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2011 ANNUAL REPORT
DIRECTORS
P Dunai – Chairman
A Walsh – Managing Director
B Burdett
J Seabrook
J Cameron
J Hayes
COMPANY SECRETARY
S Bland
P Ferguson
REGISTERED OFFICE
Level 18, 385 Bourke Street
Melbourne Vic 3000
Phone: (03) 9018 5800
Fax: (03) 9018 5844
SHARE REGISTRY
Link Market Services Limited
Level 4, 333 Collins Street
Melbourne Vic 3000
BANKERS
National Australia Bank Limited
AUDITORS
Deloitte Touche Tohmatsu
SOLICITORS
Mallesons Stephen Jaques
STOCK EXCHANGE LISTING
IRESS Market Technology Limited shares are quoted on
the Australian Stock Exchange under the code IRE.
THE ANNUAL GENERAL MEETING
The Annual General Meeting of the Shareholders of IRESS
Market Technology Limited will be held in the Board Room
at Level 18, 385 Bourke Street, Melbourne 3000 on
Thursday, 3 May 2012 at 11.30 a.m.
* For full details and Proxy Form please refer to the separate
document enclosed.
IRESS ANNUAL REPORT
HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE STATEMENT
INDEPENDENT AUDITOR’S REPORT
DIRECTORS’ DECLARATION
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
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2
3
9
33
34
46
48
49
50
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53
SHAREHOLDER INFORMATION
110
1
IRESS ANNUAL REPORT
HIGHLIGHTS
Consolidated profit from ordinary activities after income tax, adjusted for non-recurring items, for the twelve months ended
31 December 2011 was $59.8 million, an increase of 2.4% on the previous year. Group segment profits were $89.1
million, an increase of 3.4% on the previous year, and basic earnings per share on an adjusted basis increased 1.1% to
47.210 cents per share. Reported profit after tax, which includes the impact of non-recurring/non-operating items, was
$41.3 million, compared with $50.5 million last year, a decline of 18.1%.
Consistent with prior periods, the significant non-operating charges in 2011 related to the depreciation and amortisation
of software arising on the acquisition of businesses. Collectively these charges had a pre-tax impact of $17.827 million
(2010: $9.560 million). In addition the above adjusted results are prior to inclusion of share based payment expenses
which are excluded to provide inter-period comparability of the underlying business operations.
Directors have declared a final dividend of 24.0 cents per share 83% franked at a 30% tax rate.
The final dividend combined with the first half interim dividend of 14.0 cents gives a total of 38.0 cents partially franked
on each share. A total dividend of 38.0 cents per share represents a payout ratio of around 80.7% of full year adjusted
earnings.
FINANCIAL SUMMARY
12 MONTHS TO 31 DECEMBER 2011
Total revenues ($m)
Profit before income tax expense ($m)
Profit attributable to the members of the parent entity ($)
Adjusted basic earnings per share (cents)
Dividend per share (cents)
*Calculated prior to inclusion of the 3.5 cent unfranked special dividend.
CONSOLIDATED
2011
CONSOLIDATED
2010
204.758
179.585
60.160
41.341
47.210
38.0
67.827
50.479
46.675
38.0*
2
IRESS Market Technology Limited
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
FINANCIAL MARKETS – AUSTRALIA AND NEW ZEALAND
During 2011, revenue growth was strongly associated with client preparation for multiple trading venues. Revenue for our
leading range of multi-markets products and services commenced once venue competition opened in October, supported
by investment made by the company in headcount. The success of this technology transition was viewed as a key event to
retain and enhance our position in the Australian financial markets. While it is early days, we are well prepared for the
opportunities presented in the increasingly complex and fragmented Australian equity market.
Outside of services associated with multi-markets, revenues were largely flat in the face of challenging trading volumes for
our clients and an ever increasingly cost driven focus. In addition to the sizeable bad debts arising on the demise of Minc
Financial and MF Global they represented a loss in ongoing recurring subscription revenues, which are yet to be fully
replaced. Cancellations coming from the prolonged poor conditions increased late in the second half.
The division achieved revenue growth of 4.2% over the full year (up 0.6% and 1.7% on the prior half year’s results for the
period to June 2011 and December 2011 respectively). Investment in staff to support clients through what has been
arguably the most significant change in Australia’s trading micro-structure, resulted in a decline in segment profits of
4.4% for the full year (down 5.9% and 2.4% respectively on the prior half’s results).
Some of the key highlights were:
Multi-markets transition
∙
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∙
∙
∙
10,000 users upgraded for consolidated market data for all venues.
19 of 22 brokers live on ChiX launch used IOS+.
59 IOS+ servers now in production are multi-market featured.
Best Market Router (BMR) in production with 15 clients.
Liquidity view and trade-through analysis (best-execution) tools available.
Operator Trader Workstation (OTW) terminal providing multi-market upgrade path for Integrated Trading System
(ITS) users.
IRESS Optical Network (ION) 10GB low latency network established and used by 7 of top 10 brokers.
Liquidity Pool and auto-crosser in production with 3 clients.
IOS+ key role in providing high capacity flexible order management across all venues.
Low-latency IRESS eco-system offering superior technical and cost outcomes to clients.
Extended retail product suite including new web and mobile (iphone, ipad, Android) offerings.
3
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
FINANCIAL MARKETS – CANADA
Our Canadian financial markets operations produced good revenue growth with revenue up 10.9% (CAD) on 2010 (up
7.0% and 7.1% on the prior half year’s results (CAD) for the period to June 2011 and December 2011 respectively). The
outcome reflected resilience in the underlying business, together with additional revenue associated with project
completions. This growth occurs in a period of prolonged and challenging macro conditions for our client base, the impact
providing a subduing influence on demand for new services. Some improvements in contribution together with moderated
growth in the operating cost base yielded a 13.5% (CAD) improvement in segment profits (up 5.7% and 15.4% on the prior
half year’s results (CAD) for the period to June 2011 and December 2011 respectively).
The performance of the division was lessened by strong currency movements translating to growth of 2.0% and 4.5% for
revenue and segment profit respectively when measured in Australian dollars.
Some of the key highlights were:
Positive progress on institutional order management with clients and prospects. Now in broader client base rollout.
Continues to be a core strategic focus.
IRESS Best Market Router (BMR) shows continued high performance delivery of trade-through compliance and
advanced routing features.
Enhanced North American Trading Module “FXM” ready for production, offering high performance and further flexibility
in cross border settlements.
Competitively priced desk automation trading algorithms ready for production. Response to client demand and
increasingly electronic environment.
Market data desktop with analysis tools well received as essential in fragmented market.
IRESS Optical Network (ION) now deployed, enhancing ultra-low latency trading ecosystem in Canada.
IRESS infrastructure performed extremely well during record volatility and volume rates.
Retail order management extensions now in rollout with seed client. Differentiating features and expect applications
in many other firms.
Retail online trading and market data suite differentiated competitively with a number of opportunities continuing.
4
IRESS Market Technology Limited
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
FINANCIAL MARKETS – SOUTH AFRICA
The acquisition of Peresys was completed on 20 January 2011, with the focus during the year to seed new product
opportunities in response to client demand, and integrate business operations.
Our financial markets business in South Africa enjoys many of the characteristics of our other business units, with
revenues comprising approximately 90% recurring subscription revenue and the remainder generated by volume based
services. The macro climate and its impact on volumes and client businesses was no less relevant in South Africa during
2011, with the business experiencing both good growth in subscription revenues across products, somewhat mitigated by
reduced volume levels and associated volatility. Structural changes anticipated for professional equity markets during
2012 in South Africa are expected to provide an opportunity to leverage the broader IRESS technology suite.
The significant appreciation of the Australian dollar against the South African rand lessened the otherwise solid results of
the business during 2011 when assessed in Australian dollar terms.
Some of the key highlights were:
Retail product suite (Trader/Investor/Mobile) in production and well received.
Hedge fund Execution Management System (EMS) solution in production.
Trading architecture evolving, creating new opportunities.
IRESS trading gateway to the South African derivatives exchange (SAFEX) now deployed, with demonstrable latency
reductions.
JSE trading engine relocating from the United Kingdom and changing technology platforms in mid-2012. IRESS
network and technology investments open pathway for providing unique offering of ASP solutions combined with
smooth transition for clients.
Integration between IRESS and local FIX order routing hub providing seamless transition for clients over exchange and
topology changes, and new opportunities.
Private wealth solution of combined XPLAN/IRESS Portfolio System (IPS)/IOS+ a key differentiator. Components
already in production.
FINANCIAL MARKETS – ASIA
Revenue growth in Asian financial markets during 2011 was progressing well as we continued to build capability and
respond to new opportunities. However, revenue was impacted late in the second half by the collapse of MF Global, which
was material for this division.
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CHAIRMAN AND MANAGING DIRECTOR’S REPORT
WEALTH MANAGEMENT – AUSTRALIA & NEW ZEALAND
Wealth Management in Australia and New Zealand has continued to perform well through a period of ongoing change for
the industry and our clients. The division delivered good growth through differentiated product capability, demand for
tangible efficiency savings through technology, and enhanced adviser workflow and end client experience.
Contributing to this growth have been numerous new and transitional rollouts that have presented additional new client
requirements and opportunities, in addition to broad organic opportunities across the client base and product range as
clients look to efficiency.
The wealth management sector is not immune from the economic climate and the secular changes driven by advice
reform, which includes consolidation. But while it remains difficult to anticipate exactly how the segment will be impacted
in the longer-term, our experience amidst current conditions has been positive and demonstrates our important role in
providing flexible solutions allowing clients to reposition themselves for growth.
The division achieved revenue growth of 12.2% over the full year (up 5.3% and 7.5% on the prior half year’s results for the
period to June 2011 and December 2011 respectively). Positive revenue momentum combined with moderated expenses
in the second half produced segment profit growth of 8.7% for the full year (up 1.1% and 8.9% respectively on the prior
half’s results).
Some of the key highlights were:
Clients and projects
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Increased involvement in numerous institutional XPLAN transitions.
Clients focussing on scalable advice platform and efficiencies.
Private wealth management responding as differentiated segment.
Product is differentiating and proving portable
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Actively responding to clients and opportunities.
XPLAN 2 now deployed at 50% of sites, with well received design and user experience.
FoFA demanding integrated advice platform (efficiency and compliance).
XPLAN modules that ease compliance or enhance client experience in demand.
Industry
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Advice reform driving common trends in global markets. IRESS leveraging synergy and leadership opportunities.
Trend from commission to advice driving focus on client management, marketing, engagement.
Long-term impacts difficult to predict. Technology is and will remain key enabler.
XPLAN continues to be ranked as most widely used and richest functionality.
6
IRESS Market Technology Limited
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
WEALTH MANAGEMENT – SOUTH AFRICA
The South African business continues to support its client base and the significant projects underway for migration to
XPLAN, against the significant impact of client roll-offs previously flagged. While these offsets are small in a group sense,
they represent material amounts for this business. Opportunities continue for our integrated advice platform that offers
direct cost savings, efficiency and best practice opportunities for our clients. Revenue declined 6.3% (ZAR) over the year
which generated a 23.9% (ZAR) decline in segment profit.
Some of the key highlights were:
Several institutional XPLAN transitions underway or commencing in 2012.
Clients seeking to leverage integrated advice platform to manage multi-channel distribution and compliance, in a cost
efficient manner.
Increasing focus on investment planning and assets under management.
Regulation and education criteria having some impact on industry dynamics.
WEALTH MANAGEMENT – ASIA
Opportunities in the region continue to provide confidence in our medium-long term prospects that span various segments
in wealth management from tied sales, to independent advice networks, to expatriate advice franchises and private
banking. We continue to progress product and business building given our medium term outlook.
WEALTH MANAGEMENT – UNITED KINGDOM
In November 2011, IRESS announced the launch of its Wealth Management division in the United Kingdom on the back of
its selection as strategic supplier of wealth management advice technology by the largest distributor of retail financial
advice in the UK.
IRESS’ goal is to establish a competitive and comprehensive advice platform to meet the needs of the UK advice market,
and over time to build a business similar to its leading wealth management operations in other markets. The UK division
has been initiated with a local management team, with the local team growing based on deliverables.
The new division is underpinned by a long-term supply agreement, with 2012 dedicated to localisation and
commencement of rollout, and minimum fees payable from 2013. During the initial years of the rollout phase, the seed
license fee revenue will be insufficient to offset operational expenses as IRESS focuses on establishing its presence.
IRESS’ net segment profit operational funding requirement during the establishment phase will be fully expensed and
limited to $5.0m per annum, subject to regular review.
7
CHAIRMAN AND MANAGING DIRECTOR’S REPORT
OUTLOOK
The Company will continue its strategy of local tailoring of solutions to all segments of our client base and adding value,
avoiding where possible commodity product status. Continuing to act as a responsive vendor, and meeting client
requirements as their businesses evolve, is key. In addition to understanding changes in technology and regulation it
requires a willingness to invest for the medium term, and engage in active and responsive dialogue with our clients.
While the timing of a full recovery in our mature businesses remains difficult to predict, the differing level of maturity
across our various divisions provides a useful mix of early stage emerging to mature activities.
Specifically looking at the group’s financial outlook for 2012, the early signs are mixed, with maturing projects and newly
commencing client technology initiatives, combined with a widespread focus on cost reductions throughout financial
markets given the extended turbulent climate. Demand remains for our solutions, particularly in areas providing direct
savings, and those with which our clients can enhance services and engagement with their end clients. However, we
remain cautious given the environment and expect conditions for at least the short term to moderate underlying financial
growth, suggesting that flat 2012 segment profits before growth investments would represent a good result.
Our confidence in the merit of our growth investments divisions (Asia and United Kingdom) is undiminished despite the
ongoing difficult environment. While having a short-term impact on group results, we remain convinced of the medium and
long-term potential for strong growth, and have no doubt, that in these cases, our approach is the best balance of risk
and reward for creating shareholder value. Acquisitions where these make sense to bring forward growth, continue to be
considered within the parameters of our longstanding risk profile.
ACKNOWLEDGEMENTS
IRESS has a fabulous pool of technology, but its greatest asset continues to be the dedicated and committed staff
working for the Company. During the year, numerous and complex demands were made of our staff to meet client and
project requirements globally. It is fully recognised that the success of IRESS is largely a result of the dedication and
commitment of our staff, to whom we offer our sincere thanks.
This observation is not something that is taken for granted. During 2011 the demands on staff if anything, increased as
staff worked to fulfil client requirements, roll-out objectives, and to address the consequences of our growing breadth of
operations, networks and market data. In addition, the extensive internal deadlines for medium-term initiatives further
demanded staff.
There was an increase in remuneration levels during the year consistent with industry trends. For reasons outlined above,
some divisions also experienced headcount growth. Managing the human resources of the company is a vital component
in generating long term returns to shareholders, and to this end we appreciate the requirement to be fully aware of local
employment market conditions in all areas where we operate, and the importance of long term retention and stability in
our workforce.
We would also like to thank our clients for their continued support and loyalty, and assure them of our commitment to
meeting and exceeding their needs in the future.
Mr A Walsh
Managing Director
Mr P Dunai
Chairman
8
IRESS Market Technology Limited
DIRECTORS’ REPORT
The Directors of IRESS Market Technology Limited submit herewith the annual financial report for the financial year ended
31 December 2011. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows.
BOARD OF DIRECTORS
NAME
PARTICULARS
Mr P Dunai
Mr A Walsh
Chairman since May 2010, member of the Nomination and Remuneration Committee. Served as
Managing Director of the Company from inception until retiring from that role in October 2009. A
founding shareholder who joined the Board in 1993. He was Chairman of Nomination and
Remuneration Committee until 5 May 2011.
Managing Director. Founded XPLAN Technology Pty Ltd which was acquired in 2003 by the
Company, and from 2003 managed the transition of XPLAN from an independent start-up
organisation to a fully integrated material division of the Group until taking up his current role.
He joined the Board in October 2009.
Mr J Killen (OAM)
Non–executive director, Chairman of the Audit Committee for part of the year. Joined the Board
in 2000 and was Chairman of the Audit Committee from appointment through to his retirement
from the Board on 5 May 2011.
Mr B Burdett
Ms J Seabrook
Mr J Cameron
Mr J Hayes
Non–executive director, member of the Audit Committee, joined the Board in 2006 and is also
Chairman of Neurosciences Victoria Ltd, and a director of Investment Technology Group Inc, a
New York Stock Exchange listed company.
Non–executive director, Lead Independent Director since May 2010, Chair of the Nomination
and Remuneration Committee since 5 May 2011, and a member of the Audit Committee. She
joined the Board in August 2008 and is also a special advisor to Gresham Partners Limited, a
non-executive director of Iluka Resources Limited, Bank of Western Australia Ltd, Amcor Limited
and the Export Finance and Insurance Corporation. She is also a member of the Federal
Government's Takeovers Panel and ASIC’s external advisory group.
Non-executive director, member of the Nomination and Remuneration Committee since 5 May
2011, and member of the Audit Committee until 5 May 2011. He joined the Board in March
2010 and is also a director of FIX Protocol Limited.
Non–executive director, Chairman of the Audit Committee. Joined the Board on 10 June 2011,
assuming Chair of the Audit Committee from this date. He is also a member of the Advisory
Council of Comcover, a Federal Government Entity.
The above named Directors held office during and since the end of the financial year except for:
Mr J Killen (OAM) who retired from the board on 5 May 2011; and
Mr J Hayes who joined the board on 10 June 2011.
COMPANY SECRETARY
NAME
PARTICULARS
Mr S Bland
Mr P Ferguson
Chief Financial Officer and Company Secretary, joined the Company in 2001 and has held his
current position since then. He is a nominee director for all wholly owned subsidiaries.
Group General Counsel and Company Secretary, joined the Company in June 2011. Since his
appointment, he has assumed primary responsibility for Company Secretarial matters.
9
DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES
During the course of the year, the consolidated entity’s activities consisted of the provision of information, trading,
compliance, order management, portfolio and financial planning systems and related tools. The principal clients comprise
Australian, New Zealand, Canadian and South African domestic equity participants, and wealth management
professionals in Australia, New Zealand and South Africa. In addition, the consolidated entity has emerging operations in
Asia and recently established operations in the United Kingdom.
REVIEW OF OPERATIONS
In looking at the consolidated entity’s performance during 2011, the following are important themes:
Pursuit of medium term growth opportunities:
In January 2011, the Peresys operations were acquired, establishing IRESS Financial Market activities in South
Africa. In addition to being a new and profitable business segment providing good growth opportunities, it does
impact year on year comparisons for the consolidated entity;
Organic growth initiatives to establish IRESS services in Asia which commenced in 2010 continued in the
current year. Significant progress in trialling of services and engagement with clients continued and was broadly
in line with expectations. The financial investment of seeding this longer term opportunity continued in the
current year and remains an important avenue for future growth; and
In a similar manner to our organic initiative in Asia, in November 2011 wealth management operations were
commenced in the United Kingdom supported through securing a seed client arrangement with the largest retail
distributor in the United Kingdom.
Economic Conditions:
In the broad 2011 was a tough year for the financial services sector, which generally translated into softer
demand for new services, and some cancellations;
Despite this, opportunity and demand for our leading solutions in segments remained, most noticeably in
expanded requirement for retail wealth management technology and services;
Failures by Minc Financial and MF Global impacted on the current year through lost recurring revenue as well as
sizeable bad debts; and
Demand for skilled staff relevant to our business activities continues to remain high.
Conversion of off-shore results to Australian Dollars:
Group consolidated results for the year are impacted by appreciation of the Australian dollar, most noticeably in
conversion of the results from our South African operations given the 22% decline in the South African Rand.
IRESS’ recurring subscription model continues to drive results and outlook.
During the year, the profitability of the consolidated entity was impacted by:
Australia & New Zealand Financial Markets - Revenue $108.9m. (2010: $104.5m) up 4.2%; segment profits $56.3m
(2010: $58.9m) down 4.4%. Revenue growth was strongly associated with project deliveries in the commencing and
final periods of the second half, driven by client preparation for multiple trading venues late in 2011. While revenue
for our leading range of multi-markets products and services commenced once venue competition opened in October,
its positive effect was impacted through the loss of MF Global and increased cancellations. While headcount did
increase during 2011 (mainly in H2’2011), it was also impacted by the full year impact of the headcount increases
late in H2’2010 which was largely to support project work associated with the move to multi-markets. The collapses
of Minc Financial and MF Global resulted in a $0.519m bad debt expense. The combined impact of these resulted in
a margin decline from 56.3% to 51.7%.
Canadian Financial Markets – Revenue $24.0m. (2010: $23.5m) up 2.0% (10.9% in CAD); segment profits $8.2m
(2010: $7.8m) up 4.5% (13.5% in CAD). The segment produced good revenue growth in line with project completions,
although its impact was somewhat lessened due to broader economic factors. Modest improvements in contribution
from news, data and communication services combined with moderated growth in the operating cost base saw
margins in CAD improve from 33.5% to 34.2%.
10
IRESS Market Technology Limited
DIRECTORS’ REPORT
South African Financial Markets – Revenue $15.3m (ZAR 114.2m) (2010: nil); segment profits $5.5m (ZAR 41.8m)
(2010: nil). The underlying entity making up this segment (Peresys (Pty) Ltd) was acquired with effect from 20 January
2011. This business has high levels of recurring revenues, some of which are linked to volume usage. Due to
reduced trading volumes as experienced globally, this component of their revenues was negatively impacted.
Revenue growth in H2’11 was up 20.4% in ZAR, supported in part from the part period in January missing from H1, a
price increase in April as well as growth in subscription revenues. Cost growth associated with post acquisition
changes, and some initiatives to support future growth resulted in H2 margins staying largely unchanged for H2’11 at
36.6% in ZAR.
Asian Financial Markets – Revenue $1.1m. (2010: $0.6m); segment loss $(1.5)m (2010: $(0.6)m). The segments
results were impacted through the loss of MF Global in the second half, reducing revenues from a major client to the
division as well as a bad debt of $0.262m.
Australia & New Zealand Wealth Management– Revenue $49.1m. (2010: $43.8m) up 12.2%; segment profits
$20.3m (2010: $18.6m) up 8.7%. The business has continued to perform well, with revenues driven by transitional
rollouts as well as solid organic growth across the broader client base. Demand for services continues to be driven by
the efficiencies available through the suite of technology offerings. Growth in headcount to support the large number
of migrations saw margins decline marginally from 42.6% to 41.3%.
South African Wealth Management – Revenue $6.0m. (2010: $7.1m) down 15.3% (6.3% in ZAR); segment profits
$1.7m (2010: $2.5m) down 31.6% (23.9% in ZAR). The known loss of two clients (as announced with last year’s
results) produced a financial outcome inconsistent with the level of activity and work performed on XPLAN rollouts
and responding to client requirements and opportunities. With modest cost increases, margins decreased from
35.0% to 28.4%.
Asian Wealth Management – Revenue $0.2m (2010: $0.3m) down $0.1m and segment loss $(1.3)m (2010: loss
$(1.1)m). The business continues to make progress in engaging clients and establishing solutions with seed clients
across the broad spectrum of wealth management services in these markets. The cost base remained substantially
unchanged from 2010.
