Financial Report at 30 June 2000 Australian Institute of Company Directors

Australian Institute of Company Directors ACN 008 484 197 Financial Report at 30 June 2000 Together with Directors' and Independent Audit Reports

Report

The National Councillors (the Directors) of the Australian Institute of Company Directors (AICD) submits its report in respect of the financial year ended 30 June 2000.

Directors

The names and particulars of the directors in office during or since the end of the financial year are: Mr Richard Warburton FAICD National President Dr Kenneth Moss FAICD National Vice President (appointed 27.06.00) Mr James Porter FAICD National Vice President (retired 08.11.99) Miss Elizabeth Alexander AM FAICD National Vice President Mr Graeme McGregor AO FAICD National Treasurer (appointed 28.03.00) Mr Craig Jackson FAICD National Treasurer (resigned 30.09.99) Mr Clifford Breeze FAICD Dr James Gill FAICD (appointed 08.11.99) Mr Robert Graham FAICD Mr Robert Nattey LVO FAICD Mr Richard Ryan AO FAICD Mr Valentine Roy Smith FAICD Mr Gregory Swindon FAICD Mr David Young FAICD (retired 08.11.99) Details of directors and meetings attended are provided on pages X and Y of the Annual Report.

Principal activities

The principal activities of the AICD, constituted through its National Office and seven Divisions, during the financial year, were the conduct of educational activities for members including the Company Directors' Course, Company Directors' conference, panel discussions, seminars, breakfasts, luncheons and dinners; the publication of articles and statements on matters of interest to directors; liaison with other professional bodies and the Stock Exchange on matters affecting directors and companies; consultations with, and submissions to, government particularly on the Corporations Law Economic Reform Program and Tax Reform, commissions of inquiry and other public authorities about the framing of laws and regulations of concern to directors and the corporate system in Australia. During the financial year there was no significant change in the nature of those activities.

Financial results

The net amount of the AICD's surplus for the financial year was $506,874 compared with the record performance in 1999 of $646,488. The AICD is a company limited by guarantee and no dividends are payable.

Review of operations

A review of the operations of the AICD during the financial year and the results of those operations is contained in the report by the Chief Executive Officer, contained on pages X and Y of the Annual report.

Significant changes in state of affairs

During the financial year there was no significant change in the state of affairs of the AICD.

Indemnification of officers and auditors

During the financial year, the company paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary and all executive officers of the company and of any related body corporate against a liability incurred by a director, secretary or executive officer to the extent permitted by the Corporations Law. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by an officer or auditor.

Directors' and officers' remuneration

No director can hold an interest in the AICD as it is a company limited by guarantee. Each director, being a member, is liable to the extent of the guarantee given under the Memorandum and Articles of Association. No director of the AICD has received or become entitled to receive a benefit during or since the end of the financial year because of a contract that the director or a firm of which the director is a member or an entity in which the director has a substantial financial interest made with the company or an entity that the company controlled, or a body corporate that was related to the company when the contract was made or when the director received or became entitled to receive a benefit. Remuneration of senior executives of the company is established by the Remuneration Committee. Remuneration is determined as part of an annual performance review, having regard to market factors, a performance evaluation process and independent remuneration advice. For executive officers, remuneration packages generally comprise salary, a performance-based bonus and superannuation.

Significant Events after Year End

There has not been any matter or circumstance that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the AICD, the results of those operations, or the state of affairs of the AICD in financial years after this financial year.

