· 2008-09-26 · Overview of Th e Financial Year Th e Directors of Tranzact Financial Services...

www.tranzact.com.au

Registered Offi ce: Level 5, 241 Castlereagh Street, Sydney, NSW 2000Postal Address: PO Box 20314, World Square, Sydney, NSW 2002

Phone: +61 2 9236 5600, Fax: +61 2 9236 5699

ANNUAL REPORTAS AT 30 JUNE 2008

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Report from the Chairman and Managing Director 1

Directors’ Report 4

Auditor’s Independence Declaration 13

Corporate Governance Report 14

Financial Statements 20

Directors’ Declaration 61

Independent Audit Report 62

Shareholder Information 64

Twenty Largest Shareholdings 65

Corporate Directory 65

Tranzact Financial Services LimitedAnnual General Meeting21 November 2008, 10.30 a.m.Level 5241 Castlereagh StreetSydney NSW

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REPORT FROM THE CHAIRMANAND MANAGING DIRECTOR

Overview of Th e Financial Year

Th e Directors of Tranzact Financial Services Limited (“Tranzact” or the “Company”) are very pleased to report a profi t before amortisation, depreciation and tax of $2.0 million for the year ended 30 June 2008 (“FY2008”). Th is result meets the Company’s earlier profi t forecast and represents an improvement of almost 150% on last year. Net profi t after tax was $1,754,741 compared with $631,005 for the equivalent period last year, an increase of 178%. Th is equated to diluted earnings per share of 1.5 cents in FY2008, up from 0.8 cent per share in FY2007.

Th e most pleasing aspect of the result was that it was achieved under very diffi cult economic and market conditions, especially in the latter part of the fi nancial year. Th e revenue of the Company is now underpinned by a diversity of revenue streams from diff erent sources, over half of which is not aff ected by the volatility of equity markets.

Th e result represents a continuation of the solid turnaround in the fortunes of Tranzact since Grosvenor Financial Services Group Limited (“Grosvenor”) acquired a controlling interest in mid-2003 as part of a recapitalisation and revitalisation of the Company. Th e decision by the Board to recommence the payment of dividends with the declaration of a fully franked fi nal dividend of 0.25 cent per share is an affi rmation of the Board’s confi dence in the sustainability of the operating profi t.

Tranzact’s shares are presently trading at price levels which the Board believes represent attractive investment fundamentals given the favourable long term outlook for the Company and its healthy cash balance. Accordingly, the Board advised with the recent release of the Company’s FY2008 profi t result that it was considering the implementation of a share buy back program as a capital management tool.

Th e Company’s business can be broadly categorised into four main sectors at present:

Master Trust

Tranzact is now the co-promoter and administrator of the Smartsave ‘Member’s Choice’ Superannuation Master Plan. Th e acquisition and merger program over the last two years has successfully created this fund, currently with over 20,000 members holding over $260 million in funds and paying annual insurance premiums of about $3.0 million.

Tranzact is working with the Trustee to rationalise further the structure of this fund to improve the off ering for members as well as to extract additional synergies. Th is process is anticipated to be completed during the third quarter of the 2009 fi nancial year. Once the rationalisation has been completed, the Company intends to grow the fund by devoting more eff ort into marketing, undertaking further mergers and acquisitions and achieving organic growth through existing distribution channels, in particular, the Gold Financial Services Pty Ltd (“Gold”) dealer group.

In that regard, Tranzact’s 20% equity ownership of Group Insurance & Superannuation Concepts Pty Ltd (“GIS”), as co-promoter and manager of the Gold dealer group, allows the Company to work effi ciently in a complementary manner with GIS to grow the fund.

Tranzact is the promoter and administrator of the Super Eligible Rollover Fund. Th is is still a relatively small fund, but it is one of less than 20 eligible rollover funds in Australia. Tranzact has just completed an exercise, in conjunction with the Trustee, to revamp the structure of the fund to make it more competitive.

Investor Directed Portfolio Service and Custodial Services

During FY2008, Tranzact’s main priority has been in relation to the Master Trust. Consequently, the Company’s Investor Directed Portfolio Service (“IDPS”) and Custodial Services have received limited attention.

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However, Tranzact regards the IDPS area as one where the Grosvenor System can be competitive and off ers unique value propositions to fi nancial advisers in Australia. Accordingly, the Company intends to promote its IDPS in the future where appropriate to advisers with whom Tranzact already has relationships in the other areas of its business.

Tranzact believes there is good potential to roll out its IDPS (which can provide SMAs and IMAs portfolios) to clients using the Company’s Self Managed Superannuation Fund (“SMSF”) service. Th is will be the main focus in the coming months.

In terms of Custodial Services, Tranzact only off ers its custodial services to those funds where it is also the administrator. Th e synergies that Tranzact is able to achieve from the administration of those funds where it also provides the custodial services enhances the profi tability of the administration contracts.

Self Managed Superannuation Funds

Th e SMSF segment is the fastest growing sector within the Australian superannuation industry and there are in excess of 375,000 funds currently with over $280 billion in funds. Th e SMSF market is very fragmented as it has traditionally been set-up, administrated and monitored by the accountancy market.

With the rapid growth that has been experienced by SMSFs in recent years (boosted particularly by recent changes in the taxation treatment for retirees’ superannuation), more attention has been focussed on SMSF compliance issues. Th is creates a need for more professional management of these funds which is expected to result in consolidation of the administrators in this segment of the superannuation market. Th e two acquisitions that were made by Tranzact earlier this calendar year, Total Super Pty Ltd (“Total Super”) and Australian Superannuation Consultants Pty Ltd (“ASC”), have put the Company in a strong position to take advantage of the changes in this sector.

Total Super has a well-established infrastructure for providing SMSF administration, advisory and compliance services, particularly to fi nancial advisory practices. Total Super is on the recommended list for some of the largest dealer groups in Australia. ASC provides similar services but specialising in supporting accounting practices.

Th e combined operation will be based in Brisbane with a client servicing/marketing offi ce in Sydney. It will have more than 1,200 funds under administration, with funds exceeding $1.1 billion. Th e Company believes that there is signifi cant potential to increase the scale and profi tability of this operation and it is presently implementing a marketing plan to grow this area of its business.

Partnership for Growth / Camelot

Th e development and initial success of the Partnership for Growth program has exceeded the Board’s original expectations. Eleven separate practices have joined the Partnership program and the extent of their commitment is best illustrated by the creation of Camelot as a new fi nancial advisory brand in New Zealand.

Camelot is easily in the top three independent groups in New Zealand in terms of adviser numbers and Tranzact is confi dent that Camelot will meet its goal of becoming the largest group within two to three years. Moreover, the Company is very pleased with both the quality and calibre of the advisers within the Partnership which has been the result of conscious vetting and careful selection.

Th e uniqueness and strength of the Camelot model means that unlike many other dealer groups, the Partnership for Growth program is a signifi cant creator of value for the Company. Furthermore, its contribution is anticipated to grow as the Partnership expands. It is pleasing to note that every practice within Camelot has undertaken at least one merger or acquisition activity within the last 12 months.

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Phillip L Harry AM Allan S T YeoNon-Executive Chairman Managing Director and Chief Executive Offi cer

Sydney, 26 September 2008

Merger and acquisition opportunities are increasing in New Zealand due to the confl uence of factors such as the increased regulation of advisers, the fallout from the systemic failure of the fi nance company industry in New Zealand and the sub-prime led volatility in the equity markets. Th e failure of the majority of fi nance companies in New Zealand has hit many fi nancial advisers very hard. Camelot’s advisers have largely avoided the fallout due to the support and expertise of Grosvenor in this area.

Th e volatility in equity markets has also aff ected funds under advice, but as the average Camelot adviser has less than 30% of their fees exposed to equity markets (with the other 70% being insurance commission and trail income), the Company’s fi nancial investments have performed to expectation (being a minimum return of 15% on investment).

Th e Company’s stated objective has been to introduce the Partnership for Growth to Australia once the success of the concept has been demonstrated in New Zealand. Tranzact believes that it will be in a position to achieve this goal at some stage during FY2009.

Th e year ahead

Th e challenge for the Company in FY2009 is to build on the foundations created so far and to leverage off the acquisitions it has made in the SMSF area. Th ankfully, the legacies of the past are well behind the Company which is now fortunate to have a high calibre of dedicated and loyal staff .

Tranzact is in an excellent position to capitalise on the growth opportunities available to the Company and the Board is excited about its future prospects. In the absence of any further signifi cant falls in equity markets, the Board is confi dent that Tranzact can achieve further sustainable growth in the future.

Th e Directors would like to take the opportunity to thank the shareholders of Tranzact for their continued support, despite the current market conditions, and the staff of the Company who have all contributed to the success of the past year.

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Your Directors present their report on the consolidated entity consisting of Tranzact Financial Services Limited and the entities it controlled at the end of, or during, the year ended 30 June 2008.

Th e following persons were Directors of Tranzact Financial Services Limited during the whole or part of the period and up to the date of this report:

Director Period of directorship

Mr P L Harry AM Director since 8 Feb 2000

Mr R L Rodgers Director since 21 Aug 2002

Mr A S T Yeo Director since 24 Nov 2003

Mr W A Ractliff e Director since 24 Nov 2003

Particulars of the Directors’ qualifi cations, experience, all directorships in listed public companies held for the past three years and special responsibilities are set out below.

Phillip Lloyd Harry AM, B EconNon-Executive ChairmanMr Harry graduated with a Bachelor of Economics from the University of Sydney in 1959. He is an experienced businessman with signifi cant international experience. Mr Harry is a former Chairman of Mulford Holdings Pty Ltd, an international plastics group and a former president of the New South Wales Rugby Union and the Australian Rugby Union.

Allan Seng Tong Yeo, BCA (Hons), BAManaging Director, Chief Executive Offi cer Mr Yeo has held a number of senior banking roles with Barclays Bank PLC in New Zealand, Australia and the United Kingdom. Mr Yeo is also the Managing Director of Grosvenor Financial Services Group Limited and a director of the Prospero Group, one of the largest independent fi nancial advisory groups in New Zealand. Mr Yeo is also a director of TriMax Assurance Services Limited, an innovative insurance joint venture company.

Richard Lynn Rodgers, BCom, CANon-Executive Director, Company Secretary, Chairman of the Audit CommitteeMr Rodgers has over 35 years experience in the Australian accounting industry. Mr Rodgers, a Chartered Accountant, established his own practice in 1984, which he continues to operate. As part of his day to day business Mr Rodgers is involved in many aspects of the Australian fi nancial and superannuation industry and is a director of a number of private companies.

William Anthony Ractliff e, BA, BComNon-Executive Deputy Chairman, Member of the Audit CommitteeA business consultant and professional Company Director, Mr Ractliff e is Chairman of the NZ Export Credit Offi ce as well as Grosvenor Financial Services Group Limited. Previously he was Deputy Chairman of Accident Compensation Corporation (NZ) and before that NZ CEO of the National Mutual Group (now AXA NZ).

DIRECTORS’ REPORT

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PRINCIPAL ACTIVITIESDuring the year the principal activities of the consolidated entity were:• providing specialist administration services

to various superannuation entities;• operating an Investor Directed Portfolio

Service and Custodial Services;• providing Asset Consulting and Investment

Management services;• acting as a Promoter of superannuation

entities; and• acting as an Australian Financial Services

Licensee.

DIVIDENDS PAID OR RECOMMENDEDA fully franked fi nal dividend of 0.25 cent per share has been declared by the Board after balance date for the year ended 30 June 2008. Refer to Note 5.

REVIEW OF OPERATIONS & RESULTSTh e Directors are pleased to report a profi t before amortisation, depreciation and tax of $2.0 million in line with the Company’s earlier forecast and represents an increase of almost 150% in the comparable fi gure for the same period last year. Th e profi t attributable to members for the year is a 178% increase to $1,754,741 compared with $631,005 for the equivalent period last year.

Th e focus for the fi rst half of the year was the merger of the Smartsave ‘Member’s Choice’ Superannuation Master Plan (“Smartsave”), 1st Super Master Plan and Australia First Super Trust which has now been successfully completed resulting in a fund of over $250 million and nearly 20,000 members.

During the year the Partnership For Growth program has grown from strength to strength and the Company has increased its fi nancial interests accordingly. Th e following advisory practices joined the Partnership as a result:

• Van Der Wilt Financial Limited• Cranfi eld Insurance and Investments

Limited

• HFK (Rutherford Rede) Limited• Momentum Wealthcare Limited• Attwell Crews Financial Solutions Limited• Life Financial Solutions Limited

Further to the 20% strategic acquisition of GIS Concepts Pty Ltd in July 2007, the Company has forged a closer alliance with GIS Concepts by joining Gold Financial Pty Ltd, the preferred adviser network of GIS Concepts. As part of the arrangement Tranzact’s DIY Superannuation solution – Tranzact Private Super will be recommended by the advisers in Gold. In addition, the Company recently made two signifi cant acquisitions in the form of Total Super Pty Ltd and Australian Superanuation Consultants Pty Ltd. Th ese entities are specialist Self Managed Superannuation Fund administration, compliance and consulting services providers.

As a result of the Company achieving its profi t target, the Directors have declared a modest dividend for the 2008 fi nancial year. Th e Directors believe that the current environment creates potential acquisition opportunities and the Company is in a position to take advantage of such opportunities in the year ahead.

FINANCIAL POSITIONTh e Net Assets of the Group have increased from the last fi nancial year mainly due to the following:

• Increased earnings in the fi nancial year: $1.7million.

• Savings of $167,000 from the shift in premises.

• Savings in fi nancing costs of $372,000.

During the year, the Company drew down $875,000 of its $3m drawdown credit facility with the ANZ Bank to take advantage of acquisition opportunities.

Th e Directors believe the Company continues to be in a fi nancial position to implement the business strategies in the various key segments it has identifi ed.

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EARNINGS PER SHAREFor the consolidated entity in respect of the 2007/2008 year of operation, the basic earnings per share was $0.016 and diluted earnings per share was $0.015 (Note 6 to the fi nancial statements).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRSOther than already disclosed, there have been no other signifi cant changes in the state of aff airs of the Company.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAREff ective 1 July 2008 the Company acquired Australian Superannuation Consultants Pty Ltd, a self-managed superannuation fund administration, compliance and advisory services provider. Also, in August 2008, the Company executed a contract to acquire a GPen Software Licence, the system that it uses to provide superannuation administration services to master trusts.

Director Ordinary Shares Options

Mr P L Harry AM (1) 2,224,000 1,024,000Mr W A Ractliff e (2) 64,893,830 13,798,445Mr R L Rodgers (3) 500,000 500,000Mr A S T Yeo (4) 63,451,830 13,386,445

(1) A company associated with Mr Harry, Conclude Pty Ltd, holds 1,824,000 shares and 624,000 options. Mr Harry also holds 400,000 shares and 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 24).

(2) A company associated with Mr Ractliff e, Gro-Aust Holdings Ltd, holds 61,999,830 shares and 11,934,445 options. In addition, Mr Ractliff e holds 1,442,000 shares and 412,000 options as trustee of the Ractliff e Australian Family Trust and 1,052,000 shares and 1,052,000 options as trustee of the Grosvenor Employee Share Scheme. Mr Ractliff e also holds 400,000 shares and 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 24).

(3) Th ese holdings include 400,000 shares and 400,000 options held by Mr Rodgers as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 24).

(4) A company associated with Mr Yeo, Gro-Aust Holdings Ltd, holds 61,999,830 shares and 11,934,445 options. In addition, Mr Yeo holds 1,052,000 shares and 1,052,000 options as trustee of the Grosvenor Employee Share Scheme. Mr Yeo also holds 400,000 shares and 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 24).

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIESTh e Company intends to implement the following strategies in the foreseeable future:

(a) Take further strategic fi nancial interests in profi table adviser practices.

(b) Grow its self-managed superannuation fund services through its association with Gold Financial Pty Ltd and through its subsidiaries Total Super Pty Ltd and Australian Superannuation Consultants Pty Ltd.

(c) Continue to market its IDPS and Custody services.

(d) Rationalise its superannuation master trust product off ering.

INFORMATION ON DIRECTORS INTERESTSParticulars of Directors’ interests in shares, unsecured notes and options of Tranzact Financial Services Limited as at 30 June 2008 are shown in the table below.

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MEETINGS OF DIRECTORSTh e number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2008, and the number of meetings attended by each Director were:

Director’s Audit Committee Meetings MeetingsDirector Entitled Attended Entitled Attended

Mr P L Harry AM 9 6 * *

Mr W A Ractliff e 9 9 3 3

Mr A S T Yeo 9 9 * *

Mr R L Rodgers 9 8 3 3

* Not a member of the Audit Committee

ENVIRONMENTAL REGULATIONS Th ere are no environmental issues resulting from the consolidated entity’s activities, which are likely to aff ect future operations.

REMUNERATION REPORT As the whole Board currently only consists of 4 members, the Company does not have a Remuneration Committee because it would not be a more effi cient mechanism than the full Board for focusing the Company on specifi c issues. Th e Board has however delegated to the Chief Executive Offi cer the task of determining senior executive remuneration, with the exception of equity benefi ts which are approved by the Board.

(a) Policy for determining the nature and amount of key management personnel remuneration

Th e objective of the remuneration framework is to ensure that performance is competitive and appropriate for the results delivered and aligns reward with achievement of strategic objectives and the creation of value for shareholders.

Factors taken into consideration include the overall performance of the Company, particular experience of the individual concerned, level of responsibility and the demands made on the key management personnel.

Th e Board’s policy for determining the nature of remuneration for key management personnel for the Group is as follows:

Senior Executive Remuneration PolicyTh e Company is committed to remunerating its senior executives in a manner that is market competitive, consistent with best practice and supports the interests of shareholders. Th e Company aims to align the interests of senior executives with those of shareholders by remunerating senior executives through performance and long-term incentive plans in addition to their fi xed remuneration.

Consequently, senior executive remuneration typically consists of the following elements:

• fi xed salary;• short-term incentive bonus based on

performance;• long-term incentive option scheme; and• other benefi ts including superannuation.

