Financial Statements F I N A N C I A L

Transcription

1 Financial Statements F I N A N C I A L R E P O R T For the year ended 31 December 2013

2 Directors report Table of contents Directors report 3 Auditor s independence declaration 5 Statement of comprehensive income 6 Statement of financial position 7 Statement of changes in equity 8 Statement of cash flows 9 Notes to financial statements 10 Directors declaration 26 Independent auditor s report 27 The directors of Open Universities Australia Pty Ltd (the Company ) present their report together with the financial report of the group, being the Company and its controlled entities, for the year ended 31 December 2013 and auditor s report thereon. This report has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act Directors names The names of the directors in office at any time during or since the end of the year are: Mr S S Weiss (Chairman) Dr J M Slocombe (retired 1 May 2013) Mr D W De Campo Professor D S Wood Professor S H Spence (resigned 11 January 2013) Professor J M Sachs (resigned 3 March 2014) Professor A M Shoemaker (resigned 7 February 2014) Professor M E Gardner, AO Mr S J Beall Mr P J Beard Mr D J Phillips Ms P M Allen (appointed 1 February 2013) Professor D I O Connor (appointed 1 February 2013) Mr D M Pitt (appointed 7 February 2014) The directors have been in office since the start of the year to the date of this report unless otherwise stated. On 1 January 2013 Mr Matthew Walsh was appointed Company Secretary. Results The profit of the group for the year after providing for income tax amounted to $21,454,215 (2012: $20,449,088). Review of operations The group continued to engage in its principal activity, the results of which are disclosed in the attached financial statements. Significant changes in state of affairs Significant changes in the state of affairs of the group during the financial year, were as follows: On 1 July 2013 the Company acquired 100% of the shares in Interact Learning Pty Ltd trading as e3learning Solutions. Principal activities The principal activity of the group during the year was providing access to higher education. No significant change in the nature of these activities occurred during the year. After balance date events No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years. Income Tax Status In June 2010 the Company applied to the Australian Taxation Office to have its not for profit status reinstated. The Australian Taxation Office by Private Ruling in May 2011 endorsed that the Company was exempt from income tax pursuant to section of the Income Tax Assessment Act 1997 (ITAA 1997) and reinstated the Company as a charitable entity. This enabled the Company (having amended its Constitution in 2009 to enable the payment of dividends), although being a tax exempt entity, to pay dividends to its members who themselves are endorsed as tax exempt entities. The Australian Charities and Not for profits Commission Act 2012 commenced in December Under that legislation, the Australian Charities and Not for profits Commission (ACNC) was established and took over responsibility for regulating charities from the ATO. The Company s status as a charitable entity has been preserved under the new regulatory regime and the Company is a charity registered by the ACNC. On 1 July 2013 the Company acquired 100% of the shares in Interact Learning Pty Ltd trading as e3learning Solutions ( e3 ). e3 has applied for tax exempt status to the Australian Charities and Not for profits Commission. The application was made effective 16 October 2013 and bound under OUA s charitable entity status. The result of this application is yet to be determined at financial report signing date. An income tax note has not been completed. The directors have determined that any income tax payable up until application date or for the six months ended 31 December 2013, is not material. Dividends paid, recommended and declared In June 2013 a 100% unfranked dividend of $6.60 per share (total $9,240,000) was paid (2012: $6.60 per share totalling $9,240,000). Directors Benefits Since the end of the previous financial year no Director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related body corporate with the Director or with a firm of which he/she is a member, or with a Company in which he/she has a substantial financial interest. This statement excludes a benefit included in the aggregated amount of emoluments received or due and receivable by Directors shown in the notes to the financial statements. 2 Financial report Financial report 3

3 Directors report Meetings of directors Directors Directors meetings Finance, audit and risk management committee meetings Number eligible to attend Number attended Number eligible to attend Number attended Human resources committee meetings Number eligible to attend Mr S S Weiss (Chairman) Dr J M Slocombe Mr D W De Campo Professor D S Wood Professor S H Spence Professor J M Sachs Professor A M Shoemaker Professor M E Gardner, AO Mr S J Beall Mr P J Beard Mr D J Phillips Ms P M Allen Professor D I O Connor Number attended The Committees work with the Chief Executive Officer to ensure that the Company meets its regulatory obligations. The Chief Executive Officer is directly accountable to the Board. The Company has examined the Corporate Governance Council s Principals of Good Corporate Governance and Best Practice Recommendations, and the Standards Australia 2011 Risk Management guidelines, and where appropriate has taken on board these recommendations and guidelines and adjusted its structure and responsibilities to ensure transparent reporting and has a comprehensive register for the management of risk. Transactions conducted with shareholder universities are on the same conditions as those with other provider universities and colleges and are considered to be within the