United Kingdom Wealth Management – This operation was established in November 2011, and generated no revenue
in the period, and a segment loss of $(0.1)m.
The reported net profit after tax was $41.3m, an 18.1% decrease on reported profits for the same period last year.
Impacting on comparability of results for 2011 and 2010 are:
a primary factor in increased operating expenses in 2011 on 2010 was the 28.7% increase in group headcount
across the year. In addition to the 93 staff introduced into the group through the acquisition of Peresys, headcount
was increased in both financial markets and wealth management A&NZ to support client lead initiatives
(approximately a further 35 staff), the other area of growth was staffing for financial market activities in Asia. Also
very late in 2011 there were some new staff associated with setting up wealth management operations in the UK.
Further 2011 wages and other related costs reflected the full year impact for the 58 additional staff added during
2010;
the increase in total direct staff costs before share based payments at 27.1% was in line with the movement in
headcount. Short term incentives increased very slightly as a percentage of base wages, reflecting amongst other
factors the enormous effort by many associated with very major projects across the group, most notably the multi-
market implementation in Australia. Share based payments, which lag headcount movements, increased by 2.8%.
Overall total employee related expenses increased by $15.635m or 24.4%;
customer data fees increased by 8.5% reflecting expanded data requirement, largely associated with the
commencement of our financial markets South Africa operations;
communication and technology expenses increased by $1.270m or 13.6% reflecting in part expansion and upgrade
to our networks, including in Asia and South Africa;
primarily as a direct result of the increased headcount, and the introduction of Peresys into the group results, facility
related expenses increased by 28.1%. Office relocations in Brisbane, Perth and Singapore were also a factor;
11
DIRECTORS’ REPORT
during 2011 the group experienced two large bad debts (Minc Financial and MF Global) which together with an
increase in the doubtful debts provision at Peresys, resulted in a net bad debt expense for the year of $0.882m. Until
this year, bad debts of this magnitude were unprecedented for the consolidated entity. In 2010, given our negligible
claims history, there was a write back in the bad debt provision which resulted in a credit of $0.722m in the Income
Statement. In 2011 the bad debt expense was $0.882m, which represents a net movement year on year of
$1.604m;
depreciation and amortisation increased by $7.489m (49.6%) primarily due to recognition of new assets associated
with the purchase of assets from Peresys and the subsequent purchase of Peresys, which collectively gave rise to
assets such as computer software and referred to in management presentations as Strategic Charges;
net interest income decreased by $1.862m primarily from decreased average cash holdings during the year. In
addition interest expense flowing from deferred consideration associated with the Peresys vendor earnout, resulted in
a non-cash interest expense being recognised;
as previously flagged the effective income tax rate increased back to longer term levels at 31.3% from 25.6% in
2010. The change arose from concluding the previously observed overlap on tax deductions arising from the
transition of share grants from performance rights to deferred shares; and
the collective impact of these changes was a decrease in basic EPS from 40.335 cents per share to 32.644 cents
per share, a decrease of 19.1%.
CHANGES IN OPERATIONS DURING THE YEAR
During the course of the year, the operations of the consolidated entity were modified by the following changes:
Establishment of Financial Market operations in South Africa
Effective from 20 January 2011, IRESS Market Technology Limited (‘IRESS’) acquired Peresys (Pty) Ltd (‘Peresys’) and its
subsidiaries. Shortly prior to this in a separate transaction, IRESS acquired all the computer software and registered
intellectual property rights of Peresys (collectively the ‘transaction’).
Peresys is a South African based technology solutions provider to the financial markets, specialising in building and
running FIX enabled connected trading communities across all asset classes, including equities, fixed interest and
derivatives.
Peresys was acquired for an expected ZAR 375m (approximately AUD 56.1m). The transaction included an upfront cash
payment of ZAR 340.5m (approximately AUD 51.0m) and performance based payments based around the growth of the
business of up to ZAR 24.2m (approximately AUD 3.6m), most of which is payable at the end of three years. The total
aggregate purchase price is capped at ZAR 364.7m (approximately AUD 54.6m). In addition, up to an additional ZAR 10m
(approximately AUD 1.5m) is available to certain staff, with payment based on performance of the business over three
years.
Establishment of Wealth Management operations in the United Kingdom
In November 2011, IRESS Market Technology Limited (‘IRESS’) announced the establishment of wealth management
operations in the United Kingdom through a wholly owned UK subsidiary, IRESS Technology Limited (‘IRESS UK’). At the
same time it was announced IRESS UK had been selected as the strategic supplier of wealth management advice
technology to the largest distributor of retail financial advice in the UK. Supporting this new initiative the former Directors
of leading financial services consultancy business were employed, after agreeing to wind down their consulting business.
As this is an organic entry into the UK, there were no upfront payments or acquisition related amounts. The arrangement
with our seed client recognises their position in terms of future pricing of services, but there are no capital payment
amounts involved. The arrangement with the new local management team, includes potential to participate in share
grants assessed exclusively on the performance of the UK business over the medium term.
CHANGES IN STATE OF AFFAIRS
There were no other significant changes in the state of affairs of the consolidated entity other than that referred to in the
financial statements or notes thereto.
12
IRESS Market Technology Limited
DIRECTORS’ REPORT
SUBSEQUENT EVENTS
Other than as noted below, there has not been any other matter or circumstance, other than that referred to in the
financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected,
or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs
of the consolidated entity in future financial years.
FUTURE DEVELOPMENTS
Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial
years, and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity.
Accordingly, this information has not been disclosed in this report.
DIVIDENDS
In respect of the financial year ended 31 December 2010, the Directors recommended a final dividend of 24.0 cents per
share franked to 66% at 30% corporate tax rate to be paid to the holders of fully paid ordinary shares on 31 March 2011.
The record date to participate in the final dividend is 15 March 2011.
In addition, directors recommended a once off special unfranked dividend of 3.5 cents per share to be paid to the holders
of fully paid ordinary shares on 31 March 2011.
In respect of the financial year ended 31 December 2011, an interim dividend of 14.0 cents per share franked to 90% at
30% corporate tax rate was paid to the holders of fully paid ordinary shares on 30 September 2011.
In respect of the financial year ended 31 December 2011, the Directors recommend a final dividend of 24.0 cents per
share franked to 83% at 30% corporate tax rate to be paid to the holders of fully paid ordinary shares on 30 March 2012.
The record date to participate in the final dividend is 16 March 2012.
DIRECTORS’ MEETINGS
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during
the financial year and the number of meetings attended by each director (while they were a director or committee
member). During the financial year, 6 Board meetings, 5 Audit Committee meetings and 4 Nomination and Remuneration
Committee meetings were held.
BOARD OF DIRECTORS
AUDIT COMMITTEE
NOMINATION AND
REMUNERATION COMMITTEE
ELIGIBLE TO
ATTEND
ATTENDED
ELIGIBLE TO
ATTEND
ATTENDED
ELIGIBLE TO
ATTEND
ATTENDED
6
6
2
6
6
6
4
6
6
2
6
6
5
4
–
–
1
5
5
1
4
–
–
1
5
5
1
4
4
–
–
–
4
4
–
4
–
–
–
4
4
–
DIRECTORS
Mr P Dunai
Mr A Walsh
Mr J Killen
Mr B Burdett
Ms J Seabrook
Mr J Cameron
Mr J Hayes
13
DIRECTORS’ REPORT
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the year, the Company paid a premium in respect of a contract insuring each of the Directors of the Company (as
named above), the Company Secretary and each of the Executive Officers of the Company and of any related body
corporate against a liability or expense incurred as such a director, secretary or executive officer to the extent permitted
by the Corporations Act 2001. In accordance with section 300(9) of the Corporations Act 2001 further details have not
been disclosed due to confidentiality provisions in the insurance contract.
In addition, the Company has entered into a Deed of Indemnity which ensures that generally the Directors of the Company
will incur no monetary loss as a result of defending actions taken against them as Directors. Certain actions are
specifically excluded, for example, the incurring of penalties and fines which may be imposed in respect of breaches of
the law.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by the law,
indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability
incurred in their capacity as an officer or auditor.
AUDIT SERVICES
Details of amounts paid or payable to the auditor for audit services provided during the year by the auditor are outlined in
Note 27.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 33.
ROUNDING OFF AMOUNTS
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance
with that Class Order, amounts in the Directors’ Report and the Financial Report are rounded off to the nearest thousand
dollars.
AUDITED REMUNERATION REPORT
This Remuneration Report provides details of IRESS’ policy for determining the remuneration of directors and executives;
the relationship between the policy and the performance of the company during the financial year; and the remuneration
of board members and executives in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this report, Key Management Personnel of the group are defined as those persons having authority
and responsibility for planning, directing and controlling the major activities of the company and the group, directly or
indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives
in the parent or the group receiving the highest remuneration.
14
IRESS Market Technology Limited
DIRECTORS’ REPORT
RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION
The graph below outlines the relative share price performance of IRESS Market Technology Limited over the five years to
December 2011, compared to the S&P/ASX 200 index. Over the five years the IRESS share price had decreased by 0.2%
and the S&P/ASX 200 index had decreased by 28.5%. Further, during this period, IRESS has maintained its high dividend
payout ratio, and the weighted average franking of dividends was 85.6%.
160
140
120
100
80
60
40
20
0
7
0
n
a
J
7
0
r
p
A
7
0
l
u
J
7
0
t
c
O
8
0
n
a
J
8
0
r
p
A
8
0
l
u
J
8
0
t
c
O
9
0
n
a
J
9
0
r
p
A
9
0
l
u
J
9
0
t
c
O
0
1
n
a
J
0
1
r
p
A
0
1
l
u
J
0
1
t
c
O
1
1
n
a
J
1
1
r
p
A
1
1
l
u
J
1
1
t
c
O
2
1
n
a
J
IRESS
S&P/ASX 200
An analysis of company performance over the five years to December 2011 is set out in the table below.
MEASURE (a)
Share price
Change in share price
Change in share price (%)
Volume weighted average
price for period
31 DECEMBER
2007
31 DECEMBER
2008
31 DECEMBER
2009
31 DECEMBER
2010
31 DECEMBER
2011
796.9¢
97.6¢
14.0%
513.0¢
(283.9¢)
(35.6%)
855.6¢
342.7¢
66.8%
869.6¢
13.9¢
1.6%
693.0¢
(176.6¢)
(20.3%)
799.6¢
591.7¢
687.0¢
840.4¢
833.7¢
Basic earnings per share
21.904¢
29.622¢
34.784¢
40.335¢
32.644¢
Diluted earnings per
share
21.176¢
28.795¢
34.175¢
Dividend per share (b)
26.0¢
31.0¢
34.0¢
40.016¢
38.0¢(c)
32.589¢
38.0¢
Weighted average
franking on ordinary
dividends
100%
100%
100%
100%(c)
85.6%
(a)
The share price figures in the table for the four years ended 31 December 2010 have been adjusted to align with ASX
adjustment factor arising from the special dividend paid 31 March 2011.
(b) Dividend per share calculated based on total of interim and final dividend rather than dividends actually paid in the year. The
calculation excludes the impact of the 3.5¢ special dividend paid in March 2011.
15
DIRECTORS’ REPORT
(c)
All dividends prior to the December 2010 final dividend were fully franked. The calculation 2010 has been adjusted to reflect
value for the 3.5¢ special dividend paid in March 2011 as an increase to the franking percentage, rather than a heightened
dividend per share.
As set out on pages 14 to 32 the Board has regard to a number of factors when setting the levels of fixed, short term and
long term remuneration for the managing director and executives including financial performance, non-financial factors
and strategic factors.
DIRECTORS AND KEY MANAGEMENT PERSONNEL DETAILS
This remuneration report includes information on the remuneration of:
the directors of IRESS Market Technology Limited, being:
∙ Mr P Dunai (Chairman, Chairman of Nomination and Remuneration Committee until 5 May 2011);
∙ Mr A Walsh (Managing Director)
∙ Mr J Killen (Chairman of the Audit Committee, Non-executive Director; retired from the Board 5 May 2011);
∙ Mr B Burdett (Non-executive Director);
∙ Ms J Seabrook (Non-executive Director, Lead Independent Director, Chair of Nomination and Remuneration
Committee since 5 May 2011);
∙ Mr J Cameron (Non-executive Director); and
∙ Mr J Hayes (Non-executive Director, appointed 10 June 2011, Chairman of the Audit Committee since 10 June
2011);
and other key management personnel being:
∙ Mr S Bland (Chief Financial Officer and Company Secretary);
∙ Mr J Davies (President & Chief Executive Officer, Financial Markets Canada);
∙ Mr P Ferguson (Group General Counsel and Company Secretary);
∙ Ms K Gross (General Manager, Products, Sales & Marketing); and
∙ Mr D Walker (Chief Technical Officer).
(Collectively, the above other key management personnel represent the ‘executives’.)
16
IRESS Market Technology Limited
DIRECTORS’ REPORT
SHARE RIGHTS
SHARE RIGHTS GRANTED TO, AND VESTING IN, DIRECTORS AND EXECUTIVES
The following table sets out the share rights issued by the company to directors during the year, as well as the share
rights which vested during the year to directors or a related body corporate of a director.
No share rights have been issued to directors or executives since the end of the year. No share rights granted to directors
or executives have been cancelled during the year or since the end of the year. No rights that were granted in the year
ended 2011 vested in 2011.
DIRECTORS
Mr P Dunai
Mr A Walsh
NOTE
(a)
(a)
(b)
SHARE RIGHTS GRANTED
DURING THE YEAR
SHARE RIGHTS VESTED
DURING THE YEAR
–
300,000
30,000
200,000
56,000
25,000
(a) Governed by the rules of the Employee Performance Rights Plan.
(b) Governed by the rules of the Employee Deferred Share Plan.
During the year, the following share rights were issued to executives and staff and the following share rights vested to
executives or a related body corporate of theirs.
EXECUTIVES
Mr S Bland
Mr J Davies (d)
Mr P Ferguson
Ms K Gross
Mr D Walker
PERFORMANCE
RIGHTS GRANTED
DURING THE YEAR (a)
DEFERRED SHARES/DEFERRED
SHARE RIGHTS GRANTED
DURING THE YEAR (b)
SHARE RIGHTS VESTED
DURING THE YEAR (c)
31,040
15,430
–
28,520
32,710
10,290
10,010
–
10,070
10,290
59,000
33,000
–
44,500
54,000
(a) Governed by the rules of the Employee Performance Rights Plan.
(b) Governed by the rules of the Employee Deferred Share Plan and the Employee Deferred Share Rights Plan.
(c) Comprises performance rights and deferred shares.
(d)
Vested share rights may be unexercised.
The number of share rights which subsequently vest is dependent on a number of variables including the performance of
the company. In accordance with the applicable share plan rules and where they were eligible to vest, all performance
rights eligible for vesting in May 2011 and August 2011, issued in May 2008 and August 2008 respectively, vested.
Further details of the above performance rights, deferred shares and deferred share rights are set out in Notes 36 to 38.
17
DIRECTORS’ REPORT
SHARE RIGHTS EXERCISED BY DIRECTORS AND EXECUTIVES
During the financial year, the following vested share rights were exercised by the nominated person(s) and converted into
ordinary shares in IRESS Market Technology Limited. With the exception of Mr Davies, no vested shares for directors or
executives remain unexercised at 31 December 2011.
PERFORMANCE RIGHTS
EXERCISED DURING
THE YEAR (a)
DEFERRED
SHARES/DEFERRED SHARE
RIGHTS EXERCISED
DURING THE YEAR (b)
AGGREGATE
AMOUNT PAID
$
DIRECTORS
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Mr P Ferguson
Ms K Gross
Mr D Walker
200,000
56,000
46,000
–
–
33,000
42,000
–
25,000
13,000
–
–
11,500
12,000
1
1
1
–
–
1
1
(a) Governed by the Employee Performance Rights Plan. The exercise price was $1 in total for each series of performance rights
exercised.
(b) Governed by the Employee Deferred Share Plan or the Employee Deferred Share Rights Plan as applicable.
Further details on the Employee Performance Rights Plan, the Employee Deferred Share Plan and the Employee Deferred
Share Rights Plan are set out in Notes 36, 37 and 38 respectively.
DIRECTOR AND EXECUTIVE SHAREHOLDINGS
The following table sets out each director’s relevant interest held directly or through a related body corporate in shares,
performance rights and deferred share rights of the Company at the date of this report, including where applicable, shares
yet to be beneficially transferred/withdrawn by the respective director from the IRESS Employee Share Trust. There are no
vested share rights which have not been exercised. Unvested performance rights and deferred shares may, subject to
meeting performance hurdles, vest at some time in the future.
DIRECTORS
Mr P Dunai (a)
Mr A Walsh (a)
Mr B Burdett
Ms J Seabrook
Mr J Cameron
Mr J Hayes
FULLY PAID ORDINARY
SHARES
UNVESTED PERFORMANCE
RIGHTS
UNVESTED DEFERRED
SHARES
890,000
71,950
100,000
20,000
–
4,600
–
525,000
–
–
–
–
–
59,000
–
–
–
–
(a) Some or all of these shares may still be subject to restrictions as set out in the share plan rules, and as such are currently
held on trust for the respective director by the IRESS Market Technology Equity Plan Trust.
18
IRESS Market Technology Limited
DIRECTORS’ REPORT
The following table sets out the relevant interest in shares, performance rights, deferred shares and deferred share rights
of the Company for each executive held directly or through a related body corporate, at the date of this report including
where applicable, shares yet to be beneficially transferred/withdrawn by the respective executive from the IRESS
Employee Share Trust. There are no vested share rights which have not been exercised. Unvested performance rights and
deferred shares may, subject to meeting performance hurdles, vest at some time in the future.
EXECUTIVES
Mr S Bland
Mr J Davies
Mr P Ferguson
Ms K Gross
Mr D Walker
FULLY PAID
ORDINARY
SHARES
(a)(b)
270,390
–
–
227,610
471,260
UNVESTED
PERFORMANCE RIGHTS
UNVESTED
DEFERRED SHARES
UNVESTED
DEFERRED SHARE
RIGHTS
108,730
51,280
–
94,690
106,400
20,480
–
–
20,460
21,080
–
21,090
–
–
–
(a) Some or all of these shares may still be subject to restrictions as set out in the share plan rules, and as such are currently
held on trust for the respective executive by the IRESS Market Technology Equity Plan Trust.
(b) Mr Davies holds 73,000 vested but unexercised share rights.
The balance of this remuneration report is set out under the following headings.
Policy and Structure:
∙
∙
∙
Non-executive directors’ remuneration
Executive remuneration
Performance under share based incentive plans
Relationship between Company Performance and Remuneration
Specific Remuneration Details
Outline of Employment Contracts for the Managing Director and Executives
POLICY AND STRUCTURE
Non-executive directors’ remuneration
The company’s non-executive directors receive fees (including statutory superannuation) for their services plus the
reimbursement of reasonable expenses. Non-executive directors’ fees are reviewed annually and are determined by the
Board having regard for fees paid to non-executive directors of comparable companies, and where considered necessary
the Board seeks external advice on this subject.
The Board aims to set the aggregate remuneration at a level which provides the ability for IRESS to attract and retain
highly competent directors. The aggregate remuneration level is determined from time to time by shareholders in general
meeting, in accordance with the company’s Constitution. The aggregate amount is then apportioned between the directors
as agreed, taking into account market comparisons, the director’s responsibilities, and the time spent by the non-
executive directors on IRESS matters. Non-executive directors do not receive performance-based bonuses. Fees paid to
non-executive directors during 2011 were within the maximum aggregate limit of $600,000 per annum agreed to by
shareholders at the Annual General Meeting held on 5 May 2010.
19
DIRECTORS’ REPORT
At the end of the year the non-executive directors’ annualised fee structure was as follows.
ROLE
Chairman
Chairman of Audit Committee
Chair of Nominations and Remuneration Committee / Lead Independent Director
Non-executive directors
CURRENT FEE $ (a)
163,500
92,375
92,375
80,000
(a)
Includes statutory superannuation contributions or salary in lieu of statutory superannuation contributions by the Company.
Directors may elect to take all or part of their fees in cash or additional superannuation contributions.
The Company initiated a non-executive director equity plan in April 2008, but it has remained dormant up to 31 December
2011.
There are no other schemes for retirement benefits for non-executive directors. This is consistent with Principle 9.3 of the
Australian Stock Exchange (ASX) Corporate Governance Guidelines.
EXECUTIVE REMUNERATION
Philosophy
The overall objective of the Company’s approach to executive remuneration is to have practices and policies that will
enable it to attract, retain, motivate and reward executives of the calibre required to be successful in terms of delivering
long term returns to shareholders. Further, the Company’s practices will be legal, ethical and consistent with being a good
corporate citizen. It will comply with remuneration disclosures required by law and will seek to maintain the highest
standards of clarity and transparency in communications with shareholders.
The total remuneration package should comprise a base package which is both reasonable and market competitive. A
significant component of executive remuneration should be an ‘at risk’ incentive award which provides an opportunity for
the executive to receive superior remuneration when superior results are delivered.
At risk incentives are based on a mix of performance criteria for each executive, including total company performance,
relevant divisional or business unit performance and the achievement of personal objectives from the performance
appraisal process.
The at risk incentives should provide both short term benefits (to promote continuous increases in annual performance
outcomes) and long term benefits (to promote sustained delivery of long term shareholder wealth).
The Company believes that the long term interests of executives and shareholders should be aligned and that such
alignment is best achieved by executives having either direct equity in the Company or instruments whose value is
ultimately determined by the Company’s share price over the medium to long term.
Fixed annual remuneration
The fixed remuneration consists of cash salary (‘Base’), benefits, and fringe benefits. In situations where it is consistent
with the treatment of the broader employee base, the company will gross-up the amount in relation to benefits that do not
qualify as company income tax deductions. The Company makes superannuation contributions on fixed remuneration
amounts.
To ensure that fixed remuneration arrangements remain competitive, the fixed remuneration component of executive
remuneration is reviewed annually based on performance and market data.
Benchmarking of executive remuneration is against executive remuneration practices for executive roles having similar
scope, accountability and complexity to those being reviewed. Positions may be benchmarked against:
other positions within the Company so that internal relativities are maintained; and/or
roles situated in companies listed on the Australian Stock Exchange with market capitalisations similar to that of the
Company’s and/or within an industry sector in which the Company has operations.
20
IRESS Market Technology Limited
DIRECTORS’ REPORT
Short term incentive remuneration
The Company operates a short term bonus scheme to provide competitive performance based remuneration incentives to
both executives and staff. Its objectives are to:
align the interests of the executives and staff with those of shareholders;
provide participants with an opportunity to be rewarded with at risk remuneration where superior performance
outcomes are achieved over the measurement period; and
reflect a strong commitment towards attracting and retaining high performing executives and staff who are committed
to the ongoing success of the Company.
Performance objectives are established for all executives and structured to reflect each executive’s potential impact on
and contribution to the business. The performance objectives comprise elements of total company performance and
individual performance and contain measures of financial, non-financial and strategic outcomes. Achievement of
performance objectives would entitle an executive to a cash bonus.
Generally, bonus arrangements are capped at a maximum of 50% of Base, however when exceptional outcomes are
delivered, or where warranted by special circumstances, it can exceed this amount.
