TZ Limited Annual Report 2007

Plain-text annual report

29 October 2007 Lodged by ASX Online – 63 pages The Manager Company Announcement Office Australian Stock Exchange Ltd. Level 4, 20 Bridge Street Sydney, NSW 2000 2007 ANNUAL REPORT Please find attached a copy of the 2007 annual report for Tri Origin Minerals Ltd which will be sent to all shareholders today. ========================================= Media Enquiries Investor Enquiries Fraser Brown Ph: +61 2 8233 6123 f.brown@tz.net Deb Joins +1-248-220-1471, Ext. 100 d.joins@tz.net John Falconer Director/Company Secretary +61 411 420 720 j.falconer@tz.net Sydney (Registered Office) Level 12, 37 Bligh Street Sydney NSW 2000 AUSTRALIA Ph: Fax: +612 8233 9229 +612 8211 5299 Chicago (Operational Headquarters) 520 W. Erie Street Suite 210 Chicago, IL 60610, USA Ph: Fax: +1 312 751 2800 +1 312 751 2801 Web: Email: www.tzlimited.com info@tzlimited.com annual report contents2 Opening Letter2 Operational Review4 TZ Group President’s report6 TZ Group CEO’s report13 Financial Report 14 Directors’ Report22 Income Statement23 Balance Sheet24 Statement of Changes in Equity 26 Cash Flow Statement27 Notes to the Financial Statements54 Directors’ Declaration55 Independent Audit Report56 Corporate Governance58 Stock Exchange Information60 Directory 2Dear shareholders,The year 2007 marked TZ Limited’s fourth year as a listed entity on the Australian Stock Exchange and has been one of unprecedented change and signiﬁcant progress for the Company. These changes have involved the restructuring of the TZ Group business model, further commercialisation of the Intevia® technology and signiﬁcant advances with our core technology platforms. We are conﬁdent these changes represent signiﬁcant progress towards our long-term vision for the Company and for where Intelligent Fastening technology is positioned within the global market.The strategic decision to buy back our intellectual property license along with the entire Intevia® business unit from Acument™ Global Technologies, has allowed us to regain control of all future development and commercialisation of our core technology. Whilst the purchase of the Intevia® business has involved a far greater ﬁnancial commitment than in previous years, the Board believes that the increased expenditure has been justiﬁed by the signiﬁcant success the Intevia® technology has already achieved with its customer engagements. The Board will continue to support in the coming year our stated corporate objectives of implementing growth initiatives that should provide greater value creation for all TZ shareholders. Along these lines, the Board has spent considerable time and energy in positioning the Company to delist from the ASX and relist on NASDAQ in the 2008 calendar year and with the assistance of our underwriters in the U.S., we believe that goal is strongly progressing as a result of the signiﬁcant validation the technology has achieved in all market segments.On behalf of the Board I would like to thank the senior management of the two U.S. subsidiaries, Chris Kelliher, David Feber and Mark Schwartz for their continued commitment to the Company and to all the staff for their dedication and hard work in the continued success of TZ Limited.Finally I would like to express my appreciation to my fellow Directors for their invaluable efforts during the past year and to you the shareholders for your continued support and belief in our vision.Andrew Sigalla Executive DirectorOperational Review4The TZ Group consists of Telezygology, Inc. (TZI) and the PDT group of companies (PDT), all U.S. registered companies.This was a year of signiﬁcant change and solid progress toward our long-term objectives.During the year we redeﬁned and implemented a new business model, doubled our investment in commercialising our Intelligent Fastening Technology, undertook substantial restructuring of the PDT group to set a better course for proﬁtable growth, advanced our technology platforms and achieved unprecedented levels of converting customer interest into application and product development agreements that underpin a substantial revenue pipeline.The acquisition and subsequent integration of the Intevia® business unit in February of this year doubled the number of capable employees focused on commercialising our technology and already in the few months since February this initiative has produced fantastic results in terms of winning commitment from early adopter customers positioning us well to achieving our future goals. TZ Group President’s ReportWe are now ﬁrmly in control of our own commercial destiny and able to aggressively pursue and set the pace of customer engagements. Our new business model has necessitated additional investment but it offers us a signiﬁcantly enhanced ﬁnancial opportunity. Our teams are already addressing market opportunities and technology applications that in future years, with sustained levels of ongoing technology development, could translate to revenue streams in the hundreds of millions of dollars and beyond. We are experiencing tremendous customer interest in all market segments we are targeting. Invariably there will be challenges to overcome, however the resounding customer validation we have achieved so far for our technology platforms gives us conﬁdence as we pursue these aspirations.As part of the Intevia® integration many talented people joined us and I am pleased to welcome them to our organisation. David Feber, previously a senior executive with Acument Global Technologies, who among other things held responsibility for the Intevia® business unit, has taken on the senior role of CEO for the TZ Group. David and his team have made a tremendous start in their new roles. I am pleased to say this now allows me greater time to focus on our technology and growth strategies and assist the TZ Limited directors with ongoing corporate objectives here in the U.S.We are now ﬁrmly in control of our own commercial destiny and able to aggressively pursue and set the pace of customer engagements. Our new business model has necessitated additional investment but it offers us a signiﬁcantly enhanced ﬁnancial opportunity. 5To our talented teams and their leadership I thank you and acknowledge your commitment and passion to delivering results and your unrelenting belief in our company and what we can ultimately achieve.To our fellow shareholders, on behalf of the TZ group, I thank you for your continued support, belief in our vision and assure you we are working hard to achieve our goals.Chris Kelliher TZ Group PresidentOur commercial progress has been equally matched by signiﬁcant advances with our core technology platforms. Our knowledge in the area of Smart Materials and how to combine them with software and electronics to create a new class of device, never before possible, has expanded to the point where we can rightly claim to be the ﬁrst in the world to bring these devices to commercial reality and have them embraced by world leading companies that are integrating them into their own products to achieve competitive differentiation.As we look ahead we are in excellent shape to continue the drive toward our goals and to create value for those that support us in our efforts. We have talented and competent teams ﬁlling the sales pipeline, improving the quality and breadth of our products and the backup of a world class engineering company in PDT that will be increasingly engaged in developing applications for Intevia® adopters as our commercial initiatives continue to deliver results.OPERATIONS | 2007 ANNUAL REPORT6TZ Group CEO’s Report2007 was a deﬁning year for TZ Limited. The Company is now achieving signiﬁcant commercial traction for its intelligent fastener product line and is on track to creating a worldwide industry standard. The Intevia® revolution has begun.License repurchase and Intevia® Business Unit acquisitionIn February 2007, TZ purchased the Intevia® business unit including the global exclusive license to our technology back from Acument Global Technologies (formerly Textron Fastening Systems) in exchange for nearly 10% of equity in the Company. The transaction included an established customer base, application intellectual property (IP), Intevia® trademarks, sales collateral and inventory of demonstration fastening kits. Additionally, TZ retained the core Intevia® staff from Acument.The acquisition has allowed TZ to create one focused commercialisation team combining its engineering and technology resources with Acument’s sales, marketing, supply chain and manufacturing resources. With TZ the sole owner of Intevia® technology, the Company will now derive full commercial value of Intevia® sales compared with the royalty- and engineering fees-based structure under the previous arrangement with Acument.Commercial adoption of Intevia® technology increased dramatically in 2007. This important strategic acquisition ensures the Company is well placed to derive maximum value from the opportunities in front of it. Accelerated commercialisation of Intevia® product lineDuring the ﬁrst full quarter after integrating the Intevia® business unit into TZ, more than 450 customer contacts were conducted. This was a 600% increase over the number of customer contacts that both organisations had achieved over the same quarter, a year earlier. Additionally, TZ introduced the Intevia® Early Adopter Customer Program where commitments are obtained from customers at an early stage for their intent to purchase and incorporate Intevia® technology into their end-user products. At this time, 12 of the early adopter customer slots have either been ﬁnalised or are in the active negotiation stage. The early adopter customer commitments TZ has obtained in 2007 expand across all industry sectors. There are several others currently in the relationship scoping stage.Customer HighlightsAirbus TZ was invited to participate in the Airbus MTTC (Maintenance Technologies Test Centre), which is a collaborative showcase for cutting edge technologies in the reconﬁguration, modularisation, networking and innovative maintenance of aircraft. Airbus has provided a dedicated airframe for this endeavor and TZ outﬁtted a section with Intevia® application demonstrators. 7Larson TZ entered a new segment of the the general industrial market by agreeing to collaborate with the top U.S. manufacturer of storm doors. TZ is working with Larson Manufacturing on a high volume application for the storm door product market that is targeting summer of 2008 for full implementation. Larson has been manufacturing storm doors for over 50 years and produces close to 3 million doors a year. Wired Marine TZ developed a dedicated line of marine grade intelligent fasteners and achieved an agreement with Wired Marine to supply Intevia® fasteners for their luxury yacht market. Wired Marine has extensive expertise in the design and construction of luxury yachts and already has a backlog of high proﬁle yachts awaiting Intevia® solutions. As part of the agreement, Wired Marine placed a signiﬁcant initial order for fasteners and will have the rights to sell into the USD $200+ million global marine market. Commercial Vehicle OEM* TZ developed an innovative safety application for a commercial vehicle OEM and is at the advanced stages of ﬁnalising a joint development agreement to implement this product. Tier One Automotive Suppliers* TZ entered into agreements with two different global automotive suppliers for both automotive interior and exterior application. Modiﬁcations will be made to current standard Intevia® mechanisms to create a unique automotive product for incorporation into future systems on a global basis. This will lead to Intevia®-based products being speciﬁed on an automotive platform undergoing a design refreshening. These early adopter customers are two of the largest leading global automotive suppliers in the world that designs, engineers and manufactures innovative interior and exterior automotive products for vehicle manufacturers.