MoneySwitch Limited ABN 49 103 575 042 (Trading as Tyro Payments) Annual report to shareholders Year ended 30 June 2010 MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 1 CONTENTS PAGE Building a specialised banking institution (SCCI) for merchants Tyro Health Tyro Retail Tyro Culture Directors’ Report Independent Auditor Declaration Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flow Statement of Changes in Equity Notes to the Financial Statements for the year ended 30 June 2010 Note 1 – Statement of Accounting Policies Note 2 – Revenue and Expenses Note 3 – Income Tax Note 4 – Cash and Cash Equivalents Note 5 – Trade and Other Receivables Note 6 – Prepayments Note 7 – Inventories Note 8 – Available for Sale Investments Note 9 – Property, Plant and Equipment Note 10 – Share Based Payment Expense Note 11 – Trade Payables and Other Liabilities Note 12 – Provisions Note 13 – Contributed Equity and Reserves Note 14 – Financial Risk Management Objectives, Policies and Processes Note 15 – Commitments and Contingencies Note 16 – Leases Note 17 – Segment Reporting Note 18 – Auditor’s Remuneration Note 19 – Related Party Disclosures Directors’ Declaration Independent Auditor Report 3 4 5 7 8 14 15 16 17 18 19 26 28 28 29 29 29 29 30 31 32 32 32 34 37 37 37 37 38 42 43 MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 2 Building a specialised banking institution (SCCI) for merchants MoneySwitch Limited trading as Tyro Payments (or “Tyro”) is an Australian banking institution specialised in facilitating the acceptance of electronic payments on behalf of merchants and recurrent billers. Tyro holds an authority under the Banking Act to carry on a banking business as a Specialist Credit Card Institution (SCCI) and operates under the supervision of the Australian Prudential Regulation Authority (APRA). Tyro does not take money on deposit. Tyro is a Principal Member of Visa and MasterCard and a Tier One Member of the Australian payment clearing streams BECS and CECS. Tyro provides an in-house developed, end-to-end solution, authorising, clearing and settling electronic payments. Tyro accepts Visa, MasterCard, American Express/JCB, Diners, PIN based EFTPOS as well as Medicare Easyclaim, gift and loyalty card transactions. Under its banking authority, Tyro is also able to provide additional services of BPAY and direct debit services. The Tyro solution is IP based and all transactions are processed in real time. As an acquirer only, Tyro does not issue cards, thereby eliminating any potential conflict of interest between serving cardholders and merchants. At the end of June 2010, Tyro completed its third full fiscal year trading, since the commercial launch of its EFTPOS facility on 26 April 2007. Our vision and guiding principles Our vision is to be the most efficient acquirer of electronic card transactions in Australia, providing innovative service, functionality and value. Our directors, managers and employees strive to demonstrate honesty, integrity and diligence, to act in accordance with the law and always to maintain a spirit of fairness, justice and equity at all times. Our governance Whilst Senior management has responsibility for Tyro’s day-to-day management, in line with legal requirements, the Board of Directors (the board) has ultimate responsibility for Tyro’s sound and prudent management. In line with best practice and in particular the requirements of APRA Prudential Standard 510: Governance, the board establishes corporate policy and direction, supported by operational management. The board also establishes advisory committees in respect of key aspects of the business which assist it in carrying out its functions, as well as providing it with expert advice on key issues. The primary role of the board is to provide effective governance over company affairs, including its strategic direction, establishing goals for management and monitoring the achievement of those goals, to ensure that the interests of stakeholders are protected and the confidence of the merchant acquiring market is maintained, whilst having regard for the interests of all stakeholders including customers, employees and suppliers. The board currently consists of six directors, with a majority of four directors and the Chairman meeting APRA’s independence requirements. These requirements are largely consistent with that of the Corporations Act. The directors of the board have set standards of policy and conduct applicable at all levels of Tyro to ensure stringent compliance with the Tyro Code of Conduct, the Corporations Act 2001, the National Privacy Principles 2001 and the Banking Act 1959 and all other applicable regulation. In particular, the board is cognisant of its lifecycle and requirements and the need to maintain access to independent expertise. Consequently it has established a policy of board renewal that ensures it has the necessary expertise and general reinvigoration while also maintaining ongoing understanding of Tyro’s business. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 3 Building the merchant portfolio Tyro has grown his merchant portfolio in the health and general retailing space. June 2009 June 2010 Growth No of merchants or merchant outlets (MID) 1,431 2,991 No of credit and debit card transactions 929,124 1,696,299 No of Medicare Easyclaim transactions 96,000 590,000 Value of credit and debit card transactions $78.8 million $127.3 million 109% 83% 515% 62% Tyro Health: Medical Practices and Pharmacies Since launching, Tyro has focused on opportunities within primary care and related health markets. Specifically Tyro has targeted the installed base of Health Communication Network (HCN). HCN is the leading Australian provider of e-health and practice automation solutions and addresses both the General Practitioner and Specialist Practitioner market place. By end of June 2010, there were over 1000 medical practices using a Tyro facility. Tyro has also integrated with several pharmacy-focused point of sale solutions. By June 2010, there were 61 pharmacies in production. As at end of June 2010, 45% of Tyro’s revenue has come from this line of business. Medicare Easyclaim Tyro has deployed Australia’s first integrated Easyclaim platform. Easyclaim is a real-time Medicare claiming and reimbursement service for patient-paid and bulk bill claims using an EFTPOS terminal and the EFTPOS network from the medical practice immediately after the consultation has occurred. HCN has integrated the Easyclaim platform into its PracSoft practice management system. The highly automated end-to-end solution was first launched in April 2009. Tyro and HCN have developed a seamless process of electronic payment, claiming, reimbursement and reconciliation. The claim and Medicare card data is automatically transferred from the practice management system (PMS), where it resides, through the Tyro EFTPOS terminal to Medicare and from Medicare back to the PMS for reconciliation. Medicare statistics show that in June 2010 there were 8.4 million claims for GP Professional Attendances. During the same month, Tyro processed 596,000 Easyclaim transactions. By end of June 2010, 856 HCN practices used integrated Easyclaim. Tyro estimates that this is 32% of the current HCN installed base. Further Growth Opportunities There are attractive growth opportunities in the corporate medical market place. These opportunities rely heavily on the active participation of the target corporate customers to bring the revenue opportunities to fruition. Tyro will pursue these opportunities in the next financial year. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 4 Tyro Retail Tyro is continuing to develop its EFTPOS platform in line with its overall strategy of accessing merchants via Point of Sale (POS) vendors. The introduction of the Tyro Terminal Adaptor (TTA) has meant that POS vendors no longer have to implement the integration protocol directly; rather they communicate with the TTA, which is co-located on the POS. This change has meant that integration with Tyro no longer requires weeks of effort but merely days and integrations are far more robust. The TTA is a high quality and easy to use application which has been very well received by the POS vendor community as a whole. Tyro has a steady flow of POS vendors completing the integration process with Tyro and the ease of use of the TTA has facilitated this trend. As at 30 June 2009, Tyro had completed seventeen certified POS integrations. During the year Tyro completed integration and certification with a further eight POS vendors. In the Tyro business model for integrated EFTPOS, the POS vendor is the sales channel. This is achieved by revenue sharing with our business partners. One of the key integrations delivered during the year is MYOB Retail Manager. Recently Tyro has implemented a Product Management team. The objective of the team is a combination of developing a road map for future development and providing business analyst support for current development. Tyro Special Projects During the reporting year, Tyro delivered an online tenant rental solution for Westfield Limited. The solution enables Westfield tenants to pay rent or ad hoc charges via an online portal using a credit card. Leveraging the Internet Tyro architecture allows larger retail organizations to cut their infrastructure cost by reducing communication expense through the use of their corporate network and/or the public internet and by eliminating an expensive software and hardware middleware layer used by incumbents for aggregation and integration purposes. Tyro is the only EFTPOS provider with the capability of secure integrated credit and debit card processing in a “thin client” (web-based) infrastructure. Tyro removes constraints and enables businesses, no longer tied to legacy technology, to radically improve the efficiency of their processes. Product Expansion To date, the TTA only suits a generic retail environment (purchases and refunds). Tyro has recognised that if it is to achieve greater success with this strategy, then it needs to become closer aligned to the workflow of POS systems. Tyro has identified the hospitality sector as an attractive market segment. There are several POS vendors in the hospitality sector with whom Tyro has integrated with or recently begun an integration project. Tyro is working closely with the leading players in this sector to develop its differentiated hospitality product. The solution is planned to be released in stages over the next financial year. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 5 Tyro Culture Environmental Sustainability Climate change is not simply an environmental issue, it’s a key business and social issue which impacts us all. By the very nature of its innovative internet-based technology, Tyro is contributing to a more sustainable future with paperless statements, integrated receipt, online reporting and web based documentation. With the development of integrated receipt Tyro continues to further expand its environmental awareness beyond corporate headquarters to a growing proportion of its customer base. Tyro has implemented a company wide recycling program and continues to search for new and efficient ways to minimise its environmental footprint. Supporting Employees Tyro’s 51 employees are critical to its continued success. By utilising comprehensive recruitment and pre-screening practices for all employees, along with at least annual performance management reviews, Tyro endeavours to recruit, retain and suitably reward the best people in the industry. All employees are offered to participate in the Employee Share Option Plan. Security is top of mind in the financial industry Over the last year Tyro has rolled out EMV (chip card) for Visa and MasterCard to over 91.1% of its terminals. A measure of success in the application is the rate of fallback transactions, where the operator has been unsuccessful in processing with the chip and instead falls back to using the magnetic strip. The industry average for Australia is around 3%, while tyro is now down to 1.37%. At one point in time Tyro had PCI DSS certification, but it has lapsed. The emphasis going forward is to regain PCI compliance certification. There are 3 facets to PCI compliance: • PCI PA which covers the payment application as used by merchants and includes the function on the terminal and any integrated systems. • PCI DSS which covers our internal operational procedures to ensure the security of cardholder data. • Merchant PCI DSS, which has been placed by Visa and MC at the door of the acquirer. Tyro is working with compliance assessors in order to address the first 2 points above, while building a strategy for dealing with the third issue. A recent addition to Tyro’s product range is an "Electronic Imprint" capability, which is a foundation technology for reducing the PCI DSS compliance issue for merchants in the card not present (non eCommerce) environments. Tyro has continued to have negligible fraud and its chargeback ratio is low by industry standards. Availability Tyro is committed to a highly available service. For example, if required, Tyro can switch to a redundant system via an automated and transparent process, without the need of human intervention. Tyro maintains two data centres (DC) at different locations, referred to as South and North. The North DC has been configured and tested as a dedicated disaster recovery site and Tyro started processing transactions there in November 2006. Historically the North DC has been used in ‘component failure’ scenarios. Testing highlighted the various time to recover requirements across the total infrastructure. Tyro set out to move towards a live-live infrastructure that takes all of the various availability requirements into account Tyro has addressed single points of failure with its live-live initiative. Tyro’s live-live initiative has been successfully implemented and tested. Tyro now has 4 financial transaction switches (SW) available and two additional integration servers (INT) on standby. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 6 Directors Report The Board of Directors of MoneySwitch Limited has pleasure in submitting its report for the financial year ended 30 June 2010. The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. All directors were in office for the entire year unless otherwise stated. Names, qualifications, experience and special responsibilities: Kerry Roxburgh (Chairman) Non-executive Director since 18 April 2008 Kerry was one of the founders, CEO then Chairman of E*Trade Australia until ANZ Banking Group acquired the business in 2007. Kerry spent 10 years as an executive director of the Hong Kong Bank of Australia Group including 5 years as managing director of their corporate finance subsidiary. He is non-executive chairman of Charter Hall Limited and of Tasman Cargo Airlines Pty Limited. He is a non-executive director of Ramsay Health Care, The Medical Indemnity Protection Society Group, Law Cover Insurance Pty Limited and of a private investment company. Kerry is a member of the Audit Committee, Remuneration Committee and Risk Committee. Directorships held during the past 3 years: • BTIG Australia Limited (ceased January 2009) • Charter Hall Limited • eircom Holdings Limited (ceased January 2010) • E*trade Australia Limited (ceased June 2007) • Everest Financial Group Limited (ceased May 2009) • MoneySwitch Limited • Professional Insurance Australia Pty Ltd (ceased June 2010) • Ramsay Health Care Limited Brad Banducci Non-executive Director 14 December 2006 to 21 September 2009 Brad spent 15 years working in Australia, USA and New Zealand for the Boston Consulting Group, a leading global management consulting firm specialising in working with the Global 2000 companies to help grow and transform their business. Brad spent the last 8 years as a global vice president and director. He was the leader of the Sydney Office from 2001-2003 and head of its Asia-Pacific Corporate Strategy and Finance Practice from 2003-2005. Brad was CFO of MoneySwitch Limited from August 2005 until October 2006. He is now CEO of Cellarmasters Group. Directorships held during the past 3 years: • Kennedy Corporation (t/a Cellarmasters Group) and subsidiary entities • MoneySwitch Limited Michael Cannon-Brookes Non-executive Director since 10 December 2009 Michael is Co-Founder, CEO and director of Atlassian, an innovative, award-winning enterprise software company based in Australia and established in 2002. Michael was named Australian IT Professional of the Year in 2004, awarded 'Australian Entrepreneur of the Year' by Ernst & Young in 2006 and honoured by the World Economic Forum in 2009 as a Young Global Leader. Michael is an active investor and advisor to technology-focused ventures. Michael is Chairman of the Remuneration Committee. Directorships held during the past 3 years: • Atlassian Corporation Pty Limited & Subsidiaries • MoneySwitch Limited MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 7 Rob Ferguson Non-executive Director since 14 November 2005 Rob began his career as a research analyst for a Sydney stockbroker. He joined Bankers Trust Australia in 1972 and became managing director in 1985. Through his ongoing delivery of higher investment performance, he and his team built BT Funds Management into the leader in the retail mutual funds business. By mid 1990s, BT had $50 billion under management. Rob became chairman of BT Funds Management in 1999 until he resigned the position in 2002. Rob is a member of the Audit Committee, Remuneration Committee and the Risk Committee. Directorships held during the past 3 years: • Chairman of GPT Management Holdings Limited • Deputy Chair of the Sydney Institute • Director of the Lowy Institute. • MoneySwitch Limited • Non-executive Chairman of IMF (Australia) Ltd • Non-executive Chairman of Primary Health Care Limited Other previous directorships of listed or unlisted companies held by Rob Ferguson: • Director of Westfield Holdings Ltd (1994 – 2004) • Chairman of Vodafone Australia (2000 – 2002) • Chairman of Nextgen Limited (2000 – 2004) • Director of Racing, NSW (2004 – 2009) Dr Thomas Girgensohn Non-executive Director since 9 March 2006 Thomas brings extensive Australian and international experience in the consulting sector to MoneySwitch Limited. Previously managing partner (Australia and NZ) of the Boston Consulting Group and former chairman of Netcomm Ltd and TDG Logistics,he has a PhD in Business Administration from the University of Munich, a Masters of Business Administration from the University of Saarbrucken and a Bachelor of Economics from the University of Bochum, all in Germany. Thomas is a current Fellow of the Australian Institute of Company Directors, Chairman of the Audit Committee and a member of the Remuneration and Risk Committees. Directorships held during the past 3 years: • Australian Co-operative Foods Limited (ceased) • Make-A-Wish Australia • MoneySwitch Limited • Stemcor Australia Pty Ltd Paul Rickard Non-executive Director since 28 August 2009. Until July 2009, Paul was the Executive General Manager & Chief Information Officer, Payments & Business Technology for the Premium Business Services organisation at the Commonwealth Bank of Australia. The board believes that Paul brings a tremendous amount of commercial acumen and experience in the delivery of IT projects and services. Paul is Chairman of the Risk Committee. Directorships held during the past 3 years: • MoneySwitch Limited MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 8 Jost Stollmann Director and CEO since 5 April 2005 Jost founded and grew the German system and network integrator CompuNet Computer AG into a US$1B company, sold it to GE Capital and led the integration and expansion of GE Capital IT Solutions across the continent as president of Europe. As Federal Shadow Minister of Economy and Technology, he ran and managed his own election campaign contributing significantly to the landslide victory of the first German government of Chancellor Gerhard Schröder. Directorships held during the past 3 years: • MoneySwitch Limited Justin Mitchell Company Secretary since 12 April 2007 Justin is Company Secretary and Audit and Compliance Manager at MoneySwitch Limited. Justin has over fourteen years experience in the financial services and banking industry, having spent five years with Westpac in operational and project roles and most recently as Risk and Audit Manager with EDS. His wide risk, compliance and audit experience includes the design and set up of internal audit functions, design and implementation of risk frameworks and internal compliance plans and controls. Justin has also developed and delivered enterprise-wide risk and compliance training. Justin has not held any directorships during the past 3 years. Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of MoneySwitch Limited were: Director Kerry Roxburgh* Brad Banducci% Michael Cannon-Brookes Rob Ferguson# Thomas Girgensohn^ Paul Rickard Jost Stollmann Shares Options 690,182 5,289,262 0 22,072,348 8,533,052 124,102 916,667 3,775,427 444,443 10,609,233 4,330,689 790,769 41,585,685 22,524,986 * Includes Ordinary Shares and options jointly held with Alex Roxburgh as trustees for the Kerry & Alex Roxburgh Superannuation Fund being associates of Kerry Roxburgh. % Includes Ordinary Shares and options held by Guy Leon Banducci and Lisa Marie Banducci being associates of Brad Banducci. # Includes Ordinary Shares and options held by Torryburn Superannuation Fund and Ordinary Shares and options jointly held by Simon Peter Price and Rachel Emma Ferguson being associates of Rob Ferguson ^ Includes Ordinary Shares and options held by Dacroft Pty Ltd and The Girgensohn Family Trust being associates of Thomas Girgensohn DIVIDENDS No dividends have been declared or paid since the date of incorporation. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 9 CORPORATE INFORMATION Corporate Structure MoneySwitch Limited trading as Tyro Payments (“Tyro”) is an unlisted public company. It is incorporated and domiciled in Australia. The registered office of Tyro is Level 2, 125 York Street, Sydney, New South Wales, 2000. Nature of operations and principal activities Tyro’s principal activities are: • Providing electronic transaction acquiring services to Australian businesses (merchants). This includes the authorisation, clearing and settlement of credit card, pin based debit card, EFTPOS, Easyclaim and gift card transactions. • Developing the transaction switching and payment software and infrastructure required to support the provision of credit and debit acquiring services. There have been no significant changes in the nature of those activities during the year. Employees Tyro employed 51 employees as at 30 June 2010 (compared to 41 employees at 30 June 2009). OPERATING AND FINANCIAL REVIEW Overview Tyro was founded on 3 February 2003 by Paul Wood, Peter Haig and Andrew Rothwell. Two founders Peter Haig and Andrew Rothwell have maintained their active association with Tyro. In November 2004 Jost Stollmann became a major investor, Director and CEO. Kerry Roxburgh joined as non-executive Director on 18 April 2008. He was appointed Chairman of the Board on 19 February 2010. Tyro positions itself as a specialised institution focused on merchant acquiring acting as a developer of its own acquiring technology, as a processor of its own transactions and as acquirer of record with its own banking authority. Credit and Debit Acquiring Services Tyro is a specialist financial institution focused on providing credit and debit acquiring services. As such, it has implemented the necessary frameworks, policies, procedures and systems to comply with the stringent prudential and regulatory requirements to perform electronic transaction processing, clearing and settlement activities within the Australian banking sector. Software development Tyro’s focus is on using proven modern technology to provide extremely reliable, secure, low cost and flexible acquiring services to merchants and value-added resellers. As such, Tyro owns its own switching and payment software and has continued to develop this for further competitive advantage over the course of the year. Performance Indicators Reviewing and approving all Tyro business strategies and significant policies, the board ensures that it is satisfied that all aspects of management and operations conform to its strategy, direction and policies. Additionally, the board monitors management practice and ensures that senior management adhere to set KPI’s in all spheres of the business. It practices a rigorous program of board meetings, board committee meetings and the stringent review of a range of regular management reports encompassing all aspects of the business, including finance, operations, sales and strategy. In particular, the board ensures that an effective system of risk management and internal control is established and maintained, and that senior management proactively monitors the effectiveness of the risk management framework. