - - - - - - - - - - - - - - - - - - 3,482 (1,490) 1,992 12,782 1,227 475 178 (2,489) 12,173 (3,065) 9,108 infomedia.com.au 45 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2006 $’000 2005 $’000 4. INCOME TAX The major components of income tax expense are: Income statement Current income tax: Current income tax charge Adjustments in respect of current income tax of previous years. Deferred income tax: Relating to origination and reversal of temporary differences Income tax expense reported in the income statement A reconciliation between tax expense and the product of accounting proﬁ t before income tax multiplied by the Company’s applicable income tax rate is as follows: Accounting proﬁ t before income tax At the Company’s statutory income tax rate of 30% (2005: 30%) Adjustments in respect of current income tax of previous years Additional research and development deduction Decrement in value of non-current assets Expenditure not allowable for income tax purposes Other 5,469 (327) 1,526 6,668 24,814 7,444 (327) (660) - 211 - 5,649 (248) (2,027) 3,374 9,721 2,916 (248) (283) 607 318 64 3,799 (225) 1,292 4,866 18,566 5,570 (225) (601) - 122 - Income tax expense reported in the income statement 6,668 3,374 4,866 5,529 (205) (2,407) 2,917 8,628 2,588 (205) (283) 607 210 - 2,917 Tax consolidation Effective 1 July 2002, for the purposes of income taxation, Infomedia Ltd and its 100% owned Australian subsidiaries have formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly- owned subsidiaries on a pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. Tax effect accounting by members of the tax consolidated group Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112: Income Taxes. Allocations under the tax funding agreement are made after the ﬁ nalisation of the group’s income tax return. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ intercompany accounts with the tax consolidated group head company, Infomedia Ltd. infomedia.com.au 46 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 Notes BALANCE SHEET INCOME STATEMENT 4. INCOME TAX (CONTINUED) Deferred income tax Deferred income tax at 30 June relates to the following: 2006 $’000 2005 $’000 2006 $’000 2005 $’000 CONSOLIDATED Deferred tax liabilities Prepayments Derivatives Property, plant and equipment Deferred development costs Intellectual property Currency exchange CONSOLIDATED Deferred tax assets Allowance for doubtful debts Copyright intellectual property Other payables Employee entitlement provisions Other provisions Currency exchange Gross deferred income tax assets Deferred tax income/(expense) PARENT Deferred tax liabilities Prepayments Derivatives Property, plant and equipment Deferred development costs Intellectual property Currency exchange PARENT Deferred tax assets Allowance for doubtful debts Copyright intellectual property Other payables Employee entitlement provisions Other provisions Currency exchange Deferred tax income/(expense) (8) (69) (150) (1,574) (243) (18) (2,062) 75 176 97 710 732 - 1,790 (5) (69) (150) (1,335) - (17) (1,576) 69 176 91 524 732 - 1,592 - - - (1,097) (241) - (1,338) 169 - 82 663 51 23 988 - - - (1,097) - - (1,097) 169 - 63 473 51 23 779 8 69 150 477 2 18 (94) 176 15 47 681 (23) - - - (15) (2,195) (56) 127 - (186) 224 51 23 1,526 (2,027) 5 69 150 238 - 17 (100) 176 28 51 681 (23) - - - (15) (2,436) (56) 127 - (200) 99 51 23 1,292 (2,407) infomedia.com.au 47 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 5. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net proﬁ t for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net proﬁ t attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options). The following reﬂ ects the income and share data used in the total operations basic and diluted earnings per share computations: Net proﬁ t attributable to equity holders from continuing operations Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Employee share plans Share options Notes CONSOLIDATED 2006 $’000 18,146 2005 $’000 6,347 Number of shares Number of shares 325,456,844 325,037,011 14,729 132,313 7,416 1,198 Adjusted weighted average number of ordinary shares for diluted earnings per share 325,603,886 325,045,625 There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these ﬁ nancial statements. infomedia.com.au 48 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2006 $’000 2005 $’000 6. DIVIDENDS PROPOSED OR PAID (a) Dividends paid during the year: Franked interim dividend – 1.90 cents (2005:1.70) per share 6,184 5,527 6,184 5,527 Prior year ﬁ nal franked dividend – 1.70 cents (2005: 1.90 cents) per share Special dividend – 3.50 cents per share Total dividends paid during the year (b) Dividends proposed and not recognised as a liability: Final franked dividend – 2.10 cents (2005: 1.70) per share Special franked dividend – 3.50 cents (2005: Nil) per share (c) Franking credit balance: The amount of franking credits available for the subsequent ﬁ nancial year are: – – franking account balance as at the end of the ﬁ nancial year franking credits that will arise from the payment of income tax payable as at the end of the ﬁ nancial year The tax rate at which paid dividends have been franked is 30% (2005: 30%). Dividends proposed will be franked at the rate of 30% (2005: 30%). 7. TRADE AND OTHER RECEIVABLES (CURRENT) Trade debtors (a) Allowance for doubtful debts Other debtors 5,533 11,391 23,108 6,835 11,391 18,226 6,174 - 11,701 5,533 - 5,533 5,533 11,391 23,108 6,835 11,391 18,226 6,174 - 11,701 5,533 - 5,533 6,362 11,730 3,126 9,488 1,080 12,810 6,707 (480) 6,227 524 6,751 6,464 (877) 5,587 455 6,042 4,180 (228) 3,952 457 4,409 4,717 (562) 4,155 452 4,607 (a) Trade debtors are non-interest bearing and are generally on 30-60 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade debtor is impaired. The amount of the allowance/ impairment loss is recognised as the difference between the carrying amount of the debtor and the estimated future cash ﬂ ows expected to be received from the relevant debtors. infomedia.com.au 49 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2006 $’000 2005 $’000 8. INVENTORIES Raw materials At cost Total Inventories at the lower of cost and net realisable value 9. INTERCOMPANY (NON-CURRENT) Wholly-owned controlled entities 10. OTHER FINANCIAL ASSETS (NON-CURRENT) Investments in controlled entities Other receivables 84 84 - - - 804 804 88 88 - - - 1,260 1,260 71 71 451 451 248 804 1,052 44 44 22,043 22,043 247 1,260 1,507 11 11. INTERESTS IN CONTROLLED ENTITIES Name Country of Percentage of equity interest incorporation held by the Company 2006 % 2005 % IFM Europe Ltd - ordinary shares United Kingdom Infomedia Investments Pty Ltd - ordinary shares - $2 only Australia Datateck Publishing Pty Ltd - ordinary shares - $4 only Australia AutoConsulting Pty Ltd - ordinary shares - $1 only Australia IFM North America Inc - ordinary shares United States of America 100 100 100 100 100 100 100 100 100 100 infomedia.com.au 50 247 247 - - - 1 248 - - - - 247 i F n a n c a l i S t a t e m e n t s 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2004 $’000 2006 $’000 2005 $’000 2004 $’000 12. PROPERTY, PLANT AND EQUIPMENT N o t e s t o t h e Freehold land and buildings At cost Accumulated depreciation Leasehold improvements At cost Accumulated amortisation Total land and buildings Ofﬁ ce equipment At cost Accumulated depreciation Furniture and ﬁ ttings At cost Accumulated depreciation Plant and equipment At cost Accumulated depreciation - - - 1,286 (369) 917 917 6,925 (4,616) 2,309 334 (119) 215 2,597 (1,972) 625 - - - 915 (148) 767 767 5,834 (3,943) 1,891 212 (93) 119 17,531 (555) 16,976 3,039 (901) 2,138 17,531 (210) 17,321 2,664 (419) 2,245 19,114 19,566 4,691 (2,582) 2,109 471 (121) 350 5,772 (3,580) 2,192 554 (167) 387 2,512 (1,623) 889 2,325 2,597 (1,324) (1,972) 1,001 625 - - - 2,764 (725) 2,039 2,039 4,995 (3,038) 1,957 529 (151) 378 2,512 (1,623) 889 - - - 2,391 (283) 2,108 2,108 4,024 (2,130) 1,894 449 (108) 341 2,325 (1,324) 1,001 Total plant and equipment 3,149 3,468 3,460 2,635 3,224 3,236 Total property, plant and equipment At cost Accumulated depreciation and amortisation Total written down amount 11,142 (7,076) 4,066 29,408 (6,826) 22,582 27,682 (4,656) 23,026 9,558 (6,156) 3,402 10,800 (5,537) 5,263 9,189 (3,845) 5,344 infomedia.com.au 51 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2004 $’000 2006 $’000 2005 $’000 2004 $’000 12. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Reconciliation of property, plant and equipment carrying values; Freehold land and buildings Carrying amount – opening balance 16,976 17,321 - (16,644) - (332) - 2,138 619 (1,309) - (531) 917 2,192 1,281 (29) (1,135) 2,309 387 101 (218) (55) 215 889 125 - (389) 625 - - - (345) 16,976 2,245 388 - - (495) 2,138 2,109 1,081 - (998) 2,192 350 83 - (46) 387 1,001 249 (7) (354) 889 Additions Disposals Transfers to property held for resale Depreciation Carrying amount – closing balance Leasehold Improvements Carrying amount – opening balance Additions Disposals Transfers to property held for resale Depreciation Carrying amount – closing balance Ofﬁ ce equipment Carrying amount – opening balance Additions iiDisposals Depreciation Carrying amount – closing balance Furniture and ﬁ ttings Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance Plant and equipment Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance infomedia.com.au 52 2,741 17,531 (1,247) (1,437) (267) 17,321 1,066 1,945 (98) (97) (571) 2,245 2,050 1,081 - (1,022) 2,109 371 47 - (68) 350 854 498 (58) (293) 1,001 - - - - - - 2,039 524 (1,309) - (487) 767 1,957 969 (29) (1,006) 1,891 378 3 (218) (44) 119 889 125 - (389) 625 - - - - - - 2,108 386 - - (455) 2,039 1,894 971 - (908) 1,957 341 80 - (43) 378 1,001 242 - (354) 889 616 - (611) - (5) - 910 1,827 (98) - (531) 2,108 1,910 888 - (904) 1,894 358 47 - (64) 341 808 498 (12) (293) 1,001 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 CONSOLIDATED INFOMEDIA LTD Development Intellectual Development Intellectual costs1 Property2 Goodwill2 Total costs1 Property2 Goodwill2 Total $’000 $’000 $’000 $’000 $000 $’000 $’000 $’000 13. INTANGIBLE ASSETS iiiiiiAND GOODWILL At 1 July 2005 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2006 At 1 July 2005, net of accumulated iiiamortisation and impairment Additions – internal development Purchased intellectual property Impairment Amortisation At 30 June 2006, net of accumulated 4,008 (351) 3,657 3,657 2,221 - - (629) 1,500 (338) 1,162 8,837 - 8,837 14,345 (689) 13,656 1,162 8,837 13,656 - 2,410 - (283) - - - - 2,221 2,410 - (912) 4,008 (351) 3,657 3,657 1,424 - - (629) - - - - - 2,410 - (134) 6,026 10,034 - 6,026 (351) 9,683 6,026 - - - - 9,683 1,424 2,410 - (763) iiiamortisation and impairment 5,249 3,289 8,837 17,375 4,452 2,276 6,026 12,754 At 30 June 2006 Cost (gross carrying amount) Accumulated amortisation Net carrying amount 6,229 (980) 5,249 3,910 (621) 3,289 8,837 - 8,837 18,976 (1,601) 17,375 5,432 (980) 4,452 2,410 (134) 2,276 6,026 - 6,026 13,868 (1,114) 12,754 1. Internally generated. 2. Purchased as part of business/territory acquisition. Development costs have been capitalised at cost. This intangible asset has been assessed as having a ﬁ nite life and is amortised using the straight-line method over a period not exceeding four years. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount. Intellectual property includes intangible assets acquired through business or territory acquisition and relates primarily to copyright and software code over key products. Intellectual property is amortised over its useful life, being 10 years. As from 1 July 2005, goodwill is no longer amortised but is now subject to annual impairment testing (see Note 14). infomedia.com.au 53 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 13. INTANGIBLE ASSETS AND iiiiiiGOODWILL (CONTINUED) At 1 July 2004 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2005 At 1 July 2004, net of accumulated iiiamortisation and impairment Additions – internal development Purchased intellectual property Impairment Amortisation At 30 June 2005, net of accumulated CONSOLIDATED INFOMEDIA LTD Development Intellectual Development Intellectual costs Property Goodwill Total costs Property Goodwill Total $’000 $’000 $’000 $’000 $000 $’000 $’000 $’000 5,648 (1,940) 3,708 18,019 (3,566) 14,453 9,218 - 9,218 32,885 (5,506) 27,379 5,648 (1,940) 3,708 16,519 (3,378) 13,141 6,407 - 6,407 28,574 (5,318) 23,256 13,141 6,407 - - (11,589) (1,552) - - - - 23,256 1,490 - - - (381) (12,782) - (2,281) 6,026 9,683 6,026 10,034 - 6,026 (351) 9,683 3,708 1,490 - (812) (729) 14,453 9,218 - - (11,589) (1,702) - - (381) - 27,379 1,490 - (12,782) (2,431) 3,708 1,490 - (812) (729) iiiamortisation and impairment 3,657 1,162 8,837 13,656 3,657 At 30 June 2005 Cost (gross carrying amount) Accumulated amortisation Net carrying amount 4,008 (351) 3,657 1,500 (338) 1,162 8,837 - 8,837 14,345 (689) 13,656 4,008 (351) 3,657 Intangible assets that had a net zero carrying value at the end of the 2005 ﬁ nancial year, where the expected future use of those assets was considered highly unlikely, have been written out by crediting the gross carrying amount and debiting the accumulated amortisation. infomedia.com.au 54 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 14. IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES Goodwill acquired