The extract above was drawn from the Chairman s Report in Computershare s first Annual Report in 1994, and continues to have relevance today.

Transcription

1 AR04 ANNUAL REPORT 2004

2 I wish to emphasise to all our shareholders, the effort that has been made by all our staff and the spirit in which the Computershare team deals with problems and projects on a day-to-day basis. We will continue to strive and look forward to the many challenges in the future to ensure that your confidence in Computershare was not misplaced. The extract above was drawn from the Chairman s Report in Computershare s first Annual Report in 1994, and continues to have relevance today. Over the past decade, we have met the challenges that came with the high rate of acquisitive growth and from managing the company through one of the most serious global downturns in our industry. Many of our investors and staff maintained their faith in the company through the good times and the bad and I d like to think that their confidence has not been misplaced in results that, this year, have given a significant boost to shareholder value together with an increased yield. The company has gone through a metamorphosis over the course of the decade and is a better company for it. Our transition from global share registrar to an organisation that is now able to blend a wide range of products and services that create end-to-end solutions for companies, shareholders, employees and customers, separates us from our peers and puts us at a unique competitive advantage. Much has changed, but much has stayed the same. Staff, in all offices throughout the world, continue to give of their best; and as the Chairman said a decade ago, with their support we will continue to look forward to the many challenges in the future and to ensure that your confidence in Computershare was not misplaced. Chris Morris CEO ANNUAL GENERAL MEETING The Annual General Meeting will be held on 10 November 2004 at 10:00 am in our Conference Centre Yarra Falls, 452 Johnston Street, Abbotsford. The Notice of Meeting and Proxy Form are separate items accompanying this Annual Report. Computershare Limited ABN

3 Contents Financial Highlights 2 Performance Indicators 3 Chairman and CEO s Review 4 Management Discussion and Analysis 8 Technology Services Global Report 11 Pepper Global Report 14 etree From Envelope to Environment 15 REGIONAL REPORTS Asia Pacific 16 North America 24 Europe, Middle East and Africa (EMEA) 33 Senior Executive Management Group 40 DETAILED FINANCIAL REPORT 43 Corporate Governance Statement 44 Directors Report 53 Auditor s Independence Declaration 62 Statements of Financial Performance 63 Statements of Financial Position 64 Statements of Cash Flows 65 Notes to the Financial Statements 66 Directors Declaration 124 Statement of the CEO and CFO 125 Independent Audit Report 126 Shareholder Information 128 Office Locations 130 Corporate Directory 133 COMPUTERSHARE Annual Report

4 Financial Highlights JUNE 2004 JUNE 2003 % CHANGE PROFIT (A$000) Sales revenue 871, , % Earnings before interest, depreciation, amortisation and tax* 183, , % Profit attributable to shareholders after tax* 77,777 41, % BALANCE SHEET (A$000) Total assets 1,187, , % Total shareholders equity 604, , % PERFORMANCE INDICATORS Basic earnings per share (Normalised) cents Basic earnings per share cents Return on shareholders equity** 12.9% 7.0% Net debt to equity 36.6% 13.2% Earnings before interest, depreciation, amortisation and tax/interest** 21 times 16 times Staff numbers as at 30 June 7,995 5,029 * Excluding non-recurring items ** Normalised 2 COMPUTERSHARE Overview 2004

5 Performance Indicators Normalised Basic Earnings per Share Normalised Basic Earnings per Share Cash Flows from Operations A$M (cents per share) (pre-goodwill cents per share) Net of Capital Expenditure Sales Revenue A$M EBITDA A$M Total Assets A$M REGIONAL ANALYSIS Total Revenue EBITDA Return on Equity % Asia Pacific 32% North America 40% Asia Pacific 35% North America 39% 9 9.6% 6 7.0% 3 EMEA 28% EMEA 26% COMPUTERSHARE Annual Report

6 Chairman and CEO s Review INTRODUCTION Computershare is the largest and only provider of global shareholder and employee plan management services administering more than 70 million shareholder accounts for over 13,000 corporations across twelve countries on five continents. Founded in Australia in 1978, Computershare today employs almost 8,000 people worldwide. A full suite of products and services are integrated to deliver full-service solutions for company share registers and employee share and stock option plans, document design and communication, strategic investor relations and market intelligence, and a variety of sophisticated trading technologies for financial markets. Computershare s competitive advantages can be summarised as follows: The business is dedicated to the provision of full-service solutions to issuers and their stakeholders The provision of unique end-to-end solutions to meet all the needs of issuers and their stakeholders The company is the only global provider of full solutions for stakeholder services The accumulation of significant value in our intellectual property from 25 years in the industry; and Through its unique global spread, the company can apply economies of scale through its ability to spread costs across over 70 million shareholders. THE YEAR IN REVIEW The financial results this year have delivered substantial improvement across all metrics within the business, including earnings per share, revenues, cash generation and other balance sheet measurements. Normalised earnings per share increased by 61% (pre-goodwill and post preference share dividend and outside equity interests) from to cents per share and total revenues increased by 26%, from $708.6 million to $894.7 million, against a decline in operating expenses of 1% (excluding the cost of sales and the cost contribution of businesses acquired during the year). Strong cash flows, that improved by 79% to $136.1 million, provided the company with the ability to increase the final dividend to 5 cents per share, fully franked, making total dividends for the year of 8 cents per share (a 60% increase on FY 2003). The positive results posted for the financial year were delivered in a global environment that showed no sign of sustained recovery in corporate action or M&A activity in North America and Europe. This was in contrast to the Asia/Pacific region, where market conditions strongly improved throughout the year. Equally, interest rates in the northern hemisphere, where the majority of margin income is generated, remained relatively flat throughout the period. Underpinning this year s results is the success of an ongoing strategy to maintain control over costs and to deliver innovative technology to improve efficiency and service quality. This is combined with a commitment to continue to strengthen our management teams in all regions and to seek out growth, particularly in North America. The significant improvement in profitability in North America, from 27% to 39% of earnings before interest, depreciation and amortisation (EBITDA) is largely a result of the acquisition and successful integration of Georgeson Shareholder Communications that was completed in December This acquisition is the most significant in the company s recent history and paves the way for continuing growth throughout all regions, both in terms of existing Georgeson business and the cross-sell opportunities into other Computershare businesses. The range of acquisitions successfully completed during the year has further increased the breadth of products and services that can be offered and has created an opportunity to re-position the company away from the narrow definition of a global share registrar to one that more readily recognises the range of its services. The capability now exists for blending these products and services to create full-service solutions for companies, their shareholders, employees and customers. This strategy is well underway in all regions and is already having an encouraging impact in North America where the improvements in cross-selling successes are already flowing through to revenue and profit. CAPITAL MANAGEMENT On 19 December 2003, the company announced an on-market buy-back up to a maximum of 250,000 of its issued reset preference shares. On 19 March 2004, the company announced its intention to buy back a further 500,000 shares (a total of 750,000). As at 13 September 2004 the company had bought back 498,671 reset preference shares for a total consideration of $51,886,501 (an average price of $103.79). On 26 May 2004, the company announced an on market buy-back of up to 27,500,000 ordinary shares in issue. As at 13 September 2004 the company had bought back 15,970,000 shares for a total consideration of $50,748,917 (an average price of $3.18). On 19 August 2004, the company announced a final dividend of 5 cents per share, fully franked, making a full year return of 8 cents per share, fully franked. On 19 August 2004, the company announced its plans to convert all outstanding reset preference shares to ordinary shares under the terms and conditions of their issue. 4 COMPUTERSHARE Our Results 2004

7 OPERATING ACHIEVEMENTS ASIA/PACIFIC A significant improvement in market conditions, particularly in Australia and Hong Kong, underpinned an increase in revenue of 32% to $283.2 million and in EBITDA of 18% to $63.3 million. Gains in the region were further assisted by significant improvements in productivity, accuracy and efficiency that were driven, in part, by the introduction of Workflow and Electronic Data Capture technologies that have delivered a 65% improvement in productivity over the last 18 months. The winning of the IAG registry contract with over one million shareholders, and the presentation of the Australian Teleservices Association of Victoria and Tasmania Call Centre of the Year award, were the stand-out achievements for the year. Document Services, which provides for the white paper and electronic communication needs of companies, continues to show strong growth in profitability, particularly in the commercial (non-registry) area of its business and Plan Managers also experienced solid growth with the resulting improvement in their contribution to the region s profitability. The strong flow of initial public offerings from mainland China into Hong Kong continued during the year and resulted in the business winning approximately 83% in terms of capital raised. The New Zealand business has maintained its market share and continues to provide a solid contribution to profit for the region, while the joint-venture business in India with Karvy has produced excellent results that exceeded our initial forecasts. NORTH AMERICA A successful year delivered the most significant improvement by any region in their contribution to EBITDA that increased from 27% to 39% of the total. This was achieved despite the continuing flat market conditions and no real improvements in interest rates. These results have confirmed continued growth in the plans management, document services and corporate trust businesses in the region. A great deal of effort was focused on integration tasks following the acquisition of Georgeson Shareholder Communications and Transcentive Inc. As a direct consequence, many of the planned revenue and cost synergies have been realised with more to come in the next financial year. Through both acquisitions, the company has inherited highly skilled and motivated staff, who have added strength to Computershare s management team, as well as an energetic sales team who have shown the way with their early successes in cross-selling and up-selling the company s wide range of products and services. Regulatory changes in Canada (NI ) that become effective on 1 September 2004 will result in a larger proportion of mailings of proxy forms being managed by the company through its registry service provider. This regulatory change has the potential to add significantly to the services provided by both the share registry and document service businesses. EUROPE, MIDDLE EAST AND AFRICA (EMEA) The region provided an improved contribution to profitability this year with a 9% increase in both revenue and EBITDA. These results have been delivered against a backdrop of continuing flat market activity and an intensely competitive environment in the UK. By way of response, the management team in the UK sought to explore alternative avenues to create additional annuity revenue; a strategy that has proved to be successful with their appointment by HM Treasury to manage the Gilts (Government bonds) register and their recognition by the Department of Health as the preferred supplier for the register of community interests in the management of local hospitals. During the course of the year, the business in South Africa has rationalised and fine-tuned its processes and improved the quality of its services, resulting in a significant turnaround from last year s loss to a positive contribution to the company s profitability. The acquisition of the remaining shares from Deutsche Börse and the transfer of that business under the management of the Pepper team in Munich has been a great success, with this business beginning to operate profitably on our own software platform. Document Services has continued to grow, with around 42% of total sales revenue coming from non-registry related contracts. Ireland has maintained its market share and has made an improved contribution to the region s profitability this year. An increase to 45% in the company s stake in the joint venture with the National Registry Company of Russia is expected to help extract the benefit from future consolidation in this important, growing market. Despite this being a recent joint venture, this business has already made a positive contribution to the region at the EBITDA level this year. The full acquisition of Pepper Technologies AG has added considerable depth to the company s employee and shareholder relationship services that have been deployed in all key markets. Please refer to page 14 for a full description of these services. COMPUTERSHARE Annual Report

8 Chairman and CEO s Review (cont d) TECHNOLOGY ADVANCES Technology remains the key to achieving improvements in service quality and efficiency and extracting sustainable savings in our businesses throughout the world. Notable achievements this year include the design, implementation, enhancement and maintenance of electronic data capture and document storage systems in all regions. Enhancements to our web site and our telephony platform make it easier for shareholders to get information and initiate changes automatically. Shareholders gain the benefit of a 24/7 access for enquiries on their shareholding and can initiate, for example, a change of address. At the same time the company benefits through a reduction in the load on contact staff. Improved user acceptance arising through these improvements has resulted in a significant rise in the number of transactions processed through these services ACQUISITIONS Acquisitions during the year were as follows: On 15 October 2003, the acquisition was announced of Georgeson Shareholder Communication Inc for a total consideration of A$189.6 million. The acquisition was completed on 12 December This acquisition is a key component in our strategy to deliver a full range of services and solutions to our clients throughout the world. On 31 December 2003, Computershare moved to full ownership of the previous associate business of Deutsche Börse Computershare GmbH. On 2 February 2004, the purchase of 50% share in an Indian share and mutual funds registry, owned and operated by Karvy Consultants, was announced. India is recognised as one of the fastest growing emerging markets and, through this acquisition, the company has positioned itself to gain the full advantage of this growth. By establishing a presence in India the company is also able to introduce its full range of services; offering new opportunities for cross-selling and up-selling to clients. On 3 February 2004, the move to the full ownership of Pepper Technologies AG for a total consideration of A$31.6 million, was announced. The services that are now provided raise the bar on the quality and effectiveness of communications between companies and their shareholders, employees and customers. On 19 February 2004, the acquisition of US-based Transcentive Inc was announced, for a total consideration of A$46.0 million. Transcentive s technology, together with the skill of existing staff, will further strengthen the prominent position of the plan management business in the US, as well as providing an opportunity to export its model to other markets. On 4 June 2004, the company announced a strategic alliance with The NASDAQ Stock Market to provide IRtrack products to NASDAQ-listed companies. On 4 June 2004, Document Services purchased the E-Business for Enterprise (EBE) software platform from Technology Partners Group (TPG). Key EBE development staff and the associated customer contracts have been transferred to Computershare as part of this acquisition. On 24 June 2004, a further 15% stake in the Russian-based National Registry Company of Russia was acquired, taking its total holding to 45%. STRATEGIC EXECUTIVE MANAGEMENT TEAM During the course of the year, Dr Oliver Niedermaier joined the team with responsibility for strategic corporate development. Full details of the members of this group can be found on pages of this report. BOARD CHANGES On 11 November 2003, the company announced the retirement from the Board of Mr Peter Griffin. His retirement was foreshadowed in the Concise Annual Report 2003, where his significant contribution to the guidance of the company in all areas was acknowledged. We again thank him for his valued contribution. On 18 August 2004, the company announced the appointment to the Board of Dr Markus Kerber as a nonexecutive director. Dr Kerber brings a strong understanding of European financial and technology markets, having previously held senior positions with Deutsche Bank and S.G.Warburg & Co. Ltd. In recent years he has played an integral role in the acquisition and internationalisation strategy of GFT Technologies AG, where he remains a Supervisory Board member. GFT Technologies AG is a leading technology company for integrated e-business solutions in Europe. Dr Kerber holds a Masters Degree in Business and a PhD in Political Science from Hohenheim University in Germany. We are delighted to have Dr Kerber join the Board and note that his addition will further strengthen the company s European board representation, following the appointment of Tom Butler last year. Dr Kerber is based in Berlin, Germany. 6 COMPUTERSHARE Our Results 2004

9 OUTLOOK Overseas markets, particularly in the US and the UK, are not showing signs of the increased activity that was experienced in the Australian market in FY It is difficult to predict with any certainty the timing of a recovery in these markets. If the signs of pressure for a lift in interest rates materialise (particularly in the northern hemisphere), there will be a benefit flowing directly through to the bottom line. It is expected that the cost synergies from acquisitions will flow through to FY 2005, providing confidence that the growth in the plans management and document services businesses will continue throughout FY The company expects to pursue its strategic objectives through expanding its range of services across all geographies and through seeking out opportunities for both organic and acquisitive growth. CONCLUSION The past year has seen a transformation in many of the company s businesses. Service quality issues have been replaced by consistently high satisfaction ratings in independent surveys. Staff throughout the world have faced up squarely to the challenges placed before them and we are a better company as a direct result. On behalf of the Board, we would like to congratulate and extend our sincere thanks to all staff. We would also like to thank our shareholders for their continuing support for the company. COMPUTERSHARE Annual Report

10 Management Discussion and Analysis Computershare delivered substantial improvements across all financial metrics in FY 2004, including earnings per share, revenues, cash generation and other balance sheet measurements. Normalised earnings per share increased by 113% from 6.05 cents per share to cents per share. Excluding amortisation of goodwill, earnings per share rose from to cents per share. Normalised net profit after tax was $81.4 million, an increase of 98% over the previous year s normalised net profit after tax. Net profit after outside equity interests was $80.0 million. A final dividend of 5 cents per share, fully franked, takes total dividends for the year to 8 cents per share, fully franked, compared with 5 cents per share last year. Total operating expenses increased 24% on last year including the operating costs of businesses acquired during the year. Excluding these costs, and cost of sales, operating expenses declined by 1.0%, reflecting the costs savings from the previous period s restructuring efforts and a continued focus on cost control. Operating Costs Breakdown Corporate 4% Occupancy 7% Other Direct 10% FINANCIAL PERFORMANCE Total revenues increased by 26% to $894.7 million, including $140.4 million contribution from businesses acquired during the year. Excluding the revenue results of those acquisitions, total revenue growth was 6% on last year. Sales revenue increased 25% to $871.2 million. Analysis of sales revenue highlights the diverse income streams of the Computershare business. Maintenance revenue for our core registry was consistent with the previous corresponding period. Corporate actions revenue increased, reflecting the continued improvements in market conditions, particularly in the Asia Pacific region. Mutual funds is a new revenue stream following the acquisition of Georgeson Shareholder Communications and Karvy Consultants. The growth in Investor Relations Services, Plan Managers and Document Services revenues reflects the continued growth in these businesses together with the contributions of businesses acquired during the year. Margin income declined due to lower interest rates and unfavourable translation rates. Operating Costs A$M Personnel 44% Cost of Sales 22% Technology 13% Normalised EBITDA was $183.4 million, an increase of 37% on the previous year. Borrowing costs increased 8% to $9.0 million, reflecting higher debt levels primarily to fund the acquisition of Georgeson Shareholder Communications. Depreciation and amortisation increased 6% to $64.5 million. Depreciation declined 11% to $22.2 million due to the sale of the UK premises. Amortisation increased 18% to $42.3 million due to goodwill from acquisitions. The headline effective tax rate for the year ended 30 June 2004 is 24.4% (30 June %). The normalised headline effective tax rate adjusted for one-off amounts and non-recurring items, for the period ending 30 June 2004 is 29.9% (FY 2003: 20.7%). If the Australian dollar had remained at FY 2003 levels, revenue would have been reported to be $978 million; a constant dollar increase over FY 2003 of 38%; and earnings per share would have been one cent higher, at 20 cents per share COMPUTERSHARE Our Results 2004

11 REGIONAL PERFORMANCE Regionally, revenues were derived from Asia Pacific 32%, North America 40% and Europe, Middle East and Africa (EMEA) 28%. EBITDA was derived from Asia Pacific 35%, North America 39% and EMEA 26%. The North American EBITDA contribution has increased from 27% at June 2003, reflecting the improved profitability of the region together with the contribution from Georgeson Shareholder Communications and Transcentive Inc. The Asia Pacific region contributed revenues of $283.2 million and EBITDA of $63.3 million. All businesses, except Hong Kong, experienced growth during the year. In particular, Document Services business achieved higher margins on increased corporate actions work. Hong Kong performed in line with last year despite a slow first half. The Asia Pacific results include the contribution of Computershare Karvy Private Limited, since its acquisition in February The EMEA region contributed revenues of $252.0 million and EBITDA of $48.3 million. The results of the UK businesses were generally down on last year, reflecting the continued competitive market pressures. However, the South African business generated significant profit improvement in FY The EMEA results include the contribution of Pepper Technologies AG since its 100% acquisition in March The North American region contributed revenues of $356.5 million and EBITDA of $71.8 million. Plan Managers and Document Services delivered significant profit improvement. The North America results include the contribution of Georgeson Shareholder Communications since its acquisition in December 2003 and Transcentive Inc. in February INVESTMENT ANALYSIS Technology expenditure for the year was $92.1 million, in line with last year. Development expenditure of $41.1 million continued to be expensed in line with Computershare policy. The savings in external bureau fees have been offset by additional technology costs from newly acquired businesses during the year. Capital expenditure totalled $21.4 million, representing an increase on FY 2003, reflecting the growing business. Despite this increase, capital expenditure was still below depreciation. Capital expenditure included occupancy upgrades of $4.2 million, technology infrastructure of $14.0 million and Document Services equipment of $2.7 million. Capital Expenditure A$M Computershare continued to expand globally with the acquisition of: Georgeson Shareholder Communications for $189.6 million A 50% interest in Karvy Computershare Private Limited for $11.3 million; and Transcentive Inc. for $46.0 million. Computershare also moved to full ownership of previous associate businesses: Deutsche Börse Computershare GmbH; and Pepper Technologies AG for $30.3 million. Computershare acquired 498,671 of its reset preference shares for a total consideration of $51.9 million (an average price of $ per share). Computershare also acquired 16.0 million of its ordinary shares through an on-market buy-back, for $50.7 million (an average price of $3.18 per share). COMPUTERSHARE Annual Report

12 Management Discussion and Analysis (cont d) BALANCE SHEET AND CASH FLOWS Total assets were $1,187.1 million, financed by shareholders funds totalling $604.9 million. The increase in shareholders funds is the result of increased profits, partially offset by increased ordinary dividends and reduced share capital from the preference and ordinary share buy-backs. Cash flows from operations were $136.1 million, an improvement of $59.9 million (79%) compared to last year. Debtor days outstanding continued to improve to 57 days, from 61 days in the prior corresponding period. Net borrowings increased by $143.9 million to $221.6 million, to fund the share buy-back, increased dividends and acquisitions. Gearing net debt to equity increased from 13.2% to 36.6%. Cash Flows from Operations A$M During FY 2004, Computershare managed funds of between $2.7 billion and $4.1 billion. Our strategy is to minimise downside risk in the current low interest rate environment. 37% of funds are not exposed to interest rate movements and effective hedging is in place for 59% of the remaining exposed funds POST BALANCE DATE On 3 August 2004, Computershare announced the acquisition of New York-based Alamo Direct Mail Services Inc, a company specialising in print, mail, tabulation and proxy solicitation services to the mutual fund industry in North America, for a consideration of US$15.5 million (A$22.5 million) and contingent consideration of US$7 million (approximately A$10 million) that is subject to meeting specified hurdles over an initial three year period. On 19 August 2004, Computershare announced the conversion of the company s reset preference shares into fully paid ordinary shares, effective 30 September On 3 September 2004, the acquisition of UK-based Flag Communications was announced. Working Capital Management Receivable Days Payable Days COMPUTERSHARE Our Results 2004

13 Technology Services Global Report BACKGROUND Organised on global rather than regional lines, Technology Services has responsibility for three crucial components innovation, systems maintenance, and technology infrastructure that universally support Computershare s businesses as well as their clients and stakeholders. Technology Services provides the glue that binds our businesses together to create cost-effective, reliable solutions across businesses and across regions. Added to the economic and service quality benefits, technology also provides an important line of differentiation from our competitors. THE YEAR IN REVIEW The projects undertaken during the course of the year reaped the benefits of a strategy that maintained a sharp focus on aligning IT costs with the strategy of the related business and in obtaining engagement by the businesses in this strategy. In this way a more effective benefit is achieved for every technology dollar spent and better quality systems are delivered that more closely align to business needs. Technology costs, excluding costs associated with acquisitions, were broadly consistent with last year at $84.4 million. During the course of the financial year, technology staff worldwide have refined existing systems and implemented new systems, delivering opportunities for improved efficiencies that translate into better service quality and standards for clients and stakeholders. The following paragraphs describe the most significant of these technology projects. WORKFLOW AND ELECTRONIC DATA CAPTURE A considerable range of transactions are driven by physical paper that comes from shareholders. This can be either by way of a letter requesting changes to a registered address, to the more complex applications for shares in, for example, a rights issue. Computershare has developed powerful document imaging and processing systems known as EDC (Electronic Data Capture) and Workflow. These systems have been designed to manage processing of large volumes of requests received via mail, fax, and telephone. To date, Computershare has deployed these systems in Australia, USA, Canada, United Kingdom and South Africa and approximately 12 million transactions were processed in these systems during Importantly, the existence of EDC and Workflow, as an integrated transactional processing solution, is unique in the registry marketplace. Documents processed via EDC and Workflow are stored within Computershare s document storage system, which retains the images and data of these transactions so that they can be recalled and viewed. Internally, the document viewer is used by call centre and support staff, to assist in answering shareholders questions relating to work processed on their behalf. Investors and companies are also able to access many of these documents themselves via the web using our Issuer Online product. Computershare understands the value of continuous process improvement and has a strong commitment to developing state of the art systems to manage all aspects of document processing on behalf of its clients. The EDC and Workflow systems deliver sustained productivity and quality improvements and build a solid foundation that allows best practice to be implemented across the globe. INVESTORPHONE Computershare s Australian, UK, US and Canadian call centres are supported by Computershare s InvestorPhone telephony platform. InvestorPhone incorporates leading edge technologies from around the world, to deliver the host of call centre tools and facilities necessary to run leading edge contact centres. The platform provides flexible Interactive Voice Response (IVR) self-service functions together with intelligent software that automatically routes calls to the next available member of staff. One of the key features of InvestorPhone is that it provides callers with the ability to get information without the need to speak to call centre staff. In Australia for example these include: Stock price quotes (real time or 20 minute delayed) Holding balances Details of current and previous dividend payments Information about buying and selling shares Franking and tax information; and Forms requests. INTERNET SERVICES In many of Computershare s markets, the wide range of services provided to companies, their employees and shareholders meet or exceed industry standards on user interface security. During the course of the past year there has been an increased demand for electronic application of initial public offerings; in Australia, Promina Group and Virgin Blue are examples of this. The Investor Centre has been revamped, leading to a 300% increase in transactions processed through this service. The creation of integrated online registration for the etree initiative and the launch of the Australian and Canadian versions of Employee Online further enhance these services. COMPUTERSHARE Annual Report

14 Technology Services Global Report (cont d) Enhancements have been implemented throughout the global business, that extend the scope of self-service transactions available to shareholders and employee plan members. Issuer Online is a service for clients that provides them with ready access to their share registers. Enhancements implemented this year in Australia enable detailed management information reports to be immediately available and delivered in an easy to use format. Global IRtrack is a web-enabled service, tailored for the needs of investor relations managers, that provides detailed information on investment funds and their managers. Designed and implemented by Technology Services, IRtrack will be implemented in all key markets and has been adopted as the system of choice by NASDAQ. EMPLOYEE SHARE SCHEME TECHNOLOGY Technology Services has provided a wide range of software enhancements to drive greater efficiencies and improved levels of service in support of the plans management businesses worldwide. Following its successful deployment in the US and Australia, a service was introduced in the UK that allows employees who have options to use our web-service to both exercise their options and to sell them on the date of their exercise. This has been used successfully by a number of clients, providing their employees with a much improved service. The North American region has implemented web-enabled services and IVR that allows shareholders to conduct transactions online, further reducing costs to the business. Over 50% of Canada s total plan participants (60,000) now have access to their accounts online. GLOBAL REPORTING Multi-national clients listed on more than one stock exchange have to maintain share registers in each country in which they are listed. A unique benefit for these international clients is the ability to provide a single view of these share registers. This is made possible because they are all maintained on Computershare s technology platform that is brought together through innovative web technology, delivering a consolidated view of international share registers to our multi-national companies. It is therefore pleasing to report that the move occurred without any interruption to service and without any degradation in systems. INTERNAL APPLICATIONS In addition to developing technology to aid the global businesses, Technology Services also provides systems and solutions to bring efficiencies into the internal administration. Many of these technologies are applied globally and include the billing system, a new client relationship management system, HR system and many others that either help to manage the service to clients or help in the general administration of the company. NEW MARKETS IN THE UK REGION Computershare has expanded its service offering to a number of new sectors in the UK region. These have been supported by new products developed by the technology group and include: Enhancing the registry system to provide back office facilities for the UK Gilts Market on behalf of the Bank of England Expanding the Internet and IVR service to capture interest in a financial product for a high street retailer; and Enhancing the registry system to be able to operate National Health Service member registers on behalf of various trust organisations. INTEGRATION OF ACQUISITIONS IN NORTH AMERICA The transition and integration of Georgeson Shareholder Communications and Transcentive from an infrastructure perspective (desktops, networks, etc) has been successfully completed. Work has continued with the business lines to identify synergies and opportunities in applications and services. To date appreciable savings have been realised, as well as identifying services that were being outsourced and are now performed in-house including cheque printing. GLOBAL HEADQUARTERS In April 2004, the move to our new global headquarters at Yarra Falls in Johnston Street, Abbotsford was completed. The technical complexities of moving hardware that supports 16 million shareholder accounts and the technology infrastructure necessary to support well over 1000 staff cannot be underestimated. 12 COMPUTERSHARE Global Reports 2004

15 MARKETS TECHNOLOGY The Year in Review Computershare Markets Technology provides the most advanced software systems for automated trading, order routing, real time surveillance of market activity, and posttrade clearing and settlement. More than fifty organisations now critically depend upon Computershare s software in their day-to-day business operations; the largest markets technology customer base in the world. The relationship with ICAP plc, the world s largest interdealer broker, continued to expand, consolidating our role as one of their key technology providers. Several projects were completed for innovative extensions to the X-stream technology, which is used by ICAP for assisting interest rate derivative trading under the name i-swap. ICAP has now connected 39 European banks to i-swap, with a further ten connections expected in the coming year. ICAP has committed publicly to initiating electronic matching on this platform in September; a significant development in the international capital markets. The purchase of the software assets of a competitor in receivership included an undertaking to provide support to existing customers; and this has been rewarded with the conclusion of support contracts with nearly all these customers. A key strategy for these clients was to improve the quality of their software. This was achieved by introducing proper software disciplines and integrating existing business practices; all delivered through the development team in Calgary and the support office in Dubai. The results speak for themselves, with five clients ordering upgrades to the latest version and several more continuing to express interest. Significant Transactions Markets technology has extended the licence agreements with ICAP in the UK for a further three years and agreed additional orders for software development, including: Signed an agreement to supply a turnkey solution to the Philippine Dealing & Exchange Corporation (PDEX), the first official electronic market for government and private debt in the Philippines, due to be operational this year Signed a turnkey agreement with the Toronto-based Canadian Trading and Quotation Inc, a new exchange for emerging companies, which successfully launched in the first half of the year Concluded maintenance and support agreements with nearly all the former users of Horizon & Equator products and commenced software upgrade projects for five of these; and The Australian Stock Exchange (ASX) agreed to purchase the SMARTS surveillance system with implementation planned for later this year. Market Conditions Customers and potential customers remained cautious this past year as they sought to gauge the durability of the upturn in global trading in the financial markets. This resulted in a continuation of the relatively low demand for new technology that we have experienced since Consolidation continues within the industry, improving Computershare s relative position as well as generating new business opportunities. Outlook There has been a general increase in interest from potential customers in the latter part of the year, which looks like continuing through To take maximum advantage of these opportunities, the Markets Technology Group now operates as a distinct business line with Peter Jessup as Managing Director and Stuart Crosby as Chairman. This will enable us to invest in business development and sales capacity and to track the value created by that investment. With stronger business development and sales, a well managed cost base and a team of some of the most experienced technologists in the industry, Computershare Markets Technology is ideally placed to take advantage of the new business cycle. Priorities for the Coming Year Strong focus will continue to be given to research and development to maintain technological leadership. Further development and enrichment of our relationships with the existing client base; and The increased investment in business development will be leveraged into sales capacity to turn the exciting pipeline of opportunities into successful implementations. This will be supported by a range of marketing activities with both existing clients and prospects. COMPUTERSHARE Annual Report

16 Pepper Global Report The full acquisition of Pepper Technologies AG was completed during the course of the financial year and it was considered helpful to provide an explanation of the business to shareholders. Background Pepper Technologies AG was founded in Munich, Germany in 1998 and was acquired by Computershare in February It trades under the name of ComputersharePepper in Australia, the US and the UK. The Pepper business model is a unique blend of strategic consulting, data analytics, creative marketing communication and innovative technology that come together to create customised communication strategies that target selected corporate stakeholders, such as shareholders, employees and customers. Pepper pioneered ground-breaking research in the UK, and was able to demonstrate, for example, that shareholders tend to use the services or products of companies in which they hold shares, far more than non-shareholders. Through this research, Pepper recognised the potential value of investors as customers of the company and called these shareholders Investomers. In response to the growing trend of electronic communication that, in many ways, coincided with the drive by companies to reduce the cost of shareholder communication, Pepper expanded its service to include targeted campaigns aimed at obtaining addresses from shareholders, together with their permission to receive electronic documentation from the company. Through a detailed analysis of the shareholder database, Pepper identified individuals who would be most likely to accept an invitation to take up e-communications with the result that the take-up rate was far higher than had previously been achieved. This was further augmented with the introduction, in Australia, of etree an initiative that is fully described on the page opposite. In tandem with these developments, Pepper responded to the growing popularity of employee plans, by offering a service that drew on its technology and communication skills to create communication strategies for prospective participants in a new plan. Their skill in applying innovative technology design with appropriately crafted communication strategies has resulted in a growing demand to provide these services to companies, beyond their shareholder base, to include customers and loyalty program members. The Year in Review The expansion to eight international locations in the US, UK, Europe, Asia and Australia over the last 24 months has contributed to an annual growth rate of more than 80%. Staff numbers doubled in 12 months to 165 by June 2004, elevating Pepper to one of Germany s Top 100 employers for two consecutive years*. Growth is further reflected through an increase in revenue and a positive contribution to profitability this year; and To date, Pepper has analysed the records of more than 40 million customers, 15 million shareholders and five million employees for Global Fortune 1000 companies. Time zone managers across the world service major clients including AMP, Rio Tinto, Coles Myer, BHP Billiton, Hewlett Packard, BP and Deutsche Post. *measured by number of new jobs created. Significant Transactions Established a long-term contract to provide communication and consulting services to Hewlett Packard (HP) in the EMEA region, as well as a contract to deliver a monthly electronic newsletter to HP customers across the world; and Developed etree, which is an innovative shareholder capture campaign and launched it successfully in Australia. A total of 32 companies participate to date. The campaign recently expanded to the US and Canadian markets. Priorities for the Coming Year To expand Pepper service and solution offerings across the globe and to increase business opportunities worldwide To focus on further improving profitability To continue to grow a Fortune 1000 client base; and To cross-sell Pepper services and solutions together with Computershare offerings. 14 COMPUTERSHARE Global Reports 2004

17 A Computershare initiative with Landcare Australia etree From Envelope to ENVIRONMENT The brainchild of ComputersharePepper, this initiative was driven by a desire to encourage shareholders to accept shareholder communications electronically, in order to reduce the significant costs borne by companies as they churn through an estimated 180 million sheets of paper each year in Australia alone. The receipt of electronic versions of paper communications is a trend that is growing throughout the world as it gains greater acceptance within a global community who, more and more, are embracing the new technologies. It is believed that the growth in electronic communication will rise at an even steeper rate within the next decade and, as a consequence, it is essential to ensure that clients are in a position to extract the benefits that will flow from this trend. Early research indicated that, despite the high percentage of Australia s population having access to the internet, the take-up rate for electronic communications (e-communications) was incredibly low less than one per cent. Clearly there was a need to consider why this was the case and to create an initiative that would drive away shareholders ambivalence and give them a reason to act. Computershare considered a range of strategies, but the one that stood out from the crowd was etree. At its most basic level, the concept was to provide a donation in exchange for a shareholder s decision to accept future e-communications from their company. The donation would be used to fund re-vegetation and landscape change projects in areas of environmental stress throughout Australia. Research was undertaken to find a partner for this proposal and attention was drawn to Landcare Australia. Here was an organisation that had an enormous reputation for its environmental work that is implemented through a series of networks throughout Australia. These networks consist of professionals and volunteers who work enthusiastically and tirelessly to create a real difference where it matters. It is not surprising therefore that the company entered into early discussions with the Landcare team and from this created the partnership and framework for the etree initiative. In advance of the official launch of etree in March 2004, 14 of Australia s top corporates, representing 5.5 million shareholders, joined as foundation members and agreed that, as part of their membership, they would donate $2.00 for every shareholder who gave their permission for the company to send all documents electronically. Landcare undertook to direct these funds to a major project in the state in which the shareholder lives. Since the launch four months ago, etree has more than doubled in size, with 32 Australian listed companies on board and well over 125,000 shareholders giving their permission for e-communication. This has translated into the planting or planned planting of around 500,000 trees and we believe that many more companies and shareholders will follow suit over the next year or two. Brian Scarsbrick, CEO of Landcare Australia, said at the launch of etree, this could be the most important initiative in land conservation and landscape change in Australia. Australia is not the only country that will gain benefit from this initiative. Our business in the UK came up with the first partnership through Future Forests, while our Canadian and US businesses have teamed up with Tree Canada Foundation and American Forests to launch similar initiatives. If you have not already signed up for electronic communications with Computershare (or any other company whose register we maintain) and would like to help the environment, you can register now by simply going to and following the prompts. COMPUTERSHARE Annual Report

18 Regional Overview ASIA PACIFIC Computershare has businesses spread across the Asia Pacific region, with representation in Australia, Hong Kong, India, New Zealand, the Philippines and Singapore. A combination of acquisitions, increased corporate activity, continued efficiency benefits from last year s restructuring and new business wins drove a much improved year in the Asia Pacific region, with revenues up 32% and EBITDA up 18% to $63.3 million on Most importantly, while we cannot completely immunise our companies from business and market cycles, the hard work of the past couple of years places us in a strong position to maintain our strong performance. Increasingly, we are able to integrate our various offerings to provide unique solutions to clients in servicing a variety of stakeholder record keeping, analysis and communications needs. These solutions depend less and less on the type of stakeholder. We have provided solutions for shareholders, debt holders, employees and customers; indeed some of the most eciting solutions service more than one group. Acquisitions such as Georgeson Shareholder Communications and Pepper Technologies further enhance our ability to deliver solutions to our clients that are not available from any other source. Operational improvements from new technologies and structures, and the shared services arrangements we have put in place, have enabled us to compete successfully in some markets where pricing has been under great pressure. Meanwhile, we remain focused on delivering continual improvements in service to our clients and their stakeholders. Our investment in the sales and account management skills of our client and prospect-facing personnel continues to pay dividends in winning new business. Effective people management was a key regional focus during the year, in particular in terms of developing employer of choice arrangements and delivering tangible value back to employees. For instance, monthly Reward and Recognition programs are now in place, and flexible work hours (such as shift work) have been introduced where it is operationally viable. In Australia, the move to new, consolidated global headquarters in Abbotsford, Victoria, has streamlined internal communications and coordination significantly. REGIONAL OPERATIONS Highlights Continuing the centralisation and standardisation of operational processing that had commenced in March 2003; and Significant improvements in productivity, accuracy and efficiency. The Year in Review One of the key developments during the year was harnessing the benefits of the centralisation of operational processing begun in FY 2003 and continued through FY Our regional operations unit now supports all our Australian business lines and not just Investor Services. Our key operational focus during the year was to standardise processes to improve the quality of service, including service consistency and reliability. This in turn enabled far more advanced reporting, tracking, forecasting and resourcing. As a result of these and other changes, productivity increased substantially. A number of changes were implemented to improve stakeholders experiences in dealing with us. These included First Point Resolution (significantly reducing the number of links in a typical enquiry chain) and Talk First (initiating telephone contact to resolve stakeholder queries rather than relying on correspondence). The Australian operations unit dealt with about six million data transactions during the year. Over 75% of these were processed using Electronic Data Capture, with minimal manual involvement. Almost all of the remainder went through our Workflow system where, through a combination of automated business rules and image-based processing, paper movement is minimised. The Computershare Communication Centre now processes an average of 6,500 inbound routine calls per day from investors and employee holders across Australia. In quantitative terms, a key measure is that the average speed of answer is now between 12 and 30 seconds. 16 COMPUTERSHARE Regional Reports 2004