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 10 Operating Results for the Year Tyro reported an operating loss after providing for income tax of $1,823,959 (2009: $5,113,175 loss). This fell short of the initial forecast result but remained in line with expectations given that the company decided to increase capacity and resourcing in the third quarter of the period. 2010 2009 Revenues Operating Loss Revenues Operating Loss $14,298,130 $1,823,959 $6,282,651 $5,113,175 One of Tyro’s business partners agreed with Tyro to forego commission payments for the period from 1 January 2009 to 30 June 2010 in return for a heightened commission payment for the period from 1 July 2010 to 31 December 2011. The impact of this agreement decreased losses for fiscal year 2009 by $0.1 million and for fiscal year 2010 by $0.9 million. From July 2010, Tyro will pay a heightened commission which will increase commission expense for the following eighteen months. Investments for Future Performance Tyro has invested significantly in human resources to develop its availability and speed of the switching and payments system architecture. It has also invested in the purchase of computer servers and networking and security monitoring equipment to ensure sufficient scalability of the production IT infrastructure to meet the expected demand for acquiring services. In parallel, the Company has been building the non-engineering capability of the business to support the sales and operations functions necessary to offer acquiring services. Capital Structure During the period, Tyro issued 61,018,733 ordinary shares on 11 December 2009 raising $3,661,123.98 of additional capital. The capital was raised to ensure Tyro was fully compliant with prudential capital requirements imposed by APRA and to fund on-going operations. As at 30 June 2010 Tyro had accounts payable of $267,688. Cash from Operations Tyro continued to operate at a loss for the 2009/10 financial year, in line with the fact that it is still an emerging operational business. Tyro had interest income of $343,306, for the period. Funding Tyro had cash in bank of $4,428,938 at the end of the period. Under its banking authority as a SCCI, Tyro is subject to a Prudential Capital Ratio (PCR) set by APRA. The regulatory minima is set in three ways, by a PCR, minimum Tier 1 Ratio and a minimum Net Tier 1 Capital requirement. The PCR is confidential and cannot be disclosed. APRA requires Tyro to always maintain a prudent buffer above the regulatory minima. Internal limits are always above the capital minima and these internal limits currently are: Level 1 PCR 22% Tier 1 Ratio Net Tier 1 Capital 22% $5.5 million Total Tier 1 capital held as at 30 June 2010 was $10.5M. Tyro has always held sufficient capital to meet APRA’s prudential capital requirements. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 11 Risk Management Tyro is prudentially supervised by APRA and is required to comply with prudential standards and provide quarterly capital adequacy and liquidity reporting. Tyro has undertaken improvements to its risk management frameworks, policies, procedures and systems required to ensure on-going compliance with regulatory requirements and to satisfy both business needs and external stakeholders of its acquiring business. Statement of Compliance This report is based on the guidelines in The Group of 100 Incorporated Publication Guide to the Review of Operations and Financial Condition. Liquidity Although Tyro has made operating losses in prior years, this is in line with expectations given that Tyro remains in the start-up and development phase of its business. Tyro has significantly reduced its operating loss for the year ended 30 June 2010 and holds sufficient cash to pay its debts as and when they become due and payable. It is also able to manage and control its expenses. For these reasons the directors believe Tyro is a viable going concern as the next phase of the business plan approaches; one of an emerging operational business. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs. Significant events after balance date There are no significant events after balance date. Likely developments and expected results The directors predict that in the 2010/11 financial year Tyro will continue to grow the acquiring business and continue to expand the functionality of electronic transaction acquiring services. SHARE OPTIONS Unissued shares As at the date of this report, there were 39,359,508 un-issued ordinary shares under options under the Employee Share Option Plan. There are a further 61,018,733 un-issued ordinary shares under options attached to the 11 December 2009 capital- raising, these options expire on 11 December 2011. Option holders do not have any right, by virtue of the option, to participate in any share issue of the company. Shares issued as a result of the exercise of options During the financial year one employee exercised 103,261 options. Since the end of the financial year, no further options have been exercised. MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 12 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During or since the financial year, Tyro has not in respect of any person who is, or has been, an officer or auditor of the company or of a related body corporate: Indemnified or made any relevant agreement for indemnifying against a liability, including costs and expenses in successfully defending legal proceedings with the exception of the general indemnity provisions contained in the Company's Constitution. During or since the financial year, Tyro has paid premiums in relation to a contract insuring all of its directors and officers against legal costs incurred in defending proceedings for conduct involving: (a) a willful breach of duty; or (b) a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001. DIRECTORS’ MEETINGS The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director is as follows: Number of meetings held during the year Director Kerry Roxburgh Brad Banducci^ Michael Cannon-Brookes* Rob Ferguson Thomas Girgensohn Paul Rickard Jost Stollmann Board Meetings Audit Committee Risk Committee Remuneration Committee 7 6 3 4 6 6 7 7 3 2 2 2 2 3 3 3 5 4 2 3 4 3 5 5 2 2 1 1 2 1 2 2 ^Brad Banducci resigned as director on 21 September 2009. Brad attended all meetings prior to his resignation during the year. *Michael Cannon-Brookes was appointed on 10 December 2009. Michael has attended all meetings since his appointment during the year. Committee Membership As at the date of this report, Tyro had an Audit Committee, a Risk Committee and a Remuneration Committee of the Board of Directors. Members acting on the Committees of the Board during the year were: Audit Committee Risk Committee Remuneration Committee T Girgensohn (Chairman) R Ferguson K Roxburgh P. Rickard (Chairman) R Ferguson T Girgensohn K Roxburgh M. Cannon-Brookes (Chairman) K. Roxburgh T. Girgensohn R. Ferguson MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010 13 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 Note 2010 $ 2009 $ 2 2 2 2 2 2 2 2 3 12,648,612 (7,134,777) 5,513,835 733,200 (586,998) 146,202 4,760,168 (3,162,177) 1,597,991 674,255 (595,877) 78,378 573,012 499,075 343,306 349,152 109,354 55,254 2,584 670 6,688,294 2,580,520 2,074,291 3,033,126 841,269 2,527,378 22,543 13,644 8,512,251 1,828,118 2,742,894 541,000 2,435,662 38,842 107,179 7,693,695 (1,823,958) (5,113,175) - - (1,823,958) (5,113,175) STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010 Continuing Operations Fees and commission income Fees and commissions expense Net fees and commissions Income Terminal and accessories sale Terminal and accessories COGS Net Terminal and Accessories Sale Income Medicare Subsidy Interest Income Other Income Net gain on financial instruments Total Operating income Less : Expenses Engineering expenses Operations expenses Sales and marketing expenses Administrative expenses Impairment of inventory Bad debt and chargeback loss expense Total operating expenses Operating loss before tax expense Income tax expense Net loss for the year Other Comprehensive Income Net fair value gain/(loss) on available for sale financial instrument 9,635 (11,873) Total comprehensive income for the period (1,814,323) (5,125,048) The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 15 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 Note 2010 $ 2009 $ STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Total Current Assets Non-current Assets Available-for-sale investment Property, plant and equipment Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade payables and other liabilities Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained earnings TOTAL EQUITY The above Balance Sheet should be read in conjunction with the accompanying notes. 9,564,904 457,601 111,447 280,882 10,414,834 127,380 1,340,348 1,467,728 7,384,983 101,478 88,755 527,400 8,102,614 117,745 1,300,563 1,418,307 11,882,562 9,520,921 940,747 262,438 1,203,185 1,251,853 224,111 1,475,964 1,203,185 1,475,964 10,679,377 8,044,957 30,401,219 6,184,977 (25,906,819) 26,733,899 5,471,373 (24,160,315) 10,679,376 8,044,957 4 5 6 7 8 9 11 12 13 13 13 16 STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30 JUNE 2010 STATEMENT OF CASH FLOWS Cash flows from operating activities Payments to suppliers and employees Medicare Subsidy received Interest and fee income received Dividend Income Received Terminals & Accessories Sale Net cash used in operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Proceeds from maturity of treasury bonds Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares Net cash flows from financing activities Net increase/ (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 Note 2010 $ 2009 $ (14,087,458) - 12,765,973 2,584 733,200 (585,701) (9,429,310) 1,072,087 5,091,591 670 674,255 (2,590,707) 4 (911,781) 10,083 - (901,698) (841,341) 115,437 1,791,218 1,065,314 3,667,320 5,150,567 3,667,320 5,150,567 2,179,921 7,384,983 3,625,174 3,759,809 Cash and cash equivalents at end of year 4 9,564,904 7,384,983 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 17 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010 Attributable to equity holders of MoneySwitch Limited Contributed Equity Asset revaluation reserve Employee equity benefits reserve Retained Earnings Other reserves Total Note $ $ $ $ At 1 July 2008 21,536,912 47,754 4,370,351 (18,930,055) 55,858 7,080,820 Loss for the year Other Comprehensive income Total comprehensive income Issue of share capital Share-based payments Available-for-sale reserve Transfer to general reserve for credit losses - - - 5,196,987 - - (11,873) (11,873) - - - - - (5,113,175) - (5,113,175) 892,198 - - - - - (5,113,175) (11,873) - (5,125,048) 5,196,987 892,198 - - - (117,085) 117,085 - At 30 June 2009 26,733,899 35,881 5,262,549 (24,160,315) 172,943 8,044,957 Loss for the year Other Comprehensive income Total comprehensive income Issue of share capital Share-based payments Available-for-sale reserve Transfer to general reserve for credit losses - - - 3,667,320 - - - 9,635 9,635 - - - - - (1,823,958) - - - 781,423 (1,823,958) - - - - - - - - 77,454 (77,454) At 30 June 2010 13 30,401,219 45,516 6,043,972 (25,906,819) 95,489 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. (1,823,958) 9,635 - (1,814,323) 3,667,320 781,423 - - - 10,679,377 18 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES The significant policies which have been adopted in the preparation of this financial report are set out below: The financial report of MoneySwitch Limited (the Company) was authorised for issue in accordance with a resolution of the directors on 16. September 2010. MoneySwitch Limited is an unlisted public company, incorporated and domiciled in Australia. (a) Basis of preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards. Unless otherwise indicated, all amounts are expressed in Australian Dollars ($). The financial report has been prepared on the basis of historical cost and except for some assets, as disclosed in this report, has been measured at fair values. (b) Going concern The Company is in its fourth year of operation and has made an operating loss of $ 1,823,959. It commenced operation in April 2007 with the launch of stand-alone EFTPOS facilities to the general public and has been incurring losses since. The Company has a history of raising