allco equity partners - oceania capital · 2016. 5. 16. · allco equity partners limited annual...

annual report 2007

Allco Equity Partners

www.allcoequitypartners.com.au

2 Chairman’s review3 Key FinanCial results4 Board oF direCtors6 managing direCtor’s review7 the manager8 review oF investments12 Corporate governanCe statement20 direCtors’ report26 remuneration report30 lead auditor’s independenCe deClaration31 FinanCial statements65 direCtors’ deClaration66 independent auditor’s report67 shareholder inFormationiBC Corporate direCtory

allCo equity partners limited aBn 52 111 554 360

1allCo equity partners limited annual report 2007

Allco Equity PArtnErs limitEd (AEP) is An invEstmEnt comPAny which ProvidEs its shArEholdErs with thE Ability to invEst in PrivAtE Equity trAnsActions And Public mArkEt oPPortunitiEs through An AsX-listEd sEcurity. AEP will mAkE PrivAtE Equity invEstmEnts in mEdium to lArgE sizEd lEvErAgEd buyouts And will Also tAkE influEntiAl Positions in Public comPAniEs whErE it will AgitAtE for chAngE to bring About imProvEd PErformAncE And vAluE EnhAncEmEnt.

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dear shareholders,

on behalf of my fellow directors i present to you the 2007 annual report for allco equity partners limited (aep).

yEAr in rEviEw And outlookover the past year, aep has continued with its business strategy as a principal investor and has continued to pursue both private equity and opportunistic public markets transactions.

during the year the Company has:

> sold its 17.3% stake in veda advantage limited. the sale generated a cumulative profit before tax and fees in excess of $46 million over a 2 year investment period

> actively managed its investments in signature security group and trans tasman Collections holdings to enhance the value of each business over the expected investment horizon

> participated in the consortium that sought to acquire qantas airways limited

> considered numerous other investment opportunities in the private equity and public market space. a strategic position acquired whilst assessing opportunities has been realised and generated profits for the Company.

> preserved capital and maintained investment discipline when assessing prospective transactions against a very competitive m&a environment and aggressive vendor expectations.

the results of the activities undertaken have allowed the directors to declare a final dividend for the financial year of 37 cents per share.

the directors approved participation in the qantas transaction as we believed it to be a good opportunity that would benefit our shareholders with the characteristics of qantas (leading market position, strong cash flow and exciting growth prospects) meeting aep’s investment criteria. we were disappointed when the transaction did not complete. it is the nature of our business that we will not be successful with every offer that is made or even that we will proceed to make an offer for every opportunity that is considered.

as i mentioned in last year’s report, the Board determined that the risk management practice of having no more than 30 per cent of the Company’s equity funds invested in any one transaction would be reviewed. the Board subsequently determined to remove this investment cap. the quantum of equity funds invested in any transaction is monitored so that the level of exposure is appropriate to the Company’s circumstances. qantas is an example of the size of transactions that we are able to consider participating in now that this investment cap has been removed. we expect to continue to see sizeable transactions arise and aep is well positioned to participate in those transactions that meet our investment criteria.

rElAtionshiP with thE mAnAgErin July 2007, allco Finance group (aFg) acquired complete ownership of allco equity partners management pty limited, the manager of aep. the operation of the management agreement is not affected by this change of ownership.

aep will continue with its current business strategy and expects the change of ownership of the manager will enable a closer relationship between aFg and the Company. we also expect that the Company will see enhanced deal flow through aFg’s origination capabilities and opportunities to pursue joint investment activities with aFg.

as part of the transaction to acquire full ownership of the manager, aFg is also substantially increasing its ownership in the Company. this includes, subject to aep shareholder approval, entering into put and call options with lJCB investment group over approximately 15.6 per cent of the issued capital of aep. shareholder approval will be sought at the annual general meeting on 26 september 2007. Full details are contained in the accompanying notice of meeting and explanatory information.

boArd And mAnAgEmEnt chAngEsa number of Board and management changes were recently announced by the Company.

the Company has appointed michael Brogan, robert moran and ian tsicalas as directors. each brings an appropriate mix of knowledge, experience and skills to the Board. details of each of the new directors are contained in the directors’ report.

geoff morgan has retired as a director. geoff was a strong contributor to the Board since listing and brought an insightful approach to our investment process. on behalf of the directors, i thank geoff for his commitment to aep.

peter yates has stood down from his responsibilities as managing director of aep and from his executive role with the manager. peter will remain as a non-executive director of the Company. peter has demonstrated an ability to identify undervalued opportunities that meet our investment criteria and we are pleased that he will continue to bring his strategic insight to the Board.

marcus derwin has been appointed as managing director. marcus has been a non-executive director of aep since listing. in July, marcus joined allco Finance group as head of private equity and has extensive experience in the principal investment area.

AnnuAl gEnErAl mEEtingthe annual general meeting of shareholders will be held on wednesday 26 september 2007 at the shangri-la hotel in sydney. a notice of meeting accompanies this annual report. i encourage shareholders to attend and look forward to meeting you at that time.

thank you for your continuing support and investment in the Company.

dAvid coEChairman

Chairman’s review

allCo equity partners limited annual report 2007 3

Year to year to 30 June 2007 30 June 2006

revenue from ordinary activities 1 $98.7m $64.2m

other income and profits 47.3m 1.4m

Total Income $146.0m $65.6m

profit before financing costs, tax, depreciation and amortisation 1 $82.2m $41.8m

profit before tax 1 $56.3m $26.8m

Basic and diluted earnings per share 1 43.1 cents 25.7 cents

net assets per share 2 $5.75 $3.65

dividends paid or proposed per share

– interim 3.0 cents —

– Final 37.0 cents 6.0 cents

Key dates

Final dividend – record date 29 august 2007

Final dividend – payment date 17 september 2007

annual general meeting 26 september 2007

1) includes an interest income impact of $6.4 million (2006 - $19.3 million) on the income statement in respect of the transition to aiFrs arising from restating to fair value amounts due from shareholders on partly paid shares which has now ceased.

2) 2007 - shares fully paid, 2006 - shares partly paid to a$4.00.

KeY FinanCial results

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board oF direCtors

david Coe is executive Chairman of allco Finance group limited. prior to joining the allco group, david was a partner at mallesons stephen Jacques, specialising in international finance and leasing. david is chairman of both the investment Committee and the remuneration and nomination Committee.

marcus derwin was appointed as managing director in July 2007 and is head of private equity for allco Finance group. prior to joining the allco group, marcus was head of the direct investment division of amp Capital investors. he has expertise in restructuring companies which he has done since 1989 in both advisory and interim management roles across a broad range of sectors. marcus is a member of the audit, Finance and risk Committee and the investment Committee.

michael is presently a non-executive director of Firstrand Banking group. michael has extensive domestic and international experience in the areas of strategic business development, corporate governance, audit, compliance and risk management. michael is chairman of the audit, Finance and risk Committee and a member of the investment Committee.

robert moran is an executive of allco Finance group and is currently its head of Corporate Finance. over the past eight years he has been closely involved in the principal investing activities of allco Finance group and has led acquisitions, mergers, initial public offerings and disposals of business on behalf of the allco group and funds that it manages. robert is a member of the investment Committee.

DavID CoeChairman

MarCus DerwInmanaging direCtor

MIChael Brogan roBerT Moran


ian tsicalas has significant operational experience having successfully managed both public and private companies. ian was managing director of australian discount retail pty limited until may 2007 and has previously been managing director of several public companies. ian is a member of the audit, Finance and risk Committee, the investment Committee and the remuneration and nomination Committee.

greg is Chief executive officer and a director of lJCB investment group. prior to this role, greg worked in mergers and acquisitions with macquarie Bank’s corporate finance group where he specialised in private and public acquisitions and equity capital raisings. greg is a member of the investment Committee.

peter was Chief executive officer of the manager and managing director of the Company from late 2004 until July 2007. peter has had a long career in investment banking where he specialised in public company mergers and acquisitions, as well as large scale structured financing. peter was Chief executive officer and managing director of publishing and Broadcasting limited for 3 ½ years until 2004. peter is a member of the investment Committee.

Ian TsICalas gregory woolley PeTer yaTes

Further details on the experience and qualifications of each director are included in the directors’ report.

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i am pleased to present my first report as managing director, having been appointed on 25 July 2007.

during the past financial year, the Company has actively managed the investment portfolio and considered numerous opportunities. this has resulted in a net profit before tax of $56.3 million for the year ended 30 June 2007.

this result reflects:

> $41.2 million in combined dividend income and disposal profit before tax and fees from the investment in veda advantage limited;

> dividends and other income before tax and fees of $15.2 million earned from strategic shareholding interests accumulated and subsequently disposed of in the process of assessing potential opportunities;

> a profit contribution before depreciation, amortisation, tax and financing costs from signature security group of $22.3 million generated from total revenue of $64.4 million;

> interest income of $16.3 million from funds placed on deposit;

> an equity accounted profit contribution of $0.6 million from trans tasman Collections; and

> a $6.4 million interest income impact arising from the transition to aiFrs. this impact arose as a required fair value adjustment to the carrying amount that was due from shareholders on partly paid shares was unwound. this is now finalised.

these results are offset by:

> transaction and incentive fees paid or payable to the manager of $7.4 million. Fees are only paid to the manager on completion of an acquisition or on realisation of an investment, subject to performance criteria being met; and

> other due diligence and transaction costs of $11.9 million. it is the nature of our activities that costs will necessarily be incurred in assessing and pursing opportunities.

our current investments in signature security group and trans tasman Collections are performing largely in line with expectations. we have been actively involved identifying and in implementing strategies that should enhance the value of each business moving forward. Further details on each investment follow this report.

the outcome of the veda advantage transaction is an example of how the manager is able to actively identify opportunities and then create value by having appropriate capital management and business strategies implemented by the investee entity.

the assets of the group currently reflect cash holdings and the investments in signature security group and trans tasman Collections. at 30 June 2007 the net assets of the Company were $5.75 per share which reflects:

$A PEr shArE

Cash and cash equivalents 3.56

receivable from sale of shares in veda advantage 1.41

trans tasman Collections equity accounted investment and receivables 0.39

signature security group consolidated net assets before debt funding 1.36

signature security group net debt funding, non-recourse to aep (0.83)

other aep net assets (liabilities) (0.02)

tax liabilities (0.12)

net assets per share 5.75

looking to the future, i am excited by the Board and ownership changes and enhanced alignment of interest, through aFg’s long term commitment to the private equity and principal investing space.

a number of opportunities are currently being considered by the manager. Consistent with being a corporate activist, the Company has and may continue to acquire strategic holdings in listed entities that are being assessed. this position will either form the basis for a larger investment or be divested if the contemplated actions do not proceed, there is a credible divestment proposition or a favorable market event. such activities generated a profit before tax and fees of $15.2 million in the past financial year.

the investment philosophy of the Company remains to invest in private equity transactions and activist or opportunistic public market opportunities. with the manager now being wholly owned by allco Finance group, we expect there to be closer alignment of interests between the two companies. the Company expects to benefit from the origination capabilities of aFg and to possibly participate in joint investment opportunities.

mArcus dErwinmanaging director

managing direCtor’s review


the Company has entered into an exclusive 25 year management agreement with the allco equity partners management pty limited (aepm or the manager). under the terms of the agreement, the manager has been appointed to source and analyse opportunities for the Company, present investment proposals and implement and manage those investments the Board elects to pursue. From 31 July 2007, the manager is wholly owned by allco Finance group limited.

Allco finAncE grouPallco Finance group is a fully integrated global financial services business specialising in structured asset finance, funds management and debt and equity funding. allco Finance group commenced operations in australia as a private structured finance business in 1979. since then it has evolved significantly from its origins as a leveraged lease packager and underwriter and is now a diversified finance group with a global network of operations. allco Finance group is listed on the australian securities exchange (asX: aFg) and has a network of offices in australia, uK/europe, asia pacific and north america.

allco Finance group’s executive Chairman, david Coe, is Chairman of aep.

kEy tErms of thE mAnAgEmEnt AgrEEmEntthe terms of the management agreement require the manager to, among other tasks, work together with the Board to develop and review the Company’s investment strategy, prepare and present investment proposals to the Company, assist the Company to implement investments and manage those investments that the Company chooses to make.

under the terms of the management agreement, the manager has access to the resources, systems and experience of allco Finance group. where appropriate, there is a full and free exchange of information between the manager and the various divisions of the allco Finance group, with a view to ensuring that the manager is able to take advantage of the knowledge and structures within allco in optimally structuring and managing the transactions it pursues on behalf of the Company. allco Finance group provides administrative support functions to the Company on a cost recovery basis.

the Board, through the investment Committee, considers investment proposals presented to it by the manager and monitors the performance of the manager with respect to its role in managing the investments.

the manager is obliged to offer to the Company any investment opportunity it sources, that is within the investment parameters of aep, on a first right of refusal basis.

under the terms of the management agreement, if the Company elects to pursue an investment opportunity with non-strategic equity partners it must first offer the co-investment opportunity to allco Finance group on terms no less favourable than the terms available to the Company.

the Company may also allow executives of the manager to co-invest up to an aggregate maximum of 1% of the Company’s total investment in any transaction.

trAnsAction sourcingthe manager’s executives have seen, and expect to continue to see, solid transaction flow. in many instances with both public and private vendors, asset sales are not publicly announced until the transaction is concluded. this means that having the right contacts and reputations are critical to the Company’s ability to position itself to be considered as a potential purchaser and be approached to participate in confidential sale processes.

examples of transaction sources include:

> sale of non-core divisions of australian or international companies;

> Break-up of diversified companies;

> publicly listed companies which may be viewed as undervalued by the market; or

> privately owned companies seeking to raise new equity or where the current ownership wants to exit the business.

as a result of aepm now being wholly owned by allco Finance group, the interests of the Company, the manager and allco Finance group are expected to become closely aligned and enable a closer relationship between the companies. aep expects this closer relationship will see enhanced deal flow through allco Finance group’s origination capabilities, including pursuing co-investment opportunities.

the manager

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review oF investments

signature seCuritY group

1signature seCuritY group (ssg) is a leading eleCtroniC seCuritY serviCes business in australia and new Zealand. ssg’s serviCes inClude the installation, monitoring, maintenanCe, sale and leasing oF eleCtroniC seCuritY equipment to a wide range oF residential and CommerCial Customers.

the business plan for ssg at the time of acquisition involved:

> further acquisitions> accelerated growth in internally generated sales business> accelerated growth in the indirect or “dealer” channel> control of customer attrition

over the past 18 months, aep has worked closely with the ssg management team to implement these initiatives. achievements during this time include:

> two bolt on acquisitions achieved with a number of other opportunities currently under negotiation> rollout of a renewed authorised dealer programme> customer care and customer save initiatives introduced to control the rate of customer attrition

a number of these initiatives have been slower to deliver benefits than was originally expected although the current indications are positive.

aep has made a further equity contribution of $15 million to assist the business with its acquisition and growth strategies. this equity contribution was provided for in the original investment decision for the ssg acquisition.

acquired January 2006

ownership 96%

equity cost $55.0 million

enterprise value at acquisition $138.0 million

accounting treatment Consolidated

finAnciAl rEsults yEAr to 30 JunE 2007 $m siX months to 30 JunE 2006 $m

revenue 64.4 30.6

eBitda 22.3 12.8

eBit 8.4 4.4

Cash flow from operating and investing activities 10.0 8.2

net assets at 30 June 54.8 39.6


trans tasman ColleCtions (ttC) was Formed in June 2006 bY aep and db Capital partners 1. ttC is a holding vehiCle For businesses in reCeivables management and integrated debt reCoverY serviCes in australia and new Zealand.

since formation, ttC has acquired:

> Baycorp Collection services, a leading debt collection business in australia and new Zealand

> portfolio management group, a private company in which allco Finance group and funds managed by dB Capital partners 1 were investors

> a 10.3% interest in Collection house limited, an asX listed entity operating in the receivables management sector

ttC provides its services either on a fee contingency basis or through a growing trend to acquire ledgers from the debt originators. ttC acquires debt ledgers mainly from companies in the financial services or telecommunications sectors. over the past 12 months, ttC has successfully tendered for the acquisition of new debt ledgers and is well positioned to see this trend continue.

ttC is now one of the leading debt collection businesses in australia and new Zealand with a broad customer base and a diverse service offering to the private and public sectors. trading as Baycorp, the company’s vision is to be the debt service “company of choice” in australia and new Zealand.