* Some customer names are withheld at their request for competitive reasons.Obtaining immediate customer feedback as they experience Intevia® solutions ﬁrsthand accelerates further adoption of our technology in the aerospace sector and speeds time to market. A close collaboration with Airbus will be key to a successful aerospace product line.Additional inroads were made in the aerospace business segment with a purchase order received from a large airframe manufacturer for Intevia® products to be implemented on their next generation platforms. A customised implementation of Intevia® technology will be used in a high-volume area of the aircraft providing weight reduction, security and upgradeable feature capabilities. The company has asked for their name to be withheld for competitive reasons. Zodiac Precilec An agreement was reached with Precilec, a division of the €2.3 billion Zodiac Group, to include Intevia® technology in their aerospace seat actuation systems. The Intevia® solution has been prototyped and delivered to Precilec Precilec is one of the leading companies in aerospace seat actuation systems, partnering with them opens the door for TZ to introduce our technology to other divisions of The Zodiac Group. ANZES Design Engineering The ﬁrst shipment of Intevia® fasteners was delivered to ANZES Design Engineering, an aerospace maintenance, repair and overhaul (MRO) service company, of Intevia® mechanisms for stowage applications on a Boeing 737 business jet. The Intevia® mechanisms have been installed successfully and the business jet is ﬂying. BAE Systems A joint development agreement was achieved with BAE Systems, a leading defence contractor and military partner. Several applications are underway including secure access solutions and improved maintenance solutions for military vehicles.OPERATIONS | 2007 ANNUAL REPORT8Technology FocusThe Intevia® commercialisation success this year, with the achievement of major early adopters in every key market segment, has demonstrated that the vision to create a globally recognised industry standard of devices is becoming a reality. TZ’s unique position now enables us to drive a ubiquitous intelligence standard for intelligent fastening, actuation and sensing devices to run on our proprietary Intevia® software and communications platforms.The second generation of our Intevia® fasteners is now under development and will be launched later this year. These will be used to satisfy the current demand generated for the orders from our early adopter customers. This next generation of fasteners will incorporate many design improvements that will enable simpler and more cost-effective manufacturing of the devices for high volume applications.Smart materials research and development continues to be paramount to the Company’s strategy and signiﬁcant Shape Memory Alloy (SMA) programs commenced this year. This included a program to develop High Temperature SMA (HTSMA) wire as well as additional innovations regarding size of wire, crimps and metallurgy.TZ Group CEO’s ReportIntevia® technology development activity during the past year has focused on a number of key objectives:Building on the base established by the Intelligent (cid:85)(cid:202)Fastening Evaluation Kit production activity, in preparation for high volume fastener production for aerospace, automotive, military, marine and commercial/industrial business segments;Applications engineering of Intevia(cid:85)(cid:202)® into a broad range of customer applications in each industry segment, including the development of modular variants of existing fastener designs, and new fastener families;Strengthening in-house expertise and consolidating (cid:85)(cid:202)supply arrangements for critical elements;Expanding the core technology base in areas such (cid:85)(cid:202)as HTSMA, low cost and ASIC (Application Speciﬁc Integrated Circuit) base electronics, and evolving actuation technologies; andBringing to reality advanced networking, centralised (cid:85)(cid:202)database server and Internet linked control and monitoring concepts, in accordance with the Intevia® vision.9Each Intevia® market segment has unique, stringent requirements for product development, manufacture, supply and life cycle support. The technical team has been expanded by the addition of Integrated Supply Chain expertise, to assist in facing the challenges of serving our diverse customer base. Additional resources have been brought on board in areas such as SMA and HTSMA development, software engineering, Aerospace compliance and automotive engineering. Expansion of the team will continue at an increasing pace as the number of customer engagements for Intevia®-based applications expands.In addition to the success achieved in forging relationships with Intevia® early adopter customers, a number of key relationships have been developed which underpin core technology evolution:Development of advanced HTSMA is being (cid:85)(cid:202)undertaken in cooperating with recognised world-leading expertise at NASA, a leading U.S.-based SMA supplier and a European-based SMA expert;A second source of supply for standard SMA has been (cid:85)(cid:202)established with a leading European SMA supplier;A joint development activity is underway with a (cid:85)(cid:202)leading U.S.-based supplier of commercial aircraft, focusing on new types of SMA actuator and optimised control methods; andA joint development agreement has been entered with (cid:85)(cid:202)an established U.S.-based developer and supplier of advanced Internet-based monitoring and control systems, leading to the fast-tracked development of Web-enabled Intevia®.Technology developments in the forthcoming year will focus on the development of control, networking and database facilities in support of a wide range of Internet based and other Intevia® applications. The Intevia® intelligent fastener portfolio will be expanded in accordance with identiﬁed customer needs. The development of a family of ASICs is planned, as a part of longer-term capability enhancement and cost-reduction initiatives. TZ Group CEO’s ReportShape Memory AlloyUsed in Intevia® Intelligent ActuatorsOPERATIONS | 2007 ANNUAL REPORT10PDT Overview2007 saw PDT successfully manage the difﬁcult process of shutting down its under-performing tooling operation. This signiﬁcant restructuring led to a renewed focus on core competencies and is starting to achieve results in both sales and proﬁts. Additionaly, PDT is now better aligned to meet the growing demand for Intevia® products.Sales in the high-value medical and military industries grew signiﬁcantly from USD$ 350,000 in 2005, when it ﬁrst entered the areas, to over $2.2 million in 2007, representing a 620% increase in the last two years. Success in the medical industry led to the recent invitation to become a strategic development partner of the research consortium, Biomimetic Microelectronic Systems Center (BMES) at the University of Southern California. The group is comprised of more than 50 surgeons and engineers who collaborate with industry and academia to develop next generation surgical implants and devices. Membership in the group will put PDT at the forefront of cutting edge medical device design and provide valuable exposure to new customers.Overall design sales saw a 50% increase from FYE 30 June 2005 to FYE 30 June 2007. We expect this trend to continue as sales for design services in the ﬁrst quarter of ﬁscal 2008 have been strong. It is anticipated that PDT’s design sales alone will exceed the combined tooling and design revenues for 2005 and 2006. This will mark a signiﬁcant milestone as revenues from design services replace all of 2007’s lost tooling revenues.Along with growing sales, enhanced tracking systems and reﬁned internal metrics have been put in place to improve efﬁciency and optimize individual performance, which is expected to contribute to increased proﬁtability.TZ Group CEO’s ReportSwallow Enhancement DeviceDesigned by PDT for UC Davis Health Systems11The FutureWall™ SystemA major extension of the FutureWall Interior Building Platform was initiated and progressed through the year leading to the commercial availability of a new suite of fully engineered glass wall and sliding door options. The development effort also expanded the system offering to free standing pavilions and the introduction of a low cost modular variant to provide a stronger competitive edge against traditional drywall construction.The Australian architectural community was introduced to these new system extensions early in 2007, culminating in the speciﬁcation and sale of the pavilion and sliding door systems on a high proﬁle multi-million dollar Government ﬁt-out contract which is scheduled for completion in 2008. The Australian licensee anticipates that these new developments will provide a signiﬁcant boost to its ﬁve year plan to be the leader in ﬂexible interior space solutions and to develop and capture a large percentage of the ofﬁce, hotel and retail market in Australia and the UK.The Company intends to explore technology sale and licensing opportunities to capitalise on the track record of success in Australia and to build on the identiﬁed opportunities in Asia, Europe and the U.S. In SummaryIn closing I would like to thank the many talented employees of the TZ group whose dedication and hard work are making the Intevia® vision a reality. 2007 was a year of signiﬁcant commercialisation and strategic success with a solid foundation now in place for substantial and sustained revenue growth. The Company is on track to achieve its stated objective of creating a global industry standard with our Intevia® intelligent fasteners, actuators, software and communication technologies. With the Company now in full control of its technology and commercialisation destiny, and with an optimised operating structure, we look forward to the vast opportunities ahead as TZ continues launching an Intevia® technology revolution.David Feber TZ Group CEOTZ Group CEO’s ReportOPERATIONS | 2007 ANNUAL REPORT12Mass produced components for the Intevia® Radial fastenerFinancial Report14The Directors of TZ Limited (TZL) present their report together with the ﬁnancial reports of the parent entity and its controlled entities for the ﬁnancial year ended 30 June 2007.DirectorsThe details of Directors of the Company during the year and to the date of this report are:J. Falconer Non-Executive Director & Company SecretaryM. Otten Non-Executive Director (Appointed 7 July 2006)A. Sigalla Executive Director (Appointed 29 January 2007)A. Leibowitz Chairman (Resigned 7 July 2006)C. Kelliher Executive Director (Resigned 29 January 2007)Operating ResultsThe operating loss after income tax for the year ended 30 June 2007 for the consolidated entity was $10,806,516 (2006: proﬁt $592,308).Review of OperationsIt was yet another year of transformation and change for TZL’s U.S. subsidiary companies, Telezygology, Inc. (TZI) and the PDT group (PDT). The decision in February to purchase the Intevia® Business Unit from Acument™ Global Technologies (Acument) necessitated a signiﬁcant change to the operating structure of TZI requiring a substantial increase in the level of investment to drive customer engagement and technology development. TZI absorbed all of Acument’s Intevia® employees as part of the acquisition, the integrated teams were rationalised however, the net effect on consolidation was a subsequent increase of approximately sixty percent in TZI’s operating expenses. In addition, TZI’s ﬁnancial performance for the year was further impacted in that engineering fees related to Intevia® product development, originally anticipated for the second half of the ﬁscal year where no longer applicable under the new relationship with Acument.It is important to note these signiﬁcant changes to TZI’s business structure, whereby technical development, commercialisation and customer engagement resources are all now contained within TZI, have already produced positive and encouraging results in terms of winning customer commitment to the Intevia® intelligent fastening and actuation technology and has positioned the company well to achieve its future objectives. TZ is now in a position to derive the full commercial value of Intevia® sales as opposed to royalty and engineering fees. The Directors, together with their underwriters Credit Suisse of New York, are ﬁrm in their view that this signiﬁcantly increased ﬁnancial opportunity, albeit requiring higher levels of investment will ultimately create substantially more shareholder value than contemplated by the previous royalty-based business relationship with Acument. Accordingly the full year accounts reﬂect this signiﬁcant and unbudgeted additional investment resulting from the Intevia® acquisition. However, it should be noted that the scale of this investment needs to be considered in context of the dramatically increased opportunity now available to the company. The acquisition enabled the integration of the commercial and technical teams into a single cohesive unit which has signiﬁcantly enhanced the ability to win customers to the Intevia® platform. Within the last quarter of the ﬁscal year, more than 450 customer contacts were conducted – increased by 600% over last year. The introduction of the Intevia® Early Adopter Customer Program, whereby commitments are obtained from customers at an early stage of their intent to purchase and incorporate Intevia® into their end-user products, is off to a strong start. At this time 12 of the early adopter customer slots have either been ﬁnalised, or in the ﬁnal stages of negotiation with several more in the sales pipeline.The Directors are encouraged by the good progress evidenced to date with winning large industry leading customers and consider the current levels of investment being made are well justiﬁed when taken in context of the signiﬁcantly enhanced earnings anticipated by the Company in the coming years as a result of that investment. Directors’ ReportFINANCIALS | 2007 ANNUAL REPORT15In February this year the decision was made to signiﬁcantly restructure PDT and redirect its focus to address market segments that are not commoditised, typically require U.S. designed and manufactured products and are prepared to pay for the highest levels of mechanical engineering and industrial design services to differentiate their offerings. TZ acquired PDT in order to have access to this calibre of engineering competencies to design, improve and cost reduce Intevia® products and this restructure will further enable that objective and allow PDT to drive proﬁtable growth and be positioned as one of the highest quality design and engineering ﬁrms in the U.S. As part of the restructure and as foreshadowed in the half year report, the PDT injection mould tool and die making operation was discontinued. This unit had underperformed in the ﬁrst half of the year impacted by the irreversible trends of intense competition from tool making companies based in low labour cost Asian countries and the ongoing migration of its customer base, U.S.