Fixed SalaryTh e salaries of senior executives are determined from a review of the market and refl ect core performance requirements and expectations. In addition, the Company considers the following:

• the scope of the individual’s role;• the individual’s level of skill and

experience;• the Company’s legal and industrial

obligations; and• labour market conditions.

Performance BonusTh e purpose of the performance bonus is to reward actual achievement by the individual of performance objectives and for improved Company performance. Consequently, performance-based remuneration is paid where a clear contribution to successful outcomes for the Company is demonstrated and the individual attains pre-agreed key performance indicators during a performance cycle.

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Th e pre-agreed performance measures for the Chief Executive Offi cer’s Bonus are:

• Operating profi t of the Australasian Group.

• Share price of the ultimate parent.• Investment performance of portfolios

that the Australasian Group provides asset consulting advice.

• Results of satisfaction surveys of users of the Grosvenor System.

• General criteria including succession planning, skill mix, people development, training and adherence to agreed culture.

Th e method of assessing if each of the above measures is met are:

• Non-Executive Directors of the Australasian Group set the target operating profi t that has to be met.

• Non-Executive Directors of the Australasian Group set the target share price that has to be attained.

• Non-Executive Directors of the Australasian Group select the investment performance benchmark to be exceeded.

• Non-Executive Directors of the Australasian Group set the satisfaction level to be achieved for the surveys.

• Based on the discretion and judgement of Non-Executive Directors of the Australasian Group.

Performance measures used in determining the discretionary bonuses of other senior executives include:

• Operating profi t.• Exceeding service standards (internal

and external).• Attainment of relevant qualifi cations.• Accuracy and timeliness of work

outputs.• Staff development and training.

Long-Term IncentivesTh e Company has an option scheme that has been approved by shareholders in which senior executives may participate. Th e number of shares and options issued under the scheme is reasonable in relation to the existing capitalisation of the

Company and all issues of options under the scheme are made in accordance with thresholds previously approved by shareholders. Th e issue of options is not subject to any performance conditions as they are an incentive for senior executives to remain employed with the Company. In addition, the TFS Group Employee Bonus and Share Scheme acquired shares and options from the shortfall of the rights issue in May 2007 and allocated them to key staff to be vested on 1 April 2010 as a retention strategy (refer Note 20).

A policy is currently being implemented such that participants in the TFS Group Employee Bonus and Share Scheme may not enter into derivative transactions with third parties to eliminate the performance element of the options. Th is rule will be enforced via an annual declaration of compliance by all option plan participants.

Other Benefi tsSenior executives are entitled to statutory superannuation.

By remunerating senior executives through performance and long-term incentive plans in addition to their fi xed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.

Company Performance, Shareholder Wealth and Executives’ RemunerationTh e remuneration policy has been tailored to align the goals of shareholders and executives.

Th ere have been two main methods in achieving this aim, the fi rst being a performance-based bonus on key performance indicators, and the second being the issue of shares and options.

Th e improvement in the Company’s performance over the last fi ve years and the earnings forecast for the next year is shown in the table on page 9. Th e Board has decided to increase and maintain promotional activity amongst analysts so as to increase investor awareness of the Company and to stabilise the Company’s share price in line with the consistent and stable fi nancial position.

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Non-Executive Director Remuneration Policy Th e objective of the non-executive director remuneration framework is to ensure that performance is competitive and appropriate for the results delivered and aligns reward with achievement of strategic objectives and the creation of value for shareholders.

2004 2005 2006 2007 2008Revenue $84,137 $ 2,259,260 $3,680,001 $4,420,741 $5,824,646

Net Profi t attributable to members $66,367 $61,109 $184,020 $514,164 $1,754,471

Share Price at 30 June $0.06/share $0.04/share $0.05/share $0.24/share $0.155/share

Dividends Paid - - - - $0.0025/share

Factors taken into consideration include the overall performance of the Company, particular experience of the individual concerned, level of responsibility and the demands made on the Directors.

Th e contracts for the service between the Company and Directors are on a continuing basis and are not expected to change in the immediate future. Non-Executive Directors are however subject to rotation requirements of the ASX listing rules and the Company’s Constitution.

Non-Executive Directors are paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors. Th is amount is currently $300,000 per annum.

Non-Executive Directors currently do not receive performance based bonuses and do not participate in equity schemes of the Company. However, the Directors have elected to receive share options in the Company in lieu of a cash increase in their Directors’ fees for the year ended 30 June 2008 subject to shareholders’ approval at the upcoming AGM. Non-Executive Directors are entitled to statutory superannuation.

(b) Key management personnel

Th e names of persons who were key management personnel of the Group at any time during the current fi nancial year are as follows:

Name Position Held

Mr P L Harry AM Chairman - Non-Executive

Mr W A Ractliff e Deputy Chairman - Non-Executive

Mr R L Rodgers Director & Company Secretary - Non-Executive

Mr A S T Yeo Managing Director & Chief Executive Offi cer

Mr C Yip * General Manager

Ms G Ingram * Client Services and Marketing Manger

Mr G Day Finance Manager

Ms V T Luong Administration Manager

Mrs S Tawil Superannuation Services Manager

* Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company and Grosvenor Financial Services Group Ltd.

In addition, the following persons must be disclosed as they are among the 5 highest remunerated Group executives:

Name Position Held

Mr D J Busoli Chief Executive Offi cer, Total Super Pty Ltd

Ms C J Dixon Chief Operating Offi cer, Total Super Pty Ltd

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2008 ------Short Term Benefi ts ------ Post-employment

benefi ts

Long Term

Benefi ts

-------Equity-------Benefi ts

Percentage of remuneration consisting of

shares


options Salary &

FeesCash

BonusOther

Benefi ts(3)Super-

annuation

Long Service Leave Shares(5) Options Total

Name ($) ($) ($) ($) ($) ($) ($) ($) (%) (%)Mr P L Harry AM 36,000 - 9,000 3,240 - - - 48,240 - -Mr W A Ractliff e 24,000 - 6,000 2,160 - - - 32,160 - -Mr R L Rodgers 24,000 - 6,000 2,160 - - - 32,160 - -Mr A S T Yeo 19,620 57,676 (2) 6,000 - - - - 83,296 - -Other key management personnelMr C Yip (1) - - - - - - - - - -Ms G Ingram (1) - - - - - - - - - -Mr G Day 93,616 - - 8,550 3,376 8,333 - 113,875 7.32 -Ms V T Luong 95,866 5,000 (6) - 9,733 - 8,333 - 118,932 7.01 -Mrs S Tawil 60,946 - - 5,090 2,006 - - 68,042 -Total key management personnel compensation 354,048 62,676 27,000 30,933 5,382 16,666 - 496,705Other executivesMr D J Busoli (4) 63,562 - - 5,669 6,822 - - 76,053 - -Mrs C J Dixon (4) 34,913 - - 3,366 (2,076) - - 36,203 - -

452,523 62,676 27,000 39,968 10,128 16,666 - 608,961

(1) Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company and Grosvenor Financial Services Group Limited.

(2) Th e independent Non-Executive Directors approved a cash bonus payment to the Managing Director based on an assessment of the performance measures met. (3) Th e Directors have elected to take their increase in Directors’ fees for the year ended 30 June 2008 in the form of options subject to shareholders’ approval at the AGM. (4) Included as one of the 5 highest paid executives of the Group, although not considered part of key management personnel, as required under the Corporations Act 2001. Th e

fi gures above are only for the period 1 March 2008 to 30 June 2008, corresponding to the period whereby Total Super Pty Ltd was part of the Group.(5) Th e above shares (each of which has a free option attached enabling the holder to subscribe for a further share @ $0.30 before 30 April 2010) were acquired under the TFS Group

Employee Bonus and Share Scheme as set out in Note 20. Th e shares only vest if the personnel remains an employee throughout the vesting period and are expensed on a pro-rata basis.(6) Discretionary bonus based on an assessment of the performance measures met.

2007 ------Short Term Benefi ts ------ Post-employment

benefi ts

Long Term

Benefi ts

-------Equity-------Benefi ts


shares


options Salary &

FeesCash

BonusOther

Benefi tsSuper-

annuation

Long Service Leave Shares(7) Options(6) Total

Name ($) ($) ($) ($) ($) ($) ($) ($) (%) (%)Mr P L Harry AM 36,000 - - 3,240 - - - 39,240 - -Mr W A Ractliff e 25,800 - - 360 - - - 26,160 - -Mr R L Rodgers 24,000 - - 2,160 - - - 26,160 - -Mr A S T Yeo 19,620 23,465 (8) - - - - - 43,085 - -Other key management personnelMr C Yip (1) - - - - - - - - - -Mr A J Koen (2) 83,596 5,000 (9) - 7,930 - - 2,231 98,757 - 2.3Mr A J Newstead (3) 85,264 10,000 (9) - 9,474 - - 1,454 106,192 - 1.4Ms G Ingram (1) - - - - - - - - - -Mr G Day 92,308 10,000 (9) - 10,288 - 1,389 1,587 115,572 1.2 1.4Ms V T Luong (4) 78,653 - - 7,604 - 1,389 - 87,646 1.6 -Mrs S Tawil (5) 40,335 3,000 (9) 4,931 - 793 49,059 - 1.6Total key management personnel compensation 485,576 51,465 - 45,987 - 2,778 6,065 591,871

(1) Mr Yip and Ms Ingram are not employees of the Company but have been assigned to the Company as part of the management arrangements between the Company and Grosvenor Financial Services Group Limited.

(2) Resigned 14 March 2007(3) Resigned 9 February 2007(4) Commenced Administration Manager role 1 November 2006.(5) Commenced Maternity Leave 13 November 2006(6) Th e above unlisted options have been priced using the Black Scholes binomial method (refer Note 20). (7) Th e above shares (each of which has a free option attached enabling the holder to subscribe for a further share @ $0.30 before 30 April 2010) were acquired under the TFS Group

Employee Bonus and Share Scheme as set out in Note 20. Th e shares only vest if the personnel remains an employee throughout the vesting period and are expensed on a pro-rata basis.(8) Th e independent Non-Executive Directors approved a cash bonus payment to the Managing Director based on an assessment of the performance measures met. (9) Discretionary bonus based on an assessment of the performance measures met.

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(c) Details of Remuneration

Details of the compensation of key management personnel and other executives of the Group are set out above.

(d) Cash bonuses

During the year, cash bonuses were paid to the Managing Director and other key management personnel. Th ese bonuses were in recognition for the attainment of certain pre-agreed goals.

(e) Share-based payments

No share-based payments were made to key management personnel and executives as compensation during the fi nancial year.

(f ) Options and rights granted as remuneration

Th e Directors have elected to take their increase in Directors’ fees for the year ended 30 June 2008 in the form of options subject to shareholders’ approval at the AGM

No options or rights were granted to key management personnel and executives as remuneration during the fi nancial year.

(g) Equity instruments issued on exercise of remuneration options

No equity instruments were issued during the period to key management personnel and executives as a result of options exercised that had previously been granted as compensation.

Since the end of the fi nancial year 300,000 options were exercised by the holders for 300,000 shares in the Company for which the Company received a payment of $12,000 (i e. $0.04 per share).

(h) Service contracts

Service contracts have been entered into by the Group with all key management personnel and executives with the exception of Mr Allan Yeo, Ms Glenis Ingram and Mr Colin Yip who have service contracts with the ultimate parent company, Grosvenor Financial Services Group Limited. Th e service contracts describe the components and amounts of remuneration applicable on their initial appointment, including terms and performance criteria for performance-related cash bonuses and entitlements to equity benefi ts. Th ese contracts do not fi x the amount of remuneration increases from year to year. Remuneration levels are reviewed generally each year by the Managing Director in the absence of a Remuneration Committee to align with changes in job responsibilities and market salary expectations. All service contracts are for an ongoing period which can be terminated by either party giving a minimum of 4 weeks notice.

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SHARE OPTIONSNo shares or options were granted during the fi nancial year to any Directors or executives. Refer to Note 22 for details of options outstanding at the end of the fi nancial year.

Since the end of the fi nancial year 300,000 options were exercised.

INDEMNIFICATION AND INSURANCE OF OFFICERS OR AUDITOR

Th e Company indemnifi es all current and former Offi cers of the Company against any liability to another person (other than the Company or its related bodies corporate) unless the liability arises out of conduct involving lack of good faith.

Th e Company also indemnifi es all current and former Offi cers of the Company against any liabilities or expenses incurred in defending proceedings except proceedings in which the person is found guilty or which arise out of conduct involving lack of good faith.

During the year ended 30 June 2008 the Company paid a premium of $15,332 to insure the Offi cers of the Group.

Th e Offi cers of the Company are:

• Phillip L Harry AM Non-Executive Chairman • W Anthony Ractliff e Non-Executive Deputy Chairman• Allan S T Yeo Chief Executive Offi cer • Richard L Rodgers Non-Executive Director and Company Secretary

Th e liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the Offi cers in their capacity as Offi cers of entities in the consolidated entity.

PROCEEDINGS ON BEHALF OF THE COMPANYNo person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. Th e Company was not a party to any such proceedings during the year.

AUDIT COMMITTEEAt the date of this report Tranzact Financial Services Limited has a formally constituted Audit Committee of the Board of Directors.

CORPORATE GOVERNANCEA statement of the Company’s corporate governance standards is set out on pages 14 to 19 of this Annual Report.

NON-AUDIT SERVICESRyan Harvie McEnery, auditors of Total Super Pty Ltd and its wholly owned subsidiary Total Supertec Pty Ltd, also provide taxation and accountancy services to these entities (refer Note 26). Both these entities are controlled by the Company (refer Note 28).

Th e Directors are satisfi ed that the provision of non-audit services, during the year, is compatible with the general standard of independence for auditors imposed by the Corporations Act.

On the advice of the Audit Committee, the Directors are satisfi ed that the provision of non-audit services by the auditor, as set out above, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the audit committee to ensure that they do not impact the integrity and objectivity of the auditor; and

• none of the non-audit services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

AUDITOR’S INDEPENDENCE DECLARATIONA copy of the auditor’s independence declaration under Section 307C of the Corporations Act 2001 in relation to the audit for the fi nancial year is on page 13 and forms part of the Directors’ Report.

Th is Directors’ Report is signed on behalf of, and in accordance with, a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act

2001.

P L Harry AMNon-Executive Chairman

A S T YeoManaging Director and Chief Executive Offi cer


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BDO Kendalls (NSW) Level 19, 2 Market St Sydney NSW 2000 GPO Box 2551 Sydney NSW 2001 Phone 61 2 9286 5555 Fax 61 2 9286 5599 [email protected] www.bdo.com.au ABN 57 908 209 104

13

DECLARATION OF INDEPENDENCE BY NEVILLE SINCLAIR TO THE DIRECTORS OF TRANZACT FINANCIAL SERVICES LIMITED

As lead auditor of Tranzact Financial Services Limited for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the

audit; and any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Tranzact Financial Services Limited and the entities it controlled during the period.

N E Sinclair Partner

BDO Kendalls Chartered Accountants Sydney, 26th September 2008

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Th e Board is committed to implementing the highest standards of corporate governance in accordance with stakeholder expectations.

1. Board of Directors

1.1 Role and Responsibilities of the Board

Th e Board is responsible to its shareholders for the overall governance of the Company with the main role of the Board being to drive the performance of the Company.

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.

Without intending to limit this general role of the Board, the principle functions and responsibilities of the Board include the following:

i. Leadership of the Company: overseeing the Company and establishing codes that refl ect the values of the Company and guide the conduct of the Board, management and employees.

ii. Strategy Formulation: set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.

iii. Overseeing Planning Activities: overseeing the development of the Company’s strategic plan and approving that plan as well as the annual and long-term budgets.

iv. Shareholder Liaison: ensuring eff ective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.

v. Monitoring, Compliance and Risk Management: overseeing the Company’s risk management, compliance, control and accountability systems and monitoring

and directing the fi nancial and operational performance of the Company.

vi. Company Finances: approving material expenses in excess of those approved in the annual budget and approving and monitoring acquisitions, divestitures and fi nancial and other reporting.

Th e Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body.

To assist the Board carry out its functions, the Company has developed a Code of Conduct to guide the Directors in the performance of their roles.

1.2 Composition of the Board

To add value to the Company the Board has been formed so that it has eff ective composition, size and commitment to adequately discharge it responsibilities and duties. Th e names of the Directors and their qualifi cations and experience are stated on page 4 along with the term of offi ce held by each of the Directors. Directors are appointed based on the specifi c governance skills required by the Company and on the independence of their decision-making and judgement.

Th e Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can off er. Mr Phillip Harry AM, Mr Richard Rodgers and Mr Anthony Ractliff e are all Non-Executive Directors.

In addition to being Non-Executive Directors, Mr Phillip Harry AM and Mr Richard Rodgers also meet the following criteria for independence adopted by the Company.

An Independent Director:

i. is a Non-Executive Director;

ii. is not a substantial shareholder of the Company or an offi cer of, or otherwise

CORPORATE GOVERNANCE REPORT

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associated directly with, a substantial shareholder of the Company;

iii. within the last three years, has not been employed in an executive capacity by the Company or another Group member, or been a Director after ceasing to hold any such employment;

iv. within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another Group member or an employee materially associated with the service provider;

v. is not a material supplier or customer of the Company or another Group member, or an offi cer of or otherwise associated directly or indirectly with a material supplier or customer;

vi. has no material contractual relationship with the Company or other Group member other than as a Director of the Company;

vii. has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and

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

Th e Board has adopted the policy that the Chairman should in all but exceptional circumstances be an independent director and that the Chairman should not hold the position of CEO. Th e appointment of Mr Phillip Harry AM as Chairman and Mr Allan Yeo as CEO complies with this policy.

1.3 Board Policies

1.3.1 Confl icts of Interest

Directors must:

■ disclose to the Board actual or potential confl icts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and

■ if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any confl ict of interest.

If a Director cannot or is unwilling to remove a confl ict of interest then the Director must, as per the Corporations Act, absent himself from the room when discussion and/or voting occurs on matters about which the confl ict relates.

1.3.2 Commitments

Each member of the Board is committed to spending suffi cient time to enable them to carry out their duties as a Director of the Company.

1.3.3 Confi dentiality

In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confi dential, information received in the course of exercising their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.