Formed June 2006

equity held 50%

equity cost and shareholder loan $37.6 million

enterprise value of BCs and pmg acquisitions $112.0 million

accounting treatment equity accounted

finAnciAl rEsults yEAr to 30 JunE 2007 2 $m

gross revenue and receipts from pdls 82.5

pdl amortisation (24.4)

statutory revenue 58.1

eBitda 38.0

eBit 12.7

Cash flow from operations before purchase of debt ledgers 31.5

net assets at 30 June 68.0

1) funds are now managed by propel Capital which comprises former executives of dB Capital partners2) 100% basis, unaudited. First year of operations

trans tasman ColleCtions

2

10

in august 2005, aep aCquired a 17.3% interest in veda advantage limited (“veda”), and CommenCed a proportional taKeover For 50% oF the remaining issued shares oF veda.

aep announced a strategy for veda that included:

> business restructuring, including separating the credit reference and debt collection businesses> implementation of a capital management program> board representation and refreshment> simplification of the veda international businesses> operating cost reduction

the transaction closed with aep retaining its 17.3% shareholding and holding one position on the veda Board. subsequently, veda undertook a number of the initiatives proposed by aep including:

> selling its debt collection business, Baycorp Collection services, to trans tasman Collections> making two capital returns to shareholders totalling 85 cents per share> rationalising its international businesses> further board changes

in June 2007, veda was acquired by a private equity consortium for a total price of $3.61 per share. the sale settled in July 2007. aep realised a cumulative profit before tax and fees in excess of $46 million over approximately a 2 year investment period. this represented an ungeared internal rate of return before management fees of approximately 19.8%.

acquired august 2005

sold June 2007

Cost of acquisition $137.4 million

Capital returns received $ 33.0 million

net cost $104.4 million

Cumulative profit over investment period before tax and fees $46.7 million

internal rate of return (ungeared and before fees) 19.8%

review oF investments

veda advantage limited

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strategiC investment aCtivities

the Company may acquire securities in listed companies either as a stand alone investment, or as a stake sufficient to procure major changes to the management of a company, or where shares are acquired in contemplation of a takeover offer being made. the Company may also acquire strategic interests in listed entities whilst it is assessing potential opportunities. these holdings will be divested if the contemplated actions do not proceed, there is a credible divestment proposition or favourable market event.

this practice is consistent with the Company’s corporate activist philosophy.

during the past financial year, aep generated profits before fees and tax of $15.2 million from strategic interests accumulated and subsequently disposed of in the process of assessing potential opportunities.

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12

this statement outlines the main corporate governance practices in place throughout the financial year ended 30 June 2007 and any changes that have subsequently occurred. these practices comply with the asX Corporate governance Council’s “principles of Corporate governance and Best practice recommendations”, unless otherwise stated. the best practice recommendations are shown under each principle below. if the Company has not adopted a recommendation or has taken an alternative approach then the reasons for doing this are explained in the narrative.

summaries of the charters, codes and policies of the Company relating to corporate governance practices are available in the Corporate governance section of our website, www.allcoequitypartners.com.au

PrinciPlE 1

lay solid foundations for management and oversight

Recommendation:

> Formalise and disclose the functions reserved to the board and those delegated to management

the Board of directors is elected by the shareholders to represent all shareholders and has the primary responsibility for managing the Company’s business and affairs.

the duties and responsibilities of the Board and the matters and functions reserved for the Board are set out in the Board Charter and include:

> providing strategic direction, including developing and approving the corporate strategy of the Company and its performance objectives;

> monitoring the performance of the Company, including control and accountability processes and systems required to manage risks;

> appointing, evaluating and monitoring the performance of the manager, allco equity partners management pty limited;

> reviewing, evaluating and approving investment recommendations from the manager;

> implementing corporate governance practices appropriate to the Company to monitor compliance with key policies, laws and regulations;

> reporting to and communicating with shareholders;

> approving and monitoring capital allocations, capital management and acquisitions and divestments;

> monitoring financial performance, including approval of the annual and half-yearly financial reports;

> appointing and monitoring the performance of the Company secretary; and

> approval of third party costs to be incurred on transactions, including fees payable to the manager, if any.

management, with assistance from the manager, are responsible for managing the Company’s business and affairs subject to the matters and functions reserved to the Board as set out in the Board Charter.

PrinciPlE 2

structure the Board to add value

Recommendations:

A majority of the Board should be independent directors

> The chairperson should be an independent director

> The roles of the chairperson and chief executive officer should not be exercised by the same individual

> The Board should establish a nomination committee

Board Compositionthe Board is comprised of non-executive directors, both independent and non-independent.

the directors of the Company as at the date of this report are:

david Coe (Chairman)marcus derwin (managing director)michael Broganrobert moranian tsicalasgregory woolleypeter yates

Corporate governanCe statement


geoffrey morgan was a director of the Company from 17 november 2004 until 25 July 2007.

details of the current directors’ qualifications, experience and other responsibilities are contained in the directors’ report.

the Company aims to maintain a mix of directors from different backgrounds with complementary skills and experience. through the remuneration and nomination Committee an annual review is undertaken of the composition and structure of the Board and its Committees. the review aims to achieve the most appropriate mix of skills and experience so as to maximise the effectiveness of the Board and the Board Committees.

Director Independencethe Board has adopted a definition of director independence generally consistent with the asX Corporate governance Council’s “principles of Corporate governance and Best practice recommendations”.

the Board Charter states that an unrelated or independent director is one who is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act with a view to the best interests of aep and, in particular, is one who:

> is not a member of management

> is not an employee or director of the manager

> is not a substantial shareholder of aep or an officer of, or otherwise associated directly or indirectly with, a substantial shareholder of aep

> has not within the last three years been employed in an executive capacity by aep or another group member or been a director after ceasing to hold any such employment

> is not a principal of a professional adviser to aep or another group member

> is not a significant customer of aep or another group member other than as a director of aep

> is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of aep.

applying the criteria above, of the current directors, michael Brogan and ian tsicalas are independent directors. therefore, the recommendation that the Board comprise a majority of independent directors has not been followed.

each of david Coe (Chairman), marcus derwin, robert moran, greg woolley and peter yates are not independent either because of their connection to major investors in the Company or because of their current or past connection to allco equity partners management pty ltd (the manager) with whom the Company has entered into a 25 year management agreement.

however, the Board considers that the composition of the Board is appropriate given that the principal reasons that those persons are not independent is their interest or role in the manager or their role with a major investor. Both these reasons result in the directors having a strong alignment of interest with the Company.

Chairmanthe Chairman is responsible for leading the Board, ensuring that the Board activities are organised and efficiently conducted and for ensuring, together with the Company secretary, that directors are properly briefed for meetings.

For the reasons noted above, the Chairman is not an independent director.

Managing Directorthe Company has not appointed a Chief executive officer. From 25 July 2007 marcus derwin has been appointed the managing director of the Company and has been delegated many of the functions that would usually be performed by the Chief executive officer of the Company. prior to 25 July 2007, the duties of managing director had been undertaken by peter yates.

The Managerthe management of the business of the Company is conducted in association with the manager. the Board, in conjunction with the manager, has defined corporate objectives which the manager is responsible for meeting. the management relationship is governed by a management agreement, further details of which are included in note 30 to the financial statements. From 31 July 2007, the manager is wholly owned by the allco Finance group limited group.

the Company has agreed to appoint as directors three persons nominated by the manager from time to time, one of whom is to be the Chairman. From 25 July 2007, the manager representatives are david Coe, marcus derwin and robert moran. greg woolley and peter yates ceased being manager representatives from 25 July 2007.

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Board Committeesthe Board has established three committees to assist in the execution of its duties:

> audit, Finance and risk Committee (refer principle 4)

> investment Committee

> remuneration and nomination Committee (refer principle 9)

each Board Committee is governed by a Charter, approved by the Board, which sets out the duties and responsibilities of the Committee.

details of meetings held by each Committee during the past financial year and attendance at those meetings by Committee members are contained in the directors’ report.

the investment Committee comprises all of the directors. the current composition of the Committee is:

david Coe (Chairman)michael Broganmarcus derwinrobert moranian tsicalasgreg woolleypeter yates

geoffrey morgan was a member of the Committee until 25 July 2007. greg woolley was Chairman of the Committee until 15 august 2007.

the role of the investment Committee is to assist the Board on matters relating to the review and management of the Company’s investment policies, strategies, transactions and performance and to oversee management of the Company’s capital and financial resources.

the investment Committee is responsible for:

> overseeing the investment policies and strategies as agreed between the Board and the manager;

> delegating authority to the manager to execute individual transactions on behalf of the Company within policies and limits approved by the Committee and to approve investment transactions on behalf of the Company that exceed such delegated limits;

> reviewing investment transactions made on behalf of the Company and the performance of these transactions;

> reviewing the Company’s capital plan and providing guidance to the Board on significant financial policies and matters, including the Company’s dividend policy, share issuance or repurchase programmes, and the issuance of debt; and

> overseeing the treasury management function on behalf of the Company

the investment Committee meets on short notice. a quorum of 3 Committee members is required to be present for a meeting to proceed. the views of Committee members unable to attend a meeting are sought and conveyed to other Committee members.

directors have rights of access to the manager and its employees and are entitled to seek independent professional advice or other advice at the cost of the Company to assist them in performing their duties.

PrinciPlE 3

Promote ethical and responsible decision-making

Recommendations:

> Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to:

— The practices necessary to maintain confidence in the Company’s integrity

— The responsibility and accountability of individuals for reporting and investigating reports of unethical practices

> Disclose the policy concerning trading in company securities by directors, officers and employees

Code of Conductthe Board recognises that the behaviour of all directors, employees and the manager needs to meet the highest possible standards. the minimum standards expected to be achieved are set out in the Company’s Code of Conduct.

the Code of Conduct applies to the Board, the Company secretary, all directors of the manager and its employees and associates. the Code of Conduct requires that at all times the Company acts with the utmost integrity and objectivity and in compliance with the letter and spirit of both the law and the Company’s policies. the Code of Conduct governs matters such as the conflict of interests of directors, preventing directors and executives of the manager from taking advantage of corporate opportunities of the Company for personal gain, confidentiality, fair dealing and other ethical matters. Further details on the Code of Conduct are contained in the section of this Corporate governance statement that discusses principle 10.



staff Financial Products Dealing Policythe Company has adopted a staff Financial products dealing policy that is designed to provide protection to the Company, its related parties and its staff by restricting dealings in financial products, including the Company’s securities, during certain times or when staff are in possession of certain types of information. the policy extends to the directors, aep staff members, defined associates of aep directors or staff members and includes the manager and its employees.

in summary, subject to limited exceptions, dealing in specified financial products will only be allowed:

> during a permitted period;

> if pre-clearance is first obtained from the allco Compliance group;

> if the financial products have been held for at least 3 months; and

> if the person wanting to deal in the financial products is not in possession of any inside information relating to those securities.

generally, the purchase and sale of the Company’s securities will only be permitted during the 30 day periods following the release to the market of the half yearly and annual financial results of the Company and following the annual general meeting or otherwise in accordance with the procedures set out in the policy.

PrinciPlE 4

safeguard integrity in financial reporting

Recommendations:

> Require the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) to state in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects of the Company’s financial condition and operational results and are in accordance with relevant accounting standards

> The Board should establish an audit committee

> Structure the audit committee so that it consists of:

— Only non-executive directors

— A majority of independent directors

— An independent chairperson, who is not chairperson of the Board

— At least three members

> The audit committee should have a formal Charter

Chief executive officer and Chief Financial officer sign offthe Company does not have a Chief executive officer for the purposes of making certifications to the Board in relation to the Company’s financial reports. the function of the Chief executive officer for this purpose is undertaken by the managing director of the Company.

the managing director and Chief Financial officer have provided a written statement to the Board that the Company’s financial report presents a true and fair view, in all material respects, of the aep group’s financial position and operational results and are in accordance with relevant accounting standards.

audit Finance and risk Committee (aFrC)the aFrC consists of only non-executive directors, with an independent chairperson. during the past financial year the aFrC did not comprise a majority of independent directors for the same reasons that the Board does not comprise a majority of independent directors, as detailed previously in principle 2. From 15 august 2007, the aFrC comprises a majority of independent directors.

the current members of the aFrC are:

michael Brogan (Chairman)marcus derwinian tsicalas

geoff morgan and peter yates were members of the Committee until 27 July 2007 and 15 august 2007 respectively.

the aFrC members all have appropriate financial expertise and all members have a working knowledge of the financial services industry in which the Company operates.

the aFrC operates in accordance with a Charter approved by the Board. the main responsibilities of the Committee are:

> reviewing the scope and quality of the external audit;

> reviewing and overseeing the financial reporting process, including accounting policies and financial management;

> reviewing and overseeing the Company’s occupational health and safety practices;

> reviewing and overseeing the framework and processes of compliance with laws, regulations, standards, best practice guidelines and codes of conduct;

16

> reviewing, assessing and approving the Company’s internal controls and risk management systems;

> recommending to the Board the appointment, removal and remuneration of the external auditor, reviewing the terms of their engagement, the scope and quality of the audit and assessing their performance. the Board has approved an auditor independence policy that details processes to be undertaken by the aFrC to be satisfied that audit independence is maintained by the external auditor;

> overseeing the effective operation of the risk management framework;

> reviewing the processes for the prevention, detection and investigation of fraud and irregularities;

> overseeing the framework for the management of the Company’s transactional risks including concentration of exposures;

> monitoring the current forecast liquidity and cash level of the Company; and

> reporting to the Board on matters relevant to the aFrC’s roles and responsibilities.

in fulfilling its responsibilities, the aFrC receives regular reports from the manager and external auditor. the Committee meets with the external auditor at least twice a year, or more frequently if necessary.

PrinciPlE 5

Make timely and balanced disclosure

Recommendation:

> Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance

the Company has established a process for ensuring compliance with laws, regulations and other requirements relating to the external reporting of financial and non-financial information. this includes compliance with asX listing rules and Corporations act obligations.

the Company secretary has been appointed as the person responsible for communications with the australian securities exchange. this includes responsibility for ensuring compliance with the continuous disclosure requirements contained in the asX listing rules, and overseeing and coordinating information disclosure to the asX, analysts, brokers, shareholders, the media and the public. the manager assists the Company secretary in this role.

Company announcements, media briefings, details of Company meetings, press releases and financial reports are available on the Company’s website, www.allcoequitypartners.com.au

PrinciPlE 6

respect the rights of shareholders

Recommendation:

> Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings

> Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

the Company has an external reporting policy that encourages timely and effective communication with shareholders. as noted under principle 5, the Company secretary has been appointed as the person responsible for overseeing and coordinating information disclosure to shareholders.

the Company’s website, www.allcoequitypartners.com.au, provides shareholders with access to:

> reports and presentations, including annual and half yearly reports

> company announcements and media releases

> information on businesses that the Company has invested in

> access to share price and share registry information

> a summary of corporate governance policies and other information contained in the Corporate governance section of the website

> details about directors, executive management and the manager

notice of shareholder meetings, including proposed resolutions, are provided to shareholders in advance of the meetings, in accordance with legal requirements. shareholders are encouraged to attend and participate in these meetings.

the Company’s external auditor attends the annual general meeting of shareholders and is available to answer questions about the conduct of the audit of the annual financial report and the preparation and content of the auditor’s report.



PrinciPlE 7

recognise and manage risk

Recommendations:

> The Board or appropriate Board Committee should establish policies on risk oversight and management

> The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the Board in writing that:

— The statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board

— The Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects

risk management is a primary objective of the Company. policies and processes ensuring appropriate management of business and investment risk have been adopted. the audit, Finance and risk Committee (aFrC) and the investment Committee have a key role in overseeing the risk management policies and processes.

the charter of the Board is to enhance the investment decision making process, rather than taking a “gatekeeper” approach. the manager keeps the Board closely informed as to the investment pipeline and the Board is closely involved in the development of transactions so that decisions can be made in a timely fashion. in making investment decisions, the Board has regard to the risk and return parameters of individual transactions.

the Board, through the aFrC and investment Committees, applies a range of risk management practices to ensure that the Company’s capital is allocated in accordance with those practices.

the risk management practices employed include:

> monitoring the quantum of the Company’s equity funds that are invested in any one transaction so that the level of exposure is appropriate to the Company’s circumstances;

> due diligence will be undertaken by the manager where possible. however, if it is perceived that there is sufficient value to be unlocked in a situation where due diligence is not possible, such as an unsolicited acquisition, due diligence may not be required;

> transactions will be undertaken with a view to reducing concentration risk, although this risk will continue to be one of the investment characteristics of the Company;

> it is anticipated that the majority of transactions will be focused on australian and new Zealand businesses, although the Company may consider international investments. in these circumstances, a decision to hedge currency risk will be taken on a transaction by transaction basis.