-based manufacturing operations, to China. PDT incurred a loss, including one time restructure costs, of USD $1,399,276 from its discontinued tool making operation.However, an encouraging indicator is the strong revenue growth that has been achieved in the higher margin design and mechanical engineering services business and the Directors are conﬁdent that having made these necessary changes to reduce PDT operating costs that it is again on track to deliver approximately USD $3.0m EBITDA for TZL’s current ﬁscal year (June 30th 2008) and is well positioned for sustained growth in subsequent years.During the year the Company completed a signiﬁcant upgrade of its FutureWall interior ﬁt out and ofﬁce furniture system, adding a glazed partitioning and glass sliding door system, integration of Intevia® beam fasteners for panel attachment and quick release, a stand-alone pavilion style ofﬁce conﬁguration and a new low cost wall system that utilises conventional drywall style panels. A supply chain for component and panels has been established in Asia and all new extrusion dies have been produced. In addition the Australian licensee has won a number of very large government projects incorporating these system extensions which is a positive indicator of market acceptance for the new additions. The system has completed and passed various compliance testing procedures in Australia and the Company will launch the complete product offering in the U.S. in the near future.During the course of the year the Directors have continued to prepare the Company for listing on the NASDAQ exchange. Credit Suisse of New York has been retained as M&A advisors, to assist with ongoing funding activities and as underwriters to the NASDAQ listing anticipated to occur during 2008. The timing of the proposed listing is such that our advisors have indicated that the offering will be based on forecast 2009 earnings rather than those for 2008. Several strategic business/technology acquisitions have been evaluated during the year and are progressing. It should be noted that considerable expense has been incurred during the course of the year in the execution of this strategy however the Directors remain conﬁdent that the Company’s listing objectives will be achieved.Principal ActivitiesThe principal activities of the consolidated entity during the ﬁnancial year were:The development and licensing of intellectual property particularly, Intelligent Fastening, Assembly Enabling and FutureWall™ technologies through Telezygology, Inc. Providing a full service capability in product development and engineering services through PDT Group. Additionally a signiﬁcant electronic and software engineering capability has been established.All of the operations of the consolidated entity are based in Illinois, USA.Signiﬁcant Changes in State of AffairsDuring the year the Company issued 5,569,887 pre consolidation fully paid ordinary shares as ﬁnal settlement for the purchase of the PDT companies and business, as per the agreement in March 2005. The Company had also issued 10,560,157 pre consolidation fully paid ordinary shares for a total consideration of $4,593,223 pursuant to the conversion of outstanding options.In January 2007 the Company issued 19,362,404 pre consolidation fully paid ordinary shares (pre consolidation) in the Company as settlement of the consideration for the purchase of the Intevia® Business Unit from Acument Group Technologies, Inc. USA.At the Company general meeting held 23 March 2007, the Company shareholders approved the consolidation of Company securities on a 1-for-5 basis subject to rounding.Directors’ Report16Likely DevelopmentsThe particular information required by s299 (1) of the Corporations Act (2002) has not been included in this report, as the inclusion of such information is likely to result in unreasonable prejudice to the Company.DividendsNo dividend has been paid or declared since the commencement of the ﬁnancial year. The Directors do not recommend the payment of a dividend.Directors’ Skills, Experience and Expertise – Current DirectorsMr. John FalconerNon-executive Director and Company SecretaryMr. Falconer is a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Financial Services Institute of Australia. He is the principal of Carbone Falconer & Co, a small ﬁrm of Chartered Accounts in Sydney providing specialist services to private and public company clients. He is a director of Kingsgate Consolidated Limited, the company secretary of Tri Origin Minerals Limited, and formally a director of Taragon Property Fund, all ASX listed entities.As at the date of this report, Mr. Falconer had the following interest in securities in the Company:Interest in shares395,273Interest in options 200,000Mr. Michael OttenNon-executive DirectorFrom 1994 to 1998, Mr. Otten was managing director of Singleton Advertising in Melbourne and he afterwards he was the executive general manager marketing at Crown. He has also run his own marketing consultancy business, No Compromises, for the past 16 years.As at the date of this report, Mr. Otten had the following interest in securities in the Company:Interest in shares38,640Interest in options 200,000Mr. Andrew SigallaExecutive DirectorMr. Sigalla is one of the founding shareholders and currently an Executive Director of TZ Inc. and has supported the corporate development of the Company to its present stage.As at the date of this report, Mr. Sigalla had the following interest in securities in the Company:Interest in shares1,266,450Interest in options NilDirectors’ ReportFINANCIALS | 2007 ANNUAL REPORT17Directors’ Skills, Experience and Expertise – Directors Resigned During the PeriodMr. Tony Leibowitz (resigned 7 July 2006)As at the date of resignation Mr. Leibowitz had the following interest in securities in the Company:Interest in sharesNilInterest in options 100,000Mr. Chris Kelliher (resigned as Executive director of the parent entity 29 January 2007)Mr. Kelliher’s role is to oversee the Company’s operations and lead its strategic growth initiatives and from January 2007 he retired as an Australian parent Company Director and assumed the role in the U.S. of TZ Group President.Mr. Kelliher has over 20 years experience managing technology based companies ranging from start up ventures to subsidiaries of large multi national companies. He was appointed managing director of Microsoft South Paciﬁc Region In 1996 after 3 years as managing director of Microsoft’s Australian subsidiary. Prior to this, he spent 3 years as the founding managing director of Microsoft in New Zealand. Before this he held senior management positions with Digital Equipment Corporation and Philips. Mr. Kelliher is also director of Mainland Air Services Ltd, a New Zealand based air transport and training company.As at the date of resignation as Executive Director of the parent entity Mr. Kelliher had the following interest in securities in the Company:Interest in shares413,035Interest in options 100,000Directors’ MeetingsThe number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the ﬁnancial year were:No. of Meetings HeldNo. of Meetings AttendedJ. Falconer88M. Otten88A. Sigalla33C. Kelliher55A. Leibowitz00Other matters were dealt with during the year by way of circular resolutions signed by all Directors.Directors’ Report18Key Management Personnel Remuneration Report The Company’s policy for determining the nature and amount of emoluments of board members and senior executives of the company is as follows:Directors’ Fees are paid to Non Executive Directors as approved from time to time by shareholders. The last increase was approved by shareholders at the Annual General Meeting held 30 November 2006 and allowed for a ﬁxed sum not exceeding $500,000.Emoluments paid to senior executives of the Company are determined by the Chief Executive Ofﬁcer and the Board of Directors. The broad remuneration policy is to ensure the remuneration package properly reﬂects the person’s duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest quality.Details of the nature and amount of each major element of the emoluments of each Director of the Company and the consolidated entity are:Short-termemployee beneﬁtsShare-based paymentRoleSalary & feesNon-cashbeneﬁtOptionsTotalParent Entity Key Management PersonnelJ. FalconerNon-Executive Director90,000-59,502149,502M. OttenNon-Executive Director60,000-59,502119,502A. SigallaExecutive Director50,000--50,000A. Leibowitz*Non-Executive Chairman----Economic Entity Key Management PersonnelC. KelliherTZ Group President916,28713,642-929,929D. FeberTZ Group Chief Executive Ofﬁcer190,6058,511233,250432,366J. WilsonFutureWall President222,82111,928-234,749D. RudduckTZ Inc Chief Technical Ofﬁcer428,54620,437-448,983M. SchwartzPDT President and Chief Executive Ofﬁcer340,85911,338-352,197R. WiltgenPDT Chief Administration Ofﬁcer328,23411,338-339,572D. MayPDT General Manager Tooling328,23411,338-339,572Total2,955,58688,532352,2543,396,372* Mr. A. Leibowitz resigned as director 7 July 2006.Directors’ BeneﬁtsParticulars of Directors’ Beneﬁts are disclosed in Note 15.Indemniﬁcation and Insurance of Directors and OfﬁcersThe parent entity has not taken out an insurance policy indemnifying Directors and Ofﬁcers for the ﬁnancial year nor has the Company provided any indemniﬁcation during the year.Directors’ ReportFINANCIALS | 2007 ANNUAL REPORT19Signiﬁcant After Balance Date EventsOn 26 September 2007 and 28 September 2007 the Company announced that DKR Oasis SoundShore Oasis Holding Fund Limited has converted $1,500,000 of its $20 million convertible Bond holding into 508,473 fully paid ordinary shares.No other matters or circumstances have arisen since the end of the ﬁnancial year which signiﬁcantly affected or may signiﬁcant affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future ﬁnancial years.Share OptionsThe following options were granted over unissued shares or interests during or since the end of the ﬁnancial year by the Company to Directors or consultants as part of their remuneration:Expiry dateIssue price of sharesNumber under option24 January 2010$3.75600,000*23 January 2010$3.00300,000*23 January 2010$3.75300,000*31 December 2009$3.75200,000*31 December 2009$5.00200,000**Adjusted per the share consolidation on a 1-for-5 basis.At the date of this report, options over unissued shares or interests of the Company are as follows:Expiry dateIssue price of sharesNumber under option31 December 2007$5.00200,000*24 January 2010$3.75600,000*23 January 2010$3.00300,000*23 January 2010$3.75300,000*31 December 2009$3.75200,000*31 December 2009$5.00200,000**Adjusted per the share consolidation on a 1-for-5 basis.Complete details of the above options are in Note 13 and 24 to the Financial StatementsEnvironmental IssuesThe consolidated entity’s operations are not regulated by any signiﬁcant environmental regulation under a law of the Commonwealth or of a State or Territory.Corporate GovernanceThe Directors are responsible for the corporate governance practices of the Company. The main corporate governance practices that were in operation during the ﬁnancial year are set out in the Corporate Governance section of these ﬁnancial statements.Directors’ Report20Proceedings on Behalf of CompanyNo person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.The Company was not a party to any such proceedings during the year.Auditor’s Independence DeclarationThe Company’s independent auditor has provided an independence declaration for the year ended 30 June 2007. A copy of the declaration is attached to and forms part of the Directors’ Report.Signed at Sydney this 28th day of September 2007 in accordance with a resolution of the Board of Directors.J. FalconerDirectorDirectors’ ReportFINANCIALS | 2007 ANNUAL REPORT21In accordance with section 307c of the Corporation Act 2001, I am pleased to provide the following declaration of independence to the Directors of TZ Limited.As auditor of the ﬁnancial statements of TZ Limited for the ﬁnancial year ended 30 June 2007. I declare that to the best of my knowledge and belief, there have been no contraventions of:the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and• any applicable code of professional conduct in relation to the audit.