1.3.4 Continuous Disclosure

Th e Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the Australian Stock Exchange (ASX) as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifi es the ASX of information:

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i. concerning the Company that a reasonable person would expect to have a material eff ect on the price or value of the Company’s securities; and

ii. that would, or would be likely to, infl uence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.

1.3.5 Education and Induction

New Directors undergo an induction process in which they are given a full briefi ng on the Company. Th is includes meetings with key executives, tours of the premises, an induction package and presentations.

In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifi cally, Directors are provided with the resources and training to address skills gaps where they are identifi ed.

1.3.6 Independent Professional Advice

Th e Board collectively and each Director (with the prior approval of the Chairman) has the right to seek independent professional advice at the Company’s expense to assist them to carry out their duties and responsibilities.

1.3.7 Related Party Transactions

Related party transactions include any fi nancial transaction between a Director and the Company and will be reported in writing at each Board meeting. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.

1.3.8 Shareholder Communication

Th e Company respects the rights of its shareholders and to facilitate the eff ective exercise of those rights the Company is committed to:

i. communicating eff ectively with shareholders through releases to the market via the ASX, newsletters mailed to shareholders and notice of general meetings of the Company;

ii. giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;

iii. making it easy for shareholders to participate in general meetings of the Company; and

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

Th e Company also makes available a telephone number and fax number for shareholders to make enquiries of the Company.

1.3.9 Trading in Company Shares

Th e Company has an Insider Trading Procedure under which Directors, Company Secretaries and employees of the Company and any of its subsidiaries (each referred to as a Prescribed Person) should not eff ect any dealing:

i. in the period from the end of a half year/ fi nancial year until that half year’s/fi nancial

year’s result announcement is released to the ASX; or

ii. at any time when it is known by that Prescribed Person that an announcement of a major event or release of price sensitive information is likely to occur; or

iii. at any time when that Prescribed Person has any price sensitive information not generally available.

Th e CEO may in his/her absolute discretion grant a waiver to all or any part of this policy if in his/her opinion all relevant information are in the domain of the public including all information necessary to be disclosed to the ASX in accordance with the Continuous Disclosure requirement. Regardless, notice of an intention to trade must be given prior to trading in the Company’s securities as well as a confi rmation

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that the person is not in possession of any unpublished price sensitive information. Th e completion of any such trade by a Director must also be notifi ed to the Company Secretary who in turn advises the ASX.

1.3.10 Performance Review/Evaluation

Th e Board considers the ongoing development and improvement of its own performance as a critical input to eff ective governance. While the Board is committed to accountability, the fi nancial performance of the Company over recent years, recent changes in the composition of the Board and the implementation of the new business strategy has required a signifi cant level of eff ort from the Board over recent times. As a result, the Board has used informal, ongoing assessments to evaluate its performance. Formal evaluations will be performed once a degree of fi nancial and operating stability has been reached by the Company.

1.3.11 Attestations by Chief Executive Offi cer and Finance Manager

In accordance with the Board’s policy and section 295A of the Corporations Act, prior to the Board signing this Annual Report, the CEO and the Finance Manager report in writing to the Board that in their opinion the consolidated fi nancial statements of the Company and its controlled entities for each half and full fi nancial year present a true and fair view, in all material respects, of the Group’s fi nancial condition and operational results and are in accordance with accounting standards.

2. Board Committees

2.1 Audit Committee

Th e Audit Committee was established on 8 February 2000. Below is a summary of the role, composition and responsibilities of the Audit Committee. Further details are contained in the Audit Committee’s Charter.

2.1.1 Role

Th e Audit Committee is responsible for reviewing the integrity of the Company’s fi nancial reporting and overseeing the external audit of the Company.

2.1.2 Composition

Th e Audit Committee currently consists of two members. Members are appointed by the Board from amongst the Non-Executive Directors, a majority of whom are also independent if possible. Th e current members of the Audit Committee are Mr Richard Rodgers (Chairman) and Mr Anthony Ractliff e. All members can read and understand fi nancial statements and are otherwise fi nancially literate and Mr Rodgers, the Chairman, is a qualifi ed accountant with experience in tax, fi nancial and accounting matters. Th e details of the members’ qualifi cations may be found on page 4.

2.1.3 Responsibilities

Th e Audit Committee reviews the annual and half-yearly fi nancial statements and any reports which accompany published fi nancial statements and recommends to the Board whether the fi nancial statements and reports should be signed.

Th e Audit Committee also recommends to the Board the appointment, removal and remuneration of the external auditor.

Th e Audit Committee is also responsible for assisting the Board with internal control and risk management.

2.2 Remuneration Committee

As the whole Board currently only consists of four members, the Company does not have a remuneration committee because it would not be a more effi cient mechanism than the full Board for focusing the Company on specifi c issues.

For information on remuneration policies, please refer to the remuneration report on page 7.

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2.3 Nomination Committee

As the whole Board currently only consists of four members, the Company does not have a nomination committee because it would not be a more effi cient mechanism than the full Board focusing on specifi c issues. Th e Board takes on the role and responsibilities for receiving, assessing and recommending, where appropriate, nominees for appointment to the Board. All Non-Executive Directors are subject to re-election and to the ASX Listing Rules and Corporations Act provisions concerning removal of a director.

2.3.1 Criteria for selection of Directors

Directors are appointed based on the specifi c governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least two Directors with experience in the fi nancial services industry. In addition, Directors should have the relevant blend of personal experience in:

■ accounting and fi nancial management; and/or

■ legal skills; and/or

■ CEO-level business experience.

3. Company Code Of Conduct

As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. Th ese stakeholders include employees, clients, customers, government authorities, creditors and the community as whole. Th e Company adopted a Code of Conduct which includes the following.

Responsibilities to Shareholders and the Financial Community Generally

Th e Company complies with the spirit as well as the letter of all laws and regulations that govern shareholders’ rights. Th e Company has processes in place designed to ensure the truthful and

factual presentation of the Company’s fi nancial position and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and fi nancial reporting standards.

Responsibilities to Clients, Customers and Consumers

Employees have an obligation to use their best eff orts to deal in a fair and responsible manner with each of the Company’s clients, customers and consumers. Th e Company for its part is committed to providing clients, customers and consumers with fair value.

Employment Practices

Th e Company endeavours to provide a safe workplace in which there is equal opportunity for all employees at all levels. Th e Company does not tolerate the off ering or acceptance of bribes or the misuse of Company assets or resources.

Obligations Relative to Fair Trading and Dealing

Th e Company aims to conduct its business fairly and to compete ethically and in accordance with relevant competition laws. Th e Company strives to deal fairly with its customers, suppliers, competitors and employees and encourages its employees to strive to do the same.

Responsibilities to the Community

As part of the community the Company is committed to conducting its business in accordance with applicable environmental laws and regulations.

Responsibility to the Individual

Th e Company is committed to keeping private information collected from employees, clients, customers, consumers and investors confi dential and protected from uses other than those for which it was provided.

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Confl icts of Interest

Employees and Directors must avoid confl icts as well as the appearance of confl icts between personal interests and the interests of the Company.

How the Company Complies with Legislation Affecting its Operations

Within Australia, the Company strives to comply with the spirit and the letter of all legislation aff ecting its operations. Outside Australia, the Company will abide by local laws in all countries in which it operates. Where those laws are not as stringent as the Company’s operating policies, Company policy will prevail.

How the Company Monitors and Ensures Compliance with its Code

Th e Board, management and all employees of the Company are committed to implementing this Code of Conduct and each individual is accountable for such compliance. Disciplinary measures may be imposed for violating the Code.

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INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008Tranzact Financial Services LimitedABN 84 089 997 731

Note

Consolidated2008

$

Consolidated2007

$

Parent Entity 2008

$

Parent Entity 2007

$Revenue 2 5,824,646 4,418,468 2,272,778 2,179,365

Other Income 2 - 2,273 - -

5,824,646 4,420,741 2,272,778 2,179,365

Less: Expenses

Service Expenses 826,861 389,722 349,264 303,157

Occupancy Costs 188,160 311,582 130,624 297,318

Administration Expenses 623,994 859,386 106,215 179,326

Employee Benefi ts Expense 2,128,431 1,625,027 1,613,042 666,146

Amortisation and Depreciation Expenses 250,335 168,215 55,151 4,855

Financing Costs 47,688 419,190 136,822 497,247

Other Expenses 14,973 2,299 - 1,566

3 4,080,442 3,775,421 2,391,118 1,949,615

Profi t/(Loss) before Income Tax 1,744,204 645,320 (118,340) 229,750Income Tax (Benefi t)/Expense 4 (3,490) 14,315 (575,561) (154,060)

Profi t after Income Tax 1,747,694 631,005 457,221 383,810

Profi t/(Loss) attributable to:Minority interest (6,777) - - -

Equity holders of the Parent Entity 1,754,471 631,005 457,221 383,810

1,747,694 631,005 457,221 383,810

Consolidated2008

$

Consolidated2007

$

EARNINGS PER SHAREBasic Earnings per Share 6 0.016 0.011

Diluted Earnings per Share 6 0.015 0.008

DIVIDENDS PER SHARE 5 0.0025 –

The above Income Statement should be read in conjunction with the accompanying Notes.

FINANCIAL STATEMENTS

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BALANCE SHEET AS AT 30 JUNE 2008

Tranzact Financial Services LimitedABN 84 089 997 731

Note

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$CURRENT ASSETSCash & Cash Equivalents 8 3,953,640 5,157,486 243,635 781,957

Trade & Other Receivables 9 622,351 723,213 30,610 191,571

Derivatives 10 244,352 - - -

Financial Assets 11 600,484 2,559,805 - 2,000,000

Other 12 206,940 105,027 162,603 99,027

TOTAL CURRENT ASSETS 5,627,767 8,545,531 436,848 3,072,555NON-CURRENT ASSETSProperty, Plant and Equipment 13 479,141 231,691 297,000 204,336

Financial Assets 14, 28 3,025,115 - 11,274,273 7,149,864

Intangible Assets 15 6,892,271 3,457,973 2,181,403 2,181,403

Deferred Tax Assets 16 28,779 32,164 28,779 32,164

TOTAL NON-CURRENT ASSETS 10,425,306 3,721,828 13,781,455 9,567,767TOTAL ASSETS 16,053,073 12,267,359 14,218,303 12,640,322CURRENT LIABILITIESInterest Bearing Liabilities 17 887,182 - 2,102,640 -

Trade & Other Payables 18 1,017,471 866,771 400,457 626,206

Current Tax Liabilities 26,926 - - -

TOTAL CURRENT LIABILITIES 1,931,579 866,771 2,503,097 626,206NON-CURRENT LIABILITIESTrade & Other Payables 18 44,237 50,381 44,237 50,381

Provisions 19 91,214 13,305 19,640 13,305

Deferred Tax Liabilities 21 356,118 - - -

Interest Bearing Liabilities 17 - - - 1,250,000

TOTAL NON-CURRENT LIABILITIES 491,569 63,686 63,877 1,313,686TOTAL LIABILITIES 2,423,148 930,457 2,566,974 1,939,892NET ASSETS 13,629,925 11,336,902 11,651,329 10,700,430EQUITYIssued Capital 22 19,999,409 19,505,731 19,999,409 19,505,731

Accumulated Losses (6,470,525) (8,224,996) (8,387,667) (8,844,888)

Reserves 23 54,416 56,167 39,587 39,587

Parent Entity Interest 13,583,300 11,336,902 11,651,329 10,700,430Minority Equity Interest 46,625 - - -

TOTAL EQUITY 13,629,925 11,336,902 11,651,329 10,700,430

The above Balance Sheet should be read in conjunction with the accompanying Notes.

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008


Issued Capital

EmployeeOptions Reserve

Foreign Currency Reserve

Other Reserve

Accumulated Losses

Parent Entity

InterestMinority Interest

Total Equity

CONSOLIDATED $ $ $ $ $ $ $ $As at 30 June 2006 10,524,981 12,270 - 178,982 (8,856,001) 1,860,232 - 1,860,232Profi t attributable to members of the parent entity - - - - 631,005 631,005 - 631,005

Exercise of Convertible Note 1,456,422 - - (178,982) - 1,277,440 - 1,277,440

Shares issued during the year 7,917,346 - - - - 7,917,346 - 7,917,346

Transaction costs (393,018) - - 39,587 - (353,431) - (353,431)

Transfer to Unrealised Foreign Exchange Gains Reserve - - 4,498 - - 4,498 - 4,498

Employee Options Reserve - (188) - - - (188) - (188)

As at 30 June 2007 19,505,731 12,082 4,498 39,587 (8,224,996) 11,336,902 - 11,336,902Recognition of minority interest in Subsidiaries - - - - - - 53,402 53,402

Profi t attributable to members of the parent entity - - - - 1,754,471 1,754,471 - 1,754,471

Loss attributable to minority equity interest - - - - - - (6,777) (6,777)

Shares issued during the year 500,000 - - - - 500,000 - 500,000

Transaction costs (6,322) - - - - (6,322) - (6,322)

Transfer from Unrealised Foreign Exchange Gains Reserve - - (4,498) - - (4,498) - (4,498)

Employee Options Reserve - 2,747 - - - 2,747 - 2,747

As at 30 June 2008 19,999,409 14,829 - 39,587 (6,470,525) 13,583,300 46,625 13,629,925

Issued Capital

Employee Options Reserve

Foreign Currency Reserve

Other Reserve

AccumulatedLosses Total

$ $ $ $ $ $PARENT ENTITYAs at 30 June 2006 10,524,981 - - 178,982 (9,228,698) 1,475,265Profi t attributable to members of the parent entity - - - - 383,810 383,810

Exercise of Convertible Note 1,456,422 - - (178,982) - 1,277,440

Shares issued during the year 7,917,346 - - - - 7,917,346

Transaction costs (393,018) - - 39,587 - (353,431)

As at 30 June 2007 19,505,731 - - 39,587 (8,844,888) 10,700,430Profi t attributable to members of the parent entity - - - - 457,221 457,221

Shares issued during the year 500,000 - - - - 500,000

Transaction costs (6,322) - - - - (6,322)

As at 30 June 2008 19,999,409 - - 39,587 (8,387,667) 11,651,329

The above Statement of Changes in Equity should be read in conjunction with the accompanying Notes.

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2008


Note

ConsolidatedTotal2008

$

ConsolidatedTotal2007

$

Parent EntityTotal2008

$

Parent EntityTotal2007

$CASH FLOWS FROM OPERATING ACTIVITIESReceipts from Customers 5,841,994 4,435,788 2,126,624 2,279,989

Payments to Suppliers and Employees (4,489,136) (3,517,780) (2,325,450) (1,302,651)

Distributions and Interest Received 610,618 378,966 108,771 33,596

Interest and Other Finance Costs Paid (63,711) (563,823) (153,872) (712,379)

Dividends Received 50,000 - 50,000 -

Income Taxes Paid (8,528) (3,416) 745,147 -

Net cash infl ow from operating activities 31 1,941,237 729,735 551,220 298,555CASH FLOWS FROM INVESTING ACTIVITIESPayments for Acquisition of Promoter Rights (41,403) (2,000,000) (41,403) (2,000,000)

Net Payments for Acquisition of Controlled Entities (2,689,525) - (2,780,609) -

Payments for Acquisition of Administration Contracts - (134,146) - -

Payments for Acquisition of Software Licence (89,407) - (81,842) -

Net Loans/Advances to Adviser Practices (2,133,649) (709,804) - -

Cash put on Term Deposit - (2,000,000) - (2,000,000)

Payments for the Purchase of Investments (553,800) (553,800)

Payments for Purchases of Plant & Equipment (233,249) (108,932) (195,248) (106,701)

Proceeds from the Disposal of Plant & Equipment - 2,273 - -

Loans to Related Parties - (1,100) (290,000) (1,100)

Cash taken off Term Deposit 2,000,510 4,000,000 2,000,000 -

Repayment of Loans by Related Parties - 2,100 - 1,100

Net cash outfl ow from investing activities (3,740,523) (949,609) (1,942,902) (4,106,701)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Share Issues - 7,917,346 - 7,917,346

Payments associated with Share Issues (12,332) (347,418) (12,332) (347,418)

Repayment of Borrowings (292,983) (5,732,140) (1,285,521) (5,732,140)

Proceeds from Borrowings 900,755 933,036 2,151,213 930,573

Net cash infl ow from fi nancing activities 595,440 2,770,824 853,360 2,768,361Net (decrease)/increase in cash held (1,203,846) 2,550,950 (538,322) (1,039,785)Cash at the beginning of the fi nancial year 5,157,486 2,606,536 781,957 1,821,742Cash at the end of the fi nancial year 8 3,953,640 5,157,486 243,635 781,957

The above Statement of Cash Flows should be read in conjunction with the accompanying Notes.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This general purpose fi nancial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. The fi nancial report complies with Australian Equivalents to International Financial Reporting Standards (AIFRS) in their entirety. Compliance with AIFRS ensures that the fi nancial report complies with International Financial Reporting Standards.

The fi nancial report covers the year ended 30 June 2008 for the consolidated entity of Tranzact Financial Services Limited and its controlled entities, and Tranzact Financial Services Limited as an individual parent entity. Tranzact Financial Services Limited is a listed public company, incorporated and domiciled in Australia.

The fi nancial report was authorised for issue in accordance with a resolution of the Directors on 26 September 2008.

The following is a summary of the signifi cant accounting policies adopted by the Company in the preparation of the accounts. Unless otherwise stated, the accounting policies are consistent with those of the previous year.

Basis of Preparation

The fi nancial report has been prepared on an accrual basis and is based on historical costs modifi ed by the revaluation of selected non-current assets, fi nancial assets and fi nancial liabilities for which the fair value basis of accounting has been applied.

Accounting Policies

(a) Principles of Consolidation

Tranzact Financial Services Limited and its subsidiaries together are referred to in this fi nancial report as the Group or the consolidated entity. Subsidiaries are entities over which the Group has the power to govern the fi nancial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. A list of subsidiaries is contained in Note 28 to the fi nancial statements.

Where subsidiaries have entered or left the consolidated entity during the year or comparative year, their operating results have been included from the date control was obtained or until the date control ceased. The effects of all transactions between entities in the consolidated entity are eliminated in full.

