Pacific Star Network Limited - Home - Australian … look forward to keeping you updated on your...

Pacific Star Network Limited

ANNUAL REPORT 2011

Corporate Directory PACIFIC STAR NETWORK LIMITED ABN 20 009 221 630

Directors Andrew Moffat (Chairman) Ronald Hall Gary Pert

Company Secretary Stephen Sweeney CA, MBA

Registered Office 473 Swan Street RICHMOND VIC 3121 Telephone: (03) 8420 1116 Facsimile: (03) 9421 5383 Email: [email protected] Internet: www.pacificstarnetwork.com.au

Share Registry Computershare Investor Services Pty Ltd Yarra Falls, 452 Johnson Street ABBOTSFORD VIC 3067 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2096

Auditors BDO Audit (NSW-VIC) Pty Ltd Level 30, 525 Collins Street MELBOURNE VIC 3000

Solicitors Cooper Mills Lawyers Level 4, 459 Collins Street MELBOURNE VIC 3000

Bankers Bank of Melbourne 424 Warrigal Road MOORABIN VIC 3189 Stock exchange listings Pacific Star Network Limited ordinary shares are quoted on

the Australian Stock Exchange (ASX code: PNW).

Meetings The Company’s Annual General Meeting will be held on Monday 28 November 2011 at 9.30am. The location of the meeting is 473 Swan Street, Richmond Victoria 3121.

For

per

sona

l use

onl

y


ANNUAL REPORT 2011

Chairman’s Report for 2010-11 Dear Shareholder,

Your directors present their report on the consolidated entity consisting of Pacific Star Network Limited and the entities it controlled at the end of, or during the year ended 30 June 2011.

2011 Highlights

• With continuing profitable results and positive cash flows, directors declared the Company’s first unfranked interim dividend of 1.0 cents per ordinary share. Following a review of the full year financial results, directors have declared a further unfranked final dividend of 0.5 cents per ordinary share, returning an aggregated yield of 5% based on the current share price. The record date for the final dividend is 30 September and payment date will be 28 October 2011.

• Throughout the year, we welcomed a number of new clients including Carlton & United Breweries, Foxtel, National Australia Bank, De Bortolli Wines and Bingle. The quality of these clients and their desire to work with us reflects the growing awareness of the power and influence of the talk radio sports format.

• With our joint venture partners, Macquarie Radio Network Limited, we have developed new state of the art broadcasting studios at our premises in Richmond to house the MTR1377 on-air team and in April we lodged an application with the Australian Communications & Media Authority (ACMA) seeking approval to increase the strength and coverage of the MTR1377 radio licence so as to reach a greater audience, particularly in the North Western suburbs of Melbourne.

• I am delighted to report that 1116SEN ratings continue to go from strength to strength with the latest results1 reflecting continuing growth in ratings and listening audience across all programs.

1116SEN’s year on year ratings growth is a notable achievement, particularly in the 25-54 male category where the stations regularly outperforms its main competitors.

Digital Radio

• Commercial Radio Australia (CRA) announced in August that there were 940 thousand people listening to digital radio across five metropolitan capitals with 7.6% of all listening to radio now via a DAB+ digital radio device. Retailers have sold 500 thousand digital radios since the launch of digital in August 2009.

• CRA brought together nearly 100 motor vehicle industry representatives at the recent Sydney and Melbourne automotive workshops to move digital radio listening into more Australian motor vehicles.

In May 2011, BMW became the first manufacturer in Australia to announce they would be including DAB+ digital radio as an option in their vehicles from May 2011. Integrating digital radio into vehicles will enable the delivery of real time traffic updates, text based traffic messages and latest fuel prices updates etc.

• In March, The Minister for Broadband, Communications, and the Digital Economy Senator Stephen Conroy officially switched on a system for the broadcast of DAB+ digital radio in Parliament House. All Members of Parliament and Senators were presented with a digital radio donated by digital radio manufacturers; Bush, Grundig, NextWave Digital, OXX Digital, Philips, Pure, Roberts and Sangean.

1 Nielsen Ratings – Survey 4 2011.

For

per

sona

l use

onl

y


ANNUAL REPORT 2011

Overview of Operating Results

For the 2010-11 financial year:

• There was some evidence of a softening in advertising revenue for the first half of the financial year and this also continued into the second half with Sydney / Melbourne agency revenue down 5% on the comparative period. On a positive note, the 1116SEN direct revenue team delivered on budget despite the loss of key personnel from the team.

