Mortgage ChoiCe
annual report
2009
Mortgage ChoiCe liMited
ACN 009 161 979
contents
01
02
18
23
62
64
Corporate directory
Directors’ report
Corporate governance statement
Financial report
Independent auditor’s report to the members
Shareholder information
Corporate direCtory
for the year ended 30 June 2009
direCtors
Chief exeCutive
offiCer
p d ritchie
chairman
S J clancy
p G Higgins
r G Higgins
S c Jermyn
d e ralston
M i russell
seCretary
d M Hoskins
divisional general
Managers
notiCe of annual
general Meeting
prinCipal
registered offiCe
in australia
share register
auditor
soliCitors
Bankers
chief Financial officer
S r Mitchell
chief information officer
N c rose-innes
Head of Franchise distribution
d L ennis
Head of Human resources
M N Writer
the annual General Meeting
of Mortgage choice Limited
will be held at
the pavilion, Gallery Level
Star court – darling park
201 Sussex Street
Sydney NSW
time 10:00 am
date 24 November 2009
Level 10
100 pacific Highway
North Sydney NSW 2060
(02) 8907 0444
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
(02) 8280 7111
pricewaterhousecoopers
chartered accountants
darling park tower 2
201 Sussex Street
Sydney NSW 2000
Minter ellison
aurora place, 88 phillip Street
Sydney NSW 2000
aNZ Banking Group Limited
116 Miller Street
North Sydney NSW 2060
stoCk exChange
listing
Mortgage choice Limited shares are
listed on the australian Stock
exchange.
WeBsite address
www.mortgagechoice.com.au
corporate directory
1
direCtors’ report
for the year ended 30 June 2009
your directors present their report on the consolidated entity consisting of Mortgage choice Limited (“the company”) and the entities it
controlled at the end of, or during, the year ended 30 June 2009, hereafter referred to as “Mortgage choice”, “the Mortgage choice Group” or
“the Group”.
1. direCtors
the following persons were directors of Mortgage choice Limited during the whole of the financial year and up to the date of this report:
p d ritchie
p G Higgins
r G Higgins
S c Jermyn
d e ralston
S J clancy was appointed as a director on 18 May 2009 and continues in office at the date of this report.
p a Lahiff was a director from the beginning of the financial year until his resignation on 19 May 2009.
2. prinCipal aCtivities
during the year the principal continuing activity of the Mortgage choice Group was mortgage broking. this activity involves:
n
n
n
the provision of assistance in determining the borrowing capacities of prospective borrowers;
the assessment, at the request of those borrowers, of a wide range of home loan or other products; and
the submission of loan applications on behalf of prospective borrowers.
3. dividends
dividends paid or payable to members during the financial year are as follows:
a final ordinary dividend of $9.475 million (8.0 cents per fully paid share) was declared out of profits of the company for the year ended 30
June 2008 on 20 august 2008 and paid on 15 September 2008.
an interim ordinary dividend of $5.650 million (4.75 cents per fully paid share) was declared out of profits of the company for the half-year
ended 31 december 2008 on 25 February 2009 and paid on 23 March 2009.
a final ordinary dividend of $6.542 million (5.5 cents per fully paid share) was declared out of profits of the company for the year ended 30
June 2009 on 21 august 2009 to be paid on 16 September 2009.
4. revieW of operations
operational results for the year
the global credit crisis, which developed during 2007, has continued to affect the level of consumer demand for housing loans. as a
result, the value of Mortgage choice loan approvals fell on the whole as compared to the prior year. However, the robustness of
Mortgage choice’s franchise system combined with improving market conditions, including the impact of historically low interest rates
and the First Home owners Grant boost, resulted in a marked increase in the last few months of the financial year.
Loans approved – $m
change
Loans settled – #
change
Loans settled – $m
change
fy09
fy08
10,059
(8.2%)
33,646
(12.6%)
8,620
(9.8%)
10,958
(1.6%)
38,491
(5.0%)
9,560
0.4%
the decline in the level of market activity has had a direct impact not only in reducing settlements, from which Mortgage choice derives
origination commission, but also from the reduced level of refinancing and other activity, which affects the “run off” of Mortgage choice’s loan
book. a reduction in the rate of “run off” means a higher proportion of the aged loan book is retained than would otherwise be the case.
the Group’s loan book balance continued to grow. at 30 June 2009, the balance was $36.0 billion, a 5% increase on the 31 december
2008 and an 8% increase on the 30 June 2008 balance of $33.3 billion.
financial results for the year
the profit for the year reflects lower origination fee levels, which have resulted from the two fold pressure of a fall in settlement volumes
and the reduction in upfront fees implemented by a number of lenders throughout the year. trailing commissions for the year have been
reduced on the one hand by taking the present value of newly implemented reduced trail rates on new loans. But on the other hand the
reduction in run off rate has increased the value of future trailing commissions on the book as a whole.
at year end, the company performed a full actuarial review of the loan book and the assumptions used to estimate future trailing
commission. this review identified that the actual run-off rate experienced in the loan book has deviated notably from the assumed rate.
the loan book is experiencing a longer loan life than had been reflected in the balance sheet trailing commission receivable and
associated payable to date. in accordance with the Group’s accounting policy, the assumptions used to estimate future cash flows were
reassessed and a one-off, non-cash balance sheet adjustment of $15.6 million, after tax, was made to reflect the change in estimate.
this adjustment was recognised through the profit and loss for the year.
the effect of the adjustment is summarised below.
result for fy09
total revenue
result before tax
underlying
result
adJustMent to
loan Book assuMptions
total
result
30-Jun-09
$000’s
134,305
15,842
30-Jun-09
$000’s
$000’s
58,590
192,895
22,303
38,145
the Group will continue to review the assumptions used in estimating the future trailing commissions, as required in the Group’s
accounting policies, and recognise any changes in net assets in the period in which the review is performed.
the following summarises the results of the Group for the year ended 30 June 2009:
financial summary
total revenue
result before tax
year
ended
year
ended
30-Jun-09
30-Jun-08
$000’s
$000’s
192,895
161,391
38,145
27,675
directorS’ report
3
direCtors’ report Continued
strategy and plans for next year
Mortgage choice has developed a number of clear and measurable goals for this year and most importantly a strategic plan to deliver
them. the plan is codenamed dreaM, which is an acronym for:
n diversification – introduce new products to increase revenues, enhance customer retention and strengthen our duty of care to our
customers.
n recruitment – re-ignite recruitment initiatives for new franchisees while adding value for them, with green field sites a priority.
n existing franchises – foster initiatives to escalate their organic growth.
n acquisitions – identify acquisition opportunities that meet our benchmarks.
n Manage costs – continue diligent management of our cost base and work hard to create scalable business platforms.
5. signifiCant Changes in the state of affairs
except for the matters disclosed in the review of operations section of this annual report, there have been no significant changes in the state
of affairs of the consolidated entity.
6. Matters suBsequent to the end of the finanCial year
No matters or circumstances have arisen since 30 June 2009 that have significantly affected, or may significantly affect:
(a)
(b)
(c)
the Group’s operations in future financial years,
the results of those operations in future financial years, or
the Group’s state of affairs in future financial years.
7.
likely developMents and expeCted results of operations
information on likely developments in the operations of the Group and the expected results of operations have not been included in this report
because the directors believe it would be likely to result in unreasonable prejudice to the Group.
8. environMental regulation
the Group is not subject to any significant environmental regulation under a law of the commonwealth or of a State or territory in respect of
its activities.
9.
inforMation on direCtors
peter ritChie ao, BCoM, fCpa
independent non-executive Chairman
chairman of Nomination and
remuneration committees
peter is deputy chairman of Seven Network and chairman of reverse corp Limited. He
previously served as Managing director of Mcdonald’s australia from 1974 to 1995 and as
its chairman from 1995 to 2001. peter was a director of Westpac Banking corporation
from 1993 to 2002 and Solution 6 Holdings from 2000 to 2002. age 67.
peter higgins
non-executive director
Member of audit committee
rodney higgins
non-executive director
Member of Nomination and
remuneration committees
peter is co-founder of Mortgage choice. He currently serves as a director of technology
company power & data corporation pty Ltd, trading as Mainlinepower.com. Having been
successfully self-employed for over 25 years, peter is an investor in a diverse number of
industries covering manufacturing, agriculture, technology, property and finance. age 49.
rodney is co-founder of Mortgage choice. With a background in residential and
commercial property, sales and leasing, he has been a director of companies involved in
manufacturing, wholesaling, importing, retailing and finance. age 54.
deBorah ralston phd, faiCd, faiM, fCpa
independent non-executive director
Member of audit committee
deborah is director of the Melbourne centre for Financial Studies and professor of Finance at
Monash University. She was formerly pro Vice chancellor at the University of canberra and
has also been director of the centre for australian Financial institutions at the University of
Southern Queensland. deborah is a former director of Heritage Building Society. age 56.
steve JerMyn fCpa
independent non-executive director
chairman of audit committee
Steve joined Mcdonald’s australia in 1984 and joined the Board of directors in 1986. in June
1999, he was appointed deputy Managing director. Steve has been involved in all aspects of
the development of the Mcdonald’s restaurant business in australia and brings with him
significant experience in the development of new business and franchising. He retired from
Mcdonald’s australia in 2005. Steve is also a director of reverse corp Limited. age 60.
sean ClanCy dip Mkt
independent non-executive director
Member of audit committee
With a sales and marketing background across many industries including banking, fast
moving consumer goods, liquor, pharmacy, consumer electronics, telecommunications and
hardware, Sean brings a diverse range of knowledge and expertise to the Mortgage
choice Board. He is also a director of the Sydney australian Football Foundation. age 49.
paul lahiff BsC agr, faiM
Managing director
paul’s experience includes roles as Managing director of permanent trustee Limited and
Heritage Building Society, as well as senior executive roles with Westpac Banking
corporation and the credit union sector. He was responsible for managing Group
operations. age 56. resigned 19 May 2009.
the table below sets out the directors’ interests at 30 June 2009:
direCtor
p d ritchie
S J clancy
p G Higgins
r G Higgins
S c Jermyn
d e ralston
partiCulars of direCtors’ interests in share and options
350,125 ordinary shares.
Nil
5,822,939 ordinary shares
15,226,215 ordinary shares
2,000,000 ordinary shares
50,000 ordinary shares.
10. CoMpany seCretary
the company Secretary is Mr d M Hoskins B com, cpa, cSa. Mr Hoskins was appointed to the position of company Secretary in 2000.
Before joining Mortgage choice Limited he had experience in a variety of accounting and company secretarial functions, primarily in the
finance and insurance industries.
11. Meetings of direCtors
the numbers of meetings of the company’s Board of directors and of each board committee held during the year ended 30 June 2009, and
the numbers of meetings attended by each director were:
full Meetings of
direCtors
Meetings of CoMMittees
audit
nomination
remuneration
a
10
3
10
9
7
10
10
B
10
3
10
10
8
10
10
a
*
1
3
*
*
3
3
B
*
1
3
*
*
3
3
a
1
*
*
1
*
*
*
B
1
*
*
1
*
*
*
a
1
*
*
1
*
*
*
B
1
*
*
1
*
*
*
p d ritchie
S J clancy
p G Higgins
r G Higgins
p a Lahiff
S c Jermyn
d e ralston
a = Number of meetings attended
B = Number of meetings held
* = Not a member of the relevant committee
12. retireMent, eleCtion and Continuation in the offiCe of direCtors
in accordance with the constitution, peter ritchie and Steve Jermyn retire by rotation and, being eligible, offer themselves for re-election and
Sean clancy ceases to hold office at the annual General Meeting of the company and, being eligible, offers himself for election.
directorS’ report
5
direCtors’ report Continued
13. reMuneration report
the remuneration report is set out under the following main headings:
a
B
c
d
e
principles used to determine the nature and amount of remuneration
details of remuneration
Service agreements
Share-based compensation
additional information
the information provided in this remuneration report has been audited as required by section 308(3c) of corporations act 2001.
a
principles used to determine the nature and amount of remuneration
the objective of the company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. the framework aligns executive reward with the achievement of strategic objectives and the creation of value for
shareholders, and conforms with best practice. the Board ensures that executive reward satisfies the following key criteria for good
governance practices:
n competitiveness and reasonableness;
n acceptability to shareholders;
n performance linkage / alignment of executive compensation;
n
transparency; and
n capital management.
in consultation with external remuneration consultants, the company has structured an executive remuneration framework that is market
competitive and complimentary to the reward strategy of the organisation.
alignment to shareholders’ interests means the remuneration framework:
n has economic profit as a core component of the plan design;
n
focuses on sustained growth in share price; and
n attracts and retains high calibre executives.
alignment to program participants’ interests means the remuneration framework:
n
n
rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder value;
n provides a clear structure for earning rewards; and
n provides recognition for contribution.
the framework provides a mix of fixed and variable pay and a blend of short and long-term incentives. as executives gain seniority
within the Group, the balance of this mix shifts to a higher proportion of “at risk” rewards.
non-executive directors
Fees and payments to Non-executive directors reflect the demands that are made on, and the responsibilities of, the directors. Non-
executive directors’ fees and payments are reviewed annually by the Board. the Board has also sought independent research material
to ensure Non-executive directors fees and payments, including those of the chairman, are appropriate and in line with market. the
chairman’s fees are determined independently to the fees of Non-executive directors, based on comparative roles in the external
market. Non-executive directors do not receive share options.
directors’ fees
the base remuneration for the year ended 30 June 2009 was determined on 17 May 2005 and is based on the recommendations of
independent remuneration consultants. directors do not receive additional remuneration for representation on board committees.
Shareholders at the General Meeting on 5 april 2004 agreed to initially set the maximum aggregate remuneration of the Board
(excluding the Managing director and any executive director) at $750,000.
the following fees have been paid:
chairman
other Non-executive directors
froM 1 July 2009
froM 1 July 2008
to 30 June 2009
$119,900
$65,400
$119,900
$65,400
retirement allowances for directors
Non-executive directors do not receive retirement allowances. Superannuation contributions, as required under the australian
superannuation guarantee legislation, are paid on Non-executive directors’ remuneration and are included in the fees above.
executive pay
the executive pay and reward framework has three components:
n base pay and non-cash benefits;
n short-term incentives; and
n
long-term incentives through participation in executive and employee share-based plans.
the combination of these comprises an executive’s total remuneration. the company intends to revisit the incentives during the year
ending 30 June 2010.
Base pay
an executive’s base pay comprises a fixed cash salary plus superannuation. executives have an opportunity to salary sacrifice amounts
from their fixed salary towards a series of prescribed benefits and any associated fringe benefits tax.
executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay is reviewed annually in
conjunction with external consultants to ensure it is competitive with the market. an executive’s pay is also reviewed on promotion.
there are no guaranteed base pay increases in any senior executives’ contracts.
non-cash benefits
executives do not receive non-cash benefits in addition to base pay except in isolated circumstances approved by the Board or
remuneration committee.
short-term incentives
Should the Group achieve the profit target set by the Board each year, a pool of short-term incentive funds (“Sti”) is made available for
allocation during the annual review. any amounts awarded as Sti are payable in cash following the signing of the annual report each
year. Using a profit target ensures variable reward is available only when value has been created for shareholders and when this value
has been achieved in a manner consistent with the business plan. in addition, some executives have a target Sti opportunity based
solely on achieving a key performance indicator (“Kpi”) related to the accountabilities of the role and its impact on the organisation’s or
business unit’s performance. these Kpi’s are set annually by the executive and the Managing director or chief executive officer.
For senior executives, the maximum Sti opportunity ranges from 25% to 70% of their cash salary plus superannuation. However, from
time to time, bonuses are provided outside of this structure for special projects or in special circumstances.
each year, the remuneration committee reviews the appropriate profit target with which the Sti plan will be linked and the level of payout
if targets are met. this includes setting any maximum payout under the Sti plan and the minimum levels of profit performance to trigger
payment of Sti. the Sti payments may be adjusted up or down in line with under or over achievement against the target performance
levels at the discretion of the remuneration committee.
long-term incentives
Long-term incentives are provided in the form of share-based payments through the executive performance option plan (epop) and the
performance Share plan (pSp): see pages 10-14 for further information.
B
details of remuneration
amounts of remuneration
details of the remuneration of the directors and the key management personnel (as defined in aaSB 124 Related Party Disclosures) are
set out in the following tables.
the key management personnel of Mortgage choice Limited and the Group are the Non-executive directors of Mortgage choice
Limited, Managing director p a Lahiff (resigned as a Director 19 May 2009), the chief executive officer M i russell (from 23 April 2009),
and those executives that reported directly to the Managing director, or afterwards to the chief executive officer, during the year:
n S r Mitchell – Chief Financial Officer (from 27 February 2009)
n a d crossley – Chief Financial Officer (to 27 February 2009)
n M c Newton – Chief Operating Officer (to 15 May 2009)
n N c rose-innes – Chief Information Officer
n d L ennis – Head of Franchise Distribution
n L a Wyatt – Head of Marketing (to 17 October 2008)
n d M Hoskins – Company Secretary
n W J o’rourke – National Manager Corporate Affairs (to 17 October 2008)
n M N Writer – Head of Human Resources
in addition, d a player, National Lending Manager (to 12 June 2009) must be disclosed under the Corporations Act 2001 as she is
among the 5 highest remunerated Group executives.