The Group has fi nancial interests in New Zealand advisory practices through Camelot Financial Advisers Limited (Camelot). The Group has no infl uence over the business operations or decisions of the advisory practices. Camelot was set up to source funding for selected advisers to aid them in their growth initiatives. These “Partnership for Growth” fi nancial interests are arranged through loans from a Tranzact subsidiary to Camelot, and the underlying interests are treated as Available for Sale assets (refer Note 14).

(b) Property, Plant and Equipment

Property, plant and equipment are measured on a historical cost less depreciation.

The carrying amount of property, plant and equipment is reviewed annually by the Directors to ensure it is not in excess of recoverable amount. The recoverable amount is assessed on the basis of the expected net cash fl ows that will be received from the asset’s employment and subsequent disposal. The expected net cash fl ows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fi xed assets and capitalised leased assets is depreciated on a straight-line basis over their estimated useful lives from when the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Plant and Equipment 5-40% Leased Plant and Equipment 20% Leasehold Improvements 25-33% Motor Vehicle 12.5%

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than the recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.

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(continued)

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)(c) Income Tax

The charge for current income tax expense is based on the profi t for the year adjusted for any non-assessable or disallowed items and utilised tax losses. It is calculated using the tax rates that have been enacted or are substantially enacted at the balance date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profi t and loss.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future profi ts will be available against which deductible temporary timing differences can be utilised.

Tranzact Financial Services Limited, as the parent entity, and its subsidiaries implemented the tax consolidation legislation as of 1 July 2002. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the stand-alone taxpayer approach to allocation. The current tax liability for each entity in the Group is subsequently assumed by the parent entity, and becomes a liability of the parent entity.

(d) Employee Benefi ts

Provision is made for the Company’s liability for employee benefi ts arising from services rendered by employees to balance date.

Employee benefi ts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus on costs. Employee benefi ts expected to be paid later than one year have been measured at the present value of the estimated future cash outfl ows to be made for those benefi ts.

A provision is recognised for employee entitlements relating to long service and annual leave. In calculating the present value of future cash fl ows in respect of long service leave, the probability of long service leave being taken is based on historical data.

(e) Trade and Other Payables

Trade payables including accruals not yet billed are recognised when the consolidated entity becomes obliged to make future payments as a result of the purchase of assets or services. These amounts are unsecured and have generally 30-day payment terms.

(f) Share-based Payments

The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black-Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Share-based payments transactions, including transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the Company are recognised in the entity’s fi nancial statements.

For transactions with employee and others providing similar services, the Company measures the fair value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of employee services received. The fair value of equity instruments granted is measured at grant date.

(g) Subsidiary Companies

The parent entity’s interest in the subsidiary companies is recognised at the lower of cost and net recoverable value, being the amount of the subsidiaries’ net assets at 30 June 2008.

(h) Leases

Leases of fi xed assets where substantially all the risks and benefi ts incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the economic entity, are classifi ed as fi nance leases.

Leases where the lessor retains substantially all the risks and rewards of ownership of the net asset are classifi ed as operating leases. Payments under operating leases, net of incentives received from the lessor, are charged to the income statement on a straight-line basis over the period of the lease.

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(continued)

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Revenue Recognition

Fee and commission income is recognised when the economic entity has performed the related service. Dividend income is recognised when the dividend has been declared for payment. Interest income and distributions from fi nancial interests are recognised on an accrual basis.

(j) Cash and Cash Equivalents

For the purpose of the Statements of Cash Flows, cash includes cash on hand, deposits held at call with a fi nancial institution with original maturities of three months or less, net of bank overdrafts.

(k) Intangibles

In accordance with AASB 138: Intangible Assets, intangible assets are classifi ed as having either indefi nite or fi nite useful lives.

An intangible asset shall be regarded as having an indefi nite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash infl ows. The useful life of an intangible asset that arises from contractual or other legal rights shall not exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the asset is expected to be used. If the contractual or other legal rights are conveyed for a limited term that can be renewed, the useful life of the intangible asset shall include the renewal period(s) only if there is written evidence to support renewal.

An intangible asset with an indefi nite useful life shall not be amortised. Instead it must be tested for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired.

An intangible asset with a fi nite useful life shall be amortised over its useful life. The amortisation method used shall refl ect the pattern in which the assets future economic benefi ts are expected to be consumed.

Promoter Agreements

The Group has acquired the rights to be the promoter to superannuation master trusts which are classifi ed as intangible assets. Such assets are deemed to have indefi nite useful lives as it is expected that the promotership rights would continue with no foresseable limit to the period over which they are expected to generate cash fl ows. As such, they are not amortised but are subject to impairment testing.

Superannuation Administration Agreements

The Group has acquired agreements to provide administration services to superannuation entities which are classifi ed as intangible assets. Where there is written evidence that these contracts will be renewed on an ongoing basis, the asset is classifi ed as having an indefi nite useful life. Such assets are not amortised but subject to impairment testing. Where no such evidence exists, they are classifi ed as having a defi nite useful life and are amortised over the remaining term of their contract which is no more than 3 years on a straight-line basis.

Australian Financial Services Licences (AFS Licences)

The Group holds several AFS Licences which enables it to provide fi nancial services including providing advice, dealing, IDPS and custody in return for fees. The costs incurred for obtaining these AFS Licences are capitalised and amortised over a period of no more than 10 years on a straight-line basis.

Software and Website Development

Software development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefi ts and these benefi ts can be measured reliably. Development costs have a fi nite life and are amortised on a systematic basis matched to the future economic benefi ts over the useful life of the software which is no more than 3 years on a straight-line basis.

Goodwill

Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains or losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(l) Earnings Per Share

(i) Basic Earnings Per Share: Basic earnings per share is determined by dividing the operating profi t/(loss) after income tax and preference share dividends attributable to members of the Company by the weighted average number of ordinary shares outstanding during the year and are adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted Earnings Per Share: Diluted earnings per share adjusts the fi gures used in determination of basic earnings per share to take into account the after income tax effect of interest and other fi nancing 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.

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(continued)


(m) Financial Instruments

(i) Recognition

Financial instruments, incorporating fi nancial assets and fi nancial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for fi nancial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classifi ed as at fair value through profi t or loss. Transaction costs related to instruments classifi ed as at fair value through profi t or loss are expensed to profi t or loss immediately. Financial instruments are classifi ed and measured as set out below.

(ii) Financial Assets at fair value through profi t and loss

A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Derivatives are also categorised as held for trading unless they are designated hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

(iii) Loans and receivables

Loan and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market and are stated at the amortised cost using the effective interest rate method.

(iv) Held-to-maturity investments

These investments have fi xed maturities, and it is the Group’s intention to hold these investments to maturity. Any held-to-maturity investments held by the Group are stated at the amortised cost using the effective interest rate method.

(v) Available-for-sale fi nancial assets

Available-for-sale fi nancial assets include any fi nancial assets not included in the above categories. Available-for-sale fi nancial assets are refl ected at fair value. Unrealised gains and losses from changes in fair value are taken directly to equity.

(vi) Financial liabilities

Non-derivative fi nancial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

(vii) Derivative instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in the fair value are taken to the income statement unless they are designated as hedges. Gains and losses arising from designated hedges are taken directly to a hedge reserve in equity and are transferred to the income statement in the periods when the hedged item will affect the profi t and loss.

(viii) Fair value

Fair value is determined based on the current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value of unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

(ix) Impairment

At each reporting date, the Group assesses whether there is objective evidence that a fi nancial instrument has been impaired. In the case of available-for-sale fi nancial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. These assessments are based on critical accounting estimates and judgements. Impairment losses are recognised in the income statement.

(n) Finance Costs

Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include interest on short-term and long term borrowings.

(o) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST is not recoverable from the Australian Taxation Offi ce. 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 balance sheet are shown inclusive of GST.

Cash fl ows are presented in the statement of cash fl ows on a gross basis, except for the GST component of investing and fi nancing activities, which are disclosed as cash fl ows from operating activities.

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(continued)


(p) Business Combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method.

The purchase method requires an acquirer of the business to be identifi ed and for the cost of the acquisition and fair values of identifi able assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profi t or loss.

(q) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated fi nancial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash fl ow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

(r) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outfl ow of economic benefi ts will result and that outfl ow can be reliably measured.

(s) Segment Reporting

Segment information is prepared in conformity with accounting standard AASB 114: Segment Reporting.

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 other intangible assets, net of related provisions. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage.

(t) Trade Receivables

Trade receivables are recognised at original invoice amounts less an allowance for uncollectible amounts and have repayment terms between 30 and 90 days. Collectability of trade receivables is assessed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance is made for doubtful debts where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Objective evidence of impairment include fi nancial diffi culties of the debtor, default payments or debts more than 120 days overdue. On confi rmation that the trade receivable will not be collectible the gross carrying value of the asset is written off against the associated provision.

(u) Interest-Bearing Liabilities

All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the loans and borrowings using the effective interest method.

(v) Dividends

Provision is made for dividends declared, and no longer at the discretion of the Group, on or before the end of the fi nancial year but not distributed at balance date.

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(continued)


(w) Impairment

At each reporting date the Group assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in the income statement where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(x) New or Amended Australian Accounting Standard

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in any changes to the Group’s accounting policies nor affected the amounts reported for the current or prior years.

At the date of authorisation of the fi nancial report a certain number of the Australian Accounting Standards and Interpretations issued or amended but not yet effective have not been adopted by the Group for the fi nancial reporting year ended 30 June 2008. The Directors have assessed the impact of these new or amended standards (to the extent relevant to the Group) and interpretations as follows:

Reference Title Summary

Application Date of Standard*

Impact on Company Financial Report

Application Date for Company

AASB 8 and AASB 2007-3

Operating Segments and consequential amendments to other Australian Accounting Standards

New Standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting

1 January 2009 AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group’s fi nancial statements, although it may indirectly impact the level at which goodwill is tested for impairment. In addition, the amendments may have an impact on the Group’s segment disclosures. The Group has not yet determined whether there will be any impact on segment defi nition and therefore have not yet ascertained whether there will be any changes to recoverable amounts of cash-generating units.

1 July 2009

AASB 123 (Revised) and AASB 2007-6

Borrowing Costs and consequential amendments to other Australian Accounting Standards

The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.

1 January 2009 These amendments to AASB 123 require that all borrowing costs assoclated with a qualifying asset be capitalised. The Group has no borrowing costs associated with qualifying assets and as such the amendments are not expected to have any impact on the Group’s fi nancial report.

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(continued)


(x) New or Amended Australian Accounting Standard (continued)





AASB 101 (Revised) and AASB 2007-8

Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards

Introduces a statement of comprehensive income.Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifi cations of items in the fi nancial statements, changes in the presentation requirements for dividends and changes to the titles of the fi nancial statements.

1 January 2009 These amendments are only expected to affect the presentation of the Group’s fi nancial report and will not have a direct impact on the measurement and recognition of amounts disclosed in the fi nancial report. The Group has not determined at this stage whether to present a single statement of comprehensive income or two separate statements.

1 July 2009

AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations

The amendments clarify the defi nition of ‘vesting conditions’, introducing the term ‘non-vesting conditions’ for conditions other than vesting conditions as specifi cally defi ned and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfi ed.

1 January 2009 The Group has share-based payment arrangements that may be affected by these amendments. However, the Group has not yet determined the extent of the impact, if any.

1 July 2009

AASB 2008-5

&

AASB 2008-6

Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs.

1 January 2009

1 July 2009

The Group has not yet determined the extent of the impact of the amendments, if any.

1 July 2009

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(continued)


(x) New or Amended Australian Accounting Standard (continued)





AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an investment in a Subsidiary, Jointly Controlled Entity or Associate

The main amendments of relevance to Australian entitles are those made to AASB 127 deleting the ‘cost method’ and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profi t or loss in an entity’s separate fi nancial statements (i.e. parent company accounts). The distinction between pre- and post-acquisition profi ts is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment.

AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value (An issue sometimes known as a “dividend trap” in newcos).

1 January 2009 The Group has not yet determined the extent of the impact of the amendments, if any.

1 July 2009

AASB 2008-8 Amendment to Australian Accounting Standards-Eligible Hedged Items

To clarify how the principles that determine whether a hedged risk or portion of cash fl ows is eligible for designation should be applied in particular situations.

1 July 2009 The Group has not yet determined the extent of the impact of the amendments, if any.

1 July 2009

* Designates the beginning of the applicable annual reporting period unless otherwise stated.

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(continued)


Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the fi nancial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key Estimates - Impairment of Goodwill and Intangible Assets with Indefi nite Useful Lives

The Group tests annually whether goodwill and intangible assets with indefi nite useful lives have suffered any impairment, in accordance with the accounting policy stated in Note 1(w). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to Note 15 for details of these assumptions.

Key Judgements – Intangible Assets with Indefi nite Useful Lives

An intangible asset is regarded as having an indefi nite useful life when there is no foreseeable limit to the period over which the asset is expected to generate cash infl ows. The Promoter Rights and Administration Contracts of the superannuation master trusts are deemed to have indefi nite useful lives. This is because of the letter of comfort received from the Trustee stating that it is their preferred option to renew contracts where the incumbent service provider continues to remain competitive and meet its contractual obligations.

Based on this, management are of the opinion that there is no foreseeable limit over which these assets are expected to generate net cash infl ows for the Group and therefore no justifi cation for choosing a life that is unrealistically short. Impairment reviews are performed on an ongoing basis.

Key Judgements - Financial Interests in the Camelot Partnership for Growth Investments

The fi nancial interests in the Camelot Partnership for Growth Investments are treated as Available for Sale assets and are carried at fair value. The Group has no infl uence over the business operations or decisions of the advisory practices in the Camelot Partnership as these are determined by the principals of those practices. As such, these practices are not consolidated as subsidiaries nor are they accounted for as associates using the equity method of accounting (refer Note 14).

Management have deemed the carrying value of the Partnership for Growth Available for Sale investments to not be materially different from the fair value, due to the recent nature of the acquisitions, that there has been no change in market conditions and performance is tracking as expected at the time of acquisition.

Key Judgements – Financial Interests in Group Insurance & Superannuation Concepts Pty Ltd

The Group holds a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd. This has been classifi ed as an Available for Sale investment, and has not been equity accounted, as management are not able to exert any signifi cant infl uence over the operating and fi nancial decision making of the entity. The investment is held for strategic purposes only – refer to Note 14.

Management are unable to establish the fair value due to there being no quoted market for this interest, however due to the holding period, performance of the company and potential initiatives in the pipeline, it is expected that the carrying value would not be materially different from the fair value

2. REVENUE

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$RevenueRevenue from the Rendering of Services 4,619,741 3,773,607 2,126,624 2,132,662

Commission Income 475,179 312,731 - -

Bank Interest 352,638 332,130 96,154 46,703

Distributions from fi nancial interests in the Camelot Partnership 327,088 - - -

Dividends Received 50,000 - 50,000 -

TOTAL REVENUE 5,824,646 4,418,468 2,272,778 2,179,365

Other Income - 2,273 - -

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3. PROFIT BEFORE INCOME TAX

Profi t before Income Tax includes the following specifi c expenses.

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$Occupancy CostsNet Rental Expenses Relating to Operating Leases 158,107 277,869 106,249 269,696

Other Occupancy Costs 30,053 33,713 24,375 27,622

188,160 311,582 130,624 297,318

Employee Benefi ts ExpensesSalaries & Wages 1,599,597 1,178,794 1,205,068 464,203

Superannuation Contributions 140,304 118,824 107,762 42,853

Other Employee Benefi ts Expenses 388,530 327,409 300,212 355,204

2,128,431 1,625,027 1,613,042 862,260

Amortisation and Depreciation ExpensesDepreciation - Property, Plant and Equipment 89,094 37,205 55,151 4,855

Amortisation - Administration Contracts 107,937 113,461 - -

Amortisation- Trade Marks and Other Items 17,714 - - -

Amortisation- Software & Website Development 35,756 17,549 - -

250,501 168,215 55,151 4,855

Financing CostsInterest on Convertible Notes - 87,465 - 87,465

Interest on Borrowings 26,958 310,552 117,120 388,609

Fee Expenses 20,564 21,173 19,702 21,173

47,522 419,190 136,822 497,247

Foreign Exchange LossesRealised Losses 6,348 2,299 - 1,566

Unrealised Losses 16,457 - - -

22,805 2,299 - 1,566

4. INCOME TAX (a) The components of tax (benefi t)/expense comprise:

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$Current Tax 579,085 228,044 (29,867) 61,843

Deferred Tax (37,167) 12,141 3,385 12,141

Adjustments for previous years 3,671 2,174 - -

Recoupment of prior year tax losses (549,079) (228,044) (549,079) (228,044)

(3,490) 14,315 (575,561) (154,060)

(b) The prima facie tax payable on the operating profi t is reconciled to the income tax provided as follows:

Profi t/(Loss) before Income Tax 1,744,204 645,320 (118,340) 229,750

Prima facie tax payable at 30% 523,261 193,596 (35,502) 68,925

Tax Effect of Differences:

Non Allowable Deductions 12,228 46,589 2,591 5,059

Fully Franked Dividends 6,429 - 6,429 -

Recoupment of prior year tax losses previously not

recognised (549,079) (228,044) (549,079) (228,044)

Income Tax adjusted for permanent differences (7,161) 12,141 (575,561) (154,060)

Adjustments for previous years 3,671 2,174 - -

Income Tax (Benefi t)/Expense (3,490) 14,315 (575,561) (154,060)

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4. INCOME TAX (continued)

Tranzact Financial Services Limited and its wholly owned subsidiaries implemented the tax consolidation legislation as at 1 July 2002. The head entity of the tax consolidated group is Tranzact Financial Services Limited.

The wholly owned subsidiaries within the Tranzact Financial Services Group have entered into a tax funding arrangement with the head entity whereby the subsidiaries shall pay to the head entity their respective tax liabilities each year. In the case of subsidiaries having recorded a tax loss it will not need to make a payment to the head entity and it will instead receive a payment from the head entity to the extent that the tax loss can be utilised by the consolidated group. The head entity is entitled to utilise any carry forward losses of the consolidated group. Any associated costs such as general interest change and penalties shall be paid for by the head entity.