19 In qualitative terms, we continued to use independent bodies to research stakeholder satisfaction. Surveys of investors in the June 2004 quarter indicated high levels of service satisfaction, for instance: Approximately 94% of callers who responded to the survey were satisfied with their telephone representative, with 71% being very satisfied (up by 4 points on 2003) Approximately 91% of callers who responded to the survey were satisfied with their telephone contact, with 62% being very satisfied (up by 3 points on 2003); and 91% were satisfied with the overall service they received. A number of factors contributed to these strong results, including the greater uptake/use of Interactive Voice Response (IVR) for simple account maintenance tasks. Better knowledge management has also contributed significantly, with much enhanced access for call agents to information delivered during the year. In telephony, campaigns work (both inbound and outbound) increased markedly during the year, becoming a significant source of revenue. Outside Australia, we participated in a number of initiatives that will lead to more standardisation across processes, structures and responsibilities. The Year in Review An account and opportunity management framework was introduced that facilitates more robust client engagement through specific retention strategies, cross-selling and up-selling methodologies. This has been supported by the implementation across all Australian business lines of customer relationship management (CRM) software. In a key example, a sales management, strategic selling methodology was introduced to enable sales managers to use CRM data to manage their businesses more effectively. Product development was strengthened as a discipline, with full documentation of the product range, detailed product lifecycle analysis, and the careful packaging of Computershare capabilities in areas such as meeting services. For instance, a new product, Quorum has been taken to market with strong results across a range of non-traditional areas, from sporting clubs to enterprise employment agreements to creditors meetings in high-profile insolvencies. Outlook and Priorities We will continue to drive operational efficiencies and quality and seek to benchmark/demonstrate these gains publicly. For instance, in July 2004 our Communication Centre was awarded the Australian Teleservices Association s 2004 Teleservices Centre of the Year for Victoria and Tasmania, beating a field of 100 nominees. The centre is an entrant in the Australian national awards, to be judged in September REGIONAL BUSINESS DEVELOPMENT SALES AND MARKETING Highlights Significant investment in methodology, skills and supporting infrastructure for market-facing employees across the Australian businesses New sales incentive program online; and Focus on product development. COMPUTERSHARE Annual Report

20 Regional Reports AUSTRALIA INVESTOR RELATIONS Highlights Holding market share at over 60% despite aggressive competition and moderate levels of activity Winning the second largest register in Australia in IAG Successfully executing on a range of complex corporate actions, including demergers for AMP and CSR, the Virgin Blue and Pacific Brands IPOs, the spin-off of ALH by Fosters and the ANZ rights issue; and Deploying the new account and opportunity management framework across the registry business. The Year in Review The revitalisation of Computershare s Australian operational, account management and sales infrastructure provided the platform for an excellent year for our Australian Investor Services business. The creation of specific service methodologies helped us to better define our value propositions, particularly in the online IPO and integrated IPO product area. The 73 IPOs we managed brought under our management an extra 250,000 securityholders. Overall, we increased the number of holders under management by 16%. By year end, we managed the registers of 1,200 clients, including: 61% of all ASX listed companies; and 62% of ASX 200 companies. Independent customer satisfaction research (both qualitative and quantitative) rated higher than any other industry competitor in the key indices of pro-activity and innovation. The research forms part of our continuous improvement program. An important innovation was the roll-out of our new reporting solution for issuer clients. This improves our service offering to registry clients, sets new benchmarks in information useability, and saves our clients money as well as reducing demands on their internal resources. We also held discussion forums with major issuers in Sydney and Melbourne. Under the banner Smarter Registry, these forums marked a change in the way we interact with our clients and targets, reinforcing our position as thought leaders. These forums will be held annually. The Commonwealth Government s CLERP 9 reforms were ratified in the Parliament and we worked with our clients to help ensure a smooth transition to the new arrangements, and in some cases supporting the new provisions through registry innovation (eg e-communication products and services). 18 COMPUTERSHARE Regional Reports 2004 Market Conditions Financial markets in Australia have seen levels of activity that are only reasonable in absolute terms, but better than in many other markets globally. Competition in our sector remains strong, with aggressive pricing from our competitors, which we continue to address by efficiency improvements and by differentiating our offering. Nevertheless, despite this more competitive environment, we have managed to retain acceptable profit margins. We are optimistic that the pricing pressure we have seen over the past few years will start to reduce over the coming period. Significant Transactions The AMP Limited demerger was a highlight, resulting in creation of a new entity in HHG plc. The scale of the demerger exercise was significant and it drew on a range of Computershare resources across the globe, including investor services, analytics, campaigns and ComputersharePepper The CSR Limited demerger created a new entity in Rinker Group Limited and Foster s Group Limited spun-off Australian Leisure & Hospitality Limited We won the right to manage the register for insurance giant Insurance Australia Group Limited in a competitive tender. This represents a contract to service 1.1 million holders for a period of three years which commenced in April 2004 We processed most of the high profile IPOs for the year, including Pacific Brands Limited, Virgin Blue Holdings Limited, Repco Corporation Limited and JB HI-Fi Limited; and We undertook a large number of other capital management transactions, the largest of which was the rights issue for Australia and New Zealand Banking Group Limited. Outlook and Priorities In the short term, it is likely that corporate action activity (including IPOs) will remain subdued for the first part of the year Revenue growth will continue to be driven by widening the range of products we introduce to our registry client base, using account and opportunity management disciplines to convert leads into sales We have a healthy sales pipeline for the registry business, which we will be actively pursuing At the regional level, we are exploring a number of initiatives to differentiate our service delivery by drawing upon: our more flexible operations model; and our expertise in stakeholder relationship management.

21 ANALYTICS The Year in Review By the close of FY 2004 we were servicing 54% of companies on the Australian S&P/ASX 100 In the second quarter of FY 2004 our expansion continued with the establishment of a Melbourne office to service its growing clientele and market position in South Eastern Australia We also grew our back office operations in Manila as a deliberate part of strengthening our footprint in Asia Pacific During the year we focused on expanding our investor relations consulting services, encompassing: New technology to boost efficiencies (such as electronic data capture); and Development of the new IRtrack product for global release in 3Q Market Conditions The market was buoyant in FY Australian capital raising and M&A activities were markedly more active than the same period last year. Our business performed very strongly and increased its EBITDA contribution by more than 130% The Computershare group s cross-selling framework in Australia continued to provide a major source of new business opportunities, contributing 27% of sales Risk management solutions remain a key focus within our value/sales proposition, in particular investor relations consulting services in respect of: Foreign ownership monitoring Tax losses compliance Merger & Acquisition M&A work continued solidly, as the number of corporate takeovers in the Australian market grew, particularly in the resources and listed property trust sectors; and In the fiscal year s second half, Georgeson Shareholder Communications was integrated into the Computershare group. Within a relatively short period, we have been able to package and jointly take to market the ownership identification services of Analytics with the proxy campaign services of Georgeson. Outlook The Asia Pacific region holds excellent potential and expansion regionally is being pursued. In turn, this strategy will assist us to support more crossborder transactions and multi-national clients with secondary listings, which will enable Analytics global reach to be effectively deployed. Priorities We will maintain a focus on harnessing technology to deliver business efficiencies and product innovation. The highlight will be the launch of the new IRtrack product, a global ownership database with sophisticated contact management functionality that will provide significant resources on the desktops of investor relations managers; and Overall we see the Asia-Pacific region continuing to provide growth opportunities and we will continue to up-sell and cross-sell other Computershare services to exploit that environment and drive revenue growth. DOCUMENT SERVICES The Year in Review This year we took advantage of improvements in the quality and skills of our management team to create processes, practice and technology that give enhanced scalability to our services and to prepare for and drive the growing appetite to replace white paper with electronic communications. We continue to fine tune this work. We are encouraged with a very positive result this year, with an EBITDA contribution double that of the previous year. We are in a position to continue to drive growth in both our commercial and our registry-related businesses. In response to the emerging trend for electronic communications, we purchased the E-Business for Enterprise (EBE) software platform, and took over related development resources and customer contracts from Technology Partners Group. This strategic acquisition, secured in June 2004, gives us unmatched ability to deliver tools and channels for communication across web, , fax and SMS. The EBE team is one of Australia s few certified payment channel providers for payment consolidators POSTbillpay and BPAY View. These factors have combined to demonstrate our differentiation in the market, moving customers away from the low-cost, commodity-based product model towards the value-added, service solution using technology and methodology to win and retain major customers and projects. Market Conditions The design, printing and mail industry is extremely competitive and has undergone rationalisation over the past twelve months. This has put pressure on margins. But there are some positive trends that will benefit our business going forward. The increased importance of corporate governance, for example, is driving companies to communicate more frequently with their shareholders, and in more detail. COMPUTERSHARE Annual Report

22 Regional Reports (cont d) Our strength in electronic communications helps our clients contain the costs associated with this trend, while improving the immediacy of the communication itself. Significant Transactions Successfully secured a leading retail company s account for the personalisation of the store card and direct marketing work, including catalogues. The contract is for an initial term of three years and is a marque for the launching of the Sydney business into the commercial market The Westfield Group merger was handled by our Sydney office. The Scheme of Arrangement was designed, printed and mailed within less than one week Insurance Australia Group (IAG) moved its business (and a one million-plus investor base) to Computershare Investor Services in April. Initially, delivery of print and mail solutions was not part of the contract; however new shareholder packs, planned ad hoc corporate mailings and the annual report were provided E-business Viewpoint implementation into AWB, including fax and communications to handle all electronic communications as an extension of the white paper mailing currently provided; and Annual Reports and prospectuses awarded design and production contracts with AUI, DUI, Capral Aluminium, Dairycorp and Computershare. Outlook More and more, clients and prospects are looking to consolidate the number of suppliers of outsourced stakeholder communications. They are demanding more value-added services which provide greater opportunities to deliver against their broader business objectives. The challenge for the next 12 months is to ensure that the product mix taken to the market is unique and innovative while providing real value. This will be achieved through the effective bundling of Computershare s overall offering, together with research and investment into new technology such as e-business delivery and full colour digital printing. Priorities We will be working to double our market share in New South Wales (currently at 5% with a plan to increase to 10% of the market) Winning a major account in our chosen commercial segment in Victoria and New South Wales; and Roll out and produce sales of Global Viewpoint to existing and new customers. PLAN MANAGERS The Year in Review A 33% improvement in profitability this year underpinned a very satisfying growth trend in this business. We run employee share plan arrangements for 66 per cent of the Australian S&P/ASX 100 companies. Corporate client numbers increased from 74 to 95, which includes both ASX-listed and subsidiaries of foreign listed entities. By the end of FY 2004 we were managing 140,000 employee participants, with over $1 billion worth of shares, representing growth of 40% and 50% respectively. Over $100 million worth of share purchases were conducted on behalf of employee plan participants, as contributory-style plans increased in popularity. This year Computershare Plan Managers became fully licensed under the new Australian Financial Services Reform Legislation. The new regulation saw expected growth in our Plan Custodial Services materialise. Plans offering management services remained a key focus and we expanded our advisory role with clients to include strategies aimed at increasing employee participation levels and improving employee understanding of the financial and taxation benefits available under the share plans offered to them. We also significantly enhanced internet functionality for employee holders and delivered a range of other new and improved facilities and services. Market Conditions Overall the Australian market has experienced a buoyant, if at times volatile, year. Further compliance and regulations are being progressively introduced to the employee share plan marketplace. These make our outsource model more attractive and lead to increased demand for our plan services. In the second half of FY 2004 we reviewed Employee Share Plan programs among Australian S&P/ASX 100 companies. Some of the key findings are: Contributory style plans (often based on salary sacrifice) are becoming the most common form of plan offered to general employees. We expect this trend to continue A price discount or matching component is also becoming a prominent feature of many contributory style plans In line with the heightened corporate governance environment, plans are increasingly being linked to company performance, usually with respect to profit guidance. Interestingly, retail and institutional shareholders generally support broad-based employee offers and the financial commitment and/or risk they entail; and Gift shares have proved to be extremely popular with employees, with typical take-up rates in the 90 per cent 20 COMPUTERSHARE Regional Reports 2004

23 range. However such plans will be closely reviewed in light of new accounting standards due to take effect in FY 2005 requiring all share plan discounts to be fully expensed to profit and loss statements. These findings all point to growing demand for the broad range of services we provide. Companies continue to look to equity-based pay incentives as a key strategic tool in their remuneration strategy design. Along with new regulation, clients will increasingly look to maximise investment in their share plan programs, with a renewed focus on effectively communicating the plan benefits and purposes with their employees. The team has a long and proven track record in this area, having conducted many successful plan launches and re-offers over the past six years. Significant Transactions In December 2004, AMP de-merged and created a separate company (HHG) on the base of its UK operations. We were in charge of recalculating the employee entitlements of 10,000 employees in 11 different employee plan programs across the two entities, preparing and distributing explanatory correspondence and payments in three currencies A new ESP program was implemented on behalf of Australia & New Zealand Banking Group, for 6,000 employees in New Zealand arising from the client s takeover of the National Bank of New Zealand. Plan Managers also coordinated the extension of the rights issue in November 2003 to fund the New Zealand acquisition, with rights entitlements offered to the Bank s 22,000 Australian plan participants Consumer brands company Pacific Brands has 5,000 staff in Australia and New Zealand. We were appointed to launch the client s broad-based employee ownership program in conjunction with its initial public offering in April We provided a communications program involving over 70 presentations to 20 work sites and the creation of a branded website; the result saw a 99 per cent take-up and a high comprehension rate; and Fast-growing new airline, Virgin Blue Limited, had over 2,500 eligible employees at the time of its listing in December Our job was to create and launch two distinct share plans for employees to coincide with the listing. Plan Managers implemented a communication strategy (including personalised offer packs) to boost employee understanding of the offer. The result saw 95 per cent uptake of the gift offer and 37 per cent uptake of the KEPP plans. Priorities for the Coming Year Marketing our new online trading system that allows participants to sell/transfer available securities online Developing our global opportunities with Transcentive, our North American and UK-based colleagues; and Continue to drive efficiencies through our systems development initiatives. HONG KONG INVESTOR SERVICES The Year in Review Our share registry provides services to 417 listed companies representing a market share of 83%, measured in terms of total market capitalisation. Client companies include 21 of the 33 Hang Seng Index Constituent Stock Issuers, all 37 Hang Seng China Enterprise Index constituents and half of the companies listed on the GEM Equity Index. A slow start to FY 2003 gave way to a significant revival in market activity throughout the remaining period. Mainland China companies continued to actively seek listing in Hong Kong with a number of pioneer industries being listed, including the insurance, dairy, supermarkets and automobile industries. During the year, we handled 44 initial public offerings; accounting for 83% of the total funds raised on the Hong Kong market. As a consequence we achieved revenue ahead of forecast and an improvement of 18% in profitability when compared to the same period last year. Market Conditions Market conditions during the period have been buoyant and show little sign of abating. Chinese companies continue to have an appetite to list their securities in Hong Kong and we remain well placed to benefit from this. Whilst competition in Hong Kong remains keen, we continue to hold our market share in existing business and to win an appropriate share of new business entering the market. Hong Kong s move to eliminate share certificates takes its first, careful step in FY 2005 with the removal of share certificates that support the shareholding for the national depository. Significant Transactions We now represent all three of the insurance companies of mainland China including China Life Insurance, the largest IPO of 2003, PICC Property and Casualty and Ping An Insurance COMPUTERSHARE Annual Report

24 Regional Reports (cont d) We successfully managed two other large IPOs; Great Wall Automobile and Fujian Zijin Mining The largest global IPO in the first half of 2004 was Ping An Insurance, having successfully sought dual listings in New York and Hong Kong Stock Exchanges. We were appointed its share registrar for the IPO and ongoing services; and We played a key role in the global public offering of Semiconductor Manufacturing International Corporation, a reputable semi-conductor manufacturer and a privately-owned enterprise in China. Priorities for the Coming Year To re-locate to new offices in September 2004, to better meet the needs of the growing clientele and shareholder base; and To assist Georgeson Shareholder Communication in their plans to expand into Hong Kong. NEW ZEALAND INVESTOR SERVICES The Year in Review This year our market share and key performance indicators have remained relatively stable: 70% of companies on the New Zealand Exchange (including 45 of the Top 50 and all the Top 10) 90% of issued capital of listed companies 85% of transactions through the NZX; and Total number of investors up from 1.6 to 1.7 million. The activities and profile of New Zealand Exchange Ltd (NZX) have increased markedly and although the market capitalisation of companies listed on NZX has increased by 20% over the past year, there has not been a significant increase in the number of listed entities nor in the number or volume of trades on the market. The debt market has seen considerable change over the year with the decision by the Reserve Bank of New Zealand to cease providing registry (transfer agency) services. We were largely successful in bidding for this business and have secured over 70% of the former Reserve Bank clients. We now have some 170 clients with a wide variety of debt instruments, representing in excess of 250,000 individual investments. To satisfy regulatory requirements, this year we launched a facility whereby companies can be advised of changes to the holdings of listed companies shares of directors or officers of the company as soon as the change is recorded on the register. During the year we co-operated with both the New Zealand Inland Revenue Department and the Australian Taxation Office to implement a new trans-tasman tax agreement, whereby tax credits can be given on dividends granted to shareholders in both countries under certain conditions. A number of companies on both sides of the Tasman have already taken advantage of this facility. To meet the needs of the many issuers of wholesale debt for whom we now act, we have expanded our range of services to include settlement and paying agency services for these clients. Market Conditions From a solid base, corporate activity slowed markedly in the third quarter, but revived strongly in the fourth quarter, with a larger than usual number of initial public offerings of both equities and debt securities. Although all of these were fully or over-subscribed, they were mainly small issues and did not attract large numbers of new investors. Towards the end of the year a number of proposed IPOs were postponed because of a perceived lack of demand. The issue by our existing equity clients of Convertible Bonds, paying an attractive rate of interest, continues to be a method of raising funds that is popular with issuers and investors alike. With a typical term of five to seven years and generally paying interest quarterly, these bonds constitute valuable long-term registry business. Significant Transactions We have been able to capitalise on Computershare s trans-tasman presence by acting as the local manager for Australian listed companies with a NZ branch register. Examples include: AMP demerger HHG plc float Pacific Brands initial public offering and employee offer Our key clients are, in the main, household names and/or significant in terms of size and strategic importance. They include: Telecom Corporation of NZ, TOWER Ltd, Contact Energy, Auckland International Airport, Air New Zealand, Carter Holt Harvey and Fletcher Building Ltd Our experienced staff have enabled us to successfully handle a number of increasingly complex corporate actions, including a new trend towards partial takeovers. In two such successful cases, this has also involved multi-phase scaling of the acceptances. The successful outcome of these actions has further strengthened our reputation in the New Zealand market as the only company able to handle large and/or complex corporate actions; and 22 COMPUTERSHARE Regional Reports 2004

25 In addition to taking on the former Reserve Bank of New Zealand debt registry business, we were successful in assuming responsibility for the debenture register of Fisher & Paykel Finance, the finance arm of a leading consumer brand. We have also managed the initial public offerings of nine clients, who together have raised over NZ$1.1 billion of debt. Outlook In November 2003 NZX Ltd introduced their second-tier or alternative market, known as NZAX, which was designed to provide smaller enterprises with a less costly way of raising capital and of providing liquidity for their stock. Wool Equities Ltd, which was formed from the NZ Wool Board co-operative, was one of the first companies on the NZAX and one of several which we have assisted in that process; and We are continuing to build on our people and systems expertise in the provision of services to the retail finance company sector. We have secured the outsourcing business of a number of these companies in the past year and are at an advanced stage of discussions with several others. INDIA 2004 saw the establishment of Karvy Computershare Private Limited as the largest provider of registration and transfer agency services in the Indian market. A 50:50 joint venture with Karvy Consultants Limited (a leading Indian financial services and business process outsourcing firm), Karvy Computershare manages more than 16 million share and mutual fund accounts on behalf of more than 250 issuers. It employs more than 1,000 people. With China, India is one of the two strongest growth engines in the global economy, and we are very excited about the opportunity to participate in this growth. India s domestic securities market infrastructure and regulatory environment are developing at a rapid pace and its economy is internationalising rapidly, adding to the excitement. Karvy Computershare has performed well since its establishment and we expect it to win a healthy proportion of the larger IPOs in the Indian market. Our partnership with Karvy Consultants brings together the combined benefits of Computershare s global expertise and Karvy s strong position in the Indian market. Priorities We are strengthening the level of co-ordination between our New Zealand and Australian operations, with a view to increasing the up-sell and cross-sell of Computershare products and services (eg Analytics services) We will continue to promote policies that protect the welfare of our clients and their shareholders and have, through our legal advisers, made representation to The NZ Securities Commission proposing amendments to the NZ Companies Act and the Securities Transfer Act aimed at restricting the commercial use of public registers, so as to give greater protection and privacy to investors in listed securities Retail finance companies will continue to be a key target for us. The growth of this market and the momentum towards outsourcing remain strong and we plan to capitalise on this trend as a means of achieving revenue growth; and In equities registration, our focus is on deepening our knowledge of our clients businesses and building further loyalty to the Computershare service proposition. The experience of our staff is a primary competitive advantage the average length of service now being in excess of ten years. We are confident that as market practices, and corporate actions in particular, increase in complexity, the need for this depth of experience and proven capability will be viewed as an essential attribute of an outsourced service provider and we are in a unique position in this regard. COMPUTERSHARE Annual Report

26 Regional Overview NORTH AMERICA The 2004 fiscal year was an exceptional one for Computershare in North America. The acquisitions of Georgeson Shareholder Communications Inc (GSC), the pre-eminent firm in investor communications, and Transcentive Inc, the leading software solutions provider for equity plan administration as well as the launch of ComputersharePepper products and services have expanded business opportunities and added new and important dimensions to our North American business model. As a result, Computershare now offers a broader spectrum of services than provided by any of our competitors, underscoring our end-to-end services and our capabilities as a single-source provider. Our North American business is already capitalising on the synergies we can realise through our acquisitions. We are successfully cross-selling products and services between GSC and our Investor Services business lines, and the Transcentive acquisition has increased interest in employee plans solutions among our transfer agency clients. We have begun leveraging the best of our acquisition and business capabilities to market new, combined products and services. For example, we have applied GSC s investor surveillance and ownership identification expertise to our existing Computershare Analytics business, creating a new, combined division and incorporating GSC services into an expanded IRtrack product. A first significant result of that combination is a strategic alliance, launched in June 2004, with The NASDAQ Stock Market to offer the IRtrack product to their listed companies. In addition to the Georgeson Shareholder and Transcentive acquisitions, we have made great strides in all our North American businesses in the past year. We implemented new processes, new technology and new products and services, while continuing to win new business, including: Increased self-service web capabilities for investors, as well as for issuers and employee stock plan providers, in the US and Canada, significantly improving our competitive position Successfully sold a range of Document Services solutions to commercial clients, including a suite of services specifically marketed to credit unions, helping to maximise our capital investment in facilities and equipment Implemented a new business model for transfer agency services in Canada, resulting in increased client satisfaction and retention, as well as significant revenue improvement Launched several new products including Credit Union Connect credit union statement solutions and QuickCert print-on-demand stock certificates; and Continued to negotiate strategic acquisitions to grow the North American business, leading to the acquisition in July 2004 of Alamo Direct, a US mutual fund proxy services provider which, combined with Georgeson Shareholder, now makes Computershare the leading provider of mutual fund proxy services in the US. As a result of these efforts and ongoing efficiency improvements, North America s EBITDA for FY 2004 is 62% higher than FY COMPUTERSHARE Regional Reports 2004

27 GEORGESON SHAREHOLDER COMMUNICATIONS (NORTH AMERICA) For more than 65 years, Georgeson Shareholder Communications has been the pre-eminent firm in the fields of proxy solicitation for corporations and mutual funds, small shareholder programs, and post-merger clean-up services. In December 2003, Computershare acquired Georgeson Shareholder to provide our clients with the broadest range of end-to-end issuer services available in the industry today. The Year in Review Computershare completed the acquisition on 12 December Since that time, we have worked quickly to integrate Georgeson Shareholder into Computershare s core businesses. Key areas in which integration has already taken place include: Formation of a new business unit combining our investor surveillance and identification services with Computershare Analytics, leveraging the Analytics IRtrack platform to take us to the next level in the investor and market intelligence marketplace Rationalisation and integration of corporate functions, including the executive teams, human resources, sales and marketing, finance and legal functions, to reduce expenses and optimise resources; and Application of our premier sales organisation and approach to our sales efforts in all business lines. Throughout this transition period, we have maintained our dominant market position across our lines of business. For example: In the USA, the Proxy Solicitation and Corporate Governance Consulting group added a significant number of new clients. The group also maintained its excellent winning record compared to its competitors in the proxy fight segment of its business successful in 71% of proxy fights in which it was retained. The Mutual Fund Proxy group also maintained strong performance, realising the full impact of its new proprietary proxy software application, which provides greater efficiencies for its clients through more targeted solicitation campaigns and higher vote gathering rates. In addition, we served as information agent, dealer/manager or solicitor on seven of the top 10 largest merger and acquisition transactions. Moreover, the PostMerger CleanUp group added more than 80% of its targeted prospects as new clients, and the Small Shareholder Programs group continued excellent revenue growth and maintained its strong market share. In Canada, we continued to lead the market in proxy solicitation, Asset Reunification and small shareholder programs. In addition, we are preparing to capitalise on changes in the regulatory environment through the implementation of National Instrument , which will allow direct access to beneficial shareholders. Market Conditions Intensive scrutiny of corporate governance practices and increased shareholder activism across North America have created a fertile environment for our proxy solicitation and corporate governance consulting services. At the same time, the mutual fund industry is beginning to return its attention to restructuring activity, driving an increase in the need for solicitation campaigns. In addition, the implementation of National Instrument in Canada will allow us direct access to beneficial shareholder information for contested transactions, creating additional opportunities. Significant Transactions Efforts to cross-sell services to Computershare investor services and corporate trust clients, and vice versa, are already bearing fruit. Through June 2004, more than 40 cross-sell deals have closed, including: Petrofund: Asset Reunification referral from Computershare Western Canada Ethyl Corporation: Post-merger clean-up referral from Computershare Trust Company of New York Lockheed Martin: Corporate action tabulation referral to Computershare Trust Company of New York; and FPL Group: Proxy solicitation referral from Computershare Investor Services. In addition, we have completed significant transactions in all lines of business for several major US companies such as: Merger and acquisition services: Bank One Corporation merger with JP Morgan Chase & Co. and AT&T Wireless Services Inc. merger with Cingular Wireless Corporation Post merger clean up: Unilever, Bank One Corporation and AXA Small shareholder programs: Agere, Bristol-Myers, Medco and International Paper Mutual fund proxy solicitation: AIM Management Group, Prudential Investments, AIG SunAmerica Asset Management and Neuberger Berman Funds; and In Canada, significant transactions included asset reunification for a large, multinational insurance group, as well as for Manulife and Encana. COMPUTERSHARE Annual Report

28 Regional Reports (cont d) Priorities for the Coming Year During the upcoming fiscal year, we will focus on: Improving efficiencies and reducing costs through additional back-office integration with Computershare, including migration of processing functions to Computershare systems Increasing cross-selling among all lines of business, leveraging Computershare s investor services and corporate trust client relationships, to increase sales, as well as steering clients to additional Computershare services Leveraging the strength and expertise of our sales team to increase sales capability across the Computershare organisation; and Capitalising on opportunities created in the marketplace through changes in corporate governance practices and the regulatory environment. TRANSCENTIVE (NORTH AMERICA) The acquisition of Transcentive, in February 2004, represents an important step forward in the expansion of Computershare s employee share plans business. Transcentive is a leading provider of employee stock plan management software and, together with its partners, serves a client base of approximately 2,500 companies, including 48% of the Fortune Through the Transcentive acquisition, we are able to offer our employee stock plan clients a full range of service options, from software solutions for self-administered plans to fully-outsourced plan administration. The Year in Review The transition and integration of Transcentive into the overall Computershare business is proceeding successfully. At the same time, Transcentive continued to exceed revenue targets throughout the year. Market Conditions US corporations must comply with complex laws affecting employee share plans, which are governed by a host of different regulatory bodies worldwide. Dramatic changes have taken place in the regulatory environment within the past several years. One of the next major changes to be implemented, Section 404 of the Sarbanes-Oxley Act (SOX), will shortly require US CEOs and CFOs to attest to the adequacy of internal systems and controls used to support financial transactions and reporting, which must meet the scrutiny of external auditors. The web-hosted share plan management offering is an auditable, secure system that ensures the integrity and security of share plan data and supports a company s initiatives for compliance with SOX, providing us an advantage in offering solutions to companies facing these new compliance requirements. In addition, anticipated changes in FY 2005 in the accounting treatment for equity compensation, mandated by the US Financial Accounting Standards Board (FASB), also underscore the need for sophisticated valuation modelling and financial reporting systems that calculate the impact of share plans on corporate expense and earnings per share. The need for compliance with more demanding financial reporting requirements poses a market opportunity for Transcentive, which is recognised as an expert in financial reporting for share plans. Companies will be looking for the kinds of technological solutions Transcentive offers, to help them capture and track data to meet more stringent corporate governance demands. Significant Transactions Since being acquired by Computershare, Transcentive has gained 22 new clients, including Acceris, K-Sea Transportation Partners L.P, and Skywest. In addition, following the acquisition, Transcentive expanded its service relationships with both Merrill Lynch and another large international brokerage and financial services provider. These strategic partnerships represent a continuing revenue stream for the company. In addition, Transcentive signed an agreement with Oracle to link their Human Resources Management System (HRMS) to Transcentive s employee stock plan administration capabilities. Priorities for the Coming Year Completing its integration with the overall Computershare business Furthering Computershare s global share plan initiative and establishing the company as the leading provider of global share plan solutions Adding straight-through processing to its North American options business. This will combine Transcentive s leading technology with Computershare s advanced trading/processing system to deliver efficient document processing, payments, and trading/transactions to the existing Transcentive client base; and Leveraging Transcentive s expertise in providing equity compensation solutions in a rapidly changing regulatory environment, to drive new business opportunities for Transcentive and for Computershare overall. 26 COMPUTERSHARE Regional Reports 2004

29 ANALYTICS SERVICES (NORTH AMERICA) The Year in Review Two major efforts brought significant growth and change to our North American Analytics group during FY 2004: The development of a global ownership database that allows for tracking of more than $15 trillion in invested equity assets; and Integration of Georgeson Shareholders shareholder identification and surveillance products and services into IRtrack, Computershare s web-based market surveillance and institutional investor intelligence product. As a result of these two developments, we have embarked on a relaunch of IRtrack to the global market. Sales of StreetSight TM, our online, buy-side intelligence solution, providing institutional and mutual fund ownership information to capital markets professionals, grew significantly during FY We continued to build its presence at major global investment banks, as well as regional research, sales and trading firms. Over the course of the year, we also added considerably to the content of StreetSight, especially the number of contacts in our database and the number of hedge funds that we cover, while at the same time significantly improving the quality of the data. Market Conditions Improvements in market conditions have resulted in increased demand for Analytics services, as issuers have begun to seek tools to identify and communicate with institutional investors. At the same time, the growth of independent research firms and hedge funds, along with increased trading volumes, has resulted in an expanded market for our StreetSight capital markets product. Significant Transactions The expanded capabilities of IRtrack led to the formation of an alliance with The NASDAQ Stock Market, the largest US electronic stock market, to offer the IRtrack product to their 3,300 listed companies through The NASDAQ Stock Market s Corporate Services network. In addition, during 2004, we added a number of new clients to our StreetSight client list, including several major investment banks, broker/dealers and trading firms. Priorities for Coming Year In the coming year we will focus on development of a new data and web platform for our StreetSight capital markets product, as well as continued enhancement of our IRtrack platform. At the same time, we will work to expand the market for our shareholder ID and surveillance services, beyond investor relations, to reach the investment banking community. INVESTOR SERVICES (US) The Year in Review Despite a less than healthy market and tight competition, Computershare s US Investor Services revenues remained strong this fiscal year, and we added a number of transfer agency (share registry) and IPO clients. As a result of the Transcentive and Georgeson Shareholder acquisitions, Computershare s US Investor Services business is now in its best competitive position ever, able to offer US issuers the broadest spectrum of issuer services available from a single provider. In addition to this major expansion over the past year, our Investor Services business continued to make great strides in providing optimal solutions for our clients and shareholders through improved processes, new product offerings and enhanced technology: Online client and shareholder service: We increased web services to clients and shareholders, providing greater transactional and reporting capability. We now also offer clients direct web-based access to our record keeping system for real-time reporting and hands-on shareholder record management Document management processes: We completed automation of our document management processes through Workflow and Electronic Data Capture (EDC), and have automated the generation of contact centre shareholder correspondence, directly from the record keeping system. QuickCert print-on-demand stock certificates: Our QuickCert solution provides all the security of an engraved certificate but eliminates the administrative difficulty and cost of maintaining banknote certificate inventories. We pioneered this program and are the only transfer agent to receive approval from the New York Stock Exchange for its ongoing use. We currently have 61 clients using our QuickCert solution; and ComputersharePepper services: Following the acquisition of ComputersharePepper, we have begun promoting Shareholder Relationship Management and etree electronic delivery promotion services to our transfer agent clients, helping our clients to derive greater value from their shareholders and to reduce their shareholder mailing costs. Our efforts to provide improved, expanded services are reflected in high client satisfaction levels. An annual independent third-party survey of issuers shows Computershare scored first or second among all large transfer agents in the US in 31 out of 43 survey questions, with top scores for all questions in the client service and COMPUTERSHARE Annual Report

30 Regional Reports (cont d) mail service categories. Overall investor service satisfaction, as measured by an independent third-party survey of shareholders in June 2004, was at 90 percent above the industry benchmark. Market Conditions The US economy is beginning to show signs of recovery, with a lift in transactional revenue over last year. Interest rates remained low throughout FY Merger and acquisition activity also remained flat, impacting transactional revenue. At the same time, however, companies that had been holding off on their initial public offerings began finally to move forward, although the resurgence is still fairly modest. The US continues to be a highly competitive environment for Computershare in the investor services arena. However, with the Georgeson Shareholder and Transcentive acquisitions plus ComputersharePepper services, we are now positioned as an industry powerhouse for issuers seeking a full-service provider. Many economists predict that the US economy will recover more fully in the coming year, providing greater opportunities for increasing our investor services revenue. Significant Transactions Our client list has grown this fiscal year with the addition of 51 new transfer agent clients, among them 10 initial public offerings, including salesforce.com. New US transfer agent clients also include two major energy companies: FPL Group and Reliant Resources. Our corporate reorganisations group handled several major transactions last year, despite a relative dearth of major merger and acquisition activity: HSBC: Cash acquisition of Bank of Bermuda, effective February 2004 Henkel Corporation: Cash acquisition of Dial Corp (part of our agreement to provide back-office processing for Citibank A&T), effective March 2004; and PNC Financial Services: Acquisition (cash/stock election) of United National Bancorp, effective October Priorities for the Coming Year in FY 2005, with the expanded range of our service offerings, the group will: Continue to develop innovative services that can match the evolving business landscape, brought about by advancements in technology and industry changes, such as the movement toward dematerialisation and faster transaction turnaround times. In addition, the implementation of National Instrument (NI) in Canada, which allows corporations direct access to Non-Objecting Beneficial Owners shareholder information for mailing meeting notices, may open the door to deregulation in the US environment, creating additional opportunities for Computershare Maintain our commitment to technology investment, for example adding functionality to our online services and enhancing our interactive voice response (IVR) system with voice recognition facilities Continue to reduce expenses and increase productivity through additional enhancements to our Workflow and Electronic Data Capture systems, as well as through consolidation of offices Grow our revenue stream by pursuing cross-selling opportunities, aggregating our client base, as well as delivering programs that bring a customisable but comprehensive umbrella of services to individual or targeted groups of clients. We will work intensively with Georgeson Shareholder, Transcentive and ComputersharePepper to capitalise on these important cross-sell and upsell opportunities. We will also work to build alliances, similar to the the NASDAQ Stock Market, to drive further opportunities; and Capitalise on the expected US economic recovery by aggressively pursuing mergers and acquisitions, especially cross-border transactions. PLAN MANAGERS (US) The Year in Review One of the most significant events of the year was Computershare s acquisition of Transcentive in February 2004, which consolidated our position as the global leader in the employee stock plans space. Beyond this acquisition, the past fiscal year has focused on retaining our clients, as well as aggressively managing our client-calling program. As a result, we have increased the percentage of our clients who have stated their willingness to be used as a reference to 91%. We also host semi-annual meetings of our top North American clients to discuss client issues and provide information on regulatory, industry, and product developments. As a result of these sessions, we collaboratively plan enhancements to our service and technology offerings with our clients to improve our ability to meet their needs. The effectiveness of these programs is shown by Computershare s number-one rating among US plan administration providers, according to an independent survey of plan sponsors. We also continued to add online services for plan participants that provide a significant competitive advantage, including: 28 COMPUTERSHARE Regional Reports 2004