> implementation of a compliance reporting process. this includes having processes in place for bringing reportable incidents and matters to the attention of senior management and, ultimately, the Board. the aFrC receives regular written reports on compliance and risk management matters.

> funds management is overseen by the managing director and Chief Financial officer with ultimate responsibility retained by the investment Committee, on behalf of the Board.

the written statement provided by the managing director and Chief Financial officer (refer principle 4) contains statements to the Board that the Company’s risk management, internal compliance and control systems, to the extent they relate to financial reporting, are operating effectively, in all material respects, based on the risk management policies adopted by the Board.

PrinciPlE 8

encourage enhanced performance

Recommendation:

> Disclose the process for performance evaluation of the Board, its Committees and individual directors, and key executives

the Board Charter has established a process whereby, through the remuneration and nomination Committee, an assessment is performed of the size, effectiveness and contribution of the Board and the Board Committees. the remuneration and nomination Committee is required to review the Board’s required mix of skills and experience on an annual basis.

as part of this review, a formal assessment form is completed by each director. the form covers a range of areas including the role of the Board, Board composition, processes and dynamics. the responses of each director are considered by the remuneration and nomination Committee, including discussion with all Board members.

the Board is also responsible for monitoring and appraising the performance of the manager and key executives of the Company. Further detail on the process for evaluating key executives is contained in the remuneration report.

18

PrinciPlE 9

remunerate fairly and responsibly

Recommendations:

> Provide disclosure in relation to the Company’s remuneration policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to directors and key executives and corporate performance.

> The Board should establish a remuneration committee

> Clearly distinguish the structure of non-executive directors remuneration from that of executives

> Ensure that payment of equity-based remuneration is made in accordance with thresholds set in plans approved by shareholders.

the Board’s policy is that the remuneration for directors, the Company secretary and any other senior executives appointed will be competitively set to attract and retain appropriately qualified and experienced directors and executives.

the Board has established a remuneration and nomination Committee which meets as required. the Committee operates in accordance with a Charter approved by the Board. the Committee consists of three non-executive directors. From 15 august 2007 the members of the Committee are:

david Coe (Chairman)robert moranian tsicalas

geoffrey morgan and greg woolley were members of the Committee until 25 July 2007 and 15 august 2007 respectively.

the remuneration and nomination Committee is responsible for:

> advising the Board on remuneration policies and practices generally;

> the remuneration framework for the directors;

> ensuring that the directors are remunerated fairly;

> the remuneration package of senior executives;

> advising the Board on the assessment of the necessary and desirable competencies of the Board members;

> reviewing Board succession plans;

> evaluating the Board’s performance; and

> recommendations for the appointment and removal of directors.

details of the structure, composition and quantum of the remuneration of directors and senior executives are contained in the remuneration report.

PrinciPlE 10

recognise legal and other obligations to all legitimate stakeholders

Recommendation:

> Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders.

the Board requires all directors, employees and the manager to maintain high moral and ethical standards. the minimum standards to be achieved are set out in the Code of Conduct. the Code of Conduct is not intended to be exhaustive and cannot anticipate every situation which may arise. in this regard, aep expects its directors, officers, employees and the manager to use common sense and sound judgement. the four key guidelines contained in the Code of Conduct are:

> to act honestly and fairly in all business transactions and dealings with others

> treat other employees, contractors, clients, competitors and other persons with utmost courtesy and respect

> not to compromise a duty to act in the best interests of the Company

> to comply with all laws and regulations applicable to the business of the Company.

the Code of Conduct covers a wide range of areas which includes professional conduct, including conflicts of interest and equal employment opportunities, and misuse of company property, information and resources.

the Company has also introduced a:

> privacy policy, to protect the privacy of personal information the Company or its entities may be in possession of;

> related party transaction policy, the purpose of which is to ensure directors and officers are not involved in situations which could give rise to conflicts of interest and to ensure transactions occur on an arm’s length basis.


19allCo equity partners limited annual report 2007

FinanCial report

20 direCtors’ report26 remuneration report30 lead auditor’s independenCe deClaration31 inCome statements32 BalanCe sheets33 statements oF Changes in equity34 statements oF Cash Flows35 notes to the FinanCial statements65 direCtors’ deClaration66 independent auditor’s report

20

the directors present their report together with the financial report of the Consolidated entity, comprising allco equity partners limited (“the Company” or “aep”) and its controlled entities (together “the Consolidated entity”) for the year ended 30 June 2007 and the auditor’s report thereon.

directors

the directors of the Company at any time during or since the end of the financial year are:

APPointEd

david Coe (Chairman) 12 november 2004

marcus derwin (managing director) 17 november 2004

michael Brogan 10 august 2007

robert moran 25 July 2007

ian tsicalas 25 July 2007

gregory woolley 12 november 2004

peter yates 12 november 2004

geoffrey morgan was a director of the Company throughout the financial year and up until 25 July 2007 when he retired as a director.

details of the experience and qualifications of the directors in office at the date of this report are:

dAvid coE (chAirmAn)B.a (hons), llB

Chairman of Remuneration and Nomination CommitteeChairman of Investment Committee

david Coe is the executive Chairman of allco Finance group limited (formerly record investments limited. director since 2001) and its associated companies. david has over 20 years experience with allco Finance group. prior to joining allco Finance group, david was a partner at mallesons stephen Jaques, specialising in international finance and leasing. david is the Chairman of CitiC allco investments limited (since 2006) and is a founding director and Chairman of sports and entertainment limited. he is a director of the queensland treasury Corporation, the sydney Children’s hospital Foundation, the national gallery of australia Foundation and is the Chairman of the museum of Contemporary art in sydney. david was appointed as a director of rams home loan group limited in 2007.

mArcus dErwin (mAnAging dirEctor)B.Bus (accounting) (qut), m.Comm (marketing) (unsw), Ca, maiCd

Member of Audit, Finance and Risk CommitteeMember of Investment Committee

marcus derwin was appointed managing director of the Company in July 2007 and is head of private equity for allco Finance group. prior to joining allco Finance group, marcus was head of the direct investment arm of amp Capital investors, the funds management arm of amp limited, where he managed a $a2 billion alternative asset portfolio consisting of private equity, infrastructure and fund of fund investments.

his expertise has been in restructuring corporates, having worked for extensive periods in australia, the united Kingdom and the usa in a broad range of sectors and in various advisory and interim management capacities.

prior to joining amp Capital investors, marcus was seconded from pricewaterhouseCoopers to national australia Bank for 3 years, where he acted as their principal advisor providing guidance to large corporate banking clients, both in australia and the usa. marcus has both private and public company board experience. marcus was a director of equatorial mining limited from 2004 until its sale and delisting in september 2006.

direCtors’ report


michAEl brogAn

Chairman of Audit, Finance and Risk CommitteeMember of Investment Committee

michael is a non-executive director of the Firstrand Banking group. in that capacity he is Chairman of Firstrand international limited and the rmB australia group. michael is an independent non-executive director of allco managed investment Funds limited (amiFl) and Chair of the amiFl audit Committee.

michael was a senior executive director with rand merchant Bank and the Firstrand Banking group from 1994 to 2005. prior to joining the Firstrand group, michael had eight years international banking experience with standard Chartered Bank in hong Kong where he held numerous senior international executive director positions with business development and operational responsibilities ultimately spanning 17 countries. prior to joining standard Chartered Bank, michael spent 14 years as a partner in a firm of chartered accountants in australia.

michael has extensive domestic and international business experience in the areas of strategic business development, corporate governance, audit, compliance and risk management.

michael is Chairman of the arts and health Foundation and an advisor to indochina starfish Foundation.

michael is a Fellow of the institute of Chartered accountants in australia.

robErt morAnllB, B.ec, maiCd

Member of Investment CommitteeMember of Remuneration and Nomination Committee

robert moran is an executive of allco Finance group and is currently its head of Corporate Finance. he has been closely involved in the principal investing activities of the allco Finance group for the last eight years. in that time, as well as being involved in the business development of allco Finance group, robert has led acquisitions, mergers, initial public offerings and disposals of businesses on behalf of both allco Finance group and funds managed by allco Finance group. robert represents the Company’s interests by appointment to the Boards of signature security group and of trans tasman Collections holdings group.

prior to joining allco Finance group, robert practised corporate and commercial law for 11 years.

robert is a director of tag pacific limited (since 2002), awa limited (since 2004) and Krispy Kreme australia (since 2006).

iAn tsicAlAsB.a (syd), B.Com (nsw)

Member of Audit, Finance and Risk CommitteeMember of Investment CommitteeMember of Remuneration and Nomination Committee

ian tsicalas has significant operational experience having successfully managed both public and private companies.

ian was managing director of australian discount retail pty limited (adr) until may 2007. in 2005, ian successfully led the merger of the australian discount variety retail businesses of millers retail limited and the warehouse group limited to form adr.

prior to this ian was chief executive of the warehouse group australia and a director of the warehouse group limited (from december 2003 to november 2005).

ian was also previously managing director of Commander Communications limited and howard smith limited, two leading australian public companies.

grEg woollEyB.Com, llB (hons)

Member of Investment CommitteeMember of Remuneration and Nomination Committee

greg woolley is the Chief executive officer and a director of the lJCB investment group and its associated companies. prior to this, greg practised mergers and acquisitions with macquarie Bank’s corporate finance group where he specialised in public and private acquisitions and equity capital raisings. greg was the founding managing director of the aep Joint venture. greg is currently Chairman of global aviation asset management. he is also a director of stw Communications group limited (since 2003), ingevity pty limited and ares Capital management pty limited (rismark).

22

PEtEr yAtEsmaster of science (mgt) (stanford), B.Com (melb), maiCd, CFtp

Member of Investment Committee

peter yates was Chief executive officer of allco equity partners management pty ltd from late 2004 until 25 July 2007. during this period he also performed the function of managing director of the Company. peter was previously Chief executive officer and managing director of publishing and Broadcasting limited (pBl), australia’s largest media and entertainment company (director from 2001 to 2004).

prior to joining pBl, peter had a long career in the investment banking industry including 15 years with macquarie Bank, where he specialised in public company mergers and acquisitions, as well as large scale structured financing. peter is a director of signature holding Company pty limited, the parent entity of signature security group. peter is Chairman of the australian science media Centre, deputy Chairman of asialink, a member of the boards of the australian Chamber orchestra, the royal Children’s hospital Foundation (victoria), the Centre for independent studies and the national portrait gallery. he is also a member of the stanford university sloan alumni advisory Board.

peter was a director of veda advantage limited (formerly Baycorp advantage limited) from January 2006 until July 2007.

Director Meetingsthe number of Board meetings held, including meetings of Committees of the Board and the number of meetings attended by each of the directors of the Company during the financial year were:

Audit, rEmunErAtion boArd finAncE & risk invEstmEnt & nominAtion dirEctor mEEting committEE committEE committEE

a B a B a B a B

david Coe 12 13 n/a n/a 11 11 1 1

peter yates 13 13 5 5 11 11 n/a n/a

marcus derwin 12 13 5 5 11 11 n/a n/a

geoff morgan 10 13 3 5 8 11 1 1

greg woolley 13 13 n/a n/a 11 11 1 1

a) number of meetings attended.B) number of meetings held during the time the director held office during the period.

comPAny sEcrEtAry

David neufeldB.Com (hons), Ca, gaiCd

david neufeld has been Company secretary and Chief Financial officer of aep since July 2005. david has responsibility for financial and management reporting, cash management and corporate compliance. he is also Company secretary of aep’s subsidiary companies. david’s prior experience includes 5 years as a chartered accountant with ernst & young and 17 years with the Foster’s group, including 10 years with the lensworth property division where he was Chief Financial officer and Company secretary.

direCtors’ report


environmental regulationthe Company and its controlled entities were not subject to any specific environmental regulations during the year.

Principal activitythe principal activity of the Company during the course of the year was investment. the Company’s objective is to invest in private equity transactions and activist or opportunistic public market situations with decisions being based on the fundamental investment characteristics of the transaction. the Company has a broad investment mandate. the primary focus is on investing capital in a manner that aims to maximise returns to shareholders.

the Company has invested in a number of businesses that operate in the financial services and security industries. details of these investments are contained in the managing director’s review.

operating and Financial reviewFor the 2007 financial year, the net profit after tax of the Consolidated entity was $43,766,000 (2006 – $26,207,000).

the result reflects:

> dividends received or receivable of $9.3 million (2006 – $5.4 million) and a profit before tax and fees of $31.9 million from the holding and ultimate sale of shares held in veda advantage limited

> net profits, dividends, interest and other income before tax and fees of $15.2 million earned from strategic shareholding interests accumulated and subsequently disposed of in the process of assessing potential opportunities

> a profit before financing costs, depreciation, amortisation and tax of $22.3 million earned by signature security group from revenue of $64.4 million. signature security group was acquired in January 2006

> interest income earned on funds invested of $16.3 million (2006 – $8.9 million)

> an equity accounted net profit after tax contribution of $0.6 million from trans tasman Collections group. trans tasman Collections was formed in June 2006

> an interest income impact of $6.4 million (2006 – $19.3 million) on the income statement arising from the transition to aiFrs. this reflects the completion of the unwinding of an accounting discount in relation to the amounts that were due from shareholders on the previously partly paid ordinary shares

> transaction and incentive fees paid or payable to the manager of $7.4 million (2006 – $2.6 million) in connection with the acquisition and realisation of investment positions.

> transaction costs incurred in assessing and pursuing potential opportunities of $11.9 million.

Further details on the performance of individual investments follow the managing director’s review.

at balance date, the Consolidated entity held cash at bank or on deposit of $355.3 million. the balance includes the proceeds received from shareholders from the third and final instalment due on the previously partly paid ordinary shares.

on 25 may 2007, the Company announced an intention to acquire up to 5 per cent of its issued shares by way of an on-market share buy-back. the buy-back was undertaken as part of the Company’s capital management program. at the date of this report, 4,345,593 million shares have been bought back and cancelled. a maximum of 747,000 shares remain to be bought back and cancelled.

the Company had no borrowings in place at 30 June 2007. the Consolidated entity had borrowings, being $83.0 million of senior and mezzanine debt, net of unamortised borrowing costs, obtained for the acquisition of signature security group. these borrowings are recourse only to signature security group and have no recourse to the Company.

Dividendsthe 2005/2006 final dividend of $6.1 million (6.0 cents per ordinary share) was paid on 20 october 2006.

the 2006/2007 interim dividend of $3.1 million (3.0 cents per ordinary share) was paid on 16 march 2007.

the directors have declared a final dividend of 37.0 cents per share fully franked.

the dividend reinvestment plan has not been activated.

24

events subsequent to reporting datethe sale of the Consolidated entity’s investment in veda advantage limited was settled in July 2007 and the proceeds due of $140.2 million have been received. the profit on disposal is included in the financial results for the year ended 30 June 2007.

the on-market share buy-back to acquire up to 5 per cent of the Company’s issued shares is continuing.

the directors are not aware of any other matter or circumstance that has occurred since the end of the financial year that has significantly affected or may significantly affect the operations of the Consolidated entity, the results of those operations or the state of affairs of the Consolidated entity in subsequent financial years.

likely Developments and Prospectsthe Company is actively pursing transactions in accordance with its investment mandate. whilst several opportunities are currently under negotiation, no specific information has been included in this report due to the commercially sensitive nature of these possible transactions.

Commentary on individual investments follows the managing director’s review.

dirEctors’ intErEsts

shareholdingsthe movement during the reporting period in the number of ordinary shares of allco equity partners limited held, directly or indirectly, by each director in office at 30 June 2007 was as follows:

bAlAncE At PurchAsEs/ disPosAls/ bAlAncE At nAmE 1 July 2006 trAnsfErs in trAnsfErs out 30 JunE 2007

david Coe 5,850,662 383,332 — 6,233,994

peter yates 938,333 — — 938,333

greg woolley 756,667 — — 756,667

geoff morgan 1,000,000 — — 1,000,000

marcus derwin — 62,150 — 62,150

in addition to the shareholdings included in the table above, at 30 June 2007 each of david Coe, peter yates and greg woolley had ownership interests in aepl nominees pty limited which holds 10,185,185 fully paid initial ordinary shares in the Company. subsequent to year end, peter yates’ and greg woolley’s interests in aepl nominees pty limited have been sold to allco Finance group limited, in which david Coe has an ownership interest.

robert moran has an indirect interest in 618,837 ordinary shares of the Company. ian tsicalas and michael Brogan hold no shares in the Company, either directly or indirectly.

remuneration reportthe remuneration report is set out on page 26 and forms part of the directors’ report for the year ended 30 June 2007.