Total Super Pty Ltd and its wholly owned subsidiary Total Supertec Pty Ltd are not consolidated under the tax consolidation legislation. Also, they do not form part of the Tranzact Financial Services tax consolidation group. The potential future income tax benefi ts from tax losses as at 30 June 2008 available to Total Super Pty Ltd amounted to $74,826. The availability of these tax losses is subject to Total Super continuing to satisfy the Same Business Test.

The unused tax losses as at 30 June 2008 amounted to $1,164,482 (2007:$1,713,561). The availability of these tax losses is subject to the Company continuing to satisfy the Same Business Test. Deferred Tax Assets are brought to account only if the conditions set out in Note 1(c) are met.

No benefi t from the above carried forward tax losses is included in the Deferred Tax Asset balance. This is due to the possibility of transactions being considered that could result in the inability of tax losses being utilised.

5. DIVIDENDS

Since year end the Directors have recommended the payment of a fi nal fully franked dividend of 0.25 cent per share (2007:nil). The aggregate amount of the proposed dividend expected to be paid on 10 October 2008, but not recognised as a liability at year end, is $282,857 (2007:nil).

Consolidated2008

$

Consolidated2007

$Franking credits available for subsequent fi nancial years at a tax rate of 30% 161,085 161,085Franking credits from the receipt of dividends 21,428 -The amount of franking credits available for future reporting periods 182,513 161,085

The impact on the franking account of dividends recommended after year end but before the fi nancial report was authorised for issue and not recognised as a liability at year end will be a reduction on the franking account of $121,225 (2007: $nil).

6. EARNINGS PER SHARE

Consolidated2008

$

Consolidated2007

$Earnings used in the calculation of basic earnings per share 1,754,471 631,005

Net effect of Convertible Note - 37,642

Earnings used in the calculation of diluted earnings per share 1,754,471 668,647

No. No.Weighted average number of ordinary shares on issue used in the calculation of basic

earnings per share 112,837,444 58,174,386

Weighted average number of options outstanding 389,297 236,223

Weighted average converting shares on issue - 24,296,207

Weighted number of ordinary shares outstanding during the year used in calculating diluted

earnings per share 113,226,741 82,706,816

Weighted average number of converted, lapsed or cancelled potential ordinary shares

included in diluted earnings per share calculation - 24,398,991

Instruments that could potentially dilute earnings per share but were not included because

they were anti-dilutive 34,705,088 32,669,385

Refer to Note 1(l)(ii) for information relating to diluted earning per share.

No shares or options have been issued or cancelled since 30 June 2008.

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7. SEGMENT INFORMATION

The Group’s business is located in Australia and New Zealand and is organised into the following divisions.

Superannuation Fund Administration, Asset Consulting & SponsorshipThe Group operates as a superannuation fund administrator, asset consultant and sponsor. For these services the Group receives fees and commission income.

Investor Directed Portfolio Service Administration (IDPS)Tranzact Investment Services Limited, a subsidiary of the Company, holds an Australian Financial Services Licence to operate an investor directed portfolio service (IDPS) and currently provides such a service to external clients for a fee.

Custodial ServicesTranzact Investment Services Limited, a subsidiary of the Company, holds an Australian Financial Services Licence to provide custodial services and currently provides such a service to external clients for a fee.

Partnership for GrowthUnder the Partnership for Growth model, the Company takes strategic fi nancial interests in profi table adviser practices with the objective of partnering with these practices to achieve growth and improvements in profi tability. The Group expects to benefi t from the growth of these practices through its return on investment directly via capital appreciation, interest and dividend income as well as its ability to offer more of its support services.

Primary Reporting - Business Segments

Super Fund Admin, Asset Consulting &

Sponsorship IDPS AdminCustodial Services

Partnership for Growth Unallocated Total

$ $ $ $ $ $2008 Financial YearTotal Sales Revenue to external customers 4,862,210 190,376 42,149 377,089 352,822 5,824,646

Segment Result 1,433,615 101,087 29,762 323,559 352,822 2,240,845

Unallocated Expenses (496,641)

Profi t from ordinary activities before income tax expense 1,744,204

Income Tax Benefi t 3,490

Net Profi t 1,747,694

Segment Assets 9,317,159 183,903 14,450 3,966,866 2,570,695 16,053,073

Segment Liabilities 1,888,300 9,192 - - 525,656 2,423,148

Depreciation and amortisation expense 238,953 10,000 1,548 - - 250,501

Other non-cash expenses 80,655 - - 16,457 - 97,112For

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7. SEGMENT INFORMATION (continued)

Super Fund Admin, Asset Consulting &

Sponsorship IDPS AdminCustodial Services

Partnership for Growth Unallocated Total

$ $ $ $ $ $2007 Financial YearTotal Sales Revenue to external customers 3,923,159 191,432 259,447 - 46,703 4,420,741

Segment Result 904,667 126,108 (11,095) (10,556) 46,703 1,055,827

Unallocated Expenses (410,507)

Profi t from ordinary activities before income tax expense 645,320

Income Tax Expense (14,315)

Net Profi t 631,005

Segment Assets 4,931,989 461,400 31,837 709,805 6,132,328 12,267,359

Segment Liabilities 765,059 3,252 - - 162,146 930,457

Depreciation and amortisation expense 156,667 10,000 1,548 - - 168,215

Other non-cash expenses (23,584) - - - - (23,584)

Secondary Reporting – Geographical Segments

Segment Revenues from External Customers

Carrying Amount of Segment Assets

Acquisitions of Non-current Segment Assets

2008 2007 2008 2007 2008 2007$ $ $ $ $ $

Geographical Location:Australia 5,455,774 4,420,741 13,140,007 11,557,554 4,986,049 2,449,647New Zealand 368,872 - 2,913,066 709,805 1,533,165 -

5,824,646 4,420,741 16,053,073 12,267,359 6,519,214 2,499,647

8. CURRENT ASSETS – CASH & CASH EQUIVALENTS

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$Cash at Bank 3,892,044 1,937,801 243,635 603,868Cash on Deposit 61,596 3,219,685 - 178,089

3,953,640 5,157,486 243,635 781,957

Note: Cash on Deposit includes term deposits of $60,000 with original maturities of three months or less, that are lodged as security for the Australian Financial Services Licence requirements and lease guarantees.

The exposure of the Group and the parent entity to interest rate risk is discussed in Note 29.

9. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES

Trade Debtors 464,722 339,390 12,267 177,675Less: Allowance for doubtful debts 2,094 11,645 - -

462,628 327,745 12,267 177,675

Other Debtors 12,530 150,899 17,452 389Accrued Revenue 147,193 244,569 891 13,507

622,351 723,213 30,610 191,571

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9. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES (continued)

Age analysis of trade receivables at the reporting date:

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$

Total Amounts Not Past Due 462,628 327,745 12,267 177,675Total Amounts over 120 days Past Due 2,094 11,645 - -Total Amounts Impaired 2,094 11,645 - -Total Amounts Not Impaired 462,628 327,745 12,267 177,675

Analysis of Allowance Account

Opening Balance 11,645 - - -Provisions for doubtful receivables 2,094 11,645 - -Amount recognised on acquisition of subsidiary 10,000 - - -Receivables written off during the year (11,645) - - -Reversal of amounts provided (10,000) - - -

Closing balance 2,094 11,645 - -

All the current net trade receivables that are neither past due or impaired are with long standing clients who have a good credit history.

Information about the exposure of the Group and the parent entity to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in Note 29.

Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Refer to

Note 29 for more information on the risk management policy of the Group and the credit quality of its trade receivables.

10. CURRENT ASSETS – DERIVATIVES

Foreign exchange contracts - held for trading 244,352 - - -244,352 - - -

Derivative instruments used by the Group

The Group enters into derivative transactions in the normal course of business to hedge exposure to fl uctuations in foreign exchange rates.

As part of the Partnership for Growth strategy $3,236,583 in New Zealand dollar loans have been granted. In order to protect against exchange rate movements, the Group has entered into forward foreign exchange contracts with high credit quality Australasian fi nancial institutions to sell $3,259,109 New Zealand dollars to hedge principal amounts. While not designated hedges, the contracts have been taken out within $100,000 of the principal amounts in accordance with the Group’s fi nancial risk management policies (refer Note 29).

The cash fl ows are expected to occur at various dates between three months, six months and one year from the balance date. At balance date the details of outstanding contracts are as follows:

Sell New Zealand dollars

Buy Australian dollars Average exchange rate2008

$2007

$2008

$2007

$Maturity0 – 3 months 1,600,000 - 0.8943 -3 - 6 months 349,970 - 0.8433 -6 – 12 months 870,470 - 0.8251 -

These contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same remaining period to maturity. Any changes in fair values are taken to the income statement immediately. At balance date the value of these contracts totalled $244,352 (2007: $ nil), being the increase in fair value during the year ended 30 June 2008.

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11. CURRENT ASSETS – FINANCIAL ASSETS

Held-to-maturity fi nancial assets comprise of:

Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Held-to-maturity fi nancial assets – Cash on Deposit - 2,000,000 - 2,000,000 Interest Bearing Loans 600,484 (1) 559,805 - - Total 600,484 2,559,805 - 2,000,000

(1) These are loans are granted to fi nancial advisory practices under the “Partnership for Growth” Model. The returns are fi xed and have maturity of no greater than 12 months.

12. CURRENT ASSETS – OTHER

Prepayments & Deposits 206,940 105,027 162,603 99,027

13. NON-CURRENT ASSETS – PROPERTY, PLANT & EQUIPMENT

Purchased Assets Plant & Equipment at cost 508,005 295,964 243,394 164,019 Less Accumulated Depreciation 132,297 110,883 49,827 6,293 375,708 185,081 193,567 157,726 Motor Vehicle Motor Vehicle at cost 68,442 - 68,442 - Less Accumulated Depreciation 2,139 - 2,139 - 66,303 - 66,303 - Leased Assets Capitalised Leased Assets 47,400 47,400 47,400 47,400 Less Accumulated Depreciation 10,270 790 10,270 790 37,130 46,610 37,130 46,610 Total 479,141 231,691 297,000 204,336

Reconciliation

Reconciliation of the carrying amount of each class of property, plant & equipment at the beginning of the year and at the end of the fi nancial year is set out below:

Plant & Leased Plant 2008 Equipment Motor Vehicle and Equipment Total $ $ $ $Consolidated Entity Carrying amount as at 30 June 2007 185,081 - 46,610 231,691Additions 268,102 68,442 - 336,544Disposals - - - -Depreciation charge (77,475) (2,139) (9,480) (89,094) Carrying Amount as at 30 June 2008 375,708 66,303 37,130 479,141 Parent EntityCarrying amount as at 30 June 2007 157,726 - 46,610 204,336Additions 79,373 68,442 - 147,815Disposals - - - -Depreciation charge (43,532) (2,139) (9,480) (55,151) Carrying Amount as at 30 June 2008 193,567 66,303 37,130 297,000

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13. NON-CURRENT ASSETS – PROPERTY, PLANT & EQUIPMENT (continued) Plant & Leased Plant 2007 Equipment and Equipment Total $ $ $Consolidated Entity Carrying amount as at 30 June 2006 58,215 - 58,215Additions 163,281 47,400 210,681Disposals - - -Depreciation charge (36,415) (790) (37,205) Carrying Amount as at 30 June 2007 185,081 46,610 231,691 Parent EntityCarrying amount as at 30 June 2006 742 - 742Additions 161,049 47,400 208,449Disposals - - -Depreciation charge (4,065) (790) (4,855) Carrying Amount as at 30 June 2007 157,726 46,610 204,336

14. NON-CURRENT – FINANCIAL ASSETS

Consolidated2008

$

Consolidated2007

$

Parent Entity2008

$

Parent Entity2007

$Shares in Unlisted controlled entities at cost (1) - - 9,930,473 7,149,864Held-to-maturity fi nancial assets - - 290,000 -Available for Sale Assets 3,025,115 - 1,053,800 -Total 3,025,115 - 11,274,273 7,149,864

(1) Refer Note 27

Held-to-maturity fi nancial assets comprise of:Interest Bearing Loans and Receivables - - 290,000 -

The loan to Total Super Pty Ltd has no fi xed maturity. The interest charged is based on a published rate for business developments of a major bank. The loan is secured by a charge over the assets of the Total Super Group.

Available for sale assets comprise of:

Shares in Unlisted entities at cost:Group Insurance & Superannuation Concepts Pty Ltd (1) 1,000,000 - 1,000,000 -Gold Financial Pty Ltd 53,800 53,800

1,053,800 - 1,053,800 -Other Investments at cost:Financial Interests in Camelot Partnership (2) 1,971,315 - - -Total 3,025,115 - 1,053,800 -

(1) The Group holds a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd. This has been classifi ed as an Available for Sale investment, and has not been equity accounted, as management are not able to exert any signifi cant infl uence over the operating and fi nancial decision making of the entity. The investment is held for strategic purposes only. Management are unable to establish the fair value due to there being no quoted market for this interest, however due to the holding period, performance of the company and potential initiatives in the pipeline, it is expected that the carrying value would not be materially different from the fair value.

(2) The Partnership For Growth model involves the Group taking strategic fi nancial interests in profi table adviser practices with the objective of partnering with these practices to achieve growth and improvements in profi tability. In New Zealand, the Partnership For Growth model has developed into the creation of a nationwide brand, Camelot, which the various partners will operate under. The combined Camelot advisers businesses will make it one of New Zealand’s largest non-aligned fi nancial advisory groups. The Group accesses these fi nancial interests through Camelot Financial Advisers Limited. This entity was set up to obtain the funding needed for the growth initiatives of the adviser practices in the Camelot Partnership. The shares are currently held as bare custodian for the principals of the adviser practices by Mr Gary Scott, Chief Financial Offi cer of Grosvenor Financial Services Group Limited, the ultimate parent of the Group. Mr Scott is also currently the sole director of Camelot Financial Advisers Limited. All investments are performing at or better than expectation at the time of the investment being undertaken. There are no indications of impairment from recent changes in market conditions. All unlisted investments are refl ected at cost which approximates their fair values due to their recent nature and based on the holding period and impairment testing. No intention to dispose of any unlisted available-for-sale fi nancial assets existed at 30 June 2008.

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15. NON-CURRENT ASSETS – INTANGIBLE ASSETS Purchased Assets Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Promoter Agreements at Cost (Indefi nite Useful Lives) 2,181,403 2,181,403 2,181,403 2,181,403 Less Accumulated Impairment Losses - - - - 2,181,403 2,181,403 2,181,403 2,181,403 Administration Agreements at Cost (Finite Useful Lives) 971,429 321,366 - - Less Accumulated Amortisation 107,937 321,366 - - 863,492 - - - Administration Agreements at Cost (Indefi nite Useful Lives) 1,144,743 1,144,743 - - Less Accumulated Impairment Losses - - - - 1,144,743 1,144,743 - - Goodwill on Acquisition 2,267,329 - - - Less Accumulated Impairment Losses - - - - 2,267,329 - - - Licences, Trade Marks and Other Items at Cost 204,132 175,483 - - Less Accumulated Amortisation 61,370 43,656 - - 142,762 131,827 - - Software & Website Development at Cost 328,298 - - - Less Accumulated Amortisation 35,756 - - - 292,542 - - - Total Intangible Assets 6,892,271 3,457,973 2,181,403 2,181,403

An intangible asset shall be regarded as having an indefi nite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash infl ows. The useful life of an intangible asset that arises from contractual or other legal rights shall not exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the asset is expected to be used. If the contractual or other legal rights are conveyed for a limited term that can be renewed, the useful life of the intangible asset shall include the renewal period(s) only if there is written evidence to support renewal.

An intangible asset with an indefi nite useful life shall not be amortised. Instead it must be tested for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired.

The Promoter Rights and Administration Contracts of the superannuation master trusts are deemed to have indefi nite useful lives. This is because of the letter of comfort received from the Trustee stating that it is their preferred option to renew contracts where the incumbent service provider continues to remain competitive and meet its contractual obligations. Based on this, management are of the opinion that there is no foreseeable limit over which these assets are expected to generate net cash infl ows for the Group and therefore no justifi cation for choosing a life that is unrealistically short. Impairment reviews are performed on an ongoing basis.

A cash-generating unit is the smallest group of assets that includes the asset and generates cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets. Identifi cation of an asset’s cash-generating unit involves judgement. If recoverable amount cannot be determined for an individual asset, an entity identifi es the lowest aggregation of assets that generate largely independent cash infl ows.

As a result of the merger of 1st Super Master Plan and Australia First Super Trust with Smartsave ‘Member’s Choice’ Superannuation Master Plan in June 2007, the cash-generating unit is now identifi ed as the merged fund as opposed to the types of services offered to these master trusts prior to the merger.