normal course of Company business. The Company also has an Academic Programs Committee with representation from the major providers. The objective of the Committee is to make recommendations to the Chief Executive Officer on academic programs offered by the Company and to ensure the portfolio of OUA offerings is the appropriate breadth and quality. It does this by conducting regular Academic Program Committee meetings with its providers. The Company also has a Provider Agreement in place with each provider to regulate the provision of access to course content, student support and assessment, and university awards. Signed on behalf of the board of directors. Director: Samuel S Weiss, Chairman Director: Paul J Beard, Chair Finance, Audit & Risk Management Committee 28 March 2014 Indemnification of directors, officers and auditors During or since the end of the year, the Company has paid insurance premiums to insure all directors and officers against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. No indemnities have been given during or since the end of the year, for any person who is or has been an auditor of the company. Auditor s independence declaration A copy of the auditor s independence declaration under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report. Corporate governance statement The Board of Directors is responsible for the direction and oversight of Open Universities Australia Pty Ltd and its controlled entities. The Board has two Committees: 1. Mr Paul Beard chairs the Finance, Audit & Risk Management Committee. The primary objective of this Committee is to make recommendations to the Board in the effective conduct of its responsibilities. These responsibilities include compliance and statutory reporting, internal control systems, investments, reviewing the financial situation of the Company, risk management, external audit and ensuring all statutory and ethical obligations are met. 2. Mr David Phillips chairs the People and Culture Committee, the role he took over from Dr Judith Slocombe who retired on 1 May The Committee ensures that the Company has in place appropriate policies, procedures, systems and a compensation framework and reward strategy to enable the Company to recruit and retain independent directors, management and staff that will enable it to achieve its strategic objectives and provide the desired return for shareholders. The Committee also ensures that the Company has an appropriate people, performance and culture governance regime in place, building capability, attracting and retaining the right talent to ensure the Company meets its objectives; and is compliant with legislation, consistent with best practice human resources management. The People and Culture Committee oversee compliance of Work Health and Safety legislation. Auditor s independence declaration Auditor s independence declaration to the directors of Open Universities Australia Pty Ltd In relation to the independent audit for the year ended 31 December 2013, to the best of my knowledge and belief there have been: (i) (ii) No contraventions of the auditor independence requirements of the Corporations Act 2001; and No contraventions of any applicable code of professional conduct. P A Jose, Partner 28 March 2014 Pitcher Partners, Melbourne 4 Financial report Financial report 5

4 Statement of comprehensive income Statement of financial position For the year ended 31 December 2013 Note Revenue 5 182,790, ,192,652 Less: expenses Provider fees 6 (90,681,735) (101,134,473) Employee benefits expense 6 (24,778,762) (27,416,673) Advertising expense (20,275,772) (19,943,087) Product development expenses (1,058,965) (711,106) Student services expenses (678,730) (893,266) Exam services fees 6 (4,892,149) (5,674,427) Occupancy expense (1,643,673) (1,522,289) Communication expense (1,433,222) (1,231,383) Depreciation and amortisation expense 6 (6,292,765) (2,930,033) Finance costs 6 (23,047) (13,551) Other expenses (9,577,860) (9,273,276) (161,336,680) (170,743,564) Profit for the year 21,454,215 20,449,088 Other comprehensive income Revaluation decrements (405,078) Revaluation increments 1,119,933 Transfer of reserves (119,933) 35,303 Other comprehensive income for the year (119,933) 750,158 Total comprehensive income 21,334,282 21,199,246 As at 31 December 2013 Note Current assets Cash and cash equivalents 8 97,153,437 88,810,886 Receivables 9 5,574,783 4,958,507 Investments 10-1,119,933 Other assets 11 2,048,295 1,795,109 Property classified as held for sale 12 3,600,000 Total current assets 104,776, ,284,435 Non current assets Investments Intangible assets 13 39,784,833 10,098,751 Plant and equipment 14 2,443,637 2,973,774 Total non current assets 42,228,475 13,072,542 Total assets 147,004, ,356,977 Current liabilities Payables 15 65,969,754 44,810,960 Provisions 16 3,637,099 3,233,202 Current tax liabilities 45,451 Other liabilities , ,102 Total current liabilities 70,450,946 48,990,264 Non current liabilities Provisions , ,067 Total non current liabilities 240, ,067 Total liabilities 70,691,062 49,137,331 Net assets 76,313,928 64,219,646 Equity Share capital , ,000 Reserves ,933 Retained earnings 20 75,593,928 63,379,713 Total equity 76,313,928 64,219,646 6 Financial report Financial report 7