31 Online taxpayer identification certification through both the web and IVR; and The ability to download transactions to their own personal money management software, such as Quicken. Market Conditions During the past year, the US government proposed new accounting rules for employee stock option plans. As a result, companies are examining their stock option and employee stock purchase plan design features, and those that may have been intending to launch a new plan are reworking their plan designs. At the same time, however, we are beginning to see more newly implemented employee stock purchase plan clients, indicating a positive turn in that aspect of the market. The new regulatory environment is also leading to a shift toward other equity-based compensation, such as restricted stock awards and performance shares, which may open new opportunities for Computershare. The continued integration of Transcentive s equity solutions will further strengthen our ability to meet or exceed client expectations in this changing landscape. In addition, the recovery in US stock market activity over the past year is reflected in Plan Managers administrative and commission revenues. Significant Transactions We have either added as new clients or sold additional products to 20 companies. New clients include Maytag and The Stanley Works. In addition, the Transcentive acquisition added 74 stock option and employee stock purchase plan clients to our full stock plan administration business. Priorities for the Coming Year During FY 2005, we will: Leverage opportunities created by the acquisition of Transcentive and Georgeson Shareholder Further develop cross-sell opportunities by continuously evaluating client needs, particularly in the event of announced corporate actions, acquisitions, divestitures, and employee or investor communication campaigns Continue to focus on quality and overall service improvement and standardisation within the product offering Build on Computershare s and Transcentive s technology platforms to make us the best-in-class offering from both the participant and the plan sponsor perspective; and Position the business to capitalise on the trend toward new and hybrid versions of equity compensation, such as restricted stock awards and performance shares. DOCUMENT SERVICES (US) The Year in Review Computershare Document Services provides shareholder communications services to all US Computershare businesses. This year we have achieved a significant lift in profit growth in our registry-related business, and in particular, in our commercial business. Market Conditions Although the US equities market saw somewhat increased activity in the past year, business conditions remained relatively flat, resulting in limited revenue growth from internal business sources. However, the commitment to innovation and relationship-building with commercial prospects during the past year has delivered strong revenue growth. These commercial wins provide a platform upon which to build in the coming years. Significant Transactions We developed and marketed the Credit Union Connect TM product to credit unions across the US. This product provides easy-to-read member statements that can include marketing messages to different customer segments. Other significant developments include: Creating competitive advantage through the implementation of a new software solution that provides our clients with greater postage savings through finer, more advanced sorting; and Extending our support of internal business to include the new acquisitions during the year. This generated additional volumes, which are expected to double over the next fiscal year. Priorities for the Coming Year Key priorities for the coming year are to transition all the Georgeson Shareholder printing and mailing jobs to our state-of-the-art facility in Burr Ridge, Illinois, and to continue to grow our commercial business. Additional priorities include: Develop e-business through the implementation of Computershare s Viewpoint online document archiving and retrieval system. This will enable our clients to view mission-critical stakeholder communications with a click within a web browser Achieve ISO certification to demonstrate and enhance quality delivery processes; and Increase Credit Union Connect sales to credit union clients and adapt the Connect products to US associations. COMPUTERSHARE Annual Report

32 Regional Reports (cont d) INVESTOR SERVICES (CANADA) The Year in Review One of the most important events in the past year for the Canadian transfer agency business, was the acquisition of Georgeson Shareholder, which has created opportunities to offer a broader range of products and services. Several cross-sell deals have already taken place, leveraging Georgeson Shareholder s expertise and client base to expand Computershare s presence in the market. In addition, in FY 2004 we implemented a new business model in all regions, creating two streams of client services, one for larger clients (based on revenue and complexity) and one for smaller clients. The new model allows us to tailor our service delivery to meet client needs, while enabling us to promote our services to the appropriate market segment. At the same time, we implemented our global client relationship management system, to better track and manage existing and prospective clients, as well as achieving process efficiencies. We also undertook a complete overhaul of our web site, introducing improved online services for investors and for our clients. We are the only large transfer agent in Canada with online access for clients; a key competitive advantage in the market. Throughout FY 2004, we maintained market share above 60%. Moreover, in an independent third-party survey held in June 2004, 90% of our clients shareholders gave our overall service positive ratings, above the industry benchmark. On an independent third party survey of issuers, we scored 4.22 points out of a possible five in overall satisfaction. Market Conditions The number of initial public offerings in Canada doubled in the first half of calendar 2004 compared to the same period in FY 2003, the most seen in Canada since the technology bubble in However, much of the IPO activity we are seeing is the latest investment vehicle, income funds, which invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Traditionally, income funds generally produce lower revenue than our large issuer transfer agency accounts. Merger and acquisition activity returned to more normal levels in the first half of calendar 2004, compared to We are beginning to see more positive market activity with definite signs of buoyancy. We are also seeing more unit trusts and specialised equity products in the market. Stage 2 of National Instrument was approved for implementation in September 2004 and will allow issuers to choose their proxy mailing and tabulation service provider. This opens up great opportunities for transfer agents to handle proxy mailings for clients Non Objecting Beneficial Owners, representing 60% of the overall investor base. Computershare has been preparing for this opportunity and is ready to compete in this new market segment. Significant Transactions During FY 2004, we handled several major transactions, including: Management of a comprehensive Plan of Arrangement on behalf of Denison Mines, resulting in three new companies Depositary for the tender of shares of The Hockey Company Holdings Inc. under its takeover by Reebok; and We added several new transfer agency clients, including the Saskatchewan Wheat Pool and the Macquarie Power Income Fund. Priorities for the Coming Year Capitalise on opportunities presented by National Instrument This could potentially increase our mailing and tabulation service substantially Continue to enhance our web capabilities for issuers and shareholders, which have generated positive reactions from our clients and increased investor ease-of-use Increase market share through sales of enhanced products and services, leveraging the Georgeson Shareholder acquisition Leverage ComputersharePepper s etree initiative to enrol current and prospective clients in electronic delivery of shareholder communications Launch QuickCert print-on-demand stock certificates in Canada during FY 2005, capitalising on the recent successful launch in the US; and Continue to reduce expenses and increase productivity through our new national business model. CORPORATE TRUST (CANADA) The Year in Review Despite continuing slow market conditions, we exceeded revenue and profit targets, thanks to strong growth in mortgage-backed securities, new warrant issuances, and trust-related activity in the oil and gas sector, backed by prudent cost management strategies throughout the year. Broker-registered products have also provided increased revenues, due to improvements in our float income and number of accounts. 30 COMPUTERSHARE Regional Reports 2004

33 A number of steps were taken to prepare for additional growth in structured finance in Canada; specifically the asset-backed securitisation area. We received a capacity rating from Dominion Bond Rating Service affirming our capacity to act as trustee, custodian, paying agent and administrative agent for asset-backed (including mortgage-backed) securities in Canada. This capacity rating will strengthen our position in the eyes of market stakeholders and allow us to better compete with bank-owned trust companies. We also obtained use of a secondary trust company to allow us, for the first time, to function in both the issuer and indenture trustee capacities in securitization transactions a dual function currently not offered by any of our competitors. Finally, we signed an agreement with the United States Internal Revenue Service to become a Qualified Intermediary, allowing us to deal with cross-border funds more efficiently. Market Conditions Very few new issues entered the marketplace over the past year, resulting in a significant decrease in new business activity. At the same time, however, unprecedented growth in the mortgage-backed securities sector of the Canadian marketplace, coupled with our dominant presence as sole central payer and transfer agent (CPTA), led to strong growth in this line of business. Under Canada s National Housing Act, we have been appointed as the only provider of paying and transfer agent services for the mortgage-backed securities program. Despite the flat economy, a few additional aspects of the Canadian marketplace experienced growth, contributing to specific areas of our revenue: New warrant issuances; and Activity in the oil and gas sector, including new trust conversions, special business related to the energy trust market and significant new property acquisitions, resulting in energy trusts issuing subscription receipts and convertible debt. Significant Transactions Acted as trustee for the new business trusts of Brompton Group of Funds and Citadel Group of Funds CGI Group Inc: Private placement of subscription receipts used to indirectly acquire all of the issued and outstanding shares of American Management Systems Inc Issue of $462.5 million Series bonds by N-45º First CMBS Issuer Corporation Merrill Lynch Financial Assets: Closed a combination of three additional commercial mortgage-backed securitisation transactions, with further issuances expected in the coming fiscal year; and Awarded mandates to act as fund trustee, custodian and administrative agent for a variety of mutual funds companies. Priorities for the Coming Year During the coming fiscal year, we will: Pursue additional revenue opportunities from within and outside our client base Focus on client retention and added quality service Market the business as the corporate trustee of choice for the legal and business community; and Capitalise on additional growth in structured finance opportunities. PLAN MANAGERS (CANADA) The Year in Review Our Canadian Plan Managers business significantly improved EBITDA during 2004, due to efficiencies realised through the conversion from our prior legacy system onto our own technology platform. We have also undertaken an extensive review of our client fees to ensure that they are at an appropriate level. During the year, we also implemented web-enabled services and interactive voice response (IVR) technology that allows shareholders to conduct transactions online, further reducing costs. Four of our large employee plan s clients now offer online service to their participants, giving more than 60,000 participants (over 50% of our Canadian total) online access to their account information through the web. In addition, client service representatives in our national customer contact centre now handle sales over the telephone. Several Canadian clients took part in Computershare s Strategic Council meeting this year in the US. The Council is made up of high-level North American plan manager clients and provides a forum to discuss industry trends and the impact of new legislation, as well as obtain their feedback on our business strategy. Finally, the relatively flat market for employee plans gave us an opportunity to focus on consolidating our operations, while working to develop the functionality required to support a much broader array of plan types necessary to effectively compete in the Canadian market. In addition, we have already begun to adapt Transcentive s stock options system to Canadian clients. The resulting additional COMPUTERSHARE Annual Report

34 Regional Reports (cont d) functionality will significantly improve our competitive market position for Canadian stock option plans and our ability to position ourselves as the premier provider of employee plans in Canada. Market Conditions Overall, few new employee plans were launched in Canada during the year, as many companies await the impact of various new accounting rules (from the US and other countries) regarding the expensing of employee equity based incentive plans. These new rules will begin to take effect in calendar year At the same time, however, a recovering stock market and an improving economy are beginning to invigorate the business. Together with an increasing trend toward more global expansion of share plans, this will offer increased opportunities in the near term. Significant Transactions We won eleven new clients in Canada during the year, and retained all key clients. Priorities for the Coming Year Our top priority for the coming year is to aggressively pursue large employee stock purchase plan opportunities, capitalising on our improved processes and technology. We will also work to cross-sell Plan Managers products and services to the Investor Services and Georgeson Shareholder client bases, as well as leveraging the Georgeson Shareholder and Transcentive sales teams to win new business. In addition, we will: Continue to maximise internal operational efficiencies and productivity gains Continue to focus on quality, by implementing service improvements and increasing investment in staff training and development; and Continue to leverage the acquisition of Transcentive for the Canadian market. DOCUMENT SERVICES (CANADA) The Year in Review Over the past year, the majority of shareholder communications work that was previously handled by outside providers is now being handled by Document Services, and overall revenue growth rose, thanks to increases in print and mail volumes. At the same time, we improved our mail services, which delivered significant savings. During the course of the year, we devoted resources to supporting a major new client, Royal & SunAlliance, for which revenue will be recognised next financial year. We also continued to work very closely with the Canadian transfer agency group to prepare for the implementation of National Instrument , which will immediately grow the business. Market Conditions The overall print market was down this past year, affecting all our print and mail revenues including commercial accounts. At the same time, however, we are preparing to aggressively pursue opportunities created by an overall market trend toward electronic statement delivery and viewing; leveraging Document Services global division capabilities. Significant Transactions A key win in Canada, outlined in last year s annual report, was the contract awarded by Royal & SunAlliance (R&SA) to provide document design, printing, assembly and delivery of customer policy and billing documents for their insurance businesses in Canada. We partnered with R&SA to create a customer communication strategy that addresses R&SA s strategic business objectives and reduces operational costs. This project is being implemented in stages, with the first stage of production started in August Priorities for the Coming Year During FY 2005, we will: Increase mailing volumes during annual meeting season due to the implementation of National Instrument , which will allow us to mail to the Non-Objecting Beneficial owners for Computershare issuers Introduce new e-delivery technology to our existing clients Develop commercial markets; and Acquire and install new equipment to increase both capacity and our range of services, better serving the needs of Computershare transfer agent clients and commercial markets. 32 COMPUTERSHARE Regional Reports 2004

35 Regional Overview EUROPE, MIDDLE EAST AND AFRICA (EMEA) During the last year, our activity has been driven by the determination to become more client focused at every level and in every area of the company; to streamline our operations and to offer a broader range of services to all our customers. We saw the integration of our expanded range of services through our acquisition of Georgeson Shareholder and our more recent purchase of Transcentive. We have combined our client facing teams to support these areas, confident that this is the best way to deliver the benefits of our broader service to all our clients. With Pepper Technologies now wholly owned by Computershare, many of our clients have already begun to harness the value which stems from the introduction of an integrated communications strategy. Towards the end of the financial year, we also increased our interest to 45% in NRC (National Registry Company of Russia), a leading registrar in Russia. As the largest shareholder in NRC, we are now in a strong position to take full advantage of anticipated further consolidation of this market. Through our subsidiary company Computershare GmbH, we are also poised to advance on the opportunities which exist in Germany. This is currently the second largest registry market in Europe, offering many opportunities for professional shareholder administration services, as structures within the EU become more aligned. A number of successes in the past year include being awarded preferred supplier status by the Department of Health, to deliver our full spectrum of services for up to 60 Foundation Trust Hospitals and our appointment to handle the Government s gilts (Bonds) registers. We have leveraged our areas of expertise to enter these new markets. Meanwhile our plans business, through our global coverage and expertise, has had successes such as securing Reuters global executive plans encompassing 11 different plans for employees in over 90 countries. Throughout the year we have openly encouraged feedback and listened carefully to what clients and staff have told us about what we get right and what areas we need to improve. A number of internal initiatives to improve client focus, increase productivity and improve the quality of our service have been undertaken throughout the organisation. We have also made new management appointments during the year which have provided us with the opportunity to bring in individuals from outside our own industry, with broader skill sets and wider experience; reflecting our commitment to our clients changing and developing needs. Their combined influence is already leading to positive, tangible results and a renewed sense of energy and determination to take Computershare forward. In the coming year we will focus on drawing these strands together to consolidate our position as a professional services company, providing a broad portfolio of services to a large customer base across all sectors. Through our global expertise and coverage, we will be able to support global businesses whose core business is in the UK and Africa. We will also focus on making further inroads within the European global segment through our global proxy and analytics offerings. In new markets, such as government groups, we will leverage our experience in stakeholder management to provide end-to-end solutions to meet their needs. Within the insurance segment, we will provide assistance through our post-merger cleanup and odd lot activities. ComputersharePepper s expertise in stakeholder relationship management will also allow us to enter the B2C market. The EMEA region Through our increasing regional base our priority is comprises the to better position ourselves as the partner of choice United Kingdom, for organisations that view their business as within the EMEA region, as well as those which are global Ireland, Channel in nature and wish to utilise the global coverage that Computershare can provide. Islands, Germany, Financial Results FY 2004 Highlights South Africa The region performed well with revenue growth and significant profit growth achieved, compared to FY The revenue growth was achieved through the development of new revenue streams to complement the core registry business, and through further development of the employee share plans and commercial document services business. These revenue streams also contributed to the significant profit growth, along with other process driven improvements, notably in South Africa. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) 36% increase in FY 2003/4, driven mainly by: Improvements in the South African business, especially process improvement and cost reduction, combined with a strong focus on service delivery to improve quality and processing efficiency, and investment in training and development New, more profitable revenue streams in Investor Services UK, to supplement core registry business which has seen tough market conditions, including reduced interest rates and consolidation of the registry market. Also a strong focus on cost reductions, through improved efficiency and consistently meeting service targets; and Russia and Growth of Document Service s commercial revenue from non-registry business. Strong focus on growing this business, with production capacity expanded during the year, and integration of document services with other core services such as contact centre, scanning, and data management. COMPUTERSHARE Annual Report

36 Regional Reports (cont d) Revenue 10% growth in FY 2004, driven mainly by: Establishment of significant new revenue streams in Investor Services UK Substantial growth in Plan Managers revenue despite strong competition; and Increased revenue from development of Document Services commercial business from non-registry clients. UNITED KINGDOM INVESTOR SERVICES The Year in Review During the last year, the new management team s attention has focused on improved efficiency and consistently meeting service standards, while also looking at our core capabilities to deliver services in new business areas. We have also been able to extend the range of services we offer to our existing clients. Our commitment to exploiting new markets and developing new products is underlined through our establishment of the Innovations Centre, which formalises our evaluation methodology for new products and processes. Operationally, work has continued to improve and the further automation of our administrative processes, focusing on quality, has also increased productivity. Significant streamlining of the business operations has been undertaken with the centralisation of all operational processes in Bristol. The benefits of economies of scale are starting to be realised. Important strides in more transparent management reporting have been achieved and increased focus on the development of our managers has begun. The integration of Georgeson s shareholder tracing service with Computershare s own service has been achieved, resulting in an increase in our overall market share to 80% for this product. Market Conditions The last year has seen continued market consolidation, with only a few areas of our business seeing cautious signs of improvement. Limited increase in overall share prices has meant that growth has slowed in areas such as corporate actions and dealing programs. This reinforces the requirement for Computershare to deliver our core services effectively, while always looking at opportunities that can add real value to our clients businesses through new service development. Significant Transactions Following a competitive tender, we were appointed by HM Treasury to handle all functions of the government gilts register; work previously carried out by the Bank of England. The contract is for an initial period of five years NHS Awarded preferred supplier status by Department of Health, to deliver full spectrum of services for up to 60 Foundation Trust Hospitals 180 corporate actions with projects undertaken for RT Group PLC (In Members Voluntary Liquidation), Marconi, Orange, Debenhams and J Sainsbury Shareholder Solutions established itself as the leading player in the market during the last financial year, by handling the Bradford & Bingley program to trace 75,000 shareholders Shareholder Solutions appointed to trace people with outstanding cash entitlements from Woolwich Building Society conversion in 1997 Cadbury Schweppes register transferred from Lloyds; and Very successful small shareholding dealing service for a leading engineering company. Priorities for the Coming Year Develop opportunities afforded by a new segmentation approach, eg government stakeholder groups Shareholder Solutions to capitalise on Georgeson Shareholder experience to enter new markets and increase the number of medium and large programs handled Continued focus on service delivery excellence, through more transparent reporting structures and training and development of managers Ongoing development of e-commerce solutions, including e-ipos and launch of internet dealing service; and Fully integrate the services available through acquisitions and maximise their potential to add value for all our clients. 34 COMPUTERSHARE Regional Reports 2004

37 PLAN MANAGERS The Year in Review Plan Managers continues to demonstrate significant year-on-year growth, with revenue up by more than 25% on the previous year. Major new client wins and additional business derived from existing clients, either via cross-selling or through selling additional plans products, have helped achieve this result. Much of the focus throughout the year was on our internal practices, with a view to moving towards greater client focus and improving our service delivery. This included the implementation of a new performance management process, the introduction of a competence-based, productspecific training program and a restructure of our operational activities. We also launched a comprehensive process re-engineering program. Market Conditions While competition remains strong across all product lines, clients using Save As You Earn, Share Incentive Plans, option plans and other incentive plans, continue to view high quality service as their prime requirement. It is for these reasons that quality service delivery will remain a priority in the new financial year. The introduction of new accountancy standards, covering the expense of options, combined with a drive for greater corporate governance, is leading to an increasing demand for Restricted Share Plans with specific vesting criteria. This type of plan is more complicated to administer, and carries higher risk; but also provides us with an opportunity to demonstrate significant value to our clients. Significant Transactions Significant new client wins included Orange and Bombardier. We also saw additional business generated from existing clients HSBC, RBS and BP. Other noteworthy transactions were: Maturity of RBS Option 2000 and 2001 programs with online exercise and dealing functionality Reuters global executive plans won from a competitor, including the implementation of 11 different plans covering employees in over 90 countries Launched the Employee Plan Members internet site to a further eight clients including RBS and Boots. The site now has over 45,000 registered users and over 10,000 (regular) monthly users. Work to improve overall usability and accessibility of the site is ongoing BP roll out of integrated communications and training program to country coordinators/administrators covering 80 countries; and Considerable uptake in dealing on behalf of Plan Managers saw nearly a tenfold increase in income for dealing. Priorities for the Coming Year Continue to integrate the value-added services of Transcentive into our plans portfolio Complete key internal project aimed at reviewing all business processes and implement recommendations Continual improvement in service delivery and investment in training Roll out existing product suite (Internet/IVR) to remainder of client base; and Build market share of major global corporates with large employee bases. DOCUMENT SERVICES The Year in Review Over the last 12 months we have continued to provide a wide range of document solutions and secure printing services for Computershare s core registry clients. In tandem with this, we have maintained strong development of new revenue streams from non-registry related business. Revenue from non-registry clients has increased significantly (40%) and now represents 41% of total sales revenue, compared to 37% in the previous year. Production capacity has increased by approximately 25% in FY 2004, with the opening of a second production operation at the Cater Road site in Bristol. Significant investment in new machinery and sophisticated technology puts us in a strong position to compete for contracts with larger clients. We also have greater flexibility to meet wider client needs, while streamlining and simplifying our processes. Market Conditions Margins continue to be under pressure with an abundance of capacity within the industry. Despite this, the Document Services business has been successful in capturing substantial new clients, particularly in the more sophisticated end-to-end communication solutions business. Significant Transactions Marks & Spencer Money was the hugely successful launch of a mini-cash Individual Savings Account in February We created a complete solution which included Interactive Voice Response (IVR) technologies, coupon processing, data management and web service, resulting in more than 320,000 mail packs, in excess of 90,000 incoming calls and over 34,000 hits on the web site COMPUTERSHARE Annual Report

38 Regional Reports (cont d) We produced in excess of 2.1 million images and 1.65 million mail packs for West Bromwich Building Society On behalf of Corgi, the UK s gas installers regulator, we produced and delivered a variety of personalised selectable forms that were despatched to over 44,000 businesses employing approx 100,000 gas installers Work has now been completed for 19 National Health Service trusts since their conversion to trust status, which began in April 2004; and We successfully completed the Vodafone AGM mailing in June ,000 mail packs made up of annual report and accounts and proxy forms. Priorities for the Coming Year Integrating with ComputersharePepper to provide a fuller offering to the market Implementing a full roll-out of the Charter Suite of products and services in the UK which includes full end-to-end e-communication and integrated, multichannel communications/document delivery Move into colour printing capability, specifically to support the ComputersharePepper business. This also widens our portfolio for both commercial and registry clients; and The acquisition of E-Billing for Enterprise has added further capabilities to the portfolio and we will be marketing the E-Billing product in the coming year. ANALYTICS SERVICES The Year in Review We continued to position ourself as the leading supplier of UK equity ownership information during the year, with a focus on expanding the IRtrack platform and, following the Georgeson acquisition, to support our proxy business, as part of the recently completed integration of our proxy solicitation team into the Georgeson s European Team. Market Conditions While capital markets have continued to be depressed over the year, there are signs of increased corporate activity and encouragingly some firm indications of the US banks introducing corporate broking teams. Significant Transactions Launch of IRtrack, our first global shareholder and market information product Shareholder analysis activities outsourced to us by two leading investment banks; and Two banks transferred their analysis activities from competitors to us. Priorities for the Coming Year Integrate the proxy and analytics offering to meet the needs of European global markets Sell IRtrack into the UK and continental European markets Use the IRtrack leads, to help up sell other Computershare services such as proxy solicitation; and Build further relationships with intermediaries, such as investment banks and stock exchanges, to jointly provide shareholder analysis services including IRtrack. GEORGESON SHAREHOLDER COMMUNICATIONS The Year in Review Following Computershare s acquisition in December 2003, our proxy solicitation team in London was immediately integrated with the European team. As a combined force, we went on to produce a good year in revenue terms, with several major new clients successfully advised on vote and governance issues for the first time. Market Conditions With market conditions becoming more promising for corporate activity, there was greater confidence among CEOs to commit to acquisition plans. With interest rates initially threatening to rise and then actually doing so, many companies looked to re-financing existing bond issues at fixed rates. Both these developments spurred on greater transaction activity across Europe. Significant Transactions Retained by a leading global oil company to advise on its corporate governance issues and assist with the solicitation of shareholder support and participation In France, a top-tier financial advisor retained us to advise their client on the identification, communication and tender offer solicitation for a contested counter-offer In Germany, new clients include a European energy company and a leading brand sports goods retailer, who used our services to extend their knowledge of and their access to their foreign and domestic shareholders Successfully managed Centrica PLC s small shareholder program; and 36 COMPUTERSHARE Regional Reports 2004

39 Assisted the US with numerous cross-border equity and fixed income transactions, including a repayment of a US$1 billion bond, issued by the Republic of Venezuela. Priorities for the Coming Year Looking ahead, the broader range of stakeholder management solutions (share plans, multiple communication channels and shareholder analytics) provided from the integration of the two companies, will significantly differentiate Georgeson Shareholder offerings in Europe and globally. Our priorities for the year are to: Integrate the Proxy, Analytics and ComputersharePepper offerings into a unique and coherent shareholder management tool, providing the corporate user with access to the best and most intelligent information available in the international market; and Widen our European footprint as we maximise the value of our broader range of integrated services. SOUTH AFRICA The Year in Review During the last year, our emphasis has been on developing a strong service culture and addressing overall service delivery from both processing and quality viewpoints. The appointment of a new Managing Director and the introduction of an accountable and responsible middle management were fundamental steps in addressing efficiency and service delivery issues. We have also begun a process of evaluating our client relationship management and operational relationship management teams and will have this structural element finalised in the near-term. In addition, we have been investing heavily in the training and development of all employees and developing a social conscience as we seek to achieve a more inclusive organisation. We are confident that, together, the positive changes we have made this year will position our businesses for sustainable growth in the future. Black Economic Empowerment remains extremely important to our future survival and is receiving enormous attention. It stretches far beyond mere ownership and into areas of management, procurement and social responsibility. We have introduced a social responsibility program which will involve all staff over a period of time and not only help to uplift communities, but provide valuable team-building opportunities for our people. Market Conditions As in other parts of the world, stock market volumes continued to be on the low side, impacting on both the Central Securities Depository Participant (CSDP) and outsourcing businesses. Against this background, we have witnessed active targeting of our clients by our competitors. Significant Transactions Completed the integration of Georgeson Shareholder into our business; and MNet s 1998 Phuthuma Share Scheme was designed as a pioneering venture to assist in the economic empowerment of historically disadvantaged communities in South Africa. The success of the scheme, by the close of the offer, exceeded all expectations. Priorities for the Coming Year Leveraging the benefits of the Georgeson acquisition Investigation of already identified Document Service opportunities; and Opportunity for expansion in Africa. GEORGESON SHAREHOLDER COMMUNICATIONS (SOUTH AFRICA) The Year in Review During the course of the year, we made significant moves towards creating a stable, local client base that would generate ongoing revenues. We also positioned ourselves as an outsourced solution for European-based businesses. Having established good telecommunication links and multi-lingual capabilities, we were able to work on several overseas shareholder programs. We successfully executed Japanese shareholder ID projects and AGM proxy solicitation projects, working closely with the US Georgeson Proxy and ID Group. A significant development was the successful introduction of an Information Agent service for Pension Funds, assisting Pension Fund Trustees in providing telephone and data capture support. This was an important first step in positioning ourselves for future work in this area. Market Conditions The market shows a promising outlook for corporate activity, much of which is being driven by Black Economic Empowerment arrangements. The introduction of the Financial Intelligence Centre Act has increased the obligation to maintain transparent and fully disclosed data, creating opportunities for shareholder programs. New legislation pertaining to the pension funds industry, with particular regard to surplus funds, has created a further opportunity for which our services are suited. COMPUTERSHARE Annual Report

40 Regional Reports (cont d) The growing trend in shareholder activism coupled with the increasing importance of good corporate governance practices, has created a sharp focus on the need for companies to develop and execute effective communication, proxy solicitation and response strategies. Significant Transactions Information agent and receiving agent services for a pension fund of a major listed company targeted at approximately 25,000 pension fund members AGM proxy solicitation for a leading listed chemical and fuel company; and Information agent for a large banking group pertaining to a preference share issue, targeted to public investors. Priorities for the Coming Year Integrate, sustain and develop our programs within Computershare, ensuring there is sufficient product knowledge, skill and delivery capability to successfully market, sell and execute such programs, to established Computershare clients To carry out a comprehensive review of dissenting registers and associated opportunities for missing and/or post-merger clean-up programs, requiring shareholder tracing Annual general meetings proxy solicitation is a key focus for the year ahead. We aim to add value by introducing an electronic system of voting at meetings, which has the support of some of our major clients; and To increase our stakeholding in the pension funds industry, satisfying the needs of those companies with pension funds requiring dedicated communication and administration, as trustees meet their obligations to locate and notify past and present members of their respective funds. OTHER REGIONS IRELAND INVESTOR SERVICES The Year in Review Our results this year were due in part to the successful creation of alternative revenue streams and a successful cross-selling strategy that improved the penetration of our packaged services to clients. The year also saw an increase in the knowledge and skill of our registry team and we now have a significant number of managers and staff that have many years experience in this sector. We will capitalise on this to create further opportunities, as we continue to work in close partnership with our increasing number of Irish and multi-national clients. Ireland has nearly 1,000 UK companies and 500 multi-national concerns (mainly US) operating in Ireland, providing us with significant growth opportunities in employee plan administration services. The continued development of the fund administration market in the International Financial Services Centre (IFSC) in Dublin has opened up further opportunities. There are currently in excess of 3,500 funds being administered in the IFSC and we are continuing to grow our presence in this market. In this instance our technology, together with our global experience, is enabling us to win new business in this expanding market segment. After a period where we have seen rates plateau, growth rates in excess of 5% in the Irish economy are being predicted for the next 3-4 years. We expect that this will lead to a further creation of wealth through share ownership as Irish entities thrive on the international scene. Significant Transactions The latter part of the year saw an increase in the number of corporate actions, with the following projects undertaken: We participated in the largest corporate action in Ireland with the take-over of First Active Building Society by Royal Bank of Scotland Take over of Barlo, Europe s leading radiator and plastics manufacturer Receiving agent for Gresham Group, one of Ireland s leading hotel companies; and Plan administration for Pfizer Pharmaceutical and Tullow Oil. Priorities for the Coming Year We will continue to expand our plans and fund administration services We will consolidate our position in the market and move into new markets; and We will introduce leading edge print facility, working in conjunction with Document Services, to capitalise on our strong presence in the financial services market. CHANNEL ISLANDS The Year in Review Our two objectives, of increasing registry market share in the Channel Islands and providing dedicated trustee services to the global plans market, were achieved during the last financial year. 38 COMPUTERSHARE Regional Reports 2004

41 Market Conditions Market conditions in the Channel Islands improved in the year with many new Closed Ended Fund launches, especially in the Property Fund sector and many new foreign companies joining AIM, for which we became the registrar. Significant Transactions New Employee Share Scheme Trust launches were limited by the introduction of Treasury Shares in the UK, however considerable advances were made in taking on existing Trusts from the more established Trustee businesses in Jersey and several new mandates were won. Priorities for the Coming Year Grow registry business further by cementing relationships with the major fund administration groups in the Channel Islands; and Continue to attract existing trust business based on our commitment to client service and to increase our market share of this business. GERMANY The Year in Review Computershare acquired the remaining 51% of the Deutsche Börse joint venture on 31 December From this date, Computershare GmbH, located in Frankfurt and Munich, began operating as an active subsidiary, providing registry management and AGM services for the Computershare Group in Germany. The Computershare business in Germany is supported by a close working relationship with Pepper Technologies AG. The focus of the first six months of operation was to remodel the existing technical infrastructure to reduce operational costs, improve the registry management service offering and enable future profitability. Significant Transactions Computershare GmbH wholly operates the share registry business for the Computershare group in Germany. CARE, a newly developed, highly advanced registry system, designed by ComputersharePepper in Munich, was introduced in May It replaced the existing Deutsche Börse registry system with enhanced technical functionality, enabling issuers to more intelligently manage their shareholder database, capture valuable relationship history and utilise flexible analytical possibilities to develop value-added strategies; and 35 registries successfully transitioned to the new CARE registry system with many customers retaining long-term contracts of up to five years. Priorities for the Coming Year Target large German issuers to grow share registry client base Increase availability of share registry services to issuers in Germany; and Enable issuers to obtain a more valuable return from investor interaction by providing innovative stakeholder relationship management solutions. RUSSIA As part of our global expansion strategy, we increased our stake in the NRC (National Registry Company of Russia) to 45%. NRC is one of Russia s leading registrars, providing registry services to 400 clients including Aeroflot, Norilsk Nickel, Vimpelcom and Pio Global. Russia has over 70 registrars and we believe further consolidation of the market is inevitable. This business made a positive contribution to EBITDA and our significant stake in NRC places us in an optimal position to capitalise on future developments in this key market. Market Conditions In Germany, only 10% of issuers provide registered shares, with Computershare GmbH maintaining 50% of all the registers. It is a stable market with very little public capital raising activity. The focus of the market has been to increase the efficiency of managing common holding, distribution and volatility analysis. Very little attention has been placed on intelligent use of the share registry to develop long-term value-added strategies and Computershare GmbH is now educating the market on how to develop a share registry into a valuable source of business information. COMPUTERSHARE Annual Report

42 Senior Executive Management Group CHRIS MORRIS CHIEF EXECUTIVE OFFICER Computershare Limited Chris Morris is a founding member of Computershare since its establishment in 1978 and was appointed Chief Executive Officer in Chris extensive knowledge of the securities industry and its user requirements from both a national and international perspective, coupled with his passion and long term strategic vision, have been instrumental in developing Computershare into a global company that is unique in its provision of a full range of solutions to meet the needs of listed companies and their stakeholders. PENNY MACLAGAN MANAGING DIRECTOR Computershare Technology Services Penny Maclagan joined Computershare in 1983 and was appointed to the Board as an executive director in May In her role as Managing Director of Computershare Technology Services, Penny is responsible for planning, developing and executing technology across the world in support of our global strategy. Throughout her career with Computershare, Penny has been involved with all aspects of technology support and development. Her detailed understanding of Computershare s proprietary technology and of the global securities industry has greatly contributed to the establishment of Computershare s competitive advantage in the global marketplace. ROB CHAPMAN REGIONAL MANAGING DIRECTOR EUROPE, MIDDLE EAST AND AFRICA Rob was appointed as Managing Director for the EMEA region in June He has an outstanding record of delivering growth in outsourcing businesses similar to Computershare and possesses strong operational knowledge, market experience and commercial acumen that promise to deliver positive results in the region. Rob has over 18 years experience of delivering services to clients in the financial services, commercial and government arenas. He spent 15 years at EDS Corporation in a variety of roles, his last being Managing Director of its Business Process Management Division in the UK. He has also spent time leading businesses in Ireland and South Africa. 40 COMPUTERSHARE Senior Management 2004

43 PAUL CONN MANAGING DIRECTOR Global Analytics Paul was appointed as Managing Director, Global Analytics division in July This division embraces the three regional Computershare Analytics businesses, the former Georgeson Shareholder global intelligence group and newly reformed US stock surveillance team. The business unit provides services to the corporate investor relations community and market participants in key capital markets. Paul plays an important role in strategic initiatives that leverage Computershare s global assets and capabilities, delivering cross border solutions for clients and new services for Computershare and advises many of our registry businesses on major market structure changes and opportunities. Prior to joining Computershare in late 1998, Paul was Head of New Business Development at the Australian Stock Exchange. Before joining ASX, Paul worked for the London Stock Exchange in a range of administrative and management positions. STUART CROSBY REGIONAL MANAGING DIRECTOR ASIA PACIFIC In his role as Managing Director Asia Pacific, Stuart is responsible for Computershare s operations in Australia, New Zealand, India and Hong Kong. Prior to his appointment to this position in 2002, Stuart spent two years heading up Computershare s strategic business development in continental Europe and Asia. Before joining Computershare in 1999, Stuart was ASX s national head of listings ( 96-99). Stuart has also worked in Hong Kong where he ran the Hong Kong Securities and Futures Commission s intermediary licensing division and was a director of enforcement. TOM HONAN CHIEF FINANCIAL OFFICER Computershare Limited As the CFO, Tom is responsible for providing financial leadership across the entire organisation, including accounting and business support in all of the Computershare group entities. Tom s responsibilities also cover Financial Planning and Control, Treasury, Tax, Acquisition Analysis, Financial Systems, and Investor Relations. Tom has over 20 years senior finance experience that has been gained from a variety of roles and organisations in both Australia and the United States. Tom holds a Bachelor of Economics from Monash University and an MBA from University of Melbourne. COMPUTERSHARE Annual Report

44 DR OLIVER NIEDERMAIER STRATEGIC CORPORATE DEVELOPMENT Computershare Limited Oliver Niedermaier joined the Senior Executive Management Team on 1 March 2004 with a focus on strategic corporate development. In 1998, as co-founder and CEO of Pepper Technologies AG, Oliver introduced the innovative concept of Stakeholder Relationship Management to international markets that quickly translated into international growth. Oliver s dedication and innovative thinking is fundamental in driving future strategic thought for the corporate development of the Computershare Group worldwide. Oliver has a PhD in Business Administration and Strategic Management from Ludwig-Maximilian s University in Munich, Germany. STEVEN ROTHBLOOM REGIONAL MANAGING DIRECTOR NORTH AMERICA In his role as Managing Director North America, Steven is responsible for Computershare s operations in the United States and Canada. Prior to his appointment, Steven was President of Computershare Investor Services USA with direct responsibility for the registry and stock transfer businesses across all our US offices as well as our US employee plan services and options business. Steven was part of the Executive Team that came across to Computershare following the Harris Bank acquisition in He joined Harris in 1986 and after a series of senior appointments, became Executive Vice President in He holds a BA from Queens College, New York, and an MBA in Financial Management (with distinction) from Pace University in New York. PAUL TOBIN CHIEF LEGAL OFFICER/JOINT COMPANY SECRETARY Computershare Limited Paul Tobin is responsible for legal, compliance, regulatory, risk management, and group insurance activities, and shares company secretarial functions with Mark Davis. He is also active in Computershare s merger and acquisition activities. Paul has many years of experience in operations, including his role as Senior Vice President and General Counsel of a major online data provider. Paul was also Founder and President of an Internet business-to-business services firm. Paul holds a Bachelor of Arts degree from Kenyon College and received his law degree from New York Law School in He is a member of the American Bar Association, State Bar of California, and New Jersey State Bar Association. 42 COMPUTERSHARE Senior Management 2004

45 Detailed Financial Report FINANCIAL CALENDAR August Announcement of result for the Company s 2004 financial year 6 September Books close for final dividend 24 September Payment of final dividend 10 November Annual General Meeting Melbourne February Announcement of result for the half year ending 31 December 2004 COMPUTERSHARE Annual Report

46 Corporate Governance Statement COMPUTERSHARE S APPROACH TO CORPORATE GOVERNANCE Good corporate governance is important to Computershare and the Board is committed to maintaining high standards of corporate governance. Following the release of the best practice recommendations by the Australian Stock Exchange s Corporate Governance Council in March 2003, a review of Computershare s corporate governance framework was undertaken. The results of this review revealed that Computershare s framework was fundamentally consistent with the recommendations with limited exceptions. A description of Computershare s main corporate governance practices are set out in this corporate governance statement. All practices were in place for the entire year unless stated otherwise. References in this statement to the Group refer to Computershare Limited and its controlled entities. BOARD RESPONSIBILITIES The Board is responsible for the corporate governance of the Group and operates in accordance with the principles set out in the Board Charter, a summary of which is available from the corporate governance information section of the Computershare website at The principal role of the Board is to ensure the long term prosperity of the Group by setting broad corporate governance policies and ensuring that they are effectively implemented by management. The Board carries out this role principally by: overseeing the Group and its global operations appointing and removing, where appropriate, the senior executives of the Group setting the strategic direction of the Group and providing strategic advice to management providing input into and approval of management s development of corporate strategy and performance objectives reviewing and ratifying systems of governance, risk management, and internal compliance and control, codes of conduct and legal compliance to ensure appropriate compliance frameworks and controls are in place; and approval of budgets and monitoring progress against budget via the establishment and reporting of both financial and non financial key performance indicators. The Board has delegated to executive management responsibility for a number of matters including: managing the Group s day to day operations in accordance with the Board approved authorisations, policies and procedures 44 COMPUTERSHARE Detailed Financial Report 2004 developing the Group s annual budget and recommending it to the Board for approval and managing the day to day operations within the budget; and implementing corporate strategy and making recommendations on significant corporate strategic initiatives. COMPOSITION OF THE BOARD OF DIRECTORS Computershare s Constitution provides that: The minimum number of directors shall be three and the maximum number of directors shall be ten unless amended by a resolution passed at a general meeting At each annual general meeting, at least two directors must retire from office. Re-appointment is not automatic. If retiring directors wish to continue to hold office they must submit themselves to re-election by shareholders; and No director may be in office for longer than three years without facing re-election. Membership and expertise of the Board Over the past several years, the composition of Computershare s Board has been revised to better reflect the global nature of the Group s businesses. Consistent with this effort, the Board has for some time now been comprised of Australian based directors and directors from the North American and European regions in which the Group operates. The Board has a broad range of necessary skills, knowledge, and experience to govern the Group and understand the markets and challenges that the Group faces. The current Board composition with details of the backgrounds of each director is set out below: Alexander (Sandy) Stuart Murdoch DDA, BEc, ASA, ASIA Position: Chairman Age: 63 Independent: Yes Sandy Murdoch joined the Board of Computershare as non-executive Chairman when the Company listed in His previous experience included five years with merchant bank Chase NBA Group Limited in corporate finance and lending and twelve years as the Chief Executive Officer of the Linfox Transport Group. He is an active participant in senior executive meetings, and his wealth of knowledge and leadership skills are highly valued.