Subsequent to year end, p a Lahiff resigned from the company effective 1 July 2009.
directorS’ report
7
direCtors’ report Continued
key management personnel of Mortgage Choice limited
short-terM Benefits
Cash
salary
and fees
$
non-
monetary
benefits
$
sti
$
post-
eMployMent
Benefits
long-
terM
Benefits
super-
annuation
$
long
service
leave
$
termination
benefits
$
share-
Based
payMents
shares,
rights &
options1
$
–
–
–
–
–
–
–
9,900
658
5,400
5,400
5,400
5,400
32,158
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
total
$
119,900
7,966
65,400
65,400
65,400
65,400
389,466
9,405
45,518
34,078
735,928
(443,439)
887,248
–
–
–
–
–
–
–
–
–
–
8,507
–
20,631
6,755
7,490
20,124
15,596
9,762
–
632
1,719
9,845
–
–
–
–
–
32,918
142,268
33,796
291,604
–
96,648
23,707
24,653
268,063
215,258
120,365
6,748
309,183
24,883
12,915
230,122
(7,698)
536,695
16,756
(4,050)
93,600
(69,167)
223,313
5,132
(1,125)
33,225
10,299
104,553
5,344
6,559
136,545
12,220
220,051
110,000
7,308
60,000
60,000
60,000
60,000
357,308
505,758
100,843
230,422
89,158
223,600
–
–
–
–
–
–
–
–
–
–
–
–
161,200
12,090
162,463
–
235,973
40,500
186,174
57,022
59,383
–
–
–
2009
name
Non-Executive Directors
p d ritchie
Chairman
S J clancy
(from 18/5/09 to 30/6/09)
p G Higgins
r G Higgins
S c Jermyn
d e ralston
sub-total
non-executive
directors
Executive Directors
p a Lahiff 2
Managing Director
(from 1/7/08 to 19/5/09)
M i russell 4
Chief Executive Officer
(from 23/4/09- 30/6/09)
Other key management
personnel
d L ennis 3
S r Mitchell
(from 27/2/09 to 30/6/09)
N c rose-innes 3
M N Writer
d M Hoskins 3, 5
M c Newton 3
(from 1/7/08 to 15/5/09)
a d crossley
(from 1/7/08 to 27/2/09)
L a Wyatt
(from 1/7/08 to 17/10/08)
W J o’rourke
(from 1/7/08 to 17/10/08)
total key management
personnel
compensation
Other Company and
Group executives
d a player 3
(from 1/7/08 to 12/6/09)
2,369,304
52,590
9,405
211,901
67,328
1,349,785
(375,963)
3,684,350
175,171
–
–
15,765
11,917
83,378
32,744
318,975
1. remuneration in the form of rights and options includes negative amounts for rights and options forfeited during the year.
2. p a Lahiff’s employment terminated effective 1 July 2009, whereby his unvested options lapsed. His termination benefits include payment in
lieu of notice and payment for past services.
3. denotes one of the 5 highest paid executives of the company as required to be disclosed under the Corporations Act 2001.
4. M i russell received 2.5m options in the 1 May 2009 grant in conjunction with accepting the role of chief executive officer as of 23 april 2009.
5. d M Hoskins ceased to be an employee on 31 december 2008 after which his services were provided through the Governance practice
pty Limited. payments to this entity are included in the above table.
key management personnel of Mortgage Choice limited
short-terM Benefits
Cash
salary
and fees
$
non-
monetary
benefits
$
sti
$
post-eMployMent
Benefits
super-
annuation
$
retirement
benefits
$
long-
terM
Benefits
share-
Based
payMents
long
service
leave
$
shares
rights &
options 1
$
total
$
2008
name
Non-Executive Directors
p d ritchie
Chairman
p G Higgins
r G Higgins
S c Jermyn
d e ralston
sub-total non-executive
directors
Executive Directors
p a Lahiff
Managing Director
Other key management
personnel
a d crossley 2
a J Fraser
M c Newton 2
N c rose-innes
d L ennis 2
L a Wyatt
d M Hoskins 2
W J o’rourke 2
M N Writer
110,000
60,000
60,000
12,000
60,000
302,000
–
–
–
–
–
–
–
–
–
–
–
–
9,900
5,400
5,400
53,400
5,400
79,500
485,821
350,000
16,838
67,500
270,000
108,000
20,524
246,304
169,519
–
87,750
50,716
181,856
50,782
174,939
45,900
186,279
112,997
51,660
47,583
136,861
38,750
–
–
4,085
–
16,208
3,000
24,545
11,197
4,085
31,590
6,464
48,208
14,885
19,903
19,348
22,263
86,257
28,942
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
119,900
65,400
65,400
65,400
65,400
381,500
6,091
413,246 1,339,496
2,154
81,334
493,078
–
(42,420)
(15,432)
10,606
59,344
456,297
–
14,222
249,342
2,336
847
5,551
6,481
875
26,076
297,161
20,498
264,532
32,075
322,373
29,298
293,813
22,447
231,960
34,941
656,120
4,314,120
total key management
personnel compensation
2,287,100
831,141
79,958
424,860
the 2008 comparatives include salary sacrifice components as non-monetary benefits or superannuation where relevant. in 2009 these are
included in cash salary and fees.
1. remuneration in the form of rights and options includes negative amounts for rights and options forfeited during the year.
2. denotes one of the 5 highest paid executives of the company, as required to be disclosed under the Corporations Act 2001.
directorS’ report
9
direCtors’ report Continued
the relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
naMe
fixed
reMuneration
at risk – sti
at risk – lti
2009
2008
2009
2008
2009
2008
Executive Directors of Mortgage Choice Limited
p a Lahiff
100%
43%
Other key management personnel of Group
M i russell
d L ennis
S r Mitchell
N c rose-innes
M N Writer
d M Hoskins
M c Newton
a d crossley
L a Wyatt
W J o’rourke
Other Company and Group executives
d a player
C
serviCe agreeMents
77%
88%
100%
91%
83%
98%
92%
100%
90%
94%
–
74%
–
74%
74%
74%
68%
62%
75%
74%
90%
74%
–
–
–
–
–
6%
–
8%
–
–
–
–
26%
–
31%
–
17%
–
20%
17%
16%
19%
22%
17%
16%
23%
12%
–
9%
11%
2%
–
–
10%
6%
–
9%
–
6%
10%
10%
13%
16%
8%
10%
16%
10%
10%
on appointment to the Board, all Non-executive directors enter into a service agreement with the company in the form of a letter of
appointment. the letter summarises the Board policies and terms, including compensation, relevant to the director.
remuneration and other terms of employment for the Managing director, the chief executive officer and other key management
personnel are set out in their respective letters of employment. the employment terms do not prescribe the duration of employment for
executives, other than for the chief executive officer who has a set term of employment of two years and for d M Hoskins (after 31
December 2008) who has a set term of one year. the periods of notice required to terminate employment are set out below:
n the employment contracts of Messrs Lahiff, russell, rose-innes, crossley, Newton, Hoskins (up to 31 December 2008) and
Ms Mitchell are terminable by either the company or the executive with three months notice.
n the employment contracts of Messrs o’rourke, Writer, Ms ennis and Ms Wyatt are terminable by either the company or the
executive with four weeks notice and in the case of Ms player, one month notice.
except as set out below, no provision is made for termination payments other than amounts paid in respect of notice of termination:
n the employment terms of Messrs crossley, Newton and Hoskins (up to 31 December 2008) provide for a non-competition
termination benefit equal to 6 months base salary where departure is for any reason other than misconduct.
n Mr Lahiff’s employment terms provide that in the event of the sale of the company’s business or corporate restructure, subject to
certain conditions relating to length of service, Mr Lahiff will become entitled to a severance payment equivalent to 12 months
base salary, less any amounts paid in respect of notice of termination under the terms of his employment.
n Mr russell’s employment terms provide that, in the event of the sale of the company’s business or corporate restructure, subject
to certain conditions relating to length of service, Mr russell will become entitled to a severance payment equivalent to 6 months
base salary, less any amounts paid in respect of notice of termination under the terms of his employment.
d
share-Based CoMpensation
executive performance option plan (epop)
the executive performance option plan may be offered on an annual basis to eligible executives as determined by the Board. the details
of each offer may differ as to the particulars, especially with regard to performance criteria and performance period. participation in the
epop provides one component of the long-term incentive available to the selected executives within their aggregate remuneration package.
Under the terms of the epop, options are offered over one ordinary share and have an exercise price based on the market value of the
company’s shares at the time of offer. Market value will be the trade-weighted average price of the company’s shares over the one-
week period immediately preceding the date of offer.
the options offered to executives under the epop are subject to performance conditions set by the Board. in the year ending 30 June
2009, options were offered on 2 october 2008, 20 November 2008 and 1 May 2009. in relation to options offered in october and
November 2008, the performance requirement is based on the total shareholder return (tSr) of the company as compared to the tSr
of a comparator group of companies for a three year period. the performance requirement for the options offered in May 2009 is tenure
based over a two year period.
With regard to the options using tSr as the basis of the performance criteria, the tSr is the percentage increase in the company’s
share price plus reinvested dividends, expressed as a percentage of the initial investment, and reflects the increase in value delivered to
shareholders over the period. the company’s tSr will be compared to the tSrs of companies in a comparator group comprised of
selected S & p aSX top 300 companies of broadly similar size to that of Mortgage choice, excluding mining and resource companies,
as well as property related trusts or companies. the market capitalisation of the companies in the comparator group are within an
approximate range of 40% to 200% of the market capitalisation of the company.
the comparator group for the year ending 30 June 2009 comprises: allco Finance Group Limited, austin engineering Limited, aSG
Group Limited, australian Vintage Ltd, avexa Limited, amazing Loans Limited, Becton property Group, Biota Holdings Limited, Bravura
Solutions Limited, codan Limited, costaexchange Ltd, clean Seas tuna Limited, customers Limited, cedar Woods properties Limited,
coote industrial Ltd, dKN Financial Group Limited, dWS advanced Business Solutions Limited, dyesol Limited, eservglobal Limited,
Forest place Group Limited, Finbar Group Limited, Flexigroup Limited, Grd Limited, Gazal corporation Limited, infomedia Ltd,
Keybridge capital Limited, Maryborough Sugar Factory Limited, orotongroup Limited, pro Medicus Limited, Quantum energy Limited,
rcr tomlinson Limited, regional express Holdings Limited, resource Generation Limited, retail Food Group Limited, rp data Ltd,
Specialty Fashion Group Limited, Sp telemedia Limited, Sirtex Medical Limited, Structural Systems Limited, Southern cross electrical
engineering Ltd, tox Free Solutions Limited, thinksmart Limited, Universal Biosensors inc., United overseas australia Limited, Vision
Group Holdings Limited, Viridis clean energy Group, VdM Group Limited, Webjet Limited, Wilson HtM investment Group Ltd, Wattyl
Limited.
if any of the companies in the comparator group ceases to exist in its current form for any reason other than its liquidation, or if the
Board determines in its discretion that a company should no longer be in the comparator group because of an anomaly, distortion or
other event that is not directly related to the financial performance of that company, that company will cease to form part of the
comparator group.
options will not become exercisable at the end of the three year performance period unless Mortgage choice’s tSr for the period is
above the 50th percentile of the tSr of the comparator group. above the 50th percentile, options will vest and become exercisable in
accordance with the following vesting scale:
CoMpany perforManCe (tsr perCentile ranking)
perCentage of offered options alloCated
at or below the 50th percentile
at the 51st percentile
75th percentile or above
0%
52%
100%
Between the 51st percentile and 75th percentiles, an additional 2% of options will vest for every percentile increase in tSr ranking.
the rules of the epop permit the company to issue new shares or to purchase shares on-market for the purposes of satisfying the
exercise of options.
any options which do not become exercisable following the application of the performance condition and vesting scale will lapse. an
option that has become exercisable but is not exercised will lapse on the earlier of:
n
n
ten years after the date of offer;
three months, or such other period determined by the Board, after the participant ceases employment for a reason other than a
‘qualifying reason’ (i.e. death, total and permanent disability, redundancy, or any other reason determined by the Board); and
n
twelve months, or such other period determined by the Board, after the participant ceases employment for a ‘qualifying reason’.
When a participant ceases to be employed by the company prior to the end of the performance period, other than because of a
‘qualifying reason’, any options that have not become exercisable will lapse. However, if there is cessation of employment due to a
‘qualifying reason’, the Board may determine that some or all of the options may vest. in the event of a change of control of the
company, options will vest on a pro-rata basis or in their entirety for certain senior executives.
if the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment or discrimination, is
in serious breach of any duty to Mortgage choice, or, in the Board’s reasonable opinion, has brought Mortgage choice into serious
disrepute, any options held by the participant will lapse.
the terms and conditions of each grant of options affecting remuneration in the current year are as follows:
date vested and
exerCisaBle
expiry date
exerCise priCe
value per option at
grant date
grant date
2 September 2005
29 december 2006
22 November 2007
2 october 2008
From 3 September 2008 2 September 2015
From 31 august 2009
29 december 2016
From 31 august 2010
22 November 2017
From 29 august 2011
2 october 2018
20 November 2008
From 29 august 2011
20 November 2018
1 May 2009
1 May 2009
1 May 2009
From 22 May 2009
From 22 april 2010
From 22 april 2011
1 May 2019
1 May 2019
1 May 2019
$1.43
$2.60
$2.51
$1.12
$1.12
$0.76
$0.76
$0.76
$0.28
$0.67
$0.50
$0.18
$0.18
$0.03
$0.03
$0.03
offers made under the plan rules contain a restriction on removing the ‘at risk’ aspect of the instruments granted to executives. plan
participants may not enter into any transaction designed to remove the ‘at risk’ aspect of an instrument before it vests.
directorS’ report
11
direCtors’ report Continued
details of options over ordinary shares in the company provided as remuneration to each director and key management personnel of
the company are set out below. When exercisable, each option is convertible into one ordinary share of Mortgage choice Limited.
Further information on the options is set out in note 32 to the financial statements.
naMe
Directors of Mortgage Choice Limited
p a Lahiff
Other key management personnel
a d crossley
M c Newton
M i russell
nuMBer of options
granted during the year
nuMBer of options
vested during the year
2009
2008
2009
2008
3,396,250
1,200,000
229,014
323,200
–
216,000
491,050
2,500,000
–
–
69,444
58,806
900,000
81,800
92,200
–
No options have been issued since the end of the year to the date of this report.
the assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting
date, and the amount is included in the remuneration tables on pages 9 and 10 of this report. Fair values at grant date are independently
determined using a Monte carlo simulation model utilising a Black-Scholes option pricing model framework that takes into account the
exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option,
the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option.
the model inputs for options granted during the year ended 30 June 2009 included:
(a) options are granted for no consideration, each tranche vests and is exercisable three years from grant date
(2 october 2008 and 20 November 2008) or on scheduled vesting dates (1 May 2009);
(b) exercise price: $1.12 (2 october 2008 and 20 November 2008), $0.76 (1 May 2009) (2008 - $2.51);
(c) grant date: 2 october 2008, 20 November 2008 and 1 May 2009 (2008 – 22 November 2007);
(d) expiry date: 2 october 2018, 20 November 2018 and 1 May 2019 (2008 – 22 November 2017);
(e) share price at grant date: $1.12 (20 october 2008 and 20 November 2008), $0.75 (1 May 2009) (2008 - $2.49);
(f) expected price volatility of the company’s shares: 34% (2008 – 30%);
(g) expected dividend yield: 10.0% (2 october 2008 and 20 November 2008), 13.9% (1 May 2009) (2008 –6.5%); and
(h)
risk-free interest rate: 5.59% (2 october 2008 and 20 November 2008), 4.51% (1 May 2009) (2008 – 5.97%).
shares provided on exercise of remuneration options
No shares were issued as a result of the exercise of options during the year ended 30 June 2009 (2008 – nil).
performance share plan (“psp”)
the pSp permits eligible employees as identified by the Board to be offered conditional entitlements to shares. the shares allocated to
those employees are subject to the achievement of performance requirements specified by the Board. the pSp is designed to provide
the long-term incentive component of remuneration for managers and any other designated employees.
participation in the pSp is offered on an annual basis. eligible employees are offered shares to a value determined by reference to the
company’s reward policy and market practice with regard to long-term incentive arrangements provided by peer organisations. the
performance requirements and vesting scale applicable to offers under the pSp during the year ended 30 June 2009 are identical to
those specified under the executive performance option plan for options using tSr as the basis of their performance criteria. the right
to receive performance shares will lapse if the performance criteria have not been met at the end of the performance period.
the rules of the pSp permit the company to issue new shares or to purchase shares on-market if the performance requirements are
satisfied at the end of the three-year performance period. participants are not required to pay for shares allocated to them under the
pSp. Until the shares are released from the pSp, they will remain subject to the plan rules including the ‘holding lock’ applied pursuant to
those rules and the participant is restricted from trading in those shares.
Shares will not be released from the pSp and will remain subject to a holding lock until a Notice of Withdrawal approved by the Board is
lodged with the plan administrator in respect of them. once a Notice of Withdrawal is accepted, the plan administrator will release the
holding lock in respect of the shares which are the subject of that Notice.
a Notice of Withdrawal may be lodged by a participant following the earlier of:
n 1 July in the year (being a period commencing 1 July and ending 30 June) that is ten years after the year in which the offer is
made and is accepted by the participant;
n
the participant ceasing to be an employee of the company;
n a ‘capital event’ (generally, a successful takeover offer or scheme of arrangement relating to the company) occurring; or
n
the date upon which the Board gives its written consent to the lodgement of a Notice of Withdrawal by the participant.