through business combinations has been allocated to two individual cash generating units for impairment testing as follows: Electronic Catalogue & Publishing cash generating unit Business Systems (NOVA product group) cash generating unit Electronic Catalogue and Publishing cash generating unit The recoverable amount of the Electronic Catalogue and Publishing cash generating unit has been determined based on a value in use calculation using cash ﬂ ow projections based on ﬁ nancial budgets approved by senior management. The discount rate applied to cash ﬂ ow projections is 14% (2005: 14%) covering a ﬁ ve year period. Business Systems (NOVA product group) cash generating unit The recoverable amount of the Business Systems (NOVA product group) cash generating unit has also been determined based on a value in use calculation using cash ﬂ ow projections based on ﬁ nancial budgets approved by senior management. The discount rate applied to cash ﬂ ow projections is 14% (2005: 14%) covering a ﬁ ve year period Carrying amount of goodwill allocated to each of the cash generating units is as follows: CONSOLIDATED Electronic Catalogue Business Systems and Publishing (NOVA product group) Total 2006 $’000 8,541 2005 $’000 8,541 2006 $’000 296 2005 $’000 296 2006 $’000 8,837 2005 $’000 8,837 Carrying amount of goodwill PARENT Carrying amount of goodwill 6,026 6,026 - - 6,026 6,026 Key assumptions used in value in use calculations for 30 June 2006 and 30 June 2005 The following describes each key assumption on which management has based its cash ﬂ ow projections when determining the value in use of its cash generating units: the Company will continue to have access to the data supply from automakers over the budgeted period; the Company will not experience any substantial adverse movements in currency exchange rates; and the Company’s research and development program will ensure that the current suite of products remains leading edge. infomedia.com.au 55 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 15(a) 2006 $’000 1,131 2,843 3,974 2005 $’000 1,598 2,042 3,640 2006 $’000 565 2,423 2,988 2005 $’000 1,113 1,881 2,994 16(a) 500 500 - - 500 500 - - 15. TRADE AND OTHER PAYABLES (CURRENT) Trade creditors Other creditors (a) Trade creditors are non-interest bearing and are normally settled on 30 day terms. 16. INTEREST BEARING LOANS AND BORROWINGS (CURRENT) Bank loans (a) iiThe bank loan drawings have been made under a multi- currency cash advance facility. The drawings at balance date are denominated in Australian dollars. The USD13 million facility terminates in August 2008 (refer also Notes 21(c), 22(c) and 31). 17. PROVISIONS (CURRENT) Employee entitlements Provision for non-cancellable surplus lease space and other lease incentives 19(a) 18. DEFERRED REVENUE (CURRENT) Revenue in advance 2,063 1,971 1,353 648 2,711 816 816 - 1,971 810 810 648 2,001 405 405 1,294 - 1,294 367 367 infomedia.com.au 56 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 19(a) 19(b) 17 19. PROVISIONS (NON-CURRENT) Employee entitlements Provision for non-cancellable surplus lease space and other lease iiiiiincentives Make good provision (a) Movement in non-cancellable surplus lease space and other iiiiiilease incentives provision: Carrying amount at the beginning of the year Arising during the year Utilised Carrying amount at the end of the year Current Non-current The provision for non-cancellable lease space and other lease incentives has been made pursuant to the lease obligations under contract to the extent that no future beneﬁ ts are anticipated. (b) Movement in make good provision: Carrying amount at the beginning of the year Arising during the year Carrying amount at the end of the year The provision for make good has been made pursuant to the Company’s obligation to restore leased premises to original condition at the end of the lease term. 2006 $’000 545 1,294 500 2,339 178 1,868 (104) 1,942 648 1,294 1,942 - 500 500 2005 $’000 356 178 - 534 - 178 - 178 - 178 178 - - - 2006 $’000 393 1,294 500 2,187 178 1,868 (104) 1,942 648 1,294 1,942 - 500 500 2005 $’000 282 178 - 460 - 178 - 178 - 178 178 - - - infomedia.com.au 57 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 20. CONTRIBUTED EQUITY AND RESERVES Ordinary shares 2006 $’000 17,488 17,488 2005 $’000 17,488 17,488 2006 $’000 17,488 17,488 2005 $’000 17,488 17,488 Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the Parent does not have authorised capital nor par value in respect of its issued shares. Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in ordinary shares on issue At 1 July 2004 Employee Share Plan issuance – 15/7/2004 Employee Share Plan issuance – 20/1/2005 At 1 July 2005 Employee Share Plan issuance – 18/7/2005 At 30 June 2006 Employee Option Plan Notes Number $’000 23 23 23 324,762,959 17,488 192,816 200,430 - - 325,156,205 17,488 315,368 - 325,471,573 17,488 A total of 1,700,000 options were issued to eligible employees during the year at an average exercise price of $0.50. Refer to Note 23. 30 June 2006 Movement in ordinary shares on issue At 1 July 2004 Currency translation differences Share based payments At 30 June 2005 Currency translation differences Share based payments At 30 June 2006 Nature and purpose of reserves Employee equity beneﬁ ts reserve Notes CONSOLIDATED Employee equity Foreign currency beneﬁ ts reserve translation reserve $’000 $’000 395 - 330 725 - 251 976 9 (28) - (19) 53 - 34 INFOMEDIA LTD Employee equity beneﬁ ts reserve $’000 395 - 330 725 - 251 976 Total $’000 404 (28) 330 706 53 251 1,010 This reserve is used to record the value of equity beneﬁ ts provided to employees and Directors as part of their compensation. Refer to Note 23 for further details. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the ﬁ nancial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations. infomedia.com.au 58 N o t e s t o t h e i F n a n c a l i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD S t a t e m e n t s 21. STATEMENT OF CASH FLOWS (a) Reconciliation of proﬁ t after tax to the net cash ﬂ ows from operations Proﬁ t from ordinary activities after income tax expense Depreciation of non-current assets Amortisation of non-current assets Amortisation of employee options Decrement in value of non-current assets Gross proﬁ t on sale of property, plant and equipment including property held for resale Changes in assets and liabilities (Increase)/decrease in trade and other debtors (Increase)/decrease in inventories (Increase)/decrease in prepayments (Increase)/decrease in future income tax beneﬁ t (Increase)/decrease in deferred development costs Decrease/(increase) in trade and other creditors Decrease/(increase) in allowance for doubtful debts Decrease/(increase) in provision for employee entitlements Decrease/(increase) in other provisions Decrease/(increase) in income tax payable Decrease/(increase) in deferred income tax liability Decrease/(increase) in revenue in advance Net cash ﬂ ow from operating activities (b) Reconciliation of cash Cash balance comprises: – cash at bank – cash on deposit (c) Financing facilities available At reporting date, the following ﬁ nancing facilities had been negotiated and were available: Total facilities: 2006 $’000 18,146 2,443 912 251 - (4,300) (31) 4 (4) (803) (2,221) 21 (399) 178 1,868 2,236 721 7 19,029 25,853 168 26,021 2005 $’000 6,347 2,238 2,431 330 12,782 (193) 595 7 (176) (240) (1,489) (1,463) 737 483 178 (458) (2,267) 33 19,875 2006 $’000 13,700 1,926 763 251 - (194) 2,475 (29) (14) (813) (1,424) (320) (332) 66 1,868 673 478 38 19,112 2005 $’000 5,711 1,760 2,281 330 12,782 - 2,685 24 (106) (101) (1,489) (1,719) 422 330 178 (593) (2,508) 36 20,023 8,189 2,632 10,821 25,079 10 25,089 6,171 2,632 8,803 USD13 million multi-currency cash advance facility 17,580 17,060 17,580 17,060 Facilities used at reporting date: Bank loans Facilities unused at reporting date: Bank loans 500 - 500 - 17,080 17,060 17,080 17,060 infomedia.com.au 59 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $’000 2005 $’000 2006 $’000 2005 $’000 22. COMMITMENTS AND CONTINGENCIES (a) Lease expenditure commitments Operating leases (non-cancellable): Minimum lease payments – not later than one year – later than one year and not later than ﬁ ve years – aggregate operating lease expenditure contracted for at balance date 1,657 4,483 6,140 505 117 622 1,199 3,453 4,652 334 117 451 Operating lease commitments are for ofﬁ ce accommodation both in Australia and abroad. (b) Performance bank guarantee Infomedia Ltd has a performance bank guarantee to a maximum value of $700,000 relating to the lease commitments of its corporate headquarters. (c) Interlocking guarantees The bank loan drawings have been made pursuant to a multi-currency cash advance facility. The facility has been provided on the condition of interlocking guarantees between the Parent entity and its controlled entities (the guarantors). 23. SHARE BASED PAYMENT PLANS Employee Option Plan The Employee Option Plan entitles the Company to offer ‘eligible employees’ options to subscribe for shares in the Company. Options will be granted at a nil issue price unless otherwise determined by the Directors of the Company and each option enables the holder to subscribe for one share. The exercise price for the options granted will be as speciﬁ ed on the option certiﬁ cate or, if not speciﬁ ed, the volume weighted average price for shares of the Company for the ﬁ ve days’ trading immediately before the day on which the options were granted. The options may be exercised in accordance with the date determined by the Board, which must be within four years of the option being granted. Information with respect to the number of options granted under the employee share incentive scheme is as follows: Notes 2006 2005 Number of options Weighted average exercise price Number of options Weighted average exercise price 23(a) 23(b) 23(c) 23(d) 727,000 1,700,000 (477,000) - 1,950,000 $0.73 $0.50 $0.73 - $0.52 6,908,000 100,000 (6,281,000) - 727,000 $0.86 $0.67 $0.88 - $0.73 Balance at beginning of year – granted – forfeited – exercised Balance at end of year infomedia.com.au 60 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 23. SHARE BASED PAYMENT PLANS (CONTINUED) (a) Options held at the beginning of the reporting period The following table summarises information about options held by employees at 1 July 2005 Number of options Grant date Earliest vesting date Expiry date 477,000 150,000 100,000 1/7/2002 24/5/2004 20/9/2004 1/7/2004 24/5/2005 20/9/2005 1/8/2005 31/5/2007 20/9/2007 Weighted average exercise price $0.73 $0.75 $0.67 (b) Options granted during the reporting period The following table summarises information about options granted by Infomedia Ltd to employees during the year Number of options Grant date Earliest vesting date Expiry date 250,000 1,000,000 250,000 200,000 8/7/2005 27/10/2005 6/10/2005 5/1/2006 5/1/2006 5/1/2006 5/2/2008 5/2/2008 5/2/2008 16/12/2005 16/12/2006 16/1/2009 Weighted average exercise price $0.50 $0.50 $0.48 $0.49 (c) Options exercised during the reporting period There were no options exercised during the year ended 30 June 2006. (d) Options held at the end of the reporting period The following table summarises information about options held by employees at 30 June 2006. Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 150,000 100,000 250,000 1,000,000 250,000 200,000 24/5/2004 20/9/2004 8/7/2005 27/10/2005 6/10/2005 24/5/2005 20/9/2005 5/1/2006 5/1/2006 5/1/2006 31/5/2007 20/9/2007 5/2/2008 5/2/2008 5/2/2008 16/12/2005 16/12/2006 16/1/2009 $0.75 $0.67 $0.50 $0.50 $0.48 $0.49 (e) Other details re options The weighted average fair value of options granted during the year was $0.087. The fair value of the equity-settled options granted under the option plan is estimated as at the grant date using a binomial model taking into account the term and conditions upon which the options were granted. The following table lists the inputs to the model used for the year. Dividend yield (%) Expected volatility (%) Risk free rate (%) Option exercise price Weighted average share price at grant date 2006 6.8% 37.9% 5.4% $0.50 $0.50 2005 5.0% 31% 5.4% $0.67 $0.67 infomedia.com.au 61 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 23. SHARE BASED PAYMENT PLANS (CONTINUED) Employee Share Plan The Company provides employees, not including Directors, the opportunity to acquire shares in the Company. The scheme applies to employees with at least 12 months service and provides that offers be made to at least 75% of the persons employed by the Company for at least 12 months and not more than twice in each ﬁ nancial year. Each offer to each employee cannot exceed a market value of $1,000. The consideration for each share offered will be nil unless otherwise determined by the Board. Shares may not be offered to employees who are ineligible, being employees with legal or beneﬁ cial interest in more than 5% of the Company or who control or may cast more than 5% of the maximum votes at a general meeting of the Company. The total number of shares issued pursuant to the Employee Share Plan at the date of this Report is 1,488,912 (2005: 1,488,912). The following table lists the number of shares issued by tranche since the inception of the plan. Date of issue Number of shares Rounded unit Value of tranche price $ $’000 5/2/2001 5/10/2001 21/1/2002 