Likely Developments and Future Results

There are no likely developments in the operations of the AICD which would affect the results of future operations. Signed in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Law. On behalf of the Directors R F E Warburton FAICD National President G McGregor AO FAICD National Treasurer Sydney

Balance Sheet as at 30 June 2000

Note 2000 1999

$ $

Current Assets Cash 478,848 860,398 Receivables 3 936,377 567,298 Investments 4 3,439,582 2,450,000 Inventories 5 68,957 89,595 Total Current Assets 4,923,764 3,967,291

Non-Current Assets Plant and equipment 6 218,923 292,582 Total Non-Current Assets 218,923 292,582 Total Assets 5,142,687 4,259,873

Current Liabilities Accounts Payable 7 2,371,315 2,005,983 Borrowings 8 2,676 2,032 Provisions 9 172,911 172,153 Total Current Liabilities 2,546,902 2,180,168

Non Current Liabilities Borrowings 10 93 3,068 Provisions 11 128,111 115,930 Total Non-Current Liabilities 128,204 118,998 Total Liabilities 2,675,106 2,299,166 Net Assets 2,467,581 1,960,707

Members' Funds Retained surplus 12 2,467,581 1,960,707 Total Members' Funds 2,467,581 1,960,707 The accompanying notes form an integral part of this balance sheet.

Income and Expenditure Statement for the financial year ended 30 June 2000

Note 2000 1999

$ $ Operating surplus 2 506,874 646,488 Retained surplus at the beginning of the financial year 1,960,707 1,314,219 Retained surplus at the end of the financial year 2,467,581 1,960,707 The accompanying notes form an integral part of this income and expenditure statement.

Statement of Cash Flows for the financial year ended 30 June 2000

Note 2000 1999

$ $

Cash flows from operating activities Receipts from activities and donors 11,934,051 10,553,624 Payments to suppliers and employees (11,416,373) (9,251,765) Interest received 184,816 126,092 Interest paid (555) (852) Net cash provided by operating activities 20(b) 701,939 1,427,099

Cashflows from investing activities Payment for plant and equipment (91,583) (285,354) Net cash used in investing activities (91,583) (285,354)

Cashflows from financing activities Repayment of lease principal (2,331) (2,031)

Net increase in cash held 608,032 1,139,714

Cash at the beginning of the financial year 3,310,398 2,170,684

Cash at the end of the financial year

20(a) 3,918,430 3,310,398 The accompanying notes form an integral part of this statement of cash flows.

Notes to the Financial Statements for the year ended 30 June 2000

Note 1. Summary of accounting policies

Financial reporting framework

The financial statements have been prepared as a general purpose financial report which complies with the requirements of the Corporations Law, Australian Accounting Standards and Urgent Issues Group Consensus Views. The financial statements have been prepared in accordance with the historic cost convention and do not take account of changes in either the purchasing power of the dollar or in the prices of specific assets.

Significant accounting policies

Accounting policies are selected and applied in a manner which ensures that the resultant financial information satisfies the concepts of relevance and reliability, thereby, ensuring that the substance of the underlying transactions and other events is reported. The accounting policies used are consistent with those adopted in the previous year. The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Depreciation Depreciation is provided on plant and equipment and is calculated on a straight line basis so as to write off the net cost of each asset during its useful economic life. Assessments of remaining useful economic lives are made on a regular basis for all assets. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, as follows.

Life Method Office Furniture and equipment 2-6 years Straight Line Leasehold improvements 6-7 years

(b) Inventories Inventories are valued at the lower of cost and net realisable value.

Costs are assigned to inventory on hand and on a first in first out basis.

(c) Income tax Section 50 of the Income Tax Assessment Act 1997 provides that certain institutions will be exempt from income tax. The Australian Institute of Company Directors falls specifically under Section 50-5 of the Act. The exemption is based on the grounds that the company was formed as an educational institution. The Research Foundation has been granted exemption from income tax under Section 50-5 of the Income Tax Assessment Act 1997.

(d) Unearned revenue

(i) Membership subscriptions received in advance Membership subscription receipts attributable to renewals occurring in the current financial year are brought to account as revenue. Subscription receipts wholly relating to the next financial year are shown in the Balance Sheet as subscriptions in advance.

(ii) Other income received in advance Other income received in advance consists of fees received during the year of income for courses and functions that are to be held after balance date.

(e) Rent incentives - leased premises The value of any lease incentive, lessor contribution, rent free period or other financial enticement having the same effect is held in the balance sheet as a provision and amortised progressively over the full term of the lease to which the incentive relates.