While shares remain subject to the pSp rules, participants will, in general, enjoy the rights attaching to those shares (such as voting or
dividend rights etc).
Where a participant ceases to be employed by the company prior to the end of the performance period, other than because of a
‘qualifying reason’ (i.e. death, total and permanent disability, redundancy, or any other reason determined by the Board), any conditional
entitlements to receive shares will lapse. However, in the event of a change in control of the company or if there is cessation of
employment due to a ‘qualifying reason’, the Board may determine that some or all of the shares may be allocated to the participant.
if the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment or discrimination, is
in serious breach of any duty to Mortgage choice, or, in the Board’s reasonable opinion, has brought Mortgage choice into serious
disrepute, any shares to which the participant may have become entitled at the end of the performance period, and any shares held by
the participant under the pSp are forfeited by the participant.
the terms and conditions of each offer of performance shares affecting remuneration in this or future reporting periods are as follows:
offer date
value per perforManCe share at offer date
vesting date
2 September 2005
12 december 2006
31 august 2007
31 august 2008
$1.43
$2.21
$2.20
$1.00
2 September 2008
31 august 2009
31 august 2010
31 august 2011
details of performance shares in the company provided as remuneration to each director and key management personnel are set out
below. Further information on the performance shares is set out in note 32 to the financial statements.
naMe
Directors of Mortgage Choice Limited
p a Lahiff
Other key management personnel
d L ennis
N c rose-innes
M N Writer
d M Hoskins
M c Newton
a d crossley
L a Wyatt
W J o’rourke
nuMBer of
perforManCe
share rights
granted during
the year
nuMBer of
perforManCe
shares issued
during the year
2009
2008
2009
2008
–
–
44,982
97,000
53,550
23,100
10,098
24,000
33,700
29,300
–
20,250
17,600
7,668
–
–
23,500
33,780
33,900
39,900
38,156
112,750
–
13,662
27,600
24,500
–
20,850
16,915
21,650
30,800
30,800
–
–
–
–
Other Company and Group executives
d a player
23,150
20,300
48,966
30,500
the assessed fair value at grant date of share rights granted to individuals is allocated equally over the period from grant date to vesting
date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a
Monte carlo simulation model utilising a Black-Scholes option pricing model framework that takes into account the term of the rights,
the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the rights, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the share rights.
the model inputs for performance shares granted during the year ended 30 June 2009 included:
(a) share rights are granted for no consideration, each tranche vests and is exercisable three years after grant date;
(b) grant date: 11 September 2008 (2008 – 31 august 2007);
(c) share price at grant date: $1.12 (2008 – $2.49);
(d) expected price volatility of the company’s shares: 40% (2008 – 30%);
(e) expected dividend yield: 10.0% (2008 – 6.5%); and
(f)
risk-free interest rate: 5.54% (2008 – 5.97%).
directorS’ report
13
direCtors’ report Continued
shares provided on vesting of performance share entitlements
details of shares issued in the company as a result of the vesting of performance share entitlements during the year ended 30 June
2009 are set out below.
naMe
vesting date
2009
2008
nuMBer of
ordinary shares
issued on vesting
of share rights
Directors of Mortgage Choice Limited
p a Lahiff
p a Lahiff
Other key management personnel
d L ennis
d L ennis
M N Writer
d M Hoskins
d M Hoskins
d M Hoskins *
M c Newton
M c Newton
M c Newton *
a d crossley
a d crossley
L a Wyatt *
W J o’rourke
W J o’rourke
W J o’rourke *
Other Company and Group executives
d a player
d a player
d a player*
10 august 2007
–
97,000
2 September 2008
44,982
–
10 august 2007
2 September 2008
2 September 2008
10 august 2007
2 September 2008
31 december 2008
10 august 2007
2 September 2008
18 May 2009
24 February 2008
2 September 2008
17 october 2008
10 august 2007
–
24,000
10,098
7,668
–
–
–
33,900
14,148
19,632
–
–
–
27,600
11,556
26,600
–
–
–
24,500
13,662
16,915
–
–
–
30,800
2 September 2008
17 october 2008
12,852
17,948
–
–
10 august 2007
2 September 2008
12 June 2009
–
30,500
12,366
36,600
–
–
* denotes partial vesting of entitlement prior to original vesting date due to termination of employment.
e
additional inforMation
performance of Mortgage Choice limited
the remuneration of key management personnel includes short-term incentives (Sti), as detailed in Section a Principles used to
determine the nature and amount of remuneration, and long-term incentives (Lti) as detailed in Section d Share-based compensation.
payments made under the Sti plan are conditional upon the company achieving a pre-determined profit target. the following table lists
Mortgage choice Limited’s earnings per share (epS) since listing on the aSX in august 2004:
year
2005
2006
2007
2008
2009
eps (Cents per share)*
10.9
15.2
16.6
16.4
22.6
* Until 30 June 2005, earnings per share were calculated in accordance with australian Gaap as opposed to australian equivalents to
international Financial reporting Standards (aiFrS).
payments made under the Lti plan are based on the total shareholder return (tSr) of the company over a three year period compared
to the tSrs of comparator groups of companies. tSr is the percentage increase in the company’s share price plus reinvested
dividends and reflects the increase in value delivered to shareholders over the period. the following table lists Mortgage choice
Limited’s tSr since listing on the aSX in august 2004 expressed as a percentage of the opening value of the investment for each
period:
year
2005
2006
2007
2008
2009
tsr
24%
117%
34%
-61%
-20%
details of remuneration: cash bonuses, share rights and options
For each cash bonus and grant of share rights and options in the tables on pages 8-9 and 11-14, the percentage of the available grant
that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service
and performance criteria is set out below. the share rights and options vest at the end of a set period of up to three years, providing
vesting conditions are met. No share rights or options will vest if the conditions are not satisfied, hence the minimum value of the share
rights and options yet to vest is nil. the maximum value of the share rights and options yet to vest has been determined as the amount
of the grant date fair value of the share rights and options that is yet to be expensed.
sti
share rights and options
paid
%
forfeited
%
financial
year
granted
vested
%
forfeited
%
financial
years in
which
rights and
options may
vest
Minimum
total value
of grant yet
to vest
$
Maximum
total value
of grant yet
to vest
$
name
p a Lahiff
M i russell
d L ennis
S r Mitchell
N c rose-innes
M N Writer
–
–
–
–
–
30
100
–
100
100
100
70
d M Hoskins
–
100
M c Newton
46
54
a d crossley
L a Wyatt
W J o’rourke
d a player
–
–
–
–
100
100
100
100
2009
2008
2007
2006
2009
2009
2009
2009
2008
2007
2006
–
2009
2008
2009
2008
2007
2006
2009
2008
2007
2006
2009
2008
2007
2006
2009
2008
2007
2006
2009
2008
2007
2009
2008
2007
2006
2009
2008
2007
2006
–
–
–
54
–
–
100
–
–
–
54
–
–
–
–
–
–
54
–
33
67
54
–
67
–
54
–
–
–
54
–
33
67
–
33
67
54
33
67
100
54
100
100
100
46
–
–
–
–
–
–
46
–
–
–
–
–
–
46
–
67
33
46
100
33
100
46
100
100
100
46
–
67
33
–
67
33
46
67
33
–
46
30/6/2012
30/6/2011
30/6/2010
–
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
–
–
30/6/2012
30/6/2011
30/6/2012
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
30/6/2012
30/6/2011
30/6/2010
–
30/6/2012
30/6/2011
30/6/2010
–
directorS’ report
Nil
Nil
Nil
–
Nil
Nil
–
Nil
Nil
Nil
–
–
Nil
Nil
Nil
Nil
Nil
–
Nil
Nil
Nil
–
Nil
Nil
Nil
–
Nil
Nil
Nil
–
Nil
Nil
Nil
Nil
Nil
Nil
–
Nil
Nil
Nil
–
–
–
–
–
10,027
32,055
–
27,509
15,737
1,335
–
–
17,312
19,961
10,403
11,990
1,503
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15
direCtors’ report Continued
share based compensation: options
Further details relating to options are set out below.
naMe
p a Lahiff
M i russell
M c Newton
a d crossley
a
reMuneration
Consisting of
options
B
value at
grant date
$
C
value at
exerCise date
$
d
value at
lapse date
$
–
34.1%
–
–
611,325
75,000
88,389
–
–
–
–
–
–
–
–
–
share based compensation: performance shares
Further details relating to performance shares are set out below.
naMe
p a Lahiff
d L ennis
N c rose-innes
M N Writer
d M Hoskins
M c Newton
a d crossley
L a Wyatt
W J o’rourke
d a player
a
reMuneration
Consisting of
perforManCe
shares
B
value at
offer date
$
C
value at
entitleMent date
$
d
value at
lapse date
$
0.5%
11.6%
8.8%
11.5%
2.2%
5.3%
0.6%
9.9%
5.6%
10.3%
–
38,021
23,927
14,378
–
–
80,053
–
–
16,437
51,729
11,613
–
8,818
31,191
35,766
15,711
14,885
30,574
48,259
44,066
9,892
–
7,512
30,251
22,559
13,384
16,619
30,016
32,760
a = the percentage of the value of remuneration consisting of options or performance shares, based on the value of options or
performance shares expensed during the current year. if options expensed in a prior period are reversed as the result of an
employee leaving before the vesting date this information is not meaningful and therefore is not shown.
B = the value at grant date calculated in accordance with aaSB 2 Share-based Payment of options or performance shares granted
during the year as part of remuneration.
c = the value at exercise date of options that were granted as part of remuneration and were exercised during the year. the value at
entitlement date of shares is calculated as the number of shares vested at the closing price on the day.
d = the value at lapse date of options and performance shares that were granted as part of remuneration and that lapsed during the
year because a vesting condition was not satisfied. the value is determined at the time of lapsing as if all conditions were satisfied
and the instruments were able to be traded. the value of a lapsed option is calculated as the closing price of Mortgage choice
Limited shares on the lapse date less the exercise price. Where the exercise price is greater than the share price, the value is nil.
the value of a share is determined by the closing share price on the day of lapse.
shares under option
Unissued ordinary shares of Mortgage choice Limited under option at the date of this report are as follows:
date options granted
expiry date
exerCise priCe
10 august 2004
2 September 2005
1 May 2009
10 august 2014
2 September 2015
1 May 2019
$1.05
$1.43
$0.76
nuMBer under
option
415,400
287,820
2,500,000
3,203,220
No option holder has any right under the options to participate in any other share issue of the company or any other Group entity.
14.
insuranCe of direCtors and offiCers
insurance premiums were paid for the year ended 30 June 2009 in respect of directors’ and officers’ liability and legal expenses for
directors and officers of the company and all controlled entities. the insurance contract prohibits disclosure of the premium paid. the
insurance premiums relate to:
n costs and expenses incurred by relevant directors and officers in defending any proceedings; and
n other liabilities that may arise from their position, with the exception of conduct involving dishonesty, wrongful acts, or improper
use of information or position to gain personal advantage.
Since the end of the previous financial year, the company has not indemnified or made a relevant agreement for indemnifying against a
liability any person who is or has been an officer or auditor of the company.
15. proCeedings on Behalf of the CoMpany
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the
company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave
of the court under section 237 of the Corporations Act 2001.
16. non-audit serviCes
the company may decide to employ the auditor on assignments in addition to their statutory audit duties where the auditor’s expertise
and experience with the company or Group are important.
the Board of directors has considered the position and, in accordance with the advice received from the audit committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. the directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 as none of the services undermine the general
principles relating to auditor independence as set out in apeS 110 Code of Ethics for Professional Accountants.
details of the amounts paid or payable to the auditor (pricewaterhousecoopers) for audit and non-audit services provided during the
year are set out below.
1.
Audit services
pricewaterhousecoopers australian firm:
audit and review of financial reports
total remuneration for audit services
2.
Non-audit services
Audit-related services
pricewaterhousecoopers australian firm:
other assurance services
total remuneration for audit-related services
Taxation services
pricewaterhousecoopers australian firm:
tax compliance services
other tax services
total remuneration for taxation services
total remuneration for non-audit services
17. auditor
Consolidated
2009
$
2008
$
227,940
215,500
227,940
215,500
7,500
7,500
7,500
7,500
24,885
22,200
13,205
75,780
38,090
97,980
45,590
105,480
pricewaterhousecoopers continues in office in accordance with section 327 of the Corporations Act 2001
18. auditor’s independenCe deClaration
a copy of the auditor’s independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 22.
19. rounding
the company is of a kind referred to in class order 98/100 issued by the australian Securities & investments commission, relating to
the “rounding off” of amounts in the directors’ report. amounts in the directors’ report have been rounded off in accordance with that
class order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
this report is made in accordance with a resolution of the directors.
peter ritchie
director
Sydney
21 august 2009
directorS’ report
17
Corporate governanCe stateMent
30 June 2009
Mortgage choice Limited has in place corporate governance
practices to ensure the company and the Group are effectively
directed and managed, risks are monitored and assessed and
appropriate disclosures are made.
a statement of the company’s full corporate governance practices is
set out below. the company considers that it complies with the
august 2007 aSX corporate Governance principles and
recommendations.
prinCiple 1:
lay solid foundations for ManageMent and
oversight
the Board acts on behalf of shareholders and is accountable to
shareholders for the overall direction, management and corporate
governance of the company.
the Board is responsible for:
n overseeing the company, including its control and
accountability systems;
n appointing and removing the chief executive officer;
n monitoring the performance of the chief executive officer;
n monitoring senior management’s implementation of strategy,
and ensuring appropriate resources are available;
n
reporting to shareholders;
n providing strategic advice to management;
n approving management’s corporate strategy and performance
objectives;
prinCiple 2:
struCture the Board to add value
the Board comprises two Non-executive directors and four
independent Non-executive directors including the chairman, peter
ritchie. Steve Jermyn and deborah ralston were appointed as Non-
executive directors in the period prior to the company’s listing on
the aSX and Sean clancy was recently appointed in May 2009.
these individuals bring a long history of public company, operational
and franchising experience with them and assist in overseeing the
corporate governance of the company.
the Board operates in accordance with the broad principles set out
in its charter which is available in the Shareholders section of the
company’s website at www.mortgagechoice.com.au
Board size, composition and independence
the charter states that:
n
there must be a minimum of five directors and a maximum of
seven directors.
n
the Board must comprise:
n a majority of independent Non-executive directors;
n directors with an appropriate range of skills, experience
and expertise;
n directors who can understand and competently deal with
current and emerging business issues; and
n directors who can effectively review and challenge the
performance of management and exercise independent
judgement.
n determining and financing dividend payments;
n approving and monitoring the progress of major capital
n
the nomination committee is responsible for recommending
candidates for appointment to the Board.
expenditure, capital management, acquisitions and divestitures;
n each director is appointed by a formal letter of appointment
n approving and monitoring financial and other reporting;
n
n
reviewing and ratifying systems of risk management, internal
compliance and control, and legal compliance to ensure
appropriate compliance frameworks and controls are in place;
reviewing and overseeing the implementation of the company’s
corporate code of conduct and code of conduct for directors
and senior executives;
n approving charters of Board committees;
n monitoring and ensuring compliance with legal and regulatory
requirements and ethical standards and policies; and
n monitoring and ensuring compliance with best practice
corporate governance requirements.
responsibility for day-to-day management and administration of the
company is delegated by the Board to the chief executive officer
and the executive team.
setting out the key terms and conditions of their appointment to
ensure that each director clearly understands the company’s
expectations of him or her.
directors’ independence
the Board charter sets out specific principles in relation to directors’
independence. these state that an independent Non-executive
director is one who is independent of management and:
n
is not a substantial shareholder of the company or an officer of,
or otherwise associated directly with, a substantial shareholder
of the company;
n within the last three years has not been employed in an
executive capacity by the company or another Group member,
or been a director after ceasing to hold any such employment;
n within the last three years has not been a principal of a material
professional adviser or a material consultant to the company or
another Group member, or an employee materially associated
with the service provided;
n
is not a material supplier or customer of the company or other
Group member, or an officer of or otherwise associated directly
or indirectly with a material supplier or customer;
prinCiple 3:
proMote ethiCal and responsiBle deCision
Making
Codes of conduct
the company has adopted a corporate code of conduct setting out
its legal and other obligations to all legitimate stakeholders including
shareholders, franchisees, employees, customers and the community.
the company has also adopted a code of conduct for directors and
senior executives setting out required standards of behaviour, for the
benefit of all shareholders. the purpose of this code of conduct is to:
n articulate the high standards of honesty, integrity, ethical and
law-abiding behaviour expected of directors and senior
executives;
n encourage the observance of those standards to protect and
promote the interests of shareholders and other stakeholders
(including franchisees, employees, customers, suppliers and
creditors);
n guide directors and senior executives as to the practices
thought necessary to maintain confidence in the company’s
integrity; and
n set out the responsibility and accountability of directors and
senior executives to report and investigate any reported
violations of this code or unethical or unlawful behaviour.
the company requires that its directors and senior executives
adhere to a share trading policy that restricts the purchase and sale
of company securities to three six-week periods following the
release of the half-yearly and annual financial results to the market,
and the annual General Meeting.
copies of the corporate code of conduct, the code of conduct for
directors and Senior executives and the Share trading policy are
available on the Mortgage choice website.
n has no material contractual relationship with the company or
another Group member other than as a director of the
company;
n has not served on the Board for a period which could, or could
reasonably be perceived to, materially interfere with the
director’s ability to act in the best interests of the company;
and
n
is free from any interest in 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.
all directors are required to complete an independence
questionnaire.
independent professional advice
Board committees and individual directors may seek independent
external professional advice for the purposes of proper performance
of their duties.
performance assessment
the performance of the Board, the directors and key executives is
reviewed annually. the nomination committee is responsible for
reviewing:
n
n
n
the Board’s role;
the processes of the Board and Board committees;
the Board’s performance; and
n each director’s performance before the director stands for
re-election.
the process for performance evaluation of the Board, its committees
and individual directors, and key executives has been adopted by
the Board and is available in the Shareholders section of the
company’s website at www.mortgagechoice.com.au.
a review of the Board was conducted by the chairman of the
nomination committee in concert with the company Secretary
during the financial year ended 30 June 2009.