ReconciliationReconciliation of the carrying amount of each class of intangible asset at the beginning of the year and at the end of the fi nancial year is set out below:

2008Promoter

AgreementsAdministration

Agreements Goodwill

Licences, Trade Marks and

Other Items

Software & Website

Development TotalConsolidated Entity $ $ $ $ $ $

Carrying amount as at 30 June 2007 2,181,403 1,144,743 - 131,827 - 3,457,973Additions - 971,429 2,267,329 28,649 328,298 3,595,705Disposals - - - - - -Amortisation charge - (107,937) - (17,714) (35,756) (161,407)Carrying Amount as at 30 June 2008 2,181,403 2,008,235 2,267,329 142,762 292,542 6,892,271

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15. NON-CURRENT ASSETS – INTANGIBLE ASSETS (continued)

Material Intangible AssetsSmartsave ‘Member’s Choice’ Superannuation Master Plan Promotership Rights

Carrying Amount: $2,041,403 Type: Indefi nite Useful Life

Smartsave ‘Member’s Choice’ Superannuation Master Plan Administration Contract Carrying Amount: $866,344 Type: Indefi nite Useful Life

Goodwill recognised on consolidation in relation to the Total Super Group Carrying Amount: $2,267,329 Type: Indefi nite Useful Life

Australian Financial Promoter Administration Services 2007 Agreements Agreements Licences Total $ $ $ $

Consolidated Entity Carrying amount as at 30 June 2006 140,000 1,010,641 149,376 1,300,017 Additions 2,041,403 247,563 - 2,288,966 Disposals - - - - Amortisation Charge - (113,461) (17,549) (131,010) Carrying Amount as at 30 June 2007 2,181,403 1,144,743 131,827 3,457,973

Material Intangible AssetsSmartsave ‘Member’s Choice’ Superannuation Master Plan Promotership Contract

Carrying Amount: $2,041,403 Type: Indefi nite Useful Life

Smartsave ‘Member’s Choice’ Superannuation Master Plan Administration Contract Carrying Amount: $866,344 Type: Indefi nite Useful Life

Impairment DisclosuresIntangible assets allocated to the cash-generating units of the Group are as follows:

Intangibles Intangibles Licences with Indefi nite with Finite Trade Marks 2008 Goodwill Useful Lives Useful Lives and Others Total Consolidated Entity $ $ $ $ $

Smartsave ‘Member’s Choice’ Superannuation Master Plan - 3,062,979 - - 3,062,979 Super Eligible Rollover Fund - 263,168 - - 263,168 Total Super Group 2,267,329 - 863,492 321,025 3,451,846 Other - - - 114,278 114,278 2,267,329 3,326,147 863,492 435,303 6,892,271

Intangibles Intangibles Licences with Indefi nite with Finite Trade Marks 2007 Goodwill Useful Lives Useful Lives and Others Total Consolidated Entity $ $ $ $ $

Smartsave ‘Member’s Choice’ Superannuation Master Plan - 3,062,979 - - 3,062,979 Super Eligible Rollover Fund - 263,168 - - 263,168 Total Super Group - - - - - Other - - - 131,826 131,826 - 3,326,147 - 131,826 3,457,973

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15. NON-CURRENT ASSETS – INTANGIBLE ASSETS (continued)

The recoverable amount of the cash-generating units (CGU’s) is based on value-in-use calculations. Value-in-use is calculated based on present value of cash fl ow projections over a 4-year period for the Smartsave ‘Member’s Choice’ Superannuation Master Plan and the Super Eligible Rollover Fund CGU’s and over a 5-year period for the Total Super Group.

The cash fl ow projections are based on the following year’s approved budget and extrapolated for a further 3 years using an estimated revenue growth rate of 2.5% for the Smartsave ‘Member’s Choice’ Superannuation Master Plan and the Super Eligible Rollover Fund CGU’s, and 5% for the Total Super Group and projected cost savings.

The cash fl ows are discounted at a rate of 11.06% (2007: 8.5%).

16. NON-CURRENT ASSETS – DEFERRED TAX ASSETS

Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $

Deferred Tax Asset 28,779 32,164 28,779 32,164 Deferred tax assets comprise: Provisions 5,892 3,992 5,892 3,992 Accruals 22,887 28,172 22,887 28,172 28,779 32,164 28,779 32,164

Note: Deferred Tax Asset does not include any carried forward tax losses (refer Note 4).

Reconciliations Gross Movements Opening Balance 32,164 44,305 32,164 44,305 Charge to income statement (3,385) (12,141) (3,385) (12,141) Closing Balance 28,779 32,164 28,779 32,164

Movement in deferred tax assets for each temporary difference during the year is as follows:

Provisions Opening Balance 3,992 8,701 3,992 - (Charge)/credit to income statement 1,900 (4,709) 1,900 3,992 Closing Balance 5,892 3,992 5,892 3,992

Accruals Opening Balance 28,172 35,604 28,172 44,305 (Charge)/credit to income statement (5,285) (7,432) (5,285) (16,133) Closing Balance 22,887 28,172 22,887 28,172

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17. INTEREST BEARING LIABILITIES Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Short Term ANZ Commerical Bill (1) 875,000 - 875,000 - Unsecured Inter Company Loans - - 527,640 - Secured Inter Company Loans (2) - - 700,000 - Insurance Premium Funding 12,182 - - - 887,182 - 2,102,640 - Long Term Secured Inter Company Loans (2) - - - 1,250,000 - - - 1,250,000 Total 887,182 - 2,102,640 1,250,000

(1) Commercial bill facility - $3,000,000 variable interest rate facility provided by the Australia and New Zealand Banking Group Limited. This facility is unsecured and has a negative pledge.

(2) This is a secured loan from Tranzact Investment Services Ltd to Tranzact Financial Services Ltd. The loan is repayable at the option of Tranzact Investment Services Ltd.

18. TRADE & OTHER PAYABLES

Short Term Trade Creditors 444,787 110,221 95,768 53,146 Other Creditors and Accruals (1) 572,684 756,550 304,689 573,060 1,017,471 866,771 400,457 626,206

(1) Includes accruals for annual leave. The entire obligation is presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave within the next 12 months.

Long Term Other Creditors and Accruals (2) 44,237 50,381 44,237 50,381

(2) Includes the fi nance lease payments which have no interest charged on them.

Refer to Note 29 for risk exposures.

19. PROVISIONS

Long Term Employee Entitlements - Long Service Leave 91,214 13,305 19,640 13,305 Reconciliation of movements in Provisions Opening Balance 13,305 29,003 13,305 - Balance transferred as part of Business Combination 58,266 - - - Charge/(credit) to income statement 19,643 (15,698) 6,335 13,305 Closing Balance 91,214 13,305 19,640 13,305

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20. SHARE-BASED PAYMENTS

Tranzact Financial Services Limited Directors, Executives and Staff Share Option PlanThe Tranzact Financial Services Limited Directors, Executives and Staff Share Option Plan was approved by shareholders on 6 March 2000. Those eligible to participate are determined by the Board and may in its absolute discretion determine who are the offerees, the number of Ordinary Shares and/or options to be offered to them and the offering dates.

The Company shall offer such number of ordinary shares and/or Options to such offerees in accordance with their eligibility. Options are granted under the plan for no consideration. Options granted under the plan carry no dividend or voting rights. Options offered must be accepted within 30 business days after the date of the offer. The vesting period is 3 years from the date they are granted. The total number of ordinary Shares and Options issued under the plan and excluding or terminated options lapsed shall not at any time exceed that number which is 5% of the total number of issued shares.

Expenses arising from options granted under staff share option schemes for the year was $2,747.

See Note 22 for summary of movements.

Details of options outstanding as part of the Staff Share Option Plan during the fi nancial year are as follows:

2008

Grant dateExercise

dateExpirydate

Exercise price

Balance at beginning

of year

Granted during the

year

Forfeited during the

year

Exercised during the

year

Expired during the

yearBalance at end of year

Exercisable at end of

year1 May 2005 1 May 2008 1 May 2010 $0.04 300,000 - - - - 300,000 300,000*

1 July 2006 1 July 2009 1 July 2011 $0.04 125,000 - - - - 125,000 -

Total 425,000 - - - - 425,000 300,000

Weighted average exercise price $0.04 - - - - $0.04 $0.04

* These options were exercised subsequent to balance date.

2007

Grant dateExercise

dateExpirydate

Exercise price

Balance at beginning

of year

Granted during the

year

Forfeited during the

year

Exercised during the

year

Expired during the

yearBalance at end of year

Exercisable at end of

year1 May 2005 1 May 2008 1 May 2010 $0.04 300,000 - - - - 300,000 -

1 July 2006 1 July 2009 1 July 2011 $0.04 - 125,000 - - - 125,000 -

Total 300,000 125,000 - - - 425,000 -

Weighted average exercise price $0.04 $0.04 - - - $0.04 -

TFS Group Employee Bonus and Share Scheme

The Company established the TFS Group Employee Bonus and Share Scheme in April 2007 under which the Trustees of the Scheme may be issued or acquire shares in the Company, to hold for the purpose of providing rights to eligible employees provided that, for the purposes of the Scheme, in no event shall the Trustees hold in excess of 10% of the issued share capital of the Company.

Details of shares and options outstanding as part of the Employee Bonus and Share Scheme are as follows:

Parent Entity2008 2007 2008 2007

Number NumberWeighted average

priceWeighted average

priceShares issued on 1 May 2007 400,000 - $100,000 -Options issued on 1 May 2007 400,000 - - -

The Trustees of the Scheme acquired on market $100,000 worth of TFS Shares @ $0.25 (which had a free Option attached to each Share allowing the holder to acquire a Share @ $0.30 anytime before 30 April 2010). These Shares and Options were granted to certain key employees and will vest on 1 April 2010 on the condition that those employees remain full-time employees up to that date

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21. DEFERRED TAX LIABILITIES Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $

Deferred tax liabilities comprise temporary differences attributable to:

Amounts recognised in profi t and loss Accrued Income 11,542 - - -

Amounts recognised directly in equity Fair value adjustments on acquisition - intangible assets with defi nite useful lives 344,576 - - -

Total deferred tax liabilities 356,118 - - - To be settled within 12 months 140,758 - - - To be settled after more than 12 months 215,360 - - -

Movements in deferred tax liabilities

Opening balance at 1

July 2007$

Charged/ (credited) to

income statement

$

Amounts recognised on acquisition of

controlled entity$

Closing balance at 30

June 2008$

Consolidated EntityAmounts recognised in profi t and lossAccrued Income - 2,520 9,022 11,542

Amounts recognised directly in equityFair value adjustments on acquisition - intangible assets with defi nite useful lives - (43,072) 387,648 344,576

Total - (40,552) 396,670 356,118

There are no deferred tax liabilities in the Consolidated Entity for the year ended 30 June 2007 and no deferred tax liabilities in the Parent Entity for the years ended 30 June 2007 and 2008.

22. ISSUED CAPITAL

2008Shares

2008$

2007Shares

2007$

ConsolidatedShare capitalOrdinary shares - no par value

Fully paid 112,842,891 19,999,409 110,842,891 19,505,731

ParentShare capitalOrdinary shares - no par value

Fully paid 112,842,891 19,999,409 110,842,891 19,505,731

Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up the Company in proportion to the number of shares held. On a show of hands every person present who is a member or a representative or an attorney or a proxy of a member has one vote. The Company can issue further shares in accordance with its constitution and the Corporations Act.

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22. ISSUED CAPITAL (continued)

Movements in ordinary share capital

Date Details Number of shares Issue price $

1 July 2006 Opening balance 46,808,121 10,524,981

1 April 2007 Exercise of Convertible Note 32,365,385 $0.04 1,456,422

24 May 2007 Rights Issue 31,669,385 $0.25 7,917,346

Less: transaction costs arising on shares issued - (393,018)

30 June 2007 Balance 110,842,891 19,505,731

2 July 2007 Issue of Shares for GIS Concepts Acquisition (1) 2,000,000 $0.25 500,000

Less: transaction costs arising on shares issued - (6,322)

30 June 2008 Balance 112,842,891 19,999,409

(1) On 2 July 2007, 2 million shares and options were issued as part of the consideration of the acquisition of a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd. The shares were issued $0.25 fully paid with a free option attached to each share enabling the holder to acquire a further share at $0.30 anytime before 30 April 2010.

Options Parent Entity Parent Entity

2008 2007 No. No. (i) Listed Options Listed Options At the beginning of the reporting period 32,669,385 - Rights Issue - 31,669,385 Issued as part consideration for the costs of the Rights Issue - 1,000,000 Issue of Options for the acquisition of a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd (1) 2,000,000 - At Reporting Date 34,669,385 32,669,385

(1) On 2 July 2007, 2 million shares and options were issued as part of the consideration of the acquisition of a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd. The shares were issued at $0.25 fully paid with a free option attached to each share enabling the holder to acquire a

further share at $0.30 anytime before 30 April 2010.

(ii) Unlisted Options

Unlisted Options At the beginning of the reporting period 425,000 850,000 Issued - 400,000 Cancelled - (825,000) At Reporting Date 425,000 425,000

Information relating to the Tranzact Financial Services Limited Directors, Executives and Staff Share Option Plan is as set out in Note 20.For

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23. RESERVES

Employee Option Reserve The employee option reserve records items recognised as expenses on valuation of employee share options.

Foreign Currency Reserve The foreign currency reserve records net unrealised exchange gains on revaluation of foreign currency investments.

Other Reserve The other reserve records items recognised as expenses for share based payments in return for services from external parties.

24. REMUNERATION OF KEY MANAGEMENT PERSONNEL

(a) Key management personnel compensation Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Short-term employee benefi ts 443,724 537,041 443,724 537,041 Post-employment benefi ts 30,933 45,987 30,933 45,987 Other long-term benefi ts 5,382 - 5,382 - Share-based payments 16,666 8,843 16,666 8,843 Total 496,705 591,871 496,705 591,871

Further information regarding the identity of key management personnel and their compensation can be found in the Audited Remuneration Report contained in the Directors’ Report on pages 4 to 12 of this Annual Report.

(b) Equity Instruments

(i) Options and Rights Holdings

Details of options and rights held directly, indirectly or benefi cially by key management personnel and their related parties are as follows:

2008Name

Balance at 1 July 2007

Granted as compensation

Options Exercised

Other Changes

Balance at 30 June 2008

Total Vested at 30 June 2008

Total vested and exercisable at 30 June 2008

Total vested and unexercisable at

30 June 2008

Mr P L Harry AM (1) 1,024,000 - - - 1,024,000 1,024,000 1,024,000 -

Mr W A Ractliffe (2) 13,798,445 - - - 13,798,445 13,798,445 13,798,445 -

Mr R L Rodgers (3) 500,000 - - - 500,000 500,000 500,000 -

Mr A S T Yeo (4) 13,386,445 - - - 13,386,445 13,386,445 13,386,445 -

Mr C Yip (6) 300,000 - - - 300,000 (5) - - -

Ms G Ingram (6) - - - - - - - -

Mr G Day 300,000 - - - 300,000 200,000 200,000 -

Ms V T Luong 100,000 - - - 100,000 - - -

Mrs S Tawil 100,000 - - - 100,000 100,000 100,000 -

(1) A company associated with P L Harry AM, Conclude Pty Ltd, holds 624,000 Options. Mr Harry also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(2) A company associated with W A Ractliffe, Gro-Aust Holdings Ltd, holds 11,934,445 options. In addition, Mr Ractliffe holds 412,000 options as trustee of the Ractliffe Australian Family Trust and 1,052,000 options as trustee of the Grosvenor Employee Share Scheme. Mr Ractliffe also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(3) R L Rodgers holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20). (4) A company associated with A S T Yeo, Gro-Aust Holdings Ltd, holds 11,934,445 options. In addition, Mr Yeo holds 1,052,000 options as trustee of the Grosvenor

Employee Share Scheme and also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).(5) These options are held by the trustees of the Grosvenor Employee Share Scheme.(6) Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company

and Grosvenor Financial Services Group Limited.

No options were exercised or lapsed during the year.

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24. REMUNERATION OF KEY MANAGEMENT PERSONNEL (continued)

(b) Equity Instruments (continued)

(i) Options and Rights Holdings (continued)

2007 Name



Options Exercised

Other Changes


Total Vested at 30 June 2007

Total vested and exercisable at 30 June 2007

Total vested and unexercisable at

30 June 2007

Mr P L Harry AM (1) - - - 1,024,000 1,024,000 1,024,000 1,024,000 -

Mr W A Ractliffe (2) - - - 13,798,445 13,798,445 13,798,445 13,798,445 -

Mr R L Rodgers (3) - - - 500,000 500,000 500,000 500,000 -

Mr A S T Yeo (4) - - - 13,386,445 13,386,445 13,386,445 13,386,445 -

Mr C Yip (9) - - - 300,000 (8) 300,000 - - -

Mr A J Koen 100,000 (6) 200,000 - (300,000) (5) - - - -

Ms G Ingram (9) - - - - - - - -

Mr A J Newstead 300,000 (7) - - (300,000) (5) - - - -

Mr G Day 200,000 (7) 100,000 - - 300,000 - - -

Ms V T Luong - 100,000 - - 100,000 - - -

Mrs S Tawil 100,000 (7) - - - 100,000 - - -

(1) A company associated with P L Harry AM, Conclude Pty Ltd, holds 624,000 Options. Mr Harry also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(2) A company associated with W A Ractliffe, Gro-Aust Holdings Ltd, holds 11,934,445 options. In addition, Mr Ractliffe holds 412,000 options as trustee of the Ractliffe Australian Family Trust and 1,052,000 options as trustee of the Grosvenor Employee Share Scheme. Mr Ractliffe also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(3) R L Rodgers holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20). (4) A company associated with A S T Yeo, Gro-Aust Holdings Ltd, holds 11,934,445 options. In addition, Mr Yeo holds 1,052,000 options as trustee of the Grosvenor

Employee Share Scheme and also holds 400,000 options as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).(5) These options were forfeited when the personnel resigned.(6) These options were issued with an exercise price $0.07.(7) These options were issued with an exercise price $0.04.(8) These options are held by the trustees of the Grosvenor Employee Share Scheme.(9) Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company


(ii) Shareholdings

Details of equity instruments (other than options and rights) held directly, indirectly or benefi cially by key management personnel and their related parties are as follows.