sufficient capital to meet the Company's expenditure and prudential capital needs. MoneySwitch Limited is able to control its expenses. Should current cash levels not be sufficient to meet the Company's prudential capital requirements, the Company will seek to raise additional funding internally from existing shareholders and/or externally from additional strategic investors as and when required. Liabilities recognised relate to trade payables from the course of ordinary operations and unearned income from the Medicare subsidy. No other lending has been sought from financial or other entities. It is for the for the above reasons that the directors consider the company is able to pay its debts as and when they fall due, and therefore the entity is able to continue as a going concern. (c) Statement of compliance The financial report complies with Australian Accounting standards issued by the Australian Accounting Standards Board and complies with International Financial Reporting Standards issued by the International Financial Reporting Standards Board. New Australian Accounting Standards which have recently been issued or amended but are not yet effective have not been adopted for the financial year ended 30 June 2010. At the date of this report, the directors have not assessed the impact of these new Australian Accounting Standards. (d) New Accounting standards and Interpretations (i) Changes in accounting policy and disclosure The accounting policies adopted are consistent except as follows: The company has adopted the new and amended Australian Accounting Standards and AASB interpretations as of 1 July 2009. AASB 101 (Revised), AASB 2007-8 and AASB 2007-10 Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations AASB 2009-7 Amendments to Australian Accounting Standard – AASB 7 19 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (ii) Accounting standards and interpretations issued but not effective Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been effective and have not been adopted by the company for the annual reporting period ending 30 June 2010 outlined in the table below: Application date of standard 1-Jan-10 Impact on Company financial report Application date for Company 1-Jul-10 1-Jan-13 1-Jul-13 1-Jan-13 1-Jul-13 AASB 2009-5 AASB 9 AASB 2009-11 Reference Title Summary Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139] Financial Instruments Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting except for The amendment to AASB 107 explicitly states that only expenditure that results in a recognised asset can be classified as a cash flow from investing activities. AASB 9 includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Re These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below. (a) Financial assets are classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows. This replaces the numerous categories of financial assets in A (b) AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a r (c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or l The revised Standard introduces a number of changes to the accounting for financial assets, the most significant of which includes: ► two categories for financial assets being amortised cost or fair value ► strict requirements to determine which financial assets can be classified as amortised cost or fair value, Financial assets can only be classified as amortised cost if (a) the contractual cash flows from the instrument represent principal and interest ► an option for investments in equity instruments which are not held for trading to recognise fair value changes through other comprehensive income with no impairment testing and no recycling through profit or loss on derecognition ► reclassifications between amortised cost and fair value no longer permitted unless the entity’s business model for holding the asset changes ► changes to the accounting and additional disclosures for equity instruments classified as fair value through other comprehensive income 20 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (ii) Accounting standards and interpretations issued but not effective (cont'd) Reference Title Summary AASB 124 (Revised) Related Party Disclosures (December 2009) The revised AASB 124 simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition, including: Application date of standard 1-Jan-11 Impact on Company financial report Application date for Company 1-Jul-11 (a) the definition now identifies a subsidiary and an associate with the same investor as related parties of each other; (b) entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and (c) the definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures. AASB 1053 Application of Tiers of Australian Accounting Standards This Standard establishes a differential financial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose financial statements: (a) Tier 1: Australian Accounting Standards; and 1-Jan-13 1-Jul-13 AASB 2010-2 AASB 2010-4 1-Jan-13 1-Jul-13 1-Jan-13 1-Jul-13 (b) Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements. Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements. The following entities apply Tier 1 requirements in preparing general purpose financial statements: (a) for-profit entities in the private sector that have public accountability (as defined in this Standard); and (b) the Australian Government and State, Territory and Local Governments. This Standard gives effect to Australian Accounting Standards – Reduced Disclosure Requirements. AASB 1053 provides further information regarding the differential reporting framework and the two tiers of reporting requirements for preparing general purpose Amendments to Australian Accounting Standards arising from reduced disclosure requirements Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13] Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments. Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions Clarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be at 21 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (e) Significant accounting judgements, estimates and assumptions In applying the Company's accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Company. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined as follows: Share-based payments transactions - The Company recognises the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date on which they are granted. The fair value is determined using the Black-Scholes model, with the assumptions detailed in Note 11. Classification of and valuation of investments - The Company classifies its investments in listed securities as 'available -for-sale' investments and movements in fair values are recognised directly in equity. The fair value of listed shares has been determined by reference to published price quotations in an active market. Estimation of useful lives of assets - The estimation of the useful lives of assets has been based on historical experience. In addition, the condition of the assets is assessed at least once per year and considered against their remaining useful lives. Adjustments to useful lives are made when considered necessary. Depreciation charges are included in Note 10. (f) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. (i) Fees income The Company derives fees income from the following sources: - Merchant service fee income is generated from merchant customers for credit and debit card acquiring services. Fees are charged to merchants depending on the type of transaction being performed based on a percentage of transaction value or on a fixed amount per transaction. Fees related to the payment transactions are recognised at the time transactions are processed. Interchange fee is recognised as an expense instead of netting-off against merchant service fee income in the income statement. - Revenue from gift-card transaction fees generated from merchants is based on a fixed fee per transaction and is recognised when transactions are processed. - Revenue from processing Medicare Easyclaim generated from merchants is based on a fixed fee per transaction and is recognised when transactions are processed. (ii) Interest income - Interest income is recognised in the income statement on an accruals basis, using the effective Interest method. This method measures the amortised cost of a financial asset and allocates the interest income over the relevant period using the effective interest which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (iii) Service income - Unearned income is recognised on the balance sheet upon receipt of payment for contractual agreements with customers. Revenue is brought to account in the income statement over time on a percentage completion basis. (iv) Government/Medicare grant - Government and government body grant income (such as Medicare) is recognised on a systematic basis over the term of the grant in the income statement. Amounts not yet taken to the income statement are held as "unearned income" in trade payables and other liabilities at the present value of future income to be recognised. (g) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys a right to use the asset. Leases in which the Company retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as lease rental income. Operating lease payments are recognised as an income or expense in the income statement on a straight-line basis over the lease term. Deferred Income is recognised as a liability on the balance sheet on inception of the lease. The deferred lease incentive is then recognised in the income statement on a straight line basis over the term of the lease, through lease expense. (h) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and settlement account balances, presented on a net basis. Settlement account balances result from timing differences in the Company's settlement processes with the schemes and the merchants. These timing differences are primarily due to the timing between the funds received from the card issuers and settlement payments made to the merchants. Settlement funds due from/due to other financial institutions are generally convertible into cash within two (2) business days. Merchant payables are generally settled on the next business day following the transaction processing date. For the purposes of the Cash Flow Statement, cash and cash equivalents are reported net of outstanding bank overdrafts. 22 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (i) Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for any uncollectible amounts. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the Company will not be able to collect the debt. (j) Available-for-sale Investments Available-for-sale investments are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition of the investment. After initial recognition these investments are measured at fair value. Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is transferred to the income statement. The Company currently does not have any investments categorised as held-for-trading. Purchases and sale of investments are recognised on settlement date - the date on which the Company receives or delivers the asset. (k) Inventories The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Inventories are subsequently held at the lower of cost and their recoverable amounts. Impairment is assessed on an annual basis (refer to Note 1(n)). Inventories are derecognised upon transfer to property, plant and equipment when leased out to merchants or rights to benefits are transferred to a third party. (l) Income Taxes Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authority. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to recognise the deferred tax asset or liability. An exemption is made for temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or loss or taxable profit or loss. Deferred tax assets relating to tax losses, unused tax credits and deductible temporary differences are not carried forward as an asset unless it is probable that the future taxable amounts will be available to utilise those temporary differences, losses and tax credits. (m) Other Taxes Goods and Services Tax (GST) Revenues, expenses, assets and liabilities are recognised net of the amount of GST except for the following: - when the GST incurred on the purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - trade receivables and trade payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation authority is included as part of other receivables or other payables in the balance sheet. Cash flows used in or from operating activities are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from or payable to the taxation authority are classified as part of the Company's operating cash flows. Commitments and contingencies are disclosed net of the amount of GST. (n) Acquisition of assets All assets acquired including property, plant and equipment are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus any incidental costs directly attributable to the acquisition. Expenditure is only recognised as an asset only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the item can be measured reliably. All other expenditure is expensed as incurred. (o) Recoverable amount of inventory and property, plant and equipment The carrying amounts of inventory and property, plant and equipment valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amounts at balance date. If the carrying amount of such an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. 23 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (o) Recoverable amount of inventory and property, plant and equipment (cont'd) The write-down is expensed in the reporting period in which it occurs. Recoverable amount of an asset is the greater of its fair-value-less-costs-to-sell and its value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where a group of assets working together supports the generation of cash inflows, their recoverable amounts are determined as part of the cash-generating unit to which the group of asset belongs, unless the value-in-use of this group of assets can be estimated to be close to its fair value. (p) Property, plant and equipment (i) Cost and Valuation Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value (Note 1 (n)). The Company recognises in the carrying amount of an item of property, plant and equipment the cost of replacing parts when the cost is incurred and the recognition criteria are met. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant or equipment, as a replacement, provided that the recognition criteria are satisfied. (ii) Depreciation Depreciation is provided on a straight-line basis over the estimated useful life of each specific item of property, plant and equipment. Estimated useful lives are as follows: Plant and equipment: - EFTPOS terminals - Furniture and office equipment - Computer equipment 2010 2009 3 years 5 years 4 years 3 years 5 years 4 years The assets' residual values, remaining useful lives and depreciation methods are reassessed and adjusted, if appropriate at each balance sheet date. (iii) Impairment The impairment testing for property, plant and equipment is conducted in accordance with the Accounting Policy in Note 1(n). (iv) Derecognition and disposal An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to arise from continued use of the asset. Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset's carrying amount and are included in the income statement in the year the asset is derecognised. Any expenditure so capitalised is amortised over the period of expected benefit from the related project. (q) Trade and other payables Liabilities for trade and other payables are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. (r) Provisions and contingencies Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the impact of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Contingent liabilities are not recognised in the balance sheet, but are disclosed in the relevant notes to the financial statements. They may arise from uncertainty as to the existence of a liability or represent an existing liability in respect of which settlement is not probable or the amount cannot be reliably measured. Only when settlement becomes probable will a liability be recognised. The Company is contingently liable for processed credit card sales transactions in the event of a dispute between the cardholder and a merchant. If a dispute is resolved in the cardholder’s favour, the Company will credit or refund the amount to the cardholder and charge back the transaction to the merchant. If the Company is unable to collect the amount from the merchant, the Company will bear the loss for the amount credited or refunded to the cardholder. Management evaluates the risk of such transactions and estimates its potential loss for chargebacks based primarily on historical experience and other relevant factors. If there is objective evidence that a loss on merchant accounts has been incurred, a provision is maintained for merchant losses necessary to absorb chargebacks and other losses for merchant transactions that have been previously processed and on which revenues have been recorded. 24 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. STATEMENT OF ACCOUNTING POLICIES (cont'd) (s) General reserve for charge backs The Company provisions against credit risk by a general reserve for charge backs. The Company estimates the reserve by using a multiple of historical losses over a rolling 120 day period of transaction values. The general reserve for charge backs is then allocated as a separate reserve within equity. The methodology and assumptions used for estimating chargeback provisions are reviewed regularly to reduce any possibilities that uncollectible chargebacks may not have been specifically identified. (t) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Entitlements arising in respect of salaries and wages, annual leaves and other employee benefits that are expected be settled within one year have been measured at their nominal amounts. Entitlements that arise in respect of long service leave which are expected to be settled more than 12 months after the reporting date have been measured at their present values of expected future payments. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave to be taken in the future by all employees at reporting date is estimated to be less than the annual entitlement for sick leaves. Employee benefit expenses arising in respect of the following categories: - wages and salaries, non-monetary benefits, annual leave, long service leave and other leave benefits; and - other types or employee benefits are recognised in the income statement on a net basis in their respective categories. (u) Share-based payment transactions Share-based compensation benefits are provided to employees (including Key Management Personnel) via the Employee Share Option Plan, whereby employees render services in exchange for rights over the Company's shares. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined internally using the Black-Scholes Option Valuation Model. The cost of equity-settled transactions is recognised, together with any corresponding increase in equity, over the period in which the employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is based on the best available information at the reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest. There were no modifications to the terms of the outstanding options during the financial year. Details of the types of share-based payments and their respective terms and vesting conditions are disclosed in Note 11. (v) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are accounted in contributed equity as a deduction, net of tax, from the proceeds of issue. (w) Foreign currency translation Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the spot rate of exchange ruling at the balance sheet date. Non-monetary assets and liabilities are translated at their historic rates of exchange at their respective transaction dates. (x) Derecognition of assets and liabilities Assets and liabilities are derecognised from the balance sheet upon sale, maturity or settlement. Gains and losses arising from derecognition of these assets and liabilities are accounted in the income statement. (y) Prepayments Prepayments are recognised for amounts paid whereby goods have not transferred ownership to the company or where services have not yet been provided. Upon receipt of good or the service the corresponding asset is recognised in the balance sheet or the expense is recognised in the income statement. 25 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 2. REVENUE AND EXPENSES The Operating loss before tax expense has been arrived at after accounting for the following items: Fees and commission income Easyclaim income DCC commission Merchant service fee Debit card interchange fee Terminal rental income Development fee Other fee income Fees and commission expense Interchange fees Switching and settlement fees Gift card processing expenses Scheme fees Commissions expense Other expense Interest income Interest on cash and cash equivalents Other Income Gain or Loss on disposal of PPE Foreign Currency Gain/Loss Net gain on available-for-sale investments Miscellaneous share income Engineering expenses Employee benefits expense Recruitment Depreciation Other expenses Operations expenses Communication and hosting Employee benefits expense Depreciation Software and hardware maintenance Other expenses 2010 $ 2009 $ 1,091,024 245,482 9,455,544 531,204 1,155,055 125,999 44,304 12,648,612 4,865,541 270,641 7,541 1,647,771 241,347 101,936 7,134,777 33,622 79,836 3,728,242 166,302 549,771 194,442 7,954 4,760,168 2,074,756 72,365 (424) 726,439 215,469 73,573 3,162,177 343,306 343,306 349,152 349,152 (2,615) 111,969 109,354 55,254 - 55,254 2,584 670 1,962,536 57,995 32,910 20,850 2,074,291 331,065 1,259,919 785,284 201,380 455,478 3,033,126 1,764,850 13,476 38,074 11,718 1,828,118 411,256 1,147,378 660,040 112,990 411,230 2,742,894 26 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 2. REVENUE AND EXPENSES (cont'd) Sales and marketing expenses Marketing and branding Employee benefits expense Other expenses Administrative expenses Employee benefits expense Professional fees Interconnect and membership Legal Telephone and internet Depreciation Travel Office supplies Actual Chargeback (gains)/losses Insurance Recruitment Utilities Occupancy expenses Share based payments expense Shares issued in lieu of service period Miscellaneous share expense Other expenses Extracted from the above are the following: Employee benefits expense Wages, salaries and commissions Termination Payment Superannuation Depreciation of non-current assets Property, plant and equipment 2010 $ 2009 $ 23,680 773,083 44,506 841,269 8,932 500,880 31,187 541,000 687,762 335,777 128,559 116,873 53,360 41,103 22,641 48,703 - 40,872 1,873 19,043 119,678 781,423 - - 91,386 2,527,378 508,558 277,729 107,621 93,989 52,520 33,624 31,426 79,148 - 17,884 33,235 11,842 110,177 892,198 79,677 - 13,781 2,435,662 4,075,773 15,990 362,873 4,454,636 3,405,673 29,063 297,021 3,731,758 859,297 516,946 27 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 3. INCOME TAX (a) Income tax expense The major components of income tax expenses are Income statement Current income tax Current income tax charge Derecognition of deferred tax asset from tax losses* Deferred income tax Deferred income tax relating to origination and reversal of temporary differences Derecognition of deferred income tax from temporary differences* Income tax expense reported in the statement of comprehensive income (b) Amount charged or credited directly to equity Deferred tax on unrealised gain/(loss) on available-for-sale investment Derecognition of deferred income tax* Income tax expense reported in equity (c) Reconciliation between tax expense recognised in statement of comprehensive income and tax expense calculated per the statutory income tax rate Accounting profit before income tax At the statutory income tax rate of 30% Non taxable income Non deductible expenditure Other Derecognition of deferred income tax* Total (d) Recognised deferred tax assets and liabilities (i) Deferred tax assets Property plant and equipment Provisions and accruals Available-for-sale investments Unearned Income Other (ii) Deferred tax liabilities Property plant and equipment Prepayments Available-for-sale investments Net deferred tax asset/(liability) prior to derecognition Derecognition of deferred income tax from temporary differences* Net deferred tax asset recognised in the statement of financial position 2010 $ 2009 $ (305,870) 305,870 (1,112,318) 1,112,318 (136,145) 136,145 - (270,004) 270,004 - 2,891 (2,891) - (3,562) 3,562 - (1,823,958) (547,187) - 238,404 (133,231) 442,014 - (5,113,175) (1,533,953) - 293,315 (141,683) 1,382,321 - 125,432 10,487 - - 1,288 137,207 - 1,062 2,891 3,953 131,332 (131,332) - 