5 Statement of changes in equity Statement of cash flows For the year ended 31 December 2013 For the year ended 31 December 2013 Consolidated Contributed Reservers Retained Total equity earnings equity Note Cash flow from operating activities Receipts from customers 179,534, ,270,587 Balance as at 1 January ,000 (630,225) 52,170,625 52,260,400 Profit for the year 20,449,088 20,449,088 Revaluation decrements (405,078) - (405,078) Revaluation increments 1,119,933-1,119,933 Transfer of reserves on disposal of investments 35,303-35,303 Total comprehensive income for the year - 750,158 20,449,088 21,199,246 Transactions with owners in their capacity as owners: Dividends (9,240,000) (9,240,000) Total transactions with owners in their capacity as owners - - (9,240,000) (9,240,000) Balance as at 31 December , ,933 63,379,713 64,219,646 Balance as at 1 January , ,933 63,379,713 64,219,646 Profit for the year 21,454,215 21,454,215 Transfer of reserves on disposal of investments (119,933) - (119,933) Total comprehensive income for the year - (119,933) 21,454,215 21,334,282 Transactions with owners in their capacity as owners: Dividends (9,240,000) (9,240,000) Total transactions with owners in their capacity as owners - - (9,240,000) (9,240,000) Payments to suppliers and employees (139,293,041) (148,255,917) Interest received 4,749,656 4,838,539 Finance costs (23,047) (13,551) Income tax paid (281,193) Net cash provided by operating activities 23(b) 44,686,380 39,839,658 Cash flow from investing activities Proceeds from sale of plant and equipment 2,005 Proceeds from sale of investments 1,119,933 1,950,000 Proceeds from assets held for sale (net) 3,422,048 Payment for plant and equipment (523,950) (583,943) Payments for investments in incorporated entities (15) Payment for intangible assets (16,645,931) (6,876,841) Acquisition of e3, net of cash acquired 26 (14,475,929) - Net cash used in investing activities (27,103,829) (5,508,794) Cash flow from financing activities Dividends paid (9,240,000) (9,240,000) Net cash used in financing activities (9,240,000) (9,240,000) Reconciliation of cash Cash at beginning of the financial year 88,810,886 63,720,022 Net increase in cash held 8,342,551 25,090,864 Cash at end of financial year 23(a) 97,153,437 88,810,886 Balance as at 31 December ,000-75,593,928 76,313,928 8 Financial report Financial report 9

6 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act The financial report was approved by the directors as at the date of the directors report. The financial report is for Open Universities Australia Pty Ltd ( OUA ) and its consolidated entities (the group ). Open Universities Australia Pty Ltd is a Company limited by shares, incorporated and domiciled in Australia. Open Universities Australia Pty Ltd is a not for profit entity for the purpose of preparing the financial statements. The following is a summary of the material accounting policies adopted by the group in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of preparation of the financial report Compliance with IFRS The consolidated financial statements of the group also comply with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Historical Cost Convention The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. (b) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and all of the entities for which the parent has the power to control the financial and operating policies. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All inter company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is transferred to the group and are de recognised from the date that control ceases. (c) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific revenue criteria have been applied: Fee revenue for Undergraduate, Postgraduate and TAFE: Revenue for any study period is recognised in full at the census date for that study period. Revenue recognised is the full fee charged to the student. Fee revenue for CSP (Commonwealth Supported Places): Revenue for any study period is recognised in full at the census date for that study period. Revenue recognised is the commission received from the universities. Services revenue for e3learning Solutions: Revenue is recognised when the services have been provided to the customer. Fees received in advance: Revenue received in respect of study period prior to the census date is recognised as unearned income. Interest and other income is recognised when the right to receive the income has been established. All revenue is stated net of the amount of goods and services tax (GST). (d) Income tax The Australian Taxation Office by Private Ruling in May 2011 endorsed that OUA was exempt from income tax pursuant to section of the Income Tax Assessment Act (ITAA 1997) and reinstated OUA as a charitable entity. This enabled the Company (having amended its Constitution in 2009 to enable the payment of dividends), although being a tax exempt entity, to pay dividends to its members who themselves are endorsed as tax exempt entities. The Australian Charities and Not for profits Commission Act 2012 commenced in December Under that legislation, the Australian Charities and Not for profits Commission (ACNC) was established and took over responsibility for regulating charities from the ATO. The Company s status as a charitable entity has been preserved under the new regulatory regime and the Company is a charity registered by the ACNC. On 1 July 2013 the Company acquired 100% of the shares in Interact Learning Pty Ltd trading as e3learning Solutions ( e3 ). e3 has applied for tax exempt status to the Australian Charities and Not for profits Commission. The application was made effective 16 October 2013 and bound under OUA s charitable entity status. The result of this application is yet to be determined at financial report signing date. An income tax note has not been completed. The directors have determined that any income tax payable up until application date or for the six months ended 31 December 2013, is not material. (e) Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks, short term deposits with an original maturity of twelve months or less held at call with financial institutions. (f) Financial instruments Classification The group has classified its financial assets as available for sale financial assets. The classification depends on the purpose for which the instruments were acquired. Management determines the classification of