19/7/2002 6/2/2003 21/7/2003 23/1/2004 15/7/2004 20/1/2005 18/7/2005 Total 60,168 64,872 74,765 125,280 130,986 169,644 154,583 192,816 200,430 315,368 1,488,912 1.81 1.57 1.27 0.77 0.87 0.79 0.93 0.75 0.76 0.50 109 102 95 96 114 134 144 145 153 158 1,250 24. PENSIONS AND OTHER POST-EMPLOYMENT PLANS Superannuation commitments Contributions are made by the Company in accordance with the relevant statutory requirements. Contributions by the Company for the year ended 30 June 2006 were 9% (2005: 9%) of employees’ wages and salaries, which are legally enforceable in Australia. The superannuation plans provide accumulation beneﬁ ts. 25. TRANSITION TO AIFRS For all periods up to and including the year ended 30 June 2005, the Company prepared its ﬁ nancial statements in accordance with Australian Generally Accepted Accounting Principles (AGAAP). These annual ﬁ nancial statements for the year ended 30 June 2006 are the ﬁ rst the Company is required to prepare in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS). Accordingly, the Company has prepared ﬁ nancial statements that comply with AIFRS applicable for periods beginning on or after 1 January 2005 and the signiﬁ cant accounting policies meeting those requirements are described in Note 2. In preparing these ﬁ nancial statements, the Company has started from an opening balance sheet as at 1 July 2004, the Company’s date of transition to AIFRS, and made those changes in accounting policies and other restatements required by AASB 1: First-time Adoption of AIFRS. This note explains the principal adjustments made by the Company in restating its AGAAP balance sheet as at 1 July 2004 and its previously published AGAAP ﬁ nancial statements for the year ended 30 June 2005. Exemptions applied AASB 1 allows ﬁ rst-time adopters certain exemptions from the general requirement to apply AIFRS retrospectively. The Company has taken the following exemptions: Comparative information for ﬁ nancial instruments is prepared in accordance with AGAAP and the Company has adopted AASB 132: Financial Instruments: Disclosure and Presentation and AASB 139: Financial Instruments: Recognition and Measurement from 1 July 2005. infomedia.com.au 62 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 25. TRANSITION TO AIFRS (CONTINUED) AASB 2: Share based Payment has not been applied to any equity instruments that were granted on or before 7 November 2002, nor has it been applied to equity instruments granted after 7 November 2002 that vested before 1 January 2005. Explanation of material adjustments to the cash ﬂ ow statement There are no material differences between the cash ﬂ ow statement presented under AIFRS and the cash ﬂ ow statement presented under previous AGAAP. Balance sheet reﬂ ecting reconciliation of adjustments to AIFRS as at 1 July 2004: Notes CONSOLIDATED INFOMEDIA LTD AGAAP AIFRS impact AIFRS AGAAP AIFRS impact 6,887 9,389 95 1,534 364 18,269 - - 23,026 27,379 748 51,153 69,422 5,103 1,140 1,673 1,503 9,419 4,173 704 3,605 8,482 17,901 51,521 17,488 9 34,024 51,521 - - - - - - - - - - - - - - - - - - - - - - - - - 395 (395) - 6,887 9,389 95 1,534 364 6,333 8,565 68 - 328 18,269 15,294 - - 23,026 27,379 748 51,153 69,422 5,103 1,140 1,673 1,503 9,419 4,173 704 3,605 8,482 17,901 51,521 17,488 404 33,629 51,521 23,180 247 5,344 23,255 678 52,704 67,998 4,713 950 1,673 1,057 8,393 4,173 296 3,605 8,074 16,467 51,531 17,488 - 34,043 51,531 - - - - - - - - - - - - - - - - - - - - - - - - - 395 (395) - A A AIFRS 6,333 8,565 68 - 328 15,294 23,180 247 5,344 23,255 678 52,704 67,998 4,713 950 1,673 1,057 8,393 4,173 296 3,605 8,074 16,467 51,531 17,488 395 33,648 51,531 infomedia.com.au 63 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Property held for resale Other TOTAL CURRENT ASSETS NON-CURRENT ASSETS Inter-company Other ﬁ nancial assets Property, plant and equipment Intangible assets and goodwill Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Income tax payable Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest bearing liabilities Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained proﬁ ts TOTAL EQUITY e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 25. TRANSITION TO AIFRS (CONTINUED) Balance sheet reﬂ ecting reconciliation of adjustments to AIFRS as at 30 June 2005: Notes CONSOLIDATED INFOMEDIA LTD AGAAP AIFRS impact AIFRS AGAAP AIFRS impact AIFRS B,C 10,821 6,042 88 540 17,491 1,260 - 22,582 12,448 988 37,278 54,769 3,640 1,971 1,215 810 7,636 534 1,338 1,872 9,508 - - - - - - - - 1,208 - 1,208 1,208 - - - - - - - - - 10,821 6,042 88 540 8,803 4,607 44 434 17,491 13,888 1,260 23,303 - 22,582 13,656 988 38,486 55,977 3,640 1,971 1,215 810 7,636 534 1,338 1,872 9,508 247 5,263 8,946 779 38,538 52,426 2,994 1,294 1,080 367 5,735 460 1,097 1,557 7,292 - - - - - - - - 737 - 737 737 - - - - - - - - - 8,803 4,607 44 434 13,888 23,303 247 5,263 9,683 779 39,275 53,163 2,994 1,294 1,080 367 5,735 460 1,097 1,557 7,292 45,261 1,208 46,469 45,134 737 45,871 A A,B,C 17,488 (19) 27,792 45,261 - 725 483 1,208 17,488 17,488 706 28,275 46,469 - 27,646 45,134 - 725 12 737 17,488 725 27,658 45,871 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables Investments Property, plant and equipment Intangible assets and goodwill Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Income tax payable Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained proﬁ ts TOTAL EQUITY infomedia.com.au 64 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 25. TRANSITION TO AIFRS (CONTINUED) Income statement for the year ended 30 June 2005: YEAR ENDED 30 June 2005 Notes CONSOLIDATED INFOMEDIA LTD Sales revenue Rental income Interest revenue Cost of sales Gross proﬁ t Other income Employee beneﬁ ts expense Depreciation and amortisation Decrement in value of non-current assets A B C Finance costs Other expenses Proﬁ t before income tax expense Income tax expense Proﬁ t after income tax expense AGAAP $’000 59,137 618 272 60,027 (17,404) 42,623 2,682 (9,584) (5,907) (12,752) (97) (8,122) 8,843 (3,374) 5,469 AIFRS impact $’000 - - - - - - - (330) 1,238 (30) - - 878 - 878 AIFRS $’000 AGAAP $’000 59,137 52,628 618 272 60,027 (17,404) 42,623 2,682 (9,914) (4,669) - 255 52,883 (14,541) 38,342 2,489 (8,373) (4,808) (12,782) (12,752) (97) (8,122) 9,721 (3,374) 6,347 (97) (6,580) 8,221 (2,917) 5,304 AIFRS impact $’000 - - - - - - - (330) 767 (30) - - 407 - 407 AIFRS $’000 52,628 - 255 52,883 (14,541) 38,342 2,489 (8,703) (4,041) (12,782) (97) (6,580) 8,628 (2,917) 5,711 Impact of adopting AIFRS Outlined below are the areas impacted by adoption of AIFRS, including the ﬁ nancial impact on equity and proﬁ t. (A) Under AASB 2: Share based Payments, the Company has recognised the fair value of options granted to employees as remuneration as an expense on a pro-rata basis over the vesting period in the income statement with a corresponding adjustment to equity. This standard extends to other forms of equity based remuneration such as Infomedia’s Employee Share Plan. Share based payment costs were not recognised under AGAAP. (B) Goodwill is not amortised under AASB 3: Business Combinations, but was amortised under AGAAP. (C) Under AASB 136: Impairment of Assets the recoverable amount of an asset is determined as the higher of net selling price and value in use. The asset base subject to impairment testing under AIFRS is higher than AGAAP due to the non-amortisation of goodwill. The result is that the impairment writedown for FY2005 is higher by $30,000 under AIFRS. infomedia.com.au 65 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 26. DIRECTOR AND EXECUTIVE DISCLOSURES (a) Details of Key Management Personnel (i) DIRECTORS Richard Graham1 Gary Martin2 Chairman Chief Executive Ofﬁcer Barry Ford (resigned 31 March 2005) Non-executive Director Myer Herszberg Non-executive Director Geoffrey Henderson Non-executive Director Frances Hernon Non-executive Director Andrew Moffat (appointed 31 March 2005) Non-executive Director (ii) EXECUTIVES Andrew Pattinson3 Peter Adams Nick Georges Michael Roach Managing Director – IFM Europe Ltd Chief Financial Ofﬁcer Company Secretary, Legal Counsel and Alternate Director General Manager – Electronic Catalogues and Data Management Mark Kujacznski4 Vice President – IFM North America Inc 1. Retired from the position of Chief Executive Ofﬁcer effective 31 December 2004. 2. Appointed as an Executive Director on 31 October 2004 and promoted to the position of Chief Executive Ofﬁcer effective 1 January 2005. 3. Resigned as a Director of Infomedia Ltd on 31 October 2004. Continues in capacity as an executive. 4. Commenced employment on 22 August 2005. (b) Compensation of Key Management Personnel (i) COMPENSATION PHILOSOPHY The performance of the Company depends upon the quality of its Directors and executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and executives. To this end, the Company embodies the following principles in its compensation framework: Provide competitive rewards to attract high calibre executives. Link executive rewards to shareholder value. Establish appropriate performance hurdles in relation to variable executive compensation. Remuneration Committee The Remuneration & Nomination Committee (Remuneration Committee) of the Board of Directors is responsible for recommending to the Board the Company’s remuneration and compensation policy arrangements for all Key Management Personnel. The Remuneration Committee assesses the appropriateness of the nature and amount of these emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder beneﬁt from the retention of a high quality board and executive team. infomedia.com.au 66 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) Compensation structure In accordance with best practice corporate governance recommendations, the structure of non-executive Director and senior executive compensation is separate and distinct. Non-executive Director compensation Objective The Board seeks to set aggregate compensation at a level which provides the Company with the ability to attract and retain Directors of appropriate calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then available between the Directors as appropriate (for the year ended 30 June 2006, Non-executive Directors’ compensation totalled $311,489). The latest determination was at the Annual General Meeting held on 30 October 2002, when shareholders approved a maximum aggregate compensation of $450,000 per year. The Board has historically considered the advice from external consultants, as well as the fees paid to non- executive Directors of comparable companies when undertaking a review process. Senior Executive and Executive Director compensation Objective The Company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the Company and so as to: reward executives for Company and individual performance against targets set by reference to appropriate benchmarks; align the interests of executives with those of shareholders; link reward with the strategic goals and performance of the Company; and ensure total compensation is competitive by market standards. Structure In determining the level and make-up of executive compensation, the Remuneration Committee engages an external consultant from time to time to provide independent advice in the form of a written report detailing market levels of compensation for comparable executive roles. Compensation consists of the following key elements: - Fixed Compensation - Variable Compensation - Short Term Incentive (STI); and - Long Term Incentive (LTI). The actual proportion of ﬁxed compensation and variable compensation (potential short term and long term incentives) is established for Key Management Personnel (excluding the CEO and non-executive Directors) by the CEO in conjunction with the Remuneration Committee, and in the case of the CEO, by the Chairman of the Board in conjunction with the Remuneration Committee. Other executive salaries are determined by the CEO with reference to market conditions. infomedia.com.au 67 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) Fixed Compensation Objective The level of ﬁxed compensation is set so as to provide a base level of compensation which is both appropriate to the position and competitive in the market. Fixed compensation is reviewed periodically by the CEO in conjunction with the Remuneration Committee for Key Management Personnel (excluding the CEO and non-executive Directors), and in the case of the CEO, by the Chairman of the Board in conjunction with the Remuneration Committee. All other executive positions are reviewed periodically by the CEO. As noted above, the Committee has access to external advice independent of management. Structure Executives are given the opportunity to receive their ﬁxed (primary) compensation in a variety of forms, including cash or other designated employee expenditure such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. Variable Compensation – Short Term Incentive (STI) Objective The objective of short term compensation is to link the achievement of both individual performance and Company performance with the compensation received by the executive. Structure The structure of short term compensation is a cash bonus dependent upon a combination of individual performance objectives and Company objectives being met. This reﬂects the Company wide practice of ‘Performance Planning & Review’ (PPR) procedures. Individual performance objectives centre around key focus areas. Company objectives include achieving budgetary targets that are set at the commencement of the ﬁnancial year (adjusted where necessary for currency ﬂuctuations). These performance conditions were chosen, in the case of individual performance objectives, to promote and maintain the individual’s focus on their own contribution to the Company’s strategic objectives through individual achievement in key result areas (KRAs) which include, for example, ‘leadership’, ‘decision making’, ‘results’ and ‘risk management’. In the case of Company objectives, budgetary performance conditions were chosen to promote and maintain a collaborative, Company wide focus on the achievement of those targets. In assessing whether an individual performance condition has been satisﬁed, pre-agreed key performance indicators (KPIs) are used. In assessing whether Company objectives have been satisﬁed, Board level pre- determined budgetary targets are used. These methods have been chosen to create clear and measurable performance targets. Variable Compensation – Long Term Incentive (LTI) Objective The objective of the LTI plan is to reward executives in a manner which aligns this element of compensation with the creation of shareholder wealth. As such, LTI grants are made to executives who are able to inﬂuence the generation of shareholder wealth and thus have a direct impact on the Company’s performance against the relevant long term performance hurdle. Structure The structure of long term compensation is in the form of share options pursuant to the employee option and employee share plans. Performance hurdles have been introduced for all share options issued after 31 December 2004 and are determined upon grant of those share options. These hurdles typically relate to the Company’s share price reaching or exceeding a particular level. These methods were chosen to create clear infomedia.com.au 68 i F n a n c a l i S t a t e m e n t s 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (ii) COMPENSATION OF KEY MANAGEMENT PERSONNEL FOR THE YEAR ENDED 30 JUNE 2006 AND 30 JUNE 2005 Short term Post employment Share based payments Long term Total Total performance related Salary and fees Bonus Non monetary beneﬁ ts Superannuation Options Employee share plan Other $ % 2006 Financial Year: DIRECTORS: N o t e s t o t h e Richard Graham 118,019 - Gary Martin 280,000 63,000 Myer Herszberg Geoffrey Henderson Frances Hernon Andrew Moffat EXECUTIVES: 42,000 42,000 42,000 42,000 Andrew Pattinson 305,523 - - - - - Peter Adams Nick Georges 190,742 38,000 170,290 12,500 Michael Roach 153,558 14,000 - - - - - - 14,537 - - - Mark Kujacznski 170,186 - 9,589 10,350 24,445 3,780 3,780 3,780 3,780 27,497 17,167 15,326 13,820 - - 51,232 - - - - - 17,742 13,050 6,286 - - - - - - - 1,000 1,000 1,000 1,000 - - 3,267 - - - - 5,092 2,225 1,987 2,559 - 128,369 421,944 45,780 45,780 45,780 45,780 353,649 266,876 214,153 191,223 179,775 1,556,318 127,500 24,126 123,725 88,310 4,000 15,130 1,939,109 2005 Financial Year1: DIRECTORS: Richard Graham2 257,751 100,000 37,982 Andrew Pattinson 331,069 - Gary Martin 247,436 35,200 Myer Herszberg Geoffrey Henderson Frances Hernon Barry Ford Andrew Moffat EXECUTIVES: Peter Adams Nick Georges 42,000 42,000 42,000 31,338 10,823 - - - - - 192,548 32,800 155,543 10,000 Michael Roach 135,742 10,000 - - - - - - - - - - 13,815 29,796 24,445 3,780 3,780 3,780 2,997 974 19,255 13,910 11,705 1,488,250 188,000 37,982 128,237 100,980 - 30,997 30,997 - 1,000 1,000 - - - - - 4,793 30,997 3,196 - - - - - 2,000 2,000 2,000 8,000 3,200 5,518 2,887 - - - - - 2,246 1,815 2,262 412,748 398,380 341,965 45,780 45,780 45,780 34,335 11,797 253,642 214,265 164,905 17,928 1,969,377 - 27% - - - - - 21% 12% 11% - 24% 8% 19% - - - - - 15% 19% 8% 1. Group totals for 2005 are not the same as disclosed in the 2005 report as different individuals and different components were disclosed in the 2005 ﬁ nancial report. 2. Salary and fees for Richard Graham includes $120,118 of leave entitlements paid upon resignation as Chief Executive Ofﬁ cer effective 31 December 2004. infomedia.com.au 69 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (iii) COMPENSATION BY CATEGORY: KEY MANAGEMENT PERSONNEL Short term Post employment Other Long term Termination beneﬁ ts CONSOLIDATED INFOMEDIA LTD 2006 $ 2005 $ 2006 $ 2005 $ 1,707,944 1,714,232 1,040,551 1,237,421 123,725 15,130 - 128,237 17,928 - 82,408 7,479 - 84,024 86,736 10,148 - 71,787 Share based Payments 92,310 108,980 1,939,109 1,969,377 1,214,462 1,406,092 (iv) Contract for services The table and notes below summarise current executive employment contracts with the Company as at the date of this report: Commencement date per latest contract Gary Martin 1 January 2005 Andrew Pattinson 5 April 2004 Nick Georges 1 January 2005 Peter Adams 1 January 2005 Michael Roach 1 January 2005 Mark Kujacznski 22 August 2005 Duration 3 years 3 years 3 years 3 years 3 years 3 years Notice period – Company Notice period - Executive 6 months* 3 months 6 months* 6 months* 3 months 3 months 6 months 3 months 6 months 6 months 3 months 3 months The Company may terminate each of the contracts at any time without notice if serious misconduct has occurred. Options that have not yet vested upon termination will be forfeited. * In the event of redundancy, in addition to six months notice, the Company will provide the individual with a severance payment equivalent to three weeks’ base salary for each completed year of continuous service with the Company provided, however, that the minimum severance payment will be 26 weeks’ base salary and the maximum severance payment will not exceed 52 weeks’ base salary. infomedia.com.au 70 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (c) Compensation options: Granted and vested during the year (consolidated) During the ﬁ nancial year options were granted as equity compensation beneﬁ ts under the long term incentive plan to certain Key Management Personnel as disclosed above. No share options have been granted to the non-executive members of the Board of Directors under this scheme. The options were issued free of charge. Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price equal to the strike price of the shares on the date of grant. The options vest at various hurdle rates dependent upon the share price of the Company. If this increase is not met by the last available exercise date, the options are forfeited. The contractual life of each option granted is approximately three years. Vested Granted Terms and conditions for each grant 30 June 2006 Number Number Grant date Directors Fair value per option at grant date (cents) Exercise price per option (cents) Expiry date First Exercise date Last Exercise date Gary Martin 333,333 1,000,000 27 Oct 2005 8.4 50.0 5 Feb 2008 5 Jan 2006 5 Feb 2008 Executives Peter Adams 83,333 250,000 8 Jul 2005 Nick Georges 83,333 250,000 6 Oct 2005 Michael Roach - 200,000 16 Dec 2005 10.3 8.1 8.9 50.0 48.0 49.0 5 Feb 2008 5 Feb 2008 5 Jan 2006 5 Jan 2006 5 Feb 2008 5 Feb 2008 16 Jan 2009 16 Dec 2005 16 Jan 2009 499,999 1,700,000 There were no options granted in the 2005 Financial Year. (d) Shares issued on exercise of compensation options (consolidated) No options were exercised during the year by Key Management Personnel. (e) Option holdings of Key Management Personnel (consolidated) Balance at beginning of period Granted as compensation Options exercised Net change other Balance at end of period 30 June 2006 1 July 2005 30 June 2006 Total Vested at 30 June 2006 Not exercisable Exercisable Directors Gary Martin Executives Peter Adams Nick Georges Michael Roach - - - - - 1,000,000 250,000 250,000 200,000 1,700,000 - - - - - - - - - - 1,000,000 1,000,000 666,667 333,333 250,000 250,000 200,000 250,000 250,000 200,000 166,667 166,667 200,000 83,333 83,333 - 1,700,000 1,700,000 1,200,001 499,999 infomedia.com.au 71 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) Balance at beginning of period Granted as compensation Options exercised Net change other Balance at end of period 30 June 2005 1 July 2004 30 June 2005 Total Vested at 30 June 2005 Not exercisable Exercisable Directors Gary Martin Andrew Pattinson Executives Nick Georges Peter Adams Michael Roach 582,000 582,000 582,000 90,000 60,000 1,896,000 (f) Shareholdings of Key Management Personnel - - - - - - - - - - - - (582,000) (582,000) (582,000) (90,000) (60,000) (1,896,000) - - - - - - - - - - - - - - - - - - - - - - - - 30 June 2006 Number of shares held in Infomedia Ltd 1 July 2005 compensation options Net change other 30 June 2006 Balance Granted as On exercise of Balance Directors Richard Graham Myer Herszberg Gary Martin Frances Hernon Executives Andrew Pattinson Nick Georges Michael Roach Peter Adams Total 102,204,060 39,421,599 74,257 5,000 2,545,571 22,425 16,725 9,425 144,299,062 - - - - 1,996 1,996 1,996 1,996 7,984 - - - - - - - - - - - - - 102,204,060 39,421,599 74,257 5,000 (100,000) 2,447,567 - - - 24,421 18,721 11,421 (100,000) 144,207,046 infomedia.com.au 72 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 26. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) 30 June 2005 Number of shares held in Infomedia Ltd 1 July 2004 compensation options Net change other 30 June 2005 Balance Granted as On exercise of Balance Directors Richard Graham Myer Herszberg Gary Martin Frances Hernon Executives Andrew Pattinson Nick Georges Michael Roach Peter Adams Total 102,204,060 39,421,599 707,918 5,000 4,407,716 16,776 9,276 6,776 - - 1,339 - 1,310 2,649 2,649 2,649 146,779,121 10,596 - - - - - - - - - - - (635,000) - 102,204,060 39,421,599 74,257 5,000 (1,863,455) 2,545,571 3,000 4,800 - 22,425 16,725 9,425 (2,490,655) 144,299,062 All equity transactions with Key Management Personnel other than those arising from the exercise of compensation options and compensation shares have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. (g) Loans to Key Management Personnel There were no loans at the beginning or the end of the reporting period to Key Management Personnel. No loans were made available during the reporting period to Key Management Personnel. (h) Other transactions and balances with Key Management Personnel (including related entities) (i) Infomedia Ltd previously rented ofﬁ ce space from Wiser Equity Pty Limited (formerly Wiser Laboratory Pty Limited), a company in which Richard Graham is a Director. A lease termination payment of $170,000 was made on 9 August 2005 to Wiser Equity Pty Limited to relinquish the Company from its future lease commitments as the space was no longer used. (ii) Infomedia Ltd rents ofﬁ ce space from Richard Graham. The total rent payments for the year ended 30 June 2006 of $176,898 (2005: $168,144) were on commercial terms. (iii) Infomedia Ltd received ﬁ nancial consulting services from Cowoso Capital Pty Limited, a company in which Andrew Moffat is a Director. The total consulting services paid for the year ended 30 June 2006 of $12,500 (2005: $15,250) were on commercial terms. infomedia.com.au 73 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30 June 2006 Notes CONSOLIDATED INFOMEDIA LTD 2006 $ 2005 $ 2006 $ 2005 $ 27. AUDITOR’S REMUNERATION Amounts received or due and receivable by the auditors of Infomedia Ltd for: – an audit or review of the ﬁ nancial report of the entity and any other entity in the consolidated entity 183,350 170,075 158,350 152,675 – other services in relation to the entity and any other entity in the consolidated entity - 183,350 20,280 190,355 - 158,350 20,280 172,955 28. RELATED PARTY DISCLOSURES Ultimate Parent Infomedia Ltd is the ultimate Australian parent company Wholly-owned group transactions (a) An unsecured, interest bearing loan of $Nil (2005: $17,137,486) remains owing from Infomedia Investments Pty Limited to Infomedia Ltd. Interest is charged at commercial rates. (b) An unsecured, interest free loan of $2,793,213 (2005: $Nil) remains owing to Infomedia Investments Pty Limited from Infomedia Ltd. (c) An unsecured, interest free loan of $2,126,248 (2005: $2,217,581) remains owing from Datateck Publishing Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (d) An unsecured, interest free loan of $987,913 (2005: $1,231,967) remains owing from AutoConsulting Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (e) An unsecured, interest free loan of $1,013,333 (2005: $1,456,912) remains owing to IFM Europe Ltd from Infomedia Ltd. (f) An unsecured, interest free loan of $1,143,345 (2005: $Nil) remains owing from IFM North America Inc. to Infomedia Ltd. (g) During the year a management fee of $480,000 (2005: $917,484) was paid to Datateck Publishing Pty Limited by Infomedia Ltd. (h) During the year Infomedia Ltd received $7,004,846 from IFM Europe Ltd for intra-group sales. (i) During the year Datateck Publishing Pty Limited received $279,441 from IFM Europe Ltd for intra-group sales. (j) During the year IFM Europe Ltd received $1,571,822 from Infomedia Ltd for intra-group distribution services. (k) During the year Infomedia Ltd received $8,827,526 from IFM North America Inc. for intra-group sales. (l) During the year IFM North America Inc. received $813,558 from Infomedia Ltd for intra-group distribution services. Entity with deemed signiﬁ cant inﬂ uence over the Company Wiser Equity Pty Limited, a company in which Richard