• The launch of MTR1377 in April 2010 called for a significant investment of funds, time, and effort and this continued throughout the financial year. Whilst rating results are lower than expected, we are extremely proud of this new talk station, the identity it has created and the hard working on-air broadcast team.

• The Company owns the 1116SEN, MTR1377 and other digital radio licences. Following a review of the current financial performance of MTR1377 (under the joint venture agreement, Pacific Star does not incur operating losses), directors concluded that the value of $5.8 million attributed to the MTR1377 radio licence should be written down by $788 thousand in recognition of the estimated future cash flows expected to be generated from ownership of that licence.

Financial Results

• Achieved positive operating cash flows of $1.35 million (2010: $246 thousand) during the financial year contributing to cash reserves of $2.53 million at reporting date (2010: $2.13 million).

• Full year result was up 20.6% on the comparative period with a profit after tax of $825 thousand (2010: $684 thousand) and a pre impairment EBITDA of $1.02 million (2010: $808 thousand), up 26.2% on a normalised basis compared to the prior period.

• Revenue growth (including the share of profits of associates and joint ventures) was up 1.1% compared to the prior period, however this needs to be viewed in the following context:

o 1116SEN advertising revenue was up 5.8% on the comparative period to $11.6 million. o The primary source of revenue for the MTR1377 licence is based on cost recoveries from

Melbourne Radio Operations Pty Ltd, a joint venture company established with Macquarie Radio Network Limited to manage the day to day operations of MTR1377. Revenue included in these results is not directly comparable with the prior period due to changes in nature of the business. Advertising revenue for MTR1377 is reported through Melbourne Radio Operations Pty Ltd.

• Pre impairment operating costs at $12.56 million (2010: $12.63 million) were consistent with the prior period.

Outlook

• As a board, we are acutely conscious of the need to diversify revenue streams. With this in mind, a key objective moving forward is to: o Leverage greater profitability from new and existing digital assets, on-line, production, and

studios. o Seek partnerships in other media streams that strategically fit our core business; and o Identify and assess value added acquisition opportunities over the next 1-3 years.

For

per

sona

l use

onl

y


ANNUAL REPORT 2011

Outlook Cont’d

• Directors have implemented a strategy that lays the foundations for future growth to deliver improved returns to shareholders. I envisage that our dividend policy going forward will be to pay 50-60% of net profit, annually as dividends, subject to ensuring the Company has adequate funding to meet day to day needs and acquisition opportunities. I believe that this dividend policy together with the recent capital initiative to consolidate existing ordinary shares will lead to the Company’s shares becoming a more appealing investment proposition.

• With the AFL rights agreement for TV broadcasting concluded, the focus will now move to finalising the next rights agreement for radio broadcasting. We envisage that this will be a longer term agreement and our 1116SEN station will be seeking to secure rights to continue live broadcasting of AFL, however for this to continue to be viable, we will only agree to a rights agreement that is not cost prohibitive.

• Looking to the future, another important consideration is the ratings and financial performance of MTR1377. In this same report last year, I drew attention to the difficulties in predicting when this new station would turn the corner. It continues to be a work in progress in a tough market environment and as a result, has not fully met revenue expectations. We continue to work closely with our joint venture partners in mapping out a viable model for this new radio station in Melbourne.

We look forward to keeping you updated on your Company’s performance.

Yours sincerely

Andrew Moffat

Chairman Melbourne, 28 September 2011

For

per

sona

l use

onl

y


ANNUAL REPORT 2011

Table of Contents

Directors’ Report 6

Auditor’s Independence Declaration 19

Independent Audit Report 20

Directors’ Declaration 22

Consolidated Statement of Comprehensive Income 23

Consolidated Statement of Financial Position 24

Consolidated Statement of Changes in Equity 25

Consolidated Statement of Cash Flows 26

Notes to the Financial Statements 27

Corporate Governance 65

Shareholder Information 72

For

per

sona

l use

onl

y


6

ANNUAL REPORT 2011

Directors’ Report The directors’ of Pacific Star Network Limited, the consolidated entity, submit herewith the annual financial report for the financial year ended 30 June 2011. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The names and particulars of the directors of the company during or since the end of the financial year are:

Current Directors

Ronald Hall Appointed Non-Executive Director on 13 February 2002

Andrew Moffat Appointed Non-Executive Director on 1 September 2004

Gary Pert Appointed Non-Executive Director on 1 July 2008

The biographies for current directors and other staff are detailed below:

Ronald Hall Non Executive Director – age 70

Mr Hall is the founder and promoter of several successful Melbourne based retail chains, including Going Going Green, Supply & Demand along with Going Going Gone. Ron has been a long time user of the radio medium for marketing his products.