its financial instruments at initial recognition. Available for sale Available for sale financial assets include any financial assets not included in the above categories and are measured at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. The cumulative gain or loss is held in equity until the financial asset is de recognised, at which time the cumulative gain or loss held in equity is recognised in profit and loss. (g) Assets held for sale Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. Assets are not depreciated or amortised while they are classified as held for sale. Assets classified as held for sale are presented separately from the other assets in the balance sheet. (h) Property, plant and equipment Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and any accumulated impairment losses. Plant and equipment Plant and equipment is measured on the cost basis less depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets use and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts. Leasehold improvements Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Depreciation The depreciable amount of all fixed assets are depreciated over their estimated useful lives to the group commencing from the time the asset is held ready for use. The assets residual value and useful lives are reviewed, and adjusted if appropriate, at each balance date. Depreciation rates used for each class of depreciable assets are as follows: Class of Depreciation Depreciation fixed asset period basis Furniture and equipment 3-10 years Straight line Computer equipment 3-5 years Straight line (i) Intangibles Goodwill Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non controlling interest, and the acquisition date fair value of the acquirer s previously held equity interest (in case of step acquisition), less the fair value of the identifiable assets acquired and liabilities assumed. Goodwill is not amortised, but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Courseware and systems development Courseware & Systems development costs are charged as an operating expense as they are incurred, except where they meet the definition of an intangible asset, in which case they are capitalised at the cost to the group. Costs in relation to feasibility studies during the planning stage and any on going costs are treated as an expense in the period incurred. Where costs are capitalised they are amortised over future periods on a basis related to expected future benefits. Unamortised costs are reviewed at each balance date to determine the amount (if any) that is no longer recoverable and any amount identified is written off to the statement of comprehensive income. Amortisation Amortisation of intangible assets with a finite life is charged to the statement of comprehensive income on a straight line basis over the estimated useful lives of the intangible assets. Intangible assets are amortised from the date they are available for use. The estimated useful lives for intangibles with finite lives are as follows: Class Amortisation Amortisation of Intangible period basis Courseware 3-5 years Straight line Systems 3-8 years Straight line The useful lives of intangible assets are reviewed on an annual basis and the useful life is altered if estimates have changed significantly. 10 Financial report Financial report 11

7 (j) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives received under operating leases are recognised as a liability. The liability is reduced on a straight line basis over the life of the lease. Finance Leases There were no finance leases at 31 December (k) Employee benefits Liabilities arising in respect of wages and salaries, annual leave, accumulated long service leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. Contributions are made by the group to employee nominated superannuation funds. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available. (l) Provision for FEE HELP re credit A provision is raised for expected FEE HELP debt re credits. FEE HELP debt re credits occur when a student withdraws from a unit after the census date and has their application for NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The group makes certain accounting estimates include assumptions concerning the future, which may not represent actual results. Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Goodwill Goodwill is allocated to cash generating units (CGU s) according to applicable business operations. The recoverable amount of a CGU is based on value in use calculations. These calculations are based on projected cash flows approved by management covering a period of one to five years. a refund approved due to special circumstances. Under HESA legislation a student has 12 months after the census date to apply for this refund, although in exceptional cases a student may apply beyond this date. (m) Business combinations A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses and results in the consolidation of the assets and liabilities acquired. Business combinations are accounted for by applying the acquisition method. The consideration transferred is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control. Deferred consideration payable is measured at fair value. Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non controlling interest, and the acquisition date fair value of the acquirer s previously held equity interest (in case of step acquisition), less the fair value of the identifiable assets acquired and liabilities assumed. Acquisition related costs are expensed as incurred. (n) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. The group has determined that given a valuation was prepared as part of the acquisition due diligence in June 2013, and the performance of the newly acquired entity has not significantly changed since acquisition, year end goodwill impairment testing has not been performed. (b) Intangibles Intangible assets are assessed for impairment indicators annually and are carried at initial cost less accumulated amortisation and any impairment losses. Management estimates the useful life of each intangible asset when the asset is first available for use, and reassesses this annually. NOTE 3: INTERESTS IN SUBSIDIARIES (a) Subsidiaries The following are the group s significant subsidiaries: Country of incorporation Ownership interest held by the group Subsidiaries of Open Universities Australia Pty Ltd: % % Interact Learning Pty Ltd trading as e3learning Solutions ( e3 ) Australia Ownership interest are the same as voting rights Open Training Institute Pty Ltd Australia Ownership interest are the same as voting rights (b) Changes in a parent s ownership interest in a subisdiary On 1 July 2013, the group acquired 100% of the share capital of Interact Learning Pty Ltd trading as e3learning Solutions. On 27 December 2013, the group launched Open Training Institute Pty Ltd in which OUA have 100% of the share capital. This NOTE 4: CHANGES IN ACCOUNTING POLICIES DUE TO FIRST TIME ADOPTION OF AASBs (a) AASB 10: Consolidated Financial Statements The consolidated financial statements are those of the group, comprising the financial statements of the parent entity and of all entities the parent control. Under AASB 10, the group controls an entity where it has the power, for which the parent has exposure or rights to variable returns from its involvement with the entity, and for which the parent has the ability to use its power over the entities to affect the amount of its returns. The group concludes that the adoption of AASB 10 does not change the consolidation status of its subsidiaries. Therefore, no adjustments to any of the carrying amounts are required. was the establishment of a seperate entity, not an acquisition. Full disclosure of the e3 acquisition can be found in Business Combinations Note 26. Further disclosure of dormant and active entities owned by the Company can be found in Investments Note 10. (b) AASB 12: Disclosure of Interests in Other Entities AASB 12 sets new minimum disclosure requirements for interest in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Refer to: Note 3: Interests in subsidiaries for disclosure as the result of first time adoption of AASB 12. Other standards and interpretations have been issued at the reporting date but none of these have a significant effect on the consolidated financial statements of the Group. NOTE 5: REVENUE Sales revenue Enrolment revenue 176,859, ,321,541 Other revenue Interest income 4,711,233 4,609,359 Other revenue 1,100, ,952 5,811,402 5,606,311 Other Income Profit on sale of available for sale financial assets 119, , ,790, ,192, Financial report Financial report 13

8 NOTE 6: OPERATING PROFIT The following expenses are included in the profit for the year: Provider fees 90,681, ,134,473 Finance costs 23,047 13,551 Exam services fees 4,892,149 5,674,427 Employee benefits expense 24,778,762 27,416,673 Impairment of property held for sale 348,724 Impairment of intangible assets 944,575 Impairment of plant and equipment 11,681 Provision for FEE HELP re credit expense 256, ,401 Depreciation 881, ,431 Amortisation 5,411,472 1,949,602 6,292,765 2,930,033 Remuneration of auditors for: - audit services 58,385 53,100 - other services 21,470 27,320 79,855 80,420 NOTE 7: DIVIDENDS The following 100% unfranked dividend was paid in June 2013: - For the year ended 31 December 2012, a dividend of $6.60 per share 9,240,000 The following 100% unfranked dividend was paid in July 2012: - For the year ended 31 December 2011, a dividend of $6.60 per share - 9,240,000 9,240,000 9,240,000 NOTE 8: CASH AND CASH EQUIVALENTS Cash on hand Cash at bank 416, ,487 Term deposits and high interest bearing accounts at call 96,736,106 88,705,899 97,153,437 88,810,886 NOTE 9: RECEIVABLES CURRENT Trade debtors and other receivables 5,586,017 4,958,507 Less provision for doubtful debts (11,234) 5,574,783 4,958,507 Provision for doubtful debts Trade receivables for which the provision for doubtful debts relate, are non interest bearing with 14 day terms. An impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. The impairment losses have been included within other expenses in the statement of comprehensive income. All trade receivables that are not impaired are expected to be received within trading terms. Movements in the accumulated impairment losses were: Opening balance Acquired through acquisition 20,514 Amounts written back (9,280) Closing balance 11,234 Aged analysis Trade and other receivables ageing analysis at 31 December is: Gross Provision Gross Provision Past due more than 91 days 11,234 11,234 11,234 11, NOTE 10: INVESTMENTS Note CURRENT Available for sale financial assets at fair value 1,119,933 NON CURRENT Shares in incorporated entities (a) 5 17 Reconciliation of available for sale assets at fair value Opening balance 1,119,933 1,649,897 Revaluations taken to reserves 1,119,933 Investments matured (479,881) Investments sold (1,119,933) (1,170,016) Closing balance 1,119,933 (a) The following entities are 100% owned subsidiaries of Open Universities Australia Pty Ltd that have been dormant for the period covered by the financial report and are not consolidated within the financial report: - Open Net Pty Ltd - Opening Learning Agency of Australia Pty Ltd - Open Learning Group Pty Ltd - Open Learning Australia Pty Ltd - e3learning UK Ltd (100% owned by Interact Learning Pty Ltd) The below entities are 100% owned subsidiaries of Open Universities Australia Pty Ltd and have been active during the period covered by the financial report. These entities have been consolidated within the financial report: - Open Training Institute Pty Ltd (Formerly A.C.N Pty Ltd) - Interact Learning Pty Ltd trading as e3learning Solutions (acquired 1 July 2013) Full disclosure of the Companies interest in significant subsidiaries can be found in Note Financial report Financial report 15