36,131 41,372 3,562 171,905 21,764 274,734 - 1,168 - 1,168 273,566 (273,566) - * The company has not recognised any deferred tax on the basis that it does not meet the requirements under AASB 112 "Income Taxes" 4. CASH AND CASH EQUIVALENTS Term Deposit Call deposits Exchange settlement balance Due from other financial institutions Due to other financial institutions Due to merchants Cash in hand 1,525,285 2,903,653 7,606,070 6,625,445 (4,916,722) (4,179,327) 500 9,564,904 - 3,830,633 8,064,043 6,000,179 (7,404,142) (3,106,231) 500 7,384,983 28 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 4. CASH AND CASH EQUIVALENTS (cont'd) Call deposits earn interest at floating rates based on daily bank deposit rates. The Reserve Bank of Australia (RBA) pays interest on balances held in exchange settlement accounts at a rate of 25 basis points below the cash rate. Refer to note 15 for details of cash and cash equivalents pledged as security. Term deposits earn interest based on an agreed rate and term. Reconciliation of operating loss after tax to net cash flows used in operations Operating loss for the year Adjustments for: Depreciation of non-current assets Share-based payments and share issuance expense Gain / Loss on disposal of property plant and equipment Changes in assets and liabilities (Increase) / Decrease in trade and other receivables (Increase) / Decrease in prepayments (Increase) / Decrease in inventory Increase /(Decrease) in trade and other payables 2010 $ 2009 $ (1,823,959) (5,113,175) 859,297 781,423 2,615 (353,094) (22,692) 246,518 (275,809) 731,738 971,875 - 6,781 (26,293) (81,676) 920,041 Net cash used in operating activities (585,701) (2,590,707) 5. TRADE AND OTHER RECEIVABLES Trade debtors Interest receivable GST recoverable Other receivables 437,973 17,852 - 1,776 457,601 83,497 4,292 11,784 1,905 101,478 The Company's ageing of trade and other receivables is as follows: Trade and other receivables before impairment Carrying Value 2010 (Total $457,601) Current $ 191,541 1-30 days* $ 144,183 31-60 days* $ 119,654 61-90 days* $ >90 days* $ 880 1,344 2009 (Total $101,478) 73,126 12,596 - 11,919 3,837 * These balances are past due net of impairment at balance sheet date. Movements in the general reserve for credit losses account are detailed in Note 14 and the Company's accounting policy is outlined in Note 1(s). 6. PREPAYMENTS Prepayments 7. INVENTORIES Terminals and accessories EFTPOS paper rolls Impairment of inventory 8. AVAILABLE-FOR-SALE INVESTMENTS 2010 $ 2009 $ 111,447 111,447 88,755 88,755 295,142 8,285 (22,544) 280,882 554,821 11,421 (38,842) 527,400 Investment in VISA shares 127,380 117,745 These investments were acquired following the demutualisation of VISA International, as a result of which listed VISA shares were issued to members of the VISA network. All VISA shares were listed on the New York Stock Exchange (NYSE) on 26th March 2008 with VISA’s certificate of incorporation providing for the mandatory buy back of up to 80% of the common stock allocated to VISA members out of IPO proceeds as soon as possible after listing. 29 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 9. PROPERTY, PLANT AND EQUIPMENT Reconciliation of net carrying amounts at the beginning and end of the year: Year ended 30 June 2009 At 1 July 2008 net of accumulated depreciation and impairment Additions Disposals/transfers Depreciation for the year At 30 June 2009 net of accumulated depreciation and impairment At 1 July 2008 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2009 Cost or fair value Accumulated depreciation and impairment Net carrying amount Eftpos Terminals $ Furniture and Office Equipment $ Computer Equipment $ Total $ 549,855 793,898 (112,894) (405,107) 76,743 22,122 (537) (28,018) 677,792 25,321 - (298,613) 1,304,390 841,341 (113,430) (731,738) 825,752 70,310 404,500 1,300,563 867,653 (317,798) 549,855 1,501,796 (676,044) 825,752 121,186 (44,443) 76,743 136,093 (65,783) 70,310 1,273,884 (596,092) 677,792 1,299,205 (894,705) 404,500 2,262,724 (958,334) 1,304,390 2,937,095 (1,636,532) 1,300,563 Reconciliation of net carrying amounts at the beginning and end of the year: Eftpos Terminals $ Furniture and Office Equipment $ Computer Equipment $ Total $ Year ended 30 June 2010 At 1 July 2009 net of accumulated depreciation and impairment Additions/transfers Disposals/transfers Depreciation for the year At 30 June 2010 net of accumulated depreciation and impairment At 1 July 2009 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2010 Cost or fair value Accumulated depreciation and impairment Net carrying amount 825,752 780,131 (12,223) (584,161) 70,310 27,200 - (28,217) 404,500 103,974 - (246,919) 1,300,563 911,305 (12,223) (859,297) 1,009,498 69,294 261,556 1,340,348 1,501,796 (676,044) 825,752 2,254,817 (1,245,319) 1,009,498 136,093 (65,783) 70,310 159,121 (89,827) 69,294 1,299,205 (894,705) 404,500 1,403,179 (1,141,624) 261,556 2,937,095 (1,636,532) 1,300,563 3,817,118 (2,476,770) 1,340,348 Fully depreciated assets as at 30th June 2010 $108,713 (2009 : $104,417) 30 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 10.SHARE-BASED PAYMENTS The Company will provide benefits to employees and directors from time to time including share-based payments as remuneration for service. (a) Employee Share Option Plan The Employee Share Option Plan was established to grant options over ordinary shares in the Company to employees or directors of the company or to external consultants who provide services to the Company. Options granted pursuant to the Employee Share Option Plan may be exercised, in whole or part, subject to vesting terms and conditions as indicated below: Type of Option Linear vesting schedule Service vesting schedule Vesting Terms and Conditions Options granted will vest in proportion to the time that passes linearly during the vesting schedule, subject to maintaining continuous status as an employee or consultant with the Company during the vesting schedule. The options vest according to a period of service may be exercised as to a set number of shares per agreed day of service, as defined in the specific option grant. Fully vested at time of grant Options may be exercised as to all shares from the vesting commencement date. Other relevant terms and conditions applicable to options granted under the Employee Share Option Plan include: - the term of each option grant shall be 10 years from the date of grant or such shorter term as provided in the Stock Option Grant agreement. - Each option entitles the holder to one ordinary share. - All awards granted under the Employee Share Option Plan are equity-settled. (b) Fair value of options The weighted average fair value of the share options granted during the financial year is 6 cents (2009: 4 cents). The fair value of each option grant was estimated on the date of the grant using the Black-Scholes Option Valuation Model. The following table lists the assumptions used in determining the fair value of the options granted in the years ended 30 June 2010 and 30 June 2009: Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) 2010 0% 74% 5.79% 2009 0% 74% 5.25% A zero dividend policy assumption is used for valuing all option grants. This is in line with the Company's capital management policy and growth strategy. Expected volatility used is the historical volatility of the peer group. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The average expected life for 7 year options is assumed to be 5 years from the grant date. The expected life for 10 year option is assumed to be 5 - 8 years. For all other options with a contractual life of 1 - 5 years or less, the expected life is assumed to be the total contractual life (years) from grant date to expiry date. There were 103,261 options exercised during the year ended 30 June 2010 (2009: 0). The weighted average remaining contractual life for the share options outstanding as at 30 June 2010 was 5.27 years (2009: 5.53 years). The following table summarises further details of the stock options outstanding at 30 June 2010: Range of Exercise Prices Contractual life Vesting conditions 6 cents to 55 cents 6 cents to 45 cents 6 cents to 55 cents 6 cents to 55 cents Total 10 years or less 5 years and 10 years 3, 5 and 10 years 10 years or less 5 year linear vesting 12 months service 12 months linear vesting Fully vested at time of grant No of Outstanding Options 18,870,321 2,634,782 10,891,826 21,782,169 54,179,098 31 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 10.SHARE BASED PAYMENTS (cont'd) The following table illustrates the number and weighted average exercise prices (WAEP) in Cents and movements of share options during the year: Linear vesting schedule Outstanding at the beginning of the year Granted during the year Exercised during the year Forfeited/expired during the year Outstanding at the end of the year Exercisable at the end of the year Fully vested at time of grant Outstanding at the beginning of the year Granted during the year Exercised during the year Forfeited/expired during the year Outstanding at the end of the year Exercisable at the end of the year Service vesting schedule Outstanding at the beginning of the year Granted during the year Exercised during the year Forfeited/expired during the year Outstanding at the end of the year Exercisable at the end of the year Total outstanding at the end of the year Total exercisable at the end of the year 2010 No 2010 WAEP (Cents) 2009 No 2009 WAEP (Cents) 22 8 6 34 15 16 16 6 55 10 10 11 16 6 6 14,732,734 17,065,770 (103,261) (1,933,096) 29,762,147 14,942,557 15,190,227 6,847,827 - (255,885) 21,782,169 21,782,169 5,112,560 - - (2,477,778) 2,634,782 2,634,782 54,179,098 39,359,508 32 9 43 22 21 39 6 10 16 16 13 6 10 11 11 15,130,516 4,026,085 - (4,423,867) 14,732,734 8,236,623 4,757,797 13,043,478 - (2,611,048) 15,190,227 15,190,227 4,182,222 2,434,782 - (1,504,444) 5,112,560 5,112,560 35,035,521 28,539,410 The expense recognised in the income statement in relation to share-based payments is disclosed in Note 2. 11. TRADE PAYABLES AND OTHER LIABILITIES Accounts payable Unearned income Rent payable Accruals Other liabilities 12. PROVISIONS Annual leave provision Balance at the beginning of the year Provision during the year Leave taken during the year Balance at the end of the year Current No chargeback losses have been provided at reporting date. No liability for long service leave existed at reporting date. 13. CONTRIBUTED EQUITY AND RESERVES (i) Ordinary Shares Issued and fully paid Ordinary shares paid at 6 cents each Ordinary shares paid at 10 cents each Ordinary shares paid at 15 cents each Ordinary shares paid at 30 cents each Ordinary shares paid at 45 cents each Ordinary shares paid at 55 cents each 147,738,440 3,540,688 10,475,433 32,520,837 8,111,112 11,282,322 2010 $ 267,688 - 22,355 297,866 352,838 940,747 2009 $ 285,692 573,012 60,677 147,925 184,546 1,251,853 224,111 74,572 (36,245) 262,438 131,859 122,504 (30,251) 224,111 262,438 224,111 8,864,306 354,069 1,571,315 9,756,251 3,650,001 6,205,277 30,401,219 5,196,987 354,069 1,571,315 9,756,251 3,650,001 6,205,276 26,733,899 32 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 13. CONTRIBUTED EQUITY AND RESERVES (cont'd) Terms and conditions of contributed equity Ordinary shares have the right to receive dividends when declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on ordinary shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Movement in ordinary shares on issue At 1 July 2008 Shares issued during the year: - 22 Oct 2008 shares issued as remuneration for service at 6c each - 22 Oct 2008 equity raising at 6c each - 19 Jun 2009 shares issued as remuneration for service at 6c each At 1 July 2009 Shares issued during the year: - 11 Dec 2009 equity raising at 6c each - 7 May 2010 shares exercised at 6c each At 30 June 2010 (ii) Share-based payments reserve Balance at the beginning of the year Share-based payments expensed during the year - Share options issued during the year Balance at the end of the year No: Shares $ 65,930,392 21,536,912 20,752,586 65,090,345 773,515 152,546,838 61,018,733 103,261 213,668,832 1,245,155 3,905,421 46,411 26,733,899 3,661,124 6,196 30,401,219 2010 $ 2009 $ 5,262,549 4,370,351 781,423 6,043,972 892,198 5,262,549 Nature and purpose of reserve The share-based payments reserve is used to record the value of share-based payments / benefits provided to any directors, employees and consultants as part of their remuneration or compensation. Refer to Note 10 for further details of these plans. (iii) General reserve for credit losses Balance at the beginning of the year Transfer (to) / from retained earnings Balance at the end of the year 172,943 (77,454) 95,489 55,858 117,085 172,943 The general reserve for credit losses has been created to satisfy Australian Prudential and Regulation Authority (APRA) prudential standards for Authorised Deposit- Taking Institutions (ADI) to maintain a general reserve for credit losses. The Company applies an internal methodology to estimate the credit risk of its merchant customers and the maximum expected losses based upon a number of assumptions concerning the performance of merchants in relation to the Company's credit risk grading system and actual experience. (iv) Available-for-sale investment revaluation reserve Balance at the beginning of the year Total revaluations for the year Balance at the end of the year Total reserves at the end of the year (v) Retained losses Movements in retained losses were as follows: Retained losses at the beginning of the financial year Net loss attributable to shareholders of the Company Transfer to general reserve for credit losses Retained losses at the end of the financial year 2010 $ 2009 $ 35,881 9,635 45,516 47,754 (11,873) 35,881 6,184,977 5,471,373 (24,160,315) (1,823,958) 77,454 (25,906,819) (18,930,055) (5,113,175) (117,085) (24,160,315) 33 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 14. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES The Company's principal financial instruments include cash and cash equivalents, trade and other receivables, held-to-maturity investments, available-for-sale financial assets and trade and other payables. (i) Risk management The Board is responsible for approving and reviewing the risk management strategy and framework and all risk management policies. The Board also ensures senior management has identified all risks and that those risks are managed and controlled appropriately. Senior management is responsible for implementing the Board's approved risk management strategy and for developing policies, controls, processes and procedures to identify and manage risks in all of the Company’s activities. The Board has installed a Board Risk Committee to assist the Board in fulfilling its responsibilities in the management of risk. The Risk Committee overseas matters relating to credit, capital, liquidity, operational and other aspects of risk management. (ii) Risk controls Risk is controlled through a system that identifies key risks, establishes controls to manage those risks (with an emphasis on preventive control), and maintains a regular review process to monitor the effectiveness of controls. Business risks are controlled within tolerance levels set by the Chief Executive Officer and approved by the Board. A set of control and compliance principles provide prudent standards for risk management. (iii) Internal audit The Company has an internal audit program designed to evaluate the adequacy and effeteness of the financial and risk framework. Internal Audit also reviews the policies processes and control put in place by management to ensure compliance with APRA's prudential requirements. This program of internal control and audit is reviewed and approved on a regular basis by the Audit Committee. (iv) Credit risk Credit risk represents the loss if counterparties failed to perform as contracted. Credit risk arises from trade receivables, cash and cash equivalent balances, exposures to merchants and held to maturity investments. The maximum exposure to credit risk is represented by the carrying amounts of the financial assets at reporting date. The Company's credit risk management principles define the framework and core values which govern its credit risk taking activities and reflect the priorities established by the Board. From these principles flow the development of the target market strategies, underwriting standards and credit procedures which define the operating processes. The operation of a credit risk grading system coupled with ongoing monitoring, reporting and review controls allows the Company to identify changes in the credit quality at client and portfolio levels, and take necessary corrective actions in a timely manner. In addition, the Company is subject to the risk of credit card chargebacks in the event of a merchant failure. The maximum period of credit risk the Company is potentially liable for such chargebacks 120 days after the date of the transaction. The Company prudently manages the credit risk associated with its merchant portfolio both at an individual and a portfolio level, by monitoring the concentration of risk by industry and type of counterparty. It is the Company's policy that all merchants are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. The Company has an existing portfolio of low-risk merchant categories and therefore minimal exposure to credit risk in terms of liabilities. As part of equity, a general provision reserve for credit losses is raised to cover losses due to uncollectible chargebacks that have not been specifically identified. The reserve is calculated based on estimation of potential credit risk in the merchant portfolio based on a multiple of historical loss experience. 'The Company does not hold any credit derivatives of collaterals to offset its credit exposure. The Company trades only with recognised, creditworthy third parties and as such no collaterals are requested nor is it the Company's policy to securitise any of its financial assets. Credit exposures are monitored on an ongoing basis with the result that the Company's exposure to bad debts is not significant at reporting date. 30 June 2010 Standard & Poors Credit Rating* AAA AA A+ AA- BBB+ unrated 30 June 2009 Standard & Poors Credit Rating* AAA AA A+ AA- BBB+ unrated *Long-term credit rating Cash and balances with financial institutions Due from other financial institutions Trade receivables 7,606,070 4,384,793 44,145 332,014 5,644,783 314,709 Cash and balances with financial institutions 8,064,043 3,830,633 333,939 457,601 Due from other financial institutions Trade receivables 74,703 5,187,479 518,235 219,817 101,478 34 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd) (v) Operational risk Operational risk is the exposure to inadequate or failed internal processes, people and systems or external events. Operational risk includes legal and regulatory risk, the risk of legal or regulatory penalty, financial loss arising from a failure to satisfy the regulatory standards that apply to a Specialist Credit Card Institution (SCCI). (vi) Market risk Market risk is the risk the fair value or future cashflows of a financial instrument will fluctuate because of changes in market prices or conditions, and comprises interest rate risk, foreign currency risk and other price risk. The Company does not engage in financial market trading activities nor assume any foreign exchange, interest rate or other derivative positions and does not have a trading book. The Company does not undertake any hedging around the values of its financial instruments as any risk of loss is considered insignificant to the operations of the Company. Any government securities, bank bills or other marketable instruments that the Company holds are for investment or liquidity purposes and held in the normal course of business in line with investment and liquidity guidelines. Each component of market risk is detailed below as follows: (a) Interest rate risk The Company's financial assets and liabilities are subject to interest rate risk as their fair values will fluctuate in accordance with movements in the market interest rates. The Company has exposure to interest rate risk on its variable interest-bearing cash and cash equivalent balances. Held-to-maturity investments in treasury bonds are at fixed interest rate rates and as such are not exposed to any interest rate risk fluctuations. All other financial assets and financial liabilities at reporting date are non- interest bearing. The following net exposure to interest rate risk is to be reported at balance sheet date: Cash and cash equivalents 2010 2009 9,564,403 7,384,482 Sensitivity analysis: An increase of 100 basis points in the general cash rate (assuming every other factors being constant) will reduce the Company's loss after tax and increase equity by $120,350 (2009:$51,691). A decrease of 100 basis points in the general cash rate will have an equal and opposite effect. (b) Foreign Currency risk The Company's settlement of fees with card schemes and the purchases of inventory from foreign suppliers are transacted in foreign currencies and any balances at reporting date are translated at the exchange rate prevailing the balance sheet date. At reporting date the Company has some US Dollar and Euro exposure. The following USD and EUR net exposure is to be reported at balance sheet date: Available-for-sale investments-VISA shares Trade Payables USD Term Deposit Sensitivity analysis: AUD 2010 127,380 115,689 1,525,285 AUD 2009 117,745 180,391 - USD EUR USD An appreciation of 15% of the US Dollar and EUR compared to the Australian Dollar (assuming every other factors being constant) will reduce the Company's loss after tax and increase equity by $248,752 (2009: $7,970). A depreciation of 15% of the US Dollar and EUR compared to the Australian Dollar will increase the company's loss after tax and reduce equity by $432,612 (2009:$4,695). (c ) Other Price Risk The Company's investment in available-for-sale financial assets is valued by way of reference to an underlying listed equity on the New York Stock Exchange (NYSE) and as such its fair value will fluctuate in direct proportion with the quoted market price indicated. However, this investment is not linked to any NYSE Market Index and any form of Price risk as a result of movements caused by any specific index is considered minimal. No sensitivity analysis has been performed. (vi) Liquidity risk Liquidity risk is the risk that the Company will have insufficient liquidity to meet its obligations as they fall due. This risk is managed by liquidity forecasting and scenario analysis, maintaining adequate cash resources for future expenditure and other financial commitments. The Company's liquidity risk management policy aims to ensure that enough high quality liquid assets are always available for the Company's cash flow and liquidity requirements. The company forecasts cashflow and liquidity needs on a monthly basis with detailed scenarios analysis for critical funding periods such as Christmas. The company also has a capital plan in place which outlines triggers for required funding should liquidity be required. At balance sheet date, the board of directors determined that there was a sufficient cash resources available to meet its anticipated expenditure and other financial liabilities. The Company does not have any contractual financial liabilities at reporting date. 35 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd) (vii) Fair values The Company uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 – the fair value is calculated using quoted prices in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Quoted market price (Level 1) Year ended 30 June 2010 Valuation technique - market observable inputs (Level 2) Valuation technique - non market observable inputs (Level 3) Total - 127,380 - 127,380 Quoted market price (Level 1) Year ended 30 June 2009 Valuation Valuation technique - technique - non market market observable observable inputs inputs (Level 3) (Level 2) Total 117,745 - 117,745 Financial Asset Available for sale Financial Asset Available for sale Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. For financial instruments not quoted in active markets, the Company uses valuation techniques such as present value techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation techniques use both observable and unobservable market inputs. Transfer between categories There were no transfers between Level 1 and Level 2 during the year. (viii) Capital Management The Company maintains an actively managed capital base to cover risks inherent in the business. The adequacy of the Company's capital is monitored using, among other measures, the rules and ratios established by APRA. The Company has aligned its objectives and processes in respect of risk management around the prudential standards. The Company has an internal policy target ratio above the prudential limit requirement and includes elements for risk exposures such as market, operations and credit risk. During the past year, the Company complied in full with APRA's capital minima. In all planning, the Company maintains a minimum of 22% capital adequacy to ensure there is a sufficient buffer to the regulatory minima. Regulatory capital Tier 1 capital Tier 2 capital Total capital Actual 2010 10,482,586 23,591 10,506,177 Actual 2009 7,783,138 57,006 7,840,144 Risk weighted assets 6,350,133 8,800,104 Tier 1 capital ratio Total capital ratio 165% 165% 88% 89% Below defines what APRA considers as Capital : Tier 1 Capital consists of ordinary shares, general reserves, retained earnings, non-cumulative irredeemable preference shares (approved by the Board and APRA) and other APRA approved Tier 1 Capital instruments. Upper Tier 2 Capital consists of general provision for Doubtful Debts and other APRA approved Upper Tier 2 Capital instruments. Lower Tier 2 Capital (not to exceed 50% of net Tier 1 Capital) consists of APRA approved Term Subordinated Debt. The Company does not have any lower Tier 2 Capital. 