Andrew Moffat Non Executive Director Chairman – age 50

Mr Moffat has in excess of 20 years of corporate and investment banking experience and is the sole principal of Cowoso Capital Pty Ltd, a company providing corporate advisory services. Prior to establishing Cowoso Capital Pty Ltd, Andrew was a Director of Equity Capital Markets & Advisory for BNP Paribas Equities Australia Limited where he was responsible for mergers and acquisition advisory services and a range of equity capital raising mandates including placements, IPO’s, rights issues, dividend reinvestment plans and underwritings. Andrew is Chairman of 360 Capital Property Limited and a Non Executive director of Rubik Financial Limited.

Gary Pert Director – aged 46

Mr Pert possesses extensive media industry experience, gained whilst serving in various senior executive roles including Managing Director of the Channel Nine Network and General Manager of Austereo Melbourne.

After a successful AFL/VFL football career which included 233 games with Fitzroy and Collingwood, Gary took up a role with the AFL as promotions and development officer between 1989 and 1994, following which he became a sales executive in the Melbourne office of the Austereo radio network.

During his 12 years with Austereo, Gary held various senior management roles culminating in 2006 when he held the joint role of General Manager of Austereo Melbourne and Austereo’s National Sales Director.

For

per

sona

l use

onl

y


7

ANNUAL REPORT 2011

Current Directors (cont’d) Gary Pert Director – aged 46

As Managing Director of Channel Nine Melbourne, Gary held principal responsibility for one of Australia’s largest media organisations with more than 450 staff. After one of the most profitable periods in Channel Nine’s history, Gary was recruited as Chief Executive Officer of the Collingwood Football Club, one of Australia’s largest sporting brands.

Stephen Sweeney Company Secretary – age 47

Mr Sweeney is a Chartered Accountant and also holds an MBA awarded by Heriot-Watt University (Edinburgh Business School). Stephen is also the Company’s Chief Financial Officer and has over 20 years experience as a senior management executive in the banking, government and the not for profit sector.

Directorship of other Listed Companies Directorships of other listed companies, held by directors in the three years preceding the end of the financial year are as follows:

Andrew Moffat Non-Executive Director :- Cash Converters Int. Limited (resigned Oct 2008) Non-Executive Director :- Infomedia Limited (resigned Nov 2010) Non-Executive Director :- itX Limited (resigned Jan 2011)

Principal Activities The principal activities of Pacific Star Network Limited during the year was ownership of commercial broadcasting licences, 1116SEN (1116AM), MTR1377 (1377AM) and Aussie and MyMp on the new digital spectrum. Review of Operations The trading profit for the parent entity for the year after taking account of a deferred tax asset of $828 thousand (2010: $110 thousand) was $369 thousand (2010: $434 thousand loss).

The trading profit for the consolidated entity for the year after income tax amounted to $825 thousand (2010: $684 thousand).

Pre impairment EBITDA result of $1.02 million for the financial year (2010: $808 thousand).

In April 2011, shareholders voted for a consolidation of share capital on a 1 for 10 basis and accordingly all share related disclosures have been restated for the impact of the share consolidation. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity.

For

per

sona

l use

onl

y


8

ANNUAL REPORT 2011

Profit per Share The basic profit per share was 1.5 cents (2010: 1.3 cents) and diluted profit per share was 1.5 cents (2010: 1.3 cents).

The weighted average number of ordinary shares on issue during the financial year used in the calculation of basic profit per share was 53,742,145 shares (2010: 53,530,090 shares).

Subsequent Events On 21 September 2011, the Company announced that it had entered into a Heads of Agreement with International Publishing Group Pty Ltd, for the acquisition of Inside Football magazine.

No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect the state of affairs of the consolidated entity in subsequent financial years.

Future Developments, Prospects and Business Strategies Refer to the Chairman’s report for details of future developments, prospects, and business strategies.

Dividends Directors declared an interim dividend of 1.0 cents and a final dividend of 0.5 cents per share in respect of the 2011 financial year. Refer to the Chairman’s report for guidance on ongoing dividend policy.

Shares and options granted to executives and employees

In April 2011, shareholders voted for a consolidation of share capital and options on a 1 for 10 basis and consequently all shares / options on issue to KMP / executives were consolidated to 1 share / option for every 10 shares / options issued. These changes are referred to as a “post consolidated adjusted basis” for the purposes of this report.