47 Sandy is Chairman of the nomination committee and is a member of the remuneration committee and the risk and audit committee. Sandy is based in Melbourne. Christopher John Morris Position: Chief Executive Officer Age: 56 Independent: No Chris Morris was appointed Chief Executive Officer in 1990 after having been a founding member of Computershare in Chris extensive knowledge of the securities industry and its user requirements from both a national and international perspective coupled with his passion and long term strategic vision have been instrumental in developing Computershare into a global company that is unique in its provision of a full range of solutions to meet the needs of listed companies and their stakeholders. Chris is a member of the remuneration committee and the nomination committee and is based in Melbourne. Penelope Jane Maclagan BSc (Hons), DipEd Position: Executive Director Age: 52 Independent: No Penny Maclagan joined Computershare in 1983 and was appointed to the Board as an executive director in May In her role as Managing Director of Computershare Technology Services, Penny is responsible for planning, developing and executing technology across the world in support of the Group s global strategy. Throughout her career with Computershare, Penny has been involved with all aspects of technology support and development. Her detailed understanding of Computershare s proprietary technology and of the global securities industry has greatly contributed to the establishment of Computershare s competitive advantage in the global marketplace. Penny is a member of the nomination committee and is based in Melbourne. Anthony Norman Wales FCA, FCIS Position: Non-executive Director Age: 60 Independent: No Tony Wales has been involved with Computershare since 1981 and was appointed Executive (Finance) Director in On 30 September 2001, Tony relinquished his executive responsibilities and since that time has remained on the Board in a non-executive capacity. During his time as Finance Director, Tony was instrumental in much of the strategic expansion of the Group from its days as a small Australian provider of bureau services to one of Australia s largest and most successful technology companies, spread throughout many countries. Of particular importance was Tony s major role in negotiations and in the due diligence process for the Company s major acquisitions. Tony continues to be actively involved with Computershare and his background, experience and understanding of both the Group and international markets are valued highly by both the Board and senior management. Tony is Chairman of the risk and audit committee and a member of the nomination committee and the remuneration committee. Tony is based in Sydney. Philip Daniel DeFeo BA Economics (Iona, USA) Position: Non-executive Director Age: 58 Independent: Yes Philip DeFeo joined the Board of Computershare in 2002 as a non-executive director. Phillip s highly respected reputation in the US marketplace and financial services experience has further strengthened the Group s expansion efforts particularly in North America. Philip is currently Chairman and Chief Executive Officer of the California-based Pacific Exchange (PCX), one of the world s leading derivatives markets and arguably the United States most innovative securities exchange. Prior to taking up his role at PCX, Philip was President and CEO of Van Eck Associates Corp., a diversified global mutual fund and brokerage company specialising in alternative asset classes. COMPUTERSHARE Annual Report

48 Corporate Governance Statement (cont d) Philip s distinguished career includes the following senior appointments: Executive Vice President and Director of Marketing and Customer Service at Cedel International, the second largest provider of Eurobond clearance and custody services; Senior Vice President and a member of the Operating Committee at FMR Corporation (parent of Fidelity Investments); Managing Director for Worldwide Equities Operations and Systems at Lehman Brothers; and Senior Vice President in the International Securities Division at Bankers Trust Company in London. His professional career began with Procter and Gamble, where he managed operations. Philip is Chairman of the remuneration committee and a member of the nomination committee. Philip is based in San Francisco. Thomas Michael Butler BSc (Glasgow), MBA (Strathclyde) Position: Non-executive Director Age: 52 Independent: Yes Tom Butler joined the Board of Computershare on 15 May 2003 as a non-executive director. Tom has had an impressive career that has had its focus in information technology in the United Kingdom and Europe. Operating at the highest level he has demonstrated prodigious skills in both strategic positioning and in business management, often turning companies around to deliver significant profits. Tom is currently the Chief Executive Officer of Liberata plc. He has been a Council Member of the Confederation of British Industry and he is a member of the Institute of Mechanical Engineers. Tom is a member of the Company s nomination committee and is based in London. William E Ford MBA (Stanford, USA), BA Economics (Amherst College USA) Position: Non-executive Director Age: 43 Independent: No Bill brings an extensive understanding of the financial markets and has specific expertise in the finance and consumer sectors. He works closely with several portfolio companies and is director of several private and public companies, including SSA Global Technologies, Archipelago, and Multiplan. Prior to joining General Atlantic Partners, Bill worked at Morgan Stanley and Co. as an investment banker. Bill is a member of the nomination committee and is based in New York. Dr Markus Kerber Dipl. OEC, Dr. Rer. Soc. Position: Non-executive Director Age: 41 Independent: Yes Dr Markus Kerber was appointed to the Board on 18 August 2004 as a non-executive director. Markus is Vice Chairman of the Supervisory Board of GFT Technologies, one of Europe s leading IT services companies in the banking, logistics and industrial sectors. He is a major shareholder of GFT and has been its CFO and COO for many years where he has been responsible for GFT s expansion strategy across Europe. Prior to joining GFT, Markus worked as an investment banker in London in the equity capital markets divisions of Deutsche Bank AG and S.G. Warburg and Co. Limited in London. Markus is also a strategy consultant for the Conservative Party at the German Reichstag in Berlin and a member of London-based International Institute for Strategic Studies (IISS). Markus is a member of the nomination committee and is based in Berlin. Bill Ford joined the Board in January 2003 as a non-executive director. He is a General Partner at General Atlantic Partners LLC, a global private equity firm, where he chairs the firm s investment committee and is a member of the Executive and Portfolio committees. 46 COMPUTERSHARE Detailed Financial Report 2004

49 BOARD INDEPENDENCE While the concept of director independence is variously defined, the Board has considered each of the eight directors in office at the date of this report and determined that four of them are independent. The four directors who are not considered independent are Christopher Morris and Penelope Maclagan who are each executive directors, Tony Wales who is a substantial shareholder and a former executive director and Bill Ford who is associated with a substantial shareholder. Of the four remaining directors, (Sandy Murdoch, Philip DeFeo, Tom Butler and Markus Gerber) none has previously been an employee of the Group and the Board believes that none has any other relationship that could interfere with the exercise of their independent judgment. Sandy Murdoch has been a director since Despite having served on the Board for a period which on one view may be perceived to materially interfere with his independence, the Board considers that, in his case, there are no circumstances that interfere with the exercise of his unfettered and independent judgment. In particular, in the Board s view, he has not developed relationships with other directors, management, employees, substantial shareholders, advisers, suppliers, customers or any other stakeholders that have resulted in his losing his ability or willingness to operate independently and objectively, to challenge the Board and management and to otherwise act in the best interests of the Company. The Board does not consider that a majority of directors being independent is, on its own, a sufficiently compelling factor to justify additional appointments to the Board. This is particularly so given that a majority of directors would be independent but for Bill Ford s association with a substantial shareholder. While the ASX Corporate Governance Council s corporate governance best practice recommendations state that a director is not independent if he or she has such an association, in the Board s view, Mr Ford s association merely aligns his interest more closely with those of shareholders. In addition to ensuring that the Board has a broad range of necessary skills, knowledge, and experience to govern the Group and understand the markets and challenges that the Group faces, the Board believes that its membership should represent an appropriate balance between directors with experience and knowledge of the Group and directors with an external perspective. The Board also considers that its size should be conducive to effective discussion and efficient decision making. The Board believes that its current composition meets these requirements. BOARD MEETINGS The Board meets quarterly both as a Board and in conjunction with senior management to discuss the short and long term strategy of the Group. The Board receives a monthly Board report which provides the Board with current information concerning the Group and each of the three regions in which it operates, together with a report from Computershare Technology Services Managing Director. The monthly Board report includes salient financial details together with information on the performance of operations, major initiatives as well as legal, governance and compliance issues that may arise. The Board convenes monthly by phone conference to review the monthly Board report, discuss matters of importance with management, make recommendations to management, discuss strategy and plan quarterly Board meetings. CHAIRMAN AND CHIEF EXECUTIVE OFFICER (CEO) The Chairman is responsible for leading the Board, facilitating Board discussions and managing the Board s relationship with its senior executives. The CEO is responsible for implementing Group strategies and policies. The roles of the Chairman and CEO are separate roles which are undertaken by separate people. BOARD COMMITTEES Three Board Committees have been established to assist the Board in discharging its responsibilities as follows: The risk and audit committee The risk and audit committee operates in accordance with its Board approved charter, a copy of which is available from the corporate governance information section of the Computershare website The principal functions of the risk and audit committee include reviewing and making recommendations to the Board and assisting it in the discharge of its responsibilities relating to accounting policy and disclosure. The committee s responsibilities also include assessing the adequacy of accounting, financial and operating controls, reviewing the performance of external auditors and examining their evaluation of internal controls and management s response. The risk and audit committee is chaired by Tony Wales and currently has one other permanent member being Sandy Murdoch. The Board considers that these members have appropriate financial expertise and understanding of the markets in which the Group operates. COMPUTERSHARE Annual Report

50 Corporate Governance Statement (cont d) The Managing Director, Chief Financial Officer, Chief Legal Officer and the Company s external auditors are invited to risk and audit committee meetings at the discretion of the committee. The committee typically meets four times each year. Peter Griffin, who served on the risk and audit committee for a number of years, retired from the Board during the year. It is the intention of the Board that his position on the committee be replaced during the 30 June 2005 financial year. As noted above, Tony Wales is not deemed to be independent by virtue of his substantial shareholding in Computershare and because he held an executive position with the Group within the last three years. Notwithstanding the above, the Board does not consider that there are any matters that may materially interfere with the exercise by Mr Wales of unfettered and independent judgment. While the Board would have preferred Mr Wales to remain in the position of Chairman of the risk and audit committee due to the strong contribution he has made in this role and because it considers that he is the best suited director for this role, Mr Wales will be stepping down as Chairman in due course to ensure Computershare s ongoing compliance with ASX Listing Rule The nomination committee The nomination committee operates in accordance with its Board approved charter, a summary of which is available from the corporate governance section of Computershare s website The main functions of the committee are to assess the desirable competencies of the Board members, review Board succession plans, provide a framework for the evaluation process of the performance of the Board, individual directors, the chief executive and senior executive management and to make recommendations for the appointment and removal of directors. All current directors are members of the nomination committee and it is chaired by the Chairman of the Board. The nomination committee meets no less than once per year. The nomination committee s policy for the appointment of directors is to select candidates whose skills, expertise, qualifications, networks and knowledge of the markets in which Computershare operates and other markets into which it may expand, complement those of existing Board members. When selecting new directors for recommendation to the Board, the nomination committee reviews prospective directors CVs, meets with them and speaks with their referees and others who have previously worked with them to assess their suitability. The remuneration committee The remuneration committee operates in accordance with its Board approved charter, a copy of which is available from the corporate governance information section of Computershare s website The principle function of the remuneration committee is to assist the Board in ensuring that the Group s remuneration levels are appropriate and sufficient to attract and retain the directors and key executives needed to run the Group. The committee is chaired by Philip DeFeo and is comprised of Mr Murdoch, Mr Wales and Mr Morris. The committee meets at least annually with additional meetings being convened as required. The committee has access to executive management of the Group and may consult independent experts where the committee considers this necessary in order to effectively discharge its responsibilities. * For details of director attendances at committee meetings refer to the Directors Report. EQUITY PARTICIPATION BY NON-EXECUTIVE DIRECTORS The Board encourages non-executive Directors to own shares in the Company. REMUNERATION It is the Company s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately in accordance with market conditions and reflective of their contribution. The expected outcomes of this remuneration philosophy are: Retention and motivation of key executives Attraction of quality management to the Group; and Performance incentives which allow executives to share the rewards of the success of the Group. The Board is keen to encourage equity holdings by employees to align staff interests with those of shareholders. Many employees have participated in the Company s various share and option plans and the directors believe this has historically been a significant contributing factor to the Group s success. The Company s share plans were in place prior to the release of the ASX best practice recommendations and were not submitted to shareholders for approval at the time of their adoption other than, in certain cases, for approval for the purposes of sections 259B(2) and 260(c)(4) of the Corporations Act The Board considers that the composition of executive remuneration and equity related staff incentive plans are the domain of the Board subject to meeting the Company s statutory and Australian Stock Exchange Listing Rule disclosure obligations. It is not the current intention of the Board to re-submit or submit its existing share and option plans to shareholders for approval. 48 COMPUTERSHARE Detailed Financial Report 2004

51 No directors participate in share, share option or performance based plans. Non-executive directors receive only cash compensation and reimbursement of expenses for their services. For additional information relating to the Group s remuneration practices and details relating to directors and executives remuneration during the year, refer to the directors report and note 25 to the financial statements. REVIEW OF BOARD AND EXECUTIVE PERFORMANCE In order to ensure that the Board continues to discharge its duties effectively the performance of all directors was reviewed during the reporting period by the Chairman. The performance of the Chairman was reviewed during the reporting period by his fellow directors. A review of the Board has also taken place in accordance with the Company s performance evaluation process for directors and executives. The Board also annually reviews the performance of the senior management group. A summary of the performance evaluation process for directors and executives is also available on Computershare s website IDENTIFYING AND MANAGING BUSINESS RISKS There are a variety of risks that exist in the markets in which Computershare operates and there are a range of factors, some of which are beyond the control of Computershare, which may impact on the Group s performance. The Board in conjunction with the risk and audit committee reviews and approves the parameters under which such risks are managed including the responsibility for internal control systems, the procedure for identifying business risks and the methods to control their financial impact on the Company. The Board has approved a Risk Management policy, a summary of which is available on the corporate governance information section of the Company s website In essence the policy is designed to ensure that strategic, operational, legal, reputation and financial risks are identified, evaluated, effectively and efficiently monitored to enable the achievement of the Group s business objectives. The chief executive officer and the executive management team are instructed and empowered by the Board to implement risk management strategies in cooperation with it and the risk and audit committee, report to the Board and the risk and audit committee on developments related to risk, and suggest to the Board new and revised strategies for mitigating risk. The role of internal audit as part of the Group s risk management framework is to understand the key risks of the organisation and to examine and evaluate the adequacy and effectiveness of the system of risk management and internal controls used by management. Internal audit carry out regular systematic monitoring of control activities and report to both relevant business unit management and the risk and audit committee. Typically, the audit methodology includes performing risk assessments of the area under review; performing audit tests, including selecting and testing audit samples; reviewing progress made on previously reported audit findings and discussing internal control or compliance issues with line management and agreeing on actions to be taken. During the year, two new roles were created within the Group to further strengthen the Group s risk management framework. The role of enterprise risk manager was created to oversee and support risk management efforts from a group perspective ensuring that these efforts were in accordance with the direction provided by the Board and senior management, and to ensure the adequacy of the risk management information framework throughout the Group. A technology risk manager was also appointed to support management on technology risk matters globally with the focus including technology risk reviews and policy development. Although no system of risk management can provide total assurance that the risks that the Group faces will be fully diminished, the Group s approach to risk management seeks to meet the Group s specific needs and minimise the risks to which it is exposed. CORPORATE REPORTING The CEO and CFO have made the following certifications to the Board: that the Company s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and the Group and are in accordance with relevant accounting standards; and that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and the Company s risk management and internal compliance and control system is operating efficiently and effectively in all material respects. The Company adopted this certification structure for the year ended 30 June CONFLICT OF INTEREST AND INDEPENDENT ADVICE If a director has a potential conflict of interest in a matter under consideration by the Board or a sub-committee, that director must abstain from deliberations on those matters. In that instance the director is not permitted to exercise any influence over other Board members or sub-committee members on that issue nor receive relevant Board or sub-committee papers. COMPUTERSHARE Annual Report

52 Corporate Governance Statement (cont d) The Company permits any director or committee of the Board to obtain advice about transactions or matters of concern at the Company s cost. Approval for directors seeking independent advice is subject to the approval of the Chairman acting reasonably. ETHICAL STANDARDS Computershare recognises the need for directors and staff to observe the highest standards of behaviour and business ethics when engaging in corporate activity. The Board has adopted a code of ethics that sets out the principles and standards with which all officers and employees are expected to comply in the performance of their respective functions. A key element of that code is the requirement that directors, officers and staff act in accordance with the law and with the highest standards of propriety. The code and the methods of its implementation are reviewed annually. A summary of the Group s code of ethics is available from the corporate governance information section of Computershare s website CODE OF PRACTICE FOR BUYING AND SELLING COMPUTERSHARE SECURITIES The freedom of directors and executives to deal in Computershare s securities is restricted in a number of ways by statute, by common law and by the requirements of the listing rules of the ASX. In addition to these restrictions, the Company has adopted a code of practice for buying and selling Computershare securities. The code of practice contains additional restrictions on dealing. The code of practice provides that directors or executives may only deal in Computershare securities, provided they are not in possession of material non-public information, in the four weeks immediately following the Company s half year and full year financial results announcements and, if relevant, any shareholders meeting. Directors and executives may only deal in Computershare securities outside of these times with the express prior approval of the Chairman. A summary of this code of practice is available from the corporate governance information section of Computershare s website SHAREHOLDER RELATIONS The Board aims to ensure that shareholders are informed of all information necessary to assess the performance of Computershare. Information is communicated to the shareholders through: the annual report which is distributed to all shareholders (other than those who elect not to receive it) the annual general meeting and other shareholder meetings called to obtain approval for Board action as appropriate making available all information released to the Australian Stock Exchange on Computershare s website immediately following confirmation of receipt by the Australian Stock Exchange in circumstances where presentations are the subject of a webcast, making available the webcast on Computershare s website shortly after the close of the meeting ensuring all press releases issued by Computershare Limited are posted on the Company s website encouraging active participation by shareholders at shareholder meetings. For shareholders who are unable to attend and vote at shareholder meetings, Computershare encourages shareholders to vote electronically by accessing Computershare s website where, in advance of a shareholders meeting, shareholders can view an electronic version of the proxy form and submit their votes actively encouraging shareholders to provide their address to facilitate more timely and effective communication with shareholders at all times contacting shareholders who have provided addresses directly to provide details of upcoming events of interest; and encouraging all shareholders who are unable to attend general meetings to communicate issues or ask questions by writing to the Company. A copy of the Board approved Shareholder Communications Policy is available from the corporate governance information section of Computershare s website 50 COMPUTERSHARE Detailed Financial Report 2004

53 COMMITMENT TO AN INFORMED MARKET RELATING TO COMPUTERSHARE SECURITIES The Board has approved a market disclosure policy to ensure the fair and timely disclosure of price sensitive information to the investment community as required by applicable law. Computershare s joint Company Secretary and Chief Legal Officer, Mr Paul Tobin, has been appointed the disclosure officer and is required to keep abreast of all material information and where appropriate ensure disclosure of share price sensitive information. A copy of the policy is available on the corporate governance section of Computershare s website EXTERNAL AUDITORS The Company s policy is to appoint external auditors who demonstrate quality and independence. The performance of the auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into account an assessment of performance, existing value and tender costs. PricewaterhouseCoopers were appointed as the external auditors in May It is the policy of PricewaterhouseCoopers to rotate audit engagement partners on listed companies every five years. It is also the PricewaterhouseCoopers policy to provide an annual declaration of independence to the risk and audit committee. In addition, the Company has put in place a policy which lists the types of services that PricewaterhouseCoopers will not be able to undertake in order to maintain the independence and integrity of its services to the Company. As part of this policy, the Board must approve any permitted non-external audit task where the associated fee may exceed 10% of the annual external audit engagement fee. The external auditor is requested to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation of the content of the audit report. An analysis of fees paid to external auditors, including a breakdown of fees for non-audit services, is provided in the directors report and in note 26 to the financial statements. WHISTLEBLOWING The Board has approved a whistleblowing policy that specifically outlines procedures for dealing with allegations of improper conduct. Concerns can be raised in a number of ways, including in writing, anonymously through the Company s online whistleblower reporting system, or by telephone. Any concerns that are reported are assessed and handled by regional disclosure coordinators in conjunction with the Company s Chief Legal Officer. All employees have received or are in the process of receiving training about the Company s policies, including how to detect and report improper conduct. etree ENVIRONMENTAL INITIATIVE Computershare launched a joint initiative with Landcare Australia in April this year called etree. The initiative was driven by a desire to encourage shareholders to accept shareholder communications electronically in order to reduce the significant costs resulting from the use of an estimated 180 million sheets of paper each year in Australia alone. The initiative involves a donation being made to Landcare Australia for every shareholder who accepts e-communications from their company. The donations are used to fund re-vegetation and landscape change projects in areas of environmental stress throughout Australia. Since the launch in April 2004, 32 Australian listed companies have participated in this initiative with well over 125,000 shareholders giving their permission for e-communications. As a result of this, approximately 500,000 trees have been or are shortly to be planted. Similar initiatives have been launched by Computershare s businesses in the UK and North America. HEALTH AND SAFETY Computershare aims to provide and maintain a safe and healthy work environment at all operations within the Group. Computershare acts to meet this commitment by implementing work practices and procedures throughout the Group that comply with the relevant regulations governing the workplace. Employees are expected to take all practical measures to ensure a safe and healthy working environment in keeping with their defined responsibilities and regulations. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards (IFRS) for application to reporting periods beginning on or after 1 January The AASB will issue Australian equivalents to IFRS, and the Urgent Issues Group will issue abstracts corresponding to International Accounting Standards Board (IASB) interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity s financial statements for the half-year ending 31 December 2005 and the year ending 30 June COMPUTERSHARE Annual Report

54 Corporate Governance Statement (cont d) Refer to note 1 Statement of Significant Accounting Policies in the Notes to the Financial Statements for further information about how the transition to Australian equivalents to IFRS is being managed. The key differences in accounting policies that are expected to arise are set out at the end of note 1. COMPANY SECRETARIES The company secretaries are Paul Tobin and Mark Davis. Under Computershare s Constitution, the appointment and removal of the company secretaries is a matter for the Board. Amongst other matters, the company secretaries advise the Board on governance procedures and seek to support the effectiveness of the Board by monitoring Board policy and procedures and coordinating the completion and despatch of the Board meeting agendas and papers. Paul Tobin joined the Company in January 2000, having previously practised corporate and securities law at a leading international law firm and acting as Executive Vice President and General Counsel of a leading information technology company. He was also Founder and President of an online business to business firm. Paul completed a Bachelor of Arts degree at Kenyon College, Ohio and a law degree at New York Law School. Paul is also the Group s Chief Legal Officer. Mark Davis joined the Company in January 2001 having previously practised law at one of Asia Pacific s leading law firms. Mark completed a Bachelor of Commerce and Bachelor of Laws with Honours at the Monash University in Victoria, Australia. Mark has also completed a Post Graduate Diploma in Applied Finance and Investment at the Securities Institute of Australia. Mark is also the Chief Legal Counsel for the Group s Asia Pacific operations. All directors have access to the advice and services of the company secretaries. 52 COMPUTERSHARE Detailed Financial Report 2004

55 Directors Report The Board of Directors of Computershare Limited has pleasure in submitting its report in respect of the financial year ended 30 June DIRECTORS The following directors were directors during the whole of the financial year and up to the date of this report: Non-executive AS Murdoch (Chairman) TM Butler PD DeFeo WE Ford AN Wales Executive CJ Morris (Chief Executive Officer) PJ Maclagan PJ Griffin was a director from the beginning of the financial year until his resignation on 11 November M Kerber was appointed as a non-executive director on 18 August PRINCIPAL ACTIVITIES The principal activities of the consolidated entity during the course of the financial year were the operation of Investor services, Plan services, Document services, Analytics and Shareholder Relationship Management services, Corporate and Technology services. The Investor services operations comprise the provision of registry and related services. The Plan services operations comprise the provision and management of employee share and option plans. Document services operations comprise laser imaging, intelligent mailing, scanning and electronic delivery. Analytics and Shareholder Relationship Management services comprise the provision of investor analysis, investor communication and management information services to companies, their employees, shareholders and other securities industry participants. Technology services include the provision of software specialising in share registry, financial services and stock markets. The Group also offers corporate trust services and acts as trustee for clients debt offerings in certain markets and provides share ownership and other investor relations services through its analytics businesses and print and mail distribution services through its document services businesses. Specific Computershare subsidiaries are registered securities transfer agents. In addition, certain subsidiaries are Trust companies whose charters include the power to accept deposits, primarily acting as an escrow and paying agent on behalf of customers. In certain jurisdictions the Group is subject to regulation by certain federal, provincial and state agencies and undergoes periodic examinations by those regulatory agencies. The following significant changes in the nature of the activities of the consolidated Group occurred during the year: Acquisition of the US based security holder solicitation Group, Georgeson Shareholder Communications. Entry into the Indian securities and mutual fund registry market through the purchase of a 50% share in India s leading securities and mutual fund registry business, renamed Karvy Computershare Private Limited. Acquisition of the US based share plan managers, Transcentive Inc. The move to full ownership of Pepper Technologies AG, a specialist in shareholder and employee relationship management. The move to full ownership of Computershare GmbH (previously known as Deutsche Börse Computershare GmbH). Acquisition of the e-business orientated company, Global edelivery Group Pty Ltd (previously known as Technology Partners Group Pty Ltd). Acquisition of a further 15% stake in the National Registry Company (NRC), one of Russia s leading registrars, taking the Group s total stake to 45%. There were no other significant changes in the nature of the activities of the consolidated entity during the year. COMPUTERSHARE Annual Report

56 Directors Report (cont d) CONSOLIDATED PROFIT The profit of the consolidated entity for the financial year was $83,646,193 after income tax and $79,982,107 after outside equity interests. The profit after tax and outside equity interests represents a 392% increase on the 2003 result of $16,255,550. Profit of the consolidated entity for the financial year excluding non-recurring items was $81,441,193 after income tax and outside equity interests. This represents a 97.9% increase on the 2003 result of $41,147,550. Net profit before non-recurring items is determined as follows: Consolidated $000 s $000 s Net profit 83,646 16,256 Exclusion of normalising transactions (net of tax): Redundancies 16,234 Property write-offs 4,980 Asset write-offs 1,092 Profit on sale of UK premises (The Pavilions) (5,682) Restructuring costs 3,477 2,586 Net profit excluding non recurring items (refer note 2b) 81,441 41,148 DIVIDENDS The following dividends of the consolidated entity have been paid or declared since the end of the preceding financial year: Ordinary shares A final dividend in respect of the year ended 30 June 2003 was declared on 28 August 2003 and paid on 26 September This was an ordinary dividend of 2.5 cents per share amounting to $13,529,601 fully franked at 30%. An interim ordinary dividend in respect of the half year ended 31 December 2003 was declared on 25 February 2004 and paid on 26 March This was an ordinary dividend of 3.0 cents per share amounting to $16,498,020 fully franked at 30%. A final dividend recommended by the directors of the company in respect of the year ended 30 June 2004, to be paid on 24 September 2004, is an ordinary dividend of 5.0 cents per share amounting to $26,917,995 fully franked at 30%. This dividend was not declared until 18 August 2004 and accordingly no provision has been recognised at 30 June Reset preference shares A reset preference share dividend of $ per share amounting to $4,136,242 franked at 30%, in respect of the six months ended 30 November 2003, was paid on 1 December A reset preference share dividend of $ per share amounting to $3,320,073 franked at 30% in respect of the six months ended 31 May 2004 was paid on 31 May A reset preference share dividend of $ per share amounting to $534,538 has been accrued in respect of the period 1 June 2004 to 30 June The total preference share dividend referable to the year ended 30 June 2004 is $7,314,823. Following a decision by the directors of the company to cause the reset preference shares to be converted to ordinary shares on 30 September 2004, a reset preference share dividend of $ per share franked at 30% in respect of the period 1 June 2004 to 30 September 2004 will be paid on 30 September COMPUTERSHARE Detailed Financial Report 2004

57 REVIEW OF OPERATIONS Overview The current financial year s result demonstrates substantial improvement across all metrics within the business including earnings per share, revenues, cash generation and other balance sheet measures. The positive results posted for the financial year reflect a continued improvement in market conditions, particularly in the Asia Pacific region, and a significantly improved profit from North America, whose contribution to the Group s earnings before interest, tax, depreciation and amortisation (EBITDA) has improved from 27% of the total in the year ended 30 June 2003 to 39% of the total in the year ended 30 June These results reflect the prudent strategies which were set in place in the prior financial year and which have enabled the Group to take full advantage of the upswing in the Asia Pacific region. Additionally, the result of the North American integration, following recent acquisition activity, is already showing significant benefits. Computershare expects further synergies to be derived in the coming financial year. The Group s EBITDA increased by 37% before non-recurring items to $183.4 million for the year ended 30 June 2004 (2003: $133.9 million). Total revenues were $946.4 million. Excluding proceeds on the sale of the UK premises of $51.7 million, total revenues were $894.7 million, an increase of 26% over the prior financial year. Excluding the revenue contributions of businesses acquired during the year ended 30 June 2004, total revenues were 6% higher. Operating expenses, excluding cost of sales and the impact of acquisitions in the current financial year, were $459.0 million, down 1%. The Group s EBITDA was apportioned between Asia Pacific 35%, North America 39% and EMEA 26%. Computershare had an effective corporate tax rate of 24.4% during the year (2003: 41.8%). Revenues Regionally, revenues were apportioned between Asia Pacific 32%, North America 40% and EMEA 28%. These percentages reflect the increased contribution of the North American business in the current financial year. The Asia Pacific region contributed revenues of $283.2 million (2003: $214.6 million). This increase is primarily due to increased corporate actions in the year ended 30 June 2004 but is supported by improvements in all areas of the business. North America contributed revenues of $356.5 million (2003: $258.8 million) reflecting the synergies and benefits derived from the Georgeson Group and Transcentive acquisitions in the current financial year, combined with improved performance by existing businesses. The EMEA region contributed revenues of $303.8 million (2003: $231.9 million). The Registry business experienced growth during the year. Overseas operations were also impacted by exchange rate movements. Had the Australian dollar remained at financial year 2003 levels, revenue would have been reported at $978 million (excluding the sale of the UK premises), a constant dollar increase of 38% compared to the corresponding prior year. Operating costs Operating expenses have increased 22% on last year. Excluding cost of sales and the impact of acquisitions in the current financial year, operating expenses were $459.0 million, down 1% versus an increase in revenue of 6%. Total personnel costs increased 16% reflecting growth in the organisation. Total technology costs remained constant at $91.0 million. Of this amount, $41.1 million related to research and development which has been expensed. The Group is now enjoying the benefits of the migration of all major businesses onto the Group s own technology platform and external bureau costs have been largely eliminated in the current financial year. Working capital Improved working capital management contributed to operating cash flows of $136.1m for the 2004 financial year. This is an improvement of $59.9 million (79%) on the previous financial year. Continued focus on capital expenditure has ensured that total capital expenditure has remained under control at $21.4 million, 20% below the depreciation expense for the year. Working capital ratios have also continued to improve and receivable days have been reduced to 57 days (2003: 61 days). COMPUTERSHARE Annual Report

58 Directors Report (cont d) Ordinary shares On 26 May 2004 Computershare announced an on market buy-back of up to 27,500,000 ordinary shares with a closing date of 17 December The buy-back commenced on 10 June 2004 and as at 16 August, the Group had bought back 15,970,000 million shares for a total consideration of approximately $50.7 million at an average of $3.18 per share. Reset preference shares On 19 December 2003 Computershare announced its intention to buy-back a maximum of 17% of its issued reset preference shares (250,000 shares). On 19 March 2004, Computershare announced a change to this share buy-back, with an intention to buy-back a further 500,000 shares. The buy-back commenced on 5 January As at 16 August 2004, the Group had purchased 315,193 reset preference shares for a total consideration of approximately $32.7 million at an average of $ per share. Changes to accounting standards that will effectively treat reset preference shares as debt rather than equity has led to the decision to convert all reset preference shares to ordinary shares under the terms and conditions of their issue. Earnings per share Cents Cents Basic earnings per share Diluted earnings per share Normalised basic earnings per share Normalised diluted earnings per share The normalised basic and diluted earnings per share amounts have been calculated to exclude the impact of non recurring items (see note 5 in the financial report) recognised in the financial report for the year ended 30 June 2004 in order to make the earnings per share amounts for the current year more comparable with the earnings per share amounts for SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the affairs of the consolidated entity during the financial year which are reported in the consolidated financial statements were: On 2 December 2003 Computershare acquired the Georgeson Shareholder Communications Group. This acquisition served to further strengthen the Group s presence in the US market. On 31 December 2003 the Group moved to full ownership of Computershare GmbH, formerly known as Deutsche Börse Computershare GmbH. On 2 February 2004 Computershare announced its entry into the Indian securities and mutual fund registry market through the purchase of a 50% share in India s leading securities and mutual fund registry business, renamed Karvy Computershare Private Limited. On 18 February 2004 the Group acquired the US based share plan managers business, Transcentive Inc., further cementing its presence in the US market. On 1 March 2004 Computershare Limited moved to full ownership of Pepper Technologies AG, a specialist in shareholder and employee relationship management. On 4 June 2004 the Group acquired 100% of the e-business orientated company, Global edelivery Group Pty Ltd, (previously know as Technology Partners Group Pty Ltd). On 24 June 2004 the Group announced that it had acquired a further 15% stake in the National Registry Company (NRC), one of Russia s leading registrars, taking its total to 45%. The increase in the total of shareholders funds of 3% was due to acquisition activity offset by the ordinary and reset preference share buy-backs and the effect of foreign currency translation. Gearing net debt to net debt plus equity increased to 27% from 12% over the past year following the ordinary and reset preference share buy-backs and the acquisitions of businesses. 56 COMPUTERSHARE Detailed Financial Report 2004

59 In the opinion of the directors there were no other significant changes in the affairs of the consolidated entity during the financial year under review that are not otherwise disclosed in this report or the consolidated accounts. SIGNIFICANT EVENTS AFTER YEAR END No matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidated financial statements 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, except that: (a) On 26 May 2004 Computershare announced its intention to buy back up to 27,500,000 ordinary shares commencing 10 June Between 1 July 2004 and 13 September 2004 the company bought back 9,707,476 ordinary shares at an average cost per share of $3.16. The shares bought back represent 1.78% of issued ordinary shares at the balance sheet date. Between 1 July 2004 and 13 September 2004 the company bought back 183,478 preference shares at an average cost per share of $ The shares bought back represent 15% of issued preference shares at the balance sheet date. On 13 September 2004 an additional 69,259 shares had been bought back, but not yet settled. (b) On 3 August 2004 Computershare announced the acquisition of New York based Alamo Direct Mail Services Inc, a company specialising in print, mail, tabulation and proxy solicitation services to the mutual fund industry in North America, for a consideration of US $15.5 million and contingent consideration of US $7 million that is subject to meeting specified revenue hurdles on an initial 3 year period. Computershare intends to combine the Alamo business with its existing Georgeson mutual fund business to create a powerful new product offering to the mutual fund industry. (c) M Kerber was appointed as a non-executive director on 18 August (d) On 19 August 2004 Computershare announced the decision of the directors to cause the reset preference shares to be converted to ordinary shares on 30 September As noted in the dividends section above, a reset preference share dividend of $ per share franked at 30% will be paid in respect of the period 1 June 2004 to 30 September 2004 on 30 September (e) On 3 September 2004, Computershare announced the acquisition of Flag Communications Limited, a UK based employee relationship management company. Flag specialises in employee communications for FTSE 100 and 250 companies. LIKELY DEVELOPMENTS AND FUTURE RESULTS Likely developments in the operations of the consolidated entity constituted by the Computershare Group and the entities it controls from time to time that were not finalised at the date of this report include consolidation of North American acquisitions, including maximisation of synergy benefits across the global business. Additional comments on expected results of the business are included in this report under review of operations. ENVIRONMENTAL REGULATIONS The Computershare Group is not subject to significant environmental regulation. INFORMATION ON DIRECTORS The qualifications, experience and responsibilities of directors are outlined in the Corporate Governance Statement and form part of this report. COMPUTERSHARE Annual Report