(f) Recoverable amount of non-current assets Non-current assets are written down to recoverable amount where the carrying value of any non-current asset exceeds recoverable amount. In determining the recoverable amount of non-current assets, the expected net cash flows have not been discounted to their present value.

(g) Accounts payable Trade payables and other accounts payable are recognised when the company becomes obliged to make future payments resulting from purchases of goods and services.

(h) Provision for employee entitlements Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave and long service leave. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be paid. All on-costs, including payroll tax, workers' compensation premiums and fringe benefits tax are included in the determination of provisions. Annual leave and the current portion of long service leave and workers' compensation provisions are measured at their nominal amounts. The measurement of the long term portion of long service leave at nominal value is a departure from AASB 1028 Accounting for Employee Entitlements. The Directors are of the opinion that the estimates relating to the rate of increase in employee wages and salary rates together with the uncertainty as to when the entitlements will be paid, are such that they do not justify the calculations for the value of the information provided and that in any event, the bringing to account of this portion of long service leave at its nominal value will provide an estimate not materially different from that derived using the present value basis of measurement.

Employee bonuses are recognised in the financial year in which the performance related to the bonus occurred.

(i) Financial instruments Financial instruments included in assets Trade receivables are initially recorded at the amount of contracted proceeds. Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered less than likely. A specific provision is maintained for identified doubtful debts, and a general provision is maintained in respect of receivables which are doubtful of recovery but which have not been specifically identified.

(j) Comparatives Comparative figures are, where appropriate, reclassified so as to be comparable with figures presented for the financial year.

Note 2. Operating surplus

2000 1999

$ $ The operating surplus includes the following items of revenue and expense:

Operating revenue

Revenue from core activities: Membership subscriptions 4,339,473 3,950,202 Functions 1,569,786 1,537,839 Education and professional development 4,252,290 3,524,652 Membership services 330,368 331,228 Company Director Journal 1,304,664 1,069,424 Projects 363,615 92,000 Other revenue: Other income 142,934 140,388 Interest received 184,816 126,092 Total operating revenue 12,487,946 10,771,825 (a) Loss on disposal of non current assets - 2,627

Operating surplus is after charging the following expenses:

Depreciation and amortisation: Plant and equipment - depreciation 152,985 109,790 - amortisation 12,250 8,412 Operating lease rental expense: - Premises 317,795 308,478 Finance leases: - Finance charge 555 868 Transfers to provisions: - Long service leave 24,301 35,277 - Annual leave 4,315 (648)

Note 3. Receivables

2000 1999

$ $ Current: Trade receivables 532,502 295,812 Provision for doubtful debts (1,000) (1,000)

531,502 294,812 Other receivables and prepayments 404,875 272,486 Total receivables 936,377 567,298

Note 4. Current investments Short term deposits 3,439,582 2,450,000

Note 5. Inventories At cost Publications and course material 69,957 89,595

Note 6. Plant and equipment Leasehold improvements At cost 73,708 44,618 Accumulated depreciation (33,941) (23,936)

39,767 20,682 Office furniture and equipment At cost 807,290 797,508 Accumulated depreciation (630,378) (530,095)

176,912 267,413 Under finance lease 8,975 8,975 Accumulated amortisation (6,731) (4,488)

2,244 4,487

218,923 292,582

Note 7. Current accounts payable

2000 1999

$ $ Trade payables 113,297 214,121 Other creditors and accruals 1,178,583 707,115 Income received in advance 927,755 948,960 Subscriptions in advance 151,680 135,787

2,371,315 2,005,983

Note 8. Current borrowings Secured: Finance lease liabilities (note 16) 2,676 2,032

2,676 2,032 Effectively secured by the assets leased.