Shares and options are granted under the Employee Share Option Plan (ESOP). When exercisable, each option is convertible into one ordinary share of Pacific Star Network Limited (ASX Code: PNW).

The Company’s obligations under the existing ESOP are as follows:

• The Company entered into contracts in 2008 to issue options over ordinary shares to Key Management Personnel (KMP) at future dates. If all conditions are met over the remaining term of these contracts, two hundred thousand options (on a post consolidation adjusted basis) will be issued to KMP for nil consideration as a Short Term Incentive (STI). Information on the performance and vesting criteria of these options can be located in the remuneration report below.

Options issued under the plan will only vest provided the performance and vesting conditions are achieved and no options will be issued until this occurs. The vesting period is deemed to commence on the date that new contracts were agreed by both parties and it is only at this point that the Company is conditionally obliged to issue options in accordance with those contracts. Options not yet vested lapse if KMP resign their position. In addition to the future entitlements noted above, two hundred thousand options (on a post consolidation adjustment basis) were granted and vested during the year and were subsequently exercised into ordinary shares for an equivalent amount. F

or p

erso

nal u

se o

nly


9

ANNUAL REPORT 2011

Shares and options granted to executives and employees Cont'd

• There are currently eight hundred and fifty thousand options (on a post consolidation adjusted basis) on issue to KMP / employees as a Long Term Incentive (LTI), exercisable on or after 20 October 2011 for a consideration of 40 cents per share (on a post consolidation adjusted basis) and with an expiry date of 20 October 2012. The vesting condition for these options is that KMP / employees continue to be employed on or after the vesting date. Further information on options issued by the Company can be located in the remuneration report below and in Note 7.

In accordance with AASB 2: “Share-based payment” options have been valued and are or will be accounted for as an expense in the Statement of Comprehensive Income in this or future periods.

Shares and options granted subsequent to reporting date will be expensed in future periods.

The total number of options on issue under the STI / LTI at reporting date was eight hundred thousand options (on a post consolidated adjusted basis).

The following KMP have a pre-existing entitlement to vested options over ordinary shares (on a post consolidation adjusted basis) relating to the grant of options in previous financial years:

Key Management Personnel

Number of options granted in previous years

and / or subsequent to end of reporting period

Exercise Price

Value per option at

grant date

Vesting Date Expiry Date

D Hung2 100,000 300,000

Nil 40 cents

31 cents 36 cents

100% on 01/09/11 100% on 20/10/11

01/09/12 20/10/12

M Johnson3 50,000 100,000

Nil 40 cents

31 cents 36 cents

100% on 20/10/11 100% on 20/10/11

20/10/12 20/10/12

S Sweeney4 50,000 100,000

Nil 40 cents

31 cents 36 cents

100% on 20/10/11 100% on 20/10/11

20/10/12 20/10/12

G Moore 100,000 40 cents 36 cents 100% on 20/10/11 20/10/12 A. Smyth 50,000 40 cents 36 cents 100% on 20/10/11 20/10/12 Total 850,000 40 cents 33 cents

Meetings of Directors The following table sets out the number of directors’ meetings held during the financial year and the number of meetings attended by each director. During the financial year eight board meetings were held.

Directors Eligible to attend

Attended

Ronald Hall 8 8

Andrew Moffat 8 8

Gary Pert 8 7

2 In addition to the above, he exercised options over one hundred thousand ordinary shares for nil consideration in Sep 2010 under the ESOP. 3 In addition to the above, he exercised options over fifty thousand ordinary shares for nil consideration in Sep 2010 under the ESOP. 4 In addition to above, his corporate entity exercised options over fifty thousand ordinary shares for nil consideration in Sep 2010.

For

per

sona

l use

onl

y


10

ANNUAL REPORT 2011

Indemnification of Officers and Auditors During the financial year, Pacific Star Network Limited paid premiums to insure Directors and Officers against liabilities and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium is not disclosed under the terms and conditions of the policy.

As at the date of this report, no amounts have been claimed or paid in respect of this indemnity, other than the premium referred to above. During or since the financial period, the Company has not indemnified or made a relevant agreement to indemnify the auditor of the Company against a liability incurred as auditor.

Environmental Regulation The consolidated entity is not subject to any significant and/or particular environmental regulation.

Directors’ Shareholdings The relevant interests of past / current directors in the shares of the Company (on a post consolidation adjusted basis) or a related body corporate as at the date of this report are as follows. There are no options on issue to directors.