Graham is a Director, owns 30.8% of the ordinary shares in Infomedia Ltd (2005: 30.8%). infomedia.com.au 74 N o t e s t o t h e i F n a n c a l i 29. SEGMENT INFORMATION PRIMARY SEGMENT 30 June 2006 Business segments Notes Catalogue and Publishing Business Systems $’000 51,635 646 52,281 $’000 3,942 - 3,942 24,634 109 REVENUE Sales revenue Rental income Total segment revenue Unallocated revenue: Finance revenue Total consolidated revenue Segment result Unallocated items: Finance revenue Finance costs Consolidated proﬁ t before income tax Income tax expense 4 Consolidated proﬁ t after income tax S t a t e m e n t s Total $’000 55,577 646 56,223 268 56,491 24,743 268 (197) 24,814 (6,668) 18,146 ASSETS Segment assets Unallocated assets: Cash Total assets LIABILITIES Segment liabilities Other segment information: Capital expenditure Depreciation Amortisation Decrement in value of non-current assets 28,889 2,754 31,643 26,021 57,664 14,754 1,099 15,853 1,522 2,149 762 - 3(iv) 3(iv) 3(v) 103 294 150 - 1,625 2,443 912 - infomedia.com.au 75 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 29. SEGMENT INFORMATION (CONTINUED) 30 June 2005 Business segments Notes Catalogue and Publishing Business Systems $’000 55,086 618 55,704 $’000 4,051 - 4,051 14,013 (4,467) REVENUE Sales revenue Rental income Total segment revenue Unallocated revenue: Finance revenue Total consolidated revenue RESULTS Segment result Unallocated items: Finance revenue Finance costs Consolidated proﬁ t before income tax Income tax expense 4 Consolidated proﬁ t after income tax Total $’000 59,137 618 59,755 272 60,027 9,546 272 (97) 9,721 (3,374) 6,347 ASSETS Segment assets Unallocated assets: Cash Total assets LIABILITIES Segment liabilities Other segment information: Capital expenditure Depreciation Amortisation Decrement in value of non-current assets infomedia.com.au 76 42,209 2,947 45,156 10,821 55,977 8,153 1,355 9,508 1,703 1,842 2,095 10,405 3(iv) 3(iv) 3(v) 98 396 336 2,377 1,801 2,238 2,431 12,782 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 29. SEGMENT INFORMATION (CONTINUED) SECONDARY SEGMENT 30 June 2006 Geographical segments Notes Australia Europe North America Eliminations $’000 $’000 $’000 $’000 Total $’000 Segment revenue (a) 51,642 10,765 13,061 (18,977) 56,491 Segment assets 54,844 1,027 1,793 Capital expenditure 1,395 19 211 30 June 2005 - - Geographical segments Notes Australia Europe North America Eliminations $’000 $’000 $’000 $’000 57,664 1,625 Total $’000 Segment revenue (a) 58,071 13,113 Segment assets 53,589 2,388 Capital expenditure 1,762 39 - - - (11,157) 60,027 - - 55,977 1,801 (a) While the products of the Company are used globally, the Company has three distinguishable geographical segments, Australia, Europe and North America. The geographic segmental revenue is classiﬁ ed according to the originating billing source as opposed to customer destination. Segment products and locations The Company’s operating divisions are organised and managed separately according to the nature of the products and the services they provide, with each segment offering different products. Infomedia’s core business involves the production of the Microcat and Partﬁ nder Electronic Parts Catalogues and the Superservice Menus service quoting system. These systems are specialised business tools designed to make the selection and sale of replacement parts fast, easy and accurate. All products are sourced from Australia. Segment accounting policies The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Segment accounting polices are the same as the Company’s accounting policies described in Note 2. During the ﬁ nancial year, there were no changes in segment accounting policies that had a material effect on the segment information. infomedia.com.au 77 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company’s principal ﬁnancial instruments, other than derivatives, comprise bank loans, cash and short term deposits. The main purpose of these ﬁnancial instruments is to raise ﬁnance for the Company’s operations. The Company has various other ﬁnancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Company also enters into derivative transactions through forward currency contracts. The purpose is to manage the currency risks arising from the Company’s operations. It is, and has been throughout the period under review, the Company’s policy that no trading in ﬁnancial instruments shall be undertaken. The main risks arising from the Company’s ﬁnancial instruments are cash ﬂow interest rate risk, liquidity risk, foreign currency risk and credit risk. Details of the signiﬁcant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of ﬁnancial asset, ﬁnancial liability and equity instrument are disclosed in Note 2 to the ﬁnancial statements. Cash ﬂow interest rate risk The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s cash holdings with a ﬂoating interest rate. The Company’s policy is to accept the ﬂoating interest rate risk with both its cash holdings and bank loans. Cash is held primarily with leading Australian banks for periods not exceeding 30 days. Bank loans are drawn with varying bill maturities ranging from 30 to 180 days accepting the ﬂoating rate of interest. Foreign currency risk The Company has transactional currency exposures. These exposures mainly arise from the transactional sale of products and, to a lesser extent, the associated cost of sales component relating to these products. As the Company’s product offerings are typically made on a recurring monthly subscription basis, there is a relatively high degree of reliability in estimating a proportion of future cash ﬂow exposures. Approximately half of the Company’s sales are denominated in United States Dollars and around one-third of the Company’s sales are denominated in Euros. The Company seeks to mitigate exposure to movements in these currencies by entering into forward exchange derivative contracts. Typically the forward exchange coverage will seek to cover between 0% to 100% of underlying exposures over a 12 month horizon. The forward currency contracts must be in the same currency as the hedged item. As a result of the Company’s recent investment in both its European and United States subsidiaries, the Company’s balance sheet can be affected by movements in both the Euro and United States Dollar against the Australian Dollar. As the net earnings from these operations are repatriated back to Australia on a regular basis, the Company does not seek to hedge this exposure. Credit risk The Company’s credit risk with regard to accounts receivables is spread broadly across three automotive groups – manufacturers, distributors and dealerships. Receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not signiﬁcant. As the products typically have a monthly life cycle and are priced on a relatively low subscription price, the concentration of credit risk is typically low with automotive manufacturers being the exception. With respect to credit risk arising from the other ﬁnancial assets of the Company, which comprise cash and cash equivalents, available-for-sale ﬁnancial assets and certain derivative instruments, the Company’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Since the Company trades only with recognised third parties, there is no requirement for collateral. Liquidity risk The Company’s exposure to liquidity risk is minimal, given the relative strength of the balance sheet and strong cash ﬂows from operations. infomedia.com.au 78 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 31. FINANCIAL INSTRUMENTS Fair values Set out below is a comparison by category of carrying amounts and fair values of all of the Company’s ﬁ nancial instruments recognised in the ﬁ nancial statements. The fair values of derivatives have been calculated by discounting the expected future cash ﬂ ows at prevailing interest rates. CONSOLIDATED Financial assets Cash and cash equivalents Trade receivables Forward currency contracts Other ﬁ nancial assets ii(non-current) Financial liabilities Carrying amount Fair value 2006 $’000 26,021 6,227 229 2005 $’000 10,821 5,587 - 2006 $’000 26,021 6,227 229 2005 $’000 10,821 5,587 - 804 1,260 804 1,260 Trade payables 3,974 3,640 3,974 3,640 Interest-bearing loans and iiborrowings Off balance sheet Contingencies 500 - - - 500 700 Carrying amount Fair value PARENT Financial assets Cash and cash equivalents Trade receivables Forward currency contracts Intercompany Other ﬁ nancial assets ii(non-current)1 Financial liabilities 2006 $’000 25,089 3,952 229 451 1,052 2005 $’000 8,803 4,155 - 22,043 1,507 2006 $’000 25,089 3,952 229 451 5,901 - - 2005 $’000 8,803 4,155 - 22,043 1,858 Trade payables 2,988 2,994 2,988 2,994 Interest-bearing loans and iiborrowings Off balance sheet Contingencies 500 - - - 500 700 - - 1. Other ﬁ nancial assets for the parent entity include investment in wholly-owned subsidiaries. The fair value of the underlying net assets of the subsidiaries is higher than the carrying amount in the parent entity accounts. Contingencies The Company and certain controlled entities have potential ﬁ nancial liabilities that may arise from certain contingencies disclosed in Note 22. As explained in that note, no material losses are anticipated in respect of any of those contingencies and the fair value disclosed above is the Directors’ estimate of amounts that would be payable by the Company as consideration of the assumption of those contingencies by another party. infomedia.com.au 79 e h t o t s e t o N s t n e m e t a t S i l a c n a n F i 31. FINANCIAL INSTRUMENTS (CONTINUED) Interest rate risk The following table sets out the carrying amount, by maturity, of the ﬁ nancial instruments exposed to interest rate risk. YEAR ENDED 30 JUNE 2006 CONSOLIDATED PARENT Less than one year Two to ﬁ ve years Greater than ﬁ ve years $’000 $’000 $’000 Weighted average effective interest rate % Less than one year Two to ﬁ ve years $’000 $’000 Greater than ﬁ ve years $’000 Weighted average effective interest rate % Floating rate Cash and cash equivalents 26,021 Interest-bearing liabilities (500) - - - - 5.7% 6.3% 25,089 (500) - - - - 5.7% 6.3% YEAR ENDED 30 JUNE 2005 CONSOLIDATED PARENT Less than one year Two to ﬁ ve years Greater than ﬁ ve years $’000 $’000 $’000 Weighted average effective interest rate % Less than one year Two to ﬁ ve years $’000 $’000 Greater than ﬁ ve years $’000 Weighted average effective interest rate % Floating rate Cash and cash equivalents 10,821 Interest-bearing liabilities - - - - - 5.0% - 8,803 - - - - - 5.0% - Interest on ﬁ nancial instruments classiﬁ ed as ﬂ oating rate is repriced at intervals of less than one year. Interest on ﬁ nancial instruments classiﬁ ed as ﬁ xed rate is ﬁ xed until maturity of the instrument. The other ﬁ nancial instruments of the Group and Parent that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. infomedia.com.au 80 N o t e s t o t h e i F n a n c a l i S t a t e m e n t s 31. FINANCIAL INSTRUMENTS (CONTINUED) Derivative contracts The following table summarises the forward exchange contracts outstanding at 30 June 2006. Maturity Company buys Company sells Exchange rate Company buys Company sells Exchange rate Company sells United States Dollars (USD) $A’000 USD’000 $A’000 USD’000 CONSOLIDATED PARENT Quarter 1 2007 ﬁ nancial year Quarter 2 2007 ﬁ nancial year Quarter 3 2007 ﬁ nancial year Quarter 4 2007 ﬁ nancial year Company sells Euros (E) Quarter 1 2007 ﬁ nancial year Quarter 2 2007 ﬁ nancial year Quarter 3 2007 ﬁ nancial year Quarter 4 2007 ﬁ nancial year 1,392 2,087 - - $A’000 3,077 3,248 3,248 3,248 1,000 1,500 - - E ’000 1,775 1,875 1,875 1,875 0.7186 0.7186 - - 0.5768 0.5773 0.5773 0.5773 1,392 2,087 - - $A’000 3,077 3,248 3,248 3,248 1,000 1,500 - - E ’000 1,775 1,875 1,875 1,875 0.7186 0.7186 - - 0.5768 0.5773 0.5773 0.5773 The mark to market valuation of these outstanding contracts is $229,000. 