All executive bonus amounts are determined based on the recommendation of the Managing Director, having regard to
actual performance against the performance objectives. These recommendations are then put to the Nomination and
Remuneration Committee for approval. In the Managing Director’s case, the review and recommendation is performed by
the Nomination and Remuneration Committee, with recommendations put to the Board for approval (where the Managing
Director does not vote).
Under the short term remuneration arrangements outlined above, the following bonuses for executive directors and
executives were accrued during the year and paid in December 2011.
MAXIMUM
THAT COULD BE EARNED
% ACHIEVED
% NOT ACHIEVED
% OF BASE
% OF BASE (b)
% OF BASE
Mr A Walsh
Mr S Bland
Mr J Davies (a)
Mr P Ferguson
Ms K Gross (a)
Mr D Walker (a)
50
50
–
30
–
–
43
44
34
19
44
45
7
6
–
11
–
–
(a) While not stipulated in their employment contracts, practice has been to adopt a bonus as a percentage of base salary cap of
50% except where there are special circumstances.
(b) Based on annualised monthly salary as at 31 December 2011.
For its Australian executives the Company makes superannuation contributions on bonus payments at the statutory rate
or salary payments in lieu of superannuation, which is not included in the above bonus percentages.
21
DIRECTORS’ REPORT
Longer term incentive remuneration
The Company currently operates the following long term incentive plans (the details of which are set out in Notes 36 to 38
of the financial statements):
Employee Performance Rights Plan;
Employee Deferred Share Plan; and
Employee Deferred Share Rights Plan.
(collectively ‘share rights’).
The decision to make an award of share rights is made periodically by the Board (usually annually). Individual participation
is based on a number of factors including the strategic significance of the role and outcomes achieved; capacity to impact
on strategic outcomes in terms of special achievements or requirements; future potential and succession planning
requirements; and personal performance. Hedging of unvested share rights is prohibited.
Grants of performance rights under the Employee Performance Rights Plan have been made in May each year since the
plan was first introduced in 2003. Performance Rights vest, subject to meeting performance criteria (outlined below) at
the end of the three years.
The Employee Deferred Share Plan was introduced in April 2008. Deferred shares vest at the end of two years (or other
periods specified in the offer).
The Employee Deferred Share Rights plan was introduced in April 2008. Deferred shares vest at the end of two years (or
other periods specified in the offer).
The Peter Dunai Performance Rights Plan was introduced in May 2005, with the final rights granted under this plan
vesting in 2010. References to this plan are included in the 2011 Annual Report only when dealing with comparative
periods. For summary details on this plan refer to Note 37 of the 2010 Annual Report.
Following the introduction of the Deferred Share Plan and the Deferred Share Rights Plan, directors have indicated that it
is their intention to largely limit future grants of performance rights to the managing director and executives.
Performance criteria - Performance Rights
The Company’s performance ranking for a performance period is determined by reference to the total shareholder return
of the Company during the performance period as compared to the total shareholder return for each company in a peer
group of companies.
The peer group of companies comprises the top 200 companies listed in the ASX/S&P 200 companies after excluding
mining companies and listed property trusts. A peer company must have been in the ASX/S&P 200 companies for the
entire performance period (i.e. new entrants and companies dropping out of the ASX/S&P 200 companies are excluded).
The Company’s ranking within that group of companies at the end of the relevant performance period determines the
number of performance rights in the particular tranche that become exercisable (if any) on the following basis.
PERFORMANCE RANKING RANGE
NUMBER OF PERFORMANCE RIGHTS EXERCISABLE.
Below 50th percentile
No rights exercisable.
50th percentile
50% of the rights in the tranche available to be exercised.
51st percentile to 74th percentile
Rights available in the tranche available to be exercised will be determined
on a pro–rata basis between 50% and 100% depending on the Company’s
percentile performance ranking.
75th percentile or higher
100% of rights in the tranche available to be exercised.
22
IRESS Market Technology Limited
DIRECTORS’ REPORT
Performance under share based incentive plans
The table below summarises the various share rights granted to Mr Peter Dunai, and the performance of the Company, as
measured under the applicable plans rules. There were no new grants of share rights to Mr Dunai in 2011.
GRANT DATE
Number of share rights granted
Applicable plan rules
Total share rights cancelled
Fair value estimate at grant date (a)
1st performance ranking date
Date
Percentile ranking
Vested
Total vested and exercised
Total valid outstanding
Percentage vested
19 AUGUST 2008
200,000
Employee Performance
Rights Plan
–
$3.69
19 August 2011
Top quartile
200,000
200,000
–
100%
(a)
The value of performance rights at grant date set out in the tables above is based on the external valuation advice from
PricewaterhouseCoopers Securities Limited. The valuation has been made using a Monte Carlo simulation option pricing model
using standard option pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free
rates and expected share price volatility (refer Note 35) as well as adjusting for the likelihood of achieving performance
hurdles.
23
DIRECTORS’ REPORT
The table below summarises the various share rights granted to Mr Andrew Walsh, and the performance of the Company,
as measured under the applicable plans rules.
GRANT DATE
Number of share
rights granted
Applicable plan
rules (a)
Total share rights
cancelled
Fair value estimate
at grant date (b)
Performance ranking
date
Date
Percentile
ranking
Vested
Total vested and
exercised
Total valid
outstanding (c)
7 MAY
2008
7 MAY
2009
7 MAY
2009
7 MAY
2010
7 MAY
2010
9 MAY
2011
9 MAY
2011
9 MAY
2011 (d)
56,000 100,000
25,000
125,000
29,000
150,000
30,000
150,000
EPRP
EPRP
DSP
EPRP
DSP
EPRP
DSP
EPRP
–
–
–
–
–
–
–
–
$3.85
$3.90
$6.52
$5.68
$8.34
$5.87
$9.23
$5.79
7 May
2011
Top
quartile
56,000
7 May
2012
–
–
9 May
2011
Top
quartile
25,000
56,000
–
25,000
7 May
2013
7 May
2012
7 May
2015
7 May
2013
7 May
2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 100,000
–
125,000
29,000
150,000
30,000
150,000
Percentage vested
100%
–
100%
–
–
–
–
–
EPRP denotes Employee Performance Rights Plan, DSP denotes Deferred Share Plan.
(a)
(b) Refer Note (a) on page 23.
(c)
The quantum of performance rights ultimately vesting in the Managing Director is a function of the performance of the Company
relative to its peer group.
(d)
This series of performance rights has a three year measurement period commencing 7 May 2012.
24
IRESS Market Technology Limited
DIRECTORS’ REPORT
The table below summarises the various performance rights granted to executives and staff, and the performance of the
Company, as measured under the applicable plans rules.
GRANT DATE
7 MAY 2008
7 MAY 2009
7 MAY 2010
9 MAY 2011
Performance rights granted
235,000
199,000
252,650
267,640
Number of participants at grant date
Number of current participants
Total performance rights cancelled
7
7
–
6
6
–
13
13
–
13
13
–
Fair value estimate at grant date (a)
$3.85
$3.90
$5.68
$5.96
Performance ranking date
7 May 2011
7 May 2012
7 May 2013
7 May 2014
Ranking
Vested
Total vested and exercised
Total vested and not exercised
Top quartile
235,000
215,000
20,000
–
–
–
–
–
–
–
–
–
–
–
–
Total valid outstanding (b)
–
199,000
252,650
267,640
Percentage vested
100%
–
–
–
(a) Refer to note (a) on page 23.
(b)
The quantum of performance rights ultimately vesting in executives and staff is a function of the performance of the Company
relative to its peer group.
The table below summarises the various deferred shares granted to executives and staff and deferred share rights
granted to staff.
RIGHT GRANTED
DEFERRED SHARES
DEFERRED SHARE RIGHTS
Grant date
7 May 2009 7 May 2010 7 May 2011 7 May 2009 7 May 2010
7 May 2011
Number granted
553,720
540,230
554,000
94,320
71,280
70,750
Number of participants at
grant date
Current number of
participants
Total share rights cancelled
26,852
26,240
Fair value at grant date
$6.52
$8.34
168
220
244
–
199
18
–
1,000
$6.00
17
17
–
20
19
940
$7.67
$8.49
239
7,840
$9.23
Performance ranking date
9 May 2011 7 May 2012 7 May 2013 9 May 2011 7 May 2012
7 May 2013
Vested
526,868
Total vested and exercised
526,868
Total vested and not
exercised
Total valid outstanding
–
–
1,980
1,980
–
–
–
–
93,320
26,100
67,220
–
–
–
–
–
–
512,010
546,160
–
71,280
69,810
Percentage vested
100%
–
–
100%
–
–
25
DIRECTORS’ REPORT
SPECIFIC REMUNERATION DETAILS
The following table discloses the remuneration of the Directors of the Company for the year ended 31 December 2011.
SHORT TERM EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
(a)
SHARE BASED
PAYMENTS
SALARY
& FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
EQUITY SETTLED
SHARE RIGHTS
$ (b)
TOTAL
$
EXECUTIVE
DIRECTOR
Mr A Walsh
NON-EXECUTIVE
DIRECTORS
782,500
350,000
Mr P Dunai
150,000
Mr J Killen (c)
Mr B Burdett
Ms J Seabrook
Mr J Cameron
Mr J Hayes (d)
35,312
73,394
84,748
73,394
47,263
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
913,010
2,070,510
13,500
155,688
319,188
3,178
6,606
7,627
6,606
4,254
–
–
–
–
–
38,490
80,000
92,375
80,000
51,517
(a)
(b)
There were no other short term employee benefits, other pension or post employment benefits, other long term employee
benefits, termination benefits or other share based payments paid to directors during the year.
This expense is a function of both the value and duration of the instruments granted. The expense recognised in 2011
represents a combination of share grants made in 2011 and prior years.
(c) Retired 5 May 2011.
(d)
Appointed 10 June 2011.
26
IRESS Market Technology Limited
DIRECTORS’ REPORT
The following table discloses the remuneration of the Directors of the Company for the year ended 31 December 2010.
SHORT TERM EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
(a)
SHARE BASED
PAYMENTS
SALARY
& FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
EQUITY SETTLED
SHARE RIGHTS
$ (b)
TOTAL
$
EXECUTIVE
DIRECTOR
Mr A Walsh
NON-EXECUTIVE
DIRECTORS
681,250
350,000
–
25,000
569,311
1,625,561
Mr N Hamilton (c)
46,816
Mr P Dunai (d)
179,422
Mr J Killen
Mr B Burdett
Ms J Seabrook
Mr J Cameron (e)
78,375
67,875
74,767
54,300
–
–
–
–
–
–
–
471
–
–
–
–
4,213
6,750
7,054
6,109
6,729
4,887
–
51,029
499,159
685,802
–
–
–
–
85,429
73,984
81,496
59,187
(a)
(b)
There were no other short term employee benefits, other pension or post employment benefits, other long term employee
benefits, termination benefits or other share based payments paid to directors during the year.
This expense is a function of both the value and duration of the instruments granted. The expense recognised in 2010
represents a combination of share grants made in 2010 and prior years.
(c) Retired 5 May 2010.
(d)
Excludes $112,939 in accrued leave entitlements paid to Mr Dunai following his transition to Chairman.
(e)
Appointed 15 March 2010.
27
DIRECTORS’ REPORT
The following table discloses the remuneration of the five executives of the Company and the Consolidated Entity (other
than the Managing Director) for the year ended 31 December 2011.
SHORT TERM EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
(a)
SHARE BASED
PAYMENTS
SALARY
& FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
EQUITY SETTLED
SHARE RIGHTS
$ (b)
TOTAL
$
Mr S Bland
350,315
162,000
Mr J Davies (c)
386,107
132,217
Mr P Ferguson (d)
127,385
45,000
Ms K Gross
296,385
155,000
Mr D Walker
365,393
170,000
1,523
9,509
–
1,321
1,523
25,000
2,925
15,515
28,585
25,000
268,066
806,904
168,245
699,003
–
187,900
240,446
721,737
264,596
826,512
(a)
(b)
There were no prescribed or other benefits paid to executives during the year.
This expense is a function of both the value and duration of the instruments granted. The expense recognised in 2011
represents a combination of share grants made in 2011 and prior years.
(c) Where applicable remuneration details have been converted to Australian dollars at the weighted average exchange rate.
(d)
This figure reflects the total remuneration received by Mr Ferguson since joining the company on 21 June 2011.
The following table discloses the remuneration of the seven executives of the Company and the Consolidated Entity (other
than the Managing Director) for the year ended 31 December 2010.
SHORT TERM EMPLOYMENT BENEFITS
POST
EMPLOYMENT
(a)
SHARE BASED
PAYMENTS
SALARY
& FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
EQUITY SETTLED
SHARE RIGHTS
$ (b)
TOTAL
$
Mr S Bland
326,161
133,000
Mr J Davies (c)
360,964
127,483
Ms K Gross
Mr A Rudy
Mr J Rudy
246,880
114,000
220,740
83,000
210,940
85,000
Mr D Walker
321,230
132,000
Ms T Vigilante
271,717
88,000
1,455
8,237
1,164
1,455
1,455
1,455
–
25,259
2,749
26,962
26,962
26,635
26,380
26,380
273,225
759,100
168,514
667,947
227,311
616,317
170,587
502,744
181,689
505,719
260,177
741,242
109,023
495,120
(a)
(b)
There were no prescribed or other benefits paid to executives during the year.
This expense is a function of both the value and duration of the instruments granted. The expense recognised in 2010
represents a combination of share grants made in 2010 and prior years.
(c) Where applicable, Mr Davies’ remuneration details have been converted to Australian dollars at the weighted average exchange
rate.
28
IRESS Market Technology Limited
DIRECTORS’ REPORT
Share rights granted, exercised or lapsed in favour of the Managing Director and executives or a related body corporate of
theirs during the financial year ended 31 December 2011 were as follows.
% OF REMUNERATION
CONSISTING OF
SHARE BASED
CONSIDERATION (a)
VALUE OF
SHARE BASED
CONSIDERATION
GRANTED DURING THE
YEAR AT GRANT DATE
$ (b)
VALUE OF
SHARE BASED
CONSIDERATION
EXERCISED DURING
THE YEAR
$ (c)
VALUE OF
SHARE BASED
CONSIDERATION AT
LAPSE DATE, WHERE
LAPSED DURING
THE YEAR
$
DIRECTORS
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Mr P Ferguson
Ms K Gross
Mr D Walker
(d)
44
33
24
–
33
32
–
2,025,900
279,975
176,948
–
262,925
289,928
738,000
378,600
261,860
155,000
–
202,030
239,940
–
–
–
–
–
–
–
(a)
(b)
(c)
This figure is calculated on the value of share rights included in remuneration for the year ended 31 December 2011 as a
percentage of the total value of all remuneration received in that same year.
External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the
performance rights. The valuation has been made using a Monte Carlo simulation option pricing model using standard option
pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free interest rates and
expected share price volatility. In addition, the likely achievement of performance hurdles of the share rights have been taken
into account.
Figures in this column are calculated by multiplying the number of share rights exercised by directors and executives during the
year by the share price prevailing on the date share rights were exercised, notwithstanding that the underlying shares may not
be beneficially held by the respective director or executive as the shares may not have been withdrawn from the IRESS
Employee Share Trust.
(d) Share grants vesting in Mr Dunai primarily pertain to his prior role as Managing Director. In this light it would be inconsistent to
include an assessment of grants vesting in the current year relative to his current fees as a Director.
29
DIRECTORS’ REPORT
Share Rights granted, exercised or lapsed in favour of the Managing Director and executives or a related body corporate
of theirs during the financial year ended 31 December 2010 were as follows.
% OF REMUNERATION
CONSISTING OF
SHARE BASED
CONSIDERATION
(a)
VALUE OF
SHARE BASED
CONSIDERATION
GRANTED DURING THE
YEAR AT GRANT DATE
$ (b)
VALUE OF
SHARE BASED
CONSIDERATION
EXERCISED DURING
THE YEAR
$ (c)
VALUE OF
SHARE BASED
CONSIDERATION AT
LAPSE DATE, WHERE
LAPSED DURING
THE YEAR
$
DIRECTORS
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Ms K Gross
Mr A Rudy
Mr J Rudy
Mr D Walker
Ms T Vigilante
(d)
35
36
25
37
34
36
35
22
–
951,860
264,984
188,702
246,658
164,982
194,978
269,988
159,989
5,499,188
591,723
511,993
–
401,237
361,956
357,786
503,653
227,515
–
–
–
–
–
–
–
–
–
(a)
(b)
(c)
This figure is calculated on the value of share rights included in remuneration for the year ended 31 December 2010 as a
percentage of the total value of all remuneration received in that same year.
External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the
performance rights. The valuation has been made using a Monte Carlo simulation option pricing model using standard option
pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free interest rates and
expected share price volatility. In addition, the likely achievement of performance hurdles of the share rights have been taken
into account.
Figures in this column are calculated by multiplying the number of share rights exercised by directors and executives during the
year by the share price prevailing on the date share rights were exercised, notwithstanding that the underlying shares may not
be beneficially held by the respective director or executive as the shares may not have been withdrawn from the IRESS
Employee Share Trust.
(d) Share grants vesting in Mr Dunai primarily pertain to his prior role as Managing Director. In this light it would be inconsistent to
include an assessment of grants vesting in the current year relative to his current fees as a Director.
30
IRESS Market Technology Limited
DIRECTORS’ REPORT
OUTLINE OF EMPLOYMENT CONTRACTS FOR THE MANAGING DIRECTOR AND EXECUTIVES
Contractual terms for most executives are similar but do vary on occasions. Details of the general contractual terms for
executives (Mr S Bland, Mr J Davies, Ms K Gross, Mr P Ferguson and Mr D Walker) are as follows.
CRITERION
PARTICULARS
Length of contract
Open ended
Notice period
Not less than 3 months (a)
Fixed remuneration
The fixed remuneration component consists of salary, statutory employer
superannuation or retirement scheme contributions and benefits (comprising health
insurance). Any fringe benefit tax liability in respect to benefits is borne by the
employing entity. (b)
Incentive arrangements
Eligible to participate in the employing entity’s short term incentive arrangements.
Eligible to participate in the Company’s long term incentive arrangements.
Resignation
Retirement
Employment may be terminated by giving written notice of same for the period specified
in the Notice Period of the contract.
If resignation occurs during the year, then there is no entitlement to any bonus or long
term incentives which have not vested, unless otherwise determined by the Board.
There are no financial entitlements due from the employing entity on the retirement of
an executive.
Directors do have a discretion to make ex-gratia payments, for example if retirement
were to occur during the year, then directors may elect to make a pro-rata award under
any applicable bonus or incentive plan, based on performance up to the date of
retirement.
Termination on notice by the
employing entity
The employing entity may terminate the employment agreement by providing written
notice of same for the period specified in the Notice Period of the contract, or payment
in lieu of the notice period.
Redundancy
If termination occurs during the year then a pro-rata award will be made for any
applicable bonus or incentive plan, based on performance up to the date of termination.
If the employing entity terminates employment for reasons of bona fide redundancy, a
severance payment will be made. The quantum will be at the Board’s discretion taking
account of such matters as statutory requirements, the executive’s contribution,
position and length of service.
If redundancy occurs during the year then a pro-rata award will be made for any
applicable bonus or incentive plan, based on performance up to the date of termination.
Income protection insurance
The Company currently has Income Protection Insurance cover for all Australian
domiciled staff covering the period from 2 years after the applicable incident until that
staff member turns 65. Australian domiciled executives are included in this policy.
Termination for serious
misconduct
The employing entity may terminate the employment agreement at any time without
notice and the executive will only be entitled to accrued leave entitlements.
Termination and share grants Depending on the circumstances, directors may choose to exercise their discretion in
relation to share grants. Any such discretion would be assessed on a case by case
basis.
(a) Mr Davies has a six week notice period
(b)
In November 2011, Mr Bland moved to six weeks annual leave entitlement
31
DIRECTORS’ REPORT
Details of the contractual terms for the Managing Director are broadly the same as set out for executives in the above
table. Key points of difference are as follows.
CRITERION
Length of contract
Position
Notice period
PARTICULARS
Open ended.
Managing Director.
Not less than six months.
Incentive arrangements
Eligible to participate in the company’s short term incentive arrangements.
Eligible to participate in the Employee Performance Rights Plan, Employee Deferred
Share Plan, Employee Deferred Share Rights Plan or any replacement or
supplementary plan.
Restraint
A restraint arrangement exists during Mr Walsh’s employment and for a period of
six months post his employment.
Termination and share grants
Depending on the circumstances, directors may choose to exercise their discretion
in relation to share grants. Any such discretion would be assessed on a case by
case basis.
Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Mr A Walsh
Managing Director
MELBOURNE, 22 February 2012
32
IRESS Market Technology Limited
AUDITORS INDEPENDENCE DECLARATION
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
PO Box 78
Melbourne VIC 3001 Australia
DX 10307SSE
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
The Board of Directors
IRESS Market Technology Limited
Level 18, 385 Bourke St
MELBOURNE VIC 3000
22 February 2012
Dear Board Members
Independence Declaration: IRESS Market Technology Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of IRESS Market Technology Limited.
As lead audit partner for the audit of the financial statements of IRESS Market Technology Limited for the financial year
ended 31 December 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Sneza Pelusi
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu
33
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE
The Board of IRESS Market Technology Limited is committed to the Principles of Good Corporate Governance & Best
Practice Recommendations issued by the ASX Corporate Governance Council. In those few cases where the Board has
exercised its discretion to adopt a different approach, it does so because it believes this is in the best interests of
shareholders, as explained in the material set forth below.
PRINCIPLE
DESCRIPTION
Principle 1
Lay solid foundations for management and oversight
Companies should establish and disclose the roles and
responsibilities of board and management.
1.1
1.2
1.3
Companies should establish the functions reserved to the board
and those delegated to senior executives and disclose those
functions.
Companies should disclose the process for evaluating the
performance of senior executives.
Companies should provide the information indicated in the Guide
to reporting on Principle 1.
Principle 2
Structure the board to add value
Companies should have a board of an effective composition, size
and commitment to adequately discharge its responsibilities and
duties.
CORPORATE
GOVERNANCE
STATEMENT
REFERENCE
STATUS
1 Board Charter
Comply
1.2
Comply
4, 5 & Directors’
Biographies &
Directors’ Report
Comply
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the board should be independent directors.
4.3
Comply
The chair should be an independent director.
The roles of chair and chief executive officer should not be
exercised by the same individual.
The board should establish a nomination committee.
Companies should disclose the process for evaluating the
performance of the board, its committees and individual
directors.
Companies should provide the information indicated in the Guide
to reporting on Principle 2.
4.3, 4.4, 4.5,
Lead Independent
Director Charter
Not comply
4.3
Comply
9.1, Nomination &
Remuneration
Committee Charter
Comply
11.1
Comply
Comply
4.1, 4.2, 4.3
& Directors’
Biographies &
Directors’ Report
34
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE
DESCRIPTION
Principle 3
Promote ethical and responsible decision-making
Companies should actively promote ethical and responsible
decision-making.
CORPORATE
GOVERNANCE
STATEMENT
REFERENCE
STATUS
3.1
Companies should establish a code of conduct and disclose the
code or a summary of the code as to:
2
Comply
the practices necessary to maintain confidence in the
company’s integrity;
the practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders;
the responsibility and accountability of individuals for
reporting and investigating reports of unethical
practices.