Indemnification and insurance of officersthe aep Constitution provides that the Company may indemnify any current or former director, secretary or executive officer of the Company or of a subsidiary of the Company out of the property of the Company against every liability incurred by a person in that capacity (except a liability for legal costs) and against all legal costs incurred in defending proceedings, whether civil or criminal or of an administrative or investigatory nature, in which the person becomes involved because of that capacity.

in accordance with the provisions of the Corporations act 2001, the Company has a directors and officers liability policy which covers all past, present or future directors, secretaries and executive officers of the Company and its controlled entities. the terms of the policy specifically prohibit disclosure of details of the amount of the insurance cover and the premium paid.

the indemnification and insurances are limited to the extent permitted by law.

direCtors’ report


non-audit servicesduring the period, Kpmg, the Company’s auditor, has performed certain other services in addition to their statutory duties. Fees paid or payable by the consolidated entity to Kpmg for audit and non-audit services were:

$

audit services – Fees paid to Kpmg for audit and review of financial reports 228,440

transaction due diligence services 1,292,380

total fees paid or payable 1,520,820

the Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice endorsed by resolution of the audit, Finance and risk Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations act 2001, and did not compromise, the auditor independence requirements of the Corporations act 2001 for the following reasons:

> all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the audit, Finance and risk Committee to ensure they do not impact the integrity and objectivity of the auditor.

> the non-audit services provided do not undermine the general principles relating to auditor independence as set out in professional statement F1 – professional independence, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

lead auditor’s independence declaration under section 307C of the Corporations act 2001the lead auditor’s independence declaration is set out on page 30 and forms part of the directors’ report for the year ended 30 June 2007.

rounding offthe Company is of a kind referred to in asiC Class order 98/100 dated 10 July 1998 and in accordance with that Class order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

this report is made in accordance with a resolution of the directors

m A dErwinManaging Director

dated at sydney this 15th day of august 2007

26

1 PrinciPlEs usEd to dEtErminE thE nAturE And Amount of rEmunErAtion – AuditEd

the consolidated entity’s remuneration policies are designed to align the remuneration of the executive team with the interests of the shareholders by including performance related bonuses. these payments are linked to the achievement of individual objectives which are relevant to meeting the consolidated entity’s overall goals. in establishing the level of executive bonuses, a remuneration committee considers the results of a formal performance appraisal process which is undertaken annually for each employee of the consolidated entity.

the aep remuneration and nomination Committee, consisting of three non-executive directors, advises the Board on remuneration policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for all key management personnel of the Company. the remuneration of key management personnel employed by subsidiaries of the Company are governed by the remuneration committee of the relevant subsidiary. the remuneration policies applied by remuneration committees of subsidiaries are consistent with those of the Company.

executive remuneration and other terms of employment are reviewed annually by the relevant remuneration committee, having regard to the performance goals set at the start of the year, results of the annual appraisal process, relevant comparative information, and, if necessary, independent expert advice on market compensation levels. as well as a base salary, remuneration packages include superannuation, termination entitlements, performance related bonuses and fringe benefits.

remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity’s operations and achieving the Company’s strategic objectives.

remuneration and other terms of employment for executives are formalised in service agreements.

a) Fixed remunerationFixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any fringe benefits tax charges related to non-financial employee benefits), as well as employer contributions to superannuation funds.

b) Performance linked remunerationperformance linked remuneration is designed to reward key management personnel for meeting or exceeding their financial and personal objectives. at the end of each financial year the relevant remuneration committee will recommend to the appropriate board for approval the bonus amount due to each employee, based on the annual appraisal process undertaken.

c) non-executive directorsFees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. non-executive directors fees and payments are reviewed annually by the Board. remuneration of non-executive directors is determined by the Board within the maximum amount approved by shareholders from time to time. this maximum amount currently stands at $600,000 per annum in aggregate for all non-executive directors. the current fee structure was last reviewed in august 2007 and is now as follows:

> Base Fees — $80,000 per annum> Committee Fees (per committee):

— Chairman — $20,000 per annum— member — $10,000 per annum

payment of directors fees is made in cash. performance related bonuses are not payable to non-executive directors. it is expected that directors will spend approximately 15 hours per month on aep activities.

remuneration report


2 dirEctors And EXEcutivE officErs rEmunErAtion (comPAny And consolidAtEd Entity) – AuditEd

details of the nature and amount of remuneration of each director of the Company and each of the five named Company and relevant group executives who receive the highest remuneration are:

a) For the year ended 30 June 2007 Post- other short-term emPloyment long-term

non- long- Cash salary Cash monetary suPer- serviCe and fees bonus 3 benefits annuation leave total

$ $ $ $ $ $

non-executive directors

geoff morgan 1 85,000 — — — — 85,000

marcus derwin 2 70,000 — — 1,838 — 71,838

executives

howard watson 429,137 42,000 129,729 86,271 8,938 696,075

david neufeld 275,000 82,500 — 12,686 — 370,186

Chris hay 256,090 25,040 39,884 12,686 — 333,700

marc Killeen 223,976 27,365 26,773 12,686 7,542 298,342

Frank van Bokhoven 172,517 16,830 5,436 12,958 5,436 213,177

1,511,720 193,735 201,822 139,125 21,916 2,068,318

b) For the year ended 30 June 2006


geoff morgan 1 85,000 — — — — 85,000

marcus derwin 1 70,000 — — — — 70,000

executives

Chris hay (13 January 2006 – 30 June 2006) 124,151 264,000 3,840 5,564 — 397,555

marc Killeen (13 January 2006 – 30 June 2006) 96,189 220,000 3,840 5,564 1,532 327,125

david neufeld (12 July 2005 – 30 June 2006) 242,628 60,000 — 12,139 — 314,767

how ard watson (13 January 2006 – 30 June 2006) 191,085 — 46,414 33,498 3,227 274,224

william graham (13 January 2006 – 30 June 2006) 70,139 — — 5,673 1,064 76,876

879,192 544,000 54,094 62,438 5,823 1,545,547

1) payments made to an employer entity2) payments made to an employer entity until 16 march 2007 and thereafter directly to the director3) in 2006, includes retention bonuses awarded to executives of signature security group as part of the sale and purchase agreement.

payment of the bonus was subject to the executives remaining with the company for 180 days subsequent to the sale and purchase date.

28

payment of cash bonuses are dependent on the satisfaction of performance conditions. all other elements of remuneration are not directly related to performance.

none of david Coe, peter yates or greg woolley received remuneration for their position as directors of the Company.

peter yates received no remuneration directly from the Company in fulfilling the duties of his role as managing director. his remuneration was borne directly by allco equity partners management pty limited in meeting its obligations as the manager.

c) Indemnities and insuranceamounts disclosed for remuneration of key management personnel exclude insurance premiums paid by the consolidated entity during the year ended 30 June 2007 in respect of directors and officers liability insurance contracts as the contracts do not specify premiums paid in respect of individual directors and officers. information relating to the insurance contracts is set out in the directors’ report. disclosure of the total amount of the premium and the nature of the potential liabilities in respect of the policy is expressly prohibited by the policy.

d) service agreementsremuneration and other terms of employment for all key management personnel are formalised in service agreements. each of these agreements provide for the provision of performance related cash bonuses and other benefits including private health insurance, life insurance premiums, health club fees and motor vehicle allowances. other major provisions of the agreements relating to remuneration are set out below.

all contracts with executives may be terminated early by either party, subject to applicable notice periods and termination payments as detailed below.

dAvid nEufEldChief Financial officer and Company secretary, allco equity Partners limited

> term of agreement – commencing 12 July 2005, with no fixed term.

> Base salary for the year ended 30 June 2007 of $275,000 plus superannuation. to be reviewed by the relevant remuneration committee.

> annual bonus, to be established at the discretion of the relevant remuneration committee based on the performance appraisal process described above.

> payment of a termination benefit is at the discretion of the relevant remuneration committee.

> notice period of three months increasing pro rata to six months after three years service.

howArd wAtsonChief executive officer, signature security group

> term of agreement – five year term, commencing 13 January 2006.

> Base salary for the year ended 30 June 2007 of $522,000 inclusive of superannuation. total remuneration inclusive of superannuation and other nominated benefits to be reviewed annually by the relevant remuneration committee.



> notice period of six months.

chris hAygeneral Manager – strategy and Marketing, signature security group

> term of agreement – 2 year term, commencing 1 september 2005.




> notice period of six months.

remuneration report


mArc killEEngeneral Manager – operations, signature security group

> term of agreement – 2 year term, commencing 1 august 2005. the agreement is continuing on a monthly basis.




> notice period of one month.

frAnk vAn bokhovEngeneral Manager Finance, signature security group

> term of agreement – commencing 10 august 1998, with no fixed term.




> notice period of one month.

william graham, group it manager, signature security group, is no longer among the five highest remunerated executives of the group.

30

lead auditor’s Independence Declaration under section 307C of the Corporation act 2001 to the directors of allco equity Partners limitedi declare that, to the best of my knowledge and belief, in relation to the audit for the financial period ended 30 June 2007 there have been:

i) no contraventions of the auditor independence requirements as set out in the Corporations act 2001 in relation to the audit; and

ii) no contraventions of any applicable code of professional conduct in relation to the audit.

kPmg

chris whittinghAmpartner

sydney 15 august 2007

lead auditor’s independenCe deClaration


consolidAtEd thE comPAny

2007 2006 2007 2006 note $’000 $’000 $’000 $’000

sales and associated service revenue 5 64,113 30,643 — —

interest income 23,632 28,209 22,443 27,275

dividends received 10,964 5,438 40,503 —

total revenue 98,709 64,290 62,946 27,275

share of profit of associates and joint ventures 16 596 — — —

other operating income 6 46,739 1,402 1,005 4

total operating income 146,044 65,692 63,951 27,279

equipment and service materials costs (8,017) (2,850) — —

due diligence and transaction costs (19,300) (4,032) (11,545) (878)

employee benefits expense (28,575) (13,046) (474) (382)

other operating expenses 7 (7,975) (3,966) (1,489) (1,390)

total profit before financing costs, tax, depreciation and amortisation 82,177 41,798 50,443 24,629

depreciation (5,657) (3,265) (18) (13)

amortisation (8,278) (5,165) — —

total profit before financing costs and tax 68,242 33,368 50,425 24,616

Financing costs (11,979) (6,534) — —

profit before income tax 56,263 26,834 50,425 24,616

income tax expense 8 (12,497) (627) (1,047) (1,070)

profit for the period 43,766 26,207 49,378 23,546

attributable to:

equity holders of the parent entity 43,869 26,166 49,378 23,546

minority interest (103) 41 — —


Cents Cents

Basic earnings per share attributable to ordinary equity holders 34 43.10 25.69

diluted earnings per share attributable to ordinary equity holders 34 43.10 25.69

inCome statements

the above income statements should be read in conjunction with the accompanying notes.

for thE yEAr EndEd 30 JunE 2007

32


2007 2006 2007 2006 note $’000 $’000 $’000 $’000

Current assets

Cash and cash equivalents 9 355,299 177,593 354,022 173,033

receivables 10 152,974 182,455 48,278 178,161

inventories 11 1,238 945 — —

loan assets held at amortised cost 12 — — — 103

derivative financial instruments 13 1,247 — — —

Current tax assets 18 363 505 — 505

total current assets 511,121 361,498 402,300 351,802

non-Current assets

available-for-sale financial assets 14 — 125,359 — 665

loan assets held at amortised cost 12 — — 99,791 116,095

other financial assets 15 — — 87,283 72,166

investments accounted for using the equity method 16 33,659 32,500 — —

property, plant and equipment 17 11,228 11,086 61 79

deferred tax assets 18 8,769 6,957 2,770 2,345

intangible assets 19 124,618 125,703 — —

total non-current assets 178,274 301,605 189,905 191,350

total assets 689,395 663,103 592,205 543,152

Current liaBilities

Creditors and payables 20 16,759 6,402 6,761 793

derivative financial instruments 13 — 477 — —

deferred income 21 1,476 2,278 — —

interest-bearing loans and borrowings 22 2,750 3,100 — —

Current tax liabilities 18 12,277 268 12,277 —

employee entitlements 23 1,706 1,286 120 79

total current liabilities 34,968 13,811 19,158 872

non-Current liaBilities

deferred income 21 337 714 — —

interest-bearing loans and borrowings 22 80,248 97,960 — —

employee entitlements 23 562 498 — —

total non-current liabilities 81,147 99,172 — —

total liabilities 116,115 112,983 19,158 872

net assets 573,280 550,120 573,047 542,280

equity

issued capital 25 506,599 516,037 506,599 516,037

reserves 26 26,702 22,209 25,690 19,320

retained earnings 27 37,869 9,543 40,758 6,923

total equity attributable to equity holders of the parent entity 571,170 547,789 573,047 542,280

minority interest 2,110 2,331 — —

total equity 573,280 550,120 573,047 542,280

balanCe sheets

the above Balance sheets should be read in conjunction with the accompanying notes.

As At 30 JunE 2007



2007 2006 2007 2006 note $’000 $’000 $’000 $’000

total equity at the beginning of the period 550,120 544,297 542,280 544,297

adjustment on adoption of aasB 132 and aasB 139, net of tax, to:

– retained earnings — (73) — (73)

– issued capital — (25,647) — (25,647)

restated total equity at the beginning of the period 550,120 518,577 542,280 518,577

Fair value adjustments to available-for-sale financial assets, net of tax 26 (4,650) 4,650 (7) 6

recognition of deferred tax asset on deductible business related capital costs 21 214 21 214

share instalment collection costs recognised in equity (71) (63) (71) (63)

Changes in the fair value of cash flow hedges, net of tax 26 1,207 (334) —

share of associates reserves 26 900 — —

Foreign exchange translation differences 26 659 (1,420) —

net income recognised directly in equity (1,934) 3,047 (57) 157


total recognised income and expense for the period 41,832 29,254 49,321 23,703

transactions with equity holders in their capacity as equity holders:

dividends provided for or paid 28 (9,166) — (9,166) —

minority interest on acquisition of subsidiary — 2,289 — —

minority interest repurchased (118) — — —

share buy-back 25 (9,388) — (9,388) —

(18,672) 2,289 (18,554) —

total equity at the end of the period 573,280 550,120 573,047 542,280

total recognised income and expense for the period is attributable to:

equity holders of the parent entity 41,822 29,320 49,321 23,703

minority interest 10 (66) — —

total recognised income and expense for the period 41,832 29,254 49,321 23,703

statements oF Changes in equitY

the above statements of Changes in equity should be read in conjunction with the accompanying notes.


34


2007 2006 2007 2006 note $’000 $’000 $’000 $’000

Cash flows from operating activitiesreceipts from customers 70,016 33,700 — —

payments to suppliers and employees (51,526) (23,010) (1,607) (1,565)

interest received 15,700 9,171 14,615 8,281

dividends received 6,606 5,438 — —

other operating income 86 40 45 —

income taxes paid (1,854) (812) (1,029) (812)

net cash from operating activities 35 39,028 24,527 12,024 5,904

Cash flows from investing activitiespayment for acquisition of subsidiaries, net of cash acquired (1,384) (33,060) — (39,801)

Capital contribution to subsidiaries — — (15,000) —

payments for acquisition of other financial assets (1,481) — (1,481) —

proceeds from sale of financial assets at fair value through profit or loss 3,099 44,633 3,099 44,633

payments for available-for-sale financial assets (14,108) (138,139) — (654)

proceeds from sale of available-for-sale financial assets 19,403 — — —

Capital return proceeds received from available-for-sale financial assets 13,596 19,423 — —

loans to associates and jointly controlled entities (5,133) — (5,133) —

net proceeds from financial instruments 8,369 — — —

payments for equity-accounted investments — (32,500) — (32,500)

payments for property, plant and equipment (5,561) (2,847) — (92)

payments for due diligence and other transaction costs (12,810) (4,690) (7,870) (334)

payments for dealer line acquisitions (3,600) (1,520) — —

net cash from investing activities 390 (148,700) (26,385) (28,748)

Cash flows from financing activitiespayment of dividends (9,166) — (9,166) —

proceeds from share capital instalments 183,333 183,333 183,333 183,333

payments for share issue or instalment collection costs (71) (63) (71) (63)

payments for share buy-back (7,521) — (7,521) —

proceeds from borrowings 1,400 105,000 — —

repayment of borrowings (19,890) (108,133) — —

interest paid (9,679) (4,038) — —

payments for transaction financing costs — (3,895) — —

loans to controlled entities — — (63,298) (183,323)

repayment of loans by controlled entities — — 92,073 66,368

purchase of minority interests in investments (118) — — —

other financing activities — 177 — 177

net cash from financing activities 138,288 172,381 195,350 66,492

net increase in cash and cash equivalents 177,706 48,208 180,989 43,648

Cash and cash equivalents at 1 July 177,593 129,385 173,033 129,385

Cash and cash equivalents at 30 June 9 355,299 177,593 354,022 173,033

statements oF Cash Flows

the above statements of Cash Flows should be read in conjunction with the accompanying notes.