9 NOTE 11: OTHER ASSETS CURRENT Prepayments 1,390,981 1,111,522 Other current assets 657, ,587 2,048,295 1,795,109 NOTE 12: PROPERTY CLASSIFIED AS HELD FOR SALE Carrying amounts of assets Buildings held for sale 3,600,000 (a) Reconciliation Reconciliation of the carrying amounts of buildings held for sale at the beginning and end of the current and prior financial years Buildings held for sale Opening balance 3,600,000 4,353,802 Decrement in reserve (405,078) Impairment expense (348,724) Net sales proceeds (3,422,048) Loss on sale of property (177,952) 3,600,000 NOTE 13: INTANGIBLE ASSETS Goodwill at cost 14,587,346 Work in progress at cost 6,351,720 6,017,742 Courseware at cost 4,464,272 1,055,820 Accumulated amortisation and impairment (1,543,242) (1,055,820) 2,921,030 - Systems at cost 27,871,518 11,739,701 Accumulated amortisation and impairment (11,946,781) (7,658,692) 15,924,737 4,081,009 Total intangible assets 39,784,833 10,098,751 (a) Reconciliations Reconciliation of the carrying amounts of intangible assets at the beginning and end of the current financial year Goodwill at cost Additions 14,587,346 - Closing balance 14,587,346 Work in progress Opening balance 6,017,742 2,002,609 Additions 16,090,135 6,876,841 Transfer to systems and courseware (15,756,157) (2,861,708) Closing balance 6,351,720 6,017,742 Courseware Opening balance Amortisation expense (487,422) Transfers from works in progress 3,408,452 Closing balance 2,921,030 Systems Opening balance 4,081,009 2,875,325 Additions 555,797 - Fair value adjustment upon acquisition 3,491,030 Additions upon acquisition of entities 1,008,970 Impairment (944,575) - Amortisation expense (4,615,199) (1,656,024) Transfers from works in progress 12,347,705 2,861,708 Closing balance 15,924,737 4,081,009 Total Intangible assets Opening balance 10,098,751 4,877,934 Additions 31,233,278 6,876,841 Fair value upon acquisition 3,491,030 Additions upon acquisition of entities 1,008,970 Impairment (944,575) - Amortisation expense (5,102,621) (1,656,024) Closing balance 39,784,833 10,098,751 NOTE 14: PLANT AND EQUIPMENT Leasehold improvements At cost 1,695,237 1,497,008 Accumulated depreciation (661,525) (352,675) 1,033,712 1,144,333 Plant and equipment Furniture and equipment at cost 1,719,948 1,290,929 Accumulated depreciation (1,021,272) (610,792) 698, ,137 Computer equipment at cost 5,772,030 5,118,672 Accumulated depreciation (5,060,781) (3,969,368) 711,249 1,149,304 Total plant and equipment 1,409,925 1,829,441 Total property, plant and equipment 2,443,637 2,973, Financial report Financial report 17

10 Notes (a) Reconciliations Reconciliation of the carrying amounts of plant and equipment at the beginning and end of the current financial year Leasehold improvements Opening carrying amount 1,144,333 1,383,048 Additions 198,230 54,863 Amortisation expense (308,851) (293,578) Closing carrying amount 1,033,712 1,144,333 Furniture and equipment Opening carrying amount 680, ,367 Additions 23,993 23,024 Additions through acquisition of entities 147,738 Depreciation expense (153,192) (128,254) Closing carrying amount 698, ,137 Computer equipment Opening carrying amount 1,149,304 1,497,430 Additions 301, ,056 Disposals (2,005) Depreciation expense (728,101) (852,177) Impairment (11,681) - Closing carrying amount 711,249 1,149,304 Total property, plant and equipment Carrying amount 2,973,774 3,665,845 Additions 523, ,943 Disposals (2,005) Additions through acquisition of entities 147,738 Depreciation and amortisation expense (1,190,144) (1,274,009) Impairment (11,681) - Carrying amount 2,443,637 2,973,774 Notes (b) Reconciliations Reconciliation of the carrying amounts of provisions at the beginning and end of the current financial year Provision for FEE HELP re credit Opening balance 2,161,560 1,655,368 Additional amounts recognised 796,310 1,515,982 Amounts used (807,028) (1,009,790) Closing balance 2,150,842 2,161,560 NOTE 17: OTHER LIABILITIES CURRENT Sundry creditors and accruals 798, ,102 NOTE 18: SHARE CAPITAL Issued and paid up capital 1,400,000 (2012: 1,400,000) Ordinary shares 720, ,000 NOTE 19: RESERVES Fair value reserve 19(a) 119,933 (a) Fair value reserve The fair value reserve includes the accumulated net change in the fair value of available for sale investments until the investment is derecognised. Movements in reserve Opening balance 119,933 (630,225) Revaluation decrements (405,078) Revaluation increments 10 1,119,933 Transfer of reserves on disposal of investments (119,933) 35,303 Closing balance 119,933 NOTE 15: PAYABLES CURRENT Unsecured liabilities Trade and other payables 65,969,754 44,810,960 NOTE 16: PROVISIONS CURRENT Employee benefits (a) 1,486,257 1,071,642 Provision for FEE HELP re credit (b) 2,150,842 2,161,560 3,637,099 3,233,202 NON CURRENT Employee benefits (a) 240, ,067 (a) Aggregate employee benefits liability 1,726,373 1,218,709 NOTE 20: RETAINED EARNINGS Retained earnings at beginning of year 63,379,713 52,170,625 Net profit 21,454,215 20,449,088 Dividends paid 7 (9,240,000) (9,240,000) 75,593,928 63,379,713 NOTE 21: FINANCIAL RISK MANAGEMENT The group is exposed to a variety of financial risks comprising: (a) Interest rate risk (b) Credit risk (c) Liquidity risk The board of directors have overall responsibility for identifying and managing operational and financial risks. 18 Financial report Financial report 19