Board committees
Mortgage choice has three Board committees comprising the
remuneration committee, the audit committee and the nomination
committee. these committees serve to support the functions of the
Board and will make recommendations to directors on issues
relating to their area of responsibility.
the nomination committee
the objective of the nomination committee is to help the Board
achieve its objective of ensuring the company has a board of an
effective composition, size and commitment to adequately discharge
its responsibilities and duties. the nomination committee is
responsible for evaluating the Board’s performance. the nomination
committee comprises peter ritchie and rodney Higgins.
the nomination committee charter is available in the Shareholders
section of the company’s website at
www.mortgagechoice.com.au.
corporate GoVerNaNce StateMeNt
19
Corporate governanCe stateMent Continued
prinCiple 4:
safeguard integrity in finanCial reporting
prinCiple 5:
Make tiMely and BalanCed disClosure
the audit committee
the audit committee provides advice and assistance to the Board in
fulfilling the Board’s responsibilities relating to:
Continuous disclosure
the company has adopted a market disclosure protocol. the
objective of this protocol is to:
n financial reporting;
n
the application of accounting policies;
n business policies and practices;
n
n
legal and regulatory compliance; and
internal risk control and management systems.
the audit committee comprises Steve Jermyn (chairman), peter
Higgins, Sean clancy and deborah ralston.
the objective of the audit committee is to:
n maintain and improve the quality, credibility and objectivity of
the financial accountability process; and
n provide a forum for communication between the Board and
senior financial and compliance management.
the audit committee charter is available in the Shareholders section
of the company’s website at www.mortgagechoice.com.au.
external auditor
the company has adopted procedures for the selection and
appointment of the external auditor which are set out in the
Shareholders section of the company’s website at
www.mortgagechoice.com.au.
the audit committee will regularly review the performance of the
external auditor and consider any ongoing appointment.
the external auditor should rotate the senior audit partner and the
audit review partner every five years with suitable succession
planning to ensure consistency.
the external auditor should not place itself in a position where its
objectivity may be impaired or where a reasonable person might
conclude that its objectivity has been impaired. this requirement
also applies to individual members of an audit team. the credibility
and integrity of the financial reporting process is paramount. the
company has adopted guidelines on external auditor independence.
these guidelines help to ensure a consistent approach to the
appointment and review of external auditors.
the company will not give work to the external auditor likely to give
rise to a ‘self review threat’ (as defined in australian professional and
ethical Standards apeS110, the institute of chartered accountants
in australia and cpa australia). it is the policy of the external auditors
to provide an annual declaration of their independence to the audit
committee.
the external auditor is requested to attend the annual General
Meeting of the company.
n ensure the company immediately discloses all price-sensitive
information to aSX in accordance with the aSX Listing rules
and the Corporations Act 2001 (Cth);
n ensure officers and employees are aware of the company’s
continuous disclosure obligations; and
n establish procedures for:
n
the collection of all potentially price-sensitive information;
n assessing if information must be disclosed to aSX under
the aSX Listing rules or the Corporations Act 2001 (Cth);
n
n
releasing to aSX information determined to be price-
sensitive information and to require disclosure; and
responding to any queries from aSX (particularly queries
under Listing rule 3.1B).
the protocol is carried out through a market disclosure group
comprised of management representatives. the market disclosure
group is responsible for:
n ensuring compliance with continuous disclosure obligations;
n establishing a system to monitor compliance with continuous
disclosure obligations and this protocol;
n monitoring regulatory requirements so that this protocol
continues to conform with those requirements;
n monitoring movements in share price and share trading to
identify circumstances where a false market may have emerged
in company securities; and
n making decisions about trading halts.
all relevant information provided to aSX will be posted immediately
on the company’s website, www.mortgagechoice.com.au, in
compliance with the continuous disclosure requirements of the
Corporations Act 2001 (Cth) and aSX Listing rules.
prinCiple 6:
respeCt the rights of shareholders
Communication to shareholders
the Board aims to ensure that shareholders are informed of all major
developments affecting the company’s state of affairs. the Board
will:
n communicate effectively with shareholders;
n give shareholders ready access to balanced and
understandable information about the company and its
corporate goals; and
n make it easy for shareholders to participate in general
meetings.
information is communicated to shareholders through aSX
announcements, the company’s annual report, the annual General
Meeting, half and full year results announcements and the
company’s website, www.mortgagechoice.com.au.
the Board has adopted a communications strategy to facilitate and
promote effective communication with shareholders and encourage
participation at general meetings. arrangements the company has
to promote communication with shareholders are set out in the
Shareholders section of the company’s website at
www.mortgagechoice.com.au.
prinCiple 7:
reCognise and Manage risk
prinCiple 8:
reMunerate fairly and responsiBly
the company has adopted and endorsed a compliance policy. the
policy is a commitment to:
n promote a culture of compliance throughout the company and
franchise network;
n create an understanding of the relevant laws at all levels;
n minimise the possibility of a contravention of the law and
manage any legal risk;
the remuneration committee
the remuneration committee is responsible for determining and
reviewing compensation arrangements for the directors and senior
management team. the remuneration committee comprises peter
ritchie and rodney Higgins.
the objective of the remuneration committee is to help the Board
achieve its objective of ensuring the company:
n enhance the company’s corporate image and customer
n has coherent remuneration policies and practices to attract and
retain executives and directors who will create value for
shareholders;
n observes those remuneration policies and practices; and
n
fairly and responsibly rewards executives and other employees
having regard to the performance of the company, the
performance of the executive or employee and the general and
specific remuneration environment.
Non-executive directors are not entitled to retirement benefits with
the exception of statutory superannuation.
the remuneration committee charter is available in the Shareholders
section of the company’s website at www.mortgagechoice.com.au.
service; and
n market, promote and sell the company’s services in a way that
is competitive, ethical, honest and fair, and in compliance with
the law.
the company has developed and implemented a compliance
program. the aim of the program is to promote a culture of
compliance through a number of measures including staff and
franchise network training, compliance procedures, support systems
and the appointment of staff responsible for compliance.
the centrepiece of the program is a web based compliance
education and evaluation tool. a self paced system, it covers the key
legislative and regulatory obligations applicable to the business.
each major regulatory area (trade practices, privacy, equal
opportunity, occupational Health and Safety, technology,
Franchising, consumer credit code) is covered. all staff and the
Board are required to complete all modules and must repeat the
program at prescribed intervals. the program has also been rolled
out to the franchise network.
the company expects its employees, franchisees and
representatives to actively support its compliance program. it is each
employee, franchisee and representative’s responsibility to make use
of the training systems and support offered by Mortgage choice.
Non-compliance with the law or failure to comply with the
compliance program will not be tolerated and could result in
disciplinary action.
in order to comply with the australian standard for risk management,
the company has initiated a corporate risk management plan.
in fundamental terms, this process involves:
n analysing all aspects of the business to determine what
operational risks are faced, either on a continuous or isolated
basis;
n having determined these risks, assessing each of them to
allocate a rating based upon the likelihood of occurrence and
consequence of occurrence;
n determining what control measures are in place to eliminate or
reduce the identified risk – this leads to allocating each risk a
rating, all of which is recorded in a risk register; and
n executive management then make decisions as to how each
risk is to be handled i.e. avoided, managed, transferred or
accepted. the risk register is a dynamic document that
changes as business operations vary, resulting in new risks.
Management has reported to the Board that risk management and
internal control systems effectively manage the company’s material
business risks.
Corporate reporting
the chief executive officer and chief Financial officer have certified
that the company’s financial reports are complete and present a
true and fair view, in all material respects, of the financial condition
and operational results of the company and are in accordance with
relevant accounting standards.
corporate GoVerNaNce StateMeNt
21
finanCial report
30 June 2009
this financial report covers both Mortgage Choice limited
as an individual entity and the consolidated entity consisting
of Mortgage Choice limited and its controlled subsidiaries.
the financial report is presented in the australian currency.
Mortgage Choice limited is a company limited by shares,
incorporated and domiciled in australia. its registered office
and principal place of business is:
Mortgage Choice limited
level 10, 100 pacific highway
north sydney nsW 2060
a description of the nature of the Company’s operations and
its principal activities is included in the directors’ report which
is not part of this financial report.
the financial report was authorised for issue by the directors
on 21 august 2009. the Company has the power to amend
and reissue the financial report.
through the use of the internet, we have ensured that our
corporate reporting is timely, complete, and available globally
at minimum cost to the Company. all financial reports and
other information are available in the shareholders section
of our website: www.mortgagechoice.com.au.
contents
24
25
26
27
28
61
62
Income statements
Balance sheets
Statements of changes in equity
Cash flow statements
Notes to the financial statements
Directors’ declaration
Independent audit report to members
of Mortgage Choice Limited
aNNUaL FiNaNciaL report
23
inCoMe stateMents
for the year ended 30 June 2009
Consolidated
parent entity
revenue from continuing operations
other income
expenses from continuing operations
Sales
technology
Marketing
Finance
corporate
Finance costs
profit before income tax
income tax expense
net profit attributable to the members of
Mortgage Choice limited
earnings per share for profit from continuing
operations attributable to the ordinary equity holders
of the Company
Basic earnings per share
diluted earnings per share
5
6
7
8
31
31
Notes
2009
$’000
2008
$’000
2009
$’000
191,993
160,169
191,993
902
1,222
902
2008
$’000
160,169
1,222
(119,809)
(99,290)
(119,809)
(99,290)
(5,356)
(8,941)
(2,038)
(5,449)
(13,157)
38,145
(11,296)
(4,825)
(9,041)
(1,930)
(6,435)
(12,195)
27,675
(8,331)
(5,356)
(8,941)
(2,038)
(5,449)
(13,157)
38,145
(11,296)
(4,825)
(9,041)
(1,930)
(6,435)
(12,195)
27,675
(8,331)
26,849
19,344
26,849
19,344
Cents
22.6
22.6
cents
16.4
16.3
The above income statements should be read in conjunction with the accompanying notes.
BalanCe sheets
as at 30 June 2009
assets
Current assets
cash and cash equivalents
trade and other receivables
total current assets
non-current assets
receivables
property, plant and equipment
deferred tax assets
intangible assets
total non-current assets
total assets
liaBilities
Current liabilities
trade and other payables
current tax liabilities
provisions
total current liabilities
non-current liabilities
trade and other payables
deferred tax liabilities
provisions
total non-current liabilities
total liabilities
Net assets
equity
contributed equity
reserves
retained profits
total equity
Consolidated
parent entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
9
10
11
12
13
14
15
16
17
18
19
5,334
82,403
87,737
8,482
59,987
68,469
5,334
82,403
87,737
8,482
59,987
68,469
153,874
123,996
153,874
123,996
2,046
675
2,725
1,019
1,189
2,902
2,046
675
2,725
1,019
1,189
2,902
159,320
129,106
159,320
129,106
247,057
197,575
247,057
197,575
57,631
349
425
58,405
96,331
25,316
609
41,180
1,692
711
43,583
79,012
19,449
410
57,631
349
425
58,405
96,331
25,316
609
122,256
98,871
122,256
41,180
1,692
711
43,583
79,012
19,449
410
98,871
180,661
142,454
180,661
142,454
66,396
55,121
66,396
55,121
20
21(a)
21(b)
808
471
437
1,291
808
471
437
1,291
65,117
53,393
65,117
53,393
66,396
55,121
66,396
55,121
The above balance sheets should be read in conjunction with the accompanying notes.
iNcoMe StateMeNtS /
BaLaNce SHeetS
25
stateMents of Changes in equity
for the year ended 30 June 2009
Consolidated
parent entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
total equity at the beginning of the financial year
Profit for the year
55,121
26,849
52,230
19,344
55,121
26,849
52,230
19,344
transactions with equity holders in their
capacity as equity holders:
employee share rights and options
treasury shares
dividends paid
32
22
(268)
(181)
(15,125)
(15,574)
757
(62)
(17,148)
(16,453)
(268)
(181)
(15,125)
(15,574)
757
(62)
(17,148)
(16,453)
total equity at the end of the financial year
66,396
55,121
66,396
55,121
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Cash floW stateMents
for the year ended 30 June 2009
Consolidated
parent entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Cash flows from operating activities
receipts from customers (inclusive of goods and services tax)
154,229
164,635
154,229
164,635
payments to suppliers and employees (inclusive of goods and
services tax)
(134,311)
(140,437)
(134,311)
(140,437)
income taxes paid
net cash inflow from operating activities
30
Cash flows from investing activities
payments for plant and equipment
proceeds from sale of plant and equipment
payments for software and development costs
interest received from cash and deposits at call
net cash (outflow) from investing activities
19,918
(6,257)
13,661
(1,694)
4
(398)
404
(1,684)
24,198
(7,201)
16,997
(529)
–
(705)
746
(488)
19,918
(6,257)
13,661
(1,694)
4
(398)
404
(1,684)
16,978
(7,201)
16,997
(529)
–
(705)
746
(488)
Cash flows from operating & investing activities
11,977
16,509
11,977
16,509
Cash flows from financing activities
dividends paid
net cash (outflow) from financing activities
net increase/(decrease) in cash and cash equivalents
cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of year
9
(15,125)
(15,125)
(3,148)
8,482
5,334
(17,148)
(17,148)
(639)
9,121
8,482
(15,125)
(15,125)
(3,148)
8,482
5,334
(17,148)
(17,148)
(639)
9,121
8,482
The above cash flow statements should be read in conjunction with the accompanying notes.
StateMeNtS oF cHaNGeS iN eQUity /
caSH FLoW StateMeNtS
27
note to finanCial stateMents
30 June 2009
note 1.
suMMary of signifiCant aCCounting poliCies
the principal accounting policies adopted in the preparation of the financial report are set out below. these policies have been consistently
applied to all the years presented, unless otherwise stated. the financial report includes separate financial statements for Mortgage choice
Limited as an individual entity and the consolidated entity consisting of Mortgage choice Limited and its subsidiaries.
(a) Basis of preparation
this general purpose financial report has been prepared in accordance with australian accounting Standards, other authoritative
pronouncements of the australian accounting Standards Board, Urgent issues Group interpretations and the Corporations Act 2001.
Compliance with ifrs
the financial report of Mortgage choice Limited also complies with international Financial reporting Standards (iFrS) as issued by the
international accounting Standards Board (iaSB)
historical cost convention
these financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale
financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit and loss, certain classes of
property, plant and equipment and investment property.
Critical accounting estimates
the preparation of financial statements in conformity with aiFrS (australian equivalents to international Financial reporting Standards)
requires the use of certain critical accounting estimates. it also requires management to exercise its judgement in the process of applying
the Group’s accounting policies. the areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in note 3.
(B) prinCiples of Consolidation
(i) subsidiaries
the consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Mortgage choice Limited
(‘’company’’ or ‘’parent entity’’) as at 30 June 2009 and the results of all subsidiaries for the year then ended. Mortgage choice
Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial
and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. the existence and effect
of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. they are de-consolidated from the
date that control ceases.
the purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(G)).
intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
investments in subsidiaries are accounted for at cost in the individual financial statements of Mortgage choice Limited.
(ii) employee share trust
the Group has formed a trust to administer the Group’s employee share scheme. this trust is consolidated, as the substance of
the relationship is that the trust is controlled by the Group.
Shares held by the employee share scheme are disclosed as treasury shares and deducted from contributed equity.
(C) segMent reporting
a business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different to those of other business segments. a geographical segment is identified when products or services are
provided within a particular economic environment subject to risks and returns that are different from those of segments operating in
other economic environments.
(d) revenue reCognition
revenue is measured at the fair value of the consideration received or receivable.
the consolidated entity provides loan origination services and receives origination commission on the settlement of loans. additionally,
the lender will normally pay a trailing commission over the life of the loan. revenue over the estimated life of loans written is recognised
on the settlement of the loans. the consolidated entity also earns income from the sale of franchises and franchise services.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
revenue from sale of services is recognised as follows:
(i) origination commissions
origination commissions are recognised as revenue on loan settlement. commissions “clawed back” by the lender per lender
policies at a later date are netted against revenue as incurred.
(ii) trailing commissions
the company receives trailing commissions from lenders on loans they have settled that were originated by the Group and
its franchisees. the trailing commissions are received over the life of the loans based on loan book balance outstanding.
the company also makes trailing commission payments to franchisees based on the outstanding loan book balance of the
individual franchisees.
on initial recognition, trailing commission revenue and receivables are recognised at fair value, being the expected future trailing
commission receivables discounted to their net present value. in addition, an associated payable and expense to the franchisees
are also recognised, initially measured at fair value, being the expected future trailing commission payable to franchisees
discounted to their net present value.
Subsequent to initial recognition and measurement, both the trailing commission asset and trailing commission payable are
measured at amortised cost. the carrying amount of the trailing commission asset and trailing commission payable are adjusted to
reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of
estimated future cash flows at the original effective interest rate. the resulting adjustment is recognised as income or expense in
the income statement.