1 significAnt Accounting PoliciEs

this general purpose financial report for the year ended 30 June 2007 comprises allco equity partners limited (“the Company”), its subsidiaries (together referred to as the “consolidated entity”) and the consolidated entity’s interest in associates and jointly controlled entities. the principal accounting policies adopted in the preparation of the consolidated financial report are set out below, and have been consistently applied to all periods presented, unless otherwise stated.

the financial report was authorised for issue by the directors on 15 august 2007.

a) statement of compliancethis financial report is a general purpose financial report which has been prepared in accordance with australian accounting standards adopted by the australian accounting standards Board (“aasB”), and the Corporations act 2001. the consolidated financial report of the group also complies with international Financial reporting standards (“iFrs”) and interpretations adopted by the international accounting standards Board. the Company’s financial report does not comply with iFrs to the extent that the Company has elected to apply the relief provided to parent entities by aasB 132 Financial Instruments: Presentation and Disclosure in respect of certain disclosure requirements.

b) Basis of preparationthe financial report is prepared on the historical cost basis with the exception of financial instruments classified as available-for-sale, derivative financial instruments, and financial assets at fair value through profit or loss, which are stated at their fair value. investments which are equity-accounted by the consolidated entity are stated at cost in the financial statements of the Company.

the consolidated entity is of a kind referred to in asiC Class order 98/100 dated 10 July 1998 and in accordance with that Class order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

the preparation of a financial report in conformity with australian accounting standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. the estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. actual results may differ from these estimates. Judgements made by management in the application of australian accounting standards that have a significant effect on the financial report and estimates with a significant risk of material adjustment in the next period are discussed in note 3 Critical accounting estimates and judgements.

these accounting policies have been consistently applied by each entity in the consolidated entity.

c) reporting currencyall amounts are reported in australian dollars unless otherwise stated.

d) Principles of consolidation

Subsidiariesthe consolidated financial statements of allco equity partners limited incorporate the assets and liabilities of all entities controlled by the Company as at 30 June 2007 and the results of all controlled entities for the year then ended. Control exists when the consolidated entity has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. in assessing control, potential voting rights that presently are exercisable are taken into account. where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. investments in subsidiaries are carried in the Company’s financial statements at their cost of acquisition less impairment provisions, if any.

the financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. adjustments are made to bring into line any dissimilar accounting policies that may exist.

Associates and jointly controlled entitiesassociates are those entities in which the consolidated entity has significant influence, but not control, over the financial and operating policies. investments in associates are accounted for in the Company’s financial statements at cost and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. the consolidated entity’s investments in associates includes goodwill (net of any impairment loss) identified on acquisition, if any. the consolidated financial statements include the consolidated entity’s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. when the consolidated entity’s share of losses exceeds its interest in an associate, the consolidated entity’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the consolidated entity has incurred obligations or made payments on behalf of the associate.

notes to the FinanCial statements

36

unrealised gains on transactions between the consolidated entity and its associates are eliminated to the extent of the consolidated entity’s interest in the associates. unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

Joint ventures are those entities over whose activities the consolidated entity has joint control, established by contractual agreement. these entities are equity accounted on the same basis as associates, as described above.

Transactions eliminated on consolidationintercompany balances and any unrealised gains and losses or income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.

e) Foreign currency translation

Foreign currency transactions and balancestransactions in foreign currencies are initially translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items that are outstanding at reporting date are translated at the foreign exchange rate prevailing at that date.

Foreign exchange gains and losses arising on translation are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges. non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the exchange rates prevailing at the dates the fair value was determined.

Foreign operationsthe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to australian dollars at foreign exchange rates ruling at the balance sheet date. the income and expenses of foreign operations are translated into australian dollars at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case revenues and expenses are translated at exchange rates at the dates of the transactions). any exchange differences arising on translation are taken directly to the foreign currency translation reserve in equity.

exchange differences arising from the translation of the net investment in foreign operations, and of related hedges, are taken to the foreign currency translation reserve and are released into the income statement upon disposal.

f) revenuerevenue is income that arises in the course of ordinary activities of the consolidated entity and is recognised at the fair value of the consideration received or receivable. revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably.

Interest incomeinterest income is recognised in the income statement on an accruals basis, using the effective interest method. interest includes the unwind of the discount arising on restating to fair value the outstanding instalment amounts due from shareholders on issued capital.

Dividend incomedividend income is recognised in the income statement when the entity’s right to receive payment is established.

Sales and associated service revenuethe consolidated entity includes a security business which generates sales and associated service revenue from the installation and monitoring of electronic security alarm systems. this category of revenue comprises monitoring revenue, alarm response revenue, service revenue, installation revenue and leasing revenue. the following revenue recognition policies are specifically applied in respect of this business:

Monitoring revenuemonitoring revenue is billed in advance, and deferred and recognised on a straight-line basis over the period that the service is provided.

Installation revenueinstallation revenue associated with the installation of leased security systems is deferred and recognised on a straight-line basis over the period of each applicable lease agreement, being from 3 to 5 years. installation revenue associated with equipment sales is recognised upon completion of the installation.

Leasing revenuelease income from operating leases is recognised on a straight-line basis over the lease term.



g) Finance costsFinance costs comprise interest expense on borrowings, calculated using the effective interest method, and costs incurred in establishing and maintaining borrowing facilities for use in funding business acquisitions.

h) operating leasespayments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

i) Income taxthe income tax expense or benefit on the profit or loss for the year comprises current and deferred tax. income tax expense is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is also recognised directly in equity.

Current tax is the expected tax payable on the current period’s taxable income, using tax rates enacted or substantially enacted at the balance sheet date. Current tax also includes any adjustment to tax payable in respect of previous years.

deferred tax is measured using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. the amount of deferred tax recognised is based on the expected manner of realisation or settlement of the underlying items and the tax rates which are enacted or substantially enacted at the balance sheet date and expected to apply when the assets are recovered or liabilities are settled. the following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Tax consolidationthe Company and its wholly-owned australian controlled entities formed a tax consolidated group on 1 July 2005 with allco equity partners limited as the head entity.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the separate taxpayer within a group approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

any current tax liabilities or assets and deferred tax assets arising from unused tax losses of subsidiaries are assumed by the head entity in the tax consolidated group and are recognised as amounts payable to/receivable from other entities in the tax consolidated group.

the Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised. any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recovery is recognised by the head entity only.

members of the tax consolidated group have entered into a tax funding arrangement which sets out the funding obligations of members of the tax consolidated group. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

the members of the tax consolidated group have also entered into a valid tax sharing agreement under the tax consolidation legislation which sets out the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations and the treatment of entities leaving the tax consolidated group.

subsidiaries of the consolidated entity which are not wholly owned may form separate tax consolidated groups, with agreements between the members of such groups being consistent with those detailed above.

38

j) Cash and cash equivalentsCash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

k) Inventoriesinventories are stated at the lower of cost and net realisable value.

Cost includes expenditure on bringing the inventories to their existing location and condition. For work in progress and finished goods, cost comprises direct materials, direct labour and commission, and an appropriate share of overhead expenditure allocated on the basis of normal operating capacity.

net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

l) Investments and other financial assetsthe Company and consolidated entity classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables at amortised cost, and available-for-sale financial assets. the classification depends on the purpose for which the investments were acquired. management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

Financial assets at fair value through profit or lossthis category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. a financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. derivatives are also categorised as held for trading unless they are designated as hedges.

Loans and receivablesloans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. other receivables include accrued interest and goods and services tax (gst) recoverable. loans and receivables are included in receivables in the balance sheet.

Available-for-sale financial assetsavailable-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories.

purchases and sales of investments are recognised on settlement date, being the date that an asset is delivered to or by the consolidated entity. investments are initially recognised at fair value plus transaction costs. Financial assets are de-recognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.

available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. loans and receivables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. when securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

the fair values of quoted investments are based on current bid prices. if the market for a financial asset is not active (and for unlisted securities), the consolidated entity establishes fair value by using valuation techniques. these include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

Impairmentthe consolidated entity assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. in the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. if any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in the income statement. impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.



m) hedging and derivative financial instrumentsthe consolidated entity uses derivative financial instruments to hedge its exposure to interest rate risks arising from financing activities. in accordance with its treasury policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes. however, derivatives that do not qualify for hedge accounting are accounted for as trading instruments, and classified as financial assets at fair value through profit or loss.

derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to fair value. the gain or loss on re-measurement to fair value is recognised immediately in profit or loss. however, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (refer below).

the fair value of interest rate swaps is the estimated amount that the consolidated entity would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.

at the inception of a hedge relationship, the consolidated entity formally designates and documents the hedge relationship to which the group wishes to apply hedge accounting and the risk management objectives and strategies for undertaking various hedge transactions. the documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the entity will assess the effectiveness of the hedging instrument in offsetting the exposure to changes in fair values or cash flows of hedged items. hedge instruments are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Cash flow hedgewhere a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity in the hedging reserve. the gain or loss relating to the ineffective portion is recognised immediately in the income statement.

amounts accumulated in equity are recognised in the income statement in the periods when the hedged item will affect profit or loss (for instance when the repayment of borrowings that are hedged takes place).

when a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. when a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Derivatives that do not qualify for hedge accountingCertain derivative financial instruments do not qualify for hedge accounting. Changes in the fair value of any financial derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

the fair values of various derivative financial instruments used for hedging purposes are disclosed in note 13 derivative financial instruments. movements in the hedging reserve in shareholders’ equity are shown in the consolidated statement of changes in equity.

n) Property, plant and equipmentitems of property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses (refer note 1(t)). the carrying amount of an item of property, plant & equipment includes the cost of replacing part of such an item when that cost is incurred if it is probable that future economic benefits embodied with the item will eventuate and the cost of the item can be measured reliably. all other repairs and maintenance are recognised in the income statement as expenses, as incurred.

depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. the estimated useful lives in the current and comparative periods are as follows:

> capitalised equipment and installation costs shorter of lease term or useful life

> leasehold improvements shorter of lease term or useful life

> furniture and fittings 5 years

the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

40

Capitalised equipment and installation coststhe costs associated with electronic security equipment installed in connection with an extended service agreement where the customer leases the equipment from the company are capitalised. these costs are depreciated on a straight-line basis over the term of the lease applicable to each agreement, being from 3 to 5 years. Costs of installation include the cost of equipment, labour costs and sales commissions directly attributable to an installation.

o) Intangible assets

Goodwillgoodwill represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition. goodwill on acquisitions of subsidiaries is included in intangible assets, while any goodwill on acquisitions of associates is included in investments in associates. goodwill is carried at cost less accumulated impairment losses. goodwill is allocated to cash generating units for the purpose of impairment testing. gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Monitoring Contractsan intangible asset is recognised in respect of customer contracts held by a security business acquired by the Company. monitoring contracts acquired under a business combination are recognised at fair value on acquisition date, representing the value of the right to the contractual cash flows in respect of the acquired contracts. the consolidated entity establishes fair value by using valuation techniques, including reference to the fair values of recent arm’s length transactions for similar assets, and discounted cash flow analysis.

originated customer contracts are recognised at cost less accumulated amortisation and impairment losses (refer note 1(t)).

Other intangible assetsother intangible assets that are acquired by the consolidated entity are stated at fair value initially then at cost less accumulated amortisation (refer below) and accumulated impairment losses (refer note 1(t)).

Amortisationamortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. intangible assets with an indefinite useful life are systematically tested for impairment annually. other intangible assets are amortised from the date they are available for use. the useful lives of intangible assets are reviewed, and adjusted if appropriate, at each balance sheet date.

p) Creditors and payablesthese amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the period, which remain outstanding at balance date. Creditors are stated initially at fair value and subsequently at amortised cost, are unsecured, and are usually paid within 30 days of recognition.

q) Interest-bearing loans and borrowingsinterest-bearing loans and borrowings are recognised initially at fair value net of attributable transaction costs, which include legal and advisory fees, bank fees and charges and any other ancillary borrowing costs. Fair value is calculated based on discounted expected future principal and interest cash flows. subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortised cost with income recognised on an effective interest basis.

r) employee entitlements

Wages and salaries and annual leaveliabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

Long service leavethe consolidated entity’s net obligation for long service leave is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. expected future payments are discounted using market yields at the reporting date on government bonds that have maturity dates approximating to the terms of the consolidated entity’s obligations.

Profit-sharing and bonus plansthe consolidated entity recognises a provision for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation and a reliable estimate of the obligation can be made. the liability is not discounted as it is settled within 12 months.



s) Provisionsa provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount has been reliably estimated. if the effect is material, provisions are determined by discounting expected future cash flows at a market rate.

t) Impairment of non financial assetsassets that have an indefinite useful life are not subject to amortisation but are tested annually for impairment. assets that have a definite useful life and 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. an impairment loss is recognised in the income statement unless the asset has previously been revalued, in which case the loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement.

u) Issued Capitalordinary shares are classified as equity. incremental costs directly attributable to the issue of new shares, or the collection of instalment amounts payable by shareholders on issued shares, are accounted for as a deduction from equity, net of any related income tax benefit.

v) earnings per share

Basic earnings per shareBasic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, by the weighted average number of ordinary shares outstanding during the reporting period.

Diluted earnings per sharediluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

w) segment reportinga segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

x) new standards and interpretations not yet adoptedCertain new accounting standards, amendments to accounting standards, and interpretations have been published that are not mandatory for 30 June 2007 reporting periods. the following standards and amendments are available for early adoption but have not been applied by the consolidated entity in these financial statements:

> aasB 101 Presentation of Financial Statements. this revised standard is applicable for annual reporting periods beginning on or after 1 January 2007

> aasB 7 Financial Instruments: Disclosures (august 2005) replaces the presentation requirements of financial instruments in aasB 132. aasB 7 is applicable for annual reporting periods beginning on or after 1 January 2007, and will require additional disclosures with respect to the consolidated entity’s financial instruments and share capital.

> aasB 2005-10 amendments to australian accounting standards (september 2005) makes amendments to aasB 132 Financial Instruments: Disclosure and Presentation, aasB 101 Presentation of Financial Statements, aasB 114 Segment Reporting, aasB 117 Leases, aasB 133 Earnings Per Share, aasB 139 Financial Instruments: Recognition and Measurement, aasB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, aasB 4 Insurance Contracts, aasB 1023 General Insurance Contracts and aasB 1038 Life Insurance Contracts arising from the release of aasB 7. aasB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007 and is expected to only impact disclosures contained within the consolidated financial report.

> aasB 8 Operating Segments replaces the presentation requirements of segment reporting in aasB 114 Segment Reporting. aasB 8 is applicable for annual reporting periods beginning on or after 1 January 2009 and is only concerned with disclosures.

> interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss recognised in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. interpretation 10 will become mandatory for the consolidated entity’s 2008 financial statements, and will apply to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date that the consolidated entity first applied the measurement criteria of aasB 136 and aasB 139 respectively (i.e., 1 July 2004 and 1 July 2005, respectively).

42

> aasB 2007-1 amendments to australian accounting standards arising from aasB interpretation ii amends aasB 2 Share-based Payments to insert the transitional provisions of iFrs 2, previously contained in aasB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards. aasB 2007-1 is applicable for annual reporting periods beginning on or after 1 march 2007 and is not expected to have any impact on the consolidated financial report. interpretation 12 Service Concession Arrangements addresses the accounting for service concession operators, but not grantors, for public to private service concession arrangements. interpretation 12 will apply for the group’s 2009 financial report. at this time an entity must adopt the revised interpretation 4 Determining when an arrangement contains a lease and interpretation 129 Service Concession Arrangements: Disclosures.