Companies should establish a policy concerning diversity and
disclose the policy or a summary of that policy. The policy should
include requirements for the board to establish measurable
objectives for achieving gender diversity and for the board to
assess annually both the objectives and progress in achieving
them.
Companies should disclose in each annual report the measurable
objectives for achieving gender diversity set by the board in
accordance with the diversity policy and progress towards
achieving them.
Companies should disclose in each annual report the proportion
of women employees in the whole organisation, women in senior
executive positions and women on the board.
2.5, 2.6 Not comply
2.5, 2.6, 2.7 Not comply
2.7
Comply
Companies should provide the information indicated in the Guide
to reporting on Principle 3.
2, 13
Comply
3.2
3.3
3.4
3.5
Principle 4
Safeguard integrity in financial reporting
Companies should have a structure to independently verify and
safeguard the integrity of their financial reporting.
4.1
4.2
4.3
4.4
The board should establish an audit committee.
10
Comply
The audit committee should be structured so that it:
consists only of non-executive directors;
consists of a majority of independent directors;
is chaired by an independent chair, who is not chair of
the board;
has at least three members.
10.1, Audit
Committee Charter
Comply
The audit committee should have a formal charter.
9.1
Comply
Companies should provide the information indicated in the Guide
to reporting on Principle 4.
10 & Directors’
Biographies &
Directors’ Report
Comply
35
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE
DESCRIPTION
Principle 5
Make timely and balanced disclosure
5.1
5.2
Companies should promote timely and balanced disclosure of all
material matters concerning the company.
Companies should establish written policies designed to ensure
compliance with ASX Listing Rule disclosure requirements and to
ensure accountability at a senior executive level for that
compliance and disclose those policies or a summary of those
policies.
Companies should provide the information indicated in the Guide
to reporting on Principle 5.
Principle 6
Respect the rights of shareholders
Companies should respect the rights of shareholders and
facilitate the effective exercise of those rights.
Companies should design a communications policy for promoting
effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a
summary of that policy.
6.1
6.2
CORPORATE
GOVERNANCE
STATEMENT
REFERENCE
STATUS
12
Comply
12
Comply
12.2, 12.3
Comply
Companies should provide the information indicated in the Guide
to reporting on Principle 6.
12, 14
Comply
Principle 7
Recognise and manage risk
7.1
7.2
7.3
Companies should establish a sound system of risk oversight and
management and internal control.
Companies should establish policies for the oversight and
management of material business risks and disclose a summary
of those policies.
The board should require management to design and implement
the risk management and internal control system to manage the
company’s material business risks and report to it on whether
those risks are being managed effectively. The board should
disclose that management has reported to it as to the
effectiveness of the company’s management of its material
business risks.
The board should disclose whether it has received assurance from
the chief executive officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration provided in accordance
with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control and that the
system is operating effectively in all material respects in relation
to financial reporting risks.
3.2
Comply
3.3, 3.4, 3.5
Comply
3.6
Comply
7.4
Companies should provide the information indicated in the Guide
to reporting on Principle 7.
3
Comply
36
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE
DESCRIPTION
Principle 8
Remunerate fairly and responsibly
Companies should ensure that the level and composition of
remuneration is sufficient and reasonable and that its relationship
to performance is clear.
8.1
The board should establish a remuneration committee.
8.2
The remuneration committee should be structured so that it:
consists of a majority of independent directors;
is chaired by an independent director; and
has at least three members.
CORPORATE
GOVERNANCE
STATEMENT
REFERENCE
STATUS
9.1, 11,
Nomination and
Remuneration
Committee Charter
11.4, 11.5, 11.6
Lead Independent
Director Charter
Comply
Comply
8.3
8.4
Companies should clearly distinguish the structure of non-
executive directors’ remuneration from that of executive directors
and senior executives.
7, Directors’ Report
Comply
Companies should provide the information indicated in the Guide
to reporting on Principle 8.
7, 9, 11
& Directors’ Report
Comply
37
CORPORATE GOVERNANCE STATEMENT
INTRODUCTION
IRESS’ Board works under a set of well–established corporate governance policies that reinforce the responsibilities of all
directors in accordance with the requirements of the Corporations Act 2001 and the Australian Stock Exchange (ASX). In
addition, many of the governance elements are enshrined in the Company’s Constitution. In addition, in December 2011
the Board adopted a revised Board Charter, which is intended to supplement the description of the Board’s
responsibilities as set forth in the Constitution.
The Company’s policies and corporate governance practices are reviewed annually and will continue to be developed and
refined to meet the needs of the Company and best practice.
This Corporate Governance Statement outlines the key aspects and mechanisms of IRESS’ governance framework, which
have been established, and kept under review, by the Board. Copies of or summaries of the charters under which the
Board and Board committees operate and other relevant information referred to in this Corporate Governance Statement
are available on IRESS’ website http://www.iress.com.
1 BOARD RESPONSIBILITIES
1.1 The Board has ultimate responsibility to set strategy and policy for the business and affairs of the Company and its
subsidiaries for the benefit of the shareholders after having considered regulatory matters and other ethical
expectations and obligations. The Board is accountable to shareholders for the performance of the Group.
1.2 The Board’s responsibilities and functions include, to:
review and approve corporate strategies, budgets, plans and policies developed by management and evaluate
performance of the Group against those strategies and business plans in order to:
∙ monitor the performance of functions delegated to the executive team including the progress of major
capital expenditure, capital management, acquisitions, divestitures and strategic commitments; and
∙
assess the suitability of the Company’s overall strategies, business plans and resource allocation;
appoint a Managing Director for the ongoing management of the business and execution of its strategies;
regularly evaluate the performance of the Managing Director and senior management and ensure appropriate
executive succession planning is conducted;
monitor financial and business results (including the audit process) to understand at all times the financial
position of the Group;
ensure regulatory compliance and maintain adequate risk management processes;
report to shareholders; and
implement a culture of compliance with the highest legal and ethical standards and business practices.
1.3
In carrying out its duties, the Board meets regularly to discuss matters relevant to the Company, with additional
meetings held as required to address specific issues.
1.4 The Board delegates management of the Company’s resources to the executive team under the leadership of the
Managing Director. Any powers not specifically reserved for the Board are deemed to have been delegated to the
executive team.
38
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
2 ETHICAL STANDARDS AND DIVERSITY
2.1 The Company is committed to upholding high legal, moral and ethical standards in all of its corporate activities and
has adopted a Code of Ethics, which aims to strengthen its ethical climate and provide basic guidelines for
situations in which ethical issues arise. The Code of Ethics applies to directors, executives, management and
employees, and sets standards for ethical behaviour and business practice beyond complying with the law, and is
based on the key principles whereby the Company:
strives to do business with customers and suppliers of sound business character and reputation;
strives to maintain the highest standard of ethical behaviour in business dealings and to behave with integrity
in all dealings with customers, shareholders, government, employees, suppliers and the community;
does not knowingly support any public or private organisation which espouses discriminatory policies or
practices; and
expects all employees to perform their duties with honesty, truthfulness and integrity.
2.2
It is the policy of the Company to comply with the letter and spirit of all applicable laws, including those relating to
employment, discrimination, health, safety, trade practices and securities. The Company has also developed
procedures to ensure that employees are aware of and discharge their obligations under relevant privacy laws in
their handling of information provided to the Group.
2.3 No director, officer, executive or manager of the Company has authority to violate any law or to direct another
employee or any other person to violate any law on behalf of the Company.
2.4 The Company’s ethical practices and procedures are reviewed regularly, and processes are in place to promote and
communicate these policies within the Company.
2.5 The Board notes that the ASX Corporate Governance Council’s recommendations include a recommendation that
the Company should adopt a formal policy in relation to diversity.
2.6 The Company has a broad and diverse employee base across several international jurisdictions. The Board
informally monitors diversity but has not adopted a formal policy. The informal monitoring entails considering
diversity under a broad definition, including gender diversity, across the Group not only at the Board and executive
levels, but also across the general staff base. While the Board continues to observe no indicators of biases, or
impediments to diversity, it does not intend to adopt a more formalised process.
2.7 As at 31 December 2011 approximately 33% of the aggregate employment base of the Company were women, and
comprised 1 director (out of a total of 6), 2 senior managers (out of a total of 14) and 215 staff (out of a total of
641). The Board believes that these statistics suggest that its approach of informally monitoring gender diversity
has produced satisfactory results.
39
CORPORATE GOVERNANCE STATEMENT
3 RISK MANAGEMENT
3.1 All business activities contain an element of risk. IRESS’ philosophy toward risk is to identify the risks in advance,
determine potential risk mitigation strategies, assess the risk in terms of the risk/reward equation and then
determine how to proceed. Calculated risk taking is viewed as an essential part of the IRESS’ approach to creating
long term shareholder value.
3.2 For the purposes of assisting investors to better understand the nature of the risks faced by the Company, the
Board has prepared a list of operational risks as part of the Principle 7 disclosures. However the Board notes that
this does not necessarily represent an exhaustive list and that it may be subject to change based on underlying
market events.
The key areas of risk faced by IRESS include operational risk – relating to internal processes or external events,
contractual risk – relating to performance requirements in our contractual engagements, key staff risk, and
competitor risk and financial/economic risk. Several of these risks are inherent in the nature of the business and
are managed operationally on a day-to-day basis. Appropriate policies and procedures are in place to oversee and
manage these risks, and are periodically reviewed by management and the results communicated to the Board.
3.3 The Board is responsible for approving the Company’s risk management strategy and policies including the overall
internal control framework. In considering the internal control framework the Board considers no cost effective
internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the
Board has instigated an approach that can be described under the following five headings.
Financial reporting – there is a comprehensive budgeting system with an annual budget approved by the
directors. Monthly actual results are reported against budget or an alternative benchmark (where considered
appropriate) and revised internal forecasts for the year are prepared regularly. Procedures are also in place to
ensure that disclosure obligations are reviewed and information is reported to the ASX in accordance with
Continuous Disclosure Requirements.
Quality and integrity of personnel – the Company’s human resource related policies and procedures are
directed towards achieving the highest levels of service and integrity.
External advice – the Company engages external experts, particularly in the areas of legal, tax and valuation
matters to support management in performing their duties.
Operating controls – procedures including information systems controls are appropriately documented.
Exception and corrective action reports highlight any departures from these procedures.
Functional specialty reporting – at various times (for example pre and/or post an acquisition), the Board may
request additional ad-hoc information to address a particular area of concern or risk.
3.4 The tasks of undertaking and assessing risk management and internal control effectiveness are delegated to
management through the Managing Director, the CFO and the Group General Counsel, including responsibility for
the day to day design and implementation of the Company's risk management and internal control system.
Management reports to the Board on the Company’s key risks and the extent to which it believes these risks are
being adequately managed. The reporting on risk by management is a periodic agenda item at Board meetings.
3.5
In accordance with section 295A of the Corporations Act, the Managing Director and CFO have provided a written
statement to the Board that:
their view provided on the Company's financial report is founded on a sound system of risk management and
internal compliance and control which implements the financial policies adopted by the Board;
the Company's risk management and internal compliance and control system is operating effectively in all
material respects.
Internal control assurance letters are completed by the key management personnel of all significant business units,
as well as by finance managers, in support of these written statements.
3.6 The Board notes that due to its nature, internal control assurance from the Managing Director and CFO can only be
reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a
sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive
rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.
40
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
4 BOARD COMPOSITION
4.1 The Board’s policy is that there should be a majority of independent, non–executive directors to ensure that Board
discussions or decisions have the benefit of predominantly outside views and experience, and that the majority of
directors are free from interests and influences that may create a conflict with their duty to the Company.
Maintaining a balance of experience and skills is an important factor in Board composition. Details of each director
are set out on page 9.
4.2 The Board has adopted the definition of independence set out in the Corporate Governance Principles and
Recommendations released by the ASX Corporate Governance Council in August 2007. The Board has developed
guidelines to determine materiality thresholds for the purposes of that definition. Broadly speaking, these guidelines
seek to determine whether the director is generally free of any interest and any business or other relationship which
could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests
of the Company.
4.3 The Company currently has six directors, one of whom is an Executive Director (the Managing Director). The
remaining five directors are non–executive. With the exception of the Chairman, all non-executive directors are
‘independent’.
4.4 The Board notes that the ASX Corporate Governance Council’s recommendations include a recommendation that
the Chairman be an independent director. As noted in 4.3 above, although he is Chairman of the Board, Mr Dunai is
not an independent director.
4.5 The Board believes it is important that Mr Dunai remains actively engaged with the Company and that this
requirement is best met by him holding the position of Chairman. The Board is also of the view it is capable of
making, and does make, independent decisions with regard to the best interests of the Company notwithstanding
that the Chairman is not independent. As an additional measure, Ms Seabrook holds the position of Lead
Independent Director, with a clear charter to act as a point of reference and coordination where there is, or it is
perceived there may be, a conflict for the Chair (refer item 8 of this Corporate Governance Statement).
4.6
In the opinion of the Board, the present composition fairly represents the interests of all shareholders in the
Company.
5 BOARD ACCESS TO INFORMATION AND INDEPENDENT ADVICE
5.1 All directors have unrestricted access to all employees of the group and, subject to the law, access to all Company
records and information held by group employees and external advisers. The Board receives regular detailed
financial and operational reports from senior management.
5.2 Any director can seek independent professional advice at the Company’s expense in the furtherance of his or her
duties, subject to prior discussion with the Chairman. If this occurs, the Chairman must notify the other directors of
the approach, with any resulting advice received to be generally circulated to all directors.
41
CORPORATE GOVERNANCE STATEMENT
6 APPOINTMENT TERM AND OTHER DIRECTORSHIPS
6.1
6.2
In accordance with the Company’s constitution, all directors other than the Managing Director are required to seek
re–election at least once in every three years on a rotating basis.
In order to ensure that composition of the Board will change over time, the Board has a general policy that non–
executive directors should not serve for a period exceeding 12 years, and that the Chairman should not serve in
that role for more than 10 years.
6.3 Directors are required continually to evaluate the number of Boards on which they serve to ensure that each can be
given the time and attention required to fulfil their duties and responsibilities. Directors are required to seek
approval from the Chairman prior to accepting an invitation to become a director of any corporation.
7 REMUNERATION
7.1 Non–executive directors are paid an annual fee within a fixed amount approved for all non–executive directors by
shareholders. The total aggregate annual amount approved for the Company is currently $600,000 per annum,
which was set in 2010.
7.2 The Company does not pay retirement benefits to directors.
7.3 For information relating to the consolidated entity’s remuneration practices, and details relating to directors’ and
executives’ remuneration during the financial year, see the Audited Remuneration Report which starts on page 14,
and is incorporated into this corporate governance statement by reference.
7.4 No additional fees were paid to directors for serving on sub–committees during the period. As members of
management, executive directors, when appointed, do not receive any additional directors’ fee.
7.5 The fees paid to directors take into account what is paid by comparable companies and what is necessary to attract
high–calibre people to consider Board appointment. In line with general industry practice, the Board reviews its
remuneration strategies in relation to non–executive directors from time to time.
7.6 Further details regarding the remuneration paid to directors and senior executives of the Company and the group are
set out in the Directors’ Report on pages 14 to 32.
7.7 Subject to the restriction that persons may not deal in any securities when they are in possession of price–sensitive
information, directors and employees generally may only buy or sell the Company’s shares in the periods
immediately following the release of the Company’s half–year and full year results and Annual General Meeting. At
all times, directors dealing in the Company’s shares must obtain prior approval from the Chairman.
7.8 The relevant interests of each director in the share capital of the Company at the date of this report, as notified to
the ASX pursuant to the Listing Rules and section 205G of the Corporations Act 2001, are set out on page 18 in
the Directors’ Report.
42
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
8 CONFLICT OF INTEREST AND LEAD INDEPENDENT DIRECTOR
8.1
In order to ensure that any interests of a director in a particular matter to be considered by the Board are brought to
the attention of all the directors, the Company has developed protocols consistent with obligations imposed by the
Corporations Act 2001 and the Listing Rules, to require each director to disclose any contracts, offices held,
interests in transactions and other directorships which may involve any potential conflict. Appropriate procedures
have been adopted to ensure that, where the possibility of a material conflict arises, relevant information is not
provided to the director, and the director does not participate in discussion on the particular issue, or vote in
respect of the matter at the meeting where the matter is considered.
8.2 Concurrent with Mr Dunai assuming the role of Chairman, Ms Seabrook assumed the role of Lead Independent
Director. This appointment became effective on 5 May 2010.
8.3 The role of the Lead Independent Director is to provide a point of reference and coordination where there is, or it is
perceived there may be, a conflict for the Chair where the Chair is not an independent director.
9 BOARD COMMITTEES
9.1 The Board has two standing committees, namely the Audit Committee and a Nomination and Remuneration
Committee. The Company has adopted an Audit Committee Charter and a Nomination and Remuneration Charter to
define the tasks and responsibilities delegated to these committees.
9.2 The Board periodically reviews the Audit Committee and Nomination and Remuneration Committee Charters. The
Audit Committee Charter was updated in October 2011.
9.3 The Board also delegates specific functions to ad hoc committees of directors on an ‘as needs’ basis. The powers
delegated to these committees are set out in Board resolutions. Senior executives attend Board and committee
meetings by invitation, whenever particular matters arise that require management presentations or participation.
10 ACCOUNTABILITY AND AUDIT
10.1 The members of the Audit Committee during the year were all non–executive directors and comprised:
Mr J Killen (Chair) (retired 5 May 2011);
Mr J Hayes (Chair) (appointed 10 June 2011)
Mr B Burdett;
Ms J Seabrook; and
Mr J Cameron (retired from Audit Committee 5 May 2011).
10.2 Members of the Audit Committee are financially literate and the Board is of the opinion that the members of the
committee possess sufficient financial expertise and knowledge of the industry in which the Company operates.
Details of the qualifications of the Audit Committee members are included in the Directors’ Report on page 9.
10.3 The Audit Committee reviews the financial statements, adequacy of financial controls and the annual external audit
arrangements. It monitors the controls and financial reporting systems, applicable Company policies, national and
international accounting standards and other regulatory or statutory requirements.
10.4 The Committee also liaises with the Company’s external auditors, reviews the scope of their activities, their
remuneration and independence, and advises the Board on their appointment and removal. It is Board policy that
the lead external audit partner and review partner are each rotated periodically.
10.5 The Chief Financial Officer, other relevant Company officers (as required) and the lead external audit partner
participate at meetings of the Audit Committee.
10.6 The Board has adopted a policy that the Company’s external auditor shall not provide non–audit services that may
detract from the external auditor’s independence and impartiality or be perceived as doing so. Any other services
provided by the external auditor are reviewed on a case by case basis and must be approved by the Audit
Committee in advance.
43
CORPORATE GOVERNANCE STATEMENT
11 NOMINATION AND REMUNERATION
11.1 The Nomination and Remuneration Charter provides for periodic review of the structure and performance of the
Board, Board committees and individual directors and a framework for changes when necessary. This includes
identifying suitable candidates for appointment as non–executive directors. The Charter also addresses matters
such as succession and senior executive compensation policy, including short and long–term incentive plans and
the Company’s recruitment, retention and termination policies.
11.2 The Charter provides for directors to access the services of independent professional advisers to assist in the
search for high–calibre people at all levels and ensure that the terms and conditions offered by the Company are
competitive with those offered by comparable companies.
11.3 The members of the Nomination and Remuneration Committee are:
Ms J Seabrook (Chair);
Mr P Dunai; and
Mr J Cameron.
12 CONTINUOUS DISCLOSURE
12.1 The Board has a disclosure policy and procedures in place which are designed to ensure that information reported
to the ASX is in accordance with the continuous disclosure requirements of its Listing Rules. The Board regularly
reviews the Company’s compliance with its continuous disclosure obligations. The Company Secretary is
responsible for coordinating disclosure of information to the ASX, the Australian Securities and Investments
Commission and shareholders.
12.2 In addition to the Company’s obligations to disclose information to the ASX and to distribute information to
shareholders, the Company publishes annual and half–year reports, media releases, and other relevant publications
on its website, at www.iress.com
12.3 The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and discussion of the Group’s strategy and goals. The Company invites the external auditor to attend
the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and
the preparation and content of the auditor’s report.
13 SECURITIES DEALINGS
13.1 The Board’s policy concerning trading in Company securities precludes directors, executives and employees from
dealing in the Company’s securities except during three defined approved trading windows. Dealing in shares
outside these periods is prohibited without prior approval from the Board, the Managing Director or the Company
Secretary. In the case of directors, prior approval from the Chairman is required for all dealings in the Company’s
securities.
The approved trading windows are for the four weeks after:
one day following the announcement of the half-year and full year results (as the case may be); and
one day following the holding of the annual general meeting.
13.2 All directors, executives and employees are prohibited from trading the Company’s securities at any time if they
possess price-sensitive information not available to the market and which could reasonably be expected to
influence the market. At no time may directors, executives and employees may not engage in short term dealings in
the Company’s shares.
44
IRESS Market Technology Limited
CORPORATE GOVERNANCE STATEMENT
13.3 Hedging of unvested share rights is also prohibited. The Board’s view is that any share-right participant who enters
into such schemes on the unvested component of their rights would be in breach of the terms and conditions of the
grant, and the Board would exercise its right to cancel any of these hedged share rights.
13.4 As required by the ASX listing rules, the Company notifies the ASX of any transaction conducted by directors in the
securities of the Company.
13.5 At the end of 2010, pursuant to changes in the ASX listing rules, the Company announced its Securities Trading
Policy applying to Key Management Personnel. This policy is broadly consistent with the internal policies on dealing
in the Company’s securities, albeit with some incremental restrictions and obligations on the non-director members
in this group.
14 ADDITIONAL CORPORATE GOVERNANCE INFORMATION
14.1 The corporate governance section of the Company’s website contains various material relating to corporate
governance, including the Board Charter, Sub-committee Charters, Code of Ethics, Lead Independent Director
Charter, Securities Trading Policy applying to Key Management Personnel and other information. The link to the
corporate governance section of the Company’s website is www.iress.com/en/company_profile/
corporate_governance.html.
45
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF IRESS MARKET TECHNOLOGY LTD
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
PO Box 78
Melbourne
Australia
VIC
3001
DX 10307SSE
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
We have audited the accompanying financial report of IRESS Market Technology Limited, which comprises the Statement
of Financial Position as at 31 December 2011, and the Statement of Comprehensive Income, Statement of Cash Flows
and Statement of Changes in Equity for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year as set out on pages 48 to 109
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL REPORT
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the
preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances. In Note 1, the directors also state, in accordance with AASB 101 ‘Presentation of Financial Statements’,
that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the
consolidated financial statements and notes comply with International Financial Reporting Standards.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu
46
IRESS Market Technology Limited
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF IRESS MARKET TECHNOLOGY LTD
AUDITOR’S INDEPENDENCE DECLARATION
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of IRESS Market Technology Limited, would be in the same terms if given to the directors as at the time of this
auditor’s report.