Note 9. Current provisions Employee entitlements: Annual leave 141,509 143,095 Long Service leave 23,125 20,029 Rent free equalisation 8,277 9,029

172,911 172,153

Note 10. Non-current borrowings Secured: Finance lease liabilities (note 16) 93 3,068 Effectively secured by the assets leased

Note 11. Non-current provisions Employee entitlements: Long service leave 121,330 100,125 Rent free equalisation 6,781 15,805

128,111 115,930

Note 12. Members' funds The use of the description Members' Funds is a departure from the title Shareholders' Equity contained in the Corporations Law. Members' Funds more appropriately reflects the fact the company is a company limited by guarantee. If the company is wound up, the articles of association state that each member is required to contribute a maximum of $20 towards meeting any outstanding obligations of the company. At 30 June 2000 the number of members was 14,765 (1999: 14,087).

Note 13. Commitments under non-cancellable operating leases

2000 1999

$ $ Premises: Not later than 1 year 294,789 297,119 Later than 1 year but not later than 2 years 218,168 294,789 Later than 2 years but not later than 5 years 78,968 267,236

591,925 859,144

Note 14. Remuneration of officers

Income of Directors

The directors of the company are appointed on an honorary basis and as result do not receive any remuneration either directly or indirectly from the company or any related party.

Income of executives

The number of executive officers whose total income for the year falls within the following bands, were: $ $ 2000 1999 100,000 - 109,999 3 1 110,000 - 119,999 1 3 120,000 129,000 2 - 240,000 - 249,999 - 1 250,000 - 259,999 1 - The aggregate income of the executives referred to above: $945,315 $685,331 The above table includes bonus payments allocated in accordance with the policy set out in Note 1(h). Income of executives comprises amounts paid or payable to executive officers domiciled in Australia, directly or indirectly, by the company or any related party (but excluding amounts disclosed later in this note under "retirement benefits") in connection with the management of the affairs of the entity or economic entity, whether as executive officers or otherwise.

Note 15. Remuneration of auditors

2000 1999

$ $ Amounts received, or due and receivable, by the auditors from the company:

Auditing the accounts 22,000 21,000

Other services 14,800 14,500

Note 16. Finance lease commitments Office furniture and equipment: Not later than 1 year 2,885 2,885 Later than 1 year but not later than 2 years 90 2,885 Later than 2 years but not later than 5 years - 90 Minimum finance lease payments 2,975 5,860 Deduct future finance charges (206) (760) Finance lease liabilities 2,769 5,100 Included in accounts as: Creditors and borrowings Current (note 8) 2,676 2,032 Non-current (note 10) 93 3,068

2,769 5,100

Note 17. Related party disclosures The directors of the company during all of the past two financial years (except as noted) were: Mr Richard Warburton FAICD Dr Kenneth Moss FAICD (appointed 27.06.00) Mr James Porter FAICD (retired 8.11.99) Ms Elizabeth Alexander AM FAICD Mr Ian Harper AM FAICD (retired 2.11.98) Mr Graeme McGregor AO FAICD (appointed 28.03.00) Mr Craig Jackson FAICD (resigned 30.09.99) Mr Clifford Breeze FAICD (appointed 2.11.98) Dr James Gill FAICD (appointed 8.11.99) Mr Robert Graham FAICD (appointed 2.11.98) Mr Robert Nattey LVO FAICD Mr Richard Ryan AO FAICD (appointed 2.11.98) Mr Philip Pledge MAICD (retired 2.11.98) Mr Valentine Roy Smith FAICD (appointed 2.11.98) Mr Gregory Swindon FAICD (appointed 2.11.98) Mr David Young FAICD (retired 8.11.99) Mr Richard Watson FAICD (retired 2.11.98) There were no related party transactions.

Note 18. Details of controlled entity

Country of Ownership % of Shares Held Book Value of Investment Controlled entity Result

Incorporation and Formation 2000 1999 2000 1999 2000 1999

$ $ $ $ Controlled Entity Australian Institute of Company Directors Research Foundation Trust

Australia 100% 100% - - - -

Consolidated accounts have not been prepared as the assets, liabilities and results of the Australian Institute of Company Directors Research Foundation Trust for the year ended 30 June 1999 and 30 June 2000 are of no material consequence.