60 Directors Report (cont d) Directors Interests At the date of this report, the direct and indirect interests of the directors in the shares of the company are: Number of Number of Reset Name Number of Options Ordinary Shares Preference Shares TM Butler PD DeFeo 80,000 WE Ford M Kerber 40,000 PJ Maclagan 16,627,525 1,330 CJ Morris 55,712,042 AS Murdoch 609,800 AN Wales 32,592,384 Meetings of directors The number of meetings of the Board of Directors (and of Board Committees) and the number of meetings attended by each of the directors during the financial year are: Audit Committee Nomination Remuneration Directors Meetings Committee Committee Meetings Meetings Meetings A B A B A B A B AS Murdoch TM Butler PD DeFeo WE Ford 5 5 PJ Griffin* PJ Maclagan CJ Morris AN Wales A Number of meetings attended B Number of meetings held during the time the director held office during the year. * PJ Griffin is no longer a director having resigned on 11 November Remuneration practices Principles used to determine the nature and amount of remuneration The objective of the company s executive reward framework is to ensure that reward for performance is competitive. The framework seeks to align executive reward with the achievement of strategic objectives and the creation of shareholder value. The executive pay and reward framework has a number of components including base pay, possible short term performance incentives, long term incentives and other remuneration such as superannuation. The combination of these comprises the executives total remuneration. Both short and long term incentives are discretionary and are subject to both the company and the individual meeting agreed requirements. Please refer to the Corporate Governance Statement for further details on Board performance assessment procedures. Non-executive directors Details of non-executive directors base remuneration are detailed in the table below. All non-executive directors are provided with statutory retirement benefits, details of which also appear in the remuneration table below. No incentives, either short or long term, are paid to non-executive directors, nor are any termination payments due to any non-executive directors that do not complete their term of service. The aggregate amount of non-executive directors fees is determined by the shareholders upon Board recommendation. A pool of $750,000 was last approved by the shareholders in November Non-executive directors are not eligible to participate in the Company s option or share plans. 58 COMPUTERSHARE Detailed Financial Report 2004

61 Executive directors Both executive directors are employed under open ended arrangements with Computershare. The CEO is appointed to the Board under the company s constitution, and the Managing Director of Computershare Technology Services is elected by shareholders under the same rotation basis that applies to non-executive directors. Details of base salary and superannuation arrangements are detailed in the table below. No additional payments are made in consideration for their activities as directors. Short term cash incentives may be paid in years in which the company s performance exceeds agreed performance hurdles. A cash bonus in respect of the year ended 30 June 2004 has been paid subsequent to the year end, details of which are in the table below. Neither executive is eligible for any termination payments should their employment or directorship cease for any reason. Executive pay All executives listed below are employed under open ended arrangements with Computershare. Details of base salary and retirement benefits are supplied in the table below. These and other key executives are also eligible to receive both short term cash incentives and long term share based incentives. Share based awards are designed to align executives financial interests with those of the shareholders and are also designed to assist in the retention of participants. Executives who receive share based awards need to have, at a minimum, completed specified periods of service before any share awards under the plan become unconditional. Awards are discretionary and are subject to approval of the Board based on recommendations from the remuneration committee. The exercise of discretion in relation to the share awards is based on the Company s performance and the attainment of specified objectives. A bonus was awarded in respect of the year ended 30 June All of the executives listed below received their bonus as shares. All of the executives below are eligible for payment of a benefit on early termination by the employer without cause, equal to 30 months salary at the time. Under the terms of his employment contract, T Honan is entitled to receive 40,000 shares on 27 May The estimated value of these shares, which will be reported in future periods, is $26,457, based on the share price at grant date and spread over the vesting period. Under the terms of his employment, R Chapman is entitled to receive 50,000 shares on 31 December The estimated value of these shares, which will be reported in future periods, is $31,410, based on the share price at grant date and spread over the vesting period. Based on the performance of the Company for the year ended 30 June 2004, all of the executives listed in the table below were granted additional shares on 1 September All of the executives are entitled to receive these shares after completion of a two year vesting period. The estimated value of these shares, which will be reported in future periods, is $942,998, based on the share price at grant date and spread over the vesting period. Computershare Employee Option Plan Information on the Computershare Option Plans is set out in note 21. Details of shares under option, or issued during or since the end of the financial year due to the exercise of options, are set out in note 19. Details of remuneration Details of the nature and amount of each element of the emoluments for each director of the Computershare Group and each of the six officers of the company and the consolidated entity receiving the highest emoluments and being the most senior officers of the consolidated and parent entity for the year ended 30 June 2004 are set out in the table below Primary Post employment Equity Total Salary Cash Profit Non-monetary Superannuation Retirement Shares Options Shares and Fees Share and Benefits and Pension Benefits Issued as Bonuses Bonus $ $ $ $ $ $ $ $ $ Directors AS Murdoch 115,000 11, ,500 TM Butler 97,609 97,609 PD DeFeo 105, ,545 WE Ford 52,772 52,772 PJ Griffin* 41,667 5,833 47,500 PJ Maclagan 500, ,000** 50, ,207 CJ Morris 500, ,000** 50,019 1,300,207 AN Wales 75,000 7,500 82,500 TOTAL 1,487,969 1,031, ,871 2,643,840 * PJ Griffin resigned as a director on 11 November ** In place of taking the full amount of the bonus, Mr CJ Morris and Mrs PJ Maclagan asked the Company to send a donation totalling $343,750 to the Peter McCallum Institute for Cancer Research. COMPUTERSHARE Annual Report

62 Directors Report (cont d) 2004 Primary Post employment Equity Total Salary Cash Profit Non-monetary Superannuation Retirement Shares Options Shares and Fees Share and Benefits and Pension Benefits Issued as Bonuses Bonus*** $ $ $ $ $ $ $ $ $ Executives R Chapman 439,239 1,152 30, ,269 74, ,984 S Crosby 400,187 2,474 11, ,480 55, , ,683 P Conn 422, ,724 16,000 51, ,331 T Honan 330,188 11, ,701 35, , ,254 S Rothbloom 562,905 12, ,841 80, ,190 1,028,085 P Tobin 408,954 3,955 11, ,461 19,770 97, ,405 TOTAL 2,563,651 7,581 75,902 1,011, , ,847 4,592,742 *** The above bonus shares were granted on 1 September Share based compensation options Details of employee options granted which may affect remuneration in this or future reporting periods are disclosed in note 19. No directors or executives were granted options in the current financial year. Refer to note 19 for details of employee options. Option Holdings of Directors and Specified Executives Options provided as remuneration The assessed fair value at grant date of options granted to directors and specified executives is allocated equally over the period from grant date to vesting date, and the amount relating to the current financial year is included in the remuneration table above. Fair values at grant date are independently determined using a Black Scholes option pricing model that takes into account the exercise price, the current level and volatility of the underlying share price, the risk free interest rate, expected dividends on the underlying share, the market price at grant date of the underlying share, the expected life of the option and vesting period applicable to the options. Shares provided on exercise of remuneration options No directors hold options in the company. No executives were granted options during or since the end of the current financial year. Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each of the specified executives are set out in the table below. Date options granted Issue price of shares Number of shares issued 9 September 1998 $ ,000 No amounts are unpaid on any shares issued on the exercise of options. Loans to directors and executives Computershare has not made any loans to directors and executives during the current financial year. INDEMNIFICATION OF OFFICERS During the period, the company paid an insurance premium to insure directors and executive officers of the company and its controlled entities against certain liabilities. Disclosure of the amount of insurance premium payable and a summary of the nature of liabilities covered by the insurance contract is prohibited by the insurance policy. 60 COMPUTERSHARE Detailed Financial Report 2004

63 AUDITOR PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act Non-audit services The Group may decide to employ its auditor, PricewaterhouseCoopers, on assignments in addition to their statutory audit duties where the auditor s expertise and experience with the Group are important. The Board is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and internal guidelines. Further details regarding the Board s internal policy for engaging PricewaterhouseCoopers for non-audit services is set out in the Corporate Governance Statement. A copy of the auditors signed independence declaration as required under section 307C of the Corporations Act 2001 is provided immediately after this report. Details of the amounts paid to the auditor for both audit and non-audit services are provided in the table below. During the year the following amounts were paid to PricewaterhouseCoopers, the Group auditor. Consolidated $ $ Remuneration received or due and receivable by PricewaterhouseCoopers for: Audit and review of the financial statements by PricewaterhouseCoopers Australia 749, ,000 Audit and review of the financial statements by related practices of Pricewaterhouse Coopers Australia 1,520,297 1,081,612 Other services performed by PricewaterhouseCoopers Australia 202,112 8,000 Other services performed by related practices of PricewaterhouseCoopers Australia 183, ,000 Total Remuneration 2,655,457 1,920,612 Other services provided relate primarily to compliance reviews for global operations and pre-acquisition services provided in relation to the acquisition of the Georgeson Shareholder Communications Group. ROUNDING OF AMOUNTS The company is of a kind referred to in class order 98/0100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors Report. Amounts in the Directors Report and the Detailed Financial Statements have been rounded off in accordance with that Class order to the nearest thousand dollars unless specifically stated to be otherwise. Signed in accordance with a resolution of the directors. AS Murdoch Chairman CJ Morris Director 14 September 2004 COMPUTERSHARE Annual Report

64 Auditor s Independence Declaration PricewaterhouseCoopers ABN AUDITOR S INDEPENDENCE DECLARATION 333 Collins Street MELBOURNE VIC 3000 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Melbourne Australia Telephone Facsimile As lead auditor for the audit of Computershare Limited and its controlled entities for the year ended 30 June 2004, I declare that, to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. Russell Sutton Partner Melbourne PricewaterhouseCoopers 14 September COMPUTERSHARE Detailed Financial Report 2004

65 Statements of Financial Performance FOR THE YEAR ENDED 30 JUNE 2004 Consolidated Parent entity Note $000 $000 $000 $000 Revenues Sales revenue 2 871, ,519 Other revenue from ordinary activities 2 75,193 14,078 56,623 65,085 Total revenue from ordinary activities 2 946, ,597 56,623 65,085 Expenses Direct services 654, ,145 Technology services 91, ,025 Corporate services 80,665 20,633 21,931 14,079 Borrowing costs 2 9,020 8, Total expenses 835, ,099 22,877 15,009 Share of net profit/(loss) of associates accounted for using the equity method 34 (140) (2,036) Profit/(loss) from ordinary activities before related income tax expense 110,657 29,462 33,746 50,076 Income tax (expense)/benefit relating to ordinary activities 3 (27,011) (12,329) (3,558) (4,616) Net profit/(loss) 83,646 17,133 30,188 45,460 Net (profit)/loss attributable to outside equity interests (3,664) (877) Net profit/(loss) attributable to members of the parent entity 4 79,982 16,256 30,188 45,460 Net exchange difference on translation of financial reports of self-sustaining foreign controlled entities 20 (9,892) (24,321) Total revenues, expenses and valuation adjustments attributable to members of the parent entity recognised directly in equity (9,892) (24,321) Total changes in equity attributable to members of the parent entity other than those resulting from transactions with owners as owners 70,090 (8,065) 30,188 45,460 Basic earnings per share (cents per share) Normalised basic earnings per share (cents per share) Diluted earnings per share (cents per share) Normalised diluted earnings per share (cents per share) The above Statements of Financial Performance should be read in conjunction with the accompanying notes. COMPUTERSHARE Annual Report

66 Statements of Financial Position FOR THE YEAR ENDED 30 JUNE 2004 Consolidated Parent entity Note $000 $000 $000 $000 Current Assets Cash 90,495 60, ,608 Receivables 6 181, ,220 23,520 5,137 Other financial assets 7 50,944 36,653 Inventories 8 6,993 3,904 Current tax assets 11 3, ,093 Other 9 19,595 11, Total Current Assets 353, ,698 26,653 9,141 Non-Current Assets Receivables 6 1,598 1, , ,600 Other financial assets 7 15,266 30, , ,702 Property, plant and equipment 10 92, ,619 2,698 4,094 Deferred tax assets 11 20,918 47,175 1,632 10,579 Intangibles goodwill , ,502 Other 13 4,874 4, Total Non-Current Assets 833, , , ,119 Total Assets 1,187, , , ,260 Current Liabilities Payables , ,044 4,149 7,739 Interest bearing liabilities 15 98,824 5, Current tax liabilities 16 2,341 5,876 9,769 Provisions 17 32,567 24,287 6, Other 18 11,715 2,569 Total Current Liabilities 349, ,340 11,051 18,784 Non-Current Liabilities Payables Interest bearing liabilities , ,923 65,301 62,678 Deferred tax liabilities 16 9,427 15, Provisions 17 6,892 5, Other 18 3,127 2,991 Total Non-Current Liabilities 233, ,659 65,757 63,082 Total Liabilities 582, ,999 76,808 81,866 Net Assets 604, , , ,394 Equity Parent Entity Interest Contributed equity ordinary shares , , , ,375 Contributed equity reset preference shares , , , ,195 Reserves 20 (27,799) (17,907) Retained profits 4 170, ,366 54,125 61,279 Total parent entity interest , , , ,394 Outside equity interest in controlled entities 36 8,497 5,872 Total Equity 604, , , ,394 The above Statements of Financial Position should be read in conjunction with the accompanying notes. 64 COMPUTERSHARE Detailed Financial Report 2004

67 Statements of Cash Flows FOR THE YEAR ENDED 30 JUNE 2004 Consolidated Parent entity Note $000 $000 $000 $000 Cash flows from Operating Activities Receipts from customers 878, , ,528 Payments to suppliers and employees (711,945) (578,874) (26,497) (13,211) Dividends received ,159 Interest paid and other costs of finance (8,704) (9,711) (881) (790) Interest received 3,589 3, ,622 Australian net GST (paid)/refunded (9,290) (6,125) (9,284) 1,810 Income taxes (paid)/refunded (16,442) (21,274) 620 (851) Net operating cash flows 30(b) 136,124 76,179 (35,058) 38,267 Cash flows from Investing Activities Payments for purchase of controlled entities net of cash acquired 24 (208,626) (210) (13,800) (34,159) Payments for purchase of businesses (12,335) Payments for investment in associated entities (1,159) (17,603) Payments for investments (2,239) (8,604) (168) Payments for property, plant and equipment (21,378) (17,933) (5,068) (370) Net loan repayments from controlled entities 141,217 63,282 Proceeds from sale of assets 66, Other (706) Net investing cash flows (167,971) (56,160) 122,302 28,753 Cash flows from Financing Activities Proceeds from issues of ordinary shares 933 1, ,539 Buy-back of ordinary shares (20,111) (38,351) (20,111) (38,351) Buy-back of reset preference shares (32,763) (32,763) Proceeds from borrowings 320, ,015 Repayment of borrowings (164,025) (182,885) Dividends paid ordinary shares (30,028) (27,279) (30,028) (27,279) Dividends paid reset preference shares (7,456) (8,250) (7,456) (8,250) Dividends paid to outside equity interest in controlled entity (1,519) (524) Proceeds from finance leases 1, Repayment of finance leases (5,164) (1,859) (596) (613) Net financing cash flows 61,846 (29,836) (90,021) (72,954) Net increase/(decrease) in cash held 29,999 (9,817) (2,777) (5,934) Cash at the beginning of the financial year 30(a) 60,828 74,327 3,608 9,542 Exchange rate variations on foreign cash balances (332) (3,682) Cash at the end of the financial year 30(a) 90,495 60, ,608 Refer to note 30(c) for information in respect of any non-cash financing and investing transactions. The above Statements of Cash Flows should be read in conjunction with the accompanying notes. COMPUTERSHARE Annual Report

68 Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared as a general purpose financial report that complies with the requirements of the Corporations Act 2001, Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Consensus Views. The accounting policies used are consistent with those adopted in the previous year. The financial statements have been prepared in accordance with the historical cost convention and do not take account of changes in either the general purchasing power of the dollar or in the prices of specific assets except for certain assets that, where noted, are at valuation. Where applicable, comparative information has been reclassified or represented to maintain comparability with the current reporting period. The Australian Accounting Standards Board (AASB) is adopting IFRS for application to reporting periods beginning on or after 1 January The AASB will issue Australian equivalents to IFRS, and the Urgent Issues Group will issue abstracts corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity s financial statements for the half-year ending 31 December 2005 and the year ending 30 June Information about how the transition to Australian equivalents to IFRS is being managed, and the key differences in accounting policies that are expected to arise, is set out at the end of note 1. Principles of consolidation The consolidated financial statements include the financial statements of the parent entity, Computershare Limited, and its controlled entities, referred to collectively throughout these financial statements as the consolidated entity. All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. Financial statements of foreign controlled entities presented in accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with Group policy and generally accepted accounting principles in Australia. Foreign currency transactions Foreign currency transactions are converted to Australian dollars at exchange rates approximating those in effect at the date of each transaction. Amounts payable and receivable in foreign currencies at balance date are converted to Australian dollars at the average of the buy and sell rates available on the close of business at balance date. Revaluation gains and losses are brought to account as they occur. The financial statements of all foreign operations are translated using the current rate method as they are considered self-sustaining. Exchange differences relating to monetary items are included in the Statements of Financial Performance, as exchange gains or losses, in the period when the exchange rates change. Where the exchange difference relates to hedging part of the net investment in a self-sustaining foreign operation the exchange difference is transferred to the foreign currency translation reserve on consolidation. Income tax The financial statements apply the principles of tax-effect accounting. The income tax expense in the Statement of Financial Performance represents tax on the pre-tax accounting profit adjusted for income and expenses never to be assessed or allowed for taxation purposes. The provision for deferred income tax liability and the future income tax benefit include the tax effect of differences between income and expense items recognised in different accounting periods for book and tax purposes, calculated at the tax rates expected to apply when the differences reverse. The benefit arising from estimated carry forward tax losses is recorded as a future income tax benefit only where realisation of such benefit is considered to be virtually certain. The benefit arising from timing differences is recorded as a future income tax benefit where realisation of such benefit is beyond reasonable doubt. No provision is made for withholding tax on unremitted earnings of applicable foreign incorporated controlled entities as there is currently no intention to remit these earnings to the parent entity. 66 COMPUTERSHARE Detailed Financial Report 2004

69 Tax consolidation legislation Computershare Limited and its wholly-owned Australian entities implemented the tax consolidation regime with effect from 1 July The Australian Taxation Office has been formally notified of this decision. The relevant entities have also entered into a tax sharing agreement. As a consequence, Computershare Limited, as the head entity in the tax consolidation Group, has recognised the current tax liability relating to transactions, events and balances of the wholly owned Australian controlled entities in this Group in the financial statements as if that liability was its own, in addition to recognising the current tax liability arising in relation to its own transactions, events and balances. Amounts receivable or payable under the tax sharing agreement are recognised separately as tax related intercompany payables or receivables. The impact on the income tax expense and results of Computershare Limited is unlikely to be material because of the tax sharing agreement. The tax sharing agreement is not expected to have a material impact on the consolidated assets, liabilities and results. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is assigned on a first-in first-out basis. Prepaid inventory is recorded at cost and is bought on behalf of the company s clients. As the inventory is used, the costs are billed. Recoverable amount of non-current assets Non-current assets are reviewed at least annually to determine whether their carrying amounts require write-down to recoverable amount. Property, plant and equipment The amounts at which property, plant and equipment are stated in these financial statements are regularly reviewed. Where revaluations are made they are based on reports by independent valuers. The gain or loss on disposal of revalued assets is calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal and is included in the profit and loss of the consolidated entity in the year of disposal. Any related revaluation increment in the asset revaluation reserve at the time of disposal is transferred to retained earnings. Depreciation Items of property, plant and equipment, excluding freehold land and leasehold plant and equipment, are depreciated on a straight line basis at rates calculated to allocate their cost or valuation, less estimated residual value, against revenue over their estimated useful life. Additions and disposals are depreciated for the period held in the year of acquisition or disposal. Depreciation expense has been determined based on the following rates of depreciation: Buildings (2.5% per annum) Plant and Equipment (10% to 50% per annum) Fixtures and Fittings (13% to 50% per annum); and Motor Vehicles (15% to 40% per annum). Leasehold improvements The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. COMPUTERSHARE Annual Report

70 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont d) Investments Controlled entities The investments in the controlled entities are carried in the company s financial statements at the lower of cost and recoverable amount. Dividends from controlled entities are brought to account in the Statement of Financial Performance when they are proposed by the controlled entities. Associated entities Interests in material associated entities are brought to account using the equity method. Under this method the investment in associates is initially recognised at its cost of acquisition and its carrying value is subsequently adjusted for increases or decreases in the investor s share of post-acquisition results and reserves of the associate. The investment in associated entities is decreased by the amount of dividends received or receivable. Investments in associates are carried at the lower of cost and recoverable amount in the accounts of the parent entity. Detailed equity accounting information concerning the consolidated entity s interests in material associated entities is provided in note 34. Other financial assets Broker client deposits and all other investments are carried in the accounts at the lower of cost or recoverable amount. Dividend and interest income from these assets is brought to account when received. Leases Assets acquired under finance leases are capitalised and amortised over the life of the relevant lease, or where ownership is likely to be obtained on expiration of the lease, over the life of the asset. Lease payments are allocated between interest expense and reduction in the lease liability. Operating lease assets are not capitalised and rental payments are charged against operating profit in the period in which they are incurred. Software development costs Internally developed software and related costs are expensed in the year in which they are incurred. Acquisition of assets The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of the acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at the acquisition date, unless the notional price at which they could be placed in the market is a better indicator of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the entity s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Provisions for restructuring costs and related employee termination benefits are recognised as at the date of acquisition of an entity or part thereof on the basis described in the accounting policy notes for restructuring costs and employee benefits. Goodwill is brought to account as described in the accounting policy note for goodwill. Where an entity or operation is acquired and the fair value of the identifiable net assets acquired, including any liability for restructuring costs, exceeds the cost of acquisition, the difference, representing a discount on acquisition, is accounted for by reducing proportionately the fair values of the non-monetary assets acquired until the discount is eliminated. Where, after reducing the recorded amounts of the non-monetary assets acquired to zero, a discount balance remains it is recognised as revenue in the statement of financial performance. 68 COMPUTERSHARE Detailed Financial Report 2004

71 Goodwill On acquisition of a controlled entity, the difference between the purchase consideration plus incidental expenses and the fair value of identifiable net assets acquired is initially brought to account as goodwill or discount on acquisition. In establishing the fair value of the identifiable net assets acquired, a liability for restructuring costs is only recognised at the date of acquisition where there is a demonstrable commitment and a detailed plan. The liability is only recognised where there is little or no discretion to avoid payments to other parties in settlement of costs of the restructuring and a reliable estimate of the amount of the liability as at the date of acquisition can be made. Revisions in the estimated amount of restructuring costs which are recognised as a liability as at the date of acquisition are accounted for by adjusting the amount of the liability and the amount of goodwill. These adjustments are made in the reporting period in which the revision in the estimate occurs. Consequential adjustments to reflect the cumulative effect of revisions on the amount of amortisation of goodwill are recognised in the Statement of Financial Performance in the reporting period in which the revision in estimate occurs. Purchased goodwill is amortised on a straight line basis over the period during which the benefits are expected to arise. These periods have been individually assessed on an entity by entity basis and vary between 5 to 20 years from the date of gaining control. The unamortised balance of goodwill is reviewed at each balance date and charged to profit and loss to the extent that applicable future benefits are no longer probable. Restructuring costs Liabilities arising directly from undertaking a restructuring program, not in connection with the acquisition of an entity or operations, are recognised when a detailed plan of the restructuring activity has been developed and implementation of the restructuring program as planned has commenced, by either entering into contracts to undertake the restructuring activities or making a detailed announcement such that affected parties are in no doubt the restructuring program will proceed. Liabilities for the cost of restructuring entities or operations acquired are recognised as at the date of acquisition of an entity or operations, or part thereof, if the main features of the restructuring were planned and there was a demonstrable commitment to the restructuring at the acquisition date, and this is supported by a detailed plan developed within three months of the acquisition, or prior to the completion of the financial report, if earlier. Liabilities for employee termination benefits associated with restructuring relating to an acquisition are brought to account on the basis described in the accounting policy note for employee benefits. Liabilities for costs of restructurings and related employee termination benefits are disclosed in aggregate where the restructuring occurs as a consequence of an acquisition. Reversals of part or all of a provision for restructuring relating to an acquisition because the costs are no longer expected to be incurred as planned, are adjusted against the goodwill or discount on acquisition. The adjusted carrying amounts of goodwill or non-monetary assets are amortised or depreciated from the date of the reversal. Employee benefits Provision has been made in the Statements of Financial Position for benefits accruing to employees in relation to annual leave, long service leave and workers compensation. All on-costs, including payroll tax and workers compensation premiums are included in the determination of provisions. Annual leave and the current portion of long service leave are measured at their nominal amounts. The non-current portion of the long service leave provision is measured at the present value of estimated future cash flows, discounted by the interest rate applicable to Commonwealth Government securities maturing in the period the liability is expected to fall due. Retirement benefits Contributory superannuation and pension plans exist to provide benefits for the consolidated entity s employees and their dependants on retirement, disability or death. The plans are accumulation plans. The employee sponsors contribute to the plans at varying rates of contribution depending on the employee classification. The contributions made to the funds by Group entities are charged against profits (refer note 23a). Defined benefit superannuation and pension plans are operated in Hong Kong and India only. Please refer to note 23(a) for further details. COMPUTERSHARE Annual Report

72 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont d) Employee share and option ownership schemes Certain employees are entitled to participate in share and option ownership schemes. The details of schemes are described in note 21. No remuneration expense is recognised in respect of employee shares and options issued. Termination benefits Liabilities for termination benefits, not in connection with the acquisition of an entity or operation are recognised when a detailed plan for the terminations has been developed and a valid expectation has been raised in those employees affected that the terminations will be carried out. The liabilities for termination benefits are recognised in other creditors unless the amount or timing of the payments is uncertain, in which case they are recognised as provisions. Liabilities for termination benefits relating to an acquired entity or operation that arise as a consequence of acquisition are recognised as at the date of acquisition if, at or before the acquisition date, the main features of the terminations were planned and a valid expectation had been raised in those employees affected that the terminations would be carried out and this is supported by a detailed plan developed within three months of the acquisition, or prior to the completion of the financial report, if earlier. These liabilities are disclosed in aggregate with other restructuring costs as a consequence of the acquisition. Operating revenue Sales Revenue Sales revenue comprises registry and bureau revenue, sale of software licences and associated development, installation and maintenance fees (net of returns, discounts and allowances) and document processing services. Registry and bureau revenue includes all revenue earned on the provision of regular services to customers, primarily fixed monthly maintenance fees and transaction processing fees. Additionally, sales revenue includes all associated revenue earned from managing various client corporate actions, such as capital raisings, demutualisations and takeovers, which occur periodically. Revenue derived from both sources of sales revenue includes variable margin income earned on administered funds, including Save As You Earn Schemes (refer note 29a). In relation to the recognition of any profits and losses on the corporate actions which span reporting periods, where they can be reliably measured, revenue and expenses arising from the project are recognised in the Statement of Financial Performance by reference to the stage of completion of the project as at balance date. Software licence sales and associated development, installation and maintenance fees are recognised in accordance with written customer agreements so as to match revenue with expenses. Document processing revenues include revenue from the provision of paper and electronic document needs for issuers, investors and corporations. This includes design, document composition and programming, through to various production and distribution methods. Plans and Analytics revenue is recognised to match the period in which services are performed. Other Revenue Other revenue includes interest income on short-term deposits controlled by the consolidated entity, royalties and dividends received from other persons. Insurance Recoveries The consolidated entity recognises amounts receivable under its insurance policies, net of any relevant excess amounts, upon indemnity being acknowledged by the insurers. Financial instruments included in equity Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders. Reset preference shares earn a preferential non-cumulative dividend fixed for the first five years of 5.5% per annum. Further details of terms and conditions of preference shares are detailed in note 19(a) to the financial statements. Financial instruments included in liabilities Loans are recognised when issued at the amount of the net proceeds received, with any premium or discount on issue amortised over the period to maturity. Interest is recognised as an expense on an effective yield basis. 70 COMPUTERSHARE Detailed Financial Report 2004

73 Financial instruments included in assets Trade debtors Trade debtors are initially recorded at the amount of the contracted sale proceeds. Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered less than likely. Any provision established is based on a review of all outstanding amounts at balance date. Bank deposits and loans Bank deposits and loans are carried at cost. Interest revenue is recognised on an effective yield basis. Other investments Other investments, including equity interests in non-subsidiary, non-associated corporations are included in investments at the lower of cost or recoverable amount. Dividend income is brought to account when received. Hedge accounting The consolidated entity applies the principles of hedge accounting as set out in the relevant Australian Accounting Standards and UIG pronouncements, using both interest rate and foreign currency swaps and options. To the extent that hedging instruments become ineffective as a hedge of the intended risk, and are required to be marked to market, all gains and losses are recognised immediately in the Statement of Financial Performance. Cash For the purposes of the Statements of Cash Flows, cash includes deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. Cash excludes Broker Client Deposits carried on the Statement of Financial Performance that are recorded as other current financial assets. Earnings per share Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Dividend Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end of the financial year but not distributed at balance date. Change in accounting standards The new Australian Accounting Standard AASB 1046 Director and Executive Remuneration Disclosures by Disclosing Entities is applicable to the Group for the first time this financial year. Computershare is required to disclose the remuneration of each individually named director and specified executive, as well as the components of each individual s remuneration. The components are classified under the main headings of primary, post-employment, equity compensation and other benefits. This is a disclosure standard only, therefore there is no impact on the reported results of the Group in the current financial period. Note 25 includes full details of director and executive remuneration disclosures. COMPUTERSHARE Annual Report

74 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont d) The adoption of International Financial Reporting Standards For reporting periods beginning on or after 1 January 2005, Computershare must comply with the Australian equivalents of IFRS. This means that the Group will present interim financial statements for the six months ending 31 December 2005 and annual financial statements for the year ending 30 June 2006 under IFRS. Entities complying with the Australian equivalent to IFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of IFRS to that comparative period. Most adjustments to IFRS will be made, retrospectively, against opening retained earnings. It is important to note, that whilst the adoption of IFRS will change the Group s reported results, this does not represent a change in the strength of the underlying business. Management of the transition to IFRS Computershare has established a project team to manage the transition to the Australian equivalents of IFRS. The project team is chaired by the Chief Financial Officer and reports to the risk and audit committee. The project team has prepared a detailed timetable for managing the transition and is currently on schedule. Computershare is managing the transition to IFRS in three distinct phases: Analysis and planning Evaluation of the new financial reporting requirements and initial conversion; and Embedding IFRS into business as usual. As at 30 June 2004 phase one has been completed and significant progress has been made in phase two. Key milestones met include: A preliminary assessment to identify the key areas impacted by IFRS has been undertaken and provided to the Board risk and audit committee A high level project plan outlining each phase of the transition and establishing a global project team has been completed and provided to the Board risk and audit committee Project management tools, including strategies for communication, risk and issue management, the use of external advisors and the logistical implications of conversion have been established An analysis of all current Group accounting policies vis-à-vis IFRS requirements has been performed to identify potential areas of change The mandatory and optional exemptions available under AASB 1 (First time adoption of IFRS) have been reviewed; and A detailed timeline has been agreed to address the technical accounting requirements of the four areas most impacted by IFRS: annual impairment testing of goodwill, financial instruments, share based payments and deferred tax assets and liabilities. Key differences in accounting policies expected to arise upon the adoption of IFRS The most significant differences between current Computershare accounting policies and IFRS are summarised below. Both the AASB and the IASB have a number of on-going projects in place which may impact on the differences described below and the impact on the future financial results of Computershare. Annual impairment testing of goodwill Current goodwill will no longer be amortised but subject to annual impairment testing. In accordance with the new standard, this impairment testing will be based on the discounted cash flows of each cash generating unit within the Group. Under AASB 1 First Time Adoption of IFRS, it is likely that the carrying value of goodwill (being the original value less accumulated amortisation) as at 30 June 2004 will be carried forward indefinitely, subject to opening transitional adjustments and annual impairment testing. The amortisation charge currently recorded in the financial results of Computershare will be eliminated. 72 COMPUTERSHARE Detailed Financial Report 2004

75 Financial Instruments The Group s reset preference shares will be reclassified as debt under IFRS. On this basis the directors of the company have resolved to cause the reset preference shares to be converted to ordinary shares in accordance with the reset preference shares term of issue. In accordance with IFRS, all financial instruments will be recorded on the balance sheet. Computershare currently applies hedge accounting to all financial instruments and accordingly, these transactions are recorded off balance sheet. Under IFRS the fair value of financial instruments which meet the hedge accounting criteria will be recorded in the balance sheet, with changes in the fair value being taken to shareholders equity. There will be no impact on profit. Qualification for hedge accounting will be more strict than under current Australian accounting standards. The fair value of financial instruments which do not satisfy the hedge criteria will also be recorded in the balance sheet, but changes in their fair value will be taken directly to the statements of financial performance. Based on a preliminary assessment of Computershare s portfolio, most of the instruments entered into by Computershare are expected to qualify for hedge accounting under IFRS. In light of the significant complexity and on-going changes in relation to the new financial instruments accounting standards, Computershare has adopted a policy of seeking IFRS sign off before proceeding with any financial instruments. Share based payments Equity based compensation in the form of shares and options will be recognised as an expense in the period during which the employee provides related services. Currently Computershare only recognises an expense for shares purchased on market. Deferred tax assets and liabilities Deferred tax will be calculated using the balance sheet approach under IFRS. In addition, the criteria for the recognition of a deferred tax asset is lower under IFRS, therefore the adoption of IFRS may result in the recognition of more deferred tax assets and liabilities. Tax effect accounting will also follow the underlying transaction under IFRS. As a result, some tax effects may be recognised in equity. The above should not be regarded as a complete list of changes in accounting policies that will result from the transition to Australian equivalents to IFRS, as not all standards have been analysed as yet, and some decisions have not yet been made where choices of accounting policies are available. For these reasons it is not yet possible to quantify the impact of the transition to Australian equivalents to IFRS on the consolidated Group s financial position and reported results. COMPUTERSHARE Annual Report

76 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE 2004 Consolidated Parent entity $000 $000 $000 $ OPERATING PROFIT (a) Profit from ordinary activities is after crediting the following revenues: Revenue from operating activities Sales revenue Rendering of services 871, ,519 Revenue from outside the operating activities Net foreign exchange gains (refer also to borrowing costs) ,966 6,546 Decrease in underwriting liability to controlled entity following novation of financial instruments 8,044 Gain on other financial instruments Amortisation of discount on forward exchange contracts 2,318 Dividends received from: other persons controlled entity 26,773 34,159 Interest received from: other persons 3,469 3, controlled entities 1,045 6,739 Rent received and sub-lease rentals 1,178 3,940 Other fees received from controlled entities 26,417 9,366 Gross proceeds from the sale of: Property, plant and equipment and investments 66, Non-current assets to controlled entities 32 Other revenue items in total 3,501 2, Total other revenues 75,193 14,078 56,623 65,085 Total revenue from ordinary activities (excluding share of net profits of associates accounted for using the equity method) 946, ,597 56,623 65,085 Profit from ordinary activities is after charging the following expenses: Depreciation and amortisation Depreciation of property, plant and equipment 22,157 24, Amortisation of: Leased assets 4,478 1, Leasehold improvements 3,342 2, Goodwill 33,494 31,263 Other deferred expenses 1, Total depreciation and amortisation 64,474 60,737 1,252 1, COMPUTERSHARE Detailed Financial Report 2004

77 Borrowing costs Consolidated Parent entity $000 $000 $000 $000 Interest paid: to other persons 7,271 6,921 on finance leases to controlled entities Exchange (gain)/loss on foreign currency loans Loan facility fees 1,478 1, Total borrowing costs 9,020 8, Other operating expense items Operating lease rentals (i) 39,922 33, ,897 Technology spending research and development 41,100 38,600 Provision for/(reduction in) employee entitlements (78) 303 (253) (41) Net charge to provision for doubtful trade debts Expense from sale of: Non current assets 53, Plant and equipment to controlled entity 32 (Profit)/ loss on sale of non-current assets (9,922) 411 (392) (i) Operating lease rentals includes contingent rentals of $nil (2003: $786,589). (b) Individually Significant Items Included in the consolidated statement of financial performance are the following significant items: Profit from Ordinary Activities Sale of Computershare Limited s premises in the UK (The Pavilions) 2004 $000 Sale Proceeds 51,758 Written down value (46,076) Gain on Sale 5,682 Expenses $000 UK restructuring (4,967) Tax effect 1,490 (3,477) In the year ended 30 June 2003 there was significant restructuring of the company s global businesses. The impact on expenses was $35.1 million of non-recurring costs, comprising $23.2 million in redundancies, $7.5 million in property write-offs, $3.0 million in restructuring costs and $1.4 million in asset write-offs. COMPUTERSHARE Annual Report

78 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE INCOME TAX Consolidated Parent entity $000 $000 $000 $000 The income tax expense for the financial year differs from the amount calculated on the profit. The differences are reconciled as follows: Operating profit 110,657 29,462 33,746 50,076 Prima facie income tax expense thereon at 30% 33,197 8,839 10,123 15,023 Tax effect of permanent differences: Amortisation of goodwill not deductible 6,697 5,418 Research and development allowance (1,238) (1,692) Non deductible provisions ,020 Benefit of tax losses not brought to account 961 6,230 Writeoff of deferred tax liability on sale of UK buildings (the Pavilions) (4,334) Tax free profit on sale of UK buildings (due to indexation allowance) (1,705) Non-assessable and rebatable dividends (6,577) (4,490) (8,031) (10,247) Other (3,179) 2,050 (99) (118) Prior year tax (over)/under provided 693 (1,971) 545 (42) Restatement of deferred tax balances due to income tax rate changes (404) Effect of different tax rates on overseas income 1,491 (1,845) Effect of change in tax rate other 435 Income tax expense on operating profit/(loss) 27,011 12,329 3,558 4,616 before impact of tax consolidation As at 30 June 2004, companies within the consolidated entity had estimated unconfirmed gross income tax losses of $127,715,983 (2003: $18,038,000) available for offset against future years taxable income. The benefit of these losses has not been brought to account as realisation is not virtually certain. The benefit for these tax losses will only be obtained if: (a) the companies derive future assessable income of a nature and of an amount sufficient to enable the benefits from the deductions for the losses to be realised; (b) the companies continue to comply with the conditions for deductibility imposed by tax legislation; and (c) no changes in the taxation legislation adversely affect the companies in realising the benefit from the deductions for the losses. 76 COMPUTERSHARE Detailed Financial Report 2004