AUDITOR’S OPINION ON THE FINANCIAL REPORT
In our opinion:
(a)
the financial report of IRESS Market Technology Limited is in accordance with the Corporations Act 2001, including:
i)
ii)
giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in pages 14 to 32 of the Directors’ Report for the year ended 31
December 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report based on our audit conducted in accordance with Australian Auditing Standards.
AUDITOR’S OPINION
In our opinion the Remuneration Report of IRESS Market Technology Limited for the year ended 31 December 2011,
complies with Section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Sneza Pelusi
Partner
Chartered Accountants
MELBOURNE, 22 February 2012
47
DIRECTORS’ DECLARATION
The directors declare that:
(a)
(b)
(c)
(d)
in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
financial position and performance of the consolidated entity;
in the directors’ opinion, the financial statements and notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board; and
the directors have been given the declarations required by s.295A of the Corporations Act 2001
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Mr A Walsh
Managing Director
MELBOURNE, 22 February 2012
48
IRESS Market Technology Limited
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Revenue from ordinary activities
Customer data fees
Communication and other technology expenses
Employee related expenses
Other expenses including administration expenses
Facilities rent
Bad and doubtful debts
NOTE
2
3
Business acquisition and restructure expenses
Profit before depreciation, amortisation, interest and income tax
expense
2
Depreciation and amortisation expense
Profit before interest and income tax expense
Interest revenue
Interest expense
Net interest
Profit before income tax expense
Income tax expense
Profit attributable to the members of the parent entity
Other comprehensive income
Exchange differences arising on translation of foreign
operations
Total comprehensive income for the period
EARNINGS PER SHARE
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes to the financial statements are included on pages 53 to 109.
2
4
5
CONSOLIDATED
2011
$’000
2010
$’000
204,758
179,585
(21,885)
(20,170)
(10,579)
(9,309)
(79,725)
(64,090)
(6,540)
(4,752)
(3,188)
(2,489)
(882)
(793)
722
(15)
81,166
79,482
(22,587)
(15,098)
58,579
64,384
1,795
(214)
1,581
3,488
(45)
3,443
60,160
67,827
(18,819)
(17,348)
41,341
50,479
–
–
(5,754)
(342)
35,587
50,137
32.644
40.335
32.589
40.016
49
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
CURRENT ASSETS
Cash and cash equivalent assets
Trade receivables
Other receivables
Current tax receivables
Other financial assets
Total current assets
NON–CURRENT ASSETS
Plant and equipment
Computer software
Goodwill
Intangibles
Deferred tax assets
Other financial assets
Total non–current assets
Total assets
CURRENT LIABILITIES
Trade payables
Other payables
Current tax payables
Provisions
Total current liabilities
NON–CURRENT LIABILITIES
Provisions
Deferred tax liabilities
Total non–current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total equity
Notes to the financial statements are included on pages 53 to 109.
50
IRESS Market Technology Limited
NOTE
6
6
4
7
8
9
10
10
11
12
13
13
14
15
16
4
17
18
19
CONSOLIDATED
2011
$’000
2010
$’000
48,925
99,063
12,104
10,025
3,817
1,791
668
1,463
1,650
280
67,305
112,481
6,773
4,068
39,369
16,175
40,137
31,234
4,707
11,120
46
1,540
6,263
50
102,152
59,330
169,457
171,811
10,175
6,025
6,646
6,614
10,250
11,041
3,927
2,910
30,377
27,211
9,802
1,426
11,228
5,554
1,431
6,985
41,605
34,196
127,852
137,615
75,898
75,898
29,124
27,788
22,830
33,929
127,852
137,615
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
CONSOLIDATED
ISSUED
CAPITAL
$’000
RETAINED
EARNINGS
$’000
SHARE
BASED
PAYMENTS
RESERVE
$’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’000
TOTAL
$’000
75,898
33,929
32,094
(4,306)
137,615
–
–
–
–
–
–
41,341
–
41,341
–
–
(52,440)
–
–
–
–
7,090
–
–
41,341
(5,754)
(5,754)
(5,754)
35,587
–
–
–
–
7,090
(52,440)
75,898
22,830
39,184
(10,060)
127,852
75,898
27,093
25,194
(3,964)
124,221
–
–
–
–
–
–
50,479
–
50,479
–
–
(43,643)
–
–
–
–
6,900
–
–
50,479
(342)
(342)
(342)
50,137
–
–
–
–
6,900
(43,643)
75,898
33,929
32,094
(4,306)
137,615
2011
Opening balance
Profit for the year
Increase/(decrease) in translation reserve
arising on translation of foreign operations
Total comprehensive income for the year
Issue of share capital
Cost of share-based payments
Equity dividends
Closing balance
2010
Opening balance
Profit for the year
Increase/(decrease) in translation reserve
arising on translation of foreign operations
Total comprehensive income for the year
Issue of share capital
Cost of share-based payments
Equity dividends
Closing balance
Notes to the financial statements are included on pages 53 to 109.
51
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers
Payments to employees
Interest and bill discounts received
Interest paid
Income tax paid
NOTE
CONSOLIDATED
INFLOWS
(OUTFLOWS)
2011
$’000
2010
$’000
218,584
192,313
(62,513)
(50,080)
(71,363)
(56,746)
1,696
(214)
3,467
–
(31,474)
(13,398)
Net cash provided by operating activities
22
54,716
75,556
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for plant and equipment
Payment for software from Peresys
Payment for acquisition of subsidiaries
Proceeds from/(payment for) investment in listed companies
Proceeds from sale of plant and equipment
Dividends received
23
24
(7,129)
(3,783)
(39,335)
–
(3,412)
(1,799)
5
26
91
5
–
69
Net cash used in investing activities
(49,754)
(5,508)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of equity securities
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes on the
balance of cash held in foreign currencies
Cash at the end of the financial year
Notes to the financial statements are included on pages 53 to 109.
–
–
(52,438)
(43,644)
(52,438)
(43,644)
(47,476)
26,404
99,063
73,225
(2,662)
(566)
48,925
99,063
52
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1 SUMMARY OF ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act
2001, Accounting Standards and Interpretations, and complies with other requirements of the law. Accounting Standards
include Australian equivalents to International Financial Reporting Standards (‘Australian Accounting Standards).
Compliance with the Australian Accounting Standards ensures that the financial statements and notes of the consolidated
entity comply with International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 22 February 2012.
BASIS OF PREPARATION
The financial report has been prepared on the basis of historical cost. Cost is based on the fair values of the
consideration given in exchange for assets.
In the application of Australian Accounting Standards management is required to make judgments, estimates and
assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of making the judgments. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Judgments made by management in the application of Australian Accounting Standards that have significant effects on
the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed,
where applicable, in the relevant notes to the financial statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies
the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other
events is reported.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been adopted in the preparation and presentation of the financial report.
(a) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash in banks and short term, highly liquid investments in
money market instruments that are readily convertible to known amounts of cash. Bank overdrafts are shown within
borrowings in current liabilities in the statement of financial position.
(b) Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of short term employee benefits are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Provisions made in respect of long term employee benefits are measured as the present value of the estimated
future cash outflows to be made by the consolidated entity in respect of services provided by employees up to the
reporting date.
Contributions to defined contribution superannuation plans are expensed when incurred.
53
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(c) Financial assets
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a
contract whose terms require delivery of the investment within the timeframe established by the market concerned,
and are initially measured at fair value, net of transaction costs.
Subsequent to initial recognition, investments in subsidiaries are measured at cost. Subsequent to initial
recognition, investments in jointly controlled entities are accounted for under the equity method in the consolidated
financial statements and the cost method in the company financial statements.
Loans and receivables
Trade receivables, loans, and other receivables are recorded at amortised cost less impairment.
(d) Foreign currency
Foreign currency transactions
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at
the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate
existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair value was determined.
Exchange differences are recognised in profit or loss in the period in which they arise except that:
exchange differences which relate to assets under construction for future productive use are included in the
cost of those assets where they are regarded as an adjustment to interest costs on foreign currency
borrowings; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement
is neither planned or likely to occur, which form part of the net investment in a foreign operation, are
recognised in the foreign currency translation reserve in the consolidated financial statements and recognised
in profit or loss on disposal of the net investment.
Foreign operations
On consolidation, the assets and liabilities of the consolidated entity’s overseas operations are translated at
exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange
rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are
recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign
operation.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to
Australian Accounting Standards are treated as assets and liabilities of the foreign entity and translated at
exchange rates prevailing at the reporting date.
54
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(e) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except:
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables.
Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising
from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified
as operating cash flows.
(f) Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in
the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the
sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value
of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing,
goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount
of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent
period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
(g)
Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or
asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive statement of financial position liability method in respect of
temporary differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and
liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of
assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor
accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences
arising from goodwill.
55
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with these investments and interests
are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when
the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority
and the Company/Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the Statement of Comprehensive Income, except
when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised
directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken
into account in the determination of goodwill or excess.
Tax consolidation
The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under
Australian Taxation Law. IRESS Market Technology Limited is the head entity in the tax-consolidated group. Tax
expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members
of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-
consolidated group using the ‘stand alone taxpayer’ approach. Current tax liabilities and assets and deferred tax
assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised
by the company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are
recognised as payable to or receivable by the company and each member of the group in relation to the tax
contribution amounts paid or payable between the parent entity and the other members of the tax consolidated
group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in
Note 4. Where the tax contribution amount recognised by each member of the tax consolidated group for a
particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising
from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from
(or distribution to) equity participants.
(h)
Intangible assets
Intangible assets acquired in a business combination
All potential intangible assets acquired in a business combination are identified and recognised separately from
goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably.
Amortisation is provided on identifiable intangibles and is calculated on a straight line basis so as to write off the
net cost of each asset over its expected useful life to its estimated residual value.
The following estimated useful lives are used in the calculation of amortisation of identifiable intangibles.
Computer software
1 year to 5 years
Customer list
2 years to 3 years
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.
56
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(i) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify as measurement period adjustments.
All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are
accounted for in accordance with relevant Standards.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
AASB 3 “Business Combinations” are recognised at their fair value at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the consolidated entity reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or
liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the amounts recognised as of that date
(j)
Impairment of assets
At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the
consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount 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 which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in
profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the
impairment loss is treated as a revaluation increase.
Goodwill is tested for impairment annually and whenever there is an indication that the asset may be impaired. An
impairment of goodwill is not subsequently reversed.
(k) Leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic benefits
from the leased asset are consumed.
57
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(l) Payables
Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make
future payments resulting from the purchase of goods and services.
(m) Principles of consolidation
The consolidated financial statements are prepared by combining the financial statements of all the entities that
comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in AASB 127
‘Consolidated and Separate Financial Statements’. Consistent accounting policies are employed in the preparation
and presentation of the consolidated financial statements.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired
exceed the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.
The consolidated financial statements include the information and results of each subsidiary from the date on which
the company obtains control and until such time as the company ceases to control such entity.
In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised
profits arising within the consolidated entity are eliminated in full.
(n) Plant and equipment
Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that
settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts
payable in the future to their present value as at the date of acquisition.
Depreciation is provided on plant and equipment and is calculated on a straight line basis so as to write off the net
cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are
depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each
annual reporting period.
Useful life
The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual
reporting period.
The following estimated useful lives are used in the calculation of depreciation.
Leasehold improvements
Computer equipment
Furniture and fittings
Office equipment
3 years
3 years
3 years
3 years
(o) Provisions
Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic
benefits is probable, and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount
of the receivable can be measured reliably.
58
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Dividends
A provision is only recognised for dividends when they have been declared, determined or publicly recommended by
the directors.
(p) Revenue recognition
Rendering of services
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances.
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.
The stage of completion of the contract is determined by reference to the proportion of the term of the delivery of
services that has expired.
Dividend and interest revenue
Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis
that takes into account the effective yield on the financial asset.
(q) Share based payments
Equity settled share based payments are measured at fair value at the date of grant. Fair value is measured using a
Monte Carlo simulation model. The expected life used in the model has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.
The share based payments expense arising from the share rights plans (refer Notes 36 to 38) operated by IRESS,
are considered equity settled share based payment transactions in which IRESS receives goods or services as
consideration for equity instruments of IRESS.
(r) Computer software development expenditure
Where the underlying intellectual property rights are owned by the consolidated entity, all expenses incurred on
computer software development are expensed as incurred. Computer software acquired through an acquisition, or
expenses incurred for licensed third party software are capitalised and amortised over the useful life or licence term
as applicable.
(s) Financial instruments issued
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the
contractual arrangement.
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the
proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred
directly in connection with the issue of those equity instruments and which would not have been incurred had those
instruments not been issued.
Interest and dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the statement of
financial position classification of the related debt or equity instruments or component parts of compound
instruments.
59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(t) Adoption of new and revised Accounting Standards
In the current year the Consolidated Entity has adopted all of the new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for
annual reporting periods beginning on 1 January 2011.
The adoption of all new and revised Standards and Interpretations did not affect the amounts reported for the
current or prior periods. In addition, the new and revised Standards and Interpretations have not had a material
impact and not resulted in change to the Consolidated Entity’s presentation of or disclosure in these financial
statements.
At the date of authorisation of the financial report, the following Standards and Interpretations were on issue but
not yet effective:
AASB 9 ‘Financial Instruments’ (December
2009), AASB 2009-11 ‘Amendments to
Australian Accounting Standards arising from
AASB 9’
AASB 9 ‘Financial Instruments’ (December
2010), AASB 2010-7 ‘Amendments to
Australian Accounting Standards arising from
AASB 9 (December 2010)’
AASB 10 ‘Consolidated Financial Statements’
AASB 11 ‘Joint Arrangements’
Applies to annual reporting periods beginning on or after
1 January 2013
Applies on a modified retrospective basis to annual
reporting periods beginning on or after 1 January 2013
Applies to annual reporting periods beginning on or after
1 January 2013
Applies to annual reporting periods beginning on or after
1 January 2013
AASB 12 ‘Disclosure of Interests in Other
Entities’
Applies to annual reporting periods beginning on or after
1 January 2013
AASB 13 ‘Fair Value Measurement’ and related
AASB 2011-8 ‘Amendments to Australian
Accounting Standards arising from AASB 13’
AASB 119 ‘Employee Benefits’ (2011), AASB
2011-10 ‘Amendments to Australian
Accounting Standards arising from AASB 119’
(2011) and AASB 2011-11 ‘Amendments to
AASB 119 (September 2011) arising from
Reduced Disclosure Requirements’
Applies to annual reporting periods beginning on or after
1 January 2013
Applies to annual reporting periods beginning on or after
1 January 2013
AASB 127 ‘Separate Financial Statements’
(2011)
Applies to annual reporting periods beginning on or after
1 January 2013
AASB 128 ‘Investments in Associates and Joint
Ventures’ (2011)
Applies to annual reporting periods beginning on or after
1 January 2013
AASB 1053 ‘Application of Tiers of Australian
Accounting Standards’ and AASB 2010-2
‘Amendments to Australian Accounting
Standards arising from Reduced Disclosure
Requirements’
Applies to annual reporting periods beginning on or after
1 July 2013 but may be early adopted for annual
reporting period beginning on or after 1 July 2009
60
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
AASB 1054 ‘Australian Additional Disclosures’,
AASB 2011-1 ‘Amendments to Australian
Accounting Standards arising from the Trans-
Tasman Convergence Project’ and AASB 2011-
2 ‘Amendments to Australian Accounting
Standards arising from the Trans-Tasman
Convergence Project – Reduced Disclosure
Requirements’
AASB 2010-6 ‘Amendments to Australian
Accounting Standards – Disclosures on
Transfers of Financial Assets’
AASB 2010-8 ‘Amendments to Australian
Accounting Standards – Deferred Tax: Recovery
of Underlying Assets’
AASB 2011-4 ‘Amendments to Australian
Accounting Standards to Remove Individual Key
Management Personnel Disclosure
Requirements’
AASB 2011-6 ‘Amendments to Australian
Accounting Standards – Extending Relief from
Consolidation, the Equity Method and
Proportionate Consolidation – Reduced
Disclosure Requirements’
AASB 2011-7 ‘Amendments to Australian
Accounting Standards arising from the
Consolidation and Joint Arrangements
standards’
AASB 2011-9 ‘Amendments to Australian
Accounting Standards - Presentation of Items of
Other Comprehensive Income’
AASB 1054 - Applies to annual reporting periods
beginning on or after 1 July 2011
AASB 2011-1 - Applies to annual reporting periods
beginning on or after 1 July 2011
AASB 2011-2 - Applies to annual reporting periods
beginning on or after 1 July 2013
Applies to annual periods beginning on or after 1 July
2011
Applicable to annual periods beginning on or after 1
January 2012
Applicable to annual reporting periods beginning on or
after 1 July 2013
Applies to annual reporting periods beginning on or after
1 July 2013
Applies to annual reporting periods beginning on or after
1 July 2013
Applicable to annual reporting periods beginning on or
after 1 July 2012, with early adoption permitted
The Directors have not assessed the impact of the adoption of these Standards and Interpretations in future
periods on the financial statements of the consolidated entity.
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
2 PROFIT BEFORE INCOME TAX EXPENSES
Profit before income tax expense includes the following items
of revenue and expense.
REVENUE
Sales revenue
Rendering of services
Other revenue
Interest revenue
Total revenues from ordinary activities
EXPENSES
Net transfers to/(from) bad and doubtful debts provisions arising
from
Other entities
Depreciation of non–current assets
Plant and equipment
Amortisation of non–current assets
Computer software
Other intangibles
Operating lease rental expenses
Minimum lease payments
Interest Expense (a)
Net foreign exchange (gain)/loss
CONSOLIDATED
2011
$’000
2010
$’000
204,526
179,811
232
(226)
204,758
179,585
1,795
3,488
206,553
183,073
882
(722)
2,931
3,798
18,018
1,638
11,034
266
4,277
3,555
214
575
45
321
Sales of assets in the ordinary course of business have given rise to
the following (profits)/losses
Plant and equipment
(6)
(3)
(a)
Includes $0.207m (2010: nil) non-cash interest expense recognised on deferred consideration payable on the Peresys
transaction.
62
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
3 EMPLOYEE RELATED EXPENSES
Employee related expenses can be broken down as follows
Total monetary based expense (a)
Share based payment expense (b)
Total employee related expense
CONSOLIDATED
2011
$’000
2010
$’000
72,635
57,190
7,090
6,900
79,725
64,090
(a) Total monetary based expense comprises salary and fees, bonuses, superannuation and other benefits. Contributions to
superannuation and similar post employment arrangements amounted to $4.350m
(2010: $3.468m) for the consolidated entity.
(b) Expense recognised in accordance with AASB 2 ‘Share Based Payment’. This expense is a function of both the value and duration
of the instruments granted. The expense recognised in 2011 represents a combination of share grants made in 2011 and in prior
years.
INCOME TAX
4
INCOME TAX RECOGNISED IN PROFIT OR LOSS
TAX EXPENSE COMPRISES
Current tax expense/(income)
Adjustments recognised in the current year in relation to the current tax of prior years
Effect of changes in tax rates and laws
Deferred tax expense/(income) relating to the origination and reversal of temporary
differences
Effect of different tax rates
Total tax expense
The prima facie income tax expense on pre-tax accounting profit from operations
reconciles to the income tax expense in the financial statements as follows.
Profit from continuing operations
Income tax expense calculated at 30%
Non deductible expenses / non assessable income
20,859
19,373
(87)
426
119
18
(3,033)
(1,969)
654
(193)
18,819
17,348
60,160
67,827
18,048
20,348
978
767
Deductible share based payment expenses not previously recognised
(1,200)
(3,711)
Effect of different tax rates
Effect on deferred tax balances due to the change in income tax rate
from 32% to 28.5% on our Canadian operations
Effect on deferred tax balances due to the change in income tax rate from 30% to 28%
on our New Zealand operations
(Over)/under provision of income tax in previous year
Income tax expense
654
(193)
425
1
(87)
18
–
119
18,819
17,348
63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the
previous reporting period.
INCOME TAX RECOGNISED DIRECTLY IN EQUITY
During both the current and prior periods no current or deferred amounts were charged directly to equity.
CURRENT TAX ASSETS AND LIABILITIES
CONSOLIDATED
2011
$’000
2010
$’000
1,731
1,600
60
50
1,791
1,650
(6,740)
(9,617)
(3,510)
(1,424)
(10,250)
(11,041)
(8,459)
(9,391)
4,379
6,741
11,120
2,530
3,733
6,263
(1,426)
(1,431)
CURRENT TAX ASSETS
Tax refund receivable attributable to
Entities in the tax-consolidated group
Other entities
CURRENT TAX PAYABLES
Income tax payable attributable to
Parent entity
Other entities
DEFERRED TAX BALANCES
DEFERRED TAX ASSETS COMPRISE
Tax losses - revenue
Temporary differences
DEFERRED TAX LIABILITIES COMPRISE
Temporary differences
64
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Deferred tax assets/(liabilities) arise from the following.
CONSOLIDATED
OPENING
BALANCE
$000
CHARGED
TO INCOME
$000
CHARGED TO
EQUITY
$000
ACQUISITIONS
/DISPOSALS
$000
EXCHANGE
DIFFERENCES
$000
CHANGES
IN TAX
RATE
$000
CLOSING
BALANCE
$000
2011
GROSS DEFERRED
TAX LIABILITIES
Other financial assets
(1,392)
Sundry receivables
(39)
(1,431)
(1)
34
33
GROSS DEFERRED
TAX ASSETS
Doubtful debts
320
(152)
Other financial assets
1,204
233
516
336
944
413
2,860
245
109
(295)
3,733
3,000
Plant and equipment
Payables
Provisions
Other liabilities
2010
GROSS DEFERRED
TAX LIABILITIES
Other financial assets
(3,080)
1,688
Sundry receivables
(33)
(6)
(3,113)
1,682
GROSS DEFERRED
TAX ASSETS
Doubtful debts
494
(174)
Other financial assets
2,540
(1,336)
Plant and equipment
(1,442)
1,972
Payables
Provisions
Other liabilities
336
–
1,284
(340)
237
3,449
176
298
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(27)
–
(27)
17
–
–
136
89
84
326
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(1,421)
–
(5)
(1)
(1,426)
(8)
–
177
1,437
(90)
3,286
(131)
586
(89)
1,053
–
202
(318)
6,741
–
–
–
–
–
(14)
–
–
–
(1,392)
(39)
(1,431)
320
1,204
516
336
944
413
(14)
3,733
65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
UNRECOGNISED DEFERRED TAX BALANCES
There are no deferred tax assets which have not been brought to account as assets.
TAX CONSOLIDATION
(a) Relevance of Tax Consolidation to the Consolidated Entity
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect
from 14 March 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-
consolidated group is IRESS Market Technology Limited. The members of the tax-consolidated group are identified
at Note 30. The tax consolidated group does not include the IRESS Market Technology Equity Plan Trust.
(b) Nature of Tax Funding Arrangements and Tax Sharing Agreements
Refer to accounting policy Note 1(g).
66
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
5 EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
BASIC EARNINGS PER SHARE
2011
CENTS PER
SHARE
2010
CENTS PER
SHARE
32.644
32.589
40.335
40.016
2011
’000
2010
’000
The earnings and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows.