32. SUBSEQUENT EVENTS There has been no matter or circumstance that has arisen since the end of the ﬁ nancial year that has signiﬁ cantly affected the operations of the Company, the results of those operations, or the state of affairs of the Company. infomedia.com.au 81 ’ s r o t c e r i D n o i t a r a l c e D DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Infomedia Ltd, I state that: (1) In the opinion of the Directors: (a) the ﬁnancial statements and notes of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and consolidated entity’s ﬁnancial position as at 30 June 2006 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and 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) This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the ﬁnancial period ended 30 June 2006. On behalf of the Board Richard David Graham Chairman Sydney, 23 August 2006 infomedia.com.au 82 Independent audit report to members of Infomedia Ltd Scope The ﬁnancial report and Directors’ responsibility The ﬁnancial report comprises the balance sheet, income statement, statement of changes in equity, statement of cash ﬂows, accompanying notes to the ﬁnancial statements, and the Directors’ declaration for Infomedia Ltd (the company) and the consolidated entity, for the year ended 30 June 2006. The consolidated entity comprises both the company and the entities it controlled during that year. The Directors of the company are responsible for preparing a ﬁnancial report that gives a true and fair view of the ﬁnancial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the ﬁnancial report. Audit approach We conducted an independent audit of the ﬁnancial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the ﬁnancial report is free of material misstatement. The nature of an audit is inﬂuenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the ﬁnancial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory ﬁnancial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s ﬁnancial position, and of their performance as represented by the results of their operations and cash ﬂows. We formed our audit opinion on the basis of these procedures, which included: • examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the ﬁnancial report, and • assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of signiﬁcant accounting estimates made by the Directors. While we considered the effectiveness of management’s internal controls over ﬁnancial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactions was accurately reﬂected in the ﬁnancial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the Directors and management of the company. Independence We are independent of the company and the consolidated entity, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the Directors of the company a written Auditor’s Independence Declaration, a copy of which is included after the Directors’ Report. Audit opinion In our opinion, the ﬁnancial report of Infomedia Ltd is in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the ﬁnancial position of Infomedia Ltd and the consolidated entity at 30 June 2006 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and (b) other mandatory ﬁnancial reporting requirements in Australia. Ernst & Young J K Haydon Partner Sydney, 23 August 2006 Liability limited by a scheme approved under Professional Standards Legislation infomedia.com.au 83 e t a r o p r o C e c n a n r e v o G “Infomedia Ltd remains committed to corporate governance practices that are compatible with the Company’s age and size, that enhance effectiveness and which ensure an appropriate degree of accountability and transparency to shareholders and other stakeholders.” Corporate Governance Committee (Chair) Geoffrey Henderson – Corporate Governance Statement How to Read this Corporate Governance Statement This Corporate Governance Statement is divided into the following sections: an introduction, providing an overview of Infomedia’s approach to corporate governance; a discussion of major corporate governance initiatives during the reporting period; a discussion of the areas where Infomedia Ltd reports under the ‘if not, why not?’ obligation; and a subject based commentary on Infomedia Ltd’s approach to the ASX Corporate Governance Council Guidelines. Introduction This Corporate Governance Statement, which is current as at the date of the Directors’ Report, addresses the approach adopted by the Company to the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations1 and has been updated to reﬂect the actions taken by the Company since its last annual report. By way of background, the Board ﬁrst began its consideration of the ASX Corporate Governance Council Guidelines during the course of the 2003 ﬁnancial year. To aid the review process, the Board made adjustments to the structure of its Committees so that they comprise the Corporate Governance Committee, the Audit & Risk Committee and the Remuneration & Nomination Committee. Each Committee continues to be chaired by an independent Director, with its membership determined by the Board on the basis of greatest expertise in the areas of relevance to each Committee. Background details and meeting attendance records during FY2006 for members of each of the Corporate Governance, Audit & Risk and Remuneration & Nomination Committees are set out in the Directors’ Report. The Board and its committees endorse the ‘if not, why not?’ framework adopted by the ASX Corporate Governance Council (CGC) and in FY2006 the Company continued applying the relevant ASX CGC Recommendations to Infomedia’s particular circumstances. In their approach to the ASX CGC Recommendations, the Board and relevant committees continue to develop the Company’s corporate governance practices in ways which are both pragmatic and appropriate to its age and size. In allocating resources and prioritising tasks, the high level, top down approach also continues. Consequently, the various procedures and policies considered appropriate by Infomedia continue at differing stages of development and organisational implementation, as permitted by its resources. The material set out in this Corporate Governance Statement has been prepared in accordance with the ASX Listing Rules and, in particular, the various ‘Guide(s) to reporting...’ included in the ASX CGC Recommendations. Unless otherwise indicated, the ASX CGC Recommendations infomedia.com.au 84 G o v e r n a n c e C o r p o r a t e were in place for the whole ﬁnancial year. In addition, as a result of suggestions for enhanced reporting made in recent corporate governance literature2, some slight format and other changes, such as the introduction of additional content designed to assist the reader in locating the information contained within it, have been introduced. Major Corporate Governance Initiatives During the reporting year, the Board continued, through the appropriate committee, to monitor the charters, policies and procedures adopted by the Company in support of the ASX CGC Principles and remains satisﬁed that the Company’s corporate governance practices are consistent with the spirit and intent of the ASX Corporate Governance Council Guidelines. The Company continues, as it has since 2004, to engage a part time external consultant whose primary role is to facilitate the Company’s corporate governance initiatives. In FY2006 the Corporate Governance Committee entrenched the rolling review process it had introduced in FY2005, under which the Company’s various corporate governance documents, and in particular the various policies, are reviewed and reﬁned. Brieﬂy, the process involves: selecting a corporate governance document and taking a ‘snapshot’ of its effectiveness by examining, through sounding a randomly selected representative sample of employees, how well the existence, purpose and operating framework of that corporate governance document is understood; reporting the outcome of the sounding process to the Corporate Governance Committee, along with any recommendations; and Senior Management implementing those recommendations adopted (for example, publishing summary documents, increasing employee awareness through further education sessions, improving access to corporate governance documents by establishing a governance page on the Company’s intranet and including certain governance documents in employee induction packages). A number of policies were reviewed in accordance with this process, including the Share Trading Policy, the Code of Conduct and the Market Disclosure Policy, and where appropriate, were also reﬁned. As a separate exercise, the Audit & Risk Committee Charter was amended to reﬂect the policy and procedure adopted by the Board for the selection and appointment of the Company’s external auditor and for the rotation of external audit engagement partners. In yet another exercise, representatives from both the Audit & Risk Committee and the Corporate Governance Committee worked together with Senior Management to develop a question and answer assessment document that examined the effectiveness of Infomedia’s risk management initiatives. Once completed, the question and answer assessment bridged the gap between the FY2006 Risk Management Plan and the FY2007 Risk Management Plan. The question and answer assessment and the FY2007 Risk Management Plan, along with the annual risk management review cycle, were considered and, as appropriate, approved by both the Audit & Risk Committee and the Board in June and July 2006 (respectively). infomedia.com.au 85 e t a r o p r o C e c n a n r e v o G In May 2006, Infomedia voluntarily took part in the UTS – Centre for Corporate Governance Research Project on The changing roles and responsibilities of company boards and directors. This involved the General Counsel/Company Secretary participating in a one on one interview during which Infomedia’s response was canvassed to some 42 questions drawn largely from the 10 principles and 28 recommendations which comprise the ASX Corporate Governance Council Guidelines. This involvement allowed the Company to demonstrate its willingness to be a part of the wider corporate governance community and provided an invaluable opportunity to undertake a self-assessment of the corporate governance work it had done to date. In addition, as the UTS – Centre for Corporate Governance Research Project moved toward ﬁnalising its June 2006 Interim Report3, the Corporate Governance Committee sought out Infomedia speciﬁc feedback from the UTS Centre for Corporate Governance regarding the perceived effectiveness of its corporate governance initiatives. Also in May 2006 the Remuneration & Nomination Committee, with some assistance from external consultants, turned its attention to establishing the framework for the ﬁrst formal ‘whole of Board’ review. The self-assessment, which utilises individual survey responses, is being conducted with the purpose of: obtaining a consensus view on how effectively the Board is operating by assessing its performance around a range of key issues; identifying opportunities for enhancing the Board’s performance; generating recommendations/actions for improving the Board’s effectiveness by reference to ‘best practice’; and introducing a process which can be expanded upon in subsequent reporting years (by, for example, providing data to benchmark against and by establishing a methodology which can later be applied to the Board’s committees and its individual Directors). In July 2006, each Director was asked to complete a self-assessment survey and in August 2006 the individual Directors’ assessments of effectiveness of various Board matters were benchmarked against the importance of the issue, creating a gap analysis report. It is intended that this report be presented to the Board at a subsequent meeting in 2006. The summaries of the Company’s various charters, policies and procedures included on Infomedia’s website have been updated as required by the Board and committees’ ongoing review process. Management information sessions with speciﬁc presentations on risk management and corporate governance were also conducted during the ﬁnancial year. ‘If Not, Why Not?’ ASX CGC Recommendation 2.1 – A majority of the board should be independent directors ASX CGC Recommendation 2.2 – The chairperson should be an independent director ASX CGC Recommendation 2.3 – The roles of chairperson and chief executive should not be exercised by the same individual infomedia.com.au 86 G o v e r n a n c e C o r p o r a t e Traditionally, the Board has applied an Executive Director/Non-executive Director classiﬁcation to its members. Following the appointment of Geoffrey Henderson as an additional Non-executive Director in February 2003, the Infomedia Board then comprised four Non-executive Directors and two Executive Directors until 31 December 2004. The ratio of Executive to Non-executive Directors then altered when Richard Graham, who continues as Non-executive Chairman, retired as Chief Executive Ofﬁcer. Since then the Board has comprised ﬁve Non-executive Directors and one Executive Director. As a result of the changes noted above, the role of Chairman and Chief Executive Ofﬁcer has, as contemplated by ASX CGC Recommendation 2.3, been split since 31 December 2004. However, having recently retired as an executive, Richard Graham is not considered by the Board as an independent Chairman. Accordingly, the Company does not comply with ASX CGC Recommendation 2.2 that the chairperson be an independent director. Nevertheless, the Board remains of the view that its independence as a whole is not compromised and that it is in the best interests of the Company for Richard Graham to continue as Chairman. The Board believes that during this stage of growth, Infomedia is best served by keeping a strong focus on the development and implementation of strategic platforms. It believes that Richard Graham’s industry knowledge, both technological and automotive, uniquely positions him for the kind of strategic thinking required of the Chairman. As suggested in the commentary accompanying ASX CGC Recommendation 2.2, under the Board Charter, Board members may elect a lead Non-executive Director to chair informal discussion meetings of Non-executive Directors. To date, the Non-executive Directors have not had occasion to follow this course. Gary Martin, in his role as Executive Director, is also not considered by the Board as independent. However, three of the Company’s Directors, Frances Hernon, Geoffrey Henderson and Andrew Moffat, meet an objective assessment of quantitative and qualitative criteria for independence. A fourth Non-executive Director, Myer Herszberg, whilst being a major shareholder, is considered by the Board, having regard to the quantitative, qualitative and cumulative criteria, to operate independently and objectively. The Board is ﬁrmly of the