> aasB 2007-2 amendments to australian accounting standards arising from aasB interpretation 12 makes amendments to aasB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, aasB 117 Leases, aasB 118 Revenue, aasB 120 Accounting for Government Grants and Disclosure of Government Assistance, aasB 121 The Effects of Changes in Foreign Exchange Rates, aasB 127 Consolidated and Separate Financial Statement, aasB 131 Interest in Joint Ventures, and aasB 139 Financial Instruments: Recognition and Measurement. aasB 2007- 2 is applicable for annual reporting periods beginning on or after 1 January 2008 and must be applied at the same time as interpretation 12 service Concession arrangements. aasB 2007-2 amendments to australian accounting standards also amends references to “uig interpretation” to interpretations. this amending standard is applicable to annual reporting periods ending on or after 28 February 2007.

> aasB 2007-3 amendments to australian accounting standards arising from aasB 8 makes amendments to aasB 5 Non-current Assets Held for Sale and Discontinued Operations, aasB 6 Exploration for and Evaluation of Mineral Resources, aasB 102 Inventories, aasB 107 Cash Flow Statements, aasB 119 Employee Benefits, aasB 127 Consolidated and Separate Financial Statements, aasB 134 Interim Financial Reporting, aasB 136 Impairment Assets, aasB 1023 General Insurance Contracts and aasB 1038 Life Insurance Contracts. aasB 2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with aasB 8 Operating Segments. this standard is only expected to impact disclosures contained within the financial report.

> aasB 2007-4 amendments to australian accounting standards arising from ed151 and other amendments (effective 1 July 2007) was made recently to introduce accounting policy choices allowed under iFrs that were not previously incorporated by the aasB, and to remove many australian-specific disclosures.

the consolidated entity does not plan to early adopt the above standards as they are not expected to have an impact on the financial results of the Company and the consolidated entity.

2 chAngE in Accounting Policy

in the prior financial year the consolidated entity adopted aasB 132 Financial instruments: disclosure and presentation and aasB 139 Financial instruments: recognition and measurement in accordance with the transition rules contained in aasB 1 First-time adoption of australian equivalents to international Financial reporting standards. the impact of these changes were accounted for by adjusting the opening balance of retained earnings and reserves at 1 July 2005, as disclosed in the reconciliation of movements in retained earnings (note 27).

3 criticAl Accounting EstimAtEs And JudgEmEnts

estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

the consolidated entity makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, seldom equal the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of recoverable amount of intangibles (note 19).



4 sEgmEnt rEPorting

segment information is presented in respect of the consolidated entity’s business segments, which are the primary basis of segment reporting. the business segment reporting format is based on the consolidated entity’s management and internal reporting structure. inter-segment pricing is determined on an arm’s length basis. segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

the consolidated entity comprises the following main business segments, the operations of which are primarily in australia:

> Corporate Capital markets investment> security security system installation and monitoring

CorPorate seCurity Consolidated

2007 2006 2007 2006 2007 2006 $’000 $’000 $’000 $’000 $’000 $’000

total revenue from external sources 34,330 33,380 64,379 30,910 98,709 64,290

inter-segment revenue — — — — — —

segment revenue 34,330 33,380 64,379 30,910 98,709 64,290

share of net profits of associates and joint ventures using the equity method 596 — — — 596 —

other operating income 46,739 1,402 — — 46,739 1,402

segment operating income 81,665 34,782 64,379 30,910 146,044 65,692

segment result 59,901 28,980 22,276 12,818 82,177 41,798

Financing costs (1,872) (1,757) (10,107) (4,777) (11,979) (6,534)

depreciation and amortisation (19) (13) (13,916) (8,417) (13,935) (8,430)

income tax expense (12,556) (316) 59 (311) (12,497) (627)

profit for the period 45,454 26,894 (1,688) (687) 43,766 26,207

segment assets 506,749 478,950 148,987 151,653 655,736 630,603

investment in associates 33,659 32,500 — — 33,659 32,500

total assets 540,408 511,450 148,987 151,653 689,395 663,103

segment liabilities 22,004 881 94,111 112,102 116,115 112,983

Capital expenditure — 92 5,561 4,275 5,561 4,367

44


2007 2006 2007 2006 $’000 $’000 $’000 $’000

5 sAlEs And AssociAtEd sErvicE rEvEnuE

security services revenue 64,113 30,643 — —

6 othEr oPErAting incomE

profit on sale of available-for-sale financial assets 36,366 — — —

net gain on financial instruments 9,809 — — —

net gain on sale of other financial assets 482 4 964 4

net gain on interest rate derivatives not qualifying as hedges — 1,358 — —

directors fees received 82 40 41 —

46,739 1,402 1,005 4

7 othEr oPErAting EXPEnsEs

Bad and doubtful debt expense 672 221 — —

other 7,303 3,745 1,489 1,390

7,975 3,966 1,489 1,390

8 incomE tAX EXPEnsE

a) income tax expense recognised in the income statementCurrent tax 14,457 117 1,591 534

deferred tax (1,658) 525 (544) 551

under/(over) provision in prior years (302) (15) — (15)

12,497 627 1,047 1,070

deferred income tax expense/(benefit) included in income tax expense comprises:

decrease/(increase) in deferred tax assets (1,658) 525 (544) 551

(decrease)/increase in deferred tax liabilities — — — —

(1,658) 525 (544) 551




2007 2006 2007 2006 $’000 $’000 $’000 $’000

8 incomE tAX EXPEnsE continuEd

b) numerical reconciliation between income tax expense and pre-tax net profit

profit before income tax expense 56,263 26,834 50,425 24,616

income tax at the australian tax rate of 30% (2006: 30%) 16,879 8,050 15,128 7,385

increase in income tax expense due to:

– non-deductible expenses 18 1 — 1

– difference in overseas tax rates — 16 — —

– Current year tax losses for which no deferred tax asset was recognised 884 — (15) —

decrease in income tax expense due to:

– tax exempt revenues (4,982) (7,425) (14,066) (5,794)

– undistributed current tax benefit of subsidiaries — — — (507)

12,799 642 1,047 1,085

under/(over) provision in prior years (302) (15) — (15)

12,497 627 1,047 1,070

c) amounts recognised directly in equitythe aggregate current and deferred tax arising in the period and not recognised in net profit or loss but directly debited or credited to equity, is as follows: consolidAtEd thE comPAny

2007 2006 2007 2006 $’000 $’000 $’000 $’000

Current tax — — — —

deferred tax (1,354) 2,117 119 (19)

1,354) 2,117 119 (19)

d) tax losses

unused tax losses for which no deferred tax asset has been recognised 23,357 10,131 — —

potential benefit at 30% 7,007 3,039 — —

all unused tax losses were incurred by australian entities.

46


2007 2006 2007 2006 $’000 $’000 $’000 $’000

9 cAsh And cAsh EquivAlEnts

Cash at bank and on hand 4,464 1,980 3,187 1,117

deposits at call 67,344 71,212 67,344 71,212

term deposits 283,491 104,401 283,491 100,704

355,299 177,593 354,022 173,033

10 rEcEivAblEs

receivable from sale of available-for-sale financial assets 140,232 — — —

receivable from shareholders on issued shares — 176,956 — 176,956

interest receivable 1,498 587 1,498 587

trade receivables 4,668 3,616 — —

provision for doubtful debts (197) (263) — —

receivable from related entities — — 41,038 —

receivable from associates 5,133 — 5,133 —

other receivables 866 641 13 105

prepayments 774 918 596 513

152,974 182,455 48,278 178,161

11 invEntoriEs

work in progress, at cost 525 445 — —

Finished goods, at net realisable value 713 500 — —

1,238 945 — —

12 loAn AssEts hEld At AmortisEd cost

loans to controlled entities — — — 103

Current — — — 103

loans to controlled entities — — 99,791 116,095

non-current — — 99,791 116,095

13 dErivAtivE finAnciAl instrumEnts

derivative financial instruments – positive values

interest rate swap contracts – cash flow hedges 1,247 — — —

1,247 — — —

derivative financial instruments – negative values

interest rate swap contracts – cash flow hedges — 477 — —

— 477 — —




2007 2006 2007 2006 $’000 $’000 $’000 $’000

14 AvAilAblE-for-sAlE finAnciAl AssEts

listed equity securities at fair value — 125,359 — 665

— 125,359 — 665

15 othEr finAnciAl AssEts

shares in subsidiaries (note 31) — — 54,783 39,666

interest in jointly controlled entities (note 16) — — 32,500 32,500

non-current — — 87,283 72,166

16 invEstmEnts AccountEd for using thE Equity mEthod

a) investments in associates and jointly controlled entitiesin the financial statements of the Company, investments in associates and jointly controlled entities are accounted for at cost and included in other financial assets. the consolidated entity accounts for investments in associates and jointly controlled entities using the equity method. unless otherwise specified, investments are in companies incorporated in australia. Carrying amounts of investments in associates and jointly controlled entities are as follows:

ownershiP interest Consolidated the ComPany

principal 2007 2006 reporting 2007 2006 2007 2006 name of entity activity % % date $’000 $’000 $’000 $’000

trans tasman Collections receivables 30 June holdings pty limited management 50 50 2007 33,659 32,500 — —

b) results of associates and jointly controlled entities

consolidAtEd

2007 2006 $’000 $’000

share of associates and jointly controlled entities profit before income tax 2,205 —

share of income tax expense (1,609) —

share of associates and jointly controlled entities net profit accounted for using the equity method 596 —

as the date of acquisition was 30 June 2006, being the final day of the prior reporting period, the consolidated entity did not have an entitlement to a share of the results of this investment in respect of the 2006 financial year.

the consolidated entity’s share of associates expenditure commitments, contracted for at the reporting date but not recognised as liabilities, is as follows:

consolidAtEd

2007 2006 $’000 $’000

Call option to acquire shares — 1,215

Conditions precedent to debt funding — 69

— 1,284

48

consolidAtEd

2007 2006 $’000 $’000

16 invEstmEnts AccountEd for using thE Equity mEthod continuEd

c) movements in carrying amounts

Carrying amount at the beginning of the financial year 32,500 —

purchase of investment — 32,500

share of profits after income tax 596 —

share of associates reserves 900 —

less: unrealised profit eliminated on consolidation (net of tax) (337) —

Carrying amount at the end of financial year 33,659 32,500

share of net net share of net Profit/ Profit/(loss) total total assets assets equity revenues (loss) reCognised assets liabilities rePorted aCCounted

2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000

d) summarised financial information of associates and jointly controlled entities

trans tasman Collections holdings pty limited 58,097 1,192 596 145,480 77,488 67,992 33,996

Consolidated the ComPany

equiPment leasehold furniture leasehold furniture & installation imProve- and imProve- and Costs ments fittings total ments fittings total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

17 ProPErty, PlAnt And EquiPmEnt

Cost

Balance at 1 July 2005 — — — — — — —

acquisitions – business combinations 10,651 89 1,065 11,805 — — —

acquisitions – other 2,363 75 409 2,847 73 19 92

effect of movements in foreign exchange (309) (1) (26) (336) — — —

balance at 30 June 2006 12,705 163 1,448 14,316 73 19 92

acquisitions – business combinations — — 97 97 — — —

acquisitions – other 4,344 9 1,107 5,460 — — —

effect of movements in foreign exchange 7 — (3) 4 — — —

balance at 30 June 2007 17,056 172 2,649 19,877 73 19 92



Consolidated the ComPany

equiPment leasehold furniture leasehold furniture & installation imProve- and imProve- and Costs ments fittings total ments fittings total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

17 ProPErty, PlAnt And EquiPmEnt continuEd

depreciation and impairment losses

Balance at 1 July 2005 — — — — — — —

depreciation charge for the year 3,015 24 226 3,265 10 3 13

effect of movements in foreign exchange (34) — (1) (35) — — —

balance at 30 June 2006 2,981 24 225 3,230 10 3 13

depreciation charge for the year 5,065 45 547 5,657 14 4 18

effect of movements in foreign exchange (204) 2 (36) (238) — — —

balance at 30 June 2007 7,842 71 736 8,649 24 7 31

Carrying amounts

at 1 July 2006 9,724 139 1,223 11,086 63 16 79

at 30 June 2007 9,214 101 1,913 11,228 49 12 61

18 tAX AssEts And liAbilitiEs

a) Current tax assets and liabilitiesthe net current tax asset for the consolidated entity of $363,000 (2006: $505,000) represents the amount of income taxes recoverable in respect of current and prior periods.

the current tax liability for the consolidated entity of $12,277,000 (2006: $268,000) represents the amount of income taxes payable in respect of the current period.

the amount of the Company’s liability for income taxes payable on behalf of subsidiaries that are part of the tax consolidated group that is recoverable from those subsidiaries is included in loan assets held at amortised cost shown in note 12.

b) deferred tax assets and liabilities consolidAtEd thE comPAny

2007 2006 2007 2006 $’000 $’000 $’000 $’000

deferred tax assets / (liabilities)

doubtful debts 60 80 — —

employee entitlements 687 539 36 24

other items 2,649 92 1,288 182

tax losses 4,301 5,954 — —

deductible business related capital costs 1,446 2,142 1,446 2,142

available-for-sale financial assets — (1,993) — (3)

Changes in the fair value of cash flow hedges (374) 143 — —

net deferred tax assets 8,769 6,957 2,770 2,345

of the movement in deferred tax from 2006 to 2007, $1.2 million relating to tax losses has been reflected as an increase in goodwill, $1.4 million relating to fair value changes in cash flow hedges, has been recognised in equity. the remainder has been recognised in profit or loss.

50

monitoring goodwill contrActs totAl

$’000 $’000 $’000

19 intAngiblE AssEts

opening balance 1 July 2005 — — —

movement during the year ended 30 June 2006

acquisitions – business combinations 114,646 14,645 129,291

Cost of originated intangible costs — 1,520 1,520

amortisation — (5,165) (5,165)

effect of movements in foreign exchange — 57 57

Closing net carrying amount 114,646 11,057 125,703

Balance as at 30 June 2006

Cost 114,646 16,165 130,811

accumulated amortisation and impairment — (5,108) (5,108)

net carrying amount 114,646 11,057 125,703

movement during the year ended 30 June 2007

acquisitions — 1,577 1,577

Cost of originated intangible costs — 3,959 3,959

amortisation — (8,278) (8,278)

effect of movements in foreign exchange — 425 425

Fair value adjustment 1,232 — 1,232

1,232 (2,317) (1,085)

balance as at 30 June 2007

Cost 115,878 21,701 137,579

accumulated amortisation and impairment — (12,961) (12,961)

net carrying amount 115,878 8,740 124,618

the entire goodwill balance at 30 June 2007 is related to the consolidated entity’s investment in the security segment (security system installation and monitoring). the balance of goodwill has been increased by $1.2 million in accordance with provisions under the standard aasB3 Business Combinations, for deferred tax assets acquired of which utilisation is not probable.

impairment tests for goodwill

goodwill is allocated to the consolidated entity’s cash-generating units (Cgu’s), identified according to business segment. at 30 June 2007 the entire goodwill balance of $115.9 million (2006: $114.6 million) related to the consolidated entity’s investment in the security (security system installation and monitoring) segment. goodwill is reviewed annually for impairment or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired.

the recoverable amount for goodwill is determined by reference to the higher of assets fair value less costs to sell and value in use. where possible, relevant comparable information is used from an active market and where such information is not readily available a combination of market accepted valuation techniques are used to estimate the amount available from the sale of assets in arm’s-length transactions between knowledgeable and willing parties.

management believes that any reasonably possible changes in the key assumptions on which their recoverable amounts are based would not cause the aggregate carrying amount of goodwill to exceed their recoverable amounts.




2007 2006 2007 2006 $’000 $’000 $’000 $’000

20 crEditors And PAyAblEs

trade creditors 4,873 1,898 — —

other creditors and accrued expenses 11,878 4,460 6,756 757

payable to related parties 8 44 5 36

16,759 6,402 6,761 793

21 dEfErrEd incomE

deferred security services revenue 1,476 2,278 — —

Current 1,476 2,278 — —

deferred security services revenue 337 714 — —

non-current 337 714 — —

deferred income is recognised in respect of a subsidiary’s security business which generates sales and associated service revenue from the installation and monitoring of electronic security alarm systems.