Directors No. of Fully Paid Ordinary Shares

Ronald Hall5 15,877,968

Andrew Moffat6 704,629

Gary Pert -

Total 16,582,597

Remuneration Report (Audited) This Remuneration Report outlines the director and executive remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 and its regulations.

This information has been audited as required by section 308(3C) of the Act. For the purposes of this report, Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, whether as an executive or otherwise, and includes the five executives in the Company receiving the highest remuneration.

Principles used to determine the nature and amount of remuneration

The primary objective is to ensure that rewards paid for performance are competitive and appropriate for the results that are delivered. The guiding principles for developing executive remuneration are: • There should be an appropriate mix of fixed and performance based variable pay components; • The various components of remuneration should be understandable, transparent and easy to

communicate; and • Remuneration practices should be acceptable to internal and external stakeholders.

5 Ron Hall has a beneficial interest in shares through a controlling interest in Rosh Hagiborim Pty Ltd, Talk to Edith Pty Ltd and Mastiff Nominees Pty Ltd.

6 Andrew Moffat has a direct interest in 27,000 shares and a beneficial interest in half of the remaining shares through the Cowoso Superannuation Fund.

For

per

sona

l use

onl

y


11

ANNUAL REPORT 2011

Remuneration Report (Audited) Cont’d There is no specific relationship between the Company’s remuneration policies and its financial performance over the last 5 years.

Components of Key Management Personnel Total Remuneration

In accordance with best practice corporate governance, the structure of non-executive director and other Key Management Personnel (KMP) remuneration is separate and distinct.

Non-executive directors are remunerated by fees within the aggregate limit approved by shareholders.

Each non-executive director receives a fixed fee for being a director of the Company. Their remuneration for the period ending 30 June 2011 is detailed in the table below.

The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities and remuneration structures are reviewed regularly to ensure that:

• Total remuneration is competitive by market standards; • Link rewards with the strategic goals and performance of the Company; and

• Accountabilities are clearly defined so as to minimise conflicts of interest and enable effective decision making.

Total remuneration is made up of the following elements:

• Fixed Remuneration; • Short Term Incentive (STI); and • Long Term Incentive (LTI).

Fixed remuneration is set so as to provide a base level of remuneration that is appropriate to the position, is competitive with the market and takes account of each individual’s experience, qualifications, capabilities and responsibility and is benchmarked to ensure that remuneration is competitive with the market median. KMP receive their fixed remuneration in cash. This remuneration is detailed in the table below.

Short Term Incentives (STI) are based on Key Performance Measures (KPI’s) that focus participants on achieving personal and business goals which contribute to the creation of sustained shareholder value.

STI’s are the variable component of remuneration and is dependent on individual KPI’s which are linked to their role in the Company. As this variable component is not dependent on share price, or on dividends, a discussion on the relationship between the board’s remuneration policy and the Company’s performance is not provided in this report. STI’s are based on achieving agreed performance targets. These targets reflect the key business drivers / measures of the business and incorporate the principles of growth, retention, and service. STI’s include paying incentives to individuals for achieving / over achieving periodic sales targets and / or issuing ordinary shares for nil consideration as an incentive for achieving / over achieving annual targets.

The CEO is responsible for assessing the performance of individuals against targets on a periodic basis, and he may also recommend other STI’s over and above target amounts. The CEO presents his recommendations to the full board for consideration and approval. During the financial year, two hundred thousand options were issued for nil consideration to key executives in recognition of key deliverables having been achieved. Options are exercisable into escrowed ordinary shares thus restricting the holder from dealing in those shares for a twelve month period from the date of issue.

For

per

sona

l use

onl

y


12

ANNUAL REPORT 2011

Components of Key Management Personnel Total Remuneration Cont’d

1. The following table summarises the performance and vesting conditions for options that may be issued under the STI plan, as at the date of this report.

Series Issued Vesting Timing Vesting Conditions

Options Issued Vest over a 3 year Divisional EBITDA not less than 95% of 20/10/08 contract period YTD budget for 3 consecutive months.

Divisional revenue not less than 90-95% of YTD budget for 3 consecutive months.

Divisional YTD expenditure not to exceed budget by +/- 10% for 3 consecutive months. Combined radio station ratings of 5 or more in last published ratings. Continuing to be employed at the vesting date.

2. With Long Term Incentives (LTI), the objective is to reward staff including KMP, in a way that aligns this element of remuneration with the creating of shareholder value and accordingly LTI grants are made to staff and KMP to promote staff retention for the benefit of shareholder wealth.