view that good, or sound, leadership and judgement and ethical practice are driven by the culture of an organisation, not process. Infomedia has long had a strong and well developed informal culture of corporate governance and compliance. Originally grounded in proprietary company roots, this culture has now become more formalised as is appropriate for a public company. The Board’s approach ﬁnds support in this view in other corporate governance commentary, including in the observations the Royal Commissioner, Mr Justice Owen, who in his ofﬁcial report into the collapse of HIH stated that the critical issue is not so much whether, on objective criteria, the director is independent but rather whether he or she is subjectively capable of exercising independent judgement. Mr Justice Owen also said that “...I am not convinced that a mandatory requirement for boards to have a majority of non-executive directors is either necessary or desirable. In most cases it will be desirable (assuming the non-executive directors are truly independent) but ﬂexibility ought to be maintained to enable corporations to be structured in a way that best suits their circumstances”. infomedia.com.au 87 e t a r o p r o C e c n a n r e v o G “An emphasis has been placed on promoting, among other attributes, an appropriate mix of relevant skills, independence, expertise, business knowledge and executive and non-executive participation.” Remuneration & Nomination Committee (Chair) Frances Hernon – Accordingly, the Board believes it comprises a majority of independent Directors and so complies with ASX CGC Recommendation 2.1. This independence will continue to be reviewed periodically by the Board to ensure its continued good practice in this area. Ultimately, however, the Board accepts that its members remain in ofﬁce upon the vote of the Company’s shareholders and that they may elect members to the Board regardless of their standing, independent or otherwise. In order to facilitate the discharge of their duties, including in respect of independent decision making, the Board conﬁrmed in April 2004 its policy for Directors obtaining independent professional advice at the expense of the Company. Commentary The Board and Senior Management – Structure and Remuneration ASX CGC Principle 1 – Lay solid foundations for management and oversight Recognise and publish the respective roles and responsibilities of board and management ASX CGC Principle 2 – Structure the board to add value Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties ASX CGC Principle 8 – Encourage enhanced performance Fairly review and actively encourage enhanced board and management effectiveness ASX CGC Principle 9 – Remunerate fairly and responsibly Ensure that the level and composition of remuneration is sufﬁcient and reasonable and that its relationship to corporate and individual performance is deﬁned The Company’s Constitution requires a minimum of three and a maximum of seven Directors, of whom at least two must ordinarily be resident in Australia. Under the Company’s Constitution, one third of the Directors, and any other Director not in such one third who has held ofﬁce for three years or more, other than the Chief Executive Ofﬁcer, must retire by rotation each year. If eligible, the retiring Directors may offer themselves for re-election. The Infomedia Board comprises six Directors and details of the names, terms of ofﬁce, committee memberships, meeting attendance record, skills, experience and expertise of each, along with photographs, appear in the Directors’ Report. Since listing on the ASX in August 2000 in particular, the composition and size of the Infomedia Board has been shaped by its Constitution and the contribution Directors are able to make, both individually and collectively. An emphasis has been, and through the interaction of the Board and the Remuneration & Nomination Committee, will continue to be, placed on promoting, among other attributes, an appropriate mix of relevant skills, independence, expertise, business knowledge and executive and non-executive participation. infomedia.com.au 88 G o v e r n a n c e C o r p o r a t e ASX CGC Recommendation 1.1 – Formalise and disclose the functions reserved to the board and those delegated to management A formal Charter of the Board of Directors was adopted in early July 2004, following careful and considered deliberation by both the Corporate Governance Committee and the Board itself. As noted in the introduction above, the priority was to document an appropriate division of Board and management responsibilities. The Board’s focus is on the Company’s objectives, determining the strategy for achieving those objectives and setting the overall policy framework within which the business of the Company is conducted whilst ensuring that the Company operates in accordance with good management and governance practices. The Corporate Governance Committee was established to support the Board in the areas not covered by the Audit & Risk and Remuneration & Nomination Committees. The members of the Corporate Governance Committee are Geoffrey Henderson (Chair), Myer Herszberg and Frances Hernon. Each is a Non-executive Director. ASX CGC Recommendation 2.1 – A majority of the board should be independent directors ASX CGC Recommendation 2.2 – The chairperson should be an independent director and ASX CGC Recommendation 2.3 – The roles of chairperson and chief executive should not be exercised by the same individual Commentary on these three ASX CGC Recommendations is found under the heading “If Not, Why Not?” above. ASX CGC Recommendation 2.4 – The board should establish a nomination committee and ASX CGC Recommendation 9.2 – The board should establish a remuneration committee The members of the Remuneration & Nomination Committee are Frances Hernon (Chair), Myer Herszberg and Andrew Moffat. Each is a Non-executive Director. Upon the recommendation of the Remuneration & Nomination Committee, in April 2004 the Board adopted an amended Remuneration & Nomination Committee Charter. The Remuneration & Nomination Committee and the Board, as appropriate, consider all Board nominees, having regard to both the nominee’s individual merits and overall Board composition. In each case the recommendations of the Remuneration & Nomination Committee are then endorsed by the Board and then by shareholders upon the recommendation of the Board. The Remuneration & Nomination Committee formalised a policy for the nomination and induction of Directors, which was adopted by the Board in early July 2005. A summary of the Director Nomination & Induction Policy was made available on the Infomedia website thereafter. In preparing the Director Nomination & Induction Policy, regard was had to the ASX CGC Commentary accompanying ASX CGC Recommendation 8.1 and, in particular, the suggestions for an induction program. Both Gary Martin and Andrew Moffat were inducted as Directors of Infomedia under the guidance of the Remuneration & Nomination Committee and in accordance with the Director Nomination & Induction Policy. infomedia.com.au 89 e t a r o p r o C e c n a n r e v o G ASX CGC Recommendation 8.1 – Disclose the process for performance evaluation of the board, its committees and individual directors and key executives and ASX CGC Recommendation 9.1 – Provide disclosure in relation to the company’s remuneration policies to enable investors to understand (i) the costs and beneﬁts of those policies and (ii) the link between remuneration paid to directors and key executives and corporate performance Upon recommendation of the Remuneration & Nomination Committee, a Remuneration and Performance Evaluation Policy for Directors and Senior Executives was adopted by the Board in July 2004. The Policy clearly outlines the criteria for assessing the performance of the Board as a whole, the Directors as individuals, the Chairman of the Board and the senior executives, and aims to provide a framework for structuring total remuneration that will facilitate both the short and long term growth and success of the Company, that is competitive with the market place and that is demonstrably linked to the Company’s overall performance as discussed more fully in the Remuneration Report included within the Directors’ Report. In preparing the remuneration information contained in the Remuneration Report, regard was had to the ASX CGC Commentary accompanying ASX CGC Recommendation 9.1 and, in particular, the suggestions for disclosure in box 9.1. Commentary on the work undertaken during the reporting period by the Remuneration & Nomination Committee regarding a ‘whole of board’ self-assessment is found under the heading “Major Corporate Governance Initiatives” above. ASX CGC Recommendation 9.3 – Clearly distinguish the structure of non-executive directors’ remuneration from that of executives In formulating the Remuneration and Performance Evaluation Policy for Directors and Senior Executives, regard was had to both market practice and to the best practice guidance provided in the ASX CGC Commentary accompanying ASX CGC Recommendation 9.3. In contrast to Executive Directors, Non-executive Directors are remunerated by way of fees and statutory superannuation contributions only: they do not receive any additional retirement beneﬁts and nor do they currently participate in any of the Company’s incentive arrangements. Non-executive Directors have previously received options, but this practice was reconsidered with the introduction of the Remuneration and Performance Evaluation Policy for Directors and Senior Executives in FY2004, as a result of Remuneration & Nomination Committee discussion on ASX CGC Recommendation 9.3 and the accompanying ASX CGC Commentary. The Remuneration & Nomination Committee, and in turn the Board, will continue to monitor the issue as each recognises that for smaller companies option based remuneration may be an appropriate method of remunerating Non-executive Directors when accompanied by an appropriate framework and proper disclosure. ASX CGC Recommendation 9.4 – Ensure that the payment of equity based executive remuneration is made in accordance with thresholds set in plans approved by shareholders The Company has two equity based incentive plans: an Employee Option Plan, applicable to certain eligible employees, including senior executives and Executive Directors and an Employee Share Plan, applicable to all permanent employees of one or more years of service, including infomedia.com.au 90 G o v e r n a n c e C o r p o r a t e senior executives but excluding both Executive and Non-executive Directors. These plans were established prior to Infomedia’s listing in August 2000 in accordance with both the Corporations Act and the ASX Listing Rules and were disclosed in the 14 July 2000 prospectus. As a result of the altered accounting treatment required under the Australian equivalents to International Financial Reporting Standards, in June 2005 the Board resolved to indeﬁnitely suspend the Employee Share Plan with effect immediately following the scheduled July 2005 allocation. Given this background, there is no present intention to obtain shareholder approval of the Employee Option Plan (or, if re-activated, the Employee Share Plan) as proposed by ASX CGC Recommendation 9.4 unless otherwise required by the ASX Listing Rules. Further details of senior executive remuneration under these plans is included in the Remuneration Report. Business Conduct ASX CGC Principle 3 – Promote ethical and responsible decision making Actively promote ethical and responsible decision making ASX CGC Principle 10 – Recognise the legitimate interests of stakeholders Recognise legal and other obligations to all legitimate stakeholders ASX CGC Recommendation 3.1 – Establish a code of conduct to guide the directors, the chief executive ofﬁcer and any other key executives as to: 3.1.1 the practices necessary to maintain the conﬁdence in the company’s integrity 3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices and ASX CGC Recommendation 10.1 – Establish a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders A formal Code of Conduct was adopted in April 2004 following careful and considered deliberation by both the Corporate Governance Committee and the Board itself. The Infomedia Code of Conduct applies to all Infomedia personnel, including Directors, senior executives and employees and was developed having regard to the ASX CGC Commentary accompanying ASX CGC Recommendations 3.1 and 10.1. Whilst Infomedia has long held and emphasised personal integrity, respect and ethical business practices as core tenets, the Infomedia Code of Conduct strengthens the Company’s commitment to them by further articulating the cultural values which permeate the Company and better guiding dealings with all non-shareholder stakeholders. As noted above, under the direction of the Corporate Governance Committee, a number of policy document reviews occurred during the ﬁnancial year. As part of the process the Code of Conduct was reﬁned, primarily to formalise guidelines for the resolution of internal grievances. The soundings conducted as part of the review process served to promote greater awareness infomedia.com.au 91 e t a r o p r o C e c n a n r e v o G “During the last reporting period the Audit & Risk Committee reviewed the policy closely and recommended that the