• Yours faithfully, TAYLOR & COStephen K. Taylor28th September 2007Sydney, AustraliaAuditor’s Independence Declaration to the Directors of TZ Limited22 Consolidated entityParent entity Note 2007200620072006 $$$$Revenue215,864,63320,776,768--Cost of sales2(12,304,965)(10,858,201)-- Gross proﬁt 3,559,6689,918,567-- Other income2580,007241,649452,876854,978 Employee related expenses (4,870,373)(2,913,209)(693,508)(267,004)Occupancy expenses (252,905)(132,406)(34,536)-Communications expenses (343,437)(316,302)(43,840)(37,834)Depreciation (298,118)(1,064,251)(448)-Amortisation of intangibles (1,048,636)(1,057,663)--Professional and corporate services (894,293)(2,372,900)(353,722)(402,823)Travel and accommodation(1,630,165)(1,042,382)(477,342)(208,979)Write-off inter-company debts---(451,382)Foreign exchange loss(1,150,131)-(1,119,958)-Finance cost(1,401,934)(124,474)(1,170,573)(626)Other expenses (1,090,024)(784,151)(51,810)(118,016)Proﬁt/(Loss) before income tax expense3(8,840,341)352,478(3,492,861)(631,686)Income tax expense(beneﬁt)4199,672(25,774)--Proﬁt/(Loss) from continuing operations (9,040,013)378,252(3,492,861)(631,686)Proﬁt/(Loss) from discontinued operations after related income tax expense (1,766,503)214,056--Net Proﬁt/(Loss) for the year (10,806,516)592,308(3,492,861)(631,686)Net Proﬁt/(Loss) attributable to outside equity interests----Net Proﬁt/(Loss) attributable to members of the parent entity (10,806,516)592,308(3,492,861)(631,686)Continued operationsBasic earnings per share (cents)21(25.30)1.26 Diluted earnings per share (cents)21(25.30)1.13Discontinued operationsBasic earnings per share (cents)21(4.94)0.71 Diluted earnings per share (cents)21(4.94)0.64The accompanying notes form part of these ﬁnancial statements.Income Statement FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT23 Consolidated entityParent entity Note 2007200620072006 $$$$Current assets Cash and cash equivalents177,596,1243,403,1566,856,2091,002,405Trade and other receivables58,997,26710,974,9505,620,4924,117,713Work in process6758,829700,456--Total current assets 17,352,22015,078,56212,476,7015,120,118Non-current assets Trade and other receivables5--13,165,6852,931,714Financials assets7--50,209,69537,555,919Property, plant and equipment82,062,9804,266,72518,851-Intangibles assets960,634,31439,698,304--Deferred tax assets171,787470,343--Total non-current assets 62,869,08144,435,37263,394,23140,487,633Total assets 80,221,30159,513,93475,870,93245,607,751Current liabilities Trade and other payables101,940,2275,479,615741,3714,156,601Short-term provisions11619,821875,244--Financial liabilities12235,544736,735--Total current liabilities 2,795,5927,091,594741,3714,156,601Non-current liabilities Financial liabilities1221,630,5084,097,16520,000,000-Deferred tax liabilities361,733281,170--Total non-current liabilities 21,992,2414,378,33520,000,000-Total liabilities 24,787,83311,469,92920,741,3714,156,601Net assets 55,433,46848,044,00555,129,56141,451,150Equity Issued capital1384,095,41667,780,99884,095,41667,780,998Reserves142,984,8501,103,289934,85478,000Accumulated losses(31,646,798)(20,840,282)(29,900,709)(26,407,848) Total equity55,433,46848,044,00555,129,56141,451,150The accompanying notes form part of these ﬁnancial statements.Balance SheetAS AT 30 JUNE 200724Consolidated EntityNoteShare CapitalReservesAccumulated lossesTotalOrdinaryEquity-based payment Foreign currency translation$$$$$Balance at 1 July 200564,398,39667,663255,540(21,432,590)43,289,009Shares issued during the period3,384,237---3,384,237Share issue cost(1,635)---(1,635)Adjustment from translation of foreign controlled entities--769,749-769,749Share–based payment-10,337--10,337Proﬁt attributable to members of parent entity---592,308592,308Sub-total67,780,99878,0001,025,289(20,840,282)48,044,005Dividends paid or provided for-----Balance at 30 June 200667,780,99878,0001,025,289(20,840,282)48,044,005Balance at 1 July 200667,780,99878,0001,025,289(20,840,282)48,044,005Shares issued during the period18,558,600---18,558,600Share issue cost(2,244,182)---(2,244,182)Adjustment from translation of foreign controlled entities--1,024,707-1,024,707Share–based payment-856,854--856,854Proﬁt attributable to members of parent entity---(10,806,516)(10,806,516)Sub-total84,095,416934,8542,049,996(31,646,798)55,433,468Dividends paid or provided for-----Balance at 30 June 200784,095,416934,8542,049,996(31,646,798)55,433,468Statement of Changes in EquityFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT25Parent EntityNoteShare CapitalReservesAccumulated lossesTotalOrdinaryEquity-based payment Foreign currency translation$$$$$Balance at 1 July 200564,398,39667,663-(25,776,162)38,689,897Shares issued during the period3,384,237---3,384,237Share issue cost(1,635)---(1,635)Share–based payment-10,337--10,337Proﬁt attributable to members of parent entity---(631,686)(631,686)Sub-total67,780,99878,000-(26,407,848)41,451,150Dividends paid or provided for-----Balance at 30 June 200667,780,99878,000-(26,407,848)41,451,150Balance at 1 July 200667,780,99878,000-(26,407,848)41,451,150Shares issued during the period18,558,600---18,558,600Share issue cost(2,244,182)---(2,244,182)Share–based payment-856,854--856,854Proﬁt attributable to members of parent entity---(3,492,861)(3,492,861)Sub-total84,095,416934,854-(29,900,709)55,129,561Dividends paid or provided for-----Balance at 30 June 200784,095,416934,854-(29,900,709)55,129,561Statement of Changes in EquityFOR THE FINANCIAL YEAR ENDED 30 JUNE 200726Consolidated entityParent entityNote2007200620072006$$$$Cash Flows from Operating ActivitiesReceipts from customers16,287,85729,290,513--Payments to suppliers and employees(22,702,580)(28,437,351)(2,172,103)(1,037,373)Interest received536,721218,169452,876122,782Interest paid(1,235,267)(210,070)(1,003,907)(626)Income tax paid(5,166)(188,849)--Net Cash (Used in) Provided by Operating Activities17(b)(7,118,435)672,412(2,723,134)(915,217)Cash Flows from Investing ActivitiesPayment for plant and equipment(854,520)(1,029,335)(19,299)-Acquisition cost for controlled entity(2,383,290)(112,881)(2,105,251)(112,881)Acquisition for controlled entity-(1,583,168)-(1,294,027)Payments for research and development (4,643,070)(4,769,780)--Repayment of loan from controlled entity---633,190Loan to controlled entity--(9,802,000)(1,630,526)Net Cash Used in Investing Activities(7,880,880)(7,495,164)(11,926,550)(2,404,244)Cash Flows from Financing ActivitiesShare Issues3,867,6283,161,8713,867,6283,161,871Proceeds from convertible notes issue20,000,000-20,000,000-Share Issue costs(2,244,182)(1,636)(2,244,182)(1,636)Repayment of borrowing(1,320,905)(904,459)--Repayment of lease obligation-(121,458)--Proceeds from line of credit borrowing189,366930,944--Proceeds from notes payables-1,462,912--Net Cash Provided by Financing Activities20,491,9074,528,17421,623,4463,160,235Net Increase (Decrease) in Cash Held5,492,592(2,294,578)6,973,762(159,226)Cash at beginning of year17(a)3,403,1565,613,5441,002,4051,161,631Effects of exchange rate ﬂuctuations on the balances of cash held in foreign currencies(1,299,624)84,190(1,119,958)-Cash at end of year17(a)7,596,1243,403,1566,856,2091,002,405Cashﬂow StatementFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007The accompanying notes form part of these ﬁnancial statements.FINANCIALS | 2007 ANNUAL REPORT271. SUMMARY OF ACCOUNTING POLICIESStatement of ComplianceThe ﬁnancial report is a general purpose ﬁnancial report which has been prepared in accordance with the Corporation Act 2001, Australian Accounting Standards, including Urgent Issues Group Interpretations, and other authoritative pronouncements of the Australian Accounting Standards Board. The Financial reports of TZ Limited comply with all International Financial Reporting Standards (IFRS) in their entirety. The ﬁnancial report of TZ Limited was authorised for issue by the Directors 28 September 2007. TZ Limited is a public listed Company whose shares and options are quoted on the Australian Securities Exchange and is incorporated and is domiciled in Australia.The following is a summary of the material accounting policies adopted by the Company in the preparation of its ﬁnancial reports. The accounting policies have been consistently applied, unless otherwise stated.Reporting Basis and ConventionsThese ﬁnancial statements have been prepared on an accruals basis under the historical cost convention, as modiﬁed by the revaluation of available-for-sale ﬁnancial assets, ﬁnancial assets and liabilities at fair value.Early Adoption of StandardThe Company has elected to early adopt all Australian Accounting Standards and UIG Interpretations and other authoritative pronouncement of the Australian Accounting Standards Board with an application date later than 30 June 2007, with the exception of AASB 7 Financial Instruments: Disclosures and AASB 8: Operating Segments.Critical Accounting Estimates and JudgementsThe preparation of a Financial Report in conformity with Australian Accounting Standards requires management to make estimates, judgements and assumptions based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data obtained both externally and within the Company. Actual results may differ from the estimates. (a) Principles of consolidationThe consolidated ﬁnancial statements comprise the ﬁnancial statements of TZ Limited and all its controlled entities (refer note 7) other then CAP Asia Paciﬁc Pte Ltd for which the Company currently holds a 25% interest in the company. The consolidated entity currently has no direct involvements in its Asian operations, has no board representation and has no commitments to provide future funding. This investment currently is carried forward at a nil value. The Directors believe, as they are in no position to exert any signiﬁcant inﬂuence over the operations of the company and its indirect investments in CED Hong Kong Limited and CED Philippines Inc, they have been excluded from the principles of consolidation.Entities have been consolidated in the ﬁnancial statements from the date that control exists. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised proﬁts or losses, have been eliminated on consolidation.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007281. SUMMARY OF ACCOUNTING POLICIES (continued)Outside equity interest comprises the aggregate of the equity of controlled entities, other than that held either directly or indirectly by the parent entity, after making adjustments for unrealised proﬁts and losses of controlled entities and other adjustments necessary to comply with Accounting Standards.The Directors consider that the net revenues and expenses omitted from the ﬁnancials report are not signiﬁcant.(b) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments with less than 14 days to maturity, net of outstanding bank overdrafts. (c) InvestmentsInvestments are recognised in the ﬁnancial statements at fair value.(d) Property, plant and equipmentProperty, plant and equipment is included at cost, less where applicable, any accumulated depreciation or amortisation.The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it does not exceed the recoverable amount.The depreciation rates used for each class of asset are as follows:Ofﬁce Furniture and Equipment 13% - 50%• Leasehold Improvement 30%• Motor Vehicle 37% - 50%• Plant & Equipment 20% - 25%• The depreciable amount of all ﬁxed assets is depreciated on a straight line basis over their estimated useful lives commencing from the time the asset is held ready for use.(e) Receivables and payablesTrade accounts receivable, amounts due from related parties and other receivables represent the principal amounts due at balance date plus accrued interest less, where applicable, any provisions for impaired accounts.Accounts payable represent the principal amounts outstanding at balance date plus, where applicable, any accrued interest.(f) Accounts payableTrade payables and other accounts payable are recognised when the Company becomes obliged to make future payments resulting from the purchase of goods and services.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT29(g) Employee entitlementsThe provisions for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated entity has a present obligation to pay resulting from employees’ services provided up to balance date. The provision has been calculated at nominal amounts and includes related on-costs.The liability for employee entitlements to long service leave represents the present value of the estimated future cash outﬂows to be made by the employer resulting from employees’ services provided up to the balance date.(h) LeasesLease payments under operating leases, where substantially all the risks and beneﬁts remain with the lessor, are charged as expenses in the period in which they are incurred.Where assets are acquired by means of ﬁnance leases, the present value of minimum lease payments is established as an asset at the beginning of the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability is also established and each lease payment is allocated between such liability and interest expense.(i) Income taxThe consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense for the period is based on the operating result after adjusting for items which, as a result of their treatment under income tax legislation, create permanent differences between that result and the taxable income or loss.Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating result, income tax and taxable income are brought to account as either provision for deferred income tax, or an asset described as future income tax beneﬁt at the rate of income tax applicable to the period in which the beneﬁt will be received, or the liability will become payable.Future income tax beneﬁts are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax beneﬁts in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the beneﬁt. The amount of beneﬁts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufﬁcient future assessable income and comply with the conditions of deductibility imposed by the law to permit a future income tax beneﬁt to be realised.(j) Foreign currency transactions and balancesFunctional and Presentation CurrencyThe functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated ﬁnancial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.Transaction and BalancesForeign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash ﬂow or net investment hedge.Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007301. SUMMARY OF ACCOUNTING POLICIES (continued)Group CompaniesThe ﬁnancial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;• income and expenses are translated at average exchange rates for the period; and• retained earnings are translated at the exchange rates prevailing at the date of the transaction.• Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.(k) Revenue Recognition(i) Sales revenueSales revenue comprises revenue earned from the provision of products or services to entities outside the consolidated entity. (ii) Other revenue - direct cost recoveryDirect cost recovery revenue comprises revenue earned from the provision of services, the costs of which are directly recoverable from the client as they are incurred.(l) Goods and services taxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of • acquisition of an asset or as part of an item of expense; orfor receivables and payables which are recognised inclusive of GST.• The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.Cash ﬂows are included in the cash ﬂow statement on a gross basis. The GST component of cash ﬂows arising from investing and ﬁnancing activities which is recoverable from, or payable to, the taxation authority is classiﬁed as operating cash ﬂows.(m) Impairment of assetsAssets that have an indeﬁnite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash ﬂows (cash generating units).Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT31(n) Share-based paymentsThe cost to the Company of share options granted to directors and executive ofﬁcers is included at fair value as part of the directors’ and executive ofﬁcers’ aggregate remuneration in the ﬁnancial year the options are granted. The fair value of the share option is calculated using the Black Scholes option pricing model, which takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.The fair value determined at the grant date of the equity settled share based payment is expensed on a straight line basis over the vesting period.(o) Earnings per share(i) Basic earnings per share:Basic earnings per share is determined by dividing the operating proﬁt/ (loss) after income tax by the weighted average number of ordinary shares outstanding during the ﬁnancial year.(ii) Diluted earnings per share:Diluted earnings per share adjusts the ﬁgures used in determining earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the ﬁnancial year.(p) Intangible assets(i) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identiﬁable assets of the acquired subsidiary at the date of acquisition. Goodwill on the acquisition of subsidiaries is included in intangible assets. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Group’s investment in each region of operation by each primary reporting segment.(ii) Trademarks and licencesTrademarks and licences have an indeﬁnite useful life and are carried at cost less any impaired losses. (iii) Research and development Research expenditure is expensed as incurred.An intangible asset arising from development expenditure is only recognised when all recognition criteria can be demonstrated. The recognition criteria for development activity are:the technical feasibility of completing the intangible asset so that it will be available for use or sale;• the intention to complete the intangible asset and use or sell it;• the ability to use or sell the intangible asset;• whether the intangible asset will generate probable future economic beneﬁts. Among other things, the • Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it to be used internally, the usefulness of the intangible asset;Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007321. SUMMARY OF ACCOUNTING POLICIES (continued)(iii) Research and development (continued)the availability of adequate technical, ﬁnancial and other resources to complete the development and to use or • sell the intangible asset; andthe ability to measure reliably the expenditure attributable to the intangible asset during its development.• Development cost is carried at cost less accumulated amortisation and impaired losses. Where recognition criteria are not met development costs are recognised in the income statement as incurred.A summary of the amortisation policies applied to the consolidated entities intangible assets is as follows:Patents and licencesDevelopment costUseful livesIndeﬁniteFiniteMethod usedNot depreciated or revalued20 year – Straight lineInternally generated / AcquiredAcquiredInternally generatedImpairment test / Recoverable amount testingAnnually and where an indicator of impairment existsAmortisation method reviewed at each reporting period and reviewed at each reporting period for indicator of impairment(q) Financial instruments issued by the Company(i) Debt and equity instrumentsDebt and equity instruments are classiﬁed as either liabilities or as equity in accordance with the substance of the contractual arrangement.(ii) Transaction costs on the issue of equity instrumentsTransaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.(iii) Interest and dividendsInterest and dividends are classiﬁed as expenses or as distributions of proﬁt consistent with the balance sheet classiﬁcation of the related debt or equity instruments or component parts of compound instruments.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT33 ConsolidatedParent entity 20072006200720062. REVENUES FROM CONTINUING OPERATIONS$$$$ Sales and service revenue15,864,63320,776,768--Other revenueInterest – other person580,007241,649452,876145,479Write-off inter-company debts---695,948Total other revenue580,007241,649452,876854,978 3. PROFIT/(LOSS) FOR THE YEAR Proﬁt/(loss) from continuing activities includes: Cost of goods sold(12,304,965)(10,858,201)--Amortisation of non-current assets:Intellectual property(cid:115)(cid:0)1,048,6361,057,663--Depreciation(cid:115)(cid:0)298,1181,064,251448-Bad and doubtful debts expense28,438---Finance cost – external1,401,934124,4741,170,5736264. INCOME TAX The amount provided in respect of income tax differs from the amount prima facie payable on the operating result. The difference is reconciled as follows: Prima facie income tax on the operating result before income tax at 30% (2006: 30%)(3,241,955)177,692(1,047,858)(189,506)Tax effect of permanent differences:Amortisation of intangibles314,591319,916--Other non-allowable expenses91,276-91,276-Write-off inter-company debts---73,298 Future income tax beneﬁt not brought to account3,035,760(523,382)956,582116,208Income tax expense/(credit) attributable to result199,672(25,774)--The potential future income tax beneﬁt arising from tax losses has not been recognised as an asset because recovery of tax losses is not virtually certain.7,131,3774,095,6173,059,9522,103,370The taxation beneﬁts of tax losses and timing differences not brought to account and will only be obtained if:a) assessable income is derived of a nature and of amount sufﬁcient to enable the beneﬁt from the deductions to be realised;b) conditions for deductibility imposed by the law are complied with; andc) no changes in tax legislation adversely affect the realisation of the beneﬁt from the deductions.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200734 ConsolidatedParent entity Note20072006200720065. RECEIVABLES $$$$ Current Trade debtors2,655,640 5,809,184--Sundry debtors5,857,1065,094,9135,558,1784,117,713Sub-total8,512,74610,904,0975,558,1784,117,713Other debtors and prepayments484,52170,85331,314-8,997,26710,974,9505,620,4924,117,713 Non-currentAmounts receivable from:Controlled entities--13,165,6852,931,714 6. WORK IN PROCESSUncompleted/unbilled jobs - at cost758,829700,456--7. INVESTMENTS Shares in controlled entities - at cost (a)--50,209,69537,555,919(a) Shares in controlled entities are valued at cost as fair value is unable to be determined.Controlled entitiesCountry of incorporation% Owned20072006Parent entity:TZ LimitedAustraliaSubsidiaries of TZ LimitedTelezygology, Inc.USA100100PDT Holdings, Inc. USA100100Product Development Technologies, Inc.USA100100PDT Tooling, Inc.USA100100PDT Southeast Limited Liability Company (LLC)*USA100100CJSC PDT Ukraine Ukraine9090CED Asia Paciﬁc Pte LtdSingapore2525CED Hong Kong Limited (i)Hong Kong6.256.25CED Philippines Inc (i)Philippines6.256.25 (i) Owned by CED Asia Paciﬁc Pte Ltd (the 6.25% represents TZ Limited indirect interest).*An LLC is treated as a partnership for U.S. purposes.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT35ConsolidatedParent entity20072006200720068. PROPERTY, PLANT AND EQUIPMENT$$$$Property, plant and equipmentCost3,769,1505,776,19119,299-Accumulated depreciation(1,706,170)(1,509,466)(448)-Total property, plant and equipment2,062,9804,266,72518,851-MOVEMENTS DURING THE YEAROfﬁce furniture and equipmentBeginning of year1,426,5681,338,797--Additions517,288663,80119,299-Disposals(111,896)---Depreciation expense(656,509)(579,881)(448)-Net foreign currency adjustment on translation(179,427)3,851--End of year996,0241,426,56818,851-Leasehold improvementsBeginning of year491,003508,453--Additions97,92478,826--Disposals(66,348)-Depreciation expense(168,518)(118,497)--Net foreign currency adjustment on translation(61,756)22,221--End of year292,305491,003--Motor vehicleBeginning of year104,998137,142--Additions----Disposals(4,517)-Depreciation expense(31,268)(35,285)--Net foreign currency adjustment on translation(13,207)3,141--End of year56,006104,998--Plant and equipmentBeginning of year2,244,1562,187,018--Additions-348,704--Disposals(1,150,345)-Depreciation expense(425,597)(357,844)--Net foreign currency adjustment on translation50,43166,278--End of year718,6452,244,156--Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200736ConsolidatedParent entity20062005200620059. INTANGIBLES$$$$Goodwill on consolidation36,501,68722,679,131--Intellectual property22,487,69815,374,642--Trademarks1,644,9291,644,531--Total intangibles60,634,31439,698,304--MOVEMENTS DURING THE YEARGoodwill on consolidationBeginning of year22,679,13118,608,927--Additions13,822,5564,070,204--End of year36,501,68722,679,131--Intellectual propertyBeginning of year15,374,64211,795,854--Additions8,161,6924,645,176--Amortisation expense(1,048,636)(1,066,388)--End of year22,487,69815,374,642--TrademarksBeginning of year1,644,5311,602,014--Additions39842,517--End of year1,644,9291,644,531--10. PAYABLESCurrentTrade creditors1,374,5902,797,871386,61138,710Sundry creditors565,6372,762,574354,7604,117,891Total current payables1,940,2275,479,615741,3714,156,60111. SHORT-TERM PROVISIONSCurrentEmployee entitlements619,821875,244--Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT37ConsolidatedParent entity 200720062007200612. FINANCIAL LIABILITIES$$$$CurrentBank loans – secured (ii)235,544736,735--Non-CurrentConvertible note issue (i)20,000,000-20,000,000-Bank loans – secured (ii)1,630,5084,097,165--21,630,5084,097,16420,000,000-(i) The convertible note issue are secured by a ﬁrst ﬁxed and ﬂoating charge over the assets of the Company and its subsidiaries.(ii) The bank loans are secured by a mortgage over the assets of PTD Inc group assets.13. ISSUED CAPITALIssued and paid up capital2007 38,725,276 (2006: 157,212,045) fully paid ordinary shares84,095,41667,274,01584,095,41667,274,015MOVEMENTS DURING THE YEAROpening balance67,780,99864,398,39667,780,99864,398,396Shares issued during the year120,000 on the 3 August 2005-48,000-48,0001,230,189 on the 19 January 2006-418,264-418,264144,650 on the 20 February 2006-53,381-53,381175,482 on the 10 March 2006-114,063-114,0634,903,503 on the 4 April 2006-1,672,873-1,672,873100,000 on the 21 April 2006-40,000-40,0002,982,250 on the 30 May 2006-1,013,965-1,013,96543,871 on the 28 June 2006-23,690-23,6905,569,887 on the 4 August 2006 (a)3,258,384-3,258,384-491,169 on the 4 August 2006 (b)196,468-196,468-470,139 on the 17 August 2006 (b)188,056-188,056-2,652,112 on the 25 August 2006 (b)845,550-845,550-4,946,737 on the 1 September 2006 (b)1,865,921-1,865,921-19,362,404 on the 29 January 2007 (c)10,804,221-10,804,221-847,458 on the 29 January 2007 (d)500,000-500,000-2,000,000 on the 31 March 2007 (b)900,000-900,000-Share issue costs(2,244,182)(1,636)(2,244,182)(1,636)Closing balance84,095,41667,780,99884,095,41667,780,998Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200738ConsolidatedParent entity 200720062007200613. ISSUED CAPITAL (continued)No.No.No.No.Opening balance157,212,045147,512,100157,212,045147,512,1003 August 2005-120,000-120,00019 January 2006-1,230,189-1,230,18920 February 2006-144,650-144,65010 March 2006-175,482-175,4824 April 2006-4,903,503-4,903,50321 April 2006-100,000-100,00030 May 2006-2,982,250-2,982,25028 June 2006-43,871-43,8714 August 2006 (a)5,569,887-5,569,887-4 August 2006 (b)491,169-491,169-17 August 200 (b)470,139-470,139-25 August 2006 (b)2,652,112-2,652,112-1 September 2006 (b)4,946,737-4,946,737-29 January 2007 (c)19,362,404-19,362,404-29 January 2007 (d)847,458-847,458-31 March 2007 (b)2,000,000-2,000,000-Sub Total193,551,951-193,551,951-1 April 2007 share consolidation (e)(154,826,675)-(154,826,675)-Closing balance38,725,276157,212,04538,725,276157,212,045a) The Company issued 5,569,887 fully paid ordinary shares (pre consolidation) as ﬁnal settlement for the purchase consideration PDT Group of companies and business, as per the signed agreed in March 2005.b) During the year the Company issued share fully paid ordinary shares on the exercise of unlisted option held by employees and consultants.c) The Company issued 19,362,404 fully paid ordinary shares (pre consolidation) as ﬁnal settlement for the purchase consideration of the Intevia® Business Unit from Acument Group Technologies, Inc. USA.d) The Company issued 847,458 fully paid ordinary shares (pre consolidation) in lieu of a ﬁnal payment to external advisors in respect of the recent convertible note issue and purchase of the Intevia® Business Unit.e) At the Company general meeting held 23 March 2007, the Company shareholders approved the Consolidation of Company Securities on a 1-for-5 basis subject to rounding.