Note 19. Financial reporting by segments The company's activities include conducting educational activities, publication of articles and statements of interest to directors and consultation with and submissions to government, particularly on corporate law reform, commissions of inquiry and other public authorities about the framing of laws and regulations of concern to directors and the corporate system. The company operates in one geographical location, being Australia.

Note 20. Notes to the Statement of Cash Flows

(a) Reconciliation of cash For the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks and investments in money market instruments. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:

2000 1999

$ $ Cash 478,848 860,398 Short Term deposits 3,439,582 2,450,000

3,918,430 3,310,398

(b) Reconciliation of Net Cash provided by Operating Activities to Operating Surplus

2000 1999

$ $ Operating surplus 506,874 646,488 Depreciation/amortisation of non-current assets 165,235 118,202 Loss on disposal of property, plant and equipment - 2,627 Transfers to provisions: Provision for employee entitlements 22,715 34,172 Rent free equalisation (9,776) (9,024) Net cash provided by operating activities before changes in net assets and liabilities 685,048 792,465 Changes in net assets and liabilities (Increase)/Decrease in: Current trade receivables (236,690) (74,056) Current other receivables and prepayments (132,389) (18,053) Current inventories 20,638 (30,868) Increase/(Decrease) in: Current trade creditors (100,824) 58,495 Other current creditors and accruals 466,156 699,116

701,939 1,427,099

Note 21. Financial instruments

Terms and conditions of debtors

Australian Institute of Company Directors extend 30 day credit terms to debtors generally, subject to compliance with the company credit policy.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. The company has adopted the policy of only dealing with creditworthy counterparts as a means of mitigating the risk of financial losses from defaults. The carrying amount of financial assets and liabilities as show on the face of the balance sheet represents the maximum credit risk to which the company is exposed.

Net fair value

The carrying amount of the financial assets and liabilities as shown on the face of the balance sheet represents the net fair value of the financial assets and liabilities at the reporting date. All of these assets and liabilities are of such a nature that they are not readily traded.

Interest rate risk exposures

The following table summarises interest rate risk for the economic entity, together with effective interest rates as at balance date.

Fixed interest rate maturing in Average interest rate 2000 Floating interest rate (a) 1 year or less Over 1 to 5 years More than 5 years Non-interest bearing Total Floating fixed

$ $ $ $ $ $ % % Financial assets Cash 478,848 - - - - 478,848 4.75 percent - Short term deposits - 2,889,582 550,000 - - 3,439,582 - 6.14% Trade debtors - - - - 532,502 532,502 - -

478,848 2,889,582 550,000 532,502 4,450,932 Financial liabilities Trade creditors - - - - 113,297 113,297 - - Finance lease liabilities - 2,676 93 - - 2,769 - 13.86%

2,676 93 113,297 116.066 1999 Financial assets Cash 860,398 - - - - 860,398 4.2 - Short term deposits - 2,450,000 - - - 2,450,000 - 5.325 Trade debtors - - - - 295,812 295,812 - -

860,398 2,450,000 - - 295,812 3,606,210 Financial liabilities Trade creditors - - - - 214,121 214,121 - - Finance lease liabilities - 2,032 3,068 - - 5,100 - 13.86

- 2,032 3,068 - 214,121 219,221

(a) Floating interest rates represent the most recently determined rate applicable to the instrument at balance date.

Directors' Declaration The directors declare that: a) the financial statements and associated notes comply with the accounting standards and Urgent Issues Group Consensus Views; b) the financial statements and notes give a true and fair view of the financial position as at 30 June 2000 and performance of the company for the year then ended; c) in the directors' opinion: i) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and ii) the financial statements and notes are in accordance with the Corporations Law, including Sections 296 and 297. Made in accordance with a resolution of the directors. R F E Warburton FAICD National President G McGregor AO FAICD National Treasurer Sydney

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