2008 Name



Received on exercise of

options or rights Other changes (1)


Balance held nominally

Mr P L Harry AM (2) 2,224,000 - - - 2,224,000 400,000

Mr W A Ractliffe (5) 62,193,830 - - 2,700,000 64,893,830 1,452,000

Mr R L Rodgers (3) 500,000 - - - 500,000 400,000

Mr A S T Yeo (4) 60,751,830 - - 2,700,000 63,451,830 1,452,000

Mr C Yip (9) 300,000 (6) - - - 300,000 -

Ms G Ingram (9) - - - - - -

Mr G Day 109,000(7) - - - 109,000 -

Ms V T Luong 100,000(8) - - - 100,000 -

Mrs S Tawil - - - - - -

(1) Refers to shares purchased or sold during the fi nancial year.(2) A company associated with P L Harry AM, Conclude Pty Ltd, holds 1,824,000 shares. Mr Harry also holds 400,000 shares as trustee of the TFS Group

Employee Bonus and Share Scheme (refer Note 20).(3) R L Rodgers holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20). (4) A company associated with A S T Yeo, Gro-Aust Holdings Ltd, holds 61,999,830 shares. In addition, Mr Yeo holds 1,052,000 shares as trustee of the

Grosvenor Employee Share Scheme and also holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).(5) A company associated with W A Ractliffe, Gro-Aust Holdings Ltd, holds 61,999,830 shares. In addition, Mr Ractliffe holds 1,442,000 shares as trustee of the

Ractliffe Australian Family Trust and 1,052,000 shares as trustee of the Grosvenor Employee Share Scheme. Mr Ractliffe also holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(6) Held by the trustees of the Grosvenor Employee Share Scheme.(7) Of these, 9,000 shares are held by associates of the personnel and 100,000 are held by the trustees of the TFS Group Employee Bonus and Share Scheme.(8) Held by the trustees of the TFS Group Employee Bonus and Share Scheme.(9) Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company


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24. REMUNERATION OF KEY MANAGEMENT PERSONNEL (continued)

(b) Equity Instruments (continued)

(ii) Shareholdings (continued)

2007 Name


Granted as compensation (1)

Received on exercise of

options or rights Other changes (2)Balance at

30 June 2007Balance held

nominally

Mr P L Harry AM (3) 1,200,000 - - 1,024,000 2,224,000 400,000

Mr W A Ractliffe (6) 15,980,048 - - 46,213,782 62,193,830 1,452,000

Mr R L Rodgers (4) - - - 500,000 500,000 400,000

Mr A S T Yeo (5) 15,000,000 - - 45,751,830 60,751,830 1,452,000

Mr C Yip (9) - - - 300,000 (8) 300,000 -

Mr A J Koen 44,382 - - (44,382) - -

Ms G Ingram (9) - - - - - -

Mr A J Newstead - - - - - -

Mr G Day 9,000 (7) 100,000 - - 109,000

Ms V T Luong - 100,000 - - 100,000 -

Mrs S Tawil - - - - - -

(1) The shares only vest if the personnel remains an employee throughout the vesting period.(2) Refers to shares purchased or sold during the fi nancial year.(3) A Company associated with P L Harry AM, Conclude Pty Ltd, holds 1,824,000 shares. Mr Harry also holds 400,000 shares as trustee of the TFS Group

Employee Bonus and Share Scheme (refer Note 20).(4) R L Rodgers holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20). (5) A company associated with A S T Yeo, Gro-Aust Holdings Ltd, holds 59,299,830 shares. In addition, Mr Yeo holds 1,052,000 shares as trustee of the

Grosvenor Employee Share Scheme and also holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).(6) A company associated with W A Ractliffe, Gro-Aust Holdings Ltd, holds 59,299,830 shares. In addition, Mr Ractliffe holds 1,442,000 shares as trustee of the

Ractliffe Australian Family Trust and 1,052,000 shares as trustee of the Grosvenor Employee Share Scheme. Mr Ractliffe also holds 400,000 shares as trustee of the TFS Group Employee Bonus and Share Scheme (refer Note 20).

(7) Held by associates of the personnel.(8) Held by the trustees of the Grosvenor Employee Share Scheme.(9) Mr Yip and Ms Ingram are not employees of the Group but have been assigned to the Group as part of the management arrangements between the Company


(c) Other transactions with Key Management Personnel

A fi rm associated with Mr R L Rodgers provides tax consulting services to the Group on an arm’s length basis and received fees during the year of 2008: $7,500 (2007: $4,000).

Messrs W A Ractliffe and A S T Yeo are also directors of Grosvenor Financial Services Group Limited and its associated companies. For transactions between the Grosvenor Group and the Tranzact Group, refer to Note 25.

25. RELATED PARTIES

Directors and other Key Management Personnel

Disclosures relating to directors are set out in Note 24.

Parent entity

Tranzact Financial Services Limited is the parent entity of the Group. Grosvenor Financial Services Group Limited is the ultimate parent entity of the Tranzact Financial Services Group. Grosvenor Financial Services Group Limited owns 75% as at 30 June 2008 (2007: 75%) of Gro-Aust Holdings Limited which owns 54.9% of the ordinary shares in Tranzact Financial Services Limited at 30 June 2008 (2007: 52.55%).

Subsidiaries

Details of subsidiaries and ownership interests are disclosed in Note 28.

Transactions between Tranzact Financial Services Limited and its subsidiaries during the years ended 30 June 2008 and 30 June 2007 consisted of:

(a) loans advanced between members of the wholly-owned group and interest thereon

(b) loans repaid by members of the wholly-owned group and interest thereon

(c) management fees paid to Tranzact Financial Services Limited

(d) payments between the companies in the Group for the allocation of tax expenses and benefi ts (refer Note 4).

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25. RELATED PARTIES (continued) Parent Entity Parent Entity 2008 2007 $ $

Transactions with entities in the Group:

Management Fees Received by Tranzact Financial Services Limited 2,126,624 2,132,662 Interest on loan from subsidiaries to Tranzact Financial Services Limited 99,665 78,056 Interest on loan from Tranzact Financial Services Limited to subsidiaries 891 - Payments by subsidiaries to Tranzact Financial Services Limited for the allocation of income tax expenses 578,946 177,675

Loans advanced and repaid:

Amounts of loans advanced from subsidiaries to Tranzact Financial Services Limited 1,262,640 - Amounts of loans repaid by Tranzact Financial Services Limited 1,285,000 - Amounts of loans advanced by Tranzact Financial Services Limited to subsidiaries 290,000 -

Outstanding balances between entities in the Group at balance date:

Current Receivables 891 166,201 Loans from subsidiaries to Tranzact Financial Services Limited 1,227,640 1,250,000 Loans to subsidiaries by Tranzact Financial Services Limited 290,000 -

Ultimate Parent and associated companies

Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Transactions between the Group and the ultimate parent entity and its associated companies: Management/Administration Fees paid to Grosvenor Financial Services Group Limited (GFSG) 259,269 176,608 174,348 90,554 Interest on Loans by GFSG - 110,979 - 110,979 Interest on Convertible Note held by GFSAust Pty Ltd - 87,465 - 87,465 Other Expenses reimbursed to GFSG 216,044 204,673 65,049 131,315 Underwriting Fees for Renounceable Rights Issue - 158,348 - 158,348

Loans advanced and repaid: Loans advanced to Tranzact Group - 932,140 - 932,140 Loans repaid by Tranzact Group - 1,982,140 - 1,982,140 Exercise of Convertible Note - 1,456,422 - 1,456,422

Outstanding balances between the Group and the ultimate parent and its associated companies at balance date: Other - 117,554 - 114,019

The Grosvenor Financial Services Group Limited (New Zealand), of which Messrs Yeo and Ractliffe are directors, provides a number of services to the Tranzact Financial Services Limited Group. Grosvenor Financial Services Group Limited owns 75% of Gro-Aust Holdings Limited at 30 June 2008 (2007: 75%), which owns 100% of GFS Aust Pty Ltd at 30 June 2008 (2007: 100%).

26. AUDITOR’S REMUNERATION

Audit & Assurance Fees – BDO 90,000 - 90,000 - Audit & Assurance Fees – RHM 31,000 - - - Audit & Assurance Fees – PKF 7,555 98,983 7,555 98,983 Other Services - PKF - 9,515 - 9,515 Other Services - RHM 6,784 - - - 135,339 108,498 97,555 108,498

BDO Kendalls (BDO) replaced PKF as auditors of Tranzact Financial Services Limited and its wholly-owned subsidiaries for the year ended 30 June 2008. Ryan Harvie McEnery (RHM) are the auditors of Total Super Pty Ltd and its wholly owned subsidiary. RHM also provide taxation and accountancy services to the Total Super Group. The fees shown above are the amounts charged by RHM for the 12 months ended 30 June 2008.

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27. COMMITMENTS FOR EXPENDITURE

(a) Operating LeasesCommitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:


Not Later than One Year 380,466 77,410 130,613 77,410 Later than One Year but not Later than Five Years 502,525 254,717 124,104 254,717 Commitments not Recognised in the Financial Statements 882,991 332,127 254,717 332,127

The parent entity’s commitment is for is a property lease which is non-cancellable. It has a three-year term expiring on 31 May 2010. The lease payments are fi xed during this term. The lease has an option for a further three-year term.

(b) Finance LeasesCommitments for minimum lease payments in relation to non-cancellable fi nance leases are payable as follows:

Not Later than One Year 9,480 9,480 9,480 9,480 Later than One Year but not Later than Five Years 28,440 37,920 28,440 37,920 Minimum Lease payments 37,920 47,400 37,920 47,400 Less future fi nance charges - - - - Commitments not Recognised in the Financial Statements 37,920 47,400 37,920 47,400

The fi nance lease on plant and equipment, which commenced in 2007 has 4 years remaining. These are included in Other Creditors and have no interest charged on them.

(c) Capital Expenditure CommitmentsCapital expenditure commitments contracted for:

Plant and equipment purchases Not Later than One Year - 54,349 - 54,349

Other Financial Assets Not Later than One Year - 1,466,601 - 500,000

These assets are not recognised in the fi nancial statements for the year ended 30 June 2007.

28. INVESTMENTS IN SUBSIDIARIES

Name of EntityClass ofShare

EquityHolding30/06/08

%

EquityHolding30/06/07

%

Value of ParentEntity’s

Investment2008

$

Value of ParentEntity’s

Investment2007

$Tranzact Consulting Ltd Ordinary 100.00 100.00 123,442 123,442

Tranzact Investment Services Ltd Ordinary 100.00 100.00 5,456,422 5,456,422

Asset Custodian Nominees (Aust) Pty Ltd 1 Ordinary 100.00 100.00 - -

Australia First Financial Services Pty Ltd Ordinary 100.00 100.00 1,570,000 1,570,000

Tranzact Superannuation Services Pty Ltd 2 Ordinary 100.00 100.00 - -

Australia First Superannuation Administration Pty Ltd 2 Ordinary 100.00 100.00 - -

Total Super Pty Ltd 3 Ordinary 91.35 - 2,780,609 -

Total Supertec Pty Ltd 4 Ordinary 91.35 - -

9,930,473 7,149,864 1 Fully owned subsidiary of Tranzact Investment Services Ltd 2 Fully owned subsidiaries of Australia First Financial Services Pty Ltd 3 Acquired by Tranzact Financial Services Limited on 1 March 2008. 4 Fully owned subsidiary of Total Super Pty Ltd.

All companies listed above were incorporated in Australia. The proportion of ownership interest is equal to the proportion of voting power held.

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28. INVESTMENTS IN CONTROLLED ENTITIES (continued) Control Gain over Entities having Material Effect

Effective 1 March 2008, Tranzact Financial Services Ltd acquired a 59.96% interest in Total Super Pty Ltd thus gaining control of Total Super Pty Ltd and its wholly owned subsidiary Total Supertec Pty Ltd (together referred to as “Total Super”).

Total Super is an independent self-managed superannuation fund administration and compliance service provider based in Brisbane.

The Total Super business contributed revenues of $1,127,106 and net loss after tax of $27,664 to the Group from acquisition date to 30 June 2008. If the acquisition had been effective 1 July 2007, the contributed revenues would have been $3,044,518 and the net profi t after tax would have been $184,403. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the subsidiary to refl ect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to the property, plant and equipment and intangible assets had applied from 1 July 2007, together with the consequential tax effects.

The acquisitions had the following effect on the Group’s assets and liabilities at 1 March 2008:

Carrying Fair Value Amount $ $

Cash and cash equivalents 91,083 91,083 Trade and other receivables 115,828 115,828 Property, plant and equipment 153,676 153,676 Intangible Assets 1,320,811 28,649 Deferred Tax Assets 3,080 3,080 Trade and other payables (338,845) (338,845) Interest bearing loans and borrowings (290,000) (290,000) Provision for employee benefi ts (92,283) (92,283) Deferred tax liabilities (396,670) (9,022) 566,680 (337,834) Less: Minority interests (226,899) Goodwill arising on acquisition 1,725,171 2,064,952

Consideration: $

Cash paid 2,050,858 Costs associated with the acquisition 14,094 Total purchase consideration 2,064,952

Outfl ow of cash to acquire subsidiary: Cash consideration 2,064,953 Balances of cash acquired (91,083) Outfl ow of cash 1,973,870 F

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28. INVESTMENTS IN CONTROLLED ENTITIES (continued) On 31 March 2008, Tranzact Financial Services Ltd acquired a further 31.32% interest thus increasing its controlling interest in Total

Super Pty Ltd to 91.28%.

The acquisition had the following effect on the Group’s assets and liabilities at 31 March 2008:

Carrying Fair Value Amount $ $

Cash and cash equivalents 92,715 92,715 Trade and other receivables 93,231 93,231 Property, plant and equipment 157,816 157,816 Intangible Assets 1,320,727 28,566 Deferred Tax Assets 3,080 3,080 Trade and other payables (328,234) (328,234) Interest bearing loans and borrowings (290,000) (290,000) Provision for employee benefi ts (99,996) (99,996) Deferred tax liabilities (396,670) (9,022) 552,669 (351,844) Less: Initial Holding (331,380) Minority interests (48,193) Goodwill arising on acquisition 541,060 Total purchase consideration 714,156

During May 2008, Tranzact Financial Services Ltd acquired a further 0.07% interest for $1,500 increasing its controlling interest in Total Super Pty Ltd to 91.35%. As a result of this transaction a further $1,098 of goodwill was recognised.

The fair value adjustment on acquisition of Total Super Pty Ltd relates to the recognition of the value of administration contracts and the software and website development costs. The tax effect of the recognition of these intangibles was an increase in the deferred tax liability.

The goodwill is attributable to the profi tability and infrastructure of the acquired business from which synergies are expected to arise after the acquisition.

29. FINANCIAL INSTRUMENTS

The Group’s principal fi nancial instruments comprise the following:

(a) Cash, Trade and Other Receivables;(b) Held to Maturity, Available for Sale;(c) Derivatives;(d) Trade and Other Payables; and(e) Interest Bearing Liabilities

Categories of Financial Instruments

Consolidated Consolidated Parent Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Financial Assets Fair value through profi t or loss - held for trading 244,352 - - - Held-to maturity investment 600,484 2,559,805 - 2,000,000 Loans and receivables (including cash & cash equivalents) 4,416,268 5,485,231 545,902 955,185 Available-for-sale fi nancial assets 3,025,115 - 1,053,800 - 8,286,219 8,045,036 1,599,702 2,955,185 Financial Liabilities Bank Bills 875,000 - 875,000 - Trade and Other Payables 719,152 750,319 1,515,626 1,807,905 1,594,152 750,319 2,390,626 1,807,905

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29. FINANCIAL INSTRUMENTS (continued)

The main risks arising from the Group’s fi nancial instruments are market risk (including foreign currency risk and interest rate risk), liquidity risk and credit risk. Senior management, in conjunction with the Board, review and agree policies for managing each of these risks.

Risk Exposures and Responses

Market Risk

(i) Foreign Exchange Risk

As a result of operations in New Zealand the Group’s balance sheet is impacted by movements in exchange rates. This risk is assessed on an ongoing basis and forward exchange contracts are taken up from time to time as deemed appropriate. While the forward exchange contracts are not designated hedges, the strategy is to limit the un-hedged amount to $100,000 at any point in time.

The Group also has currency exposures arising from transactions in a currency other than the Group’s functional currency. Approximately 6% of the Group’s revenues are denominated in currencies other than the reporting currency of the Group. These revenues are partially offset by expenses incurred in the same currency.

At 30 June 2008, the Group had the following exposure to foreign currencies:


Financial Assets Trade and Other Receivables 92,058 - - - Financial Assets 2,571,799 559,805 - - 2,663,857 559,805 - -

Financial Liabilities Derivatives - Forward Contracts 2,576,087 - - - Net exposure 87,770 559,805 - -

The following sensitivity is based on the foreign currency risk exposures in existence at the balance sheet date. As at 30 June 2008, had the Australian Dollar moved, with all other variables held constant, post tax profi t and equity would have been affected as illustrated in the table below.

Management have assessed the closing net position of each entities assets in the table below for movements in a currency to highlight the potential impact on the net asset position. There were no material impacts identifi ed based on the parameters used.

Post Tax Profi t Equity Judgements of reasonably possible Higher/(Lower) Higher/(Lower) Movements 2008 2007 2008 2007 $ $ $ $

Consolidated Entity AUD/NZD + 10% (7,979) (50,891) - - AUD/NZD - 10% 9,752 62,201 - -

Parent Entity AUD/NZD + 10% - - - - AUD/NZD - 10% - - - -

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(continued)


(ii) Interest Rate Risk

Interest rate risk is the risk that a fi nancial instrument’s value will fl uctuate as a result of changes in market interest rates.

The following table details the Group’s exposure to interest rate risk as at 30 June 2008:

Consolidated2008

WeightedAverageEffectiveRate %

VariableInterest rate

$

Fixed Interest Rate maturing less than

1 year$

Non-interestBearing

$Total

$

Interest Bearing Assets

Cash at Bank 6.9 3,892,044 - - 3,892,044

Cash on Deposit 6.2 61,596 - - 61,596

Unsecured Loans (1) 18.7 1,971,315 600,484 - 2,571,799

Total Interest Bearing Assets 5,924,955 600,484 - 6,525,439

Non-interest Bearing Assets

Equity Investments - - 1,053,800 1,053,800

Other non-interest bearing assets - - 706,980 706,980

Total Non-interest Bearing Assets - - 1,760,780 1,760,780

Total Assets 5,924,955 600,484 1,760,780 8,286,219

Interest Bearing Liabilities

Bank Bills 8.0 - 875,000 - 875,000

Other 7.9 - 12,182 - 12,182

Total Interest Bearing Liabilities - 887,182 - 887,182

Non-interest Bearing Liabilities - - 706,970 706,970

Total Liabilities - 887,182 706,970 1,594,152

Net Assets 5,924,955 (286,698) 1,053,810 6,692,067

(1) Relates to loans as part of the partnership for growth which are repayable at the discretion of the borrower (which could potentially be immediately) and therefore have no fi xed maturity profi le.