79 Consolidated Parent entity $000 $000 $000 $ RETAINED PROFITS AND DIVIDENDS Retained profits Retained profits at the beginning of the financial year 128, ,781 61,279 37,490 Adjustment resulting from change in accounting policy for providing for dividends 13,857 13,857 Ordinary dividends provided for or paid (30,027) (27,278) (30,027) (27,278) Reset preference dividends provided for or paid (7,571) (8,250) (7,315) (8,25.0) Net profit/(loss) attributable to members of Computershare Limited 79,982 16,256 30,188 45,460 Retained profits at the end of the financial year 170, ,366 54,125 61,279 Equity Total equity at the beginning of the financial year 588, , , ,426 Adjustment resulting from change in accounting policy for providing for dividends 13,857 13,857 Total changes in equity recognised in the Statements of Financial Performance 70,090 (8,065) 30,188 45,460 Transactions with owners as owners: Contributed equity ordinary shares, net of buy-backs 14,106 (36,812) 14,105 (36,812) Contributed equity reset preference shares, net of buy-backs (32,762) (10) (32,762) (10) Dividends ordinary shares (30,027) (27,278) (30,027) (27,278) Dividends reset preference shares (7,571) (8,250) (7,315) (8,250) Total changes in outside equity interests 2,624 (783) Total equity at the reporting date 604, , , ,393 Dividends Ordinary Dividends paid during the financial year in respect of the previous year fully franked at 30% 13,530 13,861 13,530 13,861 Dividends paid in respect of the current financial year fully franked at 30% 16,498 13,421 16,498 13,421 Reset Preference Dividends paid during the financial year in respect of the previous year fully franked at 30% 676 4, ,137 Dividends paid and proposed in respect of the current financial year fully franked at 30% 7,571 8,250 7,315 8,250 For details of dividend entitlements on reset preference shares refer to note 19(a) Franked dividends The final franked dividends proposed in respect of the year ended 30 June 2004 will be franked out of existing franking credits. Dividend franking account Franking credits available for subsequent financial years based on a tax rate of 30% 13,916 43,265 13,916 43,265 The above amounts represent the balance of the franking account as at the end of the financial year adjusted for: (a) franking credits that will arise from the payment of the current tax liability (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and (d) franking credits that may be prevented from being distributed in subsequent financial years. COMPUTERSHARE Annual Report

80 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE 2004 Calculation of Calculation of Calculation of Calculation of Basic EPS Diluted EPS Normalised Normalised Basic EPS Diluted EPS $000 $000 $000 $ EARNINGS PER SHARE Year end 30 June 2004 Earnings per share (cents per share) cents cents cents cents Net profit 83,646 83,646 83,646 83,646 Outside equity interest (profit)/loss (3,664) (3,664) (3,664) (3,664) Exclusion of normalising equity transactions, net of tax (refer note 2b): UK restructuring and Pavilions (2,205) (2,205) Dividends on reset preference shares (7,313) (7,313) Net profit 72,669 79,982 70,464 77,777 Weighted average number of ordinary shares used as denominator in calculating basic earnings per share 546,570, ,570,016 Weighted average number of ordinary and potential ordinary shares used as denominator in calculating diluted earnings per share 587,684, ,684,215 Employee options on issue that are not dilutive and therefore not included in the calculation of diluted EPS are shown in the table of employee options in note 19 and marked with (A) Year end 30 June 2003 Earnings per share (cents per share) 1.47 cents 2.60 cents 6.05 cents 6.57 cents Net profit 17,133 17,133 17,133 17,133 Outside equity interest (profit)/loss (877) (877) (877) (877) Exclusion of normalising equity transactions, net of tax: Redundancies 16,234 16,234 Property write-offs 4,980 4,980 Asset write-offs 1,092 1,092 Restructuring costs 2,586 2,586 Dividends on reset preference shares (8,250) (8,250) Net profit 8,006 16,256 32,898 41,148 Weighted average number of ordinary shares used as denominator in calculating basic earnings per share 544,130, ,130,199 Weighted average number of ordinary and potential ordinary shares used as denominator in calculating diluted earnings per share 626,076, ,076,728 Employee options on issue that are not dilutive and therefore not included in the calculation of diluted EPS are shown in the table of employee options in note 19 and marked with (B) 78 COMPUTERSHARE Detailed Financial Report 2004

81 Consolidated Parent entity $000 $000 $000 $ RECEIVABLES Current Trade debtors 138,252 99, Trade debtors controlled entities 19,398 1,285 Tax related receivables controlled entities 202 2,979 Total trade debtors 138,252 99,734 19,891 4,264 Less: Provision for doubtful debts (4,759) (4,608) Trade debtors, net 133,493 95,126 19,891 4,264 Accrued revenue 37,199 32,445 Other non-trade amounts 8,854 2,676 3, Interest receivable 2,073 1, , ,220 23,520 5,137 Non-current Non-trade amounts owing by controlled entities 153, ,551 Non-trade amounts owing by associated entities Less: Provision for doubtful debts Foreign tax credits 1,598 1,049 1,519 1,049 1,598 1, , , OTHER FINANCIAL ASSETS Current Broker client deposits (a) (refer note 14) 50,745 35,987 Unlisted shares in unrelated entities ,944 36,653 (a) An overseas entity is a licensed deposit taker. As at year end this controlled entity has accepted deposits in its own name, and recorded these funds as other financial assets together with a corresponding liability. The deposits are insured through a local regulatory authority. Non-current Investments: Shares in listed companies (a) 9,683 14,453 6,890 6,785 Unlisted shares in unrelated entities, at cost Unlisted shares in controlled entities, at cost 391, ,917 Investments accounted for using the equity method 4,330 15,845 Other ,266 30, , ,702 (a) Market value of shares in unrelated listed companies 14,282 13,027 13,917 4,754 Included in the amount above is an 11% investment in E*Trade (ETR), which operates an internet brokerage business. Shares in ETR were written down at 30 June No further adjustment has been made to the carrying value of shares in listed companies during the year ended 30 June 2004 as directors believe there has been no further permanent diminution in value. COMPUTERSHARE Annual Report

82 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE INVENTORIES Consolidated Parent entity $000 $000 $000 $000 Raw materials and stores, at cost 3,515 3,323 Work in progress, at cost 3, ,993 3, OTHER Current Prepayments 19,595 11, PROPERTY, PLANT AND EQUIPMENT 19,595 11, Land at cost (a) Opening balance 11,784 12, Disposals (8,785) Currency translation differences (22) (972) Closing balance 2,977 11, Buildings, freehold at cost (a) Opening balance 50,525 53,982 2,200 2,200 Additions Disposals (42,012) Transfers (831) Currency translation differences (468) (4,320) Closing balance 7,377 50,525 2,203 2,200 Buildings, leasehold at cost (a) Opening balance 6,315 6,472 Additions Transfers 87 Currency translation differences 395 (527) Closing balance 7,148 6,315 Accumulated depreciation Opening balance 7,535 5, Depreciation for the year 1,244 2, Disposals (3,524) Transfers (29) Currency translation differences 213 (625) Closing balance 5,439 7, Net book value of land and buildings 12,063 61,089 2,347 2, COMPUTERSHARE Detailed Financial Report 2004

83 Plant and Equipment at cost Consolidated Parent entity $000 $000 $000 $000 Opening balance 110,065 98,621 1, Acquisitions through subsidiaries and businesses acquired 2,329 7,404 Additions 14,759 12, Disposals (985) (3,031) (73) Transfers 863 (869) Currency translation differences 1,748 (4,249) Closing balance 128, , ,007 Accumulated depreciation Opening balance 70,583 57, Depreciation for the year 17,221 18, Disposals (855) (2,318) (31) Transfers 596 (700) Currency translation differences 1,695 (2,902) Closing balance 89,240 70, Net book value of plant and equipment 39,539 39, Fixtures and fittings at cost Opening balance 23,956 25,534 1,349 1,340 Acquisitions through subsidiaries and businesses acquired 1,378 Additions 3, Disposals (3,197) (618) Transfers 776 (672) Currency translation differences 405 (1,260) Closing balance 26,466 23,956 1,349 1,349 Accumulated depreciation Opening balance 10,739 8, Depreciation for the year 3,627 3, Disposals (2,774) (382) Transfers 761 (265) Currency translation differences 389 (666) Closing balance 12,742 10,739 1, Net book value of fixtures and fittings 13,724 13, Motor vehicles at cost Opening balance Acquisitions through subsidiaries and businesses acquired 25 Additions Disposals (144) Currency translation differences 7 (49) Closing balance COMPUTERSHARE Annual Report

84 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE PROPERTY, PLANT AND EQUIPMENT (cont d) Consolidated Parent entity $000 $000 $000 $000 Accumulated depreciation Opening balance Depreciation for the year Disposals (128) Currency translation differences 3 (43) Closing balance Net book value of motor vehicles Leased plant and equipment at cost Opening balance 8,968 7,245 2,706 3,025 Acquisitions through subsidiaries and businesses acquired 11,248 Additions 2, Disposals (2,851) (2,706) (32) Transfers 1,541 Transfer to owned assets on expiry of lease (895) (287) (287) Currency translation differences 1,237 (290) Closing balance 19,826 8,968 2,706 Accumulated amortisation Opening balance 5,267 3,445 2,078 1,852 Amortisation for the year 4,478 1, Disposals (2,415) (2,353) Transfers 965 Transfer to owned assets on expiry of lease (169) (287) (287) Currency translation differences 1,036 (49) Closing balance 8,197 5,267 2,078 Net book value of leased plant and equipment 11,629 3, Leasehold improvements at cost Opening balance 21,572 21, Acquisitions through subsidiaries and businesses acquired 2,105 Additions 797 2,743 Disposals (96) (401) Currency translation differences 121 (1,978) Closing balance 24,499 21, Accumulated amortisation Opening balance 5,648 3, Amortisation for the year 3,342 2, Disposals 13 (209) Currency translation differences 259 (818) Closing balance 9,262 5, Net book value of leasehold improvements 15,237 15, Total property, plant and equipment 92, ,619 2,698 4,094 (a) The directors consider that on an existing use basis at 30 June 2004 the current market value of land and buildings is not materially different, in the context of the financial statements, to the cost as presented above. 82 COMPUTERSHARE Detailed Financial Report 2004

85 11. TAX ASSETS Consolidated Parent entity $000 $000 $000 $000 Current Refunds receivable 3, ,093 3, ,093 Non-current Future income tax benefit Attributable to carry forward tax losses 13,668 13,854 Attributable to timing differences 7,250 33,321 1,632 10, INTANGIBLES GOODWILL 20,918 47,175 1,632 10,579 Goodwill at cost 833, ,359 Less: Accumulated amortisation (134,696) (100,857) 13. OTHER 698, ,502 Other (including pension asset Hong Kong) 4,874 4, PAYABLES 4,874 4, Current Trade creditors unsecured 19,628 5, Trade creditors intercompany 2,518 2,048 Tax related payables intercompany 3,369 GST/VAT payable 4,523 5,434 Employee entitlements (refer note 21) 9,253 9, Other loans unsecured, non-interest bearing 1,172 1,000 1,000 Broker client deposits (refer note 7) 50,745 35,987 Other creditors and accruals 118,422 53,760 1, , ,044 4,149 7,739 Non-current Other creditors COMPUTERSHARE Annual Report

86 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE 2004 Consolidated Parent entity $000 $000 $000 $ INTEREST BEARING LIABILITIES Current Bank loans (iii) 1,452 2,747 Revolving multi-currency facility (i) 91,197 Lease Liability secured (note 23b), (ii) 6,175 2, Other ,824 5, Non-current Bank loans (iii) 529 2,357 Revolving multi-currency facility (i) 208, ,793 Loans from controlled entities unsecured 65,301 62,678 Lease liability secured (note 23b), (ii) 4, , ,923 65,301 62,678 (i) The consolidated entity maintains two revolving multi-currency facilities. The first revolving multi-currency facility is for $180,000,000 and reduces to $60,000,000 on 30 June This facility was drawn to Australian dollar equivalent of $151,197,765 at 30 June The second revolving multi-currency facility is $180,000,000 and terminates on 3 July This facility was drawn to Australian dollar equivalent of $148,295,149 at 30 June These facilities are subject to negative pledge agreements which impose certain covenants upon the consolidated entity. (ii) The lease liability is secured directly against the assets to which the leases relate. (iii) In the prior year, bank loans were drawn by Computershare Services (SA) (Pty) Ltd. This loan has been fully repaid in the current year. Bank loans represent borrowings by Pepper Technologies AG and these have been repaid in full subsequent to year end. (iv) The consolidated entity maintains bank overdraft facilities of $1,577,000. These facilities were drawn down to $1,114,000 at 30 June (v) The consolidated entity maintains an uncommitted facility of $70,755,000 at 30 June The uncommitted facility has been arranged to enable the consolidated entity to offer deferred financing of options as part of the employee plans business in the UK. Last year the facility was $66,898, COMPUTERSHARE Detailed Financial Report 2004

87 Consolidated Parent entity $000 $000 $000 $ TAX LIABILITIES Current Provision for income tax 2,341 5,876 9,769 2,341 5,876 9,769 Non-current Provision for deferred income tax on timing differences 9,427 15, PROVISIONS 9,427 15, Current Dividend reset preference shares Loss on early termination of lease 688 3,237 Future services 3,037 3,253 Restructuring 18,897 11,814 Other 9,410 5,305 6,000 32,567 24,287 6, MOVEMENT IN PROVISIONS Movements in each class of current provision during the financial year, other than employee benefits, are set out below. Dividend Restructuring Loss on early Future Other Reset termination Services preference of lease shares CONSOLIDATED 2004 $000 $000 $000 $000 $000 Carrying amount at start of year ,814 3,237 3,253 5,305 Additional provisions recognised (a) 7,312 24, ,350 9,298 Payments/other sacrifices of economic benefits (7,455) (18,396) (2,285) (1,601) Reversals (372) (1,741) (4,127) Exchange rate impacts on opening balance 512 (109) Carrying amount at end of year , ,037 9,410 (a) The additional restructuring provision recognised during 2004 relates to the provision for restructuring costs associated with the acquisitions of the Georgeson Shareholder Communications Group and Transcentive Inc. PARENT ENTITY 2004 Carrying amount at start of year 678 Additional provisions recognised 7,312 7,601 Payments/other sacrifices of economic benefits (7,455) (1,601) Carrying amount at end of year 535 6,000 COMPUTERSHARE Annual Report

88 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE PROVISIONS (cont d) Non-Current Consolidated Parent entity $000 $000 $000 $000 Employee entitlements (refer note 21) 4,998 5, Other 1,894 6,892 5, MOVEMENT IN PROVISIONS Movements in each class of non-current provision during the financial year, other than employee benefits, are set out below. Other $000 CONSOLIDATED 2004 Carrying amount at start of year Additional provisions recognised 1,894 Payments/other sacrifices of economic benefits Reversals Exchange rate impacts on opening balance Carrying amount at end of year 1, OTHER LIABILITIES Consolidated Parent entity $000 $000 $000 $000 Current Deferred settlement on acquisition of entity 11,715 2,569 11,715 2,569 Non-Current Lease inducements (a) 3,127 2,991 3,127 2,991 (a) Lease inducements represent cash payments received as an allowance for leasehold improvements made to the premises. This receipt is being accounted for as a reduction in the rental expenses over the term of the lease. 86 COMPUTERSHARE Detailed Financial Report 2004

89 19. CONTRIBUTED EQUITY Consolidated Parent entity $000 $000 $000 $000 Ordinary shares (b) 338, , , ,375 Reset preference shares (a) 114, , , ,195 Total contributed equity (b) 453, , , ,570 (a) Reset preference shares represent 1,184,807 (2003: 1,500,000) fully paid shares of $ ,000 reset preference shares were offered during November 2001 pursuant to an institutional placement. A further 750,000 reset preference shares were offered to the public pursuant to a prospectus dated 15 November The shares earn a preferential non-cumulative dividend fixed for the first five years of 5.5% per annum payable semiannually in arrears, usually on 31 May and 30 November. The first dividend was paid on 31 May The dividend may be increased or decreased on reset dates. Payment of dividends is at the discretion of directors and is subject to there being sufficient profits of Computershare out of which Computershare is lawfully able to pay dividends. The dividend rate assumes full franking. If a dividend is unfranked or partially franked, the dividend will be increased to compensate for the unfranked amount. If there is a change in the corporate tax rate, the dividend will be adjusted to reflect this. Computershare may convert the preference shares early in the case of a takeover or tax or regulatory event. A holder may convert at the minimum conversion number prior to a reset date by providing 30 business days notice. In this event no dividend is payable in respect of the converting preference shares. Following a decision by the directors of the company to cause the reset preference shares to be converted to ordinary shares on 30 September 2004, a reset preference share dividend of $ per share franked at 30% in respect of the period 1 June 2004 to 30 September 2004 will be paid on 30 September Dividends on reset preference shares will be paid in priority to any dividends declared on ordinary shares. In a winding up, reset preference shares will rank for repayment of capital behind all creditors of Computershare but ahead of ordinary shares. Computershare reserves the right in the future to issue additional reset preference shares or other securities ranking equally with the reset preference shares. Prior to conversion of reset preference shares, unless the directors otherwise determine in their discretion, holders do not have a right to participate in issues of securities, or capital reconstructions affecting holders of ordinary shares. However, the minimum and maximum numbers of ordinary shares to be issued on conversion will be adjusted for rights issues, off-market buy-backs, capital distributions, bonus issues and capital reconstructions where appropriate. The reset preference shareholders have no right to vote at general meetings except in limited circumstances. (b) During the year ended 30 June 2000 Computershare Limited increased its investment in the CDS Group from 20% to 50.02% by the payment of cash and issue of Computershare Limited equity to ACN Pty Ltd (the parent entity of the CDS Group). The shares were subsequently sold by the CDS Group at a profit. On consolidation this profit was eliminated and transferred to share capital and the outside equity interest leading to the difference in the share capital of the parent entity and that of the consolidated entity. COMPUTERSHARE Annual Report

90 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE CONTRIBUTED EQUITY (cont d) Movements in ordinary shares for the last two years Consolidated Parent entity $000 $000 $000 $000 Opening balance: 540,340,727 ordinary shares (1 July 2002: 554,278,613) 324, , , ,187 Issued during the year Number Price Date of shares per share As a result of the exercise of employee options: July ,000 $ August ,000 $ September ,000 $ September ,000 $ September ,000 $ October ,000 $ December ,000 $ December ,000 $ January ,000 $ April ,000 $ June ,000 $ June ,000 $ June ,000 $ July ,000 $ July ,000 $ August ,000 $ September ,000 $ September ,000 $ September ,000 $ October ,000 $ October ,000 $ October ,000 $ October ,000 $ December ,000 $ April ,000 $ As a result of purchases under the employee share plan: June ,502 $ December ,500,000 $ June ,546 $ Other issues: Exercise of options issued to CitiGroup: August ,271 $ Issued as part of the consideration paid for acquisitions: December ,000,000 $ ,260 22,260 March ,137,083 $ ,052 7, COMPUTERSHARE Detailed Financial Report 2004

91 Consolidated Parent entity Number Price Date of shares per share $000 $000 $000 $000 Existing shares allocated as part of consideration paid for acquisitions: December 2003 $ February 2004 $ March 2004 $ ,177 3,177 June 2004 $ Monies not received until shortly after balance date: 30 June ,391,114 $ Share buy-back Between 11 September 2002 and 21 February 2003 the company bought back 18,710,000 ordinary shares at an average cost per share of $2.05. The shares bought back represent 3.38% of issued ordinary shares at the date of the buy-back announcement. (38,350) (38,350) Between 10 June and 30 June 2004 the company bought back 6,262,524 ordinary shares at an average cost of $3.21. The shares bought back represent 1.13% of issued ordinary shares at the date of the buy-back announcement. Of these shares, 512,524 did not settle until after the balance sheet date. (20,103) (20,103) Transaction costs incurred in relation to the share buy-back (8) (8) Closing balance: 546,757,627 ordinary shares 338, , , ,375 (30 June 2003: 540,340,727) Movements in preference shares for the last two years Opening balance: 1,500,000 shares (1 July 2002: 1,500,000) 147, , , ,195 Issued during the year Number Price Date of shares per share As a result of the preference share buy-back: January 2004 (12,357) $ (1,253) (1,253) February 2004 (133,171) $ (13,829) (13,829) March 2004 (38,590) $ (4,000) (4,000) April 2004 (90,539) $ (9,430) (9,430) May 2004 (21,285) $ (2,240) (2,240) June 2004 (19,251) $ (1,975) (1,975) Transaction costs incurred in relation to the share buy-back (36) (36) Closing balance: 1,184,807 preference shares 114, , , ,195 (30 June 2003: 1,500,000) COMPUTERSHARE Annual Report

92 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE CONTRIBUTED EQUITY (cont d) Preference share buy-back On 19 December 2003 Computershare announced its intention to buy-back up to 17% (250,000) of the reset preference shares. This buy-back commenced in 5 January 2004 as part the Group s of on-going capital management. On 19 March 2004 Computershare announced a change relating to this buy-back in that the maximum number of shares that Computershare intended to buy-back was increased to 750,000. Between 5 January 2004 and 30 June 2004 the company bought back 315,193 preference shares at an average cost per share of $ with prices ranging from $ to $ The shares bought back represent 21% of issued preference shares at the date of the balance sheet date. The total cost of $32,763,243, including transaction costs, was deducted from preference shareholder equity. Between 1 July 2004 and 13 September 2004 the company bought back 183,478 preference shares at an average cost per share of $ The shares bought back represent 15% of issued preference shares at the balance sheet date. Following a decision by the directors of the company to cause the reset preference shares to be converted to ordinary shares on 30 September, a reset preference share dividend of $ per share franked at 30% in respect of the period 1 June 2004 to 30 September 2004 will be paid on 30 September Ordinary share buy-back On 26 May 2004 Computershare announced its intention to buy back up to 27,500,000 ordinary shares commencing 10 June 2004 as part of on-going capital management. Between 1 July 2004 and 13 September 2004 the company bought back 9,707,476 ordinary shares at an average cost per share of $3.16. The shares bought back represent 1.78% of issued ordinary shares at the balance sheet date. 90 COMPUTERSHARE Detailed Financial Report 2004

93 Options over ordinary shares Employee options Computershare Limited has issued the following options over ordinary shares to eligible employees. The options are generally exercisable 3 years after the date granted or earlier in the case of the employee s death or retirement. The options expire 59 months after the date issued. Each option entitles the holder to 1 ordinary share upon exercise. Number Number Number Number Number Exercise On Issue Issued Exercised Cancelled On Issue Issue Date Expiry Date Price 30/06/03 This year This year This year 30/06/04 09 Sep Aug 2003 $ ,000 (168,000) 14 Sep Aug 2003 $ ,000 (60,000) (12,000) 16 Nov Oct 2003 $ ,000 (245,000) 01 Feb Dec 2003 $ ,000 (72,000) B 26 Apr Mar 2004 $ ,188 (773,188) B 01 Jul May 2004 $ ,000 (122,000) B 01 Jul May 2004 $ ,000 (132,000) B 01 Jul May 2004 $ ,000 (200,000) B 10 Dec Nov 2004 $ ,000 (80,000) B 11 Feb Jan 2005 $ ,208,750 (271,700) 2,937,050 A, B 07 Apr Mar 2005 $ ,000 (41,000) 863,000 A, B 09 Jun May 2005 $ ,250 (3,000) 116,250 A, B 12 Jun Jun 2005 $ ,000 (30,000) B 02 Jul Jun 2005 $ ,000 (15,000) 21,000 A, B 01 Aug Jul 2005 $ ,000 20,000 A, B 15 Aug Jul 2005 $ ,000 (55,000) 224,000 A, B 08 Sep Aug 2005 $ ,030,500 (55,000) 975,500 A, B 15 Dec Nov 2005 $ ,000 (32,000) 35,000 A, B 25 Sep Aug 2005 $ ,000 99,000 A, B 29 Dec Nov 2005 $ ,200 68,200 A, B 21 Feb Jan 2006 $ ,653 (28,700) 13,953 A, B 26 Feb Jan 2006 $ ,000 58,000 A, B 27 Apr Mar 2006 $ ,000 (4,000) 18,000 A, B 01 Jul May 2006 $ , ,000 A, B 01 Jul May 2006 $ ,500 (93,000) 902,500 A, B 02 Jul Jun 2006 $ ,500 (1,000) 92,500 A, B 02 Jul Jun 2006 $ ,000 (10,000) 74,000 A, B 02 Jul Jun 2006 $ ,431,000 (340,250) 3,090,750 A, B 31 Jul Jun 2006 $ ,250 (7,000) 44,250 A, B 06 Mar Feb 2007 $ ,984,100 (113,000) 1,871,100 B 06 Mar Feb 2007 $ ,000 (50,000) 60,000 B 10 Apr Mar 2007 $ ,000 (24,000) 158,000 B 27 May Apr 2007 $ , ,000 B Total 15,346,891 (545,000) (2,492,838) 12,309,053 Options in the above table that were not included in potential ordinary shares for the purposes of the 30 June 2004 diluted earnings per share, are marked with an A in the table above. Options in the above table that were not included in potential ordinary shares for the purposes of the 30 June 2003 diluted earnings per share, are marked with a B in the table above. The market price of shares under option at 30 June 2004 was $3.18 (2003: $1.87) No options have been issued since year end. COMPUTERSHARE Annual Report

94 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE CONTRIBUTED EQUITY (cont d) The following options have been cancelled after year end and before the date of this report: Number Exercise of options Exercise date Price cancelled 5 July 2004 $ ,750 5 July 2004 $ ,000 5 July 2004 $ ,500 5 July 2004 $ ,000 5 July 2004 $ ,750 5 July 2004 $ ,000 5 July 2004 $ ,000 3 August 2004 $ ,000 3 August 2004 $ ,000 3 August 2004 $ ,000 1 September 2004 $ ,000 1 September 2004 $ ,000 Cancellation of options have resulted from employee resignations. There are no unissued shares under option as at the date of this report, other than those referred to above. Citibank options On 28 August 2002, Computershare provided CitiGroup Global Investments with options over 12,081,633 unissued ordinary shares at an exercise price of $1.83, in connection with the strategic alliance formed on that date. On 19 August 2003 the company issued 548,271 ordinary shares to CitiGroup in consideration of the release of the company s obligation to issue up to 10,581,633 shares for $1.83 per share on the exercise of 10,581,633 of the above mentioned options. As at 30 June 2004, 1,500,000 options remain over 1,500,000 unissued ordinary shares at an exercise price of $ RESERVES Consolidated Parent entity $000 $000 $000 $000 Capital redemption reserve Asset revaluation reserve Foreign currency translation reserve (28,344) (18,452) (27,799) (17,907) Movement during the year Asset revaluation reserve Opening balance Closing balance Foreign currency translation reserve Opening balance (18,452) 5,869 Translation of overseas subsidiaries (a) (9,892) (24,321) Closing balance (28,344) (18,452) (a) This amount is the net gains and losses on hedged transactions and intercompany loans after adjusting for related income tax effects. 92 COMPUTERSHARE Detailed Financial Report 2004

95 21. EMPLOYEE BENEFITS (a) Employee share and option scheme Computershare Limited offers options over ordinary shares to eligible employees at the absolute discretion of the Board. Options are generally exercisable three years after the date granted or earlier in the case of special circumstances such as the employee s death or retirement. The exercise price of the option is set at an amount equal to the market value of the shares at the date of option grant. Please refer to note 19 for a summary of options granted, exercised and issued to employees during the current financial year. During the year ended 30 June 2001 the company introduced an Exempt Employee Share Plan. The Plan gives Computershare employees the opportunity to acquire shares in Computershare Limited. Each year, participating employees can make contributions from their pre-tax salary to acquire $500 worth of shares in the company. Such employee contributions are matched by the company with an additional $500 worth of shares being acquired for each participating employee. All permanent employees in Australia with at least 3 months service are entitled to participate in this Plan. During the year ended 30 June 2002 the plan was amended to enable Computershare to match dollar for dollar any employee pre-tax contributions to a maximum of $3,000 per employee. Shares purchased and funded by employee pre-tax salary must remain in the plan for a minimum of 1 year. Matching company funded shares must be kept in the plan for a minimum of 2 years or they will be forfeited. All permanent employees in Australia with at least 3 months service are entitled to participate in this Plan. A derivative of this Plan has been made available to employees in New Zealand, the United Kingdom, Ireland, Canada and the United States of America. Subject to the discretion of the Board, shares in the company may also be allocated to selected employees in accordance with an employee share plan on a discretionary basis having regard to special circumstances as determined by the remuneration committee. Such shares may be subject to vesting and performance criteria as determined by the Board or the remuneration committee. Ordinary shares Options $000 $000 $000 $000 Total number allocated to employees during the current financial year 10,119,516 4,739, Total number allocated to employees since commencement of the scheme 15,843,750 5,724,234 41,540,427 41,540,427 Total number of employees eligible to participate in the scheme 4,645 4,007 7,995 5,029 Proceeds received and receivable from share issues or option conversions during the year ($000) 934 1,539 Fair value of shares issued through the employee share plan ($000) (i) 32,230 7,025 (i) Fair value for newly issued shares is determined by the closing price at the end of the day s trading on the Australian Stock Exchange and includes employee shares issued as a result of acquisition activity in the current year. Purchase entitlements not taken up by employees are forfeited. Accordingly no shares or options remain available at balance date for purchase. Consolidated Parent entity $000 $000 $000 $000 (b) Employee benefits recognised Aggregate employee entitlement liability (Refer note 17 and note 14) 20,251 14, (c) Number of employees The number of full time equivalent employees as at the end of the financial year was 7,995 (2003: 5,029). COMPUTERSHARE Annual Report

96 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE FOREIGN CURRENCY EXPOSURE Consolidated Parent entity $000 $000 $000 $000 Current assets Amounts receivable in foreign currency which are not effectively hedged: Canadian Dollars 29,368 7,337 1,302 Euros 11,385 3,459 Hong Kong Dollars 8,430 5, New Zealand Dollars 1,737 1,633 Philippines Peso 46 Pounds Sterling 35,904 9,501 South African Rand 6,234 6,104 2,262 United States Dollars 22,085 21, Singapore Dollars 72 Current liabilities Amounts payable in foreign currency which are not effectively hedged: Canadian Dollars 37,159 Philippines Peso Pounds Sterling 19,882 25,178 South African Rand 4,222 United States Dollars 2,385 2,030 Indian Rupees 249 Non-current assets Amounts receivable in foreign currency which are not effectively hedged: Canadian Dollars 617 Hong Kong Dollars 1,846 3,634 Euros 14 New Zealand Dollars 1,805 1,077 Philippines Peso 810 Pounds Sterling 43,983 South African Rand 1,353 United States Dollars 151 Non-current liabilities Amounts payable in foreign currency which are not effectively hedged: Canadian Dollars 25,471 50,942 Hong Kong Dollars 21,230 14,392 Euros 594 New Zealand Dollars 2,637 Pounds Sterling 35,377 45,837 13,099 South African Rand 2,357 United States Dollars 163,228 31,587 The Australian dollar equivalents of foreign currency monetary items included in the Statement of Financial Position headings, to the extent that they are not effectively hedged, are set out above. These amounts include the payables and receivables of foreign subsidiaries that are not effectively hedged by other foreign currency denominated items. 94 COMPUTERSHARE Detailed Financial Report 2004

97 23. COMMITMENTS a) Superannuation commitments Defined Contribution Funds The company and its controlled entities maintain defined contribution superannuation schemes which provide benefits to all employees upon their disability, retirement or death. Employee contributions to the funds are based upon various percentages of employees gross salaries as set out below: Australian controlled entities contribute to defined contribution funds as follows:- Category 1 Management (employer contributions, voluntary employee contributions of at least 1%) Category 2 Staff (statutory employer contributions of 9%, voluntary employee contributions) Category 3 SGC Staff and casual and fixed term employees (statutory employer contributions, voluntary employee contributions) Foreign controlled entities contribute to the defined contribution funds as follows: United Kingdom entities between 5% and 10% of employees gross salaries United States entities voluntary employee contributions with matching employer contribution up to 4% of employees base salaries Canadian entities between 2% and 7% of employees base salaries dependent upon years of service South African entities 12.25% of employees gross salaries New Zealand entities voluntary employee contributions with matching employer contribution up to 6% of employees base salaries Hong Kong between 5% and 10% of employees base salary dependent upon years of service India 12% of employees gross salaries Defined Benefit Funds Computershare Hong Kong Investor Services Limited maintained a defined benefit superannuation scheme which provides benefits to 117 (1 January 2001: 137) employees. Actuarial assessments of the fund are made at no more than three yearly intervals. Information relating to the fund based on the latest actuarial assessment of the fund at 1 January 2004 and the financial report of the fund for the year ended 31 December 2003 is set out as follows: Consolidated $000 Computershare Hong Kong Investor Services Limited Staff Retirement Plan Actuarial valuation of plan assets at 1 January ,358 Actuarial valuation of aggregate past services liability at 1 January ,682 Net surplus 2,676 Actuarial valuation of vested liability at 1 January ,948 COMPUTERSHARE Annual Report

98 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE COMMITMENTS (cont d) Karvy Computershare Private Limited maintained a defined benefit superannuation scheme which provides benefits to 734 employees. Actuarial valuation of plan assets is provided by the Life Insurance Corporation, which maintains the fund. The fund managers are not required to provide separate information on actuarial valuation of vested liability in India. Karvy Computershare Private Limited Staff Retirement Plan Consolidated $000 Actuarial valuation of plan assets at 30 June Actuarial valuation of aggregate past services liability at 30 June 2004 (226) Net deficit (25) Actuarial valuation of vested liability at 30 June Consolidated Parent entity $000 $000 $000 $000 (b) Finance lease commitments Finance lease commitments are payable as follows: Not later than 1 year 5,328 1, Later than 1 year but not later than 5 years 5,904 2,216 Total commitments 11,232 3, Less: Future finance charges Not later than 1 year (432) (169) (19) Later than 1 year but not later than 5 years (198) (224) Total future finance charges (630) (393) (19) Net finance lease liability 10,602 3, Reconciled to: Current liability (note 15) 6,175 2, Non-current liability (note 15) 4, ,602 3, Finance leases are entered into as a means of funding the acquisition of minor items of plant and equipment. Rental payments are generally fixed. No leases have escalation clauses other than in the event of payment default. Some leases have purchase options. Where such options exist, they are exercisable at the residual price, which is expected to approximate market prices. No lease arrangements create restrictions on other financing transactions, however the extent of outstanding finance lease obligations is included in the determination of other loan covenants. (c) Operating lease commitments Operating lease rentals are payable as follows: Not later than 1 year 44,950 30,924 2,353 2,303 Later than 1 year but not later than 5 years 161,107 94,977 9,917 8,466 Later than 5 years 74,984 64, , , ,334 13,151 14,559 Operating leases are entered into as a means of acquiring access to office facilities. Rental payments are generally fixed, but with inflation and/or market escalation clauses on which contingent rentals are determined. Operating lease commitments in respect of the rental of various premises are subject to market review at various intervals. Certain leases include an option to renew. No operating leases contain restrictions on financing or other leasing activities. 96 COMPUTERSHARE Detailed Financial Report 2004

99 24. DETAILS OF CONTROLLED ENTITIES The financial years of all controlled entities is 30 June except for Computershare Canada Inc and its subsidiaries; Computershare Hong Kong Investor Services Limited and its subsidiary; Pepper Technology AG and its subsidiaries; Transcentive Inc. and Computershare GmbH is the same as that of the parent entity. Canadian entities, Hong Kong entities, Pepper Technology AG entities, Transcentive Inc. and Computershare GmbH currently have a 31 December year end. The consolidated financial statements as at 30 June 2004 include the following controlled entities: Percentage of shares held Name of controlled entity Place of incorporation 30/06/ /06/2003 % % Computershare Limited Australia (2) ACN Pty Ltd Australia (2) ACN Pty Ltd Australia (7) 100 ACN Pty Ltd Australia (7) 100 ACN Pty Ltd Australia (7) 100 CDS International Limited Australia (4) Computershare Document Services Limited Australia (4) Global edelivery Group Pty Ltd (previously known as ACN Pty Ltd and TPG) Australia (1) 100 ACN Pty Ltd Australia (2) Computershare Technology Services (Philippines) Inc (prev. Computershare Systems (Philippines) Inc Philippines (1) Karvy Computershare Private Limited India (1)(10) 50 Computershare Hong Kong Investor Services Limited Hong Kong (1) Hong Kong Registrars Limited Hong Kong (1) Computershare Finance Company Pty Ltd Australia (4) Computershare US General Partnership United States of America (1) 100 Georgeson Shareholder Communications Inc. United States of America (1) 100 Georgeson Shareholder Communications Canada Inc. Canada (1) 100 GSC Shareholder Services Inc. Canada (1) Georgeson Shareholder Communications Ltd (UK) United Kingdom (1) 100 Georgeson Shareholder Communications (France) SAS France (1) 100 Georgeson Shareholder Communications South Africa Pty Ltd South Africa (1) 60 GSC Registrars (Pty) Ltd South Africa (1) 60 GS Nominees (Pty) Ltd South Africa (1) 60 Georgeson Shareholder Securities Limited (UK) United Kingdom (1) 100 Shareholder Investments Research Ltd (UK) United Kingdom (1) 100 Shareholder Investments Research (#1) Ltd (UK) United Kingdom (1) 100 Shareholder Investments Research (#2) Ltd (UK) United Kingdom (1) 100 Georgeson International Inc. United States of America (1) 100 Georgeson and Company Inc. United States of America (1) 100 GSC Proxitalia S.p.A Italy (1)(10) 46 Proxitalia S.p.A Italy (1)(10) 46 GS Proxiberica Si Italy (1)(10) 46 Georgeson Shareholder Securities Corporation United States of America (1) 100 Georgeson Shareholder Communications Australia Pty Ltd Australia (1)(9) 100 Source One Communications Australia Pty Ltd Australia (1)(9) 100 Corporate Investors Communications Inc. United States of America (1) 100 COMPUTERSHARE Annual Report