(iii) franchise fee income
Franchise fee income is derived from the sale of franchises by the consolidated entity and comprises licence fees and contributions
for training and franchise consumables. Licence fees are partially repayable should franchisees terminate their franchise agreement
in accordance with a repayment schedule as defined in the agreement. Licence fee income is recognised over a four year period in
accordance with this schedule. contributions for training and consumables are recognised as revenue on receipt. Licence fees
which may be repayable to franchisees at balance sheet date are included in liabilities.
(iv) interest income
interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the
Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income.
(v) other income
other income includes contributions from lenders towards conferences and workshops together with other non-operating
revenues. these are recognised as income in the year the conference or workshop is held.
(e)
inCoMe tax
the income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate, adjusted
by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
deferred tax assets are recognised for deductible temporary differences only if it is probable that future taxable amounts will be available
to utilise those temporary differences and losses.
deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority. current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
tax consolidation legislation
Mortgage choice Limited and its wholly-owned australian controlled entities are members of a consolidated group for income tax purposes.
the head entity Mortgage choice Limited and the controlled entities in the tax consolidated group account for their own current and
deferred tax amounts. these tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone
taxpayer in its own right.
in addition to its own current and deferred tax amounts, Mortgage choice Limited also recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as
a contribution to (or distribution from) wholly-owned tax consolidated entities.
NoteS to FiNaNciaL StateMeNtS
29
note 1. suMMary of signifiCant aCCounting poliCies (Continued)
(f) leases
Leases of property, plant and equipment, where the Group as lessee has substantially all the risks and rewards of ownership, are
classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property
and the present value of the minimum lease payments. the corresponding rental obligations, net of finance charges, are included in
other long term payables. each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on
the finance balance outstanding. the interest element of the finance cost is charged to the income statement over the lease period so
as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. the property, plant and
equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases. payments made under operating leases (net of any incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease.
(g) Business CoMBinations
the purchase method of accounting is used to account for all business combinations, including business combinations involving entities
or businesses under common control, regardless of whether equity instruments or other assets are acquired. cost is measured as the
fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange plus costs directly
attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their published
market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of
exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair
value. transaction costs arising on the issue of equity instruments are recognised directly in equity.
identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any minority interest. the excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets acquired is recorded as goodwill. if the cost of acquisition is less than the Group’s
share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income
statement, but only after a reassessment of the identification and measurement of the net assets acquired.
(h)
iMpairMent of assets
assets subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. an impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that
suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(i) Cash and Cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
(J) trade reCeivaBles
trade receivables are recognised in accordance with the revenue recognition policy outlined in note 1(d).
collectibility of trade receivables is reviewed on an ongoing basis. debts which are known to be uncollectible are written off. a provision
for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments (more than thirty days overdue) are considered indicators
that the trade receivable is impaired. the amount of the provision is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. the amount of the provision is recognised in the
income statement in other expenses.
(k)
investMents and other finanCial assets
the Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-sale financial assets. the classification depends on the purpose for which the
investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets
classified as held to maturity, re-evaluates this designation at each reporting date.
loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. they
are included in current assets, except for those with maturities greater than twelve months after the balance sheet date which are classified
as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet (notes 10 and 11).
(l) property, plant and equipMent
all property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
the carrying amount of the replaced part is derecognised. all other repairs and maintenance are charged to the income statement
during the financial period in which they are incurred.
depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual
values, over their estimated useful lives or, in the case of leasehold improvements , the shorter lease term as follows:
office equipment
computer equipment
Furniture and fittings
5-10 years
3-4 years
10-15 years
the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 1(H)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. these are included in the income statement.
(M)
intangiBle assets
software
acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
these costs are amortised over their estimated useful lives (three to five years).
costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. costs that
are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably
generate future economic benefits exceeding costs beyond one year, are recognised as intangible assets.
computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding five years).
(n) trade and other payaBles
these amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and
which are unpaid. the amounts are unsecured and are usually paid within thirty days of recognition.
(o) BorroWing Costs
Borrowing costs are recognised as expenses.
(p) provisions
provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than
not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. provisions are not
recognised for future operating losses.
provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at
the balance sheet date. the discount rate used to determine the present value reflects current market assessments of the time value of
money and the risks specific to the liability. the increase in the provision due to the passage of time is recognised as interest expense.
(q) eMployee Benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve months of
the reporting date are recognised in the provision for employee entitlements in respect of employees’ services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) long service leave
the liability for long service leave is recognised in the provision for employee entitlements and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the projected
unit credit method. consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. expected future payments are discounted using market yields at the reporting date on national government
bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) retirement benefit obligations
contributions to the defined contribution fund are recognised as an expense as they become payable. prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(iv) share-based payments
Share-based compensation benefits are provided to employees via the Mortgage choice executive performance option plan and
the Mortgage choice performance Share plan. Further details are included in note 32 of the financial report.
the fair value of options granted under the Mortgage choice executive performance option plan and share rights granted under
the Mortgage choice performance Share plan are recognised as an employee benefit expense with a corresponding increase in
equity. the fair value is measured at grant date and recognised over the period during which the employees become
unconditionally entitled to the options and share rights.
NoteS to FiNaNciaL StateMeNtS
31
note 1. suMMary of signifiCant aCCounting poliCies (Continued)
the fair value at grant date is independently determined using a Monte carlo simulation model utilising a Black-Scholes option
pricing model framework that takes into account the exercise price, the term of the option, the vesting and performance criteria,
the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
the fair value of the options and share rights granted excludes the impact of any non-market vesting conditions (for example, profitability
and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options and shares that are
expected to become exercisable. at each balance sheet date, the entity revises its estimate of the number of options and shares that are
expected to become exercisable. the employee benefit expense recognised each period takes into account the most recent estimate.
the impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.
(v) profit-sharing and bonus plans
the Group recognises a liability and an expense where contractually obliged or where there is a past practice that it has created a
constructive obligation.
(vi) termination benefits
termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits. the Group recognises termination benefits when it is demonstrably
committed to either terminating the employment of current employees according to a detailed formal plan without possibility of
withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due
more than twelve months after balance sheet date are discounted to present value.
(r) ContriButed equity
ordinary shares are classified as equity. incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds. incremental costs directly attributable to the issue of new shares or options, or for the
acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.
if the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity
and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid, including any
directly attributable incremental costs (net of income taxes), is recognised directly in equity.
(s) dividends
provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end
of the financial year but not distributed at balance date.
(t) earnings per share
(i) Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the company, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) diluted earnings per share
diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(u) goods and serviCes tax (gst)
revenues, expenses and assets are recognised net of the amount of associated GSt, unless the GSt incurred is not recoverable from
the taxation authority. in this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. receivables
and payables are stated inclusive of the amount of GSt receivable or payable. the net amount of GSt recoverable from, or payable to,
the taxation authority is included with other receivables or payables in the balance sheet.
cash flows are presented on a gross basis. the GSt components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flow.
(v) rounding of aMounts
the company is of a kind referred to in class order 98/100, issued by the australian Securities & investments commission, relating to
the “rounding off” of amounts in the financial report. amounts in the financial report have been rounded off in accordance with that
class order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
(W) neW aCCounting standards and interpretations
certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods.
the Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.
(i)
aaSB 8 Operating Segments and aaSB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 (effective from
1 January 2009)
aaSB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to
reporting on financial performance. the information being reported will be based on what the key decision makers use internally for
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
evaluating segment performance and deciding how to allocate resources to operating segments. the Group will adopt aaSB 8 from 1
July 2009. it is likely to result in an increase in the number of reportable segments presented. in addition, the segments will be reported
in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker.
(ii)
revised aaSB 101 Presentation of Financial Statements and aaSB 2007-8 Amendments to Australian Accounting Standards
arising from AASB 101 (effective from 1 January 2009)
the September 2007 revised aaSB 101 requires the presentation of a statement of comprehensive income and makes changes to
the statement of changes in equity, but will not affect any of the amounts recognized in the financial statements. if an entity has
made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet
(statement of financial position), this one being as at the beginning of the comparative period. the Group will apply the revised
standard from 1 July 2009.
(iii) aaSB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations
(effective from 1 January 2009)
aaSB 2008-1 clarifies that vesting conditions are service conditions and performance conditions only and that other features of a
share-based payment are not vesting conditions. it also specifies that all cancellations, whether by the entity or by other parties,
should receive the same accounting treatment. the Group will apply the revised standard from 1 July 2009, but it is not expected
to affect the accounting for the Group’s share-based payments.
(iv) revised aaSB 3 Business Combinations, aaSB 127 Consolidated and Separate Financial Statements and aaSB 2008-3
Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (effective from 1 July 2009)
the revised aaSB 3 continues to apply the acquisition method to business combinations, but with some significant changes. For
example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments
classified as debt subsequently remeasured through the income statement. there is a choice on an acquisition-by-acquisition
basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net assets. all acquisition-related costs must be expensed. this is different to the Group’s current policy
which is set out in note 1(G) above.
the revised aaSB 127 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no
change in control and these transactions will no longer result in goodwill or gains and losses, see note 1(B)(i). the standard also
specifies the accounting when control is lost. any remaining interest in the entity is remeasured to fair value, and a gain or loss is
recognised in profit or loss. this is consistent with the Group’s current accounting policy if significant influence is not retained.
the Group will apply the revised standards prospectively to all business combinations and transactions with non-controlling
interests from 1 July 2009.
note 2.
finanCial risk ManageMent
the Group has limited exposure to financial risks. the Group does not use derivative financial instruments such as foreign exchange contracts
and interest rate swaps to hedge certain risk exposures. it does not operate internationally and is not exposed to either securities price risk or
commodity price risk.
risk management is carried out by the Group’s finance department under policies approved by the Board of directors.
the Group and parent entity hold the following financial instruments:
financial assets
Current
cash and cash equivalents
trade and other receivables
Non-current
receivables
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
5,334
82,403
8,482
59,987
5,334
82,403
8,482
59,987
153,874
241,611
123,996
192,465
153,874
241,611
123,996
192,465
the Group’s policies in relation to financial risks to which it has exposure are detailed below.
(a) Market risk
Cash flow and fair value interest rate risk
the Group and parent entity’s main interest rate risk arises from cash and cash equivalents. at 30 June 2009 the weighted average
interest rate was 3.2% (2008 7.4%). if interest rates increased by 100 basis points, the Group’s and parent entity’s after tax result would
increase by $53,000 (2008 $77,000). a decrease of 100 basis points would reduce the Group’s and parent entity’s after tax result by
$53,000 (2008 $77,000).
the Group does not have borrowings and therefore is not exposed to interest rate risk on borrowings.
NoteS to FiNaNciaL StateMeNtS
33
note 2. finanCial risk ManageMent (Continued)
(B) Credit risk
credit risk is managed on a group basis. credit risk arises from cash and cash equivalents through deposits with banks and financial
institutions as well as credit exposure to financial institutions that are the members of the lender panel. the majority of these financial
institutions are authorised deposit-taking institutions (adis) and are regulated by the australian prudential regulation authority (apra).
Most of the financial institutions have been independently rated. this forms the basis of the Group’s assessment of credit risk. if the
lender has not been independently rated, credit risk is assessed taking into account its financial position, past experience and other
factors. the table below indicates the Group’s exposure to each ratings category.
the Group bears the risk of non-payment of future trailing commissions by lenders should they not maintain solvency (correspondingly,
Mortgage choice would not have to pay out any future trailing commissions to franchisees in relation to such loans). the risk profile of
both the parent and consolidated entities are set out in the table below.
2009
adis
Non adis
total receivable
2008
adis
Non adis
total receivable
Current assets
standard &
poor’s Credit
rating
trade
receivables
npv future
trailing
Commissions
receivable
non-Current
assets
npv future
trailing
Commissions
receivable
$ 000’s
$ 000’s
$ 000’s
aa
a+
a
BBB+
BBB
Not rated
aa
Not rated
9,920
55,294
1
607
386
340
432
9
4,926
2,400
1,810
3,623
122,164
19
10,883
5,303
3,998
8,005
11,686
68,062
150,372
–
420
420
12,106
–
1,585
1,585
69,647
–
3,502
3,502
153,874
Current assets
standard &
poor’s Credit
rating
trade
receivables
npv future
trailing
Commissions
receivable
non-Current
assets
npv future
trailing
Commissions
receivable
$ 000’s
$ 000’s
$ 000’s
aa
a+
a
BBB+
BBB
Not rated
aa
Not rated
8,591
1,318
258
333
216
614
32,095
6,159
856
1,813
1,242
3,690
83,866
16,094
2,236
4,739
3,246
9,644
11,330
45,855
119,825
2
267
269
11,599
9
1,587
1,596
47,451
24
4,147
4,171
123,996
the tables below analyse the Group’s and parent entity’s financial assets into relevant maturity groupings based on the expected future
cashflows. No financial assets are past due or impaired.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
less than
6 Months
6 – 12
Months
BetWeen
1 and 2
years
BetWeen
2 and 5
years
$’000
$’000
$’000
$’000
over 5
years
$’000
total
Cash
floWs
$’000
Carrying
aMount
$’000
5,431
3
12,106
550
38,650
56,740
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,431
5,431
3
12,106
550
3
12,106
550
35,114
35,114
58,840
58,840
104,248
104,248
76,660
76,660
313,512
331,602
223,521
241,611
less than
6 Months
6 – 12
Months
BetWeen 1
and 2
years
BetWeen 2
and 5
years
$’000
$’000
$’000
$’000
over 5
years
$’000
total
Cash
floWs
$’000
Carrying
aMount
$’000
8,479
3
11,949
587
29,646
50,664
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,479
8,479
3
11,949
587
3
11,949
587
26,933
26,933
45,132
45,132
79,961
79,961
58,800
58,800
240,472
261,490
171,447
192,465
group and parent entity –
at 30 June 2009
Non-derivatives
Interest bearing
Non-interest bearing
cash and cash equivalents
commissions receivable
other receivables
Future trailing commissions
receivable
group and parent entity –
at 30 June 2008
Non-derivatives
Interest bearing
Non-interest bearing
cash and cash equivalents
commissions receivable
other receivables
Future trailing commissions
receivable
(C) liquidity risk
prudent liquidity risk management implies maintaining sufficient cash and marketable securities. the Group manages liquidity risk by
continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities. Surplus funds
are generally only invested in instruments that are tradable in highly liquid markets.
the tables below analyse the Group’s and parent entity’s financial liabilities into relevant maturity groupings based on the expected
future cashflows.
group and parent entity –
at 30 June 2009
Non-derivatives
Non-interest bearing
commissions payable
other payables
Future trailing commissions
payable
less than
6 Months
6 – 12
Months
BetWeen 1
and 2
years
BetWeen 2
and 5
years
$’000
$’000
$’000
$’000
over 5
years
$’000
total
Cash
floWs
$’000
Carrying
aMount
$’000
8,534
4,855
24,704
38,093
–
–
–
–
–
–
–
–
8,534
4,855
8,534
4,855
22,083
22,083
36,963
36,963
65,072
65,072
47,794
47,794
196,616
210,005
140,553
153,942
NoteS to FiNaNciaL StateMeNtS
35
note 2. finanCial risk ManageMent (Continued)
group and parent entity –
at 30 June 2008
Non-derivatives
Non-interest bearing
commissions payable
other payables
Future trailing commissions
payable
less than
6 Months
6 – 12
Months
BetWeen 1
and 2
years
BetWeen 2
and 5
years
$’000
$’000
$’000
$’000
over 5
years
$’000
total
Cash
floWs
$’000
Carrying
aMount
$’000
7,396
4,789
18,966
31,151
–
–
–
–
–
–
–
–
7,396
4,789
7,396
4,789
16,954
16,954
28,377
28,377
49,957
49,957
36,693
36,693
150,947
163,132
107,905
120,090
(d) fair value estiMation
refer Note 3. critical accounting estimates and Judgements
note 3.
CritiCal aCCounting estiMates and JudgeMents
estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
(a) CritiCal aCCounting estiMates and assuMptions
the Group makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, seldom equal
the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
trailing commissions
the company receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance
outstanding to which the group is entitled without having to perform further services. the company also makes trailing commission
payments to franchisees based on the loan book balance outstanding.
the fair value of trailing commissions receivable and the corresponding payable to franchisees is determined by using the discounted
cash flow valuation technique. these calculations require the use of assumptions. the key assumptions underlying the fair value
calculations of trailing commissions receivable and the corresponding payable to franchisees at balance date include the average loan
life, discount rate and the percentage paid to franchisees. these assumptions are determined by management with the assistance of
external actuaries and are as follows:
average loan life
average discount rate
percentage paid to franchisees
(10 year average)
2009
2008
Between 3.5 and 4.0 years
Between 3.0 and 3.5 years
11.8%
63%
12.5%
63%
Were the actual final loan life outcome to differ by +/- 10% from management’s estimates, the impact on the estimates would be:
–
–
an increase in net assets of $4.3 million (made up of increases in current assets of $1.0 million, non-current assets of $15.2 million,
current liabilities of $0.6 million, non-current liabilities of $9.5 million and deferred tax liabilities of $1.8 million) if favourable; or
a decrease in net assets of $3.9 million (made up of decreases in current assets of $1.0 million, non-current assets of $13.5 million,
current liabilities of $0.6 million, non-current liabilities of $8.4 million and deferred tax liabilities of $1.6 million) if unfavourable.