11 The group holds the following financial instruments: Financial assets Cash and cash equivalents 97,153,437 88,810,886 Trade debtors and other receivables 5,574,783 4,958,507 Available for sale financial assets at fair value 1,119,933 Shares in incorporated entities ,728,225 94,889,343 Financial liabilities Trade and other payables 65,969,754 44,810,960 Sundry creditors and accruals 798, ,102 66,768,396 45,757,062 (a) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Exposure to interest rate risk might arise primarily through the company s cash & deposits. Minimisation of risk is achieved by mainly undertaking fixed 2013 rate or non interest bearing financial instruments. The group s exposure to interest rate risk in relation to future cashflows and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Financial instruments Interest Non interest Total carrying Weighted average bearing bearing amount effective interest rate $ Financial assets Cash 97,142,777 10,660 97,153, % Fixed Trade debtors and other receivables 5,574,783 5,574, % Shares in incorporated entities % 97,142,777 5,585, ,728,225 Financial liabilities Trade and other payables 65,969,754 65,969, % Sundry creditors and accruals 798, , % 66,768,396 66,768, Financial assets Cash 88,810, ,810, % Fixed Trade debtors and other receivables 4,958,507 4,958, % Shares in incorporated entities % Available for sale financial assets at fair value - 1,119,933 1,119, % 88,810,366 6,078,957 94,889,323 Financial liabilities Trade and other payables 44,810,960 44,810, % Sundry creditors and accruals 946, , % 45,757,062 45,757,062 No other financial assets or financial liabilities are expected to be exposed to interest rate risk. Sensitivity If interest rates were to increase/decrease by 100 basis points from rates used to determine fair values as at the reporting date, assuming all other variables that might impact on fair value remain constant, then the impact on profit for the year and equity is as follows: + / basis points Impact on profit after tax 971, ,104 Impact on equity 971, ,104 (b) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in statement of financial position and notes to financial statements. (i) Cash deposits Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks. (ii) Trade and other receivables Credit risk for trade receivables is managed by setting credit limits and completing credit checks for new customers. Outstanding receivables are regularly monitored for payment in accordance with credit terms. The aging analysis of trade and other receivables is provided in Note 9. As the group undertakes transactions with a large number of customers and regularly monitors payment in accordance with credit terms, the financial assets that are neither past due nor impaired, are expected to be received in accordance with the credit risk. (c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The company operates under the policy of settling financial obligations within 30 days and in the event of a dispute, make payments within 30 days from the date of resolution. It also continuously manages risk through monitoring future cash flows and maturities planning to ensure adequate holding of high quality liquid assets and dealing in highly liquid markets. The company s exposure to liquidity risk is deemed insignificant based on prior periods data and current assessment of risk. Maximum exposure to liquidity risk is the carrying amounts of financial liabilities. Maturity analysis The table below represents the undiscounted contractual settlement terms for financial instruments and managements expectation for settlement of undiscounted maturities. Total contractual Carrying <6 months 6-12 months 1-5 years cash flows amount Year ended 31 December 2013 $ Cash and cash equivalents 82,153,437 15,000,000-97,153,437 97,153,437 Trade and other receivables 5,574,783 5,574,783 5,574,783 Shares in incorporated entities Trade and other payables (65,969,754) (65,969,754) (65,969,754) Sundry creditors and accruals (798,642) (798,642) (798,642) Net maturities 20,959,829 15,000,000-35,959,829 35,959,829 Year ended 31 December 2012 Cash and cash equivalents 84,810,886 4,000,000-88,810,886 88,810,886 Trade and other receivables 4,958,507 4,958,507 4,958,507 Shares in incorporated entities Available for sale financial assets at fair value 1,119,933 1,119,933 1,119,933 Trade and other payables (44,810,960) (44,810,960) (44,810,960) Sundry creditors and accruals (946,102) (946,102) (46,102) Net maturities 45,132,281 4,000,000-49,132,281 50,032, Financial report Financial report 21

12 NOTE 22: CAPITAL AND LEASING COMMITMENTS (a) Operating lease commitments Non cancellable operating leases contracted for but not capitalised in the financial statements: Payable - not later than one year 1,192, ,195 later than one year and not later than five years 2,524,031 2,511,395 3,716,455 3,284,590 General description of leasing arrangements: - Premises at Level 1, 2 and 5, 473 Bourke Street, Melbourne. Lease terminates February 2017; - Premises at Level 10 Bourke Street, Melbourne. Lease terminates February 2017; - Premises at Level 4 Bourke Street, Melbourne. Lease terminates February 2017; - Premises at South Terrace, Adelaide. Lease terminates June 2015; and - Premises at Suite S6, 32 Sovereign Street, Leeds. Lease terminates October NOTE 23: CASH FLOW INFORMATION (a) Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position is as follows: Cash on hand Cash at bank 416, ,487 Term deposits and high interest bearing accounts at call 96,736,106 88,705,899 97,153,437 88,810,886 (b) Reconciliation of cash flow from operations with profit after income tax Profit from ordinary activities after income tax 21,454,215 20,449,088 Adjustments and non cash items Depreciation and amortisation 6,292,765 2,930,033 Impairment of intangibles 944,575 Impairment of property held for sale 348,724 Impairment of plant and equipment 11,681 Net gain on disposal of available for sale financial assets (119,933) (264,800) Loss on sale of property held for sale 177,952 Changes in assets and liabilities Decrease / (increase) in receivables 