LTI grants to staff including KMP, are delivered in the form of options. The Company uses a premium or an at market price of the shares under option as a component of the performance hurdle and in addition staff and KMP are required to meet certain length-of-service obligations.

As neither the fixed nor variable component of remuneration is dependent on share price or dividends, a discussion of the relationship between the board’s remuneration policy and performance is not provided in this report.

Directors invite individuals to participate in the Employee Share Option Plan (ESOP) and grant them options subject to service / vesting conditions at the end of specific periods. Options only vest if service / vesting conditions are achieved.

There is no intention to provide loans, interest free or otherwise to fund such transactions but this will be reviewed closer to the time that individuals will have the opportunity to exercise options and purchase ordinary shares. The table on the next page summarises the service and vesting conditions for shares issued under the LTI plan as at the date of this report. Directors believe there is no risk to KMP limiting their exposure in relation to options / shares that have been or will be issued and accordingly has not formalised a policy in relation to KMP hedging their exposure to shares.

Series Issued Vesting Timing Vesting Conditions

Options Issued Vest 20/10/11 Continuing to be employed 20/10/08 Expiry 20/10/12 at the vesting date.

If performance conditions are met over the three-year period and KMP continue to be employed, then they will be considered to have met the required the service conditions for the vesting of options. These conditions are considered an appropriate measure to reward KMP for achieving benchmarks. There was a 1 for 10 share consolidation during the year and the number of options quoted for 2010 and 2011 are stated on a post-consolidation basis.

KMP performance conditions are varied based on position and responsibilities.

For

per

sona

l use

onl

y


13

ANNUAL REPORT 2011

Details of Remuneration – Key Management Personnel

Remuneration arrangement for KMP are formalised in employment or consulting agreements.

Remuneration packages contain cash salary / fees, commissions / incentives, bonuses, superannuation and the cost of share based payments expensed under STI / LTI plans.

Remuneration for each member of KMP for the year ended 30 June 2011 is set out below.

Short Term Employee Benefits

Post Employment Benefits

Share Based

Payment STI / LTI


Cash salary/fees

$

Superannuation

$

Options

$ / %

Cash bonus

$ / %

Total

$ 2011 Directors of Pacific Star Network Limited

R Hall 45,872 4,128 - - 50,000 A Moffat (Non Exec Chairman)

68,807 6,193 - - 75,000

G Pert 45,872 4,128 - - 50,000 Sub-total 160,551 14,449 - - 175,000 Other Key Management Personnel of the Group B Quick M Johnson S Sweeney G Moore D Hung A Smyth

337,615 31,285 - 32,9807 8%

401,880

155,000 14,580 11,792 6%

7,000 4%

188,372

153,845 - 11,792 7%

- -

165,637

110,000 10,434 3,707 3%

15,678 11%

139,819

181,400

130,000

15,332

14,961

27,222 10% 1,854 1%

70,965 26%

57,255 28%

294,919

204,070

Sub-total 1,067,860 86,5928 56,3679 4%

183,87810 14%

1,394,697

Total 1,228,411 101,041 56,367 183,878 1,569,697 4% 13%

7 Includes bonus of $22,979, and $10,001 of commissions related to the previous financial year. 8 As S Sweeney is not a full time employee, he provides his services via a corporate entity. 9 Benefit calculated under the Binomial model in respect of the value of share options issued to date. 10 Includes monthly, quarterly, and annual incentives paid during the financial year resulting from the achievement of sales targets.

For

per

sona

l use

onl

y


14

ANNUAL REPORT 2011

Remuneration Report (Audited) Cont’d

Details of Remuneration – Key Management Personnel Cont’d


Post Employment

Benefits

Share Based

Payment STI / LTI


Cash salary/fees

$

Super-annuation

$

Options $

Other performance

$ / %

Total $

2010 Directors of Pacific Star Network Limited R Hall 45,871 4,129 - - 50,000 P Quattro (resigned Oct 2009)

16,667 - - - 16,667

A Moffat (Non Exec Chairman)

68,807 6,193 - - 75,000

G Pert 45,871 4,129 - - 50,000 Sub-total 177,216 14,451 - - 191,667 Other Key Management Personnel of the Group B Quick M Johnson G Meadows S Sweeney G Moore