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT39ConsolidatedParent entity200720062007200613. ISSUED CAPITAL (continued)No.No.No.No.(ii) Share unquoted optionsOpening balance14,053,17623,533,76814,053,17623,533,768Options issued*22 December 2006 (a)2,000,000-2,000,000-29 January 2007 (b)3,000,000-3,000,000-29 January 2007 (c)3,000,000-3,000,000-Options exercised:3 August 2005-(120,000)-(120,000)19 January 2006-(1,230,189)-(1,230,189)20 February 2006-(144,650)-(144,650)4 April 2006-(4,903,503)-(4,903,503)21 April 2006-(100,000)-(100,000)30 May 2006-(2,982,250)-(2,982,250)4 August 2006(491,169)-(491,169)-17 August 200(470,139)-(470,139)-25 August 2006(2,652,112)-(2,652,112)-1 September 2006(4,946,737)-(4,946,737)-31 March 2007(2,000,000)-(2,000,000)-Options expired29 August 2006(1,493,019)-(1,493,019)31 December 2006(1,000,000)-(1,000,000)Sub-Total9,000,00014,053,1769,000,00014,053,1761 April 2007 Share consolidation 1-for-5 basis(7,200,000)-(7,200,000)-Closing balance1,800,00014,053,1761,800,00014,053,176a) The Company issued 2,000,000 pre-consolidation options to acquire shares in the Company, as approved in the general meeting of shareholders held 22 December 2006, to the Company Directors or their associates, Mr. John Falconer and Mr. Michael Otten by way of two tranches. The ﬁrst tranche will vest 22 December 2007 with a exercisable price of 75 cents, and the second tranche will vest 22 December 2008 with a exercisable price of $1.00 dollar. The options will expire 22 December 2009. b) The Company issued 3,000,000 pre-consolidation options to acquire shares in the Company in lieu of ﬁnal payment to external advisors in respect for the recent capital raising and acquisition of the Intevia® Business Unit. The options vested on the date of issue with a exercisable price of 75 cents. The options will expire 24 January 2010. c) The Company issued 3,000,000 pre-consolidation options to acquire share in the Company to Mr. David Feber on his appointment as the TZ Group CEO by way of two tranches. 1.5 million of the options are exercisable at 60 cents and the reminding are exercisable at 75 cents. Half of both types of tranches vest 23 January 2008 and the balance vest 23 July 2008. The options will expire 23 January 2010. (iii) Employee Share Option Plan No shares have been issued by virtue of an exercise of an option during the year or to the date of this report.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200740ConsoldatedParent entity200720062007200614. RESERVES$$$$Foreign currency translation reserve2,049,9961,025,289--Share-based payment reserve934,85478,000934,85478,000Total reserves2,984,8501,103,289934,85478,000MOVEMENTS DURING THE YEAR:Foreign currency translation reserveOpening balance1,025,289255,540--Adjustment arising from the translation of foreign controlled entities’ ﬁnancial statements1,024,707769,749--Closing balance2,049,9961,025,289--Share based payment reserveOpening balance78,00067,66378,00067,663Share based payment856,85410,337856,85410,337Closing balance934,85478,000934,85478,00015. KEY MANAGEMENT PERSONNEL COMPENSATIONa) Names and position held of consolidated entity and parent entity key management personnel at any time during the ﬁnancial year are: DirectorsJohn Falconer Non-Executive Director Michael Otten Non-Executive Director (appointed 7 July 2006)Andrew Sigalla Executive Director (appointed 29 January 2007)Anthony Leibowitz Chairman – Non-Executive Director (resigned 7 July 2006)Chris Kelliher TZ Group CEO – Executive Director (resigned as executive director of the parent entity 29 January 2007)ExecutivesChris Kelliher TZ Group President (resigned as executive director of the parent entity and assumed the role of president of TZ Group President 29 January 2007) David Feber TZ Group CEO (appointed 29 January 2007) John Wilson FutureWall PresidentDickory Rudduck TZ Inc. CTOMark Schwartz PDT Inc. President and CEORay Wiltgen PDT Inc. Chief Administration OfﬁcerDavid May PDT Inc. General Manager ToolingNotes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT41b) Directors’ remuneration Short-term employeebeneﬁtsShare-basedpaymentSalary and feesNon-cash beneﬁtOptionsTotal2007J. Falconer90,000-59,502149,502M. Otten60,000-59,502119,502A. Sigalla50,000--50,000A. Leibowitz----C. Kelliher916,28713,642-929,929Total1,116,28713,642119,0041,248,9332006A. Leibowitz126,000--126,000C. Kelliher614,0448,715-622,759J. Falconer60,000--60,000M. Otten----Total800,0448,715-808,759c) Executives’ remuneration Short-term employee beneﬁtsShare-based paymentSalary andfeesSuperannuation contributionNon-cash beneﬁtOptionsTotal2007D. Feber190,605-8,511233,250432,366J. Wilson222,821-11,928-234,748D. Rudduck428,546-20,437-448,983M. Schwartz340,859-11,338-352,197R. Wiltgen328,234-11,388-339,572D. May328,234-11,388-339,572Total1,839,299-74,990233,2502,147,5392006J. Wilson469,462-19,901-489,363D. Rudduck418,925-19,901-438,826M. Schwartz351,406-17,398-368,804R. Wiltgen345,779-14,243-360,022D. May345,779-26,598-372,377Total1,931,351-98,041-2,029,392Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 20074215. KEY MANAGEMENT PERSONNEL COMPENSATION (continued)(d) options and rights holdingsNumber of options held by key management personnel DirectorsOpening balanceGranted as remunerationLapsed or cancelledNet changeother Closing balanceJ. Falconer1,388,182200,000(i)-(1,388,182)200,000M. Otten-200,000(i)--200,000A. Sigalla1,491,125--(1,491,125)-A. Leibowitz1,000,000-(500,000)(400,000)(i)100,000C. Kelliher4,727,812-(500,000)(4,127,812)100,000Total8,607,119400,000(1,000,000)(7,407,119)400,000ExecutivesOpening balanceGranted as remunerationLapsed or cancelledNet changeother Closing balanceD. Feber-600,000(i)-600,000J. Wilson1,491,125--(1,491,125)-D. Rudduck1,491,125-(1,491,125)--M. Schwartz----R. Wiltgen----D. May----Total2,982,250600,000(1,491,125)(1,491,125)600,000(i) The amounts have been adjusted to take effects of the share consolidation that approved at the Company general meeting held 26 March 2007.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT43(e) ShareholdingsNumber of shares held by key management personnelDirectorsOpening balance Granted as remuneration Net changeother (ii)Closing balance J. Falconer1,388,182-(992,909)395,273M. Otten208,197-(169,557)38,640A. Sigalla3,500,000-(2,233,550)1,266,450C. Kelliher1,416,569-(1,003,534)413,035Total6,512,948-(4,244,993)2,267,955 ExecutivesOpening balanceGranted as remuneration Net changeother (ii)Closing balanceD. Feber----J. Wilson4,832,004-(4,402,004)430,000D. Rudduck7,976,189-(6,636,189)1,340,000M Swartz--251,016251,016R. Wiltgen--251,016251,016D. May--251,016251,016Total12,808,193-(10,285,145)2,523,048(ii) Included in ‘Net change other’ is the adjustment required to take effects of the share consolidation that was approved at the Company general meeting held 26 March 2007.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 20074415. KEY MANAGEMENT PERSONNEL COMPENSATION (continued)(f) Remuneration practicesThe Company’s policy for determining the nature and amounts of emoluments of directors and senior executives of the Company is as follows;The remuneration structure for executive ofﬁcers, including executive directors, is based on a number of factors, including the length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and speciﬁed directors and executives are on a continuing basis the terms of which are not expected to change in the immediate future. Upon retirement speciﬁed directors and executives are paid employee beneﬁt entitlements accrued to date of retirement.Executive directors and senior executives may receive bonuses based on the achievement of speciﬁc performance hurdles. There is no separate proﬁt-share plan.The constitution provides that the remuneration of non-executive directors will not be more than the aggregate ﬁxed sum determined by a general meeting of shareholders. The aggregate remuneration has been set at the last Annual General Meeting of shareholder held 30 November 2006 in the amount of $500,000 per annum.(g) Contracts for services of key management personnelRemuneration and other terms of employment for the Executive and Non Executive Directors are formalised in service agreements. John Falconer, Non Executive Director and Company SecretaryCommenced 25 January 2007;• Term is ﬁxed until 25 January 2010;• Base salary consists of an annual remuneration package of $120,000. For the ﬁnancial year ended 30 June 2007 • total compensation amounted to $90,000 (2006: $60,000). Michael Otten, Non Executive DirectorCommenced 7 July 2006;• No ﬁxed term;• Base salary consists of a quarterly retainer of $15,000, for the ﬁnancial year ended 30 June 2007 total • compensation amounted to $60,000 (2006: $Nil). Andrew Sigalla, Executive DirectorCommenced on 25 January 2007;• Term is ﬁxed until 25 January 2010;• Base salary consists of an annual remuneration package of $120,000. For the ﬁnancial year ended 30 June 2007 • total compensation amounted to $50,000 (2006: $Nil). Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT45ConsolidatedParent entity200720062007200616. RELATED PARTY TRANSACTIONS$$$$(a) Controlled entitiesLoan to controlled entities - non-current--10,233,9711,630,526Loan repaid from controlled entities - non-current---633,190These loans are interest free. There are no ﬁxed terms of repayment.(b) Key management personnel related entity transactionsMr. J. Falconer is a director of Dunbar Associates Pty Ltd which provided corporate services including stafﬁng to the Company during the year. These services are charged at normal commercial rates and amounted to $243,305 (2006: $142,454).Mr. M. Otten is a director of No Compromises Pty Ltd which provided corporate services to the Company during the year. These services are charged at normal commercial rates and amounted to $35,891 (2006: $0).Mr. A. Sigalla is a director of ZMS Investment Pty Limited provides management services to the Company and charged at normal commercial rates which amounted to $241,667 (2006: $220,000). The Company has signed a consultancy agreement with ZMS Investment Pty Limited with a commencement date 25 January 2007 for a ﬁxed three year period, with a base monthly retainer of $25,000. Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200746ConsolidatedParent entity200720062007200617. NOTES TO THE CASH FLOW STATEMENT$$$$ (a) Reconciliation of cash For the purpose of the cash ﬂow statement, cash includes: Cash at bank and on hand2,854,5213,403,1562,114,6061,002,405Deposit on call4,741,603-4,741,603-7,596,1243,403,1566,856,2091,002,405(b) Reconciliation of ‘net cash ﬂow in operations activities’ with ‘net proﬁt/(loss) after income tax’ is as follows:Proﬁt/(loss) after income tax(10,806,516)592,308(3,492,861)(631,686) Non-cash ﬂows in operating proﬁt/(loss):Net inter-company debts written-off (beneﬁt)---(244,807)Depreciation1,281,8921,057,663448-Amortisation of intangibles1,048,6361,066,388--Unrealised exchange loss (gain)1,150,13114,2181,119,958-Share based payments304,25410,337304,25410,337Employee entitlements(255,423)746,053--Doubtful debts28,438---Changes in assets and liabilities(Increase)/decrease in trade debtors3,153,544(2,567,667)--(Increase)/decrease in prepayments and other debtors457,624(782,729)(1,367,979)(14,590)(Increase)/decrease in work in process58,373(276,644)--(Decrease)/increase in creditors and accruals(3,539,388)812,485713,046(34,471)Cash ﬂows provided by/(used in) operations(7,118,435)672,412(2,723,134)(915,217)(c) non cash ﬁnancing and investing activitiesShare IssuedOn 10 March 2006, the Company issued 175,482 pre consolidation fully paid ordinary shares in the Company at an • issue price of 65 cents per share as part consideration for the purchase of the business Mqube Design from MQBD LLC.On 28 June 2006, the Company issued 43,871 pre consolidation ordinary shares in the company at an issue price • of 54 cents per share as the ﬁnal consideration of its acquisition of the Mqube Design from MQBD LLC after certain performance criteria were reached.On 4 August 2006, the Company issued 5,569,887 pre consolidation fully paid ordinary shares at an issue price of • 58.5 cents per share as ﬁnal settlement of the consideration for the purchase of PDT entered into in March 2005.