1,612,699 (2,818,726) Increase in other assets (95,573) (220,606) Increase in payables 15,331,418 17,071,747 (Decrease) / increase in other liabilities (968,613) 1,512,893 Decrease in income tax (281,193) Increase in provisions 326, ,305 Cash flows from operating activities 44,686,380 39,839,658 (c) Credit standby arrangements with banks Bank guarantees 897, ,164 Amount utilised (827,537) (643,384) Unused facility 69,463 3,780 NOTE 24: KEY MANAGEMENT PERSONNEL COMPENSATION Compensation received by executives of the group - short term employee benefits 1,652,614 1,398,081 - post employment benefits 151, ,747 - other long term benefits 8,028 43,555 - termination benefits 828,839 1,811,947 2,400,222 Compensation received by directors of the company - short term employee benefits 343, ,625 - post employment benefits 31,367 29, , ,931 2,187,064 2,755,153 Key management personnel comprise directors and senior executives of the company. Key management personnel did not receive any share based payments during the year ended 31 December NOTE 25: RELATED PARTY TRANSACTIONS In the course of the current relationship with Shareholder universities, transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties, and which in management s opinion is comparable to amounts that would have been paid to non related parties. The Shareholder universities are as follows: - Griffith University - Macquarie University - Monash University - RMIT - Swinburne University of Technology - University of South Australia - Curtin Unversity of Technology (a) Related party transactions Provider fees: Provider fees payable 15,614,765 23,543,028 Provider fees expense 81,731,211 90,152,696 CSP revenue: CSP revenue receivable 2,904,893 1,941,613 CSP revenue 12,544,047 6,096,326 Dividends: The following 100% unfranked dividend was paid in June 2013: - For the year ended 31 December 2012, a dividend of $6.60 per share 9,240,000 The following 100% unfranked dividend was paid in July 2012: - For the year ended 31 December 2011, a dividend of $6.60 per share 9,240, Financial report Financial report 23

13 NOTE 26: BUSINESS COMBINATIONS On 1 July 2013, the group acquired 100% of the share capital of Interact Learning Pty Ltd trading as e3learning Solutions ( e3 ). Details of the transaction were: $ Consideration paid 15,644,000 Contingent consideration 5,000,000 Total consideration 20,644,000 Contingent consideration The maximum contingent consideration payable is $5,000,000 based on an earn out clause between OUA and e3. This is subject to e3 meeting stipulated revenue and EBITDA requirements for the twelve month period to 30 June Assets and liabilities acquired Assets and liabilities acquired as a result of the business combination were: Recognised on Assets and liabilities acquisition held at acquisition date: at fair value in $ - Cash and cash equivalents 1,168,071 - Trade and other receivables 2,228,975 - Other assets 157,601 - Plant and equipment 147,738 - Intangibles 4,500,000 - Trade and other payables (827,376) - Provisions (170,559) - Other liabilities (821,153) - Income tax payable (326,643) Net assets acquired 6,056,654 - Goodwill 14,587,346 20,644,000 The goodwill on acquisition arises as a result of the excess consideration paid over the net assets acquired. Contributing factors for the goodwill value are noted below: - e3 s strong capabilities in learning design that will assist OUA with all of its offerings; - assist OUA in positioning itself as a leader of online learning across all facets of learning; and - e3 has well established contracts in place with leading corporates across Australia and e3 is fast growing with good management. Purchase consideration cash outflow Consideration paid 15,644,000 Less: Cash balance acquired 1,168,071 Net cash balance acquired 1,168,071 Outflow of cash investing activities 14,475,929 Acquired receivables The acquired receivables at acquisition date totalled $2,228,975, net of an impairment provision of $20,514. Contribution since acquisition Since the acquisition date, e3 has contributed a profit after tax of $533,874 which is included within the profit of group. Had the combination occurred from the beginning of the year, operating profit for the group would have been $21,981,865 and revenue would have been $187,556,945. Transaction costs Transaction costs of $899,368 were incurred in relation to the acquisition. These costs are included with other expenses expenses in the Statement of comprehensive income. NOTE 27: PARENT ENTITY DETAILS Summarised presentation of the parent entity, Open Universities Australia Pty Ltd, financial statements: (a) Summarised statement of financial position Assets Current assets 101,759, ,284,435 Non current assets 45,662,053 13,072,542 Total assets 147,421, ,356,977 Liabilities Current liabilities 68,981,725 48,990,264 Non current liabilities 181, ,067 Total liabilities 69,163,171 49,137,331 Net assets 78,257,981 64,219,646 Equity Share capital 720, ,000 Retained earnings 77,537,981 63,379,713 Reserves 119,933 Total equity 78,257,981 64,219,646 (b) Summarised statement of comprehensive income Profit for the year 23,398,268 20,449,088 Other comprehensive income for the year (119,933) 750,158 Total comprehensive income for the year 23,278,335 21,199,246 NOTE 28: EVENTS SUBSEQUENT TO REPORTING DATE There has been no matter or circumstance, which has arisen since 31 December 2013 that has significantly affected or may significantly affect: NOTE 29: ENTITY DETAILS The registered office of the group is: Open Universities Australia Pty Ltd, Level 1, 473 Bourke Street, Melbourne VIC 3000 (a) the operations, in financial years subsequent to 31 December 2013, of the group, or (b) the results of those operations, or (c) the state of affairs, in financial years subsequent to 31 December 2013, of the group. 24 Financial report Financial report 25