Earnings used in the calculation of basic earnings per share reconciles to
profit attributable to the members of the parent entity in the statement of
comprehensive income
Weighted average number of ordinary shares (a)
$
No.
41,341
50,479
126,642
125,148
(a) Performance rights issued by the company are considered to be potential ordinary shares and are therefore excluded from the
weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary
shares are included in the calculation of diluted earnings per share.
DILUTED EARNINGS PER SHARE
The earnings and weighted average number of ordinary shares used in the
calculation of diluted earnings per share are as follows.
Earnings used in the calculation of diluted earnings per share reconciles to
profit attributable to the members of the parent entity in the statement of
comprehensive income
$
41,341
50,479
Weighted average number of ordinary shares (refer to footnote (a) above)
No.
126,856
126,147
Weighted average number of ordinary shares used in the calculation of
diluted earnings per share reconciles to the weighted average number of
ordinary shares used in the calculation of basic earnings per share as
follows.
Weighted average number of ordinary shares used in the calculation of
basic EPS
No.
126,642
125,148
Shares deemed to be issued for no consideration in respect of performance
rights (i.e. the dilutive impact of performance rights in existence during the
year that were exercisable at below the weighted average market price) (a)
No.
214,012
998,945
Weighted average number of converted, lapsed, or cancelled potential
ordinary shares used in the calculation of diluted earnings per share
No.
Right to purchase ordinary shares pursuant to the employee share scheme
No.
–
–
–
–
(a) The dilutive impact of future vestings of granted performance rights has been derived assuming the relative ranking of IRESS to
its peer group as measured at 31 December 2011 continues at that level through to the final vesting date for the applicable
performance right.
67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
6 CURRENT RECEIVABLES
Trade receivables
Allowance for doubtful debts
Sundry receivables and prepayments
MOVEMENT IN THE ALLOWANCE FOR DOUBTFUL DEBTS
Opening balance
Additions
Provision acquired through business combination
Amounts written off as uncollectible
Provision reversed
Closing balance
CONSOLIDATED
2011
$’000
2010
$’000
12,731
10,883
(627)
(858)
12,104
10,025
3,817
3,817
1,463
1,463
858
573
62
(866)
–
627
1,703
–
–
(94)
(751)
858
The consolidated entity’s policy requires customers to pay within 30 days from date of invoice. All credit and recovery
risks associated with trade receivables have been provided for in the statement of financial position. The provision in
respect of trade and sundry receivables is determined with regard for historical write-offs and specifically identified
customers. Other balances in other receivables do not contain impaired assets and are not past due.
An analysis of trade receivables as at 31 December 2011 showing receivables ‘past due but not impaired’ and
receivables ‘considered impaired’ is as follows.
CONSOLIDATED
PDNI (a)
CONSOLIDATED
CI (b)
2011
$
2010
$
2011
$
2010
$
8,430
2,390
761
523
7,117
1,721
482
705
12,104
10,025
144
10
41
432
627
137
76
14
631
858
0 – 30 days
31 – 60 days
61 – 90 days
91+ days
Total
(a) PDNI – past due not impaired.
(b) CI – considered impaired.
68
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
7 OTHER CURRENT FINANCIAL ASSETS
Other assets
8 PLANT AND EQUIPMENT
CONSOLIDATED 2011
CONSOLIDATED
2011
$’000
2010
$’000
668
280
LEASEHOLD
IMPROVE-
MENTS
$’000
FURNITURE
& FITTINGS
$’000
COMPUTER
EQUIPMENT
$’000
OFFICE
EQUIPMENT
$’000
TOTAL
$’000
GROSS CARRYING AMOUNT (COST)
Balance at beginning of financial year
6,209
1,642
13,573
278
21,702
Additions
Additions through business combination
Net foreign currency exchange differences
Disposals
576
8
(60)
(83)
209
34
(76)
(108)
4,808
156
(461)
(905)
Balance at end of financial year
6,650
1,701
17,171
18
13
(18)
(31)
260
5,611
211
(615)
(1,127)
25,782
ACCUMULATED DEPRECIATION
Balance at beginning of financial year
(5,574)
(1,497)
(10,376)
(187)
(17,634)
Disposals
Net foreign currency exchange differences
82
33
104
62
899
332
30
14
1,115
441
Depreciation expense
(324)
(121)
(2,430)
(56)
(2,931)
Balance at end of financial year
(5,783)
(1,452)
(11,575)
(199)
(19,009)
NET BOOK VALUE
At 31 December 2011
867
249
5,596
61
6,773
69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
CONSOLIDATED 2010
LEASEHOLD
IMPROVE-
MENTS
$’000
FURNITURE
& FITTINGS
$’000
COMPUTER
EQUIPMENT
$’000
OFFICE
EQUIPMENT
$’000
TOTAL
$’000
GROSS CARRYING AMOUNT (COST)
Balance at beginning of financial year
6,198
1,622
11,028
Additions
Additions through business combination
Net foreign currency exchange differences
Disposals
24
2
(15)
–
26
–
(6)
–
2,680
12
(84)
(63)
260
15
3
–
–
19,108
2,745
17
(105)
(63)
Balance at end of financial year
6,209
1,642
13,573
278
21,702
ACCUMULATED DEPRECIATION
Balance at beginning of financial year
(4,173)
(1,100)
(8,574)
(117)
(13,964)
Disposals
Net foreign currency exchange differences
–
8
–
4
60
58
–
(2)
60
68
Depreciation expense
(1,409)
(401)
(1,920)
(68)
(3,798)
Balance at end of financial year
(5,574)
(1,497)
(10,376)
(187)
(17,634)
NET BOOK VALUE
At 31 December 2010
635
145
3,197
91
4,068
Aggregate depreciation allocated, whether recognised as an
expense or capitalised as part of the carrying amount of other
assets during the year.
Leasehold improvements
Furniture and fittings
Computer equipment
Office equipment
70
IRESS Market Technology Limited
CONSOLIDATED
2011
$’000
2010
$’000
324
121
1,409
401
2,430
1,920
56
68
2,931
3,798
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
9 COMPUTER SOFTWARE
GROSS CARRYING AMOUNT (COST)
Balance at beginning of financial year
Additions (a)
Additions through business combination (Note 24)
Net foreign currency exchange differences
Adjustment – short term software licence (b)
Adjustment – fully written down software (c)
Disposals
Balance at end of financial year
ACCUMULATED AMORTISATION
Balance at beginning of financial year
Adjustment – short term software licence (b)
Adjustment – fully written down software (c)
Disposals
Net foreign currency exchange differences
Amortisation expense
Balance at end of financial year
NET BOOK VALUE
At 31 December
CONSOLIDATED
2011
$’000
2010
$’000
78,348
78,235
41,052
1,748
64
(587)
158
(128)
(1,221)
(1,299)
–
–
(306)
(366)
117,350
78,348
(62,173)
(52,932)
1,221
1,299
–
305
684
–
366
128
(18,018)
(11,034)
(77,981)
(62,173)
39,369
16,175
Aggregate amortisation allocated, whether recognised as an expense or
capitalised as part of the carrying amount of other assets during the year
18,018
11,034
(a) Primarily made up of software acquired from Peresys (Proprietary) Limited for $39.335 (refer Note 23)
(b) Short-lived third party software licence written down.
(c) Computer software written off as part of a periodic review of fully written down assets
71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
10 GOODWILL AND INTANGIBLES
GOODWILL GROSS CARRYING AMOUNT
Balance at beginning of the financial year
Additional amounts recognised from business combinations
occurring during the period
Purchase price adjustment
Effect of foreign currency exchange differences
Balance at end of financial year
There are no accumulated impairment losses.
CONSOLIDATED
2011
$’000
2010
$’000
31,234
29,722
12,896
1,985
–
(3,993)
(292)
(181)
40,137
31,234
ALLOCATION OF GOODWILL TO CASH GENERATING UNITS
Goodwill has been allocated for impairment testing purposes to the following cash generating units; Financial Markets –
Canada, Financial Markets – South Africa, Wealth Management – Australia & New Zealand, Wealth Management – South
Africa and Wealth Management – Asia.
In accordance with AASB136 ‘Impairment of Assets’, impairment testing was completed as at 31 December 2011 and no
impairment of goodwill was indicated.
The carrying amount of goodwill allocated to cash generating units that are significant individually or in aggregate is as
follows:
Financial Markets – Canada (a) (b)
Financial Markets – South Africa (a) (c)
Wealth Management – Australia & New Zealand (a)
Wealth Management – South Africa (a) (b)
Wealth Management – Asia (a) (b)
Balance at end of financial year
(a)
refer Note 25 for a description of the operations of these cash generating units
(b) movement represents only net exchange rate differences arising during the period.
(c)
refer Note 24 for a description on this business combination
CONSOLIDATED
2011
$’000
2010
$’000
8,155
8,680
10,493
–
15,179
15,179
4,403
1,907
5,390
1,985
40,137
31,234
72
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
IMPAIRMENT TESTING ASSUMPTIONS
The following assumptions were adopted in the assessment of indicators of impairment as at 31 December 2011 for
each of the cash generating units; importantly these assumptions do not seek to represent directors’ valuations of these
businesses, and there is an inherent level of conservatism in the assumptions adopted:
The recoverable amount of the cash generating unit has been determined based on a value in use calculation using
monthly cash flow projections based on the budgets approved by management for the twelve months ending 31
December 2012, the monthly cashflows for the subsequent four years (‘projection period’), and a terminal value at
the end of the projection period.
Zero revenue growth is assumed during the projection period.
Wages, operating costs and depreciation (as a proxy for capital expenditure) are assumed to grow on a partially fixed,
partially variable basis with revenue.
A terminal annual growth factor of 2% is assumed.
A discount rate of 15% has been assumed.
Where applicable the exchange rate prevailing as at 31 December 2011 is assumed to continue.
For the Financial Markets – South Africa cash generating unit, the above assumptions were adopted, together with a
notional charge to the cash generating unit for use of intellectual property (Software) formerly owned by Peresys (Pty) Ltd,
and now owned by the ultimate parent entity.
For the Wealth Management – Asia cash generating unit, the above assumptions were adopted, together with a period of
revenue growth during the projection period.
INTANGIBLES GROSS CARRYING AMOUNT
The movement in the intangibles balance represents the addition of intangibles resulting from a business combination
(refer Note 24) and amortisation of these assets in accordance with their anticipated useful lives (refer Note 2).
11 DEFERRED TAX ASSETS
Temporary differences attributable to
Parent entity
Entities in the tax consolidated group (Note 30)
Other entities (a)
Tax losses – other entities
CONSOLIDATED
2011
$’000
2010
$’000
5,504
1,344
(107)
4,379
11,120
5,135
(1,153)
(249)
2,530
6,263
(a) Wholly owned subsidiaries that are not entities in the tax consolidated group.
12 OTHER NON-CURRENT FINANCIAL ASSETS
Investment in shares at fair value
46
50
Investment in shares represents numerous minimum shareholding parcels in ASX listed
stapled securities and property trusts held for the purposes of managing IRESS’ capture
and recording of corporate actions in these securities.
73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
13 CURRENT PAYABLES
Trade payables
Sundry creditors and accruals
Trade payables and other creditors are non-interest bearing liabilities. The consolidated
entity generally processes trade creditor payments in accordance with the supplier’s
trading terms.
14 CURRENT TAX PAYABLES
Income tax payable attributable to
Parent entity
Other entities
CONSOLIDATED
2011
$’000
2010
$’000
10,175
10,175
6,025
6,025
6,646
6,646
6,614
6,614
6,740
3,510
9,617
1,424
10,250
11,041
74
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
15 CURRENT PROVISIONS
Employee benefits (Note 26)
Dividends
Restructuring and termination costs
Provision for additional payment arising on the acquisition of
subsidiaries
DIVIDENDS
Opening balance
Additional provisions recognised
Reductions arising from payments/other sacrifices of future
economic benefits
Closing balance (a)
RESTRUCTURING AND TERMINATION COSTS
Opening balance
Additional provisions recognised
Reductions arising from payments/other sacrifices of future
economic benefits
Closing balance
PROVISION FOR ADDITIONAL PAYMENT ARISING ON THE
ACQUISITION OF SUBSIDIARIES
Opening balance
Reductions arising from payments/other sacrifices of future
economic benefits
Closing balance
CONSOLIDATED
2011
$’000
2010
$’000
3,487
2,736
41
300
99
39
36
99
3,927
2,910
39
40
52,440
43,643
(52,438)
(43,644)
41
39
36
264
–
300
99
–
99
145
–
(109)
36
391
(292)
99
(a) The provision for dividends represents the aggregate amount of dividends declared, determined or publicly recommended on or
before the reporting date, which remain undistributed at the reporting date, regardless of the extent to which they are expected to
be paid in cash. At 31 December 2011, the balance represents unpresented dividend cheques.
75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
16 NON-CURRENT PROVISIONS
Employee benefits (Note 26)
Provision for third party software licence
Provision for additional payment arising on the acquisition of
subsidiaries
PROVISION FOR ADDITIONAL PAYMENT ARISING ON THE
ACQUISITION OF SUBSIDIARIES
Opening balance
Provision for additional payment arising on the acquisition of
subsidiaries
Reductions arising from payments/other sacrifices of future
economic benefits
Non-cash interest expense
Net foreign currency exchange difference
Closing balance
CONSOLIDATED
2011
$’000
2010
$’000
3,891
3,379
2,532
9,802
–
3,872
(1,010)
207
(537)
2,532
2,175
3,379
–
5,554
–
–
–
–
–
–
76
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
17 ISSUED CAPITAL
ISSUED CAPITAL
127,036,010 fully paid ordinary shares
(2010: 126,018,142)
CONSOLIDATED
2011
$’000
2010
$’000
75,898
75,898
2011
2010
NO. ‘000
$’000
NO. ‘000
$’000
FULLY PAID ORDINARY SHARE CAPITAL
Balance at beginning of financial year
126,018
75,898
123,812
75,898
Issue of shares to IRESS Market Technology Equity
Plan Trust (’Trust’) pursuant to share plans (a)
1,018
–
2,206
–
Balance at end of financial year
127,036
75,898
126,018
75,898
(a) Additional issued capital arising from the issue of these shares in the years ended 31 December 2011 and 31 December 2010
amounted to $26 and $134 respectively.
PERFORMANCE RIGHTS
Performance rights have been granted to the Managing Director, executives and employees of the Consolidated Entity.
These performance rights will vest over time subject to satisfying the criteria set out in the relevant performance rights
plan rules. Once vested, the holder of the performance right is required to pay $1 per series to exercise the performance
right (refer Notes 36 and 37).
Performance rights granted to Mr Peter Dunai vested in August 2011. Mr Dunai is currently Chairman but at the time of
grant was Managing Director. In accordance with the plan rules Mr Dunai was required to pay $1 to exercise these
performance rights.
Pursuant to performance rights granted in prior years which vested during the year, 334,548 shares (491,000 shares
less 156,452 treasury shares) were subscribed for by the Trust.
DEFERRED SHARES
Pursuant to deferred shares granted to the Managing Director, executives and employees (refer Note 37) during the year
which have not yet vested, 590,000 new shares were subscribed for by the Trust.
DEFERRED SHARE RIGHTS
Pursuant to deferred share rights granted in prior years which vested during the year, 93,320 shares were subscribed for
by the Trust.
Following cancellations of share rights granted to employees, as at 31 December 2011, the Trust holds 23,200 treasury
shares.
77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
18 RESERVES
RESERVES COMPRISE
Share based payments reserve
Foreign currency translation reserve
MOVEMENTS IN SHARE BASED PAYMENTS RESERVES
Balance at beginning of financial year
Share based payments expense
Balance at end of financial year
The share based payment reserve arises on recognition of the share based payment
expense following the grant of share rights to employees (including the Managing
Director) under the applicable share rights plan.
MOVEMENTS IN FOREIGN CURRENCY TRANSLATION RESERVES
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
Exchange differences relating to foreign currency monetary items forming part of the net
investment in a foreign operation, and the translation of foreign operations, are brought
to account by entries made directly to the foreign currency translation reserve, as
described in Note 1(d).
19 RETAINED EARNINGS
Balance at beginning of financial year
Net profit attributable to members of the parent entity
Dividends provided for or paid
Balance at end of financial year
CONSOLIDATED
2011
$’000
2010
$’000
39,184
32,094
(10,060)
(4,306)
29,124
27,788
32,094
25,194
7,090
6,900
39,184
32,094
(4,306)
(3,964)
(5,754)
(342)
(10,060)
(4,306)
33,929
27,093
41,341
50,479
(52,440)
(43,643)
22,830
33,929
78
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
20 PARENT ENTITY DISCLOSURE
FINANCIAL POSITION
ASSETS
Current assets
Non current assets
Total assets
LIABILITIES
Current liabilities
Non current liabilities
Total liabilities
EQUITY
Issued capital
Retained earnings
Share based payments reserve
Foreign currency translation reserve
Total Equity
FINANCIAL PERFORMANCE
Profit for the year
Total comprehensive income
CONTINGENT LIABILITIES
The parent entity has given a letter of support to guarantee that the
following wholly owned subsidiaries will meet their debts as and when
they fall due. The total liabilities of the wholly owned subsidiaries
(excluding amounts owed to the parent entity) are:
IRESS Data Pty Ltd
IRESS Market Technology (NZ) Limited
IRESS Asia Holdings Ltd
IRESS Market Technology (Singapore) Pte Ltd
IRESS Technology Limited
COMPANY
2011
$’000
2010
$’000
96,254
139,451
78,961
35,175
175,215
174,626
15,691
20,298
10,485
7,592
26,176
27,890
75,898
75,898
33,957
38,744
39,184
32,094
–
–
149,039
146,736
35,204
44,511
35,204
44,511
–
242
–
–
–
–
1,201
–
–
–
242
1,201
79
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
21 DIVIDENDS
FULLY PAID ORDINARY SHARES
Recognised amounts
Interim dividend
Final dividend (b)
31 DECEMBER 2011
31 DECEMBER 2010
CENTS PER
SHARE
TOTAL
$’000
CENTS PER
SHARE
TOTAL
$’000
14.0 (a)
17,785
14.0 (b)
17,642
24.0 (c)
30,244
21.0 (d)
26,001
Special dividend unfranked
3.5
4,411
–
–
52,440
43,643
Unrecognised amounts
Final dividend
24.0 (e)
30,489
24.0 (c)
30,244
Special dividend unfranked
–
–
3.5
4,411
30,489
34,655
(a) Franked to 90% at a 30% tax rate.
(b) Fully franked at a 30% tax rate.
(c) Franked to 66% at a 30% tax rate.
(d) This relates to the dividend paid based on the prior year’s results. Where applicable, amounts provided have been amended to
reflect the actual dividend paid.
(e) Franked to 83% at a 30% tax rate. The estimated value of the 2011 final dividend (that will be declared subsequent to 31
December 2011) has been calculated based on 127,036,010 ordinary shares, comprising shares on issue as at 31 December
2011.
Adjusted franking account balance (a)
COMPANY
2011
$’000
2010
$’000
10,859
4,196
(a) The franking account balance is maintained on a tax paid basis in accordance with the simplified dividend system. It has not been
adjusted for the unrecognised partially franked final dividend above.
80
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
22 NOTES TO THE STATEMENT OF CASH FLOWS
CONSOLIDATED
2011
$’000
2010
$’000
RECONCILIATION OF CASH
For the purposes of the statement of cash flows, cash includes cash on hand and in
banks and investments in money market instruments, net of outstanding bank overdrafts.
Cash at the end of the financial year as shown in the statement of cash flows is
reconciled to the related items in the statement of financial position as follows
Cash
48,925
99,063
RECONCILIATION OF PROFIT ATTRIBUTABLE TO MEMBERS OF THE
PARENT ENTITY TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period
(Profit)/loss on sale of non–current assets
Depreciation and amortisation of non–current assets
Doubtful debts expense
Net foreign exchange (gain) / loss
Equity settled share based payments
Increase/(decrease) in deferred tax balances
Changes in net assets and liabilities, net of effect of acquisitions
(Increase)/decrease in assets
current trade receivables
other current assets
Increase/(decrease) in liabilities
current trade payables
other non–current liabilities
other provisions
current tax liability
Net cash from operating activities
41,341
50,479
(6)
(3)
22,587
15,098
881
575
(722)
321
7,090
6,900
(4,862)
(1,971)
(4,424)
(2,549)
(13,199)
(354)
2,940
1,717
1,017
(941)
2,132
85
134
6,006
54,716
75,556
SUBSIDIARIES ACQUIRED DURING THE YEAR
During the year, the consolidated entity acquired some subsidiaries (refer Note 24). The net outflow on acquisition was
$3.412m.
81
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
23 ACQUISITION OF SOFTWARE
On 18 January 2011, IRESS Market Technology Limited acquired software from Peresys (Proprietary) Ltd. The software
was acquired for ZAR 264.000m (AUD 39.335m), which is considered to be fair value.
24 ACQUISITION OF BUSINESSES
PERESYS (PROPRIETARY) LTD
On 20 January 2011, IRESS Market Technology Limited acquired 100% of Peresys (Proprietary) Ltd (‘Peresys’). Peresys is
a South African based technology solutions provider to the financial markets, specialising in building and running FIX
enabled connected trading communities across all asset classes, including equities, fixed interest and derivatives.
Peresys was acquired for ZAR 66.209m (AUD 9.706m). The transaction included an upfront cash payment of ZAR
39.155m (AUD 5.834m), short term deferred consideration of ZAR 7.296m (AUD 1.044m) and performance based
payments based around the growth of the business of up to ZAR 19.758m (AUD 2.828m), most of which is payable at the
end of three years.
In addition, up to an additional ZAR 10.000m (AUD 1.464m) is available to certain staff, with payment based on
performance of the business over three years.
Details on the assets and liabilities acquired are as follows.
FAIR VALUE OF NET ASSETS ACQUIRED
CURRENT ASSETS
Cash and cash equivalent assets
Receivables
NON-CURRENT ASSETS
Plant and equipment
Customer list
Deferred tax assets
CURRENT LIABILITIES
Payables
Current tax liabilities
Provisions
NON-CURRENT LIABILITIES
Provisions
Fair value of identifiable assets acquired
Goodwill arising on acquisition
Purchase price
TOTAL FAIR VALUE
RECOGNISED ON
ACQUISITION
$’000
3,432
1,337
275
5,659
299
(2,270)
(10,138)
(318)
(1,466)
(3,190)
12,896
9,706
Other than for the customer list recognised, there were no fair value adjustments to the net book value of the assets
acquired.
In its acquisition of Peresys, IRESS Market Technology Limited paid a premium to the fair value of the net assets
acquired. Goodwill was recognised on this acquisition, as other possible classes of intangible assets did not meet the
criteria for recognition as at the date of acquisition. Goodwill represents, amongst other things, the anticipated future
earnings capacity of the assets acquired.
82
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Since acquisition, Peresys has contributed revenue of AUD 15.320m to the Consolidated Entity. Had this business
combination been effected at 1 January 2011, the revenue of the Consolidated Entity from continuing operations would
have been AUD 205.149m, and the profit for the full year from continuing operations would have been AUD 41.470m.
In determining the ‘pro-forma’ revenue and profit of the Consolidated Entity had Peresys been acquired at the beginning of
the current reporting period, the directors have evenly apportioned the revenue and profit of Peresys over this period on
the basis of there being no abnormal items within those results.