The following table details the Parent Entity’s exposure to interest rate risk as at 30 June 2008:

Parent Entily2008



$


1 year$

Non-interestBearing

$Total

$


Cash at Bank 5.0 243,635 - - 243,635

Loans to Subsidiaries 10.0 290,000 - - 290,000

Total Interest Bearing Assets 533,635 - - 533,635


Equity Investments - - 1,053,800 1,053,800


Total Non-interest Bearing Assets - - 1,066,067 1,066,067

Total Assets 533,635 - 1,066,067 1,599,702


Bank Bills 8.0 - 875,000 - 875,000

Loans from Subsidiaries 7.2 1,278,005 - - 1,278,005

Total Interest Bearing Liabilities 1,278,005 875,000 - 2,153,005


Total Liabilities 1,278,005 875,000 237,621 2,390,626

Net Assets (744,370) (875,000) 828,446 (790,924)

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(continued)


(ii) Interest Rate Risk (continued)

The following table details the Group’s exposure to interest rate risk as at 30 June 2007:

Consolidated2007



$


1 year$

Non-interestBearing

$Total

$


Cash at Bank 4.5% 1,937,801 - - 1,937,801

Cash on Deposit 6.0% - 5,219,685 - 5,219,685

Unsecured Loans 15.0% 559,805 - - 559,805

Total Interest Bearing Assets 2,497,606 5,219,685 - 7,717,291


Equity Investments - - - -


Total Non-interest Bearing Assets - - 327,745 327,745

Total Assets 2,497,606 5,219,685 327,745 8,045,036


Total Liabilities - - 750,319 750,319

Net Assets 2,497,606 5,219,685 (422,574) 7,294,717

The following table details the Parent Entity’s exposure to interest rate risk as at 30 June 2007:

Parent Entity2007



$


1 year$

Non-interestBearing

$Total

$


Cash at Bank 4.5 603,868 - - 603,868

Cash on Deposit 6.3 - 2,178,089 - 2,178,089

Total Interest Bearing Assets 603,868 2,178,089 - 2,781,957


Equity Investments - - - -


Total Non-interest Bearing Assets - - 173,228 173,228

Total Assets 603,868 2,178,089 173,228 2,955,185


Loans from Subsidiaries 6.2 1,250,000 - - 1,250,000


Total Liabilities 1,250,000 - 557,905 1,807,905

Net Assets (646,132) 2,178,089 (384,677) 1,147,280

The Group manages its interest rate risk by the use of fi xed rate instruments and by spreading the tenure of any debt to optimise the balance between costs of funds and liquidity.

Similarly, in terms of interest rate risk on cash and deposits the Group seeks to maximise the interest earned on these funds balanced against the length of the investment and impact on liquidity.

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(continued)


(ii) Interest Rate Risk (continued)

The following sensitivity analysis is based on the interest rate risk exposures in existence as at balance date.

At 30 June 2008, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profi t and equity would have been affected as follows:

Post Tax Profi t Judgements of reasonably possible Higher/(Lower) Movements 2008 2007 $ $ Consolidated Entity + 0.75% (75 basis points) 42,289 57,880 - 0.50% (50 basis points) (28,192) (38,586)

Parent Entity + 0.75% (75 basis points) (12,145) 11,490 - 0.50% (50 basis points) 8,097 (7,660)

The movements in profi t are due to movements in interest costs from variable rate debt and cash movements.

(iii) Liquidity Risk

The Group’s objective is to maintain a balance between continuity of funding and fl exibility through the use of credit facilities and bank loans.

The Group minimises liquidity risk by maintaining a signifi cant level of cash and cash equivalents, monitoring of actual performance to budgets, regular cash fl ow forecasting as well as ensuring the Group has access to credit facilities as and when required.

At balance date, the Group has $2,125,000 of unused credit facilities available for its immediate use (Note 31 (c)).

Maturity Analysis of fi nancial liabilities

The risks from the values shown in the table below, refl ects a balanced view of cash infl ows and outfl ows. Leasing obligations, trade payables and other fi nancial liabilities mainly originate from the fi nancing of assets used in ongoing operations.

Consolidated 2008 Financial Liabilities

Carrying Amount

ContractualCash Flows < 6 mths 6 – 12 mths 1 – 3 years > 3 years

Non-derivatives $ $ $ $ $ $

Bank Bills (1) 875,000 875,000 875,000 - - -

Trade and Other Payables 706,970 706,970 673,790 4,740 28,440 -

DerivativesForward Exchange Contracts (244,352) 2,576,087 1,421,631 1,154,456 - -

TOTAL 1,337,618 4,158,057 2,970,421 1,159,196 28,440 -

(1) No further interest is paid on these bank bills as the interest is paid upfront at the time of the drawdown.

Parent Entity 2008 Financial Liabilities

Carrying Amount



Bank Bills (1) 875,000 875,000 875,000 - - -

Inter Company Loans 1,278,005 1,278,005 - 1,278,005 - -

Trade and Other Payables 760,444 760,444 727,264 4,740 28,440 -

TOTAL 2,913,449 2,913,449 1,602,264 1,282,745 28,440 -

(1) No further interest is paid on these bank bills as the interest is paid upfront at the time of the drawdown.

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(continued)


(iii) Liquidity Risk (continued)

Consolidated 2007 Financial Liabilities

Carrying Amount



Trade and Other Payables 750,319 750,319 707,659 4,740 37,920 -TOTAL 750,319 750,319 707,659 4,740 37,920 -

Parent Entity 2007 Financial Liabilities

Carrying Amount



Inter Company Loans 1,250,000 1,250,000 - - 1,250,000 - Trade and Other Payables 557,905 557,905 515,245 4,740 37,920 -TOTAL 1,807,905 1,807,905 515,245 4,740 1,287,920 -

(iv) Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a fi nancial loss to the Group. The Group has policies in place to manage these risks. The Group has adopted a policy of only dealing with reputable established businesses as a means of mitigating the risk of fi nancial loss from defaults. The maximum credit risk for fi nancial assets recognised on the balance sheet is the carrying amount less, where applicable, any provisions for doubtful debts.

• Financial Interests in the Camelot Partnership

The Company has $2,633,857 in loans and interest in Camelot Financial Advisers Limited. The loans and fi nancial interests in the Camelot Partnership are unsecured and have a negative pledge. There is no material credit risk exposure to the Group as prior to the advisers joining the Camelot Partnership, they undergo strict due diligence and vetting processes to ensure they meet the necessary revenue and business value expectations. All investments are performing at or better than expectation at the time of the investment being undertaken. There are no indications of impairment from recent changes in market conditions. Ongoing monitoring is conducted to ensure there is no impairment going forward.

• Trade and Other Receivables

The Company has $267,740 in fees owing from various superannuation funds under the Trusteeship of Trust Company Superannuation Services Limited. There is no material credit risk exposure as the Company is the administrator of these funds and part of its monthly administration process is to arrange for fees to be paid to the various service providers.

• Foreign Exchange Contracts and Bank Deposits

There are net proceeds from Forward Exchange Contracts of $244,352 and $3,722,971 of funds on deposit. The credit risk on liquid funds and derivatives is limited because the counterparties are major banks with ratings of AA or higher assigned by international credit rating agencies.

(v) Net Fair Values

All fi nancial assets and liabilities have been recognised at their carrying values in the fi nancial statements which approximate their net fair values.

The net fair values of:

• Term receivables and fi xed interest securities and bonds are determined by discounting the cash fl ows, at the market interest rates of similar securities, to their present value.

• Unlisted investments where there is no organised fi nancial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash fl ows of the investment.

• Other loans and amounts due are determined by discounting the cash fl ows, at market interest rates of similar borrowings, to their present value.

• Forward exchange contracts are the recognised unrealised gain or loss at balance date determined from the current forward exchange rates for contracts with similar maturities.

• Other assets and other liabilities approximate their carrying value.

• Management have deemed the carrying value of the Partnership for Growth Available for Sale investments to not be materially different from the fair value, due to the recent nature of the acquisitions, that there has been no change in market conditions and performance is tracking as expected at the time of acquisition.

• Management are unable to establish the fair value of the Company’s 20% holding in Group Insurance & Superannuation Concepts Pty Ltd due to there being no quoted market for this interest, however due to the holding period, performance of the company and potential initiatives in the pipeline, it is expected that the carrying value would not be materially different from the fair value.

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(continued)


(v) Net Fair Values (continued)

No fi nancial assets and fi nancial liabilities are readily traded on organised markets in standardised form other than listed investments, forward exchange contracts and interest rate swaps.

(vi) Price Risk

The economic entity is not exposed to any material price risk.

30. CAPITAL RISK MANAGEMENT

The Group considers its capital to comprise of its ordinary share capital less accumulated losses.

In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions and through the payment of dividends. In order to achieve this objective, the Group assesses each relevant transaction to ensure risks and returns are at an acceptable level and also to maintain a suffi cient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, or buy back program, the Group considers not only its short-term position but also its long-term operational and strategic objectives.

The increase in borrowing at a Group level has been brought about by the Board’s decision to take on additional debt fi nance to fund acquisitions. The Group regularly reviews its capital requirements and determines whether or not to increase or decrease its borrowings. There have been no other signifi cant changes to the Group’s capital management objectives, policies and processes in the year nor has there been any change in what the Group considers to be its capital.

The Group does not currently have a gearing ratio policy.

During the period the Group complied with all externally imposed capital requirements and covenants to which it is subject.

31. CASH FLOW INFORMATION

(a) Reconciliation of Profi t After Income Tax to Net Cash Infl ow from Operating Activities


Profi t After Income Tax 1,747,694 631,005 457,221 383,810 Non-Cash Flows in Operating Profi t: Provision for Depreciation 89,094 37,205 55,151 4,855 Provision for Amortisation 161,407 131,010 - - (Decrease)/Increase in Provision for Long Term Entitlements 77,909 (15,698) 6,335 13,305 Options Expense 2,746 (188) - - Other Non-Cash Expenses - (23,584) - (23,584) Gains on Disposal of Plant and Equipment - (2,273) - - Unrealised Foreign Exchange Losses 16,457 - - - Realised Foreign Exchange Losses 6,348 2,299 - 1,566 Net Operating Liabilities acquired on purchase of Subsidiaries (705,075) - - - Changes in Assets and Liabilities: (Increase)/Decrease in Current Receivables 89,759 45,161 160,572 (160,693) (Increase)/Decrease in Prepayments (20,071) (77,523) 18,266 (97,433) Decrease in Deferred Tax Assets 3,385 12,141 3,385 12,141 Increase/(Decrease) in Creditors 88,540 (8,579) (149,710) 164,588 Increase in Deferred Tax Liabilities 356,118 - - - Increase/(Decrease) in Current Tax Liabilities 26,926 (1,241) - - Net Cash Infl ows from operating activities 1,941,237 729,735 551,220 298,555

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(continued)

31. CASH FLOW INFORMATION (continued)

(b) Non-cash Financing and Investing Activities

On 2 July 2007, 2 million shares and options were issued as part of the consideration of the acquisition of a 20% interest in Group Insurance & Superannuation Concepts Pty Ltd. The shares were issued at $0.25 fully paid with a free option attached to each share enabling the holder to acquire a further share at $0.30 anytime before 30 April 2010.

(c) Credit Standby Arrangements with Banks

Consolidated Consolidated 30/06/2008 30/06/2007 $ $

Credit facility 3,000,000 3,000,000 Amount utilised (875,000) - At Reporting Date 2,125,000 3,000,000

Commercial bill facility - $3,000,000 variable interest rate facility provided by the Australia and New Zealand Banking Group Limited.

32. EVENTS OCCURRING AFTER REPORTING DATE

Subsequent to balance date, the Group entered into the following signifi cant transactions:

• Effective 1 July 2008, Tranzact Financial Services Limited acquired a 100% interest in Australian Superannuation Consultants Pty Ltd, a self-managed superannuation fund administration, compliance and advisory services provider.

• In August 2008, Tranzact executed a contract to acquire a GPen Software Licence, the system that it uses to provide superannuation administration services to master trusts.

The fi nancial effect of these transactions has not been brought into account in these fi nancial statements as they take effect after 30 June 2008. The consideration for these transactions have not been disclosed as it is believed that to do so would be prejudicial to future negotiations.

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TRANZACT FINANCIAL SERVICES LIMITEDAND CONTROLLED ENTITIES DIRECTORS’ DECLARATION

ABN 84 089 997 731

Th e Directors of the Company declare that:

1. Th e fi nancial statements, comprising the income statement, balance sheet, cash fl ow statement, statement of changes in equity, accompanying notes, are in accordance with the Corporations Act 2001 and:

(a) comply with Accounting Standards and the Corporations Regulations 2001; and

(b) give a true and fair view of the fi nancial position as at 30 June 2008 and of the performance for the year ended on that date of the Company and the Consolidated Entity.

2. In the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

3. Th e remuneration disclosures included in pages 7 to 11 of the Directors’ Report (as part of the audited Remuneration Report), for the year ended 30 June 2008, comply with section 300A of the Corporations Act 2001.

4. Th e directors have been given the declarations by the Chief Executive Offi cer and Finance Manager required by section 295A.

Th is declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

P L Harry AM Allan S T YeoNon-Executive Chairman Managing Director and Chief Executive Offi cer


DIRECTORS’ DECLARATION

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INDEPENDENT AUDITOR’S REPORT To the members of Tranzact Financial Services Limited Report on the Financial Report

We have audited the accompanying financial report of Tranzact Financial Services Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001 would be in the same terms if it had been given to the directors at the time that this auditor’s report was made.

BDO Kendalls (NSW) Level 19, 2 Market St Sydney NSW 2000 GPO Box 2551 Sydney NSW 2001 Phone 61 2 9286 5555 Fax 61 2 9286 5599 [email protected] www.bdo.com.au ABN 57 908 209 104

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Auditor’s Opinion In our opinion: (a) the financial report of Tranzact Financial Services Limited is in accordance with the Corporations

Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report We have audited the Remuneration Report included in pages 7 to 11 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

BDO Kendalls Chartered Accountants

N E Sinclair Partner Sydney, 26 September, 2008

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SUBSTANTIAL SHAREHOLDERSSubstantial shareholders in the Company are set out below:

A. Ordinary Shares

Number Held Percentage

Gro-Aust Holdings Limited 62,981,877 55.67%

B. Directors’ Shareholding

Total Interest Benefi cial Interest Relevant Interest

P L Harry AM 2,224,000 - 2,224,000

R L Rodgers 500,000 - 500,000

A S T Yeo 64,443,877 - 64,433,877

W A Ractliff e 65,875,877 - 65,875,877

C. Number of ShareholdersTh e Company had 520 shareholders with the following distribution of holdings:

Number Number ofof Shares Shareholders

1 – 1,000 18

1,001 – 5,000 100

5,001 – 10,000 80

10,001 – 100,000 221

100,001 – over 101

Of the above, 37 shareholders did not have a marketable parcel.

D. Voting RightsSubject to any rights or restrictions for the time being attached to any class or classes of shares:

1. At meeting of members or classes of members, each member entitled to vote may vote in person or by representative or by proxy or by attorney.

2. On a show of hands every person present who is, a member, or a representative or an attorney, or a proxy of a member has one vote.

3. On a show of hands a member, representative, attorney and a proxy has only one (1) vote, irrespective of the number of shareholders that person represents.

4. Where a member appoints two (2) proxies, neither proxy may vote for that member on a show of hands.

5. On a poll every member present in person or by proxy or by attorney or other duly authorised representative has one (1) vote for each fully paid share he/she holds, and a fraction of a vote for each partly paid share he/she holds. Th e fraction must be equivalent to the proportion which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited). Th e amount paid in advance of a call must be ignored when calculating the proportion.

SHAREHOLDER INFORMATIONSTATEMENTS PURSUANT TO AUSTRALIAN STOCK EXCHANGEOFFICIAL LISTING RULES AS AT 16 SEPTEMBER 2008

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Name Holding % Issued Capital

1 Gro-Aust Holdings Limited 59,299,830 52.412 Asset Custodian Nominees Limited 3,003,700 2.653 Conclude Pty Limited 1,824,000 1.614 Asset Custodian Nominees (Aust) Pty Ltd 1,538,000 1.365 WA Ractliff e, AST Yeo, PB Christensen & SC Benton 1,452,000 1.286 UBS Nominees Pty Ltd 1,447,000 1.287 Ronald Malek 1,400,000 1.248 Contemplator Pty Ltd 1,250,000 1.109 Ruminator Pty Ltd 1,250,000 1.1010 Tuturau Nominees Ltd 1,197,138 1.0611 Forbar Custodians Limited 1,184,145 1.0512 Howard Securities Pty Ltd 1,150,000 1.0213 Cedars Properties Pty Ltd 1,000,000 0.8814 Tracy Fraser 1,000,000 0.8815 TH Roberts & SM Roberts 999,370 0.8816 Mary Christopher 922,884 0.8217 BA Bicknell & JM Bicknell 900,000 0.8018 Dalbow Superannuation Pty Limited 814,109 0.7219 Cravat Holdings Pty Ltd 800,000 0.7120 RBC Dexia Investor Services Australia Nominees Pty Ltd 800,000 0.71 83,232,176 73.56

CORPORATE DIRECTORY

Tranzact Financial Services Limited is a listed Public Company incorporated and domiciled in Australia.

Registered Offi ceTranzact Financial Services LimitedABN 84 089 997 731Level 5, 241 Castlereagh Street SYDNEY NSW 2000 Tel 02 9236 5600Fax 02 9236 5699

Offi cers of the CompanyPhillip L Harry AM Non-Executive ChairmanW Anthony Ractliff e Non-Executive Deputy ChairmanAllan S T Yeo Managing Director and Chief Executive Offi cerRichard L Rodgers Non-Executive Director and Company Secretary

TWENTY LARGEST SHAREHOLDINGSAS AT 16 SEPTEMBER 2008

BDO KendallsLevel 192 Market StreetSYDNEY NSW 2000Tel 02 9286 5555

Share RegistryComputershare Investor Services Pty Ltd ABN 48 078 279 277 Level 3, 60 Carrington StreetSYDNEY NSW 2000 Tel 02 8234 5000Australia OnlyToll Free 1300 850 505

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www.tranzact.com.au

Registered Offi ce: Level 5, 241 Castlereagh Street, Sydney, NSW 2000Postal Address: PO Box 20314, World Square, Sydney, NSW 2002

Phone: +61 2 9236 5600, Fax: +61 2 9236 5699

ANNUAL REPORTAS AT 30 JUNE 2008

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