100 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DETAILS OF CONTROLLED ENTITIES (cont d) Percentage of shares held Name of controlled entity Place of incorporation 30/06/ /06/2003 % % Source One Communications Inc. United States of America (1) 100 Source One Communications Asia Inc. (Philippines) Philippines (1) 57.5 Source One Communications Limited (UK) United Kingdom (1) 100 Alpine Fiduciary Services Inc. United States of America (1) 100 Georgeson Shareholder Asia Inc. (Philippines ROHQ) Philippines (1) 100 Computershare Inc United States of America (1) Computershare Technology Services Inc United States of America (1) Computershare Trust Company of New York Inc United States of America (1) Computershare Financial Services Inc United States of America (1) Computershare Investor Services LLC United States of America (1) Computershare Trust Company Inc United States of Americaa (1) Computershare Analytics (North America) Inc United States of America (1) Computershare Document Services Inc United States of America (1) Computershare Securities Corporation Inc United States of America (1) Transcentive Inc. United States of America (1) 100 Computershare Investments (UK) (No.2) Limited United Kingdom Computershare Canada Inc Canada (1) Computershare Trust Company of Canada Canada (1) Computershare Investor Services Inc Canada (1) Computershare Finance LLC United States of America (1) ACN Pty Ltd Australia (2)(6)(7) 100 Computershare Registry Services (PNG) Pty Ltd Papua New Guinea (1) Financial Markets Software Consultants Pty Ltd Australia (3) Computershare Analytics Pty Ltd Australia (4) Obadele Pty Ltd Australia (5) Computershare Clearing Pty Ltd Australia (2) Computershare Depositary Pty Ltd Australia (4) Computershare Technology Services Pty Ltd Australia (3) Registrars Holdings Pty Ltd Australia (2) Computershare Investor Services Pty Ltd Australia (2) CRS Custodian Pty Ltd Australia (3) Computershare Plan Managers Pty Ltd Australia (4) Computershare Plan Co Pty Ltd Australia (5) CIS Debt Securities Pty Ltd Australia (5) CPU Share Plans Pty Ltd Australia CIS (WA) Pty Ltd Australia (5)(6)(7) Global Register (Australia) Pty Ltd Australia (3)(6)(7) Sepon (Australia) Pty Ltd Australia (2) COMPUTERSHARE Detailed Financial Report 2004

101 Percentage of shares held Name of controlled entity Place of incorporation 30/06/ /06/2003 % % Computershare Limited United Kingdom (1) Computershare Investments (UK) Limited United Kingdom (1) Computershare GmbH (previously Deutsche Börse Germany (8) Computershare GmbH) Pepper Technologies AG Germany (8) Computershare Pepper SRM GmbH Germany (8) Shares and More Verwaltungs GmbH Germany (8) ibrain Technology Group AG Germany (8) Computershare Pepper SRM Ltd United Kingdom (8) Pepper Technologies PTE.Ltd Singapore (8) ComputersharePepper SRM Australia Pty Ltd Australia (8) ComputersharePepper SRM North America UnitedStates of America (8) Computershare Technology Services (UK) Ltd United Kingdom (1) Computershare Trustees Limited United Kingdom (1) Computershare Registry Services Limited United Kingdom (1) Citywatch Limited United Kingdom (1) Hlulumiti Limited United Kingdom (1) Computershare Analytics (UK) Limited United Kingdom (1) Computershare Analytics SARL France (1) Computershare Investor Services PLC United Kingdom (1) Shareholder Solutions Limited (prev. Exchange Registrars Limited) United Kingdom (1) Computershare Document Services Limited United Kingdom (1) Computershare Company Nominees Limited Scotland (1) Computershare PEP Nominees Limited Scotland (1) Computershare Services Nominees Limited Scotland (1) Computershare Investments (UK) (No.3) Limited United Kingdom (1) 100 Computershare South Africa (Pty) Ltd South Africa (1) Computershare Ltd South Africa (1) Computershare Nominees (Pty) Ltd South Africa (1) CTS Outsourcing Limited South Africa (1) Minu Investment Managers Ltd South Africa (1) Computershare Investor Services Limited South Africa (1) Computershare Management Services (Pty) Ltd South Africa (1) Computershare Plan Managers (Pty) Ltd South Africa (1) Computershare CSDP Nominees (Pty) Ltd South Africa (1) Computershare Custodial Nominees (Pty) Ltd South Africa (1) Computershare Shareholders Nominee (Pty) Ltd South Africa (1) Computershare Analytics (Pty) Ltd South Africa (1) Computershare Investor Services (Ireland) Ltd Ireland (1) Computershare Technology Services (Ireland) Ltd Ireland (1) Computershare Trustees (Ireland) Ltd Ireland (1) Computershare Systems (N.Z.) Ltd New Zealand (1) Computershare New Zealand Limited New Zealand (1) Computershare Investor Services Limited New Zealand (1) CIS (NZ) Limited New Zealand (7) 100 Computershare Services Ltd New Zealand (1) CRS Nominees Ltd New Zealand (1) Sharemart NZ Limited New Zealand (1) COMPUTERSHARE Annual Report

102 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DETAILS OF CONTROLLED ENTITIES (cont d) (1) Controlled entities audited by other PricewaterhouseCoopers member firms. The USA and Ireland entities above are only audited for Group purposes. (2) These wholly owned companies have entered into a deed of cross guarantee dated 20 July 1998 with Computershare Limited which provides that all parties to the deed will guarantee to each creditor payment in full of any debt of each company participating in the deed on winding-up of that company. As a result of a Class Order issued by the Australian Securities and Investments Commission, these companies are relieved from the requirement to prepare financial statements. (3) These companies became parties to the deed of cross guarantee noted in (2) above on 29 June (4) These companies became parties to the deed of cross guarantee noted in (2) above on 29 June (5) These companies became parties to the deed of cross guarantee noted in (2) above on 26 June (6) These companies ceased to be party to the deed of cross guarantee noted in (2) above on 29 April (7) These companies were deregistered during the year ended 30 June 2004 (8) These companies were associated entities as at 30 June (9) These companies became parties to the deed of cross guarantee noted in (2) on 29 June (10) These companies are controlled entities as Computershare Limited has the capacity to control the casting of a majority of the votes cast at a meeting of the board of directors, or the capacity to dominate decision making in relation to the financial and operating policies. Acquisition of controlled entities The following controlled entities were acquired by the consolidated entity at the date stated and their operating results have been included in the consolidated statement of financial performance since the respective dates of acquisition. a) On 2 December 2003, the consolidated entity acquired 100% of Georgeson Shareholder Communications Inc. for total consideration of $189,562,837. A liability for the estimated costs of the restructuring of $16,640,976, consisting mainly of cost of consolidation of operations, exits of lease obligations, redundancy payments and make good obligations, was recognised at the date of acquisition. Actual costs of $4,601,439 have been paid as at 30 June Details of the acquisition are as follows: $000 Fair value of identifiable net assets of controlled entity acquired Plant and equipment 13,733 Trade Debtors 30,357 Cash 4,491 Trade Creditors (36,753) Provision for restructuring (16,641) Other assets and liabilities 3,411 Interest bearing liabilities (10,870) (12,272) Less: Outside equity interests (208) (12,480) Goodwill on consolidation 202,043 Cash consideration 166,811 Other consideration 22, COMPUTERSHARE Detailed Financial Report 2004

103 b) On 18 February 2004, the consolidated entity acquired 100% of Transcentive Inc. for $45,982,618. A liability for the estimated costs of the restructuring of $268,040, consisting mainly of redundancy payments, was recognised at the date of acquisition. Actual costs of $104,956 have been paid as at 30 June Details of the acquisition are as follows: $000 Fair value of identifiable net assets of controlled entity acquired Cash 16,407 Trade Creditors (3,654) Provision for restructuring (268) Other assets and liabilities (3,016) 9,469 Goodwill on consolidation 36,514 Cash consideration 45,687 Other consideration 296 c) On 31 October 2003, the consolidated entity acquired a further 10% of Pepper Technology AG (previously held 26.65%) for $1,897,824, of which $660,629 was cash consideration. On 1 March 2004, the consolidated entity acquired the remaining 63.35% of Pepper Technology AG for $29,666,162 and now owns 100% of the issued share capital of Pepper Technology AG. Details of the acquisition are as follows: $000 Fair value of identifiable net assets of controlled entity acquired Plant and equipment 1,067 Trade Debtors 3,168 Cash 1,412 Trade Creditors (3,490) Interest bearing liabilities (1,118) 1,039 Goodwill on consolidation for 63.35% 28,627 Cash consideration for 63.35% 10,774 Total cash consideration paid during the year 11,435 Other consideration for 63.35% 18,892 d) During the year ended 30 June 2004, the consolidated entity acquired other entities for $14,762,904. Other entities acquired include Computershare GmbH, Karvy Computershare Private Limited and Global edelivery Group Pty Ltd. Details of the acquisition are as follows: $000 Fair value of identifiable net assets of controlled entity acquired Other assets 3,221 Cash 3,096 Trade Creditors (1,632) Other liabilities (763) 3,922 Goodwill on consolidation 10,841 Cash consideration 13,890 Other consideration 873 COMPUTERSHARE Annual Report

104 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DETAILS OF CONTROLLED ENTITIES (cont d) e) Outflow of cash to acquire the entities, net of cash acquired: GSC Transcentive Pepper Other 2004 $000 Cash consideration 166,811 45,687 11,435 13, ,823 Less cash balance acquired 4,491 16,407 2, , ,197 Outflow of cash 162,320 29,280 9,206 7, ,626 Note 1: cash balance acquired represents 100% of cash balance at the date of acquisition, as the entities became controlled entities from the date of acquisition. Prior to the date of acquisition, the entities were associated entities. Financial Information for Class Order Closed Group $000 $000 Computershare Limited Closed Group Statements of Financial Position as at 30 June 2004 Current Assets Cash assets 7,339 14,479 Receivables 52,365 40,326 Inventories Tax assets 2,099 Other 2,989 3,033 Total Current Assets 65,469 58,300 Non-current Assets Receivables 2, ,282 Other financial assets 767, ,081 Property, plant and equipment 17,443 17,271 Deferred tax assets 15,180 30,619 Intangibles goodwill 60,076 61,195 Other 61,191 2,393 Total Non-current Assets 923, ,841 Total Assets 989, ,141 Current Liabilities Payables 29,338 21,755 Interest bearing liabilities 706 1,244 Current tax liabilities 9,766 Provisions 6,535 1,140 Other deferred settlement of acquisition of entity 558 Total Current Liabilities 37,137 33,905 Non-current Liabilities Non Current Payables 287,314 Interest bearing liabilities 17, ,566 Deferred tax liabilities 783 6,190 Provisions 4,162 3,660 Total Non-Current Liabilities 309, ,416 Total Liabilities 346, ,321 Net Assets 642, , COMPUTERSHARE Detailed Financial Report 2004

105 $000 $000 Equity Contributed equity ordinary shares 339, ,881 Contributed equity reset preference shares 219, ,195 Preference shares held by subsidiary outside of the closed Group 104,596 Reserves 1, Retained profits 83,160 64,524 Total Equity 642, ,820 Computershare Limited Closed Group Statements of Financial Performance for the year ended 30 June 2004 Revenues Sales revenue 233, ,872 Other revenues from ordinary activities 88,024 65,204 Total Revenue 321, ,076 Expenses Direct services 140, ,428 Technology services 35,448 34,197 Corporate services 32,786 14,467 Borrowing costs 4,756 13,548 Net foreign exchange loss on hedges 38,677 17,224 Total Expenses 252, ,864 Profit from ordinary activities before income tax expense 69,447 51,212 Income tax (expense)/benefit relating to ordinary activities (2,439) (1,490) Net profit 67,008 49,722 Net profit attributable to outside equity interests Net profit attributable to members of the parent entity 67,008 49,722 Opening net assets of entities first included in the cross guarantee this period (refer to note 24, 9) (3,788) Total changes in equity other than those resulting from transactions with owners as owners 63,220 49,722 Set out below is a summary of movements in consolidated retained profits for the year of the Closed Group. Retained profits at the beginning of the financial year 64,524 36,472 Profit from ordinary activities after income tax expense/benefit 63,220 49,722 Dividends provided or paid (44,584) (21,670) Retained profits at the end of the financial year 83,160 64,524 COMPUTERSHARE Annual Report

106 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DIRECTORS AND EXECUTIVES DISCLOSURES Directors The following directors were directors during the whole of the financial year and up to the date of this report: Non-executive AS Murdoch (Chairman) TM Butler PD DeFeo WE Ford AN Wales Executive CJ Morris (Managing Director and Chief Executive Officer) PJ Maclagan (Managing Director Computershare Technology Services) PJ Griffin was a non-executive director from the beginning of the financial year until his resignation on 11 November M Kerber was appointed as a non-executive director on 18 August Executives (other than directors) with the greatest authority for strategic direction and management The following persons were the six executives with the greatest authority for the strategic direction and management of the Group ( specified executives ) during the financial year. Name Position Employer R Chapman Group Managing Director, EMEA Computershare Investor Services plc (UK) S Crosby Group Managing Director, Asia Pacific Computershare Investor Services Pty Ltd (Aust) P Conn Head of Global Services Computershare Inc (US) T Honan Chief Financial Officer Computershare Limited S Rothbloom President, North America Computershare Inc (US) P Tobin Chief Legal Officer and Company Secretary Computershare Limited All of the above persons were also specified executives for the year ended 30 June 2003 with the exception of R Chapman who was appointed as Group Managing Director, EMEA in June Previously this position was held by I Saville who was also a director in FY R. Waterhouse, Group Managing Director, Canada was also included as a specified executive in FY 2003 for the purposes of comparative information provided. Remuneration practices Principles used to determine the nature and amount of remuneration The objective of the company s executive reward framework is to ensure that reward for performance is competitive. The framework seeks to align executive reward with the achievement of strategic objectives and the creation of shareholder value. The executive pay and reward framework has a number of components including base pay, possible short term performance incentives, long term incentives and other remuneration such as superannuation. The combination of these comprises the executives total remuneration. Both short and long term incentives are discretionary and are subject to both the company and the individual meeting agreed requirements. Please refer to the Corporate Governance Statement for further details on Board performance assessment procedures. Non-executive directors Details of non-executive directors base remuneration are detailed in the table below. All non-executive directors are provided with statutory retirement benefits, details of which also appear in the remuneration table below. No incentives, either short or long term, are paid to non-executive directors, nor are any termination payments due to any non-executive directors that do not complete their term of service. The aggregate amount of non-executive directors fees is determined by the shareholders upon Board recommendation. A pool of $750,000 was last approved by the shareholders in November Non-executive directors are not eligible to participate in the Company s option or share plans. 104 COMPUTERSHARE Detailed Financial Report 2004

107 Executive directors Both executive directors are employed under open ended arrangements with Computershare. The CEO is appointed to the Board under the company s constitution, and the Managing Director of Computershare Technology Services is elected by shareholders under the same rotation basis that applies to non-executive directors. Details of base salary and superannuation arrangements are detailed in the table below. No additional payments are made in consideration for their activities as directors. Short term cash incentives may be paid in years in which the company s performance exceeds agreed performance hurdles. A cash bonus in respect of the year ended 30 June 2004 has been paid subsequent to the year end, details of which are in the table below. Neither executive is eligible for any termination payments should their employment or directorship cease for any reason. Executive pay All executives listed below are employed under open ended arrangements with Computershare. Details of base salary and retirement benefits are supplied in the table below. These and other key executives are also eligible to receive both short term cash incentives and long term share based incentives. Share based awards are designed to align executives financial interests with those of the shareholders and are also designed to assist in the retention of participants. Executives who receive share based awards need to have, at a minimum, completed specified periods of service before any share awards under the plan become unconditional. Awards are discretionary and are subject to approval of the Board based on recommendations from the remuneration committee. The exercise of discretion in relation to the share awards is based on the Company s performance and the attainment of specified objectives. A bonus was awarded in respect of the year ended 30 June All of the executives listed below received their bonus as shares. All of the executives below are eligible for payment of a benefit on early termination by the employer without cause, equal to 30 months salary at the time. Under the terms of his employment contract, T Honan is entitled to receive 40,000 shares on 27 May The estimated value of these shares, which will be reported in future periods, is $26,457, based on the share price at grant date and spread over the vesting period. Under the terms of his employment, R Chapman is entitled to receive 50,000 shares on 31 December The estimated value of these shares, which will be reported in future periods, is $31,410, based on the share price at grant date and spread over the vesting period. Based on the performance of the Company for the year ended 30 June 2004, all of the executives listed in the table below were granted additional shares on 1 September All of the executives are entitled to receive these shares after completion of a two year vesting period. The estimated value of these shares, which will be reported in future periods, is $942,998, based on the share price at grant date and spread over the vesting period. Computershare Employee Option Plan Information on the Computershare Option Plan is set out in note 21. Details of remuneration Details of the remuneration of each director of Computershare Limited and each of the six specified executives of the consolidated Group, including their personally-related entities, for the current financial year are set out in the following table Primary Post employment Equity Total Salary Cash Profit Non-monetary Superannuation Retirement Shares Options Shares and Fees Share and Benefits and Pension Benefits Issued as Bonuses Bonus $ $ $ $ $ $ $ $ $ Directors AS Murdoch 115,000 11, ,500 TM Butler 97,609 97,609 PD DeFeo 105, ,545 WE Ford 52,772 52,772 PJ Griffin* 41,667 5,833 47,500 PJ Maclagan 500, ,000** 50, ,207 CJ Morris 500, ,000** 50,019 1,300,207 AN Wales 75,000 7,500 82,500 TOTAL 1,487,969 1,031, ,871 2,643,840 * PJ Griffin resigned as a director on 11 November ** In place of taking the full amount of the bonus, Mr CJ Morris and Mrs PJ Maclagan asked the Company to send a donation totalling $343,750 to the Peter McCallum Institute for Cancer Research. COMPUTERSHARE Annual Report

108 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DIRECTORS AND EXECUTIVES DISCLOSURES (cont d) 2004 Primary Post employment Equity Total Salary Cash Profit Non-monetary Superannuation Retirement Shares Options Shares and Fees Share and Benefits and Pension Benefits Issued as Bonuses Bonus*** $ $ $ $ $ $ $ $ $ Executives R Chapman 439,239 1,152 30, ,269 74, ,984 S Crosby 400,187 2,474 11, ,480 55, , ,683 P Conn 422, ,724 16,000 51, ,331 T Honan 330,188 11, ,701 35, , ,254 S Rothbloom 562,905 12, ,841 80, ,190 1,028,085 P Tobin 408,954 3,955 11, ,461 19,770 97, ,405 TOTAL 2,563,651 7,581 75,902 1,011, , ,847 4,592,742 *** The above bonus shares were granted on 1 September Total remuneration of directors and specified executives for the consolidated Group for the year ended 30 June 2003 is set out below. Information for individual directors and executives is not shown as this is the first financial report prepared since the issue of AASB 1046 Director and Executive Disclosures by Disclosing Entities. In some cases, different individuals are considered to be specified executives in the year ended 30 June 2003 than those specified in the year ended 30 June 2004, as previously noted. 2003* Primary Post employment Equity Other Total Salary Cash Non- Superannuation Retirement Shares Options fees Profit monetary and Pension benefits Share and benefits Bonuses $ $ $ $ $ $ $ $ $ Total directors 1,179,419 77, ,088 1,360,098 Total executives 1,964, ,966 62, , ,328 2,867,997 *Group totals in respect of the financial year ended 2003 do not necessarily equal the sums of amounts disclosed for 2003 as different individuals have been disclosed in FY Share based compensation options Details of employee options granted which may affect remuneration in this or future reporting periods are disclosed in note 19. No directors or specified executives were granted options in the current financial year. Equally, no options vested during the current financial year. Option Holdings of Directors and Specified Executives Options provided as remuneration The assessed fair value at grant date of options granted to directors and specified executives is allocated equally over the period from grant date to vesting date, and the amount relating to the current financial year is included in the remuneration table above. Fair values at grant date are independently determined using a Black Scholes option pricing model that takes into account the exercise price, the current level and volatility of the underlying share price, the risk free interest rate, expected dividends on the underlying share, the market price at grant date of the underlying share, the expected life of the option and vesting period applicable to the options. 106 COMPUTERSHARE Detailed Financial Report 2004

109 Shares provided on exercise of remuneration options No directors hold options in the company. No specified executives were granted options during the current financial year. Details of ordinary shares in the company issued during the year as a result of the exercise of remuneration options to each of the specified executives are set out in the table below. No amounts are unpaid on any shares issued on the exercise of options. Number of ordinary shares issued on exercise of Name options during the year Amount paid per share P Conn 120,000 $1.37 Options holdings The number of options over ordinary shares held during the financial year by each of the specified executives of the Group is included in the table below. Total vested Toal Balance at Balance at and non vested and beginning of Granted as Options end of exercisable at exercisable at period remuneration exercised Forfeits period 30 June June 2004 R Chapman S Crosby 170,000 40, ,000 20,000 P Conn 170, ,000 50,000 20,000 T Honan 100, ,000 60,000 S Rothbloom 400, , ,000 P Tobin 160, , ,000 Share Holdings of Directors and Specified Executives Ordinary shares The number of ordinary shares in Computershare Limited held during the financial year by each director and specified executive, including details of ordinary shares provided as the result of the exercise of remuneration options, is included in the table below. Balance at On market Balance at beginning of Granted as On exercise purchases/ end of period remuneration of options sales Other period Specified Directors AS Murdoch 609, ,800 TM Butler PD De Feo 40,000 40,000 80,000 WE Ford PJ Griffin* 2,013,000 (399,000) 1,614,000 PJ Maclagan 16,567,525 60,000 16,627,525 CJ Morris 55,447, ,000 55,712,042 AN Wales 32,592,384 32,592,384 Specified Executives R Chapman 50,000 50,000 S Crosby 112,500 6, ,392 P Conn 44,000 90, ,000 (36,000) 218,000 T Honan 30,000 97,500 3, ,141 S Rothbloom 97,500 97,500 P Tobin 105,000 6, ,280 * PJ Griffin resigned as a director on 11 November Other includes employee and employer shares purchased under employee share plans. Please refer to note 21 for further details. COMPUTERSHARE Annual Report

110 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE DIRECTORS AND EXECUTIVES DISCLOSURES (cont d) Reset preference shares PJ Maclagan is the only director and specified executive to own reset preference shares. 1,330 reset preference shares have been held throughout the whole of the current financial year. Loans to directors and specified executives Computershare has not made any loans to directors and executives during the current financial year. Other transactions with directors and specified executives Details of other transactions with directors and specified executives are included in note REMUNERATION OF AUDITORS Remuneration received, or due and receivable, by the auditors of the parent entity and its affiliates for: Consolidated Parent entity $ $ $ $ Auditing or review of financial statements PricewaterhouseCoopers Australia 749, , , ,680 Related practices of PricewaterhouseCoopers 1,520,297 1,081,612 Other services (a) PricewaterhouseCoopers Australia 202,112 8, ,112 11,034 Related practices of PricewaterhouseCoopers 183, ,000 Remuneration received, or due and receivable, by auditors other than the auditor of the parent entity and its affiliates for: Auditing or review of financial statements Other services (a) This relates primarily to regulatory and compliance services and assurance services provided prior to the acquisition of the Georgeson Shareholder Communications Group. 27. RELATED PARTY DISCLOSURES (a) Directors The following directors held the position of director of Computershare Limited during all of the past two financial years, unless otherwise stated: TM Butler (Appointed 15 May 2003) PD DeFeo (Appointed 4 June 2002) WE Ford (Appointed 17 January 2003) PJ Griffin (Resigned 11 November 2003) PJ Maclagan CJ Morris AS Murdoch ID Saville (Appointed 1 May 2002, Resigned 15 May 2003) AN Wales Details of directors remuneration and superannuation payments are set out in note COMPUTERSHARE Detailed Financial Report 2004

111 (b) Directors shareholdings Shares issued by the parent entity Ordinary shares held at the end of the financial year 105,621, ,236,751 Reset preference shares held at the end of the financial year 1,330 1,330 Options held at the end of the financial year Ordinary dividends received during the year in respect of those ordinary shares* $5,554,399 $5,327,163 Reset preference dividends received during the year in respect of those reset preference shares $7,335 $7,315 Reset preference shares acquired by directors during the financial year 1,000 Ordinary Shares acquired by directors during the financial year 365,000 1,527,000 Ordinary Shares disposed of by directors during the financial year 103,000 * Dividends have been included for PJ Griffin until the date of his resignation. (c) Other transactions with directors or director-related entities $ $ CJ Morris is a director and major shareholder in Modara Grange Pty Ltd which entered into rental agreements with the company in the ordinary course of business on commercial terms and conditions. Rents received by Modara Grange Pty Ltd: 18,750 CJ Morris is a director and major shareholder in Fraser Island Pty Ltd which provided conference facilities to the company in the ordinary course of business on commercial terms and conditions. Fees received by Fraser Island Pty Ltd: 33,712 CJ Morris and PJ Maclagan are directors and major shareholders in Ellon Holdings Pty Limited which entered into rental agreements with the company in the ordinary course of business on commercial terms and conditions. Rents received by Ellon Holdings Pty Limited: 31,365 27,581 CJ Morris is a director and owner of the Portsea Hotel which provided conference facilities to the company in the ordinary course of business on commercial terms and conditions. Fees received by the Portsea Hotel: 52,567 (d) Wholly owned Group The parent entity and its controlled entities entered into the following transactions during the year within the wholly owned Group: Loans were advanced and repayments received on loans and intercompany accounts (refer notes 6 and 15) Sales were made between entities (refer note 33) Interest was charged between entities (refer note 2) The parent entity and its Australian controlled entities have entered into a tax sharing arrangement (refer note 3); and Dividends were paid between entities (refer note 2). These transactions were undertaken on commercial terms and conditions. As at 30 June 2004 Pepper Technologies AG, a wholly owned Group company, owed EURO 321,978 to related parties. No interest is payable on these loans. Pepper Technologies AG has also recorded a receivable as at 30 June 2004 of EURO 51,000 from a related party. Interest is charged on this loan at normal commercial rates. COMPUTERSHARE Annual Report

112 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE RELATED PARTY DISCLOSURES (cont d) (e) Associated entities Computershare Technology Services Pty Ltd has a receivable of $555,145 (2003: $484,560) from Chelmer Limited. This receivable has been fully provided for. The current year provision made is $70,585 (2003: $70,567). Computershare New Zealand Ltd has a receivable of $1,805,494 (2003: $1,727,118) from Chelmer Limited. This receivable has been fully provided for. The current year provision made is $78,376 (2003: $163,376). Computershare Technology Services Pty Ltd has made sales of $70,585 (2003: $70,567) to Chelmer Limited. Computershare Limited (incorporated in UK) had a receivable of $577,173 in FY 2003 from Computershare GmbH (formerly known as Deutsche Börse Computershare GmbH). On 31 December 2003 Computershare moved to 100% ownership of Computershare GmbH. Costs paid on behalf of Computershare GmbH for the 6 months to 31 December 2003 totalled $nil. Computershare Limited (incorporated in UK) had a receivable of $720,322 at 30 June 2003 from Computershare Pepper SRM Limited (a wholly owned subsidiary of Pepper Technologies AG). On 3 February 2004 Computershare signed a letter of intent to acquire the remaining shares in Pepper Technologies AG. On 1 March 2004 Computershare acquired the remaining shares in Pepper Technologies AG. Costs paid on behalf of the Pepper Group for the 8 months to 1 March 2004 totalled $nil. There have been no transactions between the Group and The National Registry Company. (f) Ultimate controlling entity The ultimate controlling entity of the consolidated entity is Computershare Limited. (g) Ownership interests in related parties Interests held in associates and joint ventures are disclosed in notes 34 and 35 of the financial statements 28. SIGNIFICANT EVENTS AFTER BALANCE DATE No matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidated financial statements 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, except that: (a) On 26 May 2004 Computershare announced its intention to buy back up to 27,500,000 ordinary shares commencing 10 June Between 1 July 2004 and 13 September 2004 the company bought back 9,707,476 ordinary shares at an average cost per share of $3.16. The shares bought back represent 1.78% of issued ordinary shares at the balance sheet date. Between 1 July 2004 and 13 September 2004 the company bought back 183,478 preference shares at an average cost per share of $ The shares bought back represent 15% of issued preference shares at the balance sheet date. On 13 September 2004, an additional 69,259 shares had been bought back, but not yet settled. (b) On 3 August 2004 Computershare announced the acquisition of New York based Alamo Direct Mail Services Inc, a company specialising in print, mail, tabulation and proxy solicitation services to the mutual fund industry in North America, for a consideration of US $15.5 million and contingent consideration of US $7 million that is subject to meeting specified revenue hurdles on an initial 3 year period. Computershare intends to combine the Alamo business with its existing Georgeson mutual fund business to create a powerful new product offering to the mutual fund industry. (c) M Kerber was appointed as a non-executive director on 18 August (d) On 19 August 2004 Computershare announced the decision of the directors to cause the reset preference shares to be converted to ordinary shares on 30 September As noted in the dividends section above, a reset preference share dividend of $ per share franked at 30% will be paid in respect of the period 1 June 2004 to 30 September 2004 on 30 September (e) On 3 September 2004, Computershare announced the acquisition of Flag Communications Limited, a UK based employee relationship management company. Flag specialises in employee communications for FTSE 100 and 150 companies. 110 COMPUTERSHARE Detailed Financial Report 2004

113 29. FINANCIAL INSTRUMENTS The consolidated entity uses derivative financial instruments to manage specifically identified interest rate and foreign currency risks. The consolidated entity is primarily exposed to the risk of adverse movements in the Australian dollar relative to certain foreign currencies, including the United States dollar, Canadian dollar and Great British pound, and to movements in interest rates. The purposes for which specific derivative instruments are used are as follows: The consolidated entity raises non-australian dollar denominated debt that is designated as a hedge of the net investment in self-sustaining foreign operations, in which case the exchange gain or loss is transferred to the foreign currency translation reserve. Forward exchange contracts and foreign currency options are also used by the consolidated entity in relation to foreign subsidiaries revenues. To the extent that the financial instrument does not satisfy the conditions for hedge accounting as set out in UIG 33, those gains or losses are recognised immediately in the statement of financial performance. The consolidated entity uses interest rate derivatives to manage the floating interest rate exposure that arises as a result of maintaining paying agent and escrow agent accounts on behalf of customers and to enhance returns on funds. The United Kingdom operations also use interest rate swaps to manage the interest rate exposure on certain Save As You Earn (SAYE) schemes as described below. (a) Administration of SAYE Schemes Computershare Investor Services PLC, a controlled entity of Computershare Limited, administers approximately 300 SAYE schemes on behalf of various listed UK entities. Under such schemes, employees make regular monthly contributions which attract government set interest or bonus credits. The total contribution plus interest is then used by the employees to purchase shares in the sponsoring listed entity. Employees monthly contributions are held by a licensed deposit taker who enters into SAYE contracts with the employees and, as such, is responsible to repay the principal contribution plus the legislated bonus on maturity of the scheme. Computershare Investor Services PLC has been appointed as administrator by the licensed deposit taker and is responsible for scheme management. As agent, Computershare Investor Services PLC indemnifies the licensed deposit taker should the return on funds deposited with them not meet the bonus payment required by law. These arrangements create interest rate risk due to the fixed rates payable on employee monthly contributions and the floating interest rate received on balances held by the licensed deposit taker. The Group employs interest rate risk management techniques, including the use of interest rate swaps and options to manage the interest rate exposure. In some instances the bonus payable to SAYE participants is embedded within the hedge instruments used. The fair value of SAYE hedge instruments at 30 June 2004 amounted to $7.0 million (2003: $48.7 million), of which a portion is payable to participants. In addition extensive modelling is undertaken to determine the net present value of the forecast cash outflows to employees with adjustments to reflect forecast attrition rates. (b) Paying Agent Funds Administration In addition to the above SAYE scheme administration bank accounts, Computershare maintains certain paying agent and escrow agent accounts on behalf of customers. Computershare earns service fee income for administering funds as part of the service. Total funds, which at year end approximated $3.4 billion (2003: $3.2 billion), are deposited in agency bank accounts at call. Given the nature of the accounts, neither the funds nor an offsetting liability are included in the Group s financial statements. As at year end, overseas controlled entities, which are licensed deposit takers, have accepted broker client deposits in their own names which at year end approximated $50.7 million (2003: $36 million), and recorded these funds as other financial assets together with a corresponding liability. The deposits are insured through a local regulatory authority. COMPUTERSHARE Annual Report

114 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE FINANCIAL INSTRUMENTS (cont d) (c) Interest rate risk exposures The consolidated entity is exposed to interest rate risk through its primary financial assets and liabilities, modified through derivative financial instruments such as interest rate swaps and options. The following table summarises the interest rate risk for the consolidated entity, together with effective interest rates as at the balance date. As at 30 June 2004 Fixed interest rate maturing in Average interest rate Financial assets Floating 1 year Over 1 to 5 Non- Total Floating Fixed interest rate or less years interest (a) bearing $000 $000 $000 $000 $000 % % Cash 90,495 90, Broker client deposits 50,745 50, Trade debtors 133, ,493 Non trade debtors and loans 8,854 8, , , ,587 Financial liabilities Broker client deposits 50,745 50, Trade creditors 19,628 19,628 Finance lease liabilities 6,175 4,427 10, Other loans 1,172 1,172 Bank loan 1, , Revolving multi-currency facilities 299, , ,238 7,627 4,956 20, ,621 As at 30 June 2003 Fixed interest rate maturing in Average interest rate Floating 1 year Over 1 to 5 Non- Total Floating Fixed interest rate or less years interest (a) bearing $000 $000 $000 $000 $000 % % Financial assets Cash 60,828 60, Broker client deposits 35,987 35, Trade debtors 95,126 95,126 Non trade debtors and loans 2,676 2,676 96,815 97, ,617 Financial liabilities Broker client deposits 35,987 35, Trade creditors 5,711 5,711 Finance lease liabilities 2, , Other loans 1,000 1,000 Bank loan 2,747 2,357 5, Revolving multi-currency facilities 129, , ,780 5,564 3,130 6, , COMPUTERSHARE Detailed Financial Report 2004

115 The interest rate exposures set out in the above table do not include the exposure relating to SAYE scheme account balances and paying agent balances. At year end there are approximately GBP 315 million (2003: GBP 273 million) of employee SAYE schemes account balances earning fixed rates as described in note 29(a). Interest rate derivatives of GBP 240 million (2003: GBP 218 million) are in place to hedge the floating rate receivables against the fixed rate payable amounts forecast. The effect of the interest rate derivatives is to convert the income margin on administered funds to a fixed rate to hedge the cost of fixed rates credited to employee account balances. The margin between the fixed rates paid to SAYE participants and fixed rates received via the interest rate derivatives is approximately 0.8%. The average floating interest rate at balance date is 4.50% (2003: 3.75%). The maturity profile of these derivatives is generally between one to five years. In relation to paying agent balances (refer note 29b), Computershare has in place interest rate derivatives totalling $451 million (2003: $536 million). (d) Credit risk exposures Credit exposure represents the extent of credit related losses that the consolidated entity may be subject to on amounts to be received from financial assets. The consolidated entity, while exposed to credit related losses in the event of non-performance by counterparties, does not expect any counterparties to fail to meet their obligations given their high credit ratings. The consolidated entity s exposure to on Statement of Financial Position credit risk is as indicated by the carrying amounts of its financial assets. Concentrations of credit risk (whether or not recognised in the Statement of Financial Position) exist for Groups of counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The consolidated entity does not have a significant exposure to any individual counterparty. The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of debtors in various countries and industries. The software sales and development segment transacts primarily with the broking and financial markets industry. The registry and bureau sector transacts with various listed companies across a number of countries. The major geographic concentrations of credit risk arise from the location of the counterparties to the consolidated entity s financial assets as shown in the following table: Location of credit risk Consolidated $000 $000 Australia 40,034 25,679 Canada 19,542 19,530 Germany 2,710 Hong Kong 6,595 5,433 India 2,855 Ireland 1,809 3,738 Italy 2,420 New Zealand 1,673 1,257 Philippines South Africa 7,240 6,100 United Kingdom 16,808 22,055 United States of America 36,826 11,854 Other European 1,571 1,772 Other 2, ,347 97,802 COMPUTERSHARE Annual Report

116 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE FINANCIAL INSTRUMENTS (cont d) The following table summarises the consolidated entity s credit exposure on derivative financial instruments with a positive net fair value and has been reduced by unfavourable contracts with the same counterparty pursuant to master netting agreements, which will not be settled before the favourable contracts. These swaps relate to the Group s administration of numerous SAYE schemes and interest rate exposures arising from agency activities on behalf of customers. Consolidated $000 $000 Derivatives: Interest rate derivatives SAYE schemes 10,274 48,703 Foreign exchange derivatives 1,970 Interest rate derivatives other 4,749 15,674 15,023 66,347 (e) Net fair value of financial assets and liabilities The carrying amounts of trade debtors, trade creditors, finance leases and loans approximate their fair values. Consolidated Carrying Net Fair Carrying Net Fair Amount Value Amount Value $000 $000 $000 $000 Derivatives: Foreign exchange options (1,432) (115) 1,602 Foreign exchange contracts (49) 368 Interest rate derivatives 574 7, ,893 (f) Foreign Exchange The following table summarises by currency the Australian dollar value of forward foreign exchange agreements. Foreign currency amounts are translated at rates current at the reporting date. The buy amounts represent the Australian dollar equivalent of commitments to purchase foreign currencies, and the sell amount represents the Australian dollar equivalent of commitments to sell foreign currencies. Contracts to buy and sell foreign currency are entered into from time to time to hedge the net investment in, and revenues, from foreign operations Average Exchange Buy Sell Buy Sell Rate Currency $000 $000 $000 $000 United States dollars: 3 months or less ,175 Over 3 months to 12 months Canadian dollars: 3 months or less ,227 2,917 Over 3 months to 12 months ,579 British pounds: 3 months or less ,006 1,241 1,494 Over 3 months to 12 months New Zealand dollars: 3 months or less ,086 Over 3 months to 12 months ,471 Total 2,889 11,135 2,730 15, COMPUTERSHARE Detailed Financial Report 2004