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
Notwithstanding the funding support letter described below, the Directors are of the opinion that there is no change to the
Consolidated Entity’s contingent liabilities or capital commitments arising from the Peresys acquisition.
As part of the transaction documents a Funding Support Letter was required to indemnify the former Peresys directors.
The document requires the consolidated entity to meet certain future obligations of Peresys crystallised in the
transaction.
The following table sets out the cash flow impact of the Peresys acquisition.
Total consideration
Provision for second payment (a)
Cash paid
Cash and cash equivalent balances acquired
Net cash flow on acquisition date
TOTAL COST OF
ACQUISITION
$’000
9,706
(2,862)
6,844
(3,432)
3,412
(a)
Includes $0.537m foreign currency movement and $0.207 non-cash interest expense.
25 SEGMENT INF0RMATION
The consolidated entity operates in two areas – Financial Markets and Wealth Management. Any transactions directly
between segments are charged on an arm’s length basis.
FINANCIAL MARKET SERVICES
The consolidated entity’s financial market services division provides information, trading, compliance, order management,
portfolio systems and related tools to cash equity participants in Australia, New Zealand, Canada and Asia. During the
period the consolidated entity, through the acquisition of Peresys (refer Note 24), commenced operations in South Africa.
On 20 January 2011, IRESS Market Technology Limited acquired Peresys (Pty) Ltd (‘Peresys’) and its subsidiaries.
Peresys provides technology solutions to the financial markets in South Africa.
83
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
WEALTH MANAGEMENT SERVICES
In this division the consolidated entity provides financial planning systems and related tools to wealth management
professionals located in Australia, New Zealand, South Africa and Asia. In addition this segment recently established
operations in the United Kingdom.
SEGMENT REVENUES
FINANCIAL MARKETS
Australia & New Zealand
Canada
South Africa
Asia
EXTERNAL SALES
TOTAL
2011
$’000
2010
$’000
2011
$’000
2010
$’000
108,919
104,538
108,919
104,538
23,954
15,320
1,061
23,488
–
613
23,954
15,320
1,061
23,488
–
613
Total financial markets
149,254
128,639
149,254
128,639
WEALTH MANAGEMENT
Australia & New Zealand
South Africa
Asia
United Kingdom
Total wealth management
Total of all segments
Interest revenue
Eliminations
Unallocated
Consolidated
49,122
43,783
49,122
43,783
5,991
7,072
5,991
7,072
159
–
317
–
159
–
317
–
55,272
51,172
55,272
51,172
204,526
179,811
204,526
179,811
1,795
–
232
3,488
–
(226)
206,553
183,073
84
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
SEGMENT PROFITS
FINANCIAL MARKETS
Australia & New Zealand
Canada
South Africa
Asia
Total financial markets
WEALTH MANAGEMENT
Australia & New Zealand
South Africa
Asia
United Kingdom
Total wealth management services
Total of all segments
Share based payment expense (Refer Note 3 (b))
Other contribution
Earnings before interest, taxes, depreciation and amortisation
Depreciation and amortisation expense
Interest (a)
Profit before income tax expense
Income tax expense
Profit attributable to the members of the parent entity
2011
$’000
2010
$’000
56,289
58,904
8,197
5,543
7,843
–
(1,454)
(586)
68,575
66,161
20,289
18,636
1,689
2,468
(1,320)
(1,121)
(119)
–
20,539
19,983
89,114
86,144
(7,090)
(6,900)
(858)
239
81,166
79,483
(22,587)
(15,098)
1,581
3,442
60,160
67,827
(18,819)
(17,348)
41,341
50,479
(a)
Includes $0.207m (2010: nil) non-cash interest expense recognised on deferred consideration payable on the Peresys
transaction, and other sundry contribution of $0.006m (2010: $0.003m).
85
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
SEGMENT ASSETS AND INFORMATION
2011
$’000
2010
$’000
CASH
RECEIVABLES PAYABLES
CASH
RECEIVABLES PAYABLES
Australia & New Zealand
38,113
9,031
(8,745)
90,868
7,329
(5,367)
Canada
South Africa
Asia
United Kingdom
1,817
8,729
266
–
1,738
1,312
23
–
(901)
(474)
(55)
–
1,275
6,771
149
–
1,906
552
238
–
(993)
(246)
(40)
–
Total consolidated
48,925
12,104
(10,175)
99,063
10,025
(6,646)
OTHER SEGMENT INFORMATION
DEPRECIATION & AMORTISATION
Australia & New Zealand
Canada
South Africa
Asia
United Kingdom
Total
ADDITIONS TO PLANT AND EQUIPMENT
Australia & New Zealand
Canada
South Africa
Asia
United Kingdom
Total
ADDITIONS TO SOFTWARE
Australia & New Zealand (a)
Canada
South Africa
Asia
United Kingdom
Total
CONSOLIDATED
2011
$’000
2010
$’000
19,893
13,898
577
1,980
137
–
673
455
72
–
22,587
15,098
4,113
557
552
389
–
1,870
752
49
74
–
5,611
2,745
40,991
1,745
–
29
32
–
–
–
161
–
41,052
1,906
(a) Primarily made up of software acquired from Peresys (Proprietary) Limited for $39.335m (refer Note 23)
86
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
ADDITIONS TO PLANT AND EQUIPMENT THROUGH BUSINESS
COMBINATIONS
Australia & New Zealand
Canada
South Africa
Asia
United Kingdom
Total
TOTAL NON CURRENT ASSETS
Australia & New Zealand
Canada
South Africa
Asia
United Kingdom
Total
26 EMPLOYEE BENEFITS
THE AGGREGATE EMPLOYEE BENEFIT LIABILITY RECOGNISED AND
INCLUDED IN THE FINANCIAL STATEMENTS IS AS FOLLOWS
Provision for employee benefits
Current (Note 15)
Non–current (Note 16)
Number of employees (full time equivalent basis) and directors at
end of the financial year, excluding staff on maternity leave or other
unpaid leave.
CONSOLIDATED
2011
$’000
2010
$’000
–
–
211
–
–
211
–
–
–
17
–
17
71,409
41,116
9,613
10,280
18,818
2,312
–
5,805
2,129
–
102,152
59,330
3,487
3,891
7,378
2,736
2,175
4,911
2011
NO.
2010
NO.
659
512
87
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
27 REMUNERATION OF AUDITORS
Auditor of the parent entity (a)
Related practice of parent entity auditor (b)
CONSOLIDATED
2011
$
2010
$
225,000
257,700
44,859
19,159
269,859
276,859
(a) The auditor of IRESS Market Technology Limited is Deloitte Touche Tohmatsu.
(b) Remuneration paid to international associates of Deloitte Touche Tohmatsu Australia located in Canada, New Zealand, South
Africa, Singapore, Hong Kong and Ireland.
There were no amounts paid/payable to the auditor for non-audit services.
28 CONTINGENT LIABILITIES
The Directors are of the opinion that there are no other contingent liabilities that need to be disclosed at the reporting
date.
29 LEASES
LEASING ARRANGEMENTS
Operating leases relate to office facilities with lease terms of between 2 to 10 years. The consolidated entity does not
have an option to purchase the leased asset at the expiry of the lease period. Melbourne, Sydney, Brisbane and Perth
office lease arrangements are supported by bank guarantees. At 31 December 2011, the total rental bank guarantees in
place amounted to $2,610,953 (2010: $2,415,539).
NON-CANCELLABLE OPERATING LEASES
Not longer than 1 year
Longer than 1 year and not longer than 5 years
In respect of non-cancellable operating leases, the following liabilities have been recognised.
MAKE GOOD PROVISIONS
Current
Non-current
88
IRESS Market Technology Limited
CONSOLIDATED
2011
$’000
2010
$’000
4,200
3,783
10,679
10,356
14,879
14,139
327
–
164
–
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
30 SUBSIDIARIES
NAME OF ENTITY
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
OWNERSHIP
INTEREST
2011
%
2010
%
PARENT ENTITY
IRESS Market Technology Limited (a)
Australia
SUBSIDIARIES
IRESS Market Technology (NZ)
Limited (c)
New Zealand / Provision of sales and related services
to users of IRESS technologies in New Zealand
100
100
IRESS Wealth Management
Pty Ltd (b)
Australia / Provision of financial planning technology
and related services
IRESS Canada Holdings Limited
Canada / Holding company
IRESS Data Pty Ltd (b) (c)
Australia / Data procurement
100
100
100
100
100
100
IRESS Asia Holdings Limited (c)
Hong Kong / Provision of financial market and financial
planning technology and related services
100
100
IRESS Market Technology
(Singapore) Pte Ltd (c)
Singapore / Provision of financial market and financial
planning technology and related services
100
100
IRESS South Africa (Australia)
Pty Ltd (b)
Australia / Software licensing company
100
100
Peresys (Proprietary) Ltd (d)
South Africa / Provision of financial market technology
and related services
IRESS Technology Limited (c) (e)
United Kingdom / Provision of financial market and
financial planning technology and related services
100
100
–
–
(a)
IRESS Market Technology Limited is the head entity within the tax consolidated group.
(b) This company and its Australian subsidiaries (if any) are members of the tax consolidated group.
(c) Subsidiary provided with a letter of support from Parent entity.
(d) Acquired 20 January 2011.
(e) Established 23 September 2011.
89
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
In relation to its Australian and New Zealand wealth management operations, IRESS Wealth Management Pty Ltd holds
the following controlled entities.
NAME OF BUSINESS
ACQUIRED / INCORPORATED
PlanTech Holdings Pty Ltd
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
Australia / Holding company for PlanTech companies
below
PlanTech Consulting Group Pty Ltd
Australia / Provider of risk (life insurance) information
and PlanTech’s financial planning services
Planning Resources Group Pty Ltd
VisiPlan Pty Ltd
Australia / No active operations, currently receives
small amount of passive income associated with former
PlanTech business
Australia / Provision of financial planning technology
and related services
TransActive Systems Pty Ltd
Australia / Provision of mortgage information and
related services
Dealer Management Systems Pty
Ltd
Australia / Provision of financial planning technology
and related services
FundData Pty Ltd
Australia / Provision of financial planning technology
and related services
OWNERSHIP
INTEREST
2011
%
2010
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
In relation to its South African wealth management operations, IRESS Wealth Management Pty Ltd holds the following
controlled entities
NAME OF BUSINESS
ACQUIRED / INCORPORATED
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
IRESS Spotlight Wealth
Management Solutions (RSA) Pty Ltd
Australia / Provision of financial planning technology
and related services
OWNERSHIP
INTEREST
2011
%
2010
%
100
100
Spotlight Wealth Management (Pty)
Ltd
South Africa / Provision of financial planning technology
and related services
100
100
Advicenet Advisory Services (Pty) Ltd South Africa / Provision of financial planning technology
100
100
IRESS Wealth Management (RSA)
(Proprietary) Limited
and related services
South Africa / Dormant
100
100
90
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
IRESS Canada Holdings Limited holds the following controlled entities.
NAME OF BUSINESS
ACQUIRED / INCORPORATED
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
IRESS (Ontario) Limited
Canada / Holding company
KTG Technologies Corp.
Canada / Dormant
IRESS Market Technology Canada
LP
Canada / Provision of financial market technology and
related services
OWNERSHIP
INTEREST
2011
%
2010
%
100
100
100
100
100
100
IRESS (LP) Holdings Corp.
Canada / General partner to IRESS Market Technology
Canada LP
100
100
IRESS Market Technology (Singapore) Pte Ltd holds the following controlled entity.
NAME OF BUSINESS
ACQUIRED / INCORPORATED
Sentryi Pte Ltd (a)
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
Singapore / Provision of financial market and financial
planning technology and related services
OWNERSHIP
INTEREST
2011
%
2010
%
100
100
(a) Subsidiary provided with a letter of support IRESS Market Technology (Singapore) Pte Ltd with consent from Parent entity
Peresys (Proprietary) Ltd holds the following controlled entities.
NAME OF BUSINESS
ACQUIRED / INCORPORATED
COUNTRY OF INCORPORATION / PRINCIPAL ACTIVITY
Peresys Derivatives (Proprietary) Ltd South Africa / Dormant
Peresys Software Limited
Ireland / Provision of services to Peresys (Proprietary)
Ltd
OWNERSHIP
INTEREST
2011
%
100
100
2010
%
–
–
Within the IRESS group there are unsecured funding arrangements in place.
91
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
31 SUBSEQUENT EVENTS
There has not been any other matter or circumstance, other than that referred to in the financial statements or notes
thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the
operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in
future financial years.
32 FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The consolidated entity manages its capital to ensure that entities in the consolidated entity will be able to continue as
going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The
consolidated entity’s overall strategy remains unchanged from 2010.
The capital structure of the consolidated entity consists of net cash (cash and cash equivalents), and equity (comprising
issued capital, reserves and retained earnings as detailed in notes 17 to 19).
The consolidated entity is not subject to any externally imposed capital requirements.
The directors review the capital structure of the consolidated entity on a periodic basis.
FINANCIAL RISK FACTORS
The company and consolidated entity undertakes transactions in a limited range of financial instruments including cash
assets and receivables.
These transactions and activities result in exposure to a number of financial risks, including market risk (interest rate risk,
foreign currency risk), credit risk, and liquidity risk. These financial risks are managed such to mitigate inappropriate
volatility of financial performance and maintain an optimal capital structure that provides returns for shareholders,
provides benefits for other stakeholders and an appropriate cost of capital.
92
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Details of foreign currency risk, liquidity risk, interest rate risk, credit risk and fair values are detailed below.
(a) Foreign Currency Risk
i)
Impact on Australian dollar equivalent reported earnings
Entities within the Consolidated Entity transact in their local currencies, which differ from the Consolidated Entity’s
presentation currency of Australian Dollars. Whilst a movement in these local currencies when compared with the
Australian Dollar does not impact underlying profit or loss (as differences are recognised in comprehensive income
through the foreign currency translation reserve), movements do impact on the Australian Dollar equivalent reported
earnings. These movements therefore impact on the perceived performance of the company when viewed in
Australian Dollars.
To assist users in understanding the impact exchange rate movements had on reported revenues from the year
ended 31 December 2011 and 31 December 2010, the financial performance of business units (as set out in Note
25) can be viewed as follows:
LC
(a)
LOCAL CURRENCY
(b)
TOTAL
(AUD) (c)
2011
‘000
2010
‘000
2011
‘000
2010
‘000
TOTAL SEGMENT
REVENUES
FINANCIAL MARKETS
Australia & New Zealand
Canada
South Africa
Asia
Total financial markets
WEALTH MANAGEMENT
Australia & New Zealand
South Africa
Asia
United Kingdom
Total wealth management
Total of all segments
AUD
CAD
ZAR
AUD
AUD
ZAR
AUD
GBP
108,919
104,538
108,919
104,538
24,606
22,189
23,954
23,488
114,210
1,061
–
613
15,320
1,061
–-
613
149,254
128,639
49,122
43,783
49,122
43,783
44,323
47,327
5,991
7,072
159
–
317
–
159
–
317
–-
55,272
51,172
204,526
179,811
(a)
(b)
(c)
LC is the local currency unit for the segment used in management accounts. New Zealand results not reported separately
and instead are converted to AUD in management accounts. For the company’s Asia operations, the two primary underlying
currencies are SGD and HKD, but these are not reported separately in management accounts and instead are converted to
AUD
These are the segment revenues as reflected in management accounts.
Reported segment revenues as reflected in Note 25.
93
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
ii)
Impact on Profit or Loss
Foreign currency risk refers to the risk that the value of a recognised asset or liability, or the future value of a
foreign currency denominated income stream, will fluctuate due to changes in foreign currency rates.
The immediate exposure of the company to foreign currency risk arises primarily from loans to wholly owned foreign
subsidiaries. These investments can give rise to realised and unrealised gains and losses in the company due to
loans to subsidiaries with the following currencies, Canadian dollar, New Zealand dollar, South African rand,
Singapore dollar, Hong Kong dollar and the Pound Sterling.
NET SUBSIDIARY INTERCOMPANY BALANCES BY CURRENCY
Payable / (receivable) by parent company
AUD
NZD
CAD
ZAR
SGD
HKD
GBP
TOTAL
LOCAL CURRENCY
2011
‘000
2010
‘000
(49,299)
(44,660)
319
1,551
(4,796)
(3,773)
(31,950)
–
(3,042)
(5,369)
(3,484)
(2,324)
(50)
–
The consolidated entity does not hedge the effect of the exchange rate movements on these loans. These loans are
interest bearing (refer Note 33).
The carrying value of the company’s intercompany receivables or payables is based on the prevailing exchange rates
at year end and unrealised gains and losses arise from movements in the subsidiaries’ local currency.
The effect of a change in the exchange rate on unrealised gains/losses and reported financial performance is as
follows.
94
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
MOVEMENT IN EXCHANGE RATE TO AUD
Strengthened by NZD cent
Weakened by NZD cent
Strengthened by CAD cent
Weakened by CAD cent
Strengthened by ZAR rand
Weakened by ZAR rand
Strengthened by SGD cent
Weakened by SGD cent
Strengthened by HKD cent
Weakened by HKD cent
Strengthened by GBP penny
Weakened by GBP penny
COMPANY UNREALISED
GAIN/(LOSS)
2011
AUD ‘000
2010
AUD ‘000
(2)
2
43
(44)
5
(5)
17
(18)
1
(1)
1
(1)
(9)
9
39
(39)
–
–
35
(35)
–
–
–
–
The primary currency risk for subsidiaries of the consolidated entity is the underlying local currency for that
subsidiary. In assessing foreign currency risk management, the emerging businesses segments (Financial Markets
in Asia, and Wealth Management in Asia and United Kingdom) are anticipated to be net borrowers in local currency
from the company until these businesses reach a level of scale. Thereafter they should be net generators of cash in
local currency. The remaining business segments are already net generators of cash in local currency.
The company does not currently hedge the impact of changes in foreign currency rates on the value of future
cashflows from its foreign subsidiaries. A material enduring change in relative exchange rates could have a
significant effect on the Australian dollar equivalent value of these operations.
The consolidated entity regularly reassesses market conditions, the financial risk, the terms of these loans, and the
appropriateness of mitigating exposure using hedges such to optimise return on capital.
During the month of January 2011, the company entered into a cashflow hedge in the form of two forward foreign
currency contracts directly associated with the amounts payable to Peresys (Proprietary) Ltd and its shareholders.
These forward contracts had terms of 15 and 10 days respectively, and were 100% effective. No other forward
contracts were entered into during the year, and there are no open foreign currency contracts at 31 December 2011
(2010: nil).
95
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(b) Liquidity Risk
Liquidity risk includes the risk that, as a result of deficiencies in managing operational liquidity, the company has
insufficient funds to settle a transaction; or it is forced to sell financial assets at a value less than what they are
worth.
The consolidated entity’s liquidity is regularly monitored. The consolidated entity’s financial liabilities comprise trade
payables and other creditors, which are non-interest bearing liabilities. Refer to note 13 for details regarding
contractual maturity.
IRESS currently has surplus funds invested in highly liquid instruments. The consolidated entity as at 31 December
2011 does not hold any standing debt facilities (2010: nil). The consolidated entity expects to meet its obligations
from a combination of existing cash reserves, operating cashflows and the proceeds of maturing financial assets.
(c)
Interest Rate Risk
The cash of the consolidated entity comprises highly liquid deposits that earn interest at a variable rate.
Sensitivity of cash deposits to movements in the interest rate can be demonstrated using assumptions that are not
necessarily relevant to the future financial position of the company, and assuming a constant deposit amount
based on 31 December 2011 year end balances. The effect of a change in the interest rate, interest income and
reported financial performance is as follows:
MOVEMENT IN INTEREST RATE
1%
CONSOLIDATED
$’000
489
The consolidated entity regularly reassesses market conditions, the financial risk, and the terms of deposits so as
to optimise return on capital.
(d) Credit Risk
Credit risk refers to the risk a counterparty will default on its contractual obligations resulting in a financial loss to
the consolidated entity. The consolidated entity (other than in relation to loans with wholly owned subsidiaries) does
not have any significant credit risk to any single counterparty or group of counterparties having similar
characteristics.
The company has a material exposure through receivables to clients in the financial services and wealth
management industries. The company actively manages this exposure.
Credit risk on cash and cash equivalent instruments is limited because the counterparties are banks with high
credit ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial report, net of any allowances for losses,
represents the consolidated entity’s maximum exposure to credit risk without taking account of the value of any
collateral or other security obtained.
(e) Fair Value
The carrying amount of financial assets and financial liabilities for the company and consolidated entity recorded in
the financial statements represents their respective net fair values, determined in accordance with the accounting
policies disclosed in Note 1 .
96
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
33 RELATED PARTY DISCLOSURES
(a) Equity Interests in Related Parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 30.
(b) Key Management Personnel Disclosures
Details of key management personnel disclosures are set out in Note 34.
(c) Transactions within the Wholly Owned Group
The wholly owned group includes:
the ultimate parent entity in the wholly owned group; and
wholly owned subsidiaries.
The ultimate parent entity in the wholly owned group is IRESS Market Technology Limited.
All loans advanced to and payable to subsidiaries are unsecured and subordinate to other liabilities.
During the financial year, the consolidated entity recognised a net receivable of $1,614,961 (2010: $1,699,300)
from its wholly owned subsidiaries for their taxes consolidated for the current period.
The company has a series of arrangements with subsidiaries which support the basis on which charges between
entities are made.
(d) Transactions with Other Related Parties
During the year, Spotlight Wealth Management (Pty) Ltd rented premises at commercial rates from Spotlight House
(Pty) Ltd, an entity associated with Mr P Moretonas, an employee of Spotlight Wealth Management (Pty) Ltd. The
amount paid was $161,322 (2010: $144,771).
(e) Transactions with ASX Limited
ASX Limited (‘ASX’) owns 23,750,001 of the ordinary shares in IRESS. ASX is a major supplier of Australian equity
market data to IRESS.
All transactions with ASX are conducted on a full arm’s length basis.
Total fees paid to ASX for Australian equity and related market data and associated services in 2011 were
$12,194,966 (2010: $11,822,525). Depending on the particular data set or service being subscribed for, these
fees are typically based on either:
a per user royalty type charge; or
a fixed annual amount.
IRESS, as a listed entity on the Australian Stock Exchange, pays ASX listing and other related fees at the scheduled
rate.
97
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
34 DIRECTORS AND KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Directors and key management personnel
The directors of IRESS Market Technology Limited were:
Mr P Dunai (Chairman, Chairman of Nomination and Remuneration Committee until 5 May 2011);
Mr A Walsh (Managing Director)
Mr J Killen (Chairman of the Audit Committee, Non-executive Director; retired from the Board 5 May 2011);
Mr B Burdett (Non-executive Director);
Ms J Seabrook (Non-executive Director, Lead Independent Director, Chair of Nomination and Remuneration
Committee since 5 May 2011);
Mr J Cameron (Non-executive Director); and
Mr J Hayes (Non-executive Director, appointed 10 June 2011, Chairman of the Audit Committee since 10 June
2011);
The executives of the IRESS Market Technology Limited consolidated entity during the year were:
Mr S Bland (Chief Financial Officer and Company Secretary);
Mr J Davies (President & Chief Executive Officer, Financial Markets Canada);
Mr P Ferguson (Group General Counsel and Company Secretary);
Ms K Gross (General Manager, Products, Sales & Marketing); and
Mr D Walker (Chief Technical Officer).