Management does not consider material changes to the percentage paid to franchisees to be reasonably possible. changes to the
discount rate are likely to occur as a result of changes to the interest rate. However, management does not consider this to have a
material impact on the fair value calculation of trailing commissions receivable and the corresponding payable to franchisees.
(B) CritiCal JudgeMents in applying the entity’s aCCounting poliCies
Judgements that management has made in the process of applying the entity’s accounting policies are not expected to have a
significant effect on the amounts recognised in the financial report.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 4.
segMent inforMation
the Mortgage choice group of companies operates only in australia and in one industry segment, mortgage broking.
note 5.
revenue
Revenue from continuing operations
Sales revenue
Services
Other revenue
interest (note (a))
(a) interest
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
170,901
140,008
170,901
140,008
21,092
191,993
20,161
160,169
21,092
191,993
20,161
160,169
interest income includes the unwinding of the discount in relation to receipt of trailing commission as well as interest earned on deposits
and loans.
note 6.
other inCoMe
conference sponsorships (note (a))
amortisation of software licence cost recovery (note (B))
other
Consolidated
parent entity
2009
$’000
844
17
41
902
2008
$’000
1,098
30
94
1,222
2009
$’000
844
17
41
902
2008
$’000
1,098
30
94
1,222
(a) ConferenCe sponsorships
Lenders sponsor Mortgage choice’s National conference, High Flyers’ conference, quarterly state conferences, and periodic training
days and workshops.
(B) aMortisation of softWare liCenCe Cost reCovery
the cost of software licences purchased for use by franchisees is recovered from franchisees. this cost recovery is amortised over
three to five years, consistent with the amortisation of the corresponding intangible asset.
NoteS to FiNaNciaL StateMeNtS
37
note 7.
expenses
profit from ordinary activities before income tax
includes the following specific expenses:
Finance costs
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
interest and finance charges (note (a))
13,157
12,195
13,157
12,195
Net loss on disposal of property, plant and equipment
141
5
141
5
Depreciation
plant and equipment
Amortisation
Leasehold improvements
computer software
Other provisions
employee entitlements
Rental expense relating to operating leases
Defined contribution superannuation expense
Termination benefits
(a)
interest and finanCe Charges
254
244
254
244
268
574
(131)
1,085
1,033
1,548
484
456
10
930
1,149
70
268
574
(131)
1,085
1,033
1,548
484
456
10
930
1,149
70
interest expense includes the unwinding of the discount in relation to payment of trailing commission to franchisees.
note 8.
inCoMe tax
(a)
inCoMe tax expense
current tax
deferred tax
Under (over) provided in prior years
income tax expense is attributable to:
profit from continuing operations
deferred income tax (revenue) expense including income
tax expense comprises:
(increase)/decrease in deferred tax assets (note 13)
increase/(decrease) in deferred tax liabilities (note 18)
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
4,915
6,381
–
11,296
7,116
1,307
(92)
8,331
4,915
6,381
–
11,296
7,116
1,307
(92)
8,331
11,296
8,331
11,296
8,331
(9,281)
15,662
6,381
(2,306)
3,613
1,307
(9,281)
15,662
6,381
(2,306)
3,613
1,307
(B) nuMeriCal reConCiliation of inCoMe tax expense to priMa faCie tax payaBle
profit from continuing operations before income tax expense
38,145
27,675
38,145
27,675
income tax calculated @ 30% (2008 – 30%)
11,444
8,303
11,444
8,303
tax effect of amounts which are not deductible/(assessable)
in calculating taxable income:
Under/(over) provision from prior years
income tax expense
(148)
11,296
–
11,296
120
8,423
(92)
8,331
(148)
11,296
–
11,296
120
8,423
(92)
8,331
No part of the deferred tax asset shown above and in note 13 is attributable to tax losses.
(C) tax Consolidation legislation
Mortgage choice and its wholly owned australian controlled entities have implemented the tax consolidation legislation as of 1 July
2002. the accounting policy in relation to this legislation is set out in note 1(e).
the wholly owned australian controlled entities of Mortgage choice are dormant and have been dormant since the date of
implementation of the tax consolidation legislation. consequently, no tax sharing agreement is in place as it is not considered necessary
by the directors.
NoteS to FiNaNciaL StateMeNtS
39
note 9.
Current assets – Cash and Cash equivalents
cash at bank and on hand
deposits at call
Consolidated
parent entity
2009
$’000
1,340
3,994
5,334
2008
$’000
125
8,357
8,482
2009
$’000
1,340
3,994
5,334
2008
$’000
125
8,357
8,482
risk exposure
the Group’s and parent entity’s exposure to interest rate risk is discussed in note 2. the maximum exposure to credit risk at the reporting date
is the carrying amount of each class of cash and cash equivalents mentioned above.
note 10.
Current assets – trade and other reCeivaBles
trade receivables (1)
Net present value of future trailing commissions receivable
Franchisee receivables
other receivables
prepayments
Consolidated
parent entity
2009
$’000
12,106
69,647
127
263
260
2008
$’000
11,599
47,451
68
377
492
2009
$’000
12,106
69,647
127
263
260
2008
$’000
11,599
47,451
68
377
492
82,403
59,987
82,403
59,987
(1)
Subject to a limited charge in favour of the Loan Book Security trust (refer to note 15)
(a) other reCeivaBles
these amounts generally arise from transactions outside the usual operating activities of the consolidated entity.
(B) effeCtive interest rates and Credit risk
information about the Group’s and the parent entity’s exposure to credit risk and interest rate risk is provided in note 2.
(C) fair values
the carrying amounts of trade and other receivables at year end is a reasonable approximation of their fair values with the exception of
the net present value of future trailing commissions receivable which are accounted for at amortised cost.
note 11.
non-Current assets – reCeivaBles
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Net present value of future trailing commissions receivable
153,874
123,996
153,874
123,996
(a)
iMpaired reCeivaBles and reCeivaBles past due
None of the non-current receivables are impaired.
(B) risk exposure
information about the Group’s and the parent entity’s exposure to credit risk and interest rate risk is provided in note 2.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 12.
non-Current assets – property, plant and
equipMent
Consolidated
parent entity
plant and
equipment
$’000
leasehold
improvements
$’000
total
$’000
plant and
equipment
$’000
leasehold
improvements
$’000
Year ended 30 June 2008
opening net book amount
additions
disposals
depreciation charge
closing net book amount
At 30 June 2008
cost
accumulated depreciation
Net book amount
Year ended 30 June 2009
opening net book amount
additions
disposals
depreciation charge
closing net book amount
At 30 June 2009
cost
accumulated depreciation
Net book amount
627
240
(5)
(244)
618
3,415
(2,797)
618
618
940
(113)
(254)
1,191
1,945
(754)
1,191
596
289
–
(484)
401
2,027
(1,626)
401
401
754
(32)
(268)
855
1,403
(548)
855
1,223
529
(5)
(728)
1,019
5,442
(4,423)
1,019
1,019
1,694
(145)
(522)
2,046
3,348
(1,302)
2,046
627
240
(5)
(244)
618
3,415
(2,797)
618
618
940
(113)
(254)
1,191
1,945
(754)
1,191
596
289
–
(484)
401
2,027
(1,626)
401
401
754
(32)
(268)
855
1,403
(548)
855
total
$’000
1,223
529
(5)
(728)
1,019
5,442
(4,423)
1,019
1,019
1,694
(145)
(522)
2,046
3,348
(1,302)
2,046
NoteS to FiNaNciaL StateMeNtS
41
note 13.
non-Current assets – deferred tax assets
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
The balance comprises temporary differences attributable to:
Net present value of future trailing commissions payable
42,166
32,371
42,166
32,371
employee benefits
depreciation and amortisation
accrued expenses
Share issue expenses
total deferred tax assets
Set-off of deferred tax assets pursuant to set-off provisions (note 18)
224
62
389
–
732
379
52
26
224
62
389
–
732
379
52
26
42,841
(42,166)
33,560
(32,371)
42,841
(42,166)
33,560
(32,371)
Net deferred tax assets
675
1,189
675
1,189
deferred tax assets to be recovered within 12 months
deferred tax assets to be recovered after more than 12 months
13,816
29,025
42,841
9,805
23,755
33,560
13,816
29,025
42,841
9,805
23,755
33,560
MoveMents – Consolidated and
parent entity
At 30 June 2007
charged/(credited) to the income
statement
At 30 June 2008
charged/(credited) to the income
statement
At 30 June 2009
npv of
future
trailing
CoMMissions
payaBle
eMployee
Benefits
depreCiation
and
aMortisation
aCCrued
expenses
$’000
$’000
$’000
$’000
30,139
2,232
32,371
9,795
42,166
683
49
732
(508)
224
322
57
379
(317)
62
58
(6)
52
337
389
other
$’000
52
(26)
26
(26)
–
total
$’000
31,254
2,306
33,560
9,281
42,841
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 14.
non-Current assets – intangiBle assets
At 30 June 2007
cost
accumulated amortisation
Net book amount
Year ended 30 June 2008
opening net book amount
additions
amortisation charge
closing net book amount
At 30 June 2008
cost
accumulated amortisation
Net book amount
Year ended 30 June 2009
opening net book amount
additions
amortisation charge
closing net book amount
At 30 June 2009
cost
accumulated amortisation
Net book amount
Consolidated parent entity
Computer
software*
$’000
Computer
software*
$’000
4,512
(1,859)
2,653
2,653
705
(456)
2,902
5,218
(2,316)
2,902
2,902
397
(574)
2,725
5,531
(2,806)
2,725
4,512
(1,859)
2,653
2,653
705
(456)
2,902
5,218
(2,316)
2,902
2,902
397
(574)
2,725
5,531
(2,806)
2,725
*capitalised computer software includes internally generated software development costs. a significant component of these costs will not be
installed and ready for use until May 2010 at which time amortisation will commence.
note 15.
Current liaBilities – trade and other payaBles
trade payables (1)
Net present value of future trailing commissions payable
Licence fees repayable
other payables
Consolidated
parent entity
2009
$’000
10,723
44,242
68
2,598
57,631
2008
$’000
9,475
28,995
176
2,534
41,180
2009
$’000
10,723
44,242
68
2,598
57,631
2008
$’000
9,475
28,995
176
2,534
41,180
(1) loan Book seCurity trust
the loan book bonus is a commission payable based on the outstanding balances of loans introduced by Mortgage choice franchisees.
the Loan Book Security Scheme provides security for the loan book bonus payable to certain eligible franchisees based on certain
performance criteria. Mortgage choice Limited has granted two charges in favour of a trustee company on behalf of the eligible
franchisees. at this time the trustee is a controlled entity of Mortgage choice Limited.
NoteS to FiNaNciaL StateMeNtS
43
note 15. Current liaBilities – trade and other payaBles
the first charge is over a specified percentage of the company’s trailing commission income. the purpose of this charge is to be the
first source of funds available to eligible franchisees for the payment of loan book bonus payments in the event that administration or
liquidation occurs. the charge will crystallise and can be enforced by eligible franchisees in the event of liquidation or administration of
Mortgage choice Limited.
as at 30 June 2009, the amount subject to charge resulting from applying the specified percentage to the trailing commission
subsequently received by Mortgage choice Limited is $3,619,843 (2008 – $3,166,993). this is included as part of the balance of trade
payables at 30 June 2009 and is subject to charge until disbursed to the eligible franchisees. the amount subject to the charge will vary
dependant on trailing commission received by Mortgage choice Limited from time to time and franchisee performance.
the second charge is a floating charge over all of the assets of Mortgage choice Limited. it is limited in the powers it allows the security
trustee company to exercise prior to liquidation. its primary purpose is to ensure that the loan book security structure need not be
subject to the moratorium arising if an administrator were to be appointed to Mortgage choice Limited. only after liquidation does this
charge confer comprehensive mortgagee powers on the security trustee.
fair values
the carrying amounts of trade and other payables at year end is a reasonable approximation of their fair values with the exception of the
net present value of future trailing commissions payable which are accounted for at amortised cost.
note 16.
Current liaBilities – provisions
Make good provision (a)
employee entitlements – annual leave
employee entitlements – long service leave
(a) Make good provision
Consolidated
parent entity
2009
$’000
–
414
11
425
2008
$’000
230
481
–
711
2009
$’000
–
414
11
425
2008
$’000
230
481
481
711
Mortgage choice is required to restore the leased premises of its offices to their original condition at the end of the respective lease
terms. a provision has been recognised for the present value of the estimated expenditure required to remove any leasehold
improvements. these costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of
the term of the lease or the useful life of the assets. Make good costs that are not expected to be settled within twelve months have
been included in non-current liabilities as detailed in note 19.
(B) MoveMents in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated and Parent entity – 2009
Current
carrying amount at start of year
amounts not expected to be settled within 12 months transferred to non-current liabilities
charged/(credited) to the income statement
- additional provisions recognised
amounts used during the period
carrying amount at end of year
Make good
provision
$’000
230
(80)
75
(225)
–
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 17.
non-Current liaBilities – payaBles
Net present value of future trailing commissions payable
Licence fees repayable
Consolidated
parent entity
2009
$’000
96,311
20
96,331
2008
$’000
78,910
102
79,012
2009
$’000
96,311
20
96,331
2008
$’000
78,910
102
79,012
note 18.
non-Current liaBilities – deferred tax liaBilities
The balance comprises temporary differences attributable to:
NpV of future trailing commissions receivable
intangibles
Set-off of deferred tax assets pursuant to set-off provisions (note 13)
Net deferred tax liabilities
deferred tax liabilities to be settled within 12 months
deferred tax liabilities to be settled after more than 12 months
MoveMents – Consolidated and parent entity
At 30 June 2007
charged to income tax provision
charged to the income statement
At 30 June 2008
charged to the income statement
At 30 June 2009
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
67,056
426
67,482
(42,166)
25,316
20,940
46,542
67,482
51,434
386
51,820
(32,371)
19,449
14,299
37,521
51,820
67,056
426
67,482
(42,166)
25,316
20,940
46,542
67,482
npv of future
trailing
CoMMissions
payaBle
$’000
48,005
–
3,429
51,434
15,622
67,056
intangiBles
$’000
–
202
184
386
40
426
51,434
386
51,820
(32,371)
19,449
14,299
37,521
51,820
total
$’000
48,005
202
3,613
51,820
15,662
67,482
NoteS to FiNaNciaL StateMeNtS
45
note 19.
non-Current liaBilities – provisions
Make good provision (refer note 16)
employee entitlements – long service leave
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
408
201
609
135
275
410
408
201
609
135
275
410
MoveMents in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated and Parent entity – 2009
Non-current
carrying amount at start of year
amounts not expected to be settled within 12 months transferred to non-current liabilities
charged/(credited) to the income statement
- unused amounts reversed
amounts used during the period
additional provision recognised – charged to leasehold improvement
carrying amount at end of year
note 20.
ContriButed equity
Make good
provision
$’000
135
80
(8)
(37)
238
408
(a) share Capital
ordinary shares – fully paid
parent entity
2009
number
’000
2008
number
’000
Consolidated and
parent entity
2009
$’000
2008
$’000
118,106
117,980
808
437
ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held.
on a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll
each share is entitled to one vote.
ordinary shares have no par value and the company does not have a limited amount of authorised capital.
total contributed equity as at 30 June 2009:
details
total ordinary shares on issue
treasury shares
total ordinary shares held as contributed equity
(i) treasury shares
notes
nuMBer of
shares
(i)
118,938,967
(833,103)
118,105,864
treasury shares are shares in Mortgage choice Limited that are held by the Mortgage choice performance Share plan trust for
the purpose of issuing shares under the Mortgage choice performance Share plan (pSp) (see note 32 for further information).
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
date
details
30 June 2007
opening balance
22 November 2007
Shares issued to the Mortgage choice performance Share plan trust
7 december 2007
25 February 2008
25 February 2008
30 June 2008
treasury shares issues under the performance Share plan to employees
acquisition of shares on market to meet vesting requirements
treasury shares issues under the performance Share plan to employees
Balance
11 September 2008
Shares issued to the Mortgage choice performance Share plan trust
24 September 2008
acquisition of shares on market to meet vesting requirements
24 September 2008
treasury shares issues under the performance Share plan to employees
17 october 2008
treasury shares issues under the performance Share plan to employees
31 december 2008
treasury shares issues under the performance Share plan to employees
15 May 2009
12 June 2009
30 June 2009
treasury shares issues under the performance Share plan to employees
treasury shares issues under the performance Share plan to employees
Balance
(B) MoveMents in ordinary share Capital:
date
details
30 June 2007
24 august 2007
opening balance
Shares vested to employees under the performance Share plan
22 November 2007
Shares issued to the Mortgage choice performance Share plan trust
22 November 2007
Held as treasury shares
7 december 2007
25 February 2008
25 February 2008
30 June 2008
Shares vested to employees under the performance Share plan
acquisition of shares on market to meet vesting requirements
Shares vested to employees under the performance Share plan
Balance
11 September 2008
Shares issued to the Mortgage choice performance Share plan trust
11 September 2008
Held as treasury shares
24 September 2008
acquisition of shares on market to meet vesting requirements
24 September 2008
Shares vested to employees under the performance Share plan
17 october 2008
Shares vested to employees under the performance Share plan
31 december 2008
Shares vested to employees under the performance Share plan
15 May 2009
12 June 2009
Shares vested to employees under the performance Share plan
Shares vested to employees under the performance Share plan
30 June 2009
Balance
(C) eMployee share sCheMe
nuMBer of
shares
216,150
308,750
(5,245)
34,945
(94,600)
460,000
499,100
172,476
(172,476)
(43,162)
(19,632)
(26,600)
(36,600)
833,103
$’000
203
171
741
(741)
10
–
53
437
–
–
–
152
78
36
47
58
808
nuMBer of
shares
117,592,767
322,200
308,750
(308,750)
5,245
(34,945)
94,600
117,979,867
499,100
(499,100)
(172,476)
172,476
43,162
19,632
26,600
36,600
118,105,864
information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 32.