Board adopt a revised Risk Management Policy and a Risk Management Plan which would better promote the establishment and implementation of an effective and appropriate risk management framework for the Company.” Andrew Moffat – Audit & Risk Committee (Chair) and use of enhanced procedures for seeking guidance where areas of concern exist, for the management of grievance issues and for the notiﬁcation of matters which potentially involve a compliance or business risk element. The implications of the Work Choices legislation for Infomedia’s employees were the subject of an Australia wide joint presentation by the Human Resources Manager and the Chief Executive Ofﬁcer in June 2006. The ‘face to face’ approach was designed to alleviate any concerns employees may have had regarding loss of entitlements or beneﬁts. The presentations were both well attended and warmly received, particularly in light of the negative publicity surrounding the introduction of the legislation. ASX CGC Recommendation 3.2 – Disclose the policy concerning trading in company securities by directors, ofﬁcers and employees A formal Policy on Share Trading by Company Directors, Ofﬁcers and Employees was originally established in October 2001 and was reviewed, amended and adopted by the Infomedia Board in April 2004, upon the recommendation of the Corporate Governance Committee. It was further reviewed by the Corporate Governance Committee as part of its review calendar and, in turn by the Board, in the last quarter of FY2006. In July 2005, a revised Policy on Securities Trading by Company Directors, Ofﬁcers and Employees was adopted by the Board and a summary was placed on the Company’s website shortly thereafter. Financial Reporting and Risk Management ASX CGC Principle 4 – Safeguard integrity in ﬁnancial reporting Have a structure to independently verify and safeguard the integrity of the company’s ﬁnancial reporting ASX CGC Principle 7 – Recognise and manage risk Establish a sound system of risk oversight and management and internal control Infomedia fully complied throughout this reporting period with the ASX CGC Recommendations accompanying ASX CGC Principle 4, relating to audit committee composition, operation and responsibility. ASX CGC Recommendation 4.1 – Require the chief executive ofﬁcer and the chief ﬁnancial ofﬁcer to state in writing to the board that the company’s ﬁnancial reports present a true and fair view, in all material respects, of the company’s ﬁnancial condition and operational results and are in accordance with relevant accounting standards and ASX CGC Recommendation 7.2 – The chief executive ofﬁcer (or equivalent) and the chief ﬁnancial ofﬁcer (or equivalent) should state to the board in writing that: 7.2.1 the statement given in accordance with best practice recommendation 4.1 (the integrity of ﬁnancial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board infomedia.com.au 92 G o v e r n a n c e C o r p o r a t e 7.2.2 the company’s risk management and internal compliance and control system is operating efﬁciently and effectively in all material respects The Company’s ﬁnancial reporting obligations for FY2006 have been fulﬁlled, as they have in previous years, in accordance with applicable legal and accounting requirements: see the ﬁnancial statements and notes contained in the Directors’ Report and the independent Audit Report. Having acted in accordance with the Board endorsed revised Risk Management Policy and Board endorsed Risk Management Plan, the Chief Executive Ofﬁcer and the Chief Financial Ofﬁcer have provided to the Board the certiﬁcations under ASX CGC Recommendation 7.2 and in turn, the certiﬁcations under ASX CGC Recommendation 4.1. and the Corporations Act. ASX CGC Recommendation 4.2 – The board should establish an audit committee ASX CGC Recommendation 4.3 – Structure the audit committee so that it consists of only non-executive directors; a majority of independent directors; an independent chairperson, who is not chairperson of the board; and at least three members. ASX CGC Recommendation 4.4 – The audit committee should have a formal charter Infomedia originally established an audit committee prior to its listing on the ASX in August 2000. Today it is known as the Audit & Risk Committee and its members are Andrew Moffat (Chair), Myer Herszberg and Geoffrey Henderson. Each is a Non-executive Director. The Board continues to ﬁrmly believe the Audit & Risk Committee is of ‘...sufﬁcient size, independence and technical expertise to discharge its mandate effectively’. As noted in the discussion around ASX CGC Recommendation 2.1 above, although traditionally the Board has applied an Executive Director/Non-executive Director classiﬁcation to its membership, the Board believes that Andrew Moffat, Myer Herszberg and Geoffrey Henderson meet an objective assessment of quantitative and qualitative criteria for independence. As such the Committee meets the requirements for an independent Chairman and a majority of independent Directors under ASX CGC Recommendation 4.3. A formal Audit & Risk Committee Charter was originally adopted in 2000 and an amended version approved by the Board in April 2004 following careful and considered deliberation by both the Audit & Risk Committee and the Board itself. Consistent with the Company’s policy, a summary of the Charter was placed on the Company’s website during the ﬁrst half of FY2005. The Audit & Risk Committee acknowledges the importance of external auditor independence. The Company’s external auditor’s engagement partner was rotated in FY2002. In response to both legislative change and to the ASX CGC Commentary, in the last quarter of FY2004 the Audit & Risk Committee began reconsidering the policy for the selection and appointment of the Company’s external auditor and the rotation of engagement partners. As noted above, the infomedia.com.au 93 e t a r o p r o C e c n a n r e v o G Committee recommended, and the Board approved, formalised procedures during FY2006, and made a summary of them available on the Infomedia website shortly thereafter. ASX CGC Recommendation 7.1 – The board or appropriate committee should establish policies on risk oversight and management Upon the recommendation of the Audit & Risk Committee, the Board adopted the Risk Management Policy in July 2004. During the last reporting period, the Audit & Risk Committee reviewed it closely and recommended that the Board adopt a revised Risk Management Policy and a Risk Management Plan which would better promote the establishment and implementation of an effective and appropriate risk management framework for the Company. The revised Risk Management Policy allocates oversight responsibility to the Board and the Audit & Risk Committee whilst the establishment of risk management procedures, compliance and control rests with the Chief Executive Ofﬁcer, Chief Financial Ofﬁcer and Senior Executives and, at a daily operating level, with departmental managers, line managers and individuals as part of regular business conduct. Work undertaken during FY2006 examining the effectiveness of Infomedia’s risk management initiatives is discussed under the heading “Major Corporate Governance Initiatives” above. A summary of the Company’s Risk Management Policy is available on the Company’s website, however, given the strategic nature of its content, the Board does not feel it is appropriate for details of the Company’s Risk Management Plan to be made publicly available as contemplated by the guidance accompanying ASX CGC Recommendation 7.3. ASX CGC Principle 5 – Make timely and balanced disclosure Promote timely and balanced disclosure of all material matters concerning the company ASX CGC Recommendation 5.1 – Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance A Market Disclosure Policy was adopted by the Board in April 2004 following careful and considered deliberation by both the Corporate Governance Committee and the Board itself. The Market Disclosure Policy was developed having regard to the ASX CGC Commentary and suggested content accompanying ASX CGC Recommendation 5.1. A review of the Market Disclosure Policy was conducted by the Corporate Governance Committee as part of its review calendar in the ﬁnal quarter of FY2006. The review concluded that both the continuous and periodic reporting obligations imposed under the ASX Listing Rules, and the Company’s internal procedures in respect of them, were well understood by Senior Management. Shareholders ASX CGC Principle 6 – Respect the rights of the shareholders Respect the rights of shareholders and facilitate the effective exercise of those rights infomedia.com.au 94 G o v e r n a n c e C o r p o r a t e ASX CGC Recommendation 6.1 – Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings and ASX CGC Recommendation 6.2 – Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the audit Through a series of initiatives, Infomedia continues to demonstrate its commitment to promoting effective communication with all shareholders. Such initiatives include the continued development of the Company website, where this Corporate Governance Statement, summaries of the various corporate governance charters, policies and guidelines, annual, half yearly and quarterly reports, a synopsis of the Infomedia business model, media releases, achievements, share price information and the July 2000 prospectus, along with the FY2006 Notice of Annual General Meeting and Explanatory Statement are all available. Infomedia continues to monitor how it might best and most cost effectively introduce e-communications to shareholders, and in the process, save paper and assist in preserving the environment. Infomedia will carefully consider any e-communication initiative permitted by the regulatory environment or which its share registry, or any other provider, introduces in response to ASX CGC Recommendations 6.1 and 6.2. Infomedia also acknowledges, and has considered and adopted as appropriate to its circumstances, the Guidelines for notices of meeting included in the ASX CGC Commentary accompanying ASX CGC Recommendation 6.1. Shareholder participation at general meetings is encouraged and Infomedia’s auditor, Ernst & Young, will attend the Annual General Meeting and be available to answer shareholder questions. 1 The ASX Corporate Governance Council Guidelines containing the ASX CGC Principles, the ASX CGC Recommendations and the ASX CGC Commentary, March 2003. 2 For example, ASX, Corporate Governance (Market Research Project), Final March 2006, page 9 and ASX – 2005 Analysis of corporate governance practice disclosure May 2006, page 6. 3 UTS Centre for Corporate Governance et al, Interim Report, June 2006. infomedia.com.au 95 l a n o i t i d d A n o i t a m r o f n I Additional Information Top 20 holders of shares as at 31 August 2006 Shares % of Total Rank Name WISER EQUITY PTY LIMITED YARRAGENE PTY LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED WESTPAC CUSTODIANS CITICORP NOMINEES PTY LIMITED ANZ NOMINEES LIMITED NATIONAL NOMINEES LIMITED ANZ NOMINEES LIMITED CASH INCOME A/C MR ANDREW PATTINSON WOODROSS NOMINEES PTY LTD BIG BEAR ENTERPRISES PTY LTD ANZ NOMINEES LIMITED TOM HADLEY ENTERPRISES PTY LTD 100,277,501 39,421,599 17,011,248 8,809,603 4,472,651 4,051,295 2,956,147 2,464,379 2,447,567 2,208,000 2,000,000 1,403,458 1,250,000 WARBONT NOMINEES PTY LTD UNPAID ENTREPOT A/C 1,000,000 WISER CENTRE PTY LTD RICHARD GRAHAM MR YET-KWONG CHIANG MRS HO YUK LIN CHIANG PORTFOLIO MANAGEMENT PTY LTD AUSTRALIAN REWARD INVESTMENT ALLIANCE AUSTIE DEVELOPMENTS PTY LTD 1,000,000 926,559 635,342 625,000 588,151 500,000 Range of shares as at 31 August 2006 30.81 12.11 5.23 2.71 1.37 1.24 0.91 0.76 0.75 0.68 0.61 0.43 0.38 0.31 0.31 0.28 0.20 0.19 0.18 0.15 1 2 3 4 5 6 8 7 9 10 11 12 13 14 15 16 17 18 19 20 Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001+ Total Shareholders Shares held % of total 446 2,623 2,232 3,015 132 8,448 369,501 8,703,583 18,666,680 83,856,217 213,875,592 325,471,573 0.11 2.67 5.74 25.76 65.72 100 As at 31 August 2006 there were 96 shareholders holding less than a marketable parcel of shares (minimum parcel $500.00) infomedia.com.au 96 D i r e c t o r y C o r p o r a t e Corporate Directory Infomedia Ltd 357 Warringah Road Frenchs Forest NSW 2086 ABN 63 003 326 243 Telephone: (02) 9454 1500 Facsimile: (02) 9454 1844 Internet: infomedia.com.au Directors Richard Graham – Chairman of the Board Myer Herszberg – Non-executive Director Frances Hernon – Non-executive Director Geoffrey Henderson – Non-executive Director Gary Martin – Chief Executive Ofﬁcer and Executive Director Andrew Moffat – Non-executive Director Company ofﬁcers Nick Georges – Company Secretary Peter Adams – Chief Financial Ofﬁcer Auditors Ernst & Young Ernst & Young Centre 680 George Street Sydney NSW 2000 Share registry Computershare Registry Services Pty Ltd GPO Box 7045 Sydney NSW 1115 Lawyers Thomson Playford Lawyers Level 25 Australia Square Tower 264 George Street Sydney NSW 2000 AutoLedgers, Infomedia, Microcat and PartsImager are registered trademarks, and LIVE, MARKET, NOVA and Superservice Menus are all trademarks of Infomedia Ltd for its business processes, software and documentation products. All other trademarks are the property of their respective owners. infomedia.com.au 97 s e t o N NOTES infomedia.com.au 98

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