117 30. NOTES TO THE STATEMENTS OF CASH FLOWS (a) Reconciliation of cash For the purposes of the Statements of Cash Flows, cash includes cash on hand and at bank and short-term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Statements of Financial Positions as follows: Consolidated Parent entity $000 $000 $000 $000 Cash at bank and on hand 84,601 48, ,602 Short-term deposits 5,894 12,064 2,006 Shown as cash on statement of financial position 90,495 60, ,608 (b) Reconciliation of net profit after income tax to net cash provided by operating activities Net profit after income tax 83,646 17,133 30,188 45,460 Adjustments for non-cash income and expense items: Depreciation and Amortisation 61,335 58,419 1,254 1,206 (Profit)/loss on sale of non-current assets (9,922) Share of net profit/(loss) of associates accounted for using equity method 140 2,036 Other (713) (590) (1,966) (14,662) Changes in assets and liabilities (Increase)/decrease in accounts receivable (6,294) 9,361 (291) 393 (Increase)/decrease in net tax assets 24,000 (9,213) (3,385) (5,394) (Increase)/decrease in inventory (3,093) (748) (Increase)/decrease in prepayments and other assets (4,567) (3,607) (Increase)/decrease in intercompany balances (64,391) (Increase)/decrease in payables 25,046 (8,462) (3,128) 807 Increase/(decrease) in income tax liabilities (9,241) (1,743) (106) 10,013 Increase/(decrease) in provisions (17,359) 15,343 5, Increase/(decrease) in other liabilities (1,482) Increase/(decrease) in reserves (5,372) (2,161) Net cash provided by operating activities 136,124 76,179 (35,058) 38,267 (c) Non-Cash transactions On 2 December 2003, Computershare Limited issued shares as part of the consideration for the acquisition of Georgeson Shareholder Communications Inc. On 18 February 2004, Computershare Limited issued shares as part of the consideration for the acquisition of Transcentive Inc. On 1 March 2004, Computershare Limited issued shares as part of the consideration for the acquisition of Pepper Technology AG. On 4 June 2004, Computershare Limited issued shares as part of the consideration for the acquisition of Global edelivery Group Pty Ltd. Please refer to note 19 for further details of shares issued. COMPUTERSHARE Annual Report

118 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE NOTES TO THE STATEMENTS OF CASH FLOWS (cont d) (d) Acquisition of businesses Consideration Business acquired Date purchased $000 $000 Charles Schwab Employee Plans 12 December ,690 EFA Market Technologies 7 February ,404 Fifth Third Bancorp 30 June ,241 Total 12,335 The amounts of assets and liabilities acquired by major class are: $000 $000 Property, plant and equipment 7,404 Intangible assets including goodwill on acquisition 7,500 Payables (476) Provisions Consideration paid and payable 14,428 Less: consideration paid in prior periods/payable in future periods (2,569) Other acquisition costs 476 Outflow of cash 12, CONTINGENT LIABILITIES Contingent liabilities at balance date, not otherwise provided for in these financial statements are categorised as follows: (a) Guarantees and Indemnities Guarantees and indemnities of $360,000,000 (30 June 2003: $240,000,000) have been given to the consolidated entity s Australian Bankers by Computershare Limited, Computershare Technology Services Pty Limited, CDS International Limited, Computershare Document Services Limited, Computershare Investor Services Pty Limited, Computershare New Zealand Limited, Computershare Investor Services Ltd (incorporated in NZ), Computershare Limited (incorporated in the UK), Computershare Investor Services PLC, Computershare Inc, Computershare Investor Services LLC, Computershare Technology Services (UK) Ltd, Computershare Analytics (UK) Limited, Computershare Financial Services Inc, ACN Pty Ltd, Computershare Investor Services Inc, Computershare Canada Inc, Computershare Finance LLC, Computershare Investments (UK) (No.2) Ltd, Computershare Investments (UK) (No.3) Ltd, Georgeson Shareholder Communications Inc, Transcentive Inc, Computershare Finance Company Pty Ltd, and Computershare US General Partnership as security for Computershare Finance Company Pty Ltd s facilities (please refer to note 15 for further detail). Bank guarantees of $520,000 (2003: $270,000) have been given in respect of facilities provided to Computershare Clearing Pty Ltd. A bank guarantee of $500,000 (2003: $250,000) has been given in respect of facilities provided to Sepon Australia Pty Ltd. A bank guarantee of $199,500 (2003: $150,000) has been given in respect of facilities provided to Computershare Investor Services Pty Ltd. A bank guarantee of $88,350 (2003: $nil) has been given in respect of facilities provided to Computershare Document Services Pty Ltd. A bank guarantee of $nil (2003: $256,786) has been given by Computershare Technology Services Pty Ltd in relation to certain customer contracts. Bank guarantees totalling CAD $1,800,000 (2003: CAD $2,006,465) have been given by Computershare Trust Company of Canada and Computershare Investor Services Inc in respect of standby letters of credit for the payment of payroll. Guarantees of US $2,000,000 (30 June 2003: US $3,001,200) have been given by Computershare Investor Services LLC as security for payroll administration services in USA. 116 COMPUTERSHARE Detailed Financial Report 2004

119 Guarantees of US $3,290,001 and AU $497,713 (30 June 2003: $4,944,341) have been given by Computershare Limited as security for bonds in respect of leased premises. A bank guarantee of HK $398,197 (2003: $nil) has been given by Computershare Hong Kong Investor Services Limited as security for bonds in respect of leased premises. A bank guarantee of Rand 850,000 (2003: Rand 850,000) has been given by Computershare South Africa (Pty) Ltd as security for bonds in respect of leased premises. (b) Legal Matters Due to the nature of operations, certain commercial claims in the normal course of business have been made against Computershare in various countries. The directors, based on legal advice, are contesting all of these matters. The majority of these claims are covered by insurance. It is considered unlikely that any material liability to the Group will eventuate. (c) Other As noted in this financial report the Group is subject to regulatory capital requirements administered by certain US and Canadian banking commissions and by the Financial Services Authority in the UK. These requirements pertain to the trust company charter granted by the commissions and the Financial Services Authority. Failure to meet minimum capital requirements, or other ongoing regulatory requirements, can initiate action by the regulators that, if undertaken, could revoke or suspend the Group s ability to provide trust services to customers in these markets. At all relevant times the Computershare subsidiaries have met all minimum capital requirements. In addition to the capital requirements, a trust company must deposit eligible securities with a custodian. The Group has deposited a certificate of deposit with the Group s custodian in the UK in order to satisfy this requirement. Computershare Limited (Australia) has issued a letter of warrant to Computershare Custodial Services Ltd. This obligates Computershare Limited (Australia) to maintain combined tier one capital of at least Rand 500,000,000. Potential withholding and other tax liabilities arising from distribution of all retained distributable earnings of all foreign incorporated subsidiaries is $3,616,807 (30 June 2003: $7,115,160). No provision is made for withholding tax on unremitted earnings of applicable foreign incorporated controlled entities as there is currently no intention to remit these earnings to the parent entity. In consideration of the Australian Securities and Investments Commission agreeing to allow $5,000,000 to form part of the net tangible assets of Computershare Clearing Pty Ltd so that it can meet certain financial requirements under the conditions of its Australian Financial Services Licence, Computershare Limited has agreed to make, at the request of Computershare Clearing Pty Ltd, a $5,000,000 loan to it. Computershare Limited has agreed to subordinate its loan to any other unsecured creditors of Computershare Clearing Pty Ltd. The loan was made pursuant to a deed of subordination dated 7 January Computershare Limited (Australia), as the parent company, has undertaken to own, either directly or indirectly, all of the equity interests and guarantee performance of the obligations of Computershare Investor Services LLC, Computershare Trust Company Inc, Georgeson Shareholder Communications Inc, Computershare Trust Company of Canada and Computershare Investor Services Inc with respect to any financial accommodation related to transactional services provided by Harris Trust and Savings Bank, Chicago. 32. CAPITAL EXPENDITURE COMMITMENTS Consolidated Parent entity $000 $000 $000 $000 Less than 1 year: Fitout of premises Purchase of equipment 1,281 1, Other 79 1,682 1, Computershare Technology Services Pty Limited is committed to pay $2,527,768 in relation to a global licensing agreement within the next year. This is considered to be non capital in nature. COMPUTERSHARE Annual Report

120 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE SEGMENT INFORMATION The consolidated entity operates predominantly in six business segments: Investor services, Plan services, Document services, Analytics and Shareholder Relationship Management services, Corporate services and Technology services. The Investor services operations comprise provision of registry and related services. Analytics and Shareholder Relationship Management services comprise the provision of investor analysis, investor communication and management information services to companies, their employees, shareholders and other securities industry participants. The Plan services operations comprise the provision and management of employee share plans. Document services operations comprise laser imaging, intelligent mailing, scanning and electronic delivery. The Asia geographic segment includes Hong Kong, the Philippines and India. The North America geographic segment includes the United States and Canada. Intersegment charges are at normal commercial rates PRIMARY BASIS Business Segments 2004 Analytics and Shareholder Major business Relationship Management Corporate Document Investor Plan Technology Unallocated/ Consolidated segments Services Services Services Services Services Services Eliminations Total $000 $000 $000 $000 $000 $000 $000 $000 Revenue External revenue 23,877 73,879 51, ,428 99,995 15,961 16, ,433 Inter-segment revenue 1,729 70,491 75,703 11,040 2,510 98,091 (259,564) Total segment revenue 25, , , , , ,052 (243,305) 946,433 Segment Result Profit/(loss) from ordinary activities before income tax (550) 2,555 21,328 76,758 6,995 (957) 4, ,657 Income tax expense (27,011) Profit from ordinary activities after income tax 83,646 Depreciation 267 2,160 3,009 8, ,937 26,660 Amortisation goodwill 1, ,488 2,510 33,494 Other non-cash expenses , ,324 Liabilities Total segment liabilities 8, ,685 9, ,144 63,316 8,985 7, ,218 Assets Total segment assets 62,158 1,102,297 96, , ,710 40,762 (1,122,049) 1,187,085 Carrying value of investments in associates included in segment assets 4,330 4,330 Segment assets acquired during the reporting period: Property, plant and equipment 2,177 3,549 3,326 16,310 1,167 10,515 1,262 38,306 Other Non Current Segment Assets 34,888 3, ,688 42, ,934 Total 37,065 3,549 6, ,998 43,463 10,515 1, , COMPUTERSHARE Detailed Financial Report 2004

121 2003 Analytics and Shareholder Major business Relationship Management Corporate Document Investor Plan Technology Unallocated/ Consolidated segments Services Services Services Services Services Services Eliminations Total $000 $000 $000 $000 $000 $000 $000 $000 Revenue External revenue 14,412 7,179 39, ,618 80,239 19,623 3, ,597 Inter-segment revenue 55 64,905 59,547 8,736 2,947 98,639 (234,829) Total segment revenue 14,467 72,084 98, ,354 83, ,262 (231,563) 708,597 Segment Result Profit/(loss) from ordinary activities before income tax (2,776) (18,270) 8,761 32,750 (1,236) 1,923 8,310 29,462 Income tax expense (12,329) Profit from ordinary activities after income tax 17,133 Depreciation 26 2,494 2,868 6, ,416 (5,193) 24,894 Amortisation goodwill ,195 2,825 1,482 31,263 Other non-cash expenses 10 (1,566) 1,261 2, ,262 Liabilities Total segment liabilities 2, ,284 9, ,255 2,323 10,448 11, ,999 Assets Total segment assets 20, ,385 48, ,556 55,827 46,516 (870,764) 894,406 Carrying value of investments in associates including segment assets 15,845 15,845 Segment assets acquired during the reporting period: Property, plant and equipment 55 1,662 1,412 6, ,084 17,933 Other Non Current Segment Assets Total 55 1,662 1,412 6, ,190 18,110 The segment Analytics and Shareholder Relationship Management Services was previously named Analytics Services. The change has been made to accommodate the results of the Pepper Technology AG Group which the Computershare Group moved to full ownership of on 1 March The results of the Pepper Group of companies until 1 March 2004 are included in the Associates note 34. Since that date the contribution of the Pepper Group to this segment is revenue of AUD$7,732,000 and a profit from ordinary activities before income tax of AUD$669,000. COMPUTERSHARE Annual Report

122 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE SEGMENT INFORMATION (cont d) SECONDARY BASIS Geographic Segments 2004 Australia and South North Unallocated/ Consolidated Major geographic segments Asia New Zealand Africa Europe America Eliminations Total $000 $000 $000 $000 $000 $000 $000 Revenue External revenue 45, ,972 37, , ,457 2, ,433 Segment Result Profit/(loss) from ordinary activities before income tax 9,973 46,146 2,320 21,723 26,625 3, ,657 Income tax expense (27,011) Profit from ordinary activities after income tax 83,646 Assets Total segment assets 95, ,769 45, ,266 1,194,063 (1,116,383) 1,187,085 Segment assets acquired during the reporting period: Property, plant and equipment 1,269 8, ,770 19,635 38,306 Other Non Current Segment Assets 10,707 3, , , ,934 Total 11,976 12, , , , Australia and South North Unallocated/ Consolidated Major geographic segments Asia New Zealand Africa Europe America Eliminations Total $000 $000 $000 $000 $000 $000 $000 Revenue External revenue 27, ,197 33, , ,842 3, ,597 Segment Result Profit/(loss) from ordinary activities before income tax 5,591 14,466 (6,584) 13,692 (6,013) 8,310 29,462 Income tax expense (12,329) Profit from ordinary activities after income tax 17,133 Assets Total segment assets 81, ,117 30, , ,993 (870,764) 894,406 Segment assets acquired during the reporting period: Property, plant and equipment 244 3,304 3,765 4,662 5,958 17,933 Other Non Current Segment Asset Total 244 3,304 3,765 4,662 6,135 18,110 Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1 and revised segment reporting accounting standard, AASB 1005 Segment Reporting. 120 COMPUTERSHARE Detailed Financial Report 2004

123 Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, inventories, property, plant and equipment and goodwill and other intangible assets, net of related provisions. Corporate segment assets also include financial assets. Segment liabilities consist primarily of trade and other creditors, employee entitlements and other provisions. Corporate segment liabilities also include borrowings. Segment assets and liabilities do not include income taxes. 34. ASSOCIATED ENTITIES Details of interests in associated entities are as follows: Principal Place of Ownership Balance Consolidated Name Activities Incorporation Interest Date Carrying amount Equity accounted Chelmer Limited Computer New Zealand 50% 50% 30 June Technology Services Computershare GmbH* Investor Germany 100% 49% 31 December 8,014 Services Pepper Technologies Shareholder United 100% 26.65% 31 December 6,376 AG ** Relationship Kingdom Management Services The National Registry Investor Services Russia 45% % 31 December 4,330 1,455 Company *** Total investments in associated entities 4,330 15,845 * Formerly known as Deutsche Börse Computershare GmbH. On 31 December 2003, the Computershare Group acquired the remaining 51% of Deutsche Börse Computershare GmbH. From that date onward, the results and balance sheet of that entity have been consolidated by the Computershare Group. Included in note 35 is the Computershare Group s share of the profit or loss of that entity up to 31 December ** On 1 March 2004, the Computershare Group acquired the remaining 73.35% of Pepper Technology AG. From that date onward, the results and balance sheet of that entity have been consolidated by the Computershare Group. Included below is the Computershare Group s share of the profit or loss of that entity up to 29 February *** On 24 June 2004, the Computershare Group acquired another % of The National Registry Company bringing the Group s holding in the Company to 45% $000 $000 Share of associates results Profit/(loss) before income tax 586 (479) Income tax (287) Profit/(loss) after tax 299 (479) Amortisation of goodwill (439) (1,557) Share of net result of associates (140) (2,036) Less dividends received (192) Retained profits at the beginning of the financial year (2,036) Effect of associates becoming subsidiary undertakings 3,809 Retained profits at the end of the financial year 1,441 (2,036) COMPUTERSHARE Annual Report

124 Notes to the Financial Statements (cont d) FOR THE YEAR ENDED 30 JUNE ASSOCIATED ENTITIES (cont d) $000 $000 Share of associates reserves Foreign currency translation reserve Balance at the beginning of the financial year 278 Share of translation of overseas associates Effect of associates becoming subsidiary undertakings (278) Balance at the end of the financial year Movements in carrying value of investments in associates Carrying amount at the beginning of the financial year 15,845 Investments acquired during the year 1,159 17,603 Share of net result from ordinary activities after income tax 299 (479) Less dividends received (192) Amortisation of goodwill (439) (1,557) Share of movement in reserves during the financial year Effect of investments ceasing to be classified as associates during the financial year (12,617) Carrying amount at the end of the financial year 4,330 15,845 Share of associates capital expenditure commitments Lease commitments Share of associates contingent liabilities There are no material contingent liabilities in respect of associates at balance date. 35. JOINT VENTURES Consolidated Joint Venture entity $000 $000 Retained profits attributable to the joint venture At the beginning of the financial year (345) At the end of the financial year (345) Foreign currency translation reserve attributable to the joint venture At the beginning of the financial year 139 At the end of the financial year 139 Movement in carrying amount of investment in joint venture Carrying amount at the beginning of the financial year 8,014 Investments acquired during the year 9,525 Share of net result from ordinary activities after income tax (723) (345) Amortisation of goodwill (883) (1,305) Share of movement in reserves during the financial year 139 Effect of investment ceasing to be a joint venture during the financial year (6,408) Carrying amount at the end of the financial year 8, COMPUTERSHARE Detailed Financial Report 2004

125 Consolidated Joint Venture entity $000 $000 Share of joint venture assets and liabilities Current assets 4,252 Non-current assets 5 Total assets 4,257 Current liabilities 438 Non-current liabilities 2 Total liabilities 440 Net assets 3,817 Share of joint venture revenues, expenses and results Revenues 2,876 1,278 Expenses (3,600) (1,623) Profit/(loss) from ordinary activities before related income tax (723) (345) Share of joint venture capital expenditure commitments There are no material capital expenditure commitments in respect of joint ventures at balance date. Share of joint venture contingent liabilities There are no material contingent liabilities in respect of joint ventures at balance date. 36. INTERESTS IN EQUITY Members of the Outside Equity Interests Parent entity $000 $000 $000 $000 Interest in the equity of the consolidated entity: Contributed equity ordinary shares 338, ,881 5,657 6,245 Contributed equity reset preference shares 114, ,195 Reserves (27,799) (17,907) 212 (2,164) Retained profits 170, ,366 2,628 1,791 Total interest in equity 596, ,535 8,497 5,872 COMPUTERSHARE Annual Report

126 Directors Declaration The directors of Computershare Limited declare that the financial statements and notes set out on pages 63 to 123. (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (b) give a true and fair view of the company s and consolidated entity s financial position as at 30 June 2004 and of their performance, as represented by the results of their operations and their cashflows, for the financial year ended on that date. In the directors opinion: (i) the financial statements and notes are in accordance with the Corporations Act 2001; and (ii) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (iii) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group, identified in note 24, will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the deed of cross guarantee described in note 24. This declaration is made in accordance with a resolution of the directors. AS Murdoch Chairman 14 September COMPUTERSHARE Detailed Financial Report 2004

127 Statement of the CEO and CFO Computershare Limited We, the undersigned, state that: a) With regard to the integrity of the year end financial report Computershare Limited and its controlled entities (the Group) for the year ended 30 June 2004: (i) The financial statements and associated notes comply in all material respects with applicable accounting standards, local corporations law requirements and Computershare Group Accounting Policies and Computershare Group year end reporting requirements; and (ii) The financial statements and associated notes give a true and fair view, in all material respects, of the financial position as at 30 June 2004 and performance of the Group for the year then ended; and (iii) In our opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. b) With regard to the financial records and systems of risk management and internal compliance and control of the Group for the year ended 30 June 2004: (i) The financial records of the Group have been properly maintained such that the records correctly record and explain its transactions and financial position and performance and would enable true and fair financial statements to be prepared and audited; and (ii) The statements made in (a) above regarding the integrity of the financial statements are founded on a sound system of risk management and internal compliance and control which, in all material respects, implement the policies adopted by the Board of Directors of Computershare Limited; (iii) The risk management and internal compliance and control systems of the Group relating to financial reporting, compliance and operations objectives are, in all material respects, operating efficiently and effectively; and (iv) Subsequent to 30 June 2004, no changes or other matters have arisen that would have a material effect on the operation of risk management and internal compliance and control systems of the Group. CJ Morris Chief Executive Officer TF Honan Chief Financial Officer 14 September 2004 COMPUTERSHARE Annual Report

128 Independent Audit Report to the Members of Computershare Limited AUDIT OPINION In our opinion, the financial report of Computershare Limited: gives a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of Computershare Limited and the Computershare Limited Group (defined below) as at 30 June 2004, and of their performance for the year ended on that date, and is presented in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, and the Corporations Regulations This opinion must be read in conjunction with the rest of our audit report. PricewaterhouseCoopers ABN Collins Street MELBOURNE VIC 3000 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Melbourne Australia Telephone Facsimile SCOPE The financial report and directors responsibility The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors declaration for both Computershare Limited (the company) and the Computershare Limited Group (the consolidated entity), for the year ended 30 June The consolidated entity comprises both the company and the entities it controlled during that year. The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. AUDIT APPROACH We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company s and the consolidated entity s financial position, and of their performance as represented by the results of their operations and cash flows. 126 COMPUTERSHARE Detailed Financial Report 2004

129 We formed our audit opinion on the basis of these procedures, which included: examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors. When this audit report is included in an Annual Report, our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. While we considered the effectiveness of management s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. INDEPENDENCE In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act PricewaterhouseCoopers Russell Sutton Partner Melbourne PricewaterhouseCoopers 14 September 2004 COMPUTERSHARE Annual Report

130 Shareholder Information This section contains additional information required by the Australian Stock Exchange Limited listing rules not disclosed elsewhere in this report. SHAREHOLDINGS Substantial Shareholders The following information is extracted from the Company s Register of Substantial Shareholders. Number of Name Date of notice to Company ordinary shares Christopher John Morris 10 May ,712,042 General Atlantic Partners 12 March ,000,705 Schroder Investment Management 4 August ,481,597 Anthony Norman Wales 14 September ,592,384 Class of shares and voting rights At 27 August 2004 there were 25,167 holders of ordinary shares in the Company. The voting rights attaching to the ordinary shares, set out in clause 50 of the Company s Constitution, are: (a) every member may vote (b) on a show of hands every member has one vote, and (c) on a poll every member has: (i) for each fully paid share held by the member, one vote; and (ii) for each partly paid share held by the member, a fraction of a vote equivalent to the proportion that the amount paid up bears to the total issue price of the share. At 27 August 2004 there were 3,009 holders of reset preference shares in the company. The voting rights of reset preference shares are one vote for each share, but voting rights are limited to matters affecting the rights of reset preference shareholders. At 27 August 2004 there were 12,088,053 options over ordinary shares issued to eligible employees at the discretion of the Board. The options are generally exercisable 3 years after the date granted or earlier in the case of the employee s death or retirement. Distribution of shareholders of shares as at 27 August 2004 Size of holding Ordinary shareholders Reset preference shareholders 1 1,000 8,184 2,940 1,001 5,000 13, ,001 10,000 3, ,001 and over Total shareholders 25,167 3,009 There were 385 shareholders holding less than a marketable parcel of 141 ordinary shares at 27 August There were 4 shareholders holding less than a marketable parcel of 5 reset preference shares at 27 August COMPUTERSHARE Detailed Financial Report 2004

131 Twenty Largest Shareholders of ordinary shares as at 27August 2004 Ordinary shares Number % National Nominees Limited 89,891, Finico Pty Limited 43,712, JP Morgan Nominees Australia 37,108, Welas Pty Limited 32,592, Westpac Custodian Nominees 31,261, PJ Maclagan 16,627, Cogent Nominees Pty Limited 11,597, MJ O Halloran 10,952, CPU Share Plans Pty Ltd 9,841, AMP Life Limited 9,782, Citicorp Nominees Pty Ltd 9,486, CJ Morris 9,441, Queensland Investment Corporation 8,667, UBS Nominees Pty Ltd 6,829, Computershare Clearing Pty Ltd 5,684, ANZ Nominees Limited 4,461, Suncorp Custodian Services Pty Ltd 4,294, Australian Foundation Investment Company Limited 3,500, RBC Global Services Australia Nominees Pty Limited 3,271, GL Ryan 2,569, Total 351,574, Twenty Largest Shareholders of reset preference shares as at 27 August 2004 Reset preference shares Number % Australian Foundation Investment Company Limited 174, ARGO Investments Limited 73, Djerriwarrh Investments Limited 67, Comsec Nominees Pty Limited 50, Warbont Nominees Pty Limited 39, RBC Global Services Australia Nominees Pty Limited 34, JB Were Capital Markets Limited 22, Sandhurst Trustees Ltd 14, Mirrabooka Investments Limited 13, Westpac Financial Services Limited 11, Lutovi Investments Pty Ltd 10, Perpetual Trustees Consolidated Limited 8, UBS Private Clients Australia Limited Pty Ltd 5, ANZ Executors and Trustee Company Limited 5, Equifast Nominees Pty Ltd 5, Tower Trust Limited 5, Computershare Clearing Pty Ltd 5, Invia Custodian Pty Limited 5, JF Edwards and JR Edwards 4, Catholic Church Insurances Limited 4, Total 560, COMPUTERSHARE Annual Report

132 Office Locations ASIA/PACIFIC REGION AUSTRALIA Melbourne Global Headquarters COMPUTERSHARE LIMITED Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Australia PO Box 103 Abbotsford VIC 3067 Australia Telephone Facsimile COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Yarra Falls 452 Johnston Street Abbotsford VIC 3067 GPO Box 2975 Melbourne VIC 3001 Australia Telephone Facsimile Investor enquiries (for use within Australia only) COMPUTERSHARE TECHNOLOGY SERVICES PTY LTD Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Australia PO Box 103 Abbotsford VIC 3067 Australia Telephone Facsimile COMPUTERSHARE PLAN MANAGERS PTY LIMITED Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Australia GPO Box 658 Melbourne VIC 3001 Australia Telephone Facsimile COMPUTERSHARE DOCUMENT SERVICES 5 Westside Avenue Port Melbourne VIC 3207 Australia Telephone Facsimile Sydney COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Level 3/60 Carrington Street Sydney NSW 2000 Australia GPO Box 7045 Sydney NSW 2001 Australia Telephone Facsimile Investor enquiries (for use within Australia only) COMPUTERSHARE TECHNOLOGY SERVICES PTY LTD Level 5/60 Carrington Street Sydney NSW 2000 Australia Telephone Facsimile COMPUTERSHARE ANALYTICS PTY LIMITED Level 3/60 Carrington Street Sydney NSW 2000 Australia Telephone Facsimile COMPUTERSHARE PLAN MANAGERS PTY LIMITED Level 3/60 Carrington Street Sydney NSW 2000 Australia GPO Box 1501 Sydney NSW 2001 Australia Telephone Facsimile COMPUTERSHARE DOCUMENT SERVICES 6 Hope Street Ermington NSW 2115 Australia Telephone Facsimile GEORGESON SHAREHOLDER COMMUNICATIONS AUSTRALIA PTY LTD Level 1, 190 George Street Sydney NSW 2000 Australia Telephone Facsimile Perth COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Level 2 Reserve Bank Building 45 St George s Terrace Perth WA 6000 Australia GPO Box D182 Perth WA 6840 Australia Telephone Facsimile Investor enquiries (for use within Australia only) Adelaide COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Level 5/115 Grenfell Street Adelaide SA 5000 Australia GPO Box 1903 Adelaide SA 5001Australia Telephone Facsimile Investor enquiries (for use within Australia only) Brisbane COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Level 27 Central Plaza One 345 Queen Street Brisbane QLD 4000 Australia GPO Box 523 Brisbane QLD 4001 Australia Telephone Facsimile Investor enquiries (for use within Australia only) HONG KONG COMPUTERSHARE HONG KONG INVESTOR SERVICES LIMITED 46th floor Hopewell Centre 183 Queen s Road East, Hong Kong Address effective of 6 Sept 04 Telephone Facsimile NEW ZEALAND Auckland COMPUTERSHARE INVESTOR SERVICES LTD Level Hurstmere Road Takapuna North Shore City Private Bag Auckland 1020 New Zealand Telephone Facsimile Investor enquiries: PHILIPPINES Manila COMPUTERSHARE TECHNOLOGY SERVICES PHILIPPINES INC. 22nd Floor, BPI Buendia Center Sen. Gil Puyat Avenue Makati City 1200 Philippines Telephone Facsimile INDIA Hyderabad KARVY COMPUTERSHARE PRIVATE LIMITED 46, Avenue 4, Street No1, Banjara Hills, Hyderabad India Telephone Facsimile COMPUTERSHARE Detailed Financial Report 2004

133 NORTH AMERICA REGION USA Chicago COMPUTERSHARE INVESTOR SERVICES LLC 2 North LaSalle Street Chicago Illinois Telephone Facsimile COMPUTERSHARE PLAN MANAGERS 2 North LaSalle Street Chicago Illinois Telephone Facsimile COMPUTERSHARE SECURITIES CORPORATION 2 North LaSalle Street Chicago Illinois Telephone Facsimile COMPUTERSHARE TECHNOLOGY SERVICES 2 North LaSalle Street Chicago Illinois Telephone Facsimile COMPUTERSHARE DOCUMENT SERVICES 7600 Grant Street Burr Ridge Illinois Telephone Facsimile COMPUTERSHAREPEPPER 2 North LaSalle Street Chicago Illinois Telephone Facsimile Cleveland COMPUTERSHARE INVESTOR SERVICES LLC 7550 Lucerne Drive, Suite 103, Cleveland, Ohio Telephone Facsimile Dallas COMPUTERSHARE INVESTOR SERVICES LLC 3020 Legacy Drive, Suite , Plano, Texas Telephone Facsimile Golden COMPUTERSHARE TRUST COMPANY, INC. COMPUTERSHARE INVESTOR SERVICES, LLC 350 Indiana Street Golden Colorado Telephone Facsimile COMPUTERSHARE PLAN MANAGERS 350 Indiana Street Golden Colorado Telephone Facsimile New York COMPUTERSHARE TRUST COMPANY OF NEW YORK Wall Street Plaza 88 Pine Street 19th Floor New York, NY Telephone Facsimile GEORGESON SHAREHOLDER COMMUNICATIONS INC. 17 State Street New York, NY Telephone Facsimile GEORGESON SHAREHOLDER COMMUNICATIONS INC. 219 Murray Hill Parkway East Rutherford, NJ Telephone Facsimile SOURCE ONE COMMUNICATIONS, INC 111 Commerce Road Carlstadt, NJ Telephone Facsimile Rockville GEORGESON SHAREHOLDER ANALYTICS N.A. INC Wyaconda Road Rockville, Maryland Telephone Facsimile Edison COMPUTERSHARE PLAN MANAGERS Raritan Plaza 3, 101 Fieldcrest Avenue Edison, NJ Telephone Facsimile San Francisco COMPUTERSHARE INVESTOR SERVICES One Market 36th Floor San Francisco, CA Telephone Facsimile TRANSCENTIVE, INC. One Market, Spear Tower Suite 3600 San Francisco, CA Telephone Facsimile Shelton TRANSCENTIVE, INC. Two Enterprise Drive Shelton, CT Telephone Facsimile CANADA Toronto COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC. 11th Floor 100 University Avenue Toronto, Ontario M5J 2Y1 Telephone Facsimile COMPUTERSHARE DOCUMENT SERVICES 88A East Beaver Creek Road Richmond Hill, Ontario L4B 4A8 Telephone Facsimile GEORGESON SHAREHOLDER COMMUNICATIONS INC. 66 Wellington Street West TD Bank Tower, Suite 5210 Toronto-Dominion Centre PO Box 240 Toronto, Ontario M5K 1J3 Telephone Facsimile COMPUTERSHAREPEPPER 11th Floor 100 University Avenue Toronto, Ontario M5J 2Y1 Telephone Facsimile Calgary COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC. Suite 600/530 8th Avenue SW Calgary, Alberta T2P 3S8 Telephone Facsimile GEORGESON SHAREHOLDER COMMUNICATIONS INC. Suite 600/530 8th Avenue SW Calgary, Alberta T2P 3S8 Telephone Facsimile Halifax COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC. Suite 501,1465 Brenton Street PO Box Halifax, Nova Scotia B3J 3S9 Telephone Facsimile Montreal COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC. Suite 700, 1500 University Street Montreal, Quebec H3A 3S8 Telephone Facsimile COMPUTERSHARE Annual Report

134 Vancouver COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC. 2nd Floor, 510 Burrard Street Vancouver, British Columbia V6C 3B9 Telephone Facsimile Winnipeg COMPUTERSHARE TRUST COMPANY OF CANADA COMPUTERSHARE INVESTOR SERVICES INC Portage Avenue Winnipeg, Manitoba R3B 3K6 Telephone Facsimile EUROPE, MIDDLE EAST AND AFRICA REGION (EMEA) UNITED KINGDOM Bristol COMPUTERSHARE INVESTOR SERVICES PLC COMPUTERSHARE ANALYTICS (UK) LIMITED COMPUTERSHARE DOCUMENT SERVICES LIMITED COMPUTERSHARE TECHNOLOGY SERVICES (UK) LIMITED COMPUTERSHARE PEPPER PO Box 82 The Pavilions Bridgwater Road Bedminster Down, Bristol BS99 7NH Telephone Facsimile web.queries@computershare.co.uk Edinburgh COMPUTERSHARE INVESTOR SERVICES PLC COMPUTERSHARE TECHNOLOGY SERVICES (UK) LIMITED 7 Lochside House Edinburgh Park South Gyle Edinburgh EH12 9DJ Telephone Facsimile web.queries@computershare.co.uk London COMPUTERSHARE INVESTOR SERVICES PLC COMPUTERSHARE TECHNOLOGY SERVICES (UK) LIMITED COMPUTERSHARE ANALYTICS COMPUTERSHARE LIMITED GEORGESON SHAREHOLDER TRANSCENTIVE 2nd Floor, Vintners Place 68 Upper Thames Street London EC4V 3BJ Telephone Facsimile web.queries@computershare.co.uk CHANNEL ISLANDS Jersey COMPUTERSHARE INVESTOR SERVICES (CHANNEL ISLANDS) LIMITED PO Box 83 Ordnance House 31 Pier Road St Helier Jersey JE4 8PW Channel Islands Telephone Facsimile web.queries@computershare.co.uk GERMANY Munich COMPUTERSHARE GmbH Cuvilliésstrasse 14a Munich Telephone Facsimile PEPPER TECHNOLOGIES Cuvilliésstrasse 14a Munich Telephone Facsimile IRELAND Dublin COMPUTERSHARE INVESTOR SERVICES (IRELAND) LIMITED COMPUTERSHARE TECHNOLOGY (IRELAND) LIMITED Heron House, Corrig Road, Sandyford Industrial Estate Dublin 18 Ireland Telephone Facsimile web.queries@computershare.ie ITALY GSC PROXITALIA SpA Via Emilia Roma Telephone Facsimile info@gscproxitalia.com RUSSIA Moscow THE NATIONAL REGISTRY COMPANY 6 Veresaeva Street Moscow Russia Telephone Facsimile nrc@relline.ru SOUTH AFRICA Johannesburg COMPUTERSHARE SOUTH AFRICA (PROPRIETARY) LIMITED HOLDING COMPANY Computershare Limited (formerly Computershare Custodial Services Ltd) with its divisions INVESTOR SERVICES 70 Marshall Street Johannesburg 2001 PO Box Marshalltown Johannesburg 2001 Telephone Facsimile investor.services@computershare.co.za CUSTODIAL SERVICES 70 Marshall Street Johannesburg 2001 PO Box Marshalltown Johannesburg 2107 Telephone Facsimile Swift CSEVZAJJ custody@computershare.co.za PLAN MANAGERS 70 Marshall Street Johannesburg 2001 PO Box Marshalltown Johannesburg 2001 Telephone Facsimile planmanagers@computershare.co.za ANALYTICS 70 Marshall Street Johannesburg 2001 PO Box 536 Auckland Park 2006 Telephone Facsimile analytics@computershare.co.za CST OUTSOURCING LIMITED (a joint venture company) PO Box 24 Newtown 2113 Telephone Facsimile outsourcing@computershare.co.za 132 COMPUTERSHARE Detailed Financial Report 2004

135 CORPORATE DIRECTORY Directors Alexander Stuart Murdoch (Chairman) Christopher John Morris (Chief Executive Officer) Thomas Michael Butler Philip Daniel DeFeo William E Ford Markus Kerber Penelope Jane Maclagan Anthony Norman Wales Company Secretaries Paul Xavier Tobin Mark Benjamin Davis Registered Office Yarra Falls 452 Johnston Street Abbotsford Victoria Australia 3067 Telephone Facsimile Stock Exchange Listings AUSTRALIAN STOCK EXCHANGE LIMITED THE NEW ZEALAND STOCK EXCHANGE Solicitors MINTER ELLISON Level 23, Rialto Towers 525 Collins Street Melbourne Victoria 3000 Auditors PRICEWATERHOUSE COOPERS 333 Collins Street Melbourne Victoria 3000 Share Registry COMPUTERSHARE INVESTOR SERVICES PTY LIMITED Yarra Falls 452 Johnston Street Abbotsford Victoria 3067 PO Box 103 Abbotsford Victoria Australia 3067 Telephone Facsimile Investor Relations Yarra Falls 452 Johnston Street Abbotsford Victoria 3067 Telephone Facsimile investor.relations@computershare.com.au Website Bankers NATIONAL AUSTRALIA BANK LIMITED 500 Bourke Street Melbourne Victoria 3000 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 530 Collins Street Melbourne Victoria 3000 THE ROYAL BANK OF SCOTLAND PLC Corporate and Institutional Banking 135 Bishopsgate London EC2M 3UR Designed and printed by Computershare Document Services Sydney Melbourne 6 Hope Street 5 Westside Avenue Ermington NSW 2115 Port Melbourne Vic 3207 Ph Ph Fax Fax or (03) Printed on 50% recycled paper. Virgin wood fibre from sustainable plantation forests. Elemental chlorine free oxygen bleached.

136