The Nomination and Remuneration Committee, in accordance with the Company’s Nomination and Remuneration
Charter reviews the remuneration packages of all directors and executives on an annual basis. Remuneration
packages are reviewed and adjusted by a performance factor to reflect changes in the performance of the Company.
The non-executive directors are appointed in accordance with the Company’s constitution, with directors required to
stand for re-election every three years. No termination payments arise should a non executive director resign, retire
or fail to be re-elected. Termination payments would arise should directors elect to terminate this arrangement prior
to expiry. Generally, the minimum notice period for any executive is three months, and the maximum is six months.
Except for termination payments arising from the circumstances outlined below, payments arising at the discretion
of the board, or payments in lieu of notice, no termination payments are payable to executives. Further details on
employment terms for executives are set out on pages 31 and 32.
Contractual terms associated with the employment of the Managing Director and executives could, in certain
circumstances, give rise to additional future payments particularly with regard to situations involving redundancy or
termination without cause.
98
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
The aggregate compensation of the key management personnel of the consolidated entity and the company is set
out below.
Short term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share-based payment
CONSOLIDATED
2011 (a)
2010
3,800,289
4,269,612
163,795
247,069
–
–
–
–
2,010,051
2,458,997
5,974,135
6,975,678
(a)
There were 11 key management personnel in 2011, some of whom have a part year of service (2010:14).
(b) Director and key management personnel equity holdings
Fully paid ordinary shares issued by IRESS Market Technology Limited to directors and key management personnel
or to a related party of them
OPENING
BALANCE
NO.
GRANTED AS
COMPENSATION
NO.
RECEIVED ON
EXERCISING OF
SHARE
RIGHTS
NO. (a)
NET OTHER
CHANGE
NO.
CLOSING
BALANCE
NO.
BALANCE HELD
NOMINALLY
NO.
2011
DIRECTORS
Mr P Dunai
690,000
Mr A Walsh
70,950
Mr J Killen (b)
77,500
Mr B Burdett
100,000
Ms J Seabrook
20,000
Mr J Cameron
Mr J Hayes
EXECUTIVES
–
–
Mr S Bland
220,390
Mr J Davies (c)
Mr P Ferguson
–
–
Ms K Gross
183,110
Mr D Walker
417,260
–
–
–
–
–
–
–
–
–
–
–
–
200,000
–
890,000
81,000
(80,000)
71,950
–
–
–
–
–
–
–
–
–
–
100,000
20,000
–
4,600
4,600
59,000
(9,000)
270,390
–
–
44,500
54,000
–
–
–
–
–
–
227,610
471,260
–
–
–
–
–
–
–
–
–
–
–
–
99
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Fully paid ordinary shares issued by IRESS Market Technology Limited to directors and key management personnel
or to a related party of them
OPENING
BALANCE
NO.
GRANTED AS
COMPENSATION
NO.
RECEIVED ON
EXERCISING OF
SHARE
RIGHTS
NO. (a)
NET OTHER
CHANGE
NO.
CLOSING
BALANCE
NO.
BALANCE HELD
NOMINALLY
NO.
2010
DIRECTORS
Mr N Hamilton
100,000
Mr P Dunai
30,625
Mr A Walsh
–
Mr J Killen
77,500
Mr B Burdett
80,000
Ms J Seabrook
20,000
Mr J Cameron
–
EXECUTIVES
Mr S Bland
170,500
Mr J Davies (c)
60,000
Ms K Gross
135,000
Mr A Rudy
Mr J Rudy
5,000
–
Mr D Walker
366,400
Ms T Vigilante
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
659,375
70,950
–
–
–
–
–
–
–
–
100,000
690,000
70,950
77,500
20,000
100,000
–
–
20,000
–
61,390
(11,500)
220,390
–
(60,000)
–
48,110
–
183,110
43,400
(48,400)
42,900
(42,900)
–
–
60,390
(9,530)
417,260
27,280
–
27,280
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Performance Rights issued by IRESS Market Technology Limited to directors and key management personnel, or to a
related party of them
OPENING UNVESTED
BALANCE
NO.
GRANTED AS
COMPENSATION
NO.
VESTED DURING THE
PERIOD
NO. (b)
CLOSING UNVESTED
BALANCE
NO.
2011
DIRECTORS (a)
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Mr P Ferguson
Ms K Gross
Mr D Walker
2010
DIRECTORS (a)
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Ms K Gross
Mr A Rudy
Mr J Rudy
Mr D Walker
Ms T Vigilante
200,000
281,000
123,690
55,850
–
99,170
115,690
759,375
207,950
138,390
65,000
108,110
88,400
89,400
130,390
9,280
–
(200,000)
–
300,000
(56,000)
525,000
31,040
15,430
–
28,520
32,710
(46,000)
(20,000)
–
(33,000)
(42,000)
–
(559,375)
125,000
(51,950)
31,690
15,850
28,170
19,370
23,770
31,690
17,610
(46,390)
(25,000)
(37,110)
(33,400)
(33,400)
(46,390)
(9,280)
108,730
51,280
–
94,690
106,400
200,000
281,000
123,690
55,850
99,170
74,370
79,770
115,690
17,610
(a)
(b)
(c)
During the year, other than as noted above, there were no outstanding performance rights issued to directors or a related
party of them.
Retired 5 May 2011
Upon vesting, performance rights are exercisable. With the exception of Mr Davies, all performance rights which vested
during the relevant year were exercised prior to the year end in both 2011 and 2010.
Details of the terms and conditions of the Employee Performance Rights plan are set out in Note 36.
No amounts remain outstanding on performance rights exercised during the year.
101
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Deferred shares /deferred share rights issued by IRESS Market Technology Limited to directors and key
management personnel, or to a related party of them (a)
OPENING UNVESTED
BALANCE
NO.
GRANTED AS
COMPENSATION
NO.
VESTED
DURING THE PERIOD
NO.
CLOSING UNVESTED
BALANCE
NO.
2011
DIRECTORS
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Mr P Ferguson
Ms K Gross
Mr D Walker
2010
DIRECTORS
Mr P Dunai
Mr A Walsh
EXECUTIVES
Mr S Bland
Mr J Davies
Ms K Gross
Mr A Rudy
Mr J Rudy
Mr D Walker
Ms T Vigilante
–
54,000
23,190
24,080
–
21,890
22,790
–
–
30,000
(25,000)
10,290
10,010
–
10,070
10,290
(13,000)
(13,000)
–
(11,500)
(12,000)
100,000
44,000
–
(100,000)
29,000
(19,000)
28,000
28,000
22,500
18,000
18,500
26,000
31,000
10,190
11,080
10,390
6,590
7,190
10,790
7,190
(15,000)
(15,000)
(11,000)
(10,000)
(9,500)
(14,000)
(18,000)
–
59,000
20,480
21,090
–
20,460
21,080
–
54,000
23,190
24,080
21,890
14,590
16,190
22,790
20,190
(a)
During the year, other than as noted above, there were no outstanding deferred shares or deferred share rights issued to
directors or a related party of them. With the exception of Mr Davies, directors and executives receive deferred shares.
102
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(c) Other transactions with Directors and key management personnel
During the year, there were no transactions with directors or key management personnel or their related parties
other than transactions associated with the director’s or key management personnel’s compensation or equity
holdings, which impacted on profit from ordinary activities before income tax, assets or liabilities.
35 SHARE BASED PAYMENTS
To assist in the attraction, retention and motivation of employees, the Company operates the following share based
payment plans:
the Employee Performance Rights Plan;
the Employee Deferred Share Plan; and
the Employee Deferred Share Rights Plan.
Summaries of the rules governing the above plans are set out in Notes 36 to 38 respectively.
The per unit fair value of share rights granted to directors, executives and staff during the financial year has been derived
based on the external valuation advice from PricewaterhouseCoopers Securities Limited. The valuation has been made
using a Monte Carlo simulation option pricing model using standard option pricing inputs such as the underlying stock
price, exercise price, expected dividends, expected risk free rates and expected share price volatility. In addition, the
likely achievement of performance hurdles of the share rights (where applicable) has been taken into account.
103
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Set out below are the fair values of share rights (which were derived by PricewaterhouseCoopers Securities Limited) and the key inputs used in the pricing model, which were available
during the year.
SERIES (a)
SHARE
PRICE ON
GRANT DATE
$
GRANT
DATE
FAIR VALUE
$
EXPECTED
VOLATILITY
%
DIVIDEND
YIELD
%
RISK-FREE
INTEREST
RATE
%
KEY
PERFORMANCE
MEASURE (b)
INTERIM
VESTING
TERM
MONTHS
INDICATIVE
VESTING
31/12/11
% (c)
VALID
OUTSTANDING
31/12/11
May 2008 PR
7/5/08
Aug 2008 PR
19/8/08
May 2009 PR
7/5/09
May 2009 DSR
7/5/09
May 2009 DS
7/5/09
May 2010 PR
7/5/10
May 2010 DSR
7/5/10
May 2010 DS
7/5/10
May 2011*4 PR
9/5/11
May 2011*3 PR
9/5/11
May 2011 PR
9/5/11
May 2011 DSR
9/5/11
May 2011 DS
9/5/11
6.26
6.15
6.52
6.52
6.52
8.34
8.34
8.34
9.23
9.23
9.23
9.23
9.23
3.85
3.69
3.90
6.00
6.52
5.68
7.67
8.34
5.79
5.87
5.96
8.49
9.23
35
35
35
35
4.3
4.3
4.3
4.3
6.4
5.7
3.9
3.6
N / A
N / A
N / A
35
35
4.3
4.3
5.0
4.7
N / A
N / A
N / A
30
30
30
30
N/A
4.3
4.3
4.3
4.3
N/A
5.2
5.2
5.2
5.1
N/A
A
A
A
B
B
A
B
B
A
A
A
B
B
No
No
No
No
No
No
No
No
No
No
No
No
No
36
36
36
24
24
36
24
24
48
48
36
24
24
100
100
77
100
100
56
100
100
–
–
–
–
–
–
–
299,000
–
–
377,650
71,280
561,570
150,000
150,000
267,640
69,810
576,160
(a)
(b)
(c)
PR refer Note 36, DS refer Note 37, DSR refer Note 38.
A denotes series is benchmarked on modified ASX200 index, B denotes series is measured on ongoing employment and acceptable performance.
Indicative vesting has been calculated based on ranking relative to the benchmark as at 31 December 2011. Actual vesting will be determined based on performance at the end
of the vesting period. Deferred shares and deferred share rights are assumed to fully vest for this analysis.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
The following table summarises movements in not-fully-vested share rights in place during the year.
HOLDER
INCENTIVE PLAN
DIRECTOR – P DUNAI
August 2008 PR
DIRECTOR – A WALSH
May 2008 PR
EXECUTIVES
STAFF
May 2009 PR
May 2009 DS
May 2010 PR
May 2010 DS
May 2011*4 PR
May 2011*3 PR
May 2011 DS
May 2008 PR
May 2009 PR
May 2009 DSR
May 2009 DS
May 2010 PR
May 2010 DSR
May 2010 DS
May 2011 PR
May 2011 DSR
May 2011 DS
May 2008 PR
May 2009 PR
May 2009 DSR
May 2009 DS
May 2010 PR
May 2010 DSR
May 2010 DS
May 2011 PR
May 2011 DSR
May 2011 DS
UNVESTED 1/1/11
OR GRANTED
DURING THE YEAR
’000
200
56
100
25
125
29
150
150
30
141
146
13
37
107
11
31
108
10
31
94
53
80
498
146
60
501
160
61
523
VESTED
’000
(200)
(56)
–
(25)
–
–
–
–
–
(141)
–
(13)
(37)
–
–
–
–
–
–
(94)
–
(80)
(490)
–
–
(2)
–
–
–
CANCELLED
’000
UNVESTED
31/12/11
’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
–
–
(19)
–
(1)
(8)
–
–
100
–
125
29
150
150
30
–
146
–
–
107
11
31
108
10
31
–
53
–
–
146
60
480
160
60
515
105
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
The following table sets out the share rights of directors, executives and staff exercised during the year and the weighted
average share price prevailing on the date of exercise.
2011
2010
INCENTIVE PLAN (a)
May 2005 PDPR
May 2006 PDPR
May 2006 PR
May 2007 PR
May 2008 PR
August 2008 PR
May 2008 DSR
May 2009 DSR
May 2008 DS
May 2009 DS
May 2010 DS
WEIGHTED
AVERAGE
SHARE PRICE
($)
QUANTITY
–
–
15,000
8,000
271,000
200,000
16,500
26,100
–
551,868
1,980
–
–
9.07
9.07
9.20
8.15
9.22
8.65
–
9.20
7.91
WEIGHTED
AVERAGE
SHARE PRICE
($)
8.19
8.19
7.88
8.08
–
–
8.72
–
8.34
–
–
QUANTITY
300,000
259,375
24,000
848,802
–
–
40,000
–
807,430
–
–
(a) Calculated as the weighted average closing share price on the date(s) the share rights were exercised during the year.
36 SUMMARY OF THE EMPLOYEE PERFORMANCE RIGHTS PLAN
On 7 May 2003, the IRESS Employee Performance Rights Plan (the PR Plan) was established to assist in the attraction,
retention and motivation of employees of the Company. This plan was modified on 26 March 2008 following the creation
of the IRESS Market Technology Equity Plan Trust (the Trust).
The key terms of the PR Plan are set out below.
GENERAL RULES
(a)
The PR Plan is open to full–time and part–time employees of an entity in the IRESS group.
(b)
(c)
(d)
(e)
The Board will determine the quantum of performance rights issued under the PR Plan.
The total number of unvested performance rights together with all other shares outstanding under the various
employee share plans, must not exceed 5% of the total number of issued shares in that class at the time of the
offer.
The PR Plan will be administered by the trustee in accordance with the instructions of the Board. The Board may
make further rules for the operation of the PR Plan which are consistent with the PR Plan.
The PR Plan provides for the possibility of accelerated vesting of performance rights upon the occurrence of a
specified ‘event’ (such as a takeover is made for the Company, a scheme of arrangement is proposed or the
Company is wound up).
(f)
Performance rights lapse in certain circumstances, including where:
i)
ii)
iii)
the performance criteria have not been satisfied within the required time period;
vested performance rights expire; or
an employee or consultant ceases their employment with the Company. Refer to i) below for further details.
106
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
(g) Where an employee leaves the Company, other than for a qualifying reason, all unvested rights lapse. Where an
employee leaves the Company as a result of a qualifying reason, performance rights granted in the last six months
lapse but remaining unvested rights vest on a pro–rata basis having regard to the period which has elapsed
between the issue of the performance rights to the employee and the employee leaving the Company. Finally, where
in the Board's view there are special circumstances under which it would be unfair not to allocate shares or the
cash equivalent to a departing employee, the Board has the capacity to make such an allocation of shares or cash.
(h)
The quantum of performance rights issued to an employee under the PR Plan are modified in accordance with
standard industry adjustments to reflect:
i)
ii)
a bonus issue; or
a reconstruction of the Company’s issued capital.
(i)
(j)
Performance rights will not be quoted on the ASX, however upon issuance of shares in accordance with the PR Plan
rules, the Company will immediately apply for quotation of those shares on the ASX.
The exercise price for a performance right holder to subscribe for and be allotted, credited as fully paid, shares
arising under the Plan, is $1, irrespective of the number of performance rights exercised on the applicable day. The
$1 fee is payable each time a performance right holder subscribes for shares under the Plan.
(k) During the ‘restriction period’, any share provided on the exercise of a performance right is held on trust by the
trustee. In addition to other restrictions the Board considers necessary to give effect to the restrictions, it may
place a holding lock on these shares.
(l)
Shares may be withdrawn from the Trust upon the submission and approval of a valid ‘withdrawal notice’.
PERFORMANCE CRITERIA
The following performance criteria shall apply to performance rights issued under the PR Plan.
Performance ranking
The Company’s performance ranking for a performance period is determined by reference to the total shareholder return
of the Company during the performance period as compared to the total shareholder return for each company in a peer
group of companies. The peer group of companies comprises the top 200 companies listed in the ASX/S&P 200
companies after excluding mining companies and listed property trusts. A peer company must have been in the ASX/S&P
200 companies for the entire performance period (i.e. new entrants and companies dropping out of the ASX/S&P 200
companies are excluded). The Company’s ranking within that group of companies at the end of the relevant performance
period determines the number of performance rights in the particular tranche that become exercisable (if any) on the
following basis.
PERFORMANCE RANKING RANGE
NUMBER OF PERFORMANCE RIGHTS EXERCISABLE.
Below 50th percentile
No rights exercisable.
50th percentile
50% of the rights in the tranche available to be exercised.
51st percentile to 74th percentile
Rights available in the tranche available to be exercised will be
determined on a pro–rata basis between 50% and 100% depending on the
Company’s percentile performance ranking.
75th percentile or higher
100% of rights in the tranche available to be exercised.
Total shareholder return in respect of a company in a performance period, is the increase in the value of a shareholder’s
investment in that company during the performance period, on the basis that all dividends and other returns grossed up
for franking credits, are immediately reinvested in the Company, at the closing price for the shares on the payment date
of the dividend or other return.
Tranches
Performance rights granted in 2005 and subsequent years become available for exercise at the end of the third year
based on the Company’s performance ranking for the performance period.
Performance rights granted in prior periods were eligible for exercise in tranches over three years.
107
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Performance period
For performance rights granted in 2005 and subsequent years the performance period is the period commencing on the
commencement date and ending three years after the commencement date.
TERMS OF THE RIGHTS
(a) Rights may be exercised during a two year period from the date on which they become exercisable and to the extent
they are not exercised within that period they will lapse.
(b) Should the performance criteria not be met in the performance period for that series, the Company’s ranking will be
retested on a monthly basis for up to 6 months after the end of the performance period for that series.
37 SUMMARY OF THE EMPLOYEE DEFERRED SHARE PLAN
On 26 March 2008, the IRESS Employee Share Plan (the Deferred Share Plan) was established. The Deferred Share plan
is broadly similar in operation to the Employee Performance Rights Plan outlined in Note 36.
Key areas of difference are as follows.
GENERAL RULES
(a) No exercise price is payable for a deferred share holder to subscribe for and be allotted, credited as fully paid,
shares arising under the Plan;
(b)
(c)
Participants are eligible to receive dividends and vote during the vesting period; and
The vesting term and performance criteria are stipulated in the individual offering.
VESTING TERM AND CRITERIA
Deferred shares granted in May 2008, 2009 and 2010 have a two year vesting period, and performance criteria requiring
satisfactory individual performance during the vesting period. There is no benchmarking against an external peer group of
companies with graduated vesting based on relative ranking, as is the case for performance rights.
38 SUMMARY OF THE EMPLOYEE DEFERRED SHARE RIGHTS PLAN
On 26 March 2008, the IRESS Employee Deferred Share Rights Plan (the Deferred Share Rights Plan) was established.
The Deferred Share Rights plan is very similar in operation to the Deferred Share Plan outlined in Note 37.
Key areas of difference are as follows.
GENERAL RULES
(a)
Participants are not eligible to receive dividends or vote during the vesting period.
VESTING TERM AND CRITERIA
Deferred shares rights granted in May 2008, 2009 and 2010 have a two year vesting period, and performance criteria
requiring satisfactory individual performance during the vesting period. As with deferred shares, there is no benchmarking
against an external peer group of companies or graduated vesting based on relative ranking, as is the case for
performance rights.
108
IRESS Market Technology Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
39 SUMMARY OF THE IRESS NON-EXECUTIVE DIRECTOR SHARE PLAN
The IRESS Non-Executive Directors share plan (‘NED Plan’) was established following the Company’s Annual General
Meeting in May 2008. As at 31 December 2011, and at the date of this report, no shares have been issued under the
NED plan. The key terms of the NED Plan are set out below.
GENERAL RULES
(a)
Participation in the NED Share Plan is voluntary.
(b)
(c)
The maximum proportion of a participating non-executive director’s remuneration which may be provided in the form
of shares is 50%.
It is currently proposed that shares will be allocated to participants for prescribed periods (either quarterly or half-
yearly) and in advance. If a participating director ceases to hold office during this period he or she will forfeit a pro
rata portion of shares for that period.
(d) Once allocated, the shares will be held in trust on behalf of participating directors in accordance with the terms of
the NED Share Plan until the earlier of:
i)
ii)
iii)
a prescribed period from the date of allocation;
cessation of office; or
the occurrence of a specified ‘event’ (such as a takeover is made for the Company, a scheme of arrangement
is proposed or the Company is wound up).
(e) During this period, participating directors will not be able to sell or otherwise deal in the shares.
(f) While the shares are held on trust, participating directors will be entitled to dividends and voting rights and may
enjoy other rights accruing to the shares in common with other shareholders (e.g. rights to participate in bonus and
rights issues).
(g)
If shares are not able to be provided to a participating director for any reason (e.g. because of legal impediments
applicable at the time), cash will be provided instead.
109
SHAREHOLDER INFORMATION
The following information reflects shareholdings at 31 January 2012.
DISTRIBUTION OF MEMBERS AND THEIR HOLDINGS
SIZE OF HOLDING
1
– 1,000
1,001 – 5,000
5,001 – 10,000
10,00 – 100,000
100,001 and over
NUMBER OF
ORDINARY
SHAREHOLDERS
2,296
3,034
623
343
33
SHARES
1,297,654
7,685,923
4,605,210
7,820,068
105,627,155
Total
6,329
127,036,010
NUMBER OF
PERFORMANCE
RIGHTS
HOLDERS
NUMBER OF
DEFERRED
SHARE
HOLDERS
NUMBER OF
DEFERRED
SHARE RIGHTS
HOLDERS
–
–
–
11
3
14
54
117
41
27
–
239
4
3
7
6
–
20
Number of shareholders with less than a marketable parcel
107
ORDINARY SHARE CAPITAL
127,036,010 fully paid ordinary shares are held by 6,329 shareholders
All issued ordinary shares carry one vote per share held
SHARE RIGHTS
1,244,290 performance rights held by 14 individual holders
1,117,170 deferred share held by 239 individual holders
141,090 deferred shares rights held by 20 individual holders
Only deferred shares carry a right to vote
TREASURY SHARES
23,200 treasury shares
Treasury shares have the right to vote and would be voted in accordance with the recommendation of the directors
110
IRESS Market Technology Limited
SHAREHOLDER INFORMATION
SUBSTANTIAL SHAREHOLDERS
ORDINARY SHAREHOLDERS
ASX Limited
Hyperion Asset Management Limited
Commonwealth Bank Group
BlackRock Investment Management (Australia) Limited
Total
FULLY PAID
NUMBER
PERCENTAGE
23,750,001
15,349,992
7,223,772
6,577,657
18.70%
12.08%
5.69%
5.18%
52,901,422
41.65%
TWENTY LARGEST SHAREHOLDERS OF QUOTED EQUITY SECURITIES
ORDINARY SHAREHOLDERS
ASX Ltd
JP Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited
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