220,000 27,447 - 108,17611 30%

355,623

155,000 14,040 24,885 13%

1,000 1%

194,925

130,000 - 10,914 6%

33,051 19%

173,965

110,046 - 24,885 18%

- -

134,931

110,000 9,900 3,638 3%

- -

123,538

D Hung 165,138 14,462 53,408 14%

142,959 38%

375,967

Sub-total 890,184 65,84912 117,73013

9% 285,18614

21% 1,358,949

Total 1,067,400 80,300 117,730 285,186 1,550,616 8% 18%

11 Under his employment contract, the CEO was entitled to a bonus based on achieving budgeted profitability. B Quick had the potential to earn

a bonus of $34,000. His actual bonus was $23,000 (68%) and bonus foregone was 11,000 (32%) of the potential bonus amount. 12 P Quattro, G Meadows and S Sweeney provided their services via corporate entities. 13 Benefit calculated under the Binomial model in respect of the value of share options issued to date. 14 Includes monthly, quarterly, and annual incentives paid during the financial year resulting from the achievement of sales targets.

For

per

sona

l use

onl

y


15

ANNUAL REPORT 2011

Remuneration Report (Audited) Cont’d Share Based Payments

2011 – Issue 5 Issued to / grant date

Date Vested and Exercisable

Expiry Date

Exercise Price

Number

Vested during

the year Number

Exercised during

the year Number

Balance at the end of the year Number

Share price at grant date

Risk free interest rate %

D Hung

06 Nov 09

06 Nov 09

N/a

Nil

100,000

(100,000)

-

31 cents

5.62% M Johnson

06 Nov 09

06 Nov 09

N/a

Nil

50,000

(50,000)

-

31 cents

5.62% S Sweeney

06 Nov 09

06 Nov 09

N/a

Nil

50,000

(50,000)

-

31 cents

5.62% Total N/a Nil 200,000 (200,000) - 31 cents 5.62%

2009 – Issue 3 Issued to / grant date

Date Vested and Exercisable

Expiry Date

Exercise Price

Number

Balance at start of the

year Number

Vested during

the year Number

Balance at the end of the year Number

Share price at grant date

Risk free interest rate %

D Hung

20 Oct 08

20 Oct 11

20 Oct 12

40 cents

300,000

-

300,000

36 cents

4.45% M Johnson

20 Oct 08

20 Oct 11

20 Oct 12

40 cents

100,000

-

100,000

36 cents

4.45% S Sweeney

20 Oct 08

20 Oct 11

20 Oct 12

40 cents

100,000

-

100,000

36 cents

4.45% G Moore

20 Oct 08

20 Oct 11

20 Oct 12

40 cents

100,000

-

100,000

36 cents

4.45% A. Smyth

20 Oct 08

20 Oct 11

20 Oct 12

40 cents

50,000

-

50,000

36 cents

4.45% Total 20 Oct 12 40 cents 650,000 - 650,000 36 cents 4.45%

• The fair value of each of the two hundred thousand options exercised by KMP was 31 cents. • In 2008, the Company granted 1.325 million (on a post consolidation adjusted basis) options to KMP

and other employees as an LTI, with an exercise date of 20 October 2011 and an exercise price of 40 cents. Unexpired options at reporting date were:

o six hundred thousand options that can be exercised at a future date by KMP as per the table above; and

o two hundred thousand options that can be exercised at a future date by other employees as per the table in Note 7.

• For STI purposes, 200,000 options were granted to KMP on 29 September 2010 as reward for achieving STI performance conditions (Issue 5) and these were subsequently exercised and converted to shares of an equivalent amount for nil consideration on that date.

• Subject to meeting required performance conditions as disclosed on page 11, the Company has the discretion to issue a further 200,000 options to KMP as STI’s over the coming months.

• There are currently 1million options issued to KMP and other employees under the ESOP. • When exercisable, each option is convertible into one ordinary share in Pacific Star Network Limited.

For

per

sona

l use

onl

y


16

ANNUAL REPORT 2011

Remuneration Report (Audited) Cont’d Share Based Payments Cont’d

Details of options over ordinary shares provided as remuneration to KMP is set out below.

When exercisable, each option is convertible into one ordinary share in Pacific Star Network Limited.