(d) options
information relating to the Mortgage choice executive performance option plan, including details of options issued, exercised and
lapsed during the financial year and options outstanding at the end of the financial year are set out in the directors’ report – refer to
section d of the remuneration report on pages 10 to 14.
NoteS to FiNaNciaL StateMeNtS
47
note 21.
reserves and retained profits
(a) reserves
Share-based payments reserve
Movements:
Share-based payments reserve
Balance 1 July
options and performance shares expensed/(reversed)
acquisition of shares on market to meet vesting requirements
Vesting of shares held by the Mortgage choice performance Share plan trust
to employees
Balance 30 June
(B) retained profits
Balance 1 July
Net profit for the year
dividends
Balance 30 June
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
471
1,291
471
1,291
1,291
(268)
(181)
(371)
471
830
757
(62)
(234)
1,291
1,291
(268)
(181)
(371)
471
830
757
(62)
(234)
1,291
Consolidated
parent entity
2009
$’000
53,393
26,849
(15,125)
65,117
2008
$’000
51,197
19,344
(17,148)
53,393
2009
$’000
53,393
26,849
(15,125)
65,117
2008
$’000
51,197
19,344
(17,148)
53,393
(C) nature and purpose of reserves
share-based payments reserve
the share-based payments reserve is used to recognise the fair value of options and performance shares granted but not vested.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 22.
dividends
(a) ordinary shares
Final dividend declared out of profits of the company for the year ended 30 June 2007 of 8.5 cents
per fully paid share paid on 18 September 2007:
Fully franked based on tax paid @ 30%
8.5 cents per share
interim dividend declared out of profits of the company for the half-year ended 31 december 2007 of
6.0 cents per fully paid share paid 18 March 2008:
Fully franked based on tax paid @ 30%
6.0 cents per share
Final dividend declared out of profits of the company for the year ended 30 June 2008 of 8.0 cents
per fully paid share paid on 15 September 2008:
Fully franked based on tax paid @ 30%
8.0 cents per share
interim dividend declared out of profits of the company for the half-year ended 31 december 2008 of
4.75 cents per fully paid share paid 23 March 2009:
Fully franked based on tax paid @ 30%
4.75 cents per share
parent entity
2009
$’000
2008
$’000
–
–
10,041
7,106
9,475
5,650
–
–
15,125
17,148
(B) dividends not reCognised at year end
in addition to the above dividends, since year end the directors have recommended the payment of a
final dividend of 5.5 cents per fully paid ordinary share, (2008 – 8.0 cents) fully franked based on tax
paid at 30%. the aggregate amount of the proposed dividend expected to be paid on 16 September
2009 out of retained profits at 30 June 2009, but not recognised as a liability at year end, is
6,542
9,475
(C) franked dividend
the franked portions of the final dividends recommended after 30 June 2009 will be franked out of existing franking credits or out of
franking credits arising from the payment of income tax in the year ending 30 June 2010.
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Franking credits available for subsequent financial years
based on a tax rate of 30% (2008 – 30%)
2,927
4,494
2,927
4,494
the above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a)
franking credits that will arise from the payment of the amount of the provision for income tax;
(b)
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c)
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
the consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were
paid as dividends.
the impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at
year end, will be a reduction in the franking account of $2,804,000 (2008: $4,061,000).
NoteS to FiNaNciaL StateMeNtS
49
note 23.
key ManageMent personnel disClosures
(a) key ManageMent personnel CoMpensation
Short-term employee benefits
post-employment benefits
Long-term benefits
termination benefits
Share-based payments
Consolidated
parent entity
2009
$
2008
$
2009
$
2008
$
2,431,299
3,198,199
2,431,299
3,198,199
211,901
67,328
1,349,785
(375,963)
424,860
34,941
211,901
67,328
–
1,349,785
424,860
34,941
–
656,120
(375,963)
656,120
3,684,350
4,314,120
3,684,350
4,314,120
detailed remuneration disclosures are provided in section a-c of the remuneration report on pages 6-10.
(B) equity instruMent disClosures relating to key ManageMent personnel
(i)
options and performance shares provided as remuneration and shares issued on exercise of such
options
details of options and performance shares provided as remuneration and shares issued on the exercise of such options, together
with terms and conditions of the options, can be found in section d of the remuneration report on pages 10-14.
(ii) option holdings
the numbers of options over ordinary shares in the company held during the financial year by each director of Mortgage choice
Limited and other key management personnel of the Group, including their personally related parties, are set out below.
2009
naMe
BalanCe at
the start
of the
year
granted as
CoMpensation
exerCised
other
Changes
BalanCe at
the end of
the year
vested and
exerCisaBle
unvested
–
–
–
–
(5,537,636)
552,214
552,214
(536,100)
(638,394)
–
–
151,006
151,006
–
–
–
–
2,500,000
900,000
1,600,000
Directors of Mortgage Choice Limited
p a Lahiff
2,693,600
3,396,250
Other key management personnel of the Group
536,100
298,350
–
–
491,050
2,500,000
a d crossley
M c Newton
M r russell
2008
naMe
BalanCe at
the start
of the
year
granted as
CoMpensation
exerCised
other
Changes
BalanCe at
the end of
the year
vested and
exerCisaBle
unvested
Directors of Mortgage Choice Limited
p a Lahiff
1,493,600
1,200,000
Other key management personnel of the Group
a d crossley
a J Fraser
M c Newton
320,100
117,050
298,350
216,000
–
–
–
–
–
–
–
–
2,693,600
323,200
2,370,400
536,100
81,800
454,300
(117,050)
–
–
–
–
298,350
92,200
206,150
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
(iii) performance share rights
the number of performance share rights held during the financial year by each director of Mortgage choice Limited and other key
management personnel of the Group, including their personally related parties, are set out below.
2009
naMe
BalanCe at
the start
of the
year
granted as
CoMpensation
exerCised
other
Changes
BalanCe at
the end of
the year
unvested
Directors of Mortgage Choice Limited
p a Lahiff
Other key management personnel of the Group
83,300
54,600
29,300
45,800
67,400
61,300
25,300
35,800
61,550
–
(44,982)
(38,318)
–
–
53,550
33,700
20,250
–
–
112,750
–
–
(10,098)
(8,602)
–
(7,668)
(33,780)
(38,156)
(13,662)
(16,915)
(30,800)
–
(6,532)
(33,620)
(23,144)
(124,388)
(18,885)
(30,750)
89,450
63,000
51,850
89,450
63,000
51,850
–
–
–
–
–
–
–
–
–
–
BalanCe at
the start
of the
year
granted as
CoMpensation
exerCised
other
Changes
BalanCe at
the end of
the year
unvested
d L ennis
N c rose-innes
M N Writer
d M Hoskins
M c Newton
a d crossley
L a Wyatt
W J o’rourke
2008
naMe
Directors of Mortgage Choice Limited
p a Lahiff
180,300
Other key management personnel of the Group
a d crossley
a J Fraser
M c Newton
N c rose-innes
d L ennis
L a Wyatt
d M Hoskins
W J o’rourke
M N Writer
49,800
52,550
49,000
–
55,500
14,950
77,800
70,700
28,200
–
–
–
39,900
29,300
23,100
20,850
23,500
21,650
17,600
(97,000)
(24,500)
–
–
83,300
83,300
25,300
25,300
–
(52,550)
(27,600)
–
(24,000)
–
(33,900)
(30,800)
–
–
–
–
–
–
–
–
–
61,300
29,300
54,600
35,800
67,400
61,550
45,800
–
61,300
29,300
54,600
35,800
67,400
61,550
45,800
NoteS to FiNaNciaL StateMeNtS
51
note 23. key ManageMent personnel disClosures (Continued)
(iv) share holdings
the number of shares in the company held during the financial year by each director of Mortgage choice Limited and other key
management personnel of the Group, including their personally related parties, are set out below.
2009
naMe
Directors of Mortgage Choice Limited
BalanCe
at the start of
the year
reCeived during
the year on
the vesting of
share rights
other Changes
during the year
BalanCe
at the end of
the year
p a Lahiff
p d ritchie
p G Higgins
r G Higgins
S c Jermyn
d e ralston
S J clancy
Other key management personnel of the Group
M r russell
d L ennis
S r Mitchell
N c rose-innes
M N Writer
d M Hoskins
M c Newton
a d crossley
L a Wyatt
W J o’rourke
2008
naMe
Directors of Mortgage Choice Limited
p a Lahiff
p d ritchie
p G Higgins
r G Higgins
S c Jermyn
d e ralston
Other key management personnel of the Group
a d crossley
M c Newton
N c rose-innes
d L ennis
d M Hoskins
W J o’rourke
M N Writer
L a Wyatt
247,000
350,125
5,822,939
15,226,215
2,000,000
50,000
–
–
–
–
–
–
33,950
27,600
17,500
–
32,889
44,982
–
–
–
–
–
–
–
10,098
–
–
7,668
33,780
38,156
13,662
16,915
30,800
–
–
–
–
–
–
–
–
–
–
–
–
(67,730)
(65,756)
(31,162)
(16,915)
(63,689)
291,982
350,125
5,822,939
15,226,215
2,000,000
50,000
–
–
10,098
–
–
7,668
–
–
–
–
–
BalanCe
at the start of
the year
reCeived during
the year on
the vesting of
share rights
other Changes
during the year
BalanCe
at the end of
the year
100,000
350,125
5,822,939
15,226,215
2,000,000
50,000
–
–
–
–
50
2,089
–
–
97,000
50,000
–
–
–
–
–
24,500
27,600
–
24,000
33,900
30,800
–
–
–
–
–
–
–
(7,000)
–
–
(24,000)
–
–
–
–
247,000
350,125
5,822,939
15,226,215
2,000,000
50,000
17,500
27,600
–
–
33,950
32,889
–
–
Shareholdings of directors and other key management personnel of the Group include those that have been disclosed under
representation made to them by the parties within the aaSB 124 related party disclosures. the directors and other key
management personnel have relied upon the representations made as they have no control or influence over the financial affairs of
the personally related entities to substantiate the shareholdings declared. Where a personally related entity has declined to provide
shareholding details, the shareholding of that personally related entity has been assumed to be nil.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 24.
reMuneration of auditors
during the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
(a) audit serviCes
pricewaterhousecoopers australian firm:
audit and review of financial reports
total remuneration for audit services
(B) non-audit serviCes
Audit-related services
pricewaterhousecoopers australian firm:
other assurance services
total remuneration for audit-related services
Taxation services
pricewaterhousecoopers australian firm:
tax compliance services
other tax services
total remuneration for taxation services
Consolidated
parent
2009
$
2008
$
2009
$
2008
$
227,940
227,940
215,500
215,500
227,940
227,940
201,800
201,800
7,500
7,500
7,500
7,500
7,500
7,500
7,500
7,500
24,885
13,205
38,090
22,200
75,780
97,980
24,885
13,205
38,090
22,200
75,780
97,980
total remuneration for non-audit services
45,590
105,480
45,590
105,480
note 25.
ContingenCies
Contingent liaBilities
the parent entity and consolidated entity had contingent liabilities at 30 June 2009 in respect of:
guarantees
Guarantees given in respect of premises leases $963,405 (2008: $1,155,488).
Contingent claims
From time to time disputes occur between the company and its franchisees in the normal course of operation, a number of which may be
unresolved at any point in time. at 30 June 2009 and 30 June 2008, there were no disputes or claims in progress that are expected to have a
material financial impact on the company.
No material losses are anticipated in respect of any of the above contingent liabilities.
NoteS to FiNaNciaL StateMeNtS
53
note 26.
CoMMitMents
(a) lease CoMMitMents
non-cancellable operating leases
the company leases various offices under non-cancellable operating leases expiring within one to six years. the leases have varying
terms, escalation clauses and renewal rights. on renewal, the terms of the leases are renegotiated. the company also leases various
office equipment under non-cancellable operating leases. the table below includes lease commitments associated with the relocation of
the company’s head office to new premises in North Sydney.
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
1,018
3,008
–
4,026
920
3,325
185
4,430
1,018
3,008
–
4,026
920
3,325
185
4,430
Consolidated
parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
50
–
50
830
50
880
50
–
50
830
50
880
Operating leases
operating lease expenditure contracted for at the reporting date but not
recognised as liabilities payable:
Within one year
Later than one year but not later than five years
Later than five years
(B) other CoMMitMents
commitments in relation to non-cancellable obligation for the supply of media
placement services as at the reporting date but not recognised as liabilities
payable:
Later than one year but not later than five years
Within one year
note 27.
related party transaCtions
(a) parent entities
the ultimate parent entity within the Group is Mortgage choice Limited.
(B) suBsidiaries
interests in subsidiaries are set out in note 28.
(C) key ManageMent personnel
disclosures relating to key management personnel are set out in note 23.
(d) loans to/froM related parties
the Group has formed a trust to administer the Group’s employee share scheme. this is funded by the parent entity. this trust is
consolidated, as the substance of the relationship is that the trust is controlled by the Group.
No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in
respect of bad or doubtful debts due from related parties.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 28.
suBsidiaries
the consolidated financial statements incorporate the assets, liabilities and results of the following in accordance with the accounting policy
described in note 1(B):
naMe of entity
Country of
inCorporation
Class of
shares
equity holding
Cost of parent entity’s
investMent
Mortgage choice (W.a.) pty Limited
Mc Loan Book Security pty Limited
australia
australia
ordinary
ordinary
2009
%
–
100
2008
%
100
100
2009
$
–
2
2008
$
100
2
note 29.
events oCCurring after the BalanCe sheet date
dividend payMent
a final ordinary dividend of $6,542,000 (5.5 cents per fully paid share) was declared out of profits of the company for the year ended 30 June
2009 on 21 august 2009 to be paid on 16 September 2009.
the financial effects of the above transaction have not been brought to account at 30 June 2009.
note 30.
reConCiliation of profit after inCoMe tax to net
Cash infloW froM operating aCtivities
Consolidated
parent entity
profit for the year
depreciation and amortisation
Non-cash net present value of future trailing inflows
Non-cash net present value of future trailing outflows
Non-cash employee expense benefits – share-based payments
Share purchases to meet vesting – share-based payments
interest received on cash and deposits at call
Net loss on sale of non-current assets
change in operating assets and liabilities:
(increase)/decrease in trade and other receivables
decrease/(increase) in deferred tax asset
decrease/(increase) in other operating assets
increase/(decrease) in trade payables
(decrease)/increase in other operating liabilities
(decrease)/increase in provision for income taxes payable
increase/(decrease) in provision for deferred income tax
increase/(decrease) in other provisions
Net cash inflow from operating activities
2009
$’000
26,849
1,095
(52,074)
32,648
(268)
(181)
(404)
143
(452)
514
232
1,166
(44)
(1,343)
5,867
(87)
13,661
2008
$’000
19,344
1,184
(11,429)
7,440
757
(62)
(746)
5
819
(74)
(322)
(921)
(402)
(379)
1,583
200
16,997
2009
$’000
26,849
1,095
(52,074)
32,648
(268)
(181)
(404)
143
(452)
514
232
1,166
(44)
(1,343)
5,867
(87)
13,661
NoteS to FiNaNciaL StateMeNtS
2008
$’000
19,344
1,184
(11,429)
7,440
757
(62)
(746)
5
819
(74)
(322)
(921)
(402)
(379)
1,583
200
16,997
55
note 31.
earnings per share
Basic earnings per share
diluted earnings per share
Consolidated
2009
Cents
22.6
22.6
2008
cents
16.4
16.3
$’000
$’000
earnings used in calculating earnings per share – profit from continuing operations
26,849
19,344
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
adjustments for calculation of diluted earnings per share:
rights and options
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
inforMation ConCerning the ClassifiCation of seCurities
2009
Number
2008
Number
118,811,799
118,270,854
154,769
499,304
118,966,568
118,770,158
(a) options
options granted to employees under the Mortgage choice executive performance option plan are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share. the options have not been included in the
determination of basic earnings per share. details relating to the options are set out in the remuneration report.
(b) performance share plan
rights to shares issued to employees under the Mortgage choice performance Share plan are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share. the rights have not been included in the
determination of basic earnings per share. details relating to the options are set out in the remuneration report.
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
note 32.
share-Based payMents
(a) exeCutive perforManCe option plan (epop)
the executive performance option plan may be offered on an annual basis to eligible executives as determined by Board. the details of
each offer may differ as to the particulars especially with regard to performance criteria and performance period. participation in the epop
provides one component of the long-term incentive available to the selected executives within their aggregate remuneration package.
Under the terms of the epop, options are offered over one ordinary share and have an exercise price based on the market value of the
company’s shares at the time of offer. Market value will be the trade-weighted average price of the company’s shares over the one-
week period immediately preceding the date of offer.
the options offered to executives under the epop are subject to performance conditions set by the Board. in the year ending 30 June
2009, options were offered on 2 october 2008, 20 November 2008 and 1 May 2009. in relation to options offered in october and
November 2008, the performance requirement is based on the total shareholder return (tSr) of the company compared to the tSr of a
comparator group of companies over a three year period. the performance requirement for the options offered in May, 2009 is tenure
based over a two year period.