36 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 15. COMMITMENTS AND CONTINGENCIES Contingent liabilities -secured (I) Irrecoverable standby letters of credit in favour of: - MasterCard International - Visa International (ii) Bank Guarantee in favour of: - Dukeville Pty Ltd, the lessor of 125 York Street, Sydney 2010 $ 2009 $ 2,925,285 140,000 1,400,000 140,000 245,025 3,310,310 245,025 1,785,025 The Company has provided an irrevocable standby letter of credit of $3,065,285, secure through fixed charges over term deposits with the Commonwealth Bank of Australia and Westpac Banking Corporation, to MasterCard International and Visa International. These are one-year arrangements that are subject to automatic renewal on a yearly basis. MasterCard International and Visa International, at their discretion, may increase the required amounts of the standby letters of credit upon written request to the Company. The required amounts of the standby letters of credit are dependent on MasterCard International's and Visa International's view of their risk exposure to the Company. A bank guarantee is held with the Commonwealth Bank of Australia in relation to the lease arrangement for the office premises. The amount represents 9 months rent and is refundable on expiry of the lease agreement, subject to satisfactory vacation of the leased premises. 16. LEASES (a) Operating lease commitments - Company as lessor Prior to April 2010, Tyro operated a "rent to own" model whereby ownership of the terminal would transfer to the merchant once they had made 36 consecutive rental payments. However Tyro bears the risk of repairing or replacing the terminal over the 3 year period. The merchant would then continue to pay a service and maintenance fee after this period. There is no minimum rental period for merchants and they are able to terminate with Tyro at any time with no penalty or buy out fees. From April 2010, the company has moved to a perpetual rental model whereby there will be no transfer of ownership of the asset and the merchant will pay rental for the duration that they are with Tyro. Type of Terminals Xenta Xentissimo Cost 1,625,276 629,541 2,254,817 Depreciation Expense Net Carrying Value 716,324 528,995 1,245,319 908,952 100,546 1,009,498 (b) Operating lease commitments - Company as lessee Future minimum rentals payable under the non-cancellable operating leases as at 30 June 2010 are as follows: - Within one year - After one year but not more than five years 173,250 - 173,250 297,000 173,250 470,250 The operating lease commitments relates to the lease of the Company's registered office located at 125 York Street, Sydney NSW. It is a non-cancellable lease with a term of 4 years ending 28 February 2011. The lease agreement provides the Company with a right of renewal on expiry at which time all terms will be renegotiated. Lease payments are subject to discretionary annual increases of 4%. 17. SEGMENT REPORTING The Company operates in one geographical segment being Australia and within one business segment being the provision of credit and debit card acquiring services to merchants. 18. AUDITOR'S REMUNERATION Amounts received or due and receivable by Ernst & Young: - an audit of the financial report of the Company - other services in relation to the Company 2010 $ 2009 $ 209,500 8,500 218,000 135,960 - 135,960 37 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 19. RELATED PARTY DISCLOSURES (a) Key Management Personnel The total cash remuneration paid to the Directors and Executives of the Company amounted to $816,375 (2009: $847,784). Details of compensation paid to key management personnel including all monetary and non-monetary components are shown in the various tables in this note. Details of Key Management Personnel Appointed Resigned Directors Kerry Roxburgh Brad Banducci Michael Cannon-Brookes Rob Ferguson Thomas Girgensohn Paul Rickard Jost Stollmann Executives Garry Duursma Peter Haig Justin Mitchell Non-executive Chairman Non-executive Non-executive Non-executive Non-executive Non-executive Chief Executive Officer Title VP Sales and Marketing VP Engineering Company Secretary Compensation of Key Management Personnel Short-term Benefits Post Employment benefits (superannuation) Other long-term benefits Termination Benefits Share-based Payments Total 21-Sep-09 18-Apr-08 14-Dec-06 10-Dec-09 14-Nov-05 09-Mar-07 28-Aug-09 05-Apr-05 1-Jan-07 3-Feb-03 19-Mar-07 2010 $ 2009 $ 683,073 133,302 - - 565,324 644,122 174,599 - 29,063 613,056 1,381,699 1,460,840 30 June 2010 Directors Kerry Roxburgh Brad Banducci Michael Cannon-Brookes Rob Ferguson Thomas Girgensohn Paul Rickard Jost Stollmann Executives Garry Duursma Peter Haig Justin Mitchell 30 June 2009 Directors Kerry Roxburgh Brad Banducci William Bartlett Rob Ferguson Thomas Girgensohn Jost Stollmann Executives Garry Duursma Peter J Haig John Hallis Justin Mitchell Short-term Benefits Salary & fees ($) Termination Benefits ($) Post Employment Super- annuation ($) Share-based Payments Options ($) - - - - - - 104,347 242,429 199,831 136,466 683,073 Short-term Benefits Salary & fees ($) Termination Benefits ($) - - - - - 28,823 217,777 78,779 199,654 119,089 673,185 - - - - - - - - - - - - - - - - - - - - - - - 45,676 29,891 45,453 12,282 133,302 23,677 11,838 15,785 35,515 23,677 23,677 176,304 79,840 126,266 48,745 565,324 Post Employment Super- annuation ($) Share-based Payments Options ($) - 33,612 24,198 40,334 20,167 226,882 50,418 151,856 50,418 39,369 637,254 - - - - - 2,594 45,760 97,557 17,969 10,718 174,599 38 - - 29,063 - 29,063 Total ($) 23,677 11,838 15,785 35,515 23,677 23,677 326,327 352,160 371,550 197,493 1,381,699 Total ($) - 33,612 24,198 40,334 20,167 258,299 313,955 328,192 297,104 169,176 1,485,038 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 19. RELATED PARTY DISCLOSURES (cont'd) Shareholdings of Key Management Personnel and their Related Entities Transactions 30 June 2010 Directors Kerry Roxburgh Brad Banducci Michael Cannon-Brookes Rob Ferguson Thomas Girgensohn Paul Rickard Jost Stollmann Executives Garry Duursma Peter Haig Justin Mitchell Total 30 June 2009 Directors Kerry Roxburgh Brad Banducci Rob Ferguson Thomas Girgensohn Jost Stollmann Executives Garry Duursma Peter Haig John Hallis Justin Mitchell Total Outstanding at start of year 440,182 2,392,545 - 11,569,524 3,437,523 - 29,704,061 Shares Issued during the year 250,000 2,392,545 - 8,280,602 2,980,872 124,102 11,881,624 1,197,433 3,739,310 - 52,480,578 957,946 1,666,667 - 28,534,358 Outstanding at start of year 133,334 1,505,849 5,258,413 3,170,856 20,845,105 681,818 2,072,222 434,633 - 34,102,230 Shares Issued during the year 306,848 886,696 6,311,111 266,667 8,858,956 515,615 1,667,088 (181,819) - 18,631,162 On exercise of options Outstanding at end of year - - - - - - - - - - - 690,182 4,785,090 - 19,850,126 6,418,395 124,102 41,585,685 2,155,379 5,405,977 - 81,014,936 On exercise of options Outstanding at end of year - - - - - - - - - - 440,182 2,392,545 11,569,524 3,437,523 29,704,061 1,197,433 3,739,310 252,814 - 52,733,392 39 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 19. RELATED PARTY DISCLOSURES (cont'd) Option Holdings of Key Management Personnel 30 June 2010 Linear/Service vesting schedule Directors Kerry Roxburgh Brad Banducci Michael Cannon-Brookes Rob Ferguson Thomas Girgensohn Paul Rickard Jost Stollmann Executives Executives Garry Duursma Peter Haig Justin Mitchell Fully vested at time of grant Directors Brad Banducci Jost Stollmann Executives Garry Duursma Peter Haig Justin Mitchell Total 30 June 2009 Linear/Service vesting schedule Directors Brad Banducci Rob Ferguson Thomas Girgensohn Jost Stollmann Executives Executives Garry Duursma Peter Haig John Hallis Justin Mitchell Fully vested at time of grant Directors Brad Banducci Jost Stollmann Executives Garry Duursma Peter Haig John Hallis Justin Mitchell Total Outstanding at start of period 1-Jul-09 Granted as Remuneration Options exercised/ expired during the year Outstanding at end of period 2010 Exercisable at end of period 2010 - 1,197,146 - 1,328,631 683,150 - 2,506,364 - 1,339,921 213,043 7,268,255 109,091 6,142,292 1,413,439 4,240,316 677,994 12,583,132 19,851,387 666,667 333,333 444,443 1,000,000 666,667 666,667 3,154,100 545,046 1,472,323 382,884 9,332,130 - 223,233 - - - - 886,667 666,667 1,307,246 444,443 2,328,631 1,349,817 666,667 4,773,797 666,667 1,307,246 444,443 2,328,631 1,349,817 666,667 4,773,797 - - - 1,109,900 545,046 2,812,244 595,927 15,490,485 545,046 2,812,244 595,927 15,490,485 - 1,956,522 109,091 - - 8,098,814 - 8,098,814 1,956,522 1,956,522 978,261 6,847,827 16,179,957 - - - 109,091 1,218,991 3,369,961 6,196,838 1,656,255 19,321,868 34,812,353 3,369,961 6,196,838 1,656,255 19,321,868 34,812,353 Outstanding at start of period 1-Jul-08 Granted as Remuneration Options exercised during the year Outstanding at end of period 30-Jun-09 Exercisable at end of period 30-Jun-09 327,581 285,153 161,411 1,456,364 909,091 1,339,921 1,120,746 213,043 5,813,310 109,091 272,727 109,091 1,327,273 309,091 25,820 2,153,093 7,966,403 869,565 1,043,478 521,739 1,050,000 - - - - 3,484,782 - 5,869,565 1,304,348 3,913,043 1,304,348 652,174 13,043,478 16,528,260 - - - - 909,091 - 909,091 - 1,818,182 1,197,146 1,328,631 683,150 2,506,364 - 1,339,921 211,655 213,043 7,479,910 1,197,146 1,328,631 683,150 2,506,364 - 1,339,921 211,655 213,043 7,479,910 - - 109,091 6,142,292 109,091 6,142,292 - 1,000,000 - - 1,000,000 2,818,182 1,413,439 4,240,316 1,613,439 677,994 14,196,571 21,676,481 1,413,439 4,240,316 1,613,439 677,994 14,196,571 21,676,481 40 MONEYSWITCH LIMITED (TRADING AS TYRO PAYMENTS) ABN 49 103 575 042 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 19. RELATED PARTY DISCLOSURES (cont'd) Option Terms and Conditions Stock option grants may be exercised, in whole or in part, subject to vesting terms and conditions indicated below: Type Type of Option Linear vesting schedule Service vesting schedule Terms and Conditions Vesting Terms and Conditions Options granted will vest in proportion to the time that passes linearly during the vesting schedule, subject to maintaining continuous status as an employee or consultant with the Company during the vesting schedule. The options with service vesting schedule may be exercised as to a set number of shares per agreed day of consulting service, as defined in the specific option grant. Fully vested at time of grant Options may be exercised as to all shares from the vesting commencement date. (b) Transactions with related parties The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year. These transactions were on commercial terms & conditions. Related Party Health Communications Network Commissions Paid There is no other amount receivable from or payable to related parties. 2010 $ - 2009 $ 56,505 41 corporate information directors kerry roxburgh (Chairman) michael cannon-brookes rob ferguson thomas girgensohn paul rickard jost stollmann company secretary justin mitchell registered office level 2 125 York Street Sydney NSW 2000 (02) 8907 1700 solicitors cowell clarke level 5, 63 pirie street adelaide SA 5000 (08) 8228 1111 auditors ernst & young 680 george street sydney NSW 2000 (02) 9248 5555 internet address www.tyro.com MoneySwitch Limited ABN 49 103 575 042 Annual Report 2010
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