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT47On 23 January 2007, the Company successfully negotiated the acquisition of the Intevia• ® Business Unit from Acument Global Technologies, Inc. The deal was valued at approximately AUD $24.6 million with the purchase consideration consisting of the issue of 19,362,404 pre consolidation fully paid ordinary shares at an implied value of $1.27 per share.On 24 January 2007, the Company issued 847,458 pre consolidation fully paid ordinary shares at 59 cents per • share as part of ﬁnal payment to external advisors in respect of recent Intevia® acquisition and convertible note issue.18. SEGMENT INFORMATIONSegment revenuesSegment results2007200620072006Segment revenues and results$$$$Engineering and design15,991,76420,776,768(5,547,152)914,552Investments452,876254,416(3,492,861)(536,300)Total of all segments16,444,64021,031,184(9,040,013)378,252Discontinued operations4,345,6679,770,930(1,766,503)214,056Consolidated20,790,30730,802,114(10,806,516)592,308All sales were to customers outside the consolidated entityAssetsLiabilities2007200620072006Segment assets and liabilities$$$$Engineering and design67,725,74954,393,8164,046,46211,380,008Investments12,495,5525,120,11720,741,37189,921Total of all segments80,221,30159,513,93324,787,83311,469,929Discontinued operations----Consolidated80,221,30159,513,93324,787,83311,469,929The consolidated entity’s predominant activities is the licensing of its patented intellectual property and operating software, as well as providing application engineering and technology development services to manufacturers in the automotive, aerospace and construction industries.The Company operates its engineering and design division predominantly in the U.S. while maintaining a presence in the UK and Ukraine. The Company operates these geographical locations with the U.S. operation and are not signiﬁcant to be reported separately. The Company investments division is predominantly in Australia.During the year ended 30 June 2007, the Company ﬁnalised the closure of the tooling operations within the engineering and design division, as detailed in the 1 August 2007 Company Announcement. 19. FINANCIAL INSTRUMENTS(a) Interest rate risk exposureThe Company is exposed to interest rate risk through primary ﬁnancial assets and ﬁnancial liabilities. The following table summarises the interest rate risk for the Company, together with the effective weighted average interest rate for each class of ﬁnancial assets and liabilities.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 20074819. FINANCIAL INSTRUMENTS (continued)Weighted averageInterest ratesFloatingInterest rateFixed Interest maturingin 1 year or lessFixed Interest maturingIn over 1 to 5 yearsNon interest bearingTotal$$$$$200720062007200620072006200720062007200620072006Financial assets Cash 4.944.557,296,1243,403,156300,000-----7,596,1243,403,156 Receivables --------8,997,26710,974,9528,997,26710,974,952 Total ﬁnancial assets 7,296,1243,403,156300,000---8,997,26710,974,95216,593,39114,378,108Financial liabilities Bank loan8.258.25235,5441,886,024-----235,5441,886,024Bills/installment notes7.917.67--1,130,508615,307500,0002,289,406--1,630,5082,904,713Convertible note10.00-----20,000,000---20,000,000-Lease liabilities-7.15---43,166-----43,166Trade and sundry creditors --------1,940,2275,479,6141,940,2275,479,614Total ﬁnancial liabilities (235,544)(1,886,024)(1,130,508)(658,473)(20,500,000)(2,289,406)(1,940,227)(5,479,614)(23,806,279)(10,313,517)Net ﬁnancial assets 7,060,5801,517,132(830,508)(658,473)(20,500,000)(2,289,406)7,057,0405,495,338(7,212,888)4,064,591Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT4919. FINANCIAL INSTRUMENTS (continued)Weighted averageInterest ratesFloatingInterest rateFixed Interest maturingin 1 year or lessFixed Interest maturingIn over 1 to 5 yearsNon interest bearingTotal$$$$$200720062007200620072006200720062007200620072006Financial assets Cash 4.944.557,296,1243,403,156300,000-----7,596,1243,403,156 Receivables --------8,997,26710,974,9528,997,26710,974,952 Total ﬁnancial assets 7,296,1243,403,156300,000---8,997,26710,974,95216,593,39114,378,108Financial liabilities Bank loan8.258.25235,5441,886,024-----235,5441,886,024Bills/installment notes7.917.67--1,130,508615,307500,0002,289,406--1,630,5082,904,713Convertible note10.00-----20,000,000---20,000,000-Lease liabilities-7.15---43,166-----43,166Trade and sundry creditors --------1,940,2275,479,6141,940,2275,479,614Total ﬁnancial liabilities (235,544)(1,886,024)(1,130,508)(658,473)(20,500,000)(2,289,406)(1,940,227)(5,479,614)(23,806,279)(10,313,517)Net ﬁnancial assets 7,060,5801,517,132(830,508)(658,473)(20,500,000)(2,289,406)7,057,0405,495,338(7,212,888)4,064,591Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 20075019. FINANCIAL INSTRUMENTS (continued)Reconciliation of net ﬁnancial assets to net assets20072006$$ Net ﬁnancial assets above (7,212,888)4,064,591 Non-ﬁnancial assets and liabilities Work in process758,829700,456Property, plant and equipment 2,062,9804,266,725Intangibles60,634,31439,698,304Deferred tax assets171,787470,343Provision for employee entitlements (619,821)(875,244)Deferred tax liabilities(361,733)(281,170) Net assets per the balance sheet55,433,46848,044,005(b) Net fair values of ﬁnancial assets and liabilities (i) The net fair values of cash and cash equivalents and non-interest bearing monetary ﬁnancial assets and liabilities approximate their carrying values as disclosed in the statement of ﬁnancial position and the notes to the ﬁnancial statements. (ii) The carrying amounts and estimated net fair values of equity investments approximate their carrying values as disclosed in the statement of ﬁnancial position and the notes to the ﬁnancial statements. (c) Credit risk exposure The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised ﬁnancial assets is the carrying amount, net of any provision for doubtful debts, as disclosed in the statement of ﬁnancial position and notes to the ﬁnancial statements.Receivables due from major debtors are not normally secured by collateral, however the credit worthiness of debtors is monitored.ConsolidatedParent entity200720062007200620. COMMITMENTS FOR EXPENDITURE$$$$Operating lease commitments payableNot later than one year805,437844,305--Later than one year but not later than ﬁve years426,705622,947--Later than ﬁve years---1,232,1421,467,253--Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT51Consolidated entity2007Consolidated entity200621. EARNINGS PER SHAREContinuing operationsEarning used in the calculation of basic and dilutive from continuing operations(9,040,013)378,252Basic earnings per share (cents per share) from continuing operations(25.30)1.26(i)Diluted earnings per share (cents per share) from continuing operations(25.30)(ii)1.13(i)Discontinuing operationsEarning used in the calculation of basic and dilutive from discontinuing operations(1,766,503)214,056Basic earnings per share (cents per share) from continuing operations(4.94)0.71(i)Diluted earnings per share (cents per share) from continuing operations(4.94)(ii)0.64(i)Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share:35,729,15129,942,755(i)Weighted average number of options outstanding1,568,6013,447,718(i)Weighted average number of ordinary shares outstanding used in calculation of dilutive earnings per share 37,297,75233,390,473(i)(i) The 2006 comparative ﬁgures have been adjusted to take effects of the share consolidation that approved at the Company general meeting held on the 26 March 2007.(ii) Diluted earnings per share is not reﬂected as the result is anti-dilutive in nature.22. EVENTS SUBSEQUENT TO REPORTING DATEOn the 26 September 2007 and 28 September 2007 the Company announced that DKR Oasis SoundShore Oasis Holding Fund Limited has converted $1,500,000 of its $20 million convertible Bond holding into 508,473 fully paid ordinary shares.No other matter or circumstance has arisen since the end of the ﬁnancial year which has not been dealt with in the ﬁnancial statements that has signiﬁcantly affected or may signiﬁcantly effect:the operations of the Company;• the results of those operations; or• the state of affairs of the Company.• Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200752ConsolidatedParent entity200720062007200623. AUDITOR’S REMUNERATION$$$$Auditors of the parent entity – taylor & co45,46745,20045,46745,200Other services from auditors of the parent entity----Other auditors ----Other services from other auditors89,633130,869--The auditors received no other fees or beneﬁts.24. SHARE-BASED PAYMENTSThe following share-based payment arrangements existed at 30 June 2007:On 31 December 2004, 2,000,000 pre consolidation share options were granted to directors or their associates as approved by shareholders at the general meeting held on 14 July 2005. The ﬁrst 1,000,000 (200,000 consolidated) of these options vested on 31 December 2004 and are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time after the vesting date until their expiry on 31 December 2006. The other 1,000,000 (200,000 consolidated) options vest on 31 December 2005 and are exercisable at $1.00 dollar ($5.00 dollars consolidated) per share option at any time after the vesting date until their expiry on 31 December 2007. The options hold no voting or rights to any dividend and are not transferable. At balance date the ﬁrst tranche lapsed and were cancelled without exercise, and at reporting date none of the vested options had been exercised.On 22 December 2006, 2,000,000 pre consolidation share options were granted to directors or their associates as approved by shareholders at the Annual General Meeting held 30 November 2006. The ﬁrst 1,000,000 (200,000 consolidated) of these options will vest on 22 December 2007 and are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time after the vesting date until their expiry on 22 December 2009. The other 1,000,000 (200,000 consolidated) options vest on 22 December 2008 and are exercisable at $1.00 dollar ($5.00 dollars consolidated) per share option at any time after the vesting date until their expiry on 22 December 2009. The options hold no voting or rights to any dividend and are not transferable. At reporting date, the options are yet to be vested and therefore unable to be exercised.On 29 January 2007, 3,000,000 pre consolidation share options were granted to David Feber on his appointment as TZ Group CEO by a way of two tranches. 1,500,000 options (300,000 consolidated) are exercisable at 60 cents ($3.00 dollars consolidated) and the balance of 1,500,000 options (300,000 consolidated) are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time prior to their expiry on 23 January 2010, half of both tranches vest 23 January 2008 and the balance of both half vest 23 July 2008. The options hold no voting or rights to any dividend and are not transferable. At reporting date, the options are yet to be vested and therefore unable to be exercised.On 29 January 2007, 3,000,000 pre consolidation share options were granted to the Company consultant in lieu of ﬁnal payment in relation to the convertible note issue and recent acquisition of the Intevia® Business Unit. The 3,000,000 options (600,000 consolidated) are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time prior to their expiry on 24 January 2010. The options hold no voting or rights to any dividend and are not transferable. At reporting date, none of the vested options had been exercised.The following share-based payment arrangements were in existence during the period:Options seriesNumber*Grant dateExpiry dateExercise price*Fair value at grant date* $(cents)(1) Issued 31 December 2004200,00014/07/0531/12/075.0015.0(2) Issued 22 December 2006200,00030/11/0622/12/093.7582.6(3) Issued 22 December 2006200,00030/11/0622/12/095.0063.5(4) Issued 23 January 2007300,00029/01/0723/01/103.00109.1(5) Issued 24 January 2007300,00029/01/0723/01/103.7592.1(6) Issued 24 January 2007600,00029/01/0724/01/103.7592.1* The ﬁgures have been adjusted to take effects of the share consolidation that approved at the Company general meeting held 26 March 2007.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007FINANCIALS | 2007 ANNUAL REPORT53The weighted average fair value of the share options granted during the ﬁnancial year is 84 cents (2006: Nil). Options were priced using a Black Scholes option pricing model. Expected volatility is based on the historical share price volatility. Inputs into the modelOptions series (1)Options series (2)Options series (3)Options series (4)Options series (5)OptionsSeries (6)Grant date share price *$2.10$2.45$2.45$2.60$2.60$2.60Exercise price per option*$5.00 $3.75 $5.00 $3.00 $3.75 $3.75 Expected volatility38.75%62%62%62%62%62%Option life36 months36 months36 months36 months36 months36 monthsDividend yield0%0%0%0%0%0%Risk-free interest rate5.8%6.0%6.0%6.0%6.0%6.0%* The original ﬁgures have been adjusted to take effects of the share consolidation that approved at the Company’s general meeting held on the 26 March 2007.The following reconciles the outstanding share options granted at the beginning and end of the ﬁnancial year:20072006Number of options*Weighted average exercise price*$Number of options*Weighted average exercise price*$Balance at beginning of ﬁnancial year400,0004.37400,0004.37Granted during the ﬁnancial year1,600,0004.00--lapsed during the ﬁnancial year(200,000)(3.75)--Exercised during the ﬁnancial year (i)----Balance at end of the ﬁnancial year 1,800,0004.22400,0004.37Exercisable at end of the ﬁnancial year800,0004.58400,0004.37* The ﬁgures have been adjusted to take effects of the share consolidation that approved at the Company’s general meeting held 26 March 2007.(i) Exercised during the yearNo share options granted as remuneration were exercised during the ﬁnancial year:Recognition of share based payments expenseThe total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 2 ‘Share-based Payment’. The Standard requires the value of the options to be determined at grant date and to be recognised as an expense in the income statement over the vesting period. Consequently a share option expense of $856,854 (2006: 10,337) was recognised and expensed for the year, $304,254 (2006: $10,337) directly in the income statement while the balance $552,600 (2006: Nil) was capitalised to the balance sheet on the Business Unit acquired during the year as ﬁnal payment and part consideration to external adviser.Notes to the Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 JUNE 200754The directors of the TZ Limited declare that:The ﬁnancial statements and associated notes of the Company and of the economic entity for the ﬁnancial year ended • 30 June 2007:are in accordance with the Corporations Act 2001;• comply with Accounting Standards and the Corporations Act 2001; and• give a true and fair view of the Company’s and consolidated entity’s ﬁnancial position as at 30 June 2007 and the • performance for the year ended on that date;the Chief Executive Ofﬁcer and Chief Finance Ofﬁcer have each declared that:• the ﬁnancial records of the Company for the ﬁnancial year have been properly maintained in accordance with section • 286 of the Corporations Act 2001;the ﬁnancial statements and notes for the ﬁnancial year comply with the Accounting Standards; and• the ﬁnancial statements and notes for the ﬁnancial year give a true and fair view.