22 intErEst-bEAring loAns And borrowings


2007 2006 2007 2006 $’000 $’000 $’000 $’000

senior secured borrowings 2,750 3,100 — —

Current 2,750 3,100 — —

senior secured borrowings 55,863 73,750

subordinated secured borrowings 24,385 24,210 — —

non-current 80,248 97,960 — —

the above borrowings represent debt facilities acquired by the consolidated entity as part of the acquisition of the signature security group during the prior reporting period, the terms of which are as follows:

senior secured borrowings are provided by a syndicate including national australia Bank and Bos international (australia) limited. the borrowings are secured by a first ranking fixed and floating charge over the assets of the relevant subsidiary and are denominated in australian dollars. interest rates applicable to the various tranches of the facility were between BBsy + 1.75% and BBsy + 2.0% during the year ended 30 June 2007, averaging 8.2% for this period. the maturity date of the facility is 30 June 2011.

subordinated secured borrowings are provided by amp Capital investors limited. the borrowings are secured by a fixed and floating charge over the assets of the relevant subsidiary, subordinated to the senior secured borrowings, and are denominated in australian dollars. interest repayments for the period were at an average borrowing rate of 12.3%. the maturity date of the subordinated facility is six months after the final repayment of the senior secured borrowings.

the consolidated entity also has access to a $30.0 million acquisition facility provided by national australia Bank and Bos international (australia) limited, of which $1.4 million was utilised as at the balance date. a further $10.0 million working capital facility provided by national australia Bank is drawn to $0.2 million at the balance date.

the facilities are secured against the assets of the subsidiary entities with no recourse to the Company.

the above borrowings are reported net of associated borrowing costs which are amortised over the term of the facilities.

52


2007 2006 2007 2006 $’000 $’000 $’000 $’000

23 EmPloyEE EntitlEmEnts

liability for annual leave 1,018 800 20 13

provision for bonuses 459 350 100 66

liability for long-service leave 229 136 — —

Current 1,706 1,286 120 79

liability for long-service leave 562 498 — —

non-current 562 498 — —

24 finAnciAl instrumEnts

a) Financial risk management

the consolidated entity’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk, and cash flow interest rate risk. the consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. the consolidated entity uses derivative instruments such as interest rate swaps to hedge certain risk exposures.

exposure to interest rate, currency and credit risk arises in the normal course of the consolidated entity’s business. derivative financial instruments are used to hedge exposure to fluctuations in interest rates.

b) Interest rate risk

i) Hedging – interest rate swap contracts – cash flow hedgesthe consolidated entity assesses the interest rate risk of all entities within the group and determines the appropriate hedging strategy based on the degree of risk to which it is exposed. the Company is not currently exposed to significant interest rate risk at a corporate level because it has no borrowings. accordingly there is no hedging of interest rate risk by the Company at this time. management will continue to re-evaluate this strategy in line with the changing nature of the business activities.

during the 30 June 2006 financial year the consolidated entity acquired an operating business which is exposed to interest rate risk on its floating rate borrowings. For this business, the consolidated entity adopts a policy of ensuring that approximately 75 per cent of its exposure to changes in interest rates on borrowings is on a fixed rate basis. interest rate swaps, denominated in australian dollars, have been entered into to achieve an appropriate mix of fixed and floating rate exposure within this policy, ensuring compliance with covenants in borrowing documents.

the swaps mature over the next six years following the maturity of the related loans and have fixed swap rates at around 6.4%. the contracts require settlement of net interest receivable or payable semi-annually. the settlement dates coincide with the dates on which interest is payable on the underlying debt. the contracts are settled on a net basis.

the gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and reclassified into profit or loss when the hedged interest expense is recognised. the ineffective portion is recognised in income immediately.

at balance date these contracts represented assets with a fair value of $1.3 million. For the year ended 30 June 2006, the consolidated entity recognised a net gain on the remeasurement to fair value of derivatives not qualifying for hedge accounting (and in place prior to acquisition) of $1.4 million.

ii) Effective interest rates and repricing analysisin respect of income earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature.



weighted average effeCtive more interest 6 months 6 – 12 1 – 2 2 – 5 than Consolidated note rate total or less months years years 5 years

% $’000 $’000 $’000 $’000 $’000 $’000

24 finAnciAl instrumEnts continuEd


Cash and cash equivalents 1 9 6.2 355,299 355,299 — — — —

derivative financial instruments 1 13 6.4 1,247 1,247

total interest-bearing assets 356,546 356,546 — — — —

secured bank loans – fixed rate 22 9.4 82,998 1,375 1,375 3,840 11,521 64,887

total interest-bearing liabilities 82,998 1,375 1,375 3,840 11,521 64,887

net interest-bearing assets 273,548 355,171 (1,375) (3,840) (11,521) (64,887)

notional value of swaps 63,383

net after derivatives 210,165


Cash and cash equivalents 1 9 5.8 177,593 177,593 — — — —

total interest-bearing assets 177,593 177,593 — — — —

secured bank loans – fixed rate 22 8.6 101,060 1,550 1,550 5,300 29,600 63,060

derivative financial instruments 13 6.5 477 477 — — — —

total interest-bearing liabilities 101,537 2,027 1,550 5,300 29,600 63,060

net interest-bearing assets 76,056 175,566 (1,550) (5,300) (29,600) (63,060)

notional value of swaps 77,250

net after derivatives (1,194)

1) all other financial assets and liabilities are non-interest bearing.

54

24 finAnciAl instrumEnts continuEd

c) Foreign currency riskthe consolidated entity is exposed to foreign currency risk in relation to the earnings of a new Zealand based subsidiary, which has not been hedged on the basis of its significance to the consolidated entity’s results.

d) Credit riskmanagement has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. the consolidated entity does not require collateral in respect of financial assets.

investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to, or better than, the consolidated entity. transactions involving derivative financial instruments are with counterparties with whom the consolidated entity has a signed netting agreement as well as sound credit ratings. given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

at the balance sheet date there were no significant concentrations of credit risk. the maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

e) liquidity riskprudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions. due to the dynamic nature of the underlying business, the consolidated entity aims at maintaining flexibility in funding by keeping committed credit lines available.

f) Price riskthe consolidated entity is exposed to equity securities price risk. this arises from investments held by the consolidated entity which are classified on the balance sheet as available-for-sale financial assets. the consolidated entity is not exposed to commodity price risk.

g) Fair valuesthe carrying amounts shown in the balance sheet are representative of the fair values of financial assets and liabilities.

i) Estimation of fair valuesthe methods and assumptions used in estimating the fair values of financial instruments are as follows:

SecuritiesFair value is based on quoted market prices at the balance sheet date without any deduction for transaction costs.

Derivativesinterest rate swaps are marked to market using broker quotes. those quotes are back tested using pricing models or discounted cash flow techniques. where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date. where other pricing models are used, inputs are based on market related data at the balance sheet date.

Interest-bearing loans and borrowingsFair value is calculated based on discounted expected future principal and interest cash flows, and is inclusive of costs which would be incurred on settlement of a liability.

Receivables and creditorsFor receivables and creditors with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. all other receivables and creditors are discounted to determine the fair value.

ii) Interest rates used for determining fair valuethe consolidated entity uses the government yield curve as at 30 June 2007, plus an adequate constant credit spread, to discount financial instruments. the interest rates used are as follows:

2007 2006 % %

derivative financial instruments 6.4 6.5

loans and borrowings 9.4 8.6

receivables 7.7 7.7

net fair values of financial assets and liabilities do not materially differ to their carrying amounts.




2007 2006 2007 2006 shares shares $’000 $’000

25 issuEd cAPitAl

a) ordinary share capital

ordinary shares fully paid (2006: partly paid) 101,851,851 91,666,666 550,000 550,000

initial ordinary shares fully paid — 10,185,185 — —

shares bought back (2,221,267) — (9,388) —

net transaction costs associated with shares issued pursuant to prospectus and collection of instalments on partly paid shares — — (11,242) (11,171)

deferred tax asset recognised directly in equity — — 2,876 2,855

adjustment on adoption of aasB 132 and aasB 139, net of tax — — (25,647) (25,647)

99,630,584 101,851,851 506,599 516,037

ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. the voting restrictions that previously applied to the initial ordinary shares ceased upon the final instalment on the previously partly paid ordinary shares becoming due for payment.

number of shares $’000

b) movements in issued capital

movement in ordinary share capital

opening balance 1 July 2005 101,851,851 541,534

transactions costs, net of tax — 131

adjustment on adoption of aasB 132 and aasB 139, net of tax — (25,647)

deferred tax asset recognised directly in equity — 19

Closing balance at 30 June 2006 101,851,851 516,037

movement in ordinary share capital

opening balance at 1 July 2006 101,851,851 516,037

transactions costs, net of tax — (71)

deferred tax asset recognised directly in equity — 21

shares bought back (2,221,267) (9,388)

Closing balance at 30 June 2007 99,630,584 506,599

c) share buy-backon 25 may 2007, the Company announced an on market share buy-back of up to 5% of its issued shares as part of the company’s capital management program. the buy-back began on 8 June 2007 and will continue for 12 months or until the maximum number of shares is acquired or until notice is given that the buy-back is concluded (whichever first occurs).

56


2007 2006 2007 2006 $’000 $’000 $’000 $’000

26 rEsErvEs

equity reserve

opening balance 19,313 — 19,313 —

transfer from retained earnings 6,377 19,313 6,377 19,313

total equity reserve 25,690 19,313 25,690 19,313

available-for-sale investments revaluation reserve

opening balance 4,650 — 7 —

revaluation movement during period, net of tax — 4,650 — 7

transfer to net profit (4,650) — (7) —

total available-for-sale investments revaluation reserve — 4,650 — 7

Cash flow hedging reserve

opening balance (334) — — —

revaluation movement during period, net of tax 1,207 (334) — —

total cash flow hedging reserve 873 (334) — —

Foreign currency translation reserve

opening balance (1,420) — — —

Currency translation differences arising during the period 659 (1,420) — —

total foreign currency translation reserve (761) (1,420) — —

share of reserves of interests in associates and joint ventures using the equity method

opening balance — — — —

share of reserves during the period 900 — — —

total share of reserves of interests in associates and joint ventures using the equity method 900 — — —

total reserves 26,702 22,209 25,690 19,320



26 rEsErvEs continuEd

a) equity reservein accordance with aiFrs, a financial asset was recognised in respect of unpaid share capital receivable from shareholders, discounted to fair value at recognition. this treatment has resulted in the recognition of $6.4 million interest income during the year ended 30 June 2007 (2006: $19.3 million), representing the unwind of the discount over the term to recovery of the receivable. the directors have determined that this income should not be used to pay future dividends and approved the transfer of this amount to an equity reserve.

b) available-for-sale investments revaluation reserveChanges in fair value and exchange differences arising on translation of investments classified as available-for-sale financial assets are taken to the fair value reserve. amounts are recognised in profit or loss when the associated assets are sold or impaired.

c) hedging reservethe hedging reserves comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments recognised directly in equity. amounts are recognised in profit or loss when the associated hedged transaction affects profit or loss.

d) Foreign currency translation reserveexchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation reserve. amounts are recognised in the profit or loss when the net investment is disposed of.

e) share of reserves of interests in associates and joint ventures using the equity methodthe consolidated entity’s share of reserves of interests in associates and joint ventures using the equity method are recognised in this reserve.


2007 2006 2007 2006 $’000 $’000 $’000 $’000

27 rEtAinEd EArnings

opening balance 9,543 2,763 6,923 2,763

adjustment on adoption of aasB 132 and aasB 139, net of tax — (73) — (73)

net profit for the year 43,869 26,166 49,378 23,546

transfer to equity reserve (note 26) (6,377) (19,313) (6,377) (19,313)

dividends paid (9,166) — (9,166) —

37,869 9,543 40,758 6,923

thE comPAny

2007 2006 $’000 $’000

28 dividEnds

dividends paid

dividends provided for or paid during the year 9,166 —

dividends proposed

dividends not recognised at the end of the year 36,077 6,111

a dividend of 37.0 cents per share (2006 – 6.0 cents per share) has been proposed for payment. the expected payment date is 17 september 2007.

Franking credits available for subsequent financial years based on a tax rate of 30% at dividend proposal date 16,214 3,143

58

29 commitmEnts

Commitments in relation to non-cancellable operating leases, contracted for at the reporting date but not recognised as liabilities, are payable as follows:


2007 2006 2007 2006 $’000 $’000 $’000 $’000

within one year 1,195 1,300 70 67

later than one year but not later than five years 1,539 1,436 162 232

later than five years 41 — — —

2,775 2,736 232 299

the lease commitments represent payments due for leased premises under non-cancellable operating leases, and payments for motor vehicles under operating leases.

30 kEy mAnAgEmEnt PErsonnEl disclosurEs

the following were key management personnel of the consolidated entity at any time during the reporting period and, unless otherwise indicated, were key management personnel for the entire period:

non-executive directorsdavid Coe (Chairman)peter yates (managing director until 25 July 2007)marcus derwin (managing director from 25 July 2007)geoff morgan (until 25 July 2007)greg woolleyrobert moran (from 25 July 2007)ian tsicalas (from 25 July 2007)michael Brogan (from 10 august 2007)

executivesdavid neufeld (Chief Financial officer and Company secretary, allco equity partners limited)howard watson (Chief executive officer, signature security group)

other than as noted above, there have been no changes in key management personnel in the period after reporting date and prior to the date when the financial report is authorised for issue.

a) Details of remunerationdetails of the total remuneration of all key management personnel, including their personally related entities, are as follows:


2007 2006 2007 2006 $ $ $ $

short-term employee benefits 1,113,366 695,127 512,500 457,628

other long-term benefits 8,938 3,227 — —

post-employment benefits 100,795 45,637 14,524 12,139

1,223,099 743,991 527,024 469,767

information regarding individual directors and executives remuneration is provided in the remuneration report section of the directors’ report. disclosures in the remuneration report will differ to the information provided in this note in order to comply with the requirements of the Corporations act.



30 kEy mAnAgEmEnt PErsonnEl disclosurEs continuEd

b) equity instrument disclosures relating to key management personnelthe numbers of shares in the Company held during the financial year by key management personnel of the consolidated entity, including their personally related entities, are set out below:

bAlAncE At PurchAsEs/ disPosAls/ bAlAncE At nAmE 1 July 2006 trAnsfErs in trAnsfErs out 30 JunE 2007


david Coe 5,850,662 383,332 — 6,233,994

peter yates 938,333 — — 938,333

greg woolley 756,667 — — 756,667

geoff morgan 1,000,000 — — 1,000,000

marcus derwin — 62,150 — 62,150

executives

david neufeld 4,000 — — 4,000

in addition to the shareholdings included in the table above, at 30 June 2007 each of david Coe, peter yates and greg woolley had ownership interests in aepl nominees pty limited which holds 10,185,185 fully paid initial ordinary shares in the Company. subsequent to year end, peter yates’ and greg woolley’s interests in aepl nominees pty limited have been sold to the allco Finance group limited, in which david Coe has an ownership interest.

c) other transactions with key management personnela number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

a number of those entities transacted with the Company or its subsidiaries in the reporting period. the terms and conditions of the transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s-length basis.

the Company has entered into an exclusive 25 year management agreement with allco equity partners Joint venture acting through its authorised agent allco equity partners management pty limited (aepm or the manager). From 31 July 2007, aepm is wholly owned by the allco Finance group in which david Coe and robert moran have ownership interests. prior to 31 July 2007, each of david Coe, greg woolley and peter yates held indirect ownership interests in aepm. under the terms of the management agreement, the manager provides the following services:

> works together with the Board to develop the Company’s investment strategy and assists in reviewing that strategy from time to time;

> develops investment proposals for consideration by the Board;

> assists in the preparation of Board papers pertaining to such proposals;

> assists the Company in the implementation of investments that the Board chooses to pursue;

> manages the Company’s investments including developing proposals for the realisation of the Company’s investments and assisting the Company in the implementation of any disposal decisions;

> assists the Company to comply with its obligations with respect to keeping of accounting records, preparation of financial statements, company secretarial functions such as arranging meetings of shareholders and liaison with the share registry;

> provides information in its possession to assist the Company secretary in their role;

> Consults with the Company in relation to all investor related public announcements; and

> establishes and maintains a website for the Company and provides all necessary it support if requested to do so by the Board. all costs of providing such support will be recoverable by the manager from the Company.