With regard to the options using tSr as the basis of the performance criteria, the tSr is the percentage increase in the company’s
share price plus reinvested dividends, expressed as a percentage of the initial investment, and reflects the increase in value delivered to
shareholders over the period. the company’s tSr will be compared to the tSrs of companies in a comparator group comprised of
selected S & p aSX top 300 companies of broadly similar size to that of Mortgage choice, excluding mining and resource companies
as well as property related trusts or companies. the comparator companies are drawn from a group within an approximate range of
40% to 200% of the market capitalisation of the company.
the companies comprising the comparator group for the year ending 30 June 2009 are allco Finance Group Limited, austin
engineering Limited, aSG Group Limited, australian Vintage Ltd, avexa Limited, amazing Loans Limited, Becton property Group, Biota
Holdings Limited, Bravura Solutions Limited, codan Limited, costaexchange Ltd, clean Seas tuna Limited, customers Limited, cedar
Woods properties Limited, coote industrial Ltd, dKN Financial Group Limited, dWS advanced Business Solutions Limited, dyesol
Limited, eservglobal Limited, Forest place Group Limited, Finbar Group Limited, Flexigroup Limited, Grd Limited, Gazal corporation
Limited, infomedia Ltd, Keybridge capital Limited, Maryborough Sugar Factory Limited, orotongroup Limited, pro Medicus Limited,
Quantum energy Limited, rcr tomlinson Limited, regional express Holdings Limited, resource Generation Limited, retail Food Group
Limited, rp data Ltd, Specialty Fashion Group Limited, Sp telemedia Limited, Sirtex Medical Limited, Structural Systems Limited,
Southern cross electrical engineering Ltd, tox Free Solutions Limited, thinksmart Limited, Universal Biosensors inc., United overseas
australia Limited, Vision Group Holdings Limited, Viridis clean energy Group, VdM Group Limited, Webjet Limited, Wilson HtM
investment Group Ltd, Wattyl Limited.
if any of the companies in the comparator group ceases to exist in its current form for any reason other than its liquidation, or if the
Board determines in its discretion that a company should no longer be in the comparator group because of an anomaly, distortion or
other event that is not directly related to the financial performance of that company, that company will cease to form part of the
comparator group.
options will not become exercisable at the end of the three year performance period unless Mortgage choice’s tSr for the period is
above the 50th percentile of the comparator group at the end of the performance period. above the 50th percentile, options will vest
and become exercisable in accordance with a vesting scale.
the vesting scale is as follows:
CoMpany perforManCe (tsr perCentile ranking)
perCentage of offered options alloCated
at or below the 50th percentile
at the 51st percentile
75th percentile or above
0%
52%
100%
Between the 51st percentile and 75th percentiles, an additional 2% of options will vest for every percentile increase in tSr ranking.
the rules of the epop permit the company to issue new shares or to purchase shares on-market for the purposes of satisfying the
exercise of options.
any options which do not become exercisable following the application of the performance condition and vesting scale will lapse. an
option that has become exercisable but is not exercised will lapse on the earlier of:
n
n
ten years after the date of offer;
three months, or such other period determined by the Board, after the participant ceases employment for a reason other than a
‘qualifying reason’ (i.e. death, total and permanent disability, redundancy, and any other reason determined by the Board); and
n
twelve months, or such other period determined by the Board, after the participant ceases employment for a ‘qualifying reason’.
Where a participant ceases to be employed by the company prior to the end of the performance period, other than because of a
‘qualifying reason’, any options that have not become exercisable will lapse. However, if there is cessation of employment due to a
‘qualifying reason’, the Board may determine that some or all of the options may vest. in the event of a change of control of the
company, all options will vest on a pro-rata basis or in their entirety for certain senior executives.
NoteS to FiNaNciaL StateMeNtS
57
note 32. share-Based payMents (Continued)
if the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment or discrimination,
is in serious breach of any duty to Mortgage choice, or, in the Board’s reasonable opinion, has brought Mortgage choice into serious
disrepute, any options held by the participant will lapse.
details of options over ordinary shares in the company provided as remuneration to each director and key management personnel of
the company are set out below. When exercisable, each option is convertible into one ordinary share of Mortgage choice Limited.
Further information on the options is set out in the remuneration report.
Set out below are summaries of options granted under the plan:
GraNt Date
expIry Date
exerCISe
prICe
BaLaNCe at
Start oF
the year
GraNteD
DurING
the year
exerCISeD
DurING
the year
expIreD
DurING
the year
ForFeIteD
DurING
the year
BaLaNCe
at eND oF
the year
exerCISaBLe
at eND oF
the year
Number
Number
Number
Number
Number
Number
Number
Consolidated and parent entity – 2009
10 august 2004
10 august 2014
24 February 2005
24 February 2015
2 September 2005
2 September 2015
$1.05
$1.08
$1.43
29 december 2006
29 december 2016
$2.60
415,400
81,800
661,600
953,250
22 November 2007
22 November 2017
$2.51
1,416,000
–
–
–
–
–
2 october 2008
2 october 2018
20 November 2008
20 November 2018
1 May 2009
1 May 2019
$1.12
$1.12
$0.76
–
491,050
– 3,396,250
– 2,500,000
total
3,528,050 6,387,300
Weighted average exercise price
$2.13
$0.98
–
–
–
–
–
–
–
–
–
–
–
415,400
415,400
(81,800)
–
–
(373,780)
287,820
287,820
–
–
–
–
–
–
(953,250)
(1,416,000)
(491,050)
– (3,396,250)
–
–
–
–
–
–
–
–
–
–
–
– 2,500,000
900,000
(6,712,130) 3,203,220
1,603,220
$1.64
$0.86
$0.96
GraNt Date
expIry Date
exerCISe
prICe
BaLaNCe at
Start oF
the year
GraNteD
DurING
the year
exerCISeD
DurING
the year
expIreD
DurING
the year
ForFeIteD
DurING
the year
BaLaNCe
at eND oF
the year
exerCISaBLe
at eND oF
the year
Number
Number
Number
Number
Number
Number
Number
Consolidated and parent entity – 2008
10 august 2004
10 august 2014
24 February 2005
24 February 2015
2 September 2005
2 September 2015
$1.05
$1.08
$1.43
29 december 2006
29 december 2016
$2.60
415,400
81,800
733,000
998,900
–
–
–
–
22 November 2007
22 November 2017
$2.51
– 1,416,000
total
2,229,100 1,416,000
Weighted average exercise price
$1.87
$2.51
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
415,400
81,800
415,400
81,800
(71,400)
661,600
(45,650)
953,250
– 1,416,000
–
–
–
(117,050) 3,528,050
497,200
$1.89
$2.13
$1.05
the weighted average remaining contractual life of share options outstanding at the end of the period was 8.88 years (2008 – 8.19 years).
the assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date,
and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Monte carlo
simulation model utilising a Black-Scholes option pricing model framework that takes into account the exercise price, the term of the option,
the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
the model inputs for options granted during the year ended 30 June 2009 included:
(a)
options are granted for no consideration, each tranche vests and is exercisable three years from grant date
(2 october 2008 and 20 November 2008) or on scheduled vesting dates (1 May 2009);
(b) exercise price: $1.12 (2 october 2008 and 20 November 2008), $0.76 (1 May 2009) (2008 - $2.51);
(c) grant date: 2 october 2008, 20 November 2008 and 1 May 2009 (2008 – 22 November 2007);
(d) expiry date: 2 october 2018, 20 November 2018 and 1 May 2019 (2008 – 22 November 2017);
(e) share price at grant date: $1.12 (20 october 2008 and 20 November 2008), $0.75 (1 May 2009) (2008 - $2.49);
(f) expected price volatility of the company’s shares: 34% (2008 – 30%);
(g) expected dividend yield: 10.0% (2 october 2008 and 20 November 2008), 13.9% (1 May 2009) (2008 – 6.5%); and
(h)
risk-free interest rate: 5.59% (2 october 2008 and 20 November 2008), 4.51% (1 May 2009) (2008 – 5.97%).
NoteS to FiNaNciaL StateMeNtS – 30 JUNe 2009
(B) perforManCe share plan (psp)
the pSp permits eligible employees identified by the Board to be offered conditional entitlements to shares. the shares allocated to
those employees are subject to the achievement of performance requirements specified by the Board. the pSp is designed to provide
the long-term incentive component of remuneration for managers and any other designated employees.
participation in the pSp is offered on an annual basis. eligible employees are offered shares to a value determined by reference to the
company’s reward policy and market practice with regard to long-term incentive arrangements provided by peer organisations. the
performance requirements and vesting scale applicable to offers under the pSp during the year ended 30 June 2009 are identical to
those specified under the executive performance option plan for options using tSr as the basis of their performance criteria. the
right to receive performance shares will lapse if the performance criteria have not been met at the end of the performance period.
the rules of the pSp permit the company to issue new shares or to purchase shares on-market if the performance requirements are
satisfied at the end of the three-year performance period. participants will not be required to pay for any shares allocated to them under
the pSp. Until the shares are released from the pSp, they will remain subject to the pSp rules and to the ‘holding lock’ applied pursuant
to those rules, and the participant will be restricted from trading in those shares.
Shares will not be released from the pSp and will remain subject to a holding lock until a Notice of Withdrawal approved by the Board is
lodged with the plan administrator in respect of them. once a Notice of Withdrawal is accepted, the plan administrator will release the
holding lock in respect of the shares which are the subject of that Notice.
a Notice of Withdrawal may be lodged by a participant following the earlier of:
n 1 July in the year (being a period commencing 1 July and ending 30 June) that is ten years after the year in which the offer is
made and is accepted by the participant;
n
the participant ceasing to be an employee of the company;
n a ‘capital event’ (generally, a successful takeover offer or scheme of arrangement relating to the company) occurring; or
n
the date upon which the Board gives its written consent to the lodgement of a Notice of Withdrawal by the participant.
While shares remain subject to the pSp rules, participants will, in general, enjoy the rights attaching to those Shares (such as voting or
dividend rights etc). Where a participant ceases to be employed by Mortgage choice prior to the end of the performance period, other than
because of a ‘qualifying reason’ (i.e. death, total and permanent disability, redundancy, and any other reason determined by the Board), any
conditional entitlements to receive shares will lapse. However, in the event of a change in control of the company or if there is cessation of
employment due to a ‘qualifying reason’, the Board may determine that some or all of the shares may be allocated to the participant.
if the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment or discrimination, is
in serious breach of any duty to Mortgage choice, or, in the Board’s reasonable opinion, has brought Mortgage choice into serious
disrepute, any shares to which the participant may have become entitled at the end of the performance period, and any shares held by
the participant under the pSp are forfeited by the participant.
details of performance shares in the company provided as remuneration to each director and key management personnel of Mortgage
choice Limited are set out below. Further information on the performance shares is set out in the remuneration report.
Set out below are summaries of performance shares conditionally issued under the plan:
oFFer Date
VeStING Date
VaLue
BaLaNCe at
Start oF
the year
GraNteD
DurING
the year
exerCISeD
DurING
the year
expIreD
DurING
the year
ForFeIteD
DurING
the year
BaLaNCe
at eND oF
the year
exerCISaBLe
at eND oF
the year
Number
Number
Number
Number
Number
Number
Number
Consolidated and parent entity – 2009
2 September 2005
2 September 2008
$1.43
12 december 2006
31 august 2009
31 august 2007
31 august 2010
31 august 2008
31 august 2011
$2.21
$2.20
$1.00
total
328,700
150,300
308,750
–
–
–
–
499,100
(172,476)
(51,180)
(67,097)
(7,717)
787,750
499,100
(298,470)
Weighted average exercise price
$1.88
$1.00
$1.73
–
–
–
–
–
(156,224)
–
(37,020)
62,100
(99,103)
142,550
(172,033)
319,350
(464,380)
524,000
$1.50
$1.47
–
–
–
–
–
NoteS to FiNaNciaL StateMeNtS
59
note 32. share-Based payMents (Continued)
oFFer Date
VeStING Date
VaLue
BaLaNCe at
Start oF
the year
GraNteD
DurING
the year
exerCISeD
DurING
the year
expIreD
DurING
the year
ForFeIteD
DurING
the year
BaLaNCe
at eND oF
the year
exerCISaBLe
at eND oF
the year
Number
Number
Number
Number
Number
Number
Number
Consolidated and parent entity – 2008
10 august 2004
10 august 2007
$1.05
297,400
6 September 2004
6 September 2007
$1.05
4 January 2005
4 January 2008
24 February 2005
24 February 2008
$0.91
$1.08
2 September 2005
2 September 2008
$1.43
12 december 2006
31 august 2009
31 august 2007
31 august 2010
$2.21
$2.20
total
24,800
94,800
24,500
415,900
211,800
–
–
–
–
–
–
(297,400)
(24,800)
(70,100)
(24,500)
–
(5,245)
–
308,750
–
1,069,200
308,750
(422,045)
–
–
–
–
–
–
–
–
–
–
–
(24,700)
–
–
–
–
–
(87,200)
328,700
(56,255)
150,300
–
308,750
(168,155)
787,750
$1.61
$1.88
–
–
–
–
–
–
–
–
–
Weighted average exercise price
$1.42
$2.20
$1.04
the weighted average remaining contractual life of performance shares outstanding at the end of the period was 1.66 years
(2008 – 1.15 years).
the assessed fair value at grant date of share rights granted to individuals is allocated equally over the period from grant date to vesting
date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a
Monte carlo simulation model utilising a Black-Scholes option pricing model framework that takes into account the term of the rights,
the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the rights, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the share rights.
the model inputs for performance shares granted during the year ended 30 June 2009 included:
(a) share rights are granted for no consideration, each tranche vests and is exercisable three years from the grant date;
(b) grant date: 11 September 2008 (2008 – 31 august 2007);
(c) share price at grant date: $1.12 (2008 – $2.49);
(d) expected price volatility of the company’s shares: 40% (2008 – 30%);
(e) expected dividend yield: 10.0% (2008 – 6.5%); and
(f)
risk-free interest rate: 5.54% (2008 – 5.97%).
(C) expenses arising froM share-Based payMent transaCtions
total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were
as follows:
options issued under epop
Shares issues under pSp
Consolidated
parent entity
2009
$’000
(519)
251
(268)
2008
$’000
472
285
757
2009
$’000
(519)
251
(268)
2008
$’000
472
285
757
direCtors’ deClaration
30 June 2009
in the directors’ opinion:
(a)
the financial statements and notes set out on pages 27 to 60 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their
performance, for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
the directors have been given the declarations by the chief executive officer and chief Financial officer required by section 295a of the
Corporations Act 2001.
this declaration is made in accordance with a resolution of the directors.
peter ritchie
director
Sydney
21 august 2009
NoteS to FiNaNciaL StateMeNtS
61
decLaratioN
63
shareholder inforMation
the shareholder inforMation set out BeloW Was appliCaBle as at 19 august 2009
a. distribution of equity securities
analysis of numbers of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
there were 59 holders of less than a marketable parcel of ordinary shares.
B. equity security holders
twenty largest quoted equity security holders
the names of the twenty largest holders of quoted equity securities are listed below:
Finconnect (australia) pty Ltd
National Nominees Limited
HSBc custody Nominees (australia) Limited
J p Morgan Nominees australia Limited
ochoa pty Ltd
Basscave pty Limited
citicorp Nominees pty Limited
citicorp Nominees pty Limited
rBc dexia investor Services australia Nominees pty Limited
r G Higgins
ochoa pty Ltd
rBc dexia investor Services australia Nominees pty Limited
ScJ pty Ltd
aNZ Nominees Limited
Finconnect (australia) pty Ltd
pacific custodians pty Ltd
Mr ian edwards & Mrs Josephine edwards
rBc dexia investor Services australia Nominees pty Limited
Finconnect (australia) pty Ltd
rBc dexia investor Services australia Nominees pty Limited
unquoted equity securities
options issued under the executive performance option plan
Class of equity seCurity
ordinary
shares
options
378
1039
563
582
39
2,601
3
3
ordinary shares
number
held
percentage
of issued
shares
19,095,388
11,323,097
10,488,706
10,142,532
9,620,000
5,817,939
4,418,830
3,170,994
3,034,252
2,934,548
2,666,667
2,221,122
2,000,000
1,124,457
996,893
824,262
675,000
519,715
519,504
500,000
16.05
9.52
8.82
8.53
8.09
4.89
3.72
2.67
2.55
2.47
2.24
1.87
1.68
0.95
0.84
0.69
0.57
0.43
0.43
0.42
92,093,906
77.43
nuMBer on
issue
nuMBer of
holders
3,203,220
3
C. substantial holders
Substantial holders in the company are set out below:
ordinary shares
count Financial Limited
r G Higgins and ochoa pty Ltd
FMr corp. & Fidelity international Limited
orbis investment Management (australia) pty Ltd
iNVeSco australia Limited
d. voting rights
nuMBer
held
perCentage
20,611,785
15,231,215
13,270,161
8,104,530
5,967,834
17.33
12.80
11.20
6.81
5.02
the voting rights attaching to each class of equity securities are set out below:
(a) ordinary shares
on a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
(b) options
No voting rights
SHareHoLder iNForMatioN
65
Mortgage Choice’s mission is to empower
australians by educating them about the
mortgage industry and guiding them
through the loan maze. our ‘Client for Life’
philosophy means we provide them with
credible, professional service from initial
appointment to application, settlement
and throughout the life of the loan.