• In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and • when they become due and payable.This declaration is made in accordance with a resolution of the Board of Directors. J. FalconerDirectorDated this 28th day of September 2007Sydney, AustraliaDirectors’ DeclarationFINANCIALS | 2007 ANNUAL REPORT55Report on the Financial ReportWe have audited the accompanying ﬁnancial report of TZ Limited, which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash ﬂow statement for the year ended on that date, a summary of signiﬁcant accounting policies and other explanatory notes.The Responsibility of the Directors for the Financial ReportThe Directors are responsible for the preparation and fair presentation of the ﬁnancial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations). This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the ﬁnancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on the ﬁnancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the ﬁnancial report is free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁnancial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the ﬁnancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the ﬁnancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used with the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the ﬁnancial report.We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our audit opinion.Auditor’s OpinionIn our opinion, the ﬁnancial report presents fairly, in all material respects, (or “gives a true and fair view of“) the ﬁnancial position of TZ Limited as of 30 June 2007, and of its ﬁnancial performance and its cash ﬂows for the year then ended in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations). Taylor & Co.Stephen Taylor28th September 2007Sydney, AustraliaIndependent Audit Report to the Members of TZ Limited56The Board has formally reviewed the ASX Corporate Governance Council paper entitled “Principles of Good Corporate Governance and Best Practice Recommendations” which was published in March 2003. The Company is a small company and accordingly the directors consider that many of the corporate governance guidelines intended to apply to larger companies are not practical.The Company’s position on those recommendations is set out below;Principle 1: Lay solid foundations for management and oversightRole of the BoardThe Board’s primary responsibility is to oversee the Company’s business activities and management for the beneﬁt of shareholders which it accomplishes by:establishing corporate governance, and ethical, business standards;• setting objectives, goals and strategic direction with a view to maximise shareholder value;• approving and monitoring budgets and major investments;• ensuring adequate internal controls exist and are appropriately monitored;• ensuring signiﬁcant business risks are identiﬁed and appropriately managed;• appointing the CEO and monitoring the CEO’s performance;• The Board has delegated responsibilities and authorities to management to enable management to conduct the Company’s day-to-day activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits, require Board approval.Apart from the statements on responsibility the Company has not formalised the functions reserved to the Board and those delegated to management for the reasons noted above.Principle 2: Structure the board to add valueThe composition of this Board is determined using the following principles:The Chairman should be a non-executive director.• The Board should comprise a majority of non-executive directors.• Directors appointed by the Board are subject to election by shareholders at the following Annual General Meeting and • thereafter directors are subject to re-election at least every three years.The names of the Directors in ofﬁce at the date of this Report, the date they were appointed, their status as non-executive, executive or independent Directors, whether they are retiring by rotation and seeking re-election by shareholders at the 2007 Annual General Meeting, are set out in the table below:DirectorAppointedNon-ExecutiveIndependentRetiring at 2007 AGMSeeking re-election at 2007 AGMJohn Falconer6 February 2004YesNoNoNoMichael Otten7 July 2006YesNoNoYesAndrew Sigalla29 January 2007NoNoNoNoThe main areas of divergence with recommended principles are:The Chairman is not independent, however he is separate from the Chief Executive.• The Company does not have a formally constituted Audit Committee, Board Nominations Committee or Remuneration • Committee.The majority of Directors are not independent.• Each Director of the Company has the right to seek independent professional advice at the expense of the Company.Principle 3: Promote ethical and responsible decisions-makingThe Company does not have a formal code of conduct reﬂecting the Company’s small size and the close interaction of the small number of individuals throughout the organisation. However, the Directors are aware of their legal responsibilities and adhere to the following policy.Corporate GovernanceFINANCIALS | 2007 ANNUAL REPORT57The directors will not deal in Company shares:Except between three and 30 days after either the release of the Company’s half year and annual results to the • Australian Stock Exchange, the Annual General Meeting or any major announcement.Whilst in possession of price sensitive information.• In accordance with the Corporations Act 2001 and the Listing Rules of the Australian Stock Exchange, Directors advise the ASX of any transactions conducted by them in shares in the Company.Principle 4: Safeguard integrity in ﬁnancial reportingThe Company Secretary is responsible for producing the ﬁnancial results and has stated in writing to the other members of the Board that the Company’s consolidated year end ﬁnancial statements present a true and fair view, in all material respects, and are in accordance with relevant accounting standards.The Company and its Directors are aware of continuous disclosure requirements under the Listing Rules and Corporations Act and operate in an environment where strong emphasis is placed on full and appropriate disclosure. The Company does not have formal written policies regarding disclosure, but uses strong informal systems underpinned by experienced individuals.Principle 6: Respects the rights of shareholdersThe Company does not have a communications strategy to promote effective communication with shareholders, as it believes this is excessive for small companies. The Company maintains a website which is used in conjunction with timely announcements to the ASX to ensure shareholders are kept fully informed.The Company also aims to ensure that the shareholders are informed of all major developments through:Despatch of the annual and half yearly ﬁnancial reports.• Despatch of all notices of meetings of shareholders.• Submitting to a vote of shareholders proposed major changes in the consolidated entity which may impact on • share ownership rights.The Board encourages full participation of shareholders at the Annual General Meeting to ensure high level of accountability and identiﬁcation of the consolidated entity’s strategic goals. Important issues are presented to the shareholders as single resolutions.The Company requests the external auditor to attend the General Meeting.Principle 7: Recognise and manage riskThe Company is a small company and does not believe that there is signiﬁcant need for formal policies on risk oversights and management. However, the board considers risk exposure and management as a standing agenda item at board meetings.Risk management arrangements are the responsibility of the Board of Directors.Principle 8: Encourage enhanced performanceThe Company does not have a Remuneration Committee. There has been no formal performance evaluation of the board during the past ﬁnancial year.Principle 9: Remunerate fairly and responsiblyThere are no formal remuneration policies maintained by the Company. Details of the Company’s policy for determining the nature and amount of emoluments of board members and senior executives of the Company are contained in the Directors’ Report.In accordance with Corporations Act requirements, the Company discloses the fees or salaries paid to all Directors, and Executive Ofﬁcers of the Company.Principle 10: Recognise the legitimate interests of stakeholdersThe Company does not have a formal Code of Conduct to guide compliance with legal and other obligations. This reﬂects the Company’s size which makes its legal compliance a less onerous task than with larger companies.The Board of Directors continues to review the situation to determine the most appropriate and effective operational procedures.Corporate Governance58Statement of Quoted Securities as at 28 September 2007There are 2,255 shareholders holding a total of 38,894,767 ordinary fully paid shares. (cid:115)(cid:0)The twenty largest shareholders between them hold 55.70% of the total shares on issue.(cid:115)(cid:0)Voting rights are that on a show of hands each member present in person or by proxy or attorney or representative shall have (cid:115)(cid:0)one vote and upon a poll every member so present shall have one vote for every fully paid share held and for each partly paid share held shall have a fraction of a vote pro-rata to the amount paid up on each partly paid share relative to its issue price.Distribution of Quoted Shares and Options as at 28 September 2007SharesRangeNumber of holders1 - 1,0008381,001 - 5,0008845,001 - 10,00020610,001 - 100,000279100,001 - and over48Total holders2,255 There were 69 shareholders whose total holding had a market value of less than $500 at 28 September 2007.Substantial Shareholdings as at 28 September 2007The following shareholders have notiﬁed the Company that, pursuant to the provisions of section 671B of the Corporations Act 2001, they are substantial shareholders.SubstantialshareholderTotal relevantinterest (ordinary shares)% of total voting rightsat 28 September 2007Acument Global Technologies, Inc.3,872,4819.96Directors’ ShareholdingsAs at 28 September 2007, directors of the Company held a relevant interest in the following securities on issue by the Company. DirectorOrdinary sharesUnquoted optionsJ. Falconer395,273200,000M. Otten38,640200,000A. Sigalla1,266,450NilOn-Market Buy-BacksThere is no on-market buy back currently in place.Stock Exchange InformationFINANCIALS | 2007 ANNUAL REPORT59Top Twenty Holders of Ordinary Shares at 28 September 2007Shareholder nameNumber of shares % of totalANZ Nominees Limited 8,023,92220.63Acument Global Technologies, Inc.3,872,4819.96Merrill Lynch (Australia) Nominees Pty Limited 1,724,5044.43National Nominees Limited1,411,2413.63HSBC Custody Nominees (Australia) Limited1,088,6052.80Merrill Lynch (Australia) Nominees Pty Limited741,3151.91Citicorp Nominees Pty Limited738,8021.90Morwellham Investments Pty Limited549,692 1.41Moon Corporation Pty Ltd497,8401.28Forbar Custodians Limited 413,0351.06HSBC Custody Nominees (Australia) Limited-GSI ECSA396,1791.02Capital World Holdings Limited336,2280.86Proﬁt Pearl Holdings LTD312,9830.80Lippo securities Nominees (BVI) LTD270,0000.69Moggs Creek Pty Ltd 250,0000.64Mr. Arthur Mo222,400 0.57HSBC Custody Nominees (Australia) Limited - GSCO ECA222,1170.57JFT Nominees Pty Ltd203,2420.52Davambros Pty Ltd200,0000.51Karreman Management services Pty Ltd200,0000.51Total held by top twenty holders of ordinary shares21,674,58655.70Note the above list does not identify related party holdings. Readers should have regards to substantial shareholders notices and directors declarations.Voting RightsAll shares have equal voting rights.Stock Exchange Information60TZ LimitedABN 26 073 979 272DIRECTORSJ. FalconerA. SigallaM. OttenCOMPANY SECRETARYJ. FalconerREGISTERED OFFICELevel 12, 37 Bligh StreetSydney NSW 2000Telephone +61 2 8233 9229Facsimile +61 2 8211 5299WEBSITEwww.tzlimited.comEMAILinfo@tzlimited.comBANKERSNational Australia Bank LimitedLevel 18, 255 George StreetSydney NSW 2000AUDITORSTaylor & CoChartered AccountantsLevel 11179 Elizabeth StreetSydney NSW 2000SOLICITORSKemp Strang Lawyers55 Hunter StreetSydney NSW 2000SHARE REGISTRYComputershare Investor Services Pty Limited452 Johnston StreetAbbotsford VIC 3067Telephone +61 3 9415 5000Facsimile +61 3 9473 2500STOCK EXCHANGEAustralian Securities Exchange Code: TZLDirectory©2007 TZ LimitedIntevia®, FutureWall™, On Board Technology™ and TZ On Board™ are trademarks of Telezygology, Inc.Sydney (Registered Ofﬁce)Level 12, 37 Bligh StreetSydney NSW 2000 AustraliaChicago (Operational Headquarters)520 W. Erie StreetSuite 210Chicago, IL 60610 United Stateswww.tzlimited.com

Continue reading text version or see original annual report in PDF format above