60

30 kEy mAnAgEmEnt PErsonnEl disclosurEs continuEd

under this agreement the manager is entitled to a transaction fee on completed transactions and an incentive fee for investments generating an internal rate of return in excess of 15%. transaction fees paid or payable to the manager during the year ended 30 June 2007 totalled $4,170,222 (2006: $2,648,928). incentive fees paid or payable during the year ended 30 June 2007 amounted to $3,317,538 (2006: nil).

the manager may delegate its functions to certain entities as stipulated in the management agreement provided that the manager remains responsible at all times for any acts or omissions of the delegate. in accordance with the management agreement, the provision of administrative services and functions has been delegated by the manager to allco Finance group limited. the cost of providing these services is recovered by allco Finance group limited from the Company on a cost recovery only basis. For the period ended 30 June 2007, costs paid and payable to allco Finance group limited amounted to $348,447 (2006: $302,551).

as part of the acquisition of signature security group, the consolidated entity acquired a $25.0 million subordinated debt facility provided by amp Capital investors limited of which marcus derwin was an executive throughout the financial year until march 2007. the terms and conditions of this borrowing are detailed in note 22. the facility remains in place at 30 June 2007.

under the terms of the consolidated entity’s acquisition of signature security group at 30 June 2006, a personal indemnification was provided to howard watson. the potential liability was estimated at $500,000 at 30 June 2006 and was recognised as a fair value adjustment on acquisition and included in creditors. there is no liability outstanding at balance date.

aggregate amounts of each of the above types of other transactions with key management personnel and the consolidated entity:


2007 2006 2007 2006 $’000 $’000 $’000 $’000

amounts recognised as expense

Fees for provision of administrative services and functions 348 303 348 303

348 303 348 303

aggregate amounts of assets and liabilities at balance date relating to the above transactions with key management personnel of the consolidated entity:


2007 2006 2007 2006 $’000 $’000 $’000 $’000

amounts recognised as assets

transaction fees capitalised — 2,649 — 1,290

— 2,649 — 1,290

amounts recognised as liabilities

payable to allco Finance group 5 44 5 39

payable to amp Capital investors limited — 24,210 — —

indemnification provided to howard watson or a related entity — 500 — —

5 24,754 5 39

apart from the details disclosed in this note, no key management personnel have entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving key management personnel interests existing at balance date.



31 subsidiAriEs

the consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(d).

Country Class of equity holding (%)name of entity inCorPoration shares 2007 2006

aep aurora pty limited australia ordinary 100.0 —

aep Financial investments pty limited australia ordinary 100.0 100.0

aep Financial services holdings pty limited australia ordinary 100.0 100.0

aep holdings nZ limited¹ new Zealand ordinary 100.0 100.0

aep signature holdings pty limited australia ordinary 100.0 100.0

aep signature trust australia ordinary 99.7 99.6

Banksia trust australia ordinary 100.0 100.0

Catd investments pty limited australia ordinary 100.0 —

electronic security pty limited australia ordinary 95.8 —

equity spv pty limited² australia ordinary — 93.9

signature eios pty limited australia ordinary 95.8 —

signature holding Company pty limited australia ordinary 95.8 93.9

signature security group holdings pty limited australia ordinary 95.8 93.9

signature security group limited new Zealand ordinary 95.8 93.9

signature security group pty limited australia ordinary 95.8 93.9

1) deregistration pending2) deregistered

32 businEss combinAtion

a) summary of acquisitionon 19 June 2007, signature security group pty limited acquired the business of the Cactus group limited. as the acquired business was purchased at the end of the financial year, it contributed no revenues or net profit to the consolidated entity.

2007 2006 $’000 $’000

b) purchase consideration

purchase consideration

Cash consideration 1,536 34,631

direct costs relating to the acquisition 212 1,213

total purchase consideration 1,748 35,844

reconciliation of cash movement

Cash consideration 1,536 34,631

less: cash acquired (152) (1,571)

total cash outflow 1,384 33,060

62

AcquirEE’s cArrying fAir vAluE Amount AdJustmEnts fAir vAluE

$’000 $’000 $’000

32 businEss combinAtion continuEd

c) Fair value of net assets acquiredprepayments 5 — 5

inventories 69 — 69

Fixed assets 97 — 97

intangible assets — 1,577 1,577

net assets acquired 171 1,577 1,748

purchase consideration 1,748

Fair value of net assets acquired 1,748

goodwill on acquisition —

33 Auditor rEmunErAtion

during the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:


2007 2006 2007 2006 $’000 $’000 $’000 $’000

audit services

Kpmg australia

– audit and review of financial reports 228,440 203,000 40,500 63,000

228,440 203,000 40,500 63,000

other services

Kpmg australia

– other assurance services — 12,000 — 12,000

– transaction due-diligence services 1,292,380 313,460 1,292,380 —

1,292,380 325,460 1,292,380 12,000

overseas Kpmg Firms

– transaction due-diligence services — 203,390 — 203,390

— 203,390 — 203,390



consolidAtEd

2007 2006 Cents Cents

34 EArnings PEr shArE

Basic earnings per share 43.10 25.69

diluted earnings per share 43.10 25.69

$’000 $’000

reconciliation of earnings used in the calculation of basic earnings per share

profit for the year 43,766 26,207

loss/(profit) attributable to minority interests 103 (41)

total earnings used in the calculation of basic earnings per share 43,869 26,166

reconciliation of earnings used in the calculation of diluted earnings per share

earnings used in the calculation of basic earnings per share 43,869 26,166

non-discretionary changes in earnings arising from dilutive potential ordinary shares — —

total earnings used in the calculation of diluted earnings per share 43,869 26,166

number number of shares of shares

weighted average number of ordinary shares used in the calculation of basic earnings per share 101,794,514 101,851,851

weighted average number of ordinary shares used in the calculation of diluted earnings per share 101,794,514 101,851,851

64


2007 2006 2007 2006 $’000 $’000 $’000 $’000

35 rEconciliAtion of cAsh flows from oPErAting ActivitiEs

net profit for the year after related income tax expense 43,766 26,207 49,378 23,546

depreciation and amortisation 13,934 8,430 18 13

Fair value gains/(losses) on other financial assets through profit or loss (36,849) (4) (964) (4)

interest income recognised on the unwind of discounted share capital receivables (6,377) (19,313) (6,377) (19,313)

investment associated cost write-offs 19,300 5,786 11,545 878

debt issuance cost amortisation 428 — — —

share of profit of associates and joint ventures (596) — — —

intercompany elimination of unrealised profit 500 — — —

Changes in operating assets and liabilities

– (increase) decrease in receivables (5,669) 973 (54,352) 562

– (increase) decrease in inventories (293) (45) (79) —

– (increase) decrease in current and deferred tax assets (58) 30 — 332

– (increase) decrease in other operating assets (787) — (202) —

– increase (decrease) in creditors (557) 4,285 456 (115)

– increase (decrease) in provisions and employee entitlements (8) (994) 41 79

– increase (decrease) in current and deferred tax liabilities 12,294 (828) 12,560 (74)

net cash from operating activities 39,028 24,527 12,024 5,904

36 EvEnts subsEquEnt to bAlAncE dAtE

the sale of the consolidated entity’s investment in veda advantage limited was settled in July 2007 and the proceeds due of $140.2 million have been received. the profit on disposal is included in the financial results for the year ended 30 June 2007.

the on-market share buy-back to acquire up to 5 percent of the Company’s issued shares is continuing. since 30 June 2007, a further 2,124,326 shares have been bought back and cancelled at a cost of $11.3 million. a maximum of 747,000 shares remain to be bought back and cancelled.



in the opinion of the directors of allco equity partners limited (“the Company”):

a) the financial statements and notes set out on pages 31 to 64, and the remuneration disclosures that are contained in pages 26 to 29 of the directors’ report, are in accordance with the Corporations act 2001, including:

i) giving a true and fair view of the financial position of the Company and the consolidated entity as at 30 June 2007 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date; and

ii) complying with australian accounting standards and the Corporations regulations 2001; and

b) the remuneration disclosures set out on pages 26 to 29 of the directors’ report comply with australian accounting standard aasB 124 related party disclosures and Corporations regulations 2001.

c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

the directors have been given the declarations by the chief executive officer and chief financial officer required by section 295a of the Corporations act 2001 for the financial year ended 30 June 2007.

signed in accordance with a resolution of the directors.

m A dErwinManaging Director

dated at sydney this 15 day of august 2007.

direCtors’ deClaration

66

report on the financial report and aasB 124 remuneration disclosures contained in the directors’ reportwe have audited the accompanying financial report of allco equity partners limited (the Company), which comprises the balance sheets as at 30 June 2007, and the income statements, statements of changes in equity and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 36 and the directors’ declaration set out on pages 31 to 65 of the group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

as permitted by the Corporations Regulations 2001, the Company has disclosed information about the remuneration of directors and executives (remuneration disclosures), required by australian accounting standard aasB 124 related party disclosures, under the heading “remuneration report” of the directors’ report and not in the financial report. we have audited these remuneration disclosures.

Directors’ responsibility for the financial report the directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with australian accounting standards (including the australian accounting interpretations) and the Corporations Act 2001. this responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. in note 1(a), the directors also state, in accordance with australian accounting standard aasB 101 Presentation of Financial Statements, that the financial report of the group, comprising the financial statements and notes, complies with international Financial reporting standards but that the financial report of the Company does not comply.

the directors of the Company are also responsible for the remuneration disclosures contained in the directors’ report.

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 judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. in making those

risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

we performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and australian accounting standards (including the australia accounting interpretations), a view which is consistent with our understanding of the Company’s and the group’s financial position and of their performance.

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:

a) the financial report of allco equity partners limited is in accordance with the Corporations act 2001, including:

i) giving a true and fair view of the Company’s and the group’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and

ii) complying with australian accounting standards (including the australian accounting interpretations) and the Corporations regulations 2001.

b) the financial report also complies with international Financial reporting standards as disclosed in note 1(a).

Auditor’s opinion on AASB 124 remuneration disclosures contained in the directors’ reportin our opinion the remuneration disclosures that are contained in section 2 of the directors’ report comply with australian accounting standard aasB 124 Related Party Disclosures.

kPmg

chris whittinghAmPartner

sydney15 august 2007

independent auditor’s report to thE mEmbErs of Allco Equity PArtnErs limitEd


the shareholder information set out below was applicable as at 31 July 2007.

distribution of Equity sEcuritiEs

range total holders number of shares % of issued shares

1-1,000 344 232,691 0.24

1,001-5,000 880 2,403,752 2.47

5,001-10,000 326 2,615,518 2.68

10,001-100,000 277 7,694,495 7.89

100,001 and over 48 84,559,802 86.72

total 1,875 97,506,258 100.00

the number of shareholders holding less than a marketable parcel of shares is 17.

lArgEst shArEholdErs

the names of the 20 largest registered holders of ordinary shares are listed below:

name number of shares held % of issued shares

lJCB investments pty ltd 23,720,409 24.33

aepl nominees pty limited 10,185,185 10.45

monetti pty limited 6,233,994 6.39

amp life limited 5,419,261 5.56

uBs nominees pty ltd 4,917,297 5.04

Jp morgan nominees australia limited 4,103,105 4.21

Cogent nominees pty limited 3,152,440 3.23

Citicorp nominees pty limited 2,936,824 3.01

Bond street Custodians limited 2,750,000 2.82

hsBC Custody nominees (australia) limited – a/C 3 2,672,069 2.74

national nominees limited 2,292,159 2.35

hsBC Custody nominees (australia) limited 1,862,899 1.91

suncorp Custodian services pty limited 1,640,806 1.68

Cogent nominees pty ltd 1,246,163 1.28

anZ nominees limited 1,232,833 1.26

hsBC Custody nominees (australia) limited – gsi eCsa 1,223,000 1.25

hsBC Custody nominees (australia) limited – gsCo eCa 1,061,000 1.09

morgan & Banks investments pty limited 1,000,000 1.03

argo investments limited 830,000 0.85

equitas nominees pty limited 718,000 0.74

substAntiAl shArEholdErs

the number of shares held by substantial shareholders as at 31 July 2007 as disclosed in substantial shareholder notices received by the Company was:

name number of issued shares held % 1

lJCB investments pty ltd, greg woolley and related entities 24,477,076 25.10

allco Finance group limited and related bodies 19,403,745 19.90

Challenger Financial services group limited and related entities 8,641,381 8.65

amp limited 6,960,722 7.59

uBs nominees pty ltd and related bodies corporate 7,055,253 7.24

david raymond Coe, michelle terese Coe and monetti pty limited 5,850,662 6.38

deutsche Bank ag 5,041.080 5.50

1) percentage calculations are based on the number of shares on issue at the time the notices were lodged by the shareholder.

shareholder inFormation

68

buy-bAckthe Company commenced an on-market share buy-back of its ordinary shares on 8 June 2007. the Company is seeking to buy-back up to 5 per cent of its issued shares. information on the status of the buy-back is contained in notes 25 and 36 of the financial statements.

voting rightsshareholders are encouraged to attend the annual general meeting. however, when this is not possible, they are encouraged to use the proxy form by which they can express their views.

every member present at a general meeting, their proxy or shareholder’s representative has one vote on a show of hands, except where a shareholder appoints two proxies, in which case the shareholder may specify the proportion or number of votes which each proxy may exercise. if no proportion or number is specified, each proxy may exercise half of the shareholder’s votes.

AmEndmEnts to thE comPAny’s constitutionon 6 march 2007 shareholders voted to amend the Company’s Constitution. the amendments limit the level of foreign ownership in the Company whilst it has a direct or indirect interest in an entity making a takeover bid for qantas airways limited (“qantas”) or a relevant interest in qantas shares representing 3% or more of the issued share capital of qantas. at the date of this report, neither of these conditions are satisfied in relation to the Company. however, the shareholding restrictions remain in the Constitution and will apply if either of these conditions is satisfied in the future.

in summary, the shareholding restrictions, should they apply, require that:

a) the Company must be and remain an australian person for the purposes of paragraph (h) of the definition of that term in section 7(7) of the qantas sale act;

b) no person may become or remain a member of the Company if as a consequence the Company would cease to be an australian person in accordance with (a) or be or become a Foreign person (as those terms are defined in the Constitution (as amended));

c) members are required to give, and the Company is permitted to request members provide, certain information to enable the Company to ensure that the foreign ownership restrictions continue to be met; and

d) the directors have powers to regulate membership of the Company so as to ensure that paragraphs (a) and (b) respectively are complied with at all relevant times.

Full details of the shareholding restrictions, and the actions the directors are empowered to take to ensure they are complied with, are contained in the amended Company Constitution. a copy of the Constitution (as amended) is available from the Company secretary upon request.

shArEholdEr EnquiriEsshareholders with enquiries about their shareholdings should contact the Company’s share registry:

Computershare Investor services Pty limitedyarra Falls452 Johnston streetabbotsford, viC 3067australia

telephone: (03) 9415 4000Fax: (03) 9473 2500

please mail all share registry correspondence to gpo Box 2975, melbourne, victoria 3001

please include your shareholder reference number (srn) or holder identification number (hin) in all correspondence to the share registry.

Change of addressit is important for shareholders to notify the share registry in writing promptly of any change of address. as an added security measure, please quote your shareholder reference number and your old address.

Investor Informationthe Company maintains a website at www.allcoequitypartners.com.au where company information is available and a service for any queries is provided. For any further queries, please contact the Company on (03) 8626 9800 or email enquiries to [email protected]

stock exchange listingallco equity partners limited ordinary shares are quoted on the australian securities exchange (asX Code: aep).

annual general Meetingthe annual general meeting of allco equity partners limited will be held on wednesday 26 september 2007 at 9.30am, in the essex rooms, shangri-la hotel, 176 Cumberland street, the rocks, sydney nsw. Full details are contained in the notice of meeting sent to all shareholders.

shareholder inFormation

de

sig

nd

av

ey

chAirmAndavid Coe

dirEctorsmichael Broganmarcus derwinrobert moranian tsicalasgregory woolleypeter yates

sEcrEtArydavid neufeld

rEgistErEd officElevel 35101 Collins streetmelbourne viC 3000

telephone: 03 8626 9800Fax: (03) 8626 9811

[email protected]

sydnEy officElevel 29gateway1 macquarie placesydney nsw 2000

telephone: (02) 9255 4100

thE mAnAgErallco equity Partners Management Pty limitedlevel 24gateway1 macquarie placesydney nsw 2000

telephone: (02) 9255 4100

[email protected]

shArE rEgistryComputershare Investor services Pty limitedyarra Falls452 Johnston streetabbotsford, viC 3067

telephone: (03) 9415 4000Fax: (03) 9473 2500

please mail all share registry correspondence to gpo Box 2975, melbourne, victoria 3001

AuditorKPMg10 shelley streetsydney nsw 2000

stock EXchAngE listingallco equity partners limited shares are listed on the australian securities exchange (asX Code: aep)

wEbsitE AddrEssEsallco equity Partnerswww.allcoequitypartners.com.au

signature security groupwww.signaturesecurity.com

Trans Tasman Collectionswww.baycorp.com.au

Corporate direCtorY

www.allcoequitypartners.com.au

allco equity partners - oceania capital · 2016. 5. 16. · allco equity partners limited annual...

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