Further information on issued options can be located in the table in Note 7. Key Management Personnel

Granted in previous years

Number

Granted / (Exercised) in the year

Number

Vested and Exercisable

Date

Exercised

Number

Vested during

the year

%

Forfeited during the

year

%

Expiry Date

Estimate of min /

max value of grant

$

2009 – Issue 3

D Hung 300,000 - 20/10/11 - - - 20/10/12 10,914

M Johnson 100,000 - 20/10/11 - - - 20/10/12 3,638

S Sweeney 100,000 - 20/10/11 - - - 20/10/12 3,638

G Moore 100,000 - 20/10/11 - - - 20/10/12 3,638

A. Smyth 50,000 - 20/10/11 - - - 20/10/12 1,819

Sub-total 650,000 - 20/10/11 - - - 20/10/12 23,647

2011 – Issue 5

D Hung 200,000 - 29/09/10 (100,000) 50 - N/a 16,308

M Johnson 100,000 - 29/09/10 (50,000) 50 - N/a 8,154

S Sweeney 100,000 - 29/09/10 (50,000) 50 - N/a 8,154

Sub-total 400,000 - 29/09/10 (200,000) 50 - N/a 32,616

Total 1,050,000 - - (200,000) 19 - N/a 56,263

Where applicable, the assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using the binomial approximation option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The model inputs for options granted during the financial year ended 30 June 2011 included:

a) Options were issued for nil consideration and on vesting are exercisable into an equivalent amount of ordinary shares.

b) Exercise price at grant date of 06 November 2009 was 31 cents and at vest date on 29 September 2010 was 40 cents.

c) Vest date for the options was 29 September 2010. d) Expected price volatility of shares for the calculation of the share based cost was 75.2%. e) Risk free interest rate for options issued on 29 September 2010 was 5.62%.

The weighted average fair value of options granted and exercised during year was 31 cents.

For

per

sona

l use

onl

y


17

ANNUAL REPORT 2011

Remuneration Report Cont’d (Audited) Service Agreements – Key Management Personnel

Remuneration and other terms of employment for the CEO and other specified executives are formalised in service agreements. None of the directors are under contract.

Barrie Quick, Chief Executive Officer - Term of Agreement is 4 years renewable from 1 July 2014. - Base salary, inclusive of superannuation, for the year ended 30 June 2011 was $368,000 p.a. - Payment of termination benefit on early termination, other than for gross misconduct, equal to

three months base salary (to be confirmed). The contract may be terminated by the employee providing three months notice (to be confirmed).

Mark Johnson, Group Program Director - Term of employment is ongoing. - Base salary, inclusive of superannuation, for the year ended 30 June 2011 was $168,950 p.a. - Payment of termination benefit on early termination, other than for gross misconduct, equal to

three months base salary. The contract may be terminated by the employee providing three months notice.

Stephen Sweeney, Company Secretary, and Chief Financial Officer - Term of Agreement is 3 years renewable from 20 October 2011. - Base fee for the year ended 30 June 2011 was $154,285 p.a. - Payment of termination benefit on early termination, other than for gross misconduct, equal to

three months base fee. The contract may be terminated by the contractor providing three months notice.

Gordon Moore, Group Creative & Brand Director - Term of Agreement is ongoing. - Base fees, inclusive of superannuation for the year ended 30 June 2011 was $119,900 p.a. - Payment of termination benefit on early termination by the Company, other than for gross

misconduct, equal to three months base salary. The contract may be terminated by the employee providing three months notice.

David Hung, Group Sales Director - Term of Agreement is 3 years renewable from 1 September 2011. - Base fees, inclusive of superannuation for the year ended 30 June 2011 was $180,000 p.a. - Payment of termination benefit on early termination, other than for gross misconduct, equal to

three months base salary. The contract may be terminated by the employee providing three months notice.

Anthony Smyth, Group Agency Manager - Term of Agreement is ongoing. - Base fees, inclusive of superannuation for the year ended 30 June 2011 was $130,000 p.a. - Payment of termination benefit on early termination, other than for gross misconduct, equal to

one months base salary. The contract may be terminated by the employee providing one months notice.

End of Remuneration Report

For

per

sona

l use

onl

y


18

ANNUAL REPORT 2011

Non Audit Services The Company may decide to employ the auditors on assignments additional to their statutory audit duties where the auditors’ expertise and experience is considered important. Non-audit services performed by BDO was for taxation services during the year, was $23,650.

The board is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001, for the following reasons: • all non-audit services have been reviewed by the board to ensure they do not impact the impartiality

and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in

the Corporations Act 2001 including reviewing or auditing the auditor’s own work, acting in a management or a decision making capacity, or acting as advocate, or jointly sharing economic risk and rewards.

The details of fees paid to auditors are disclosed in Note 8 including fees for non-audit services.

Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2011 as required under Section 307(c) of the Corporations Act 2001 has been received and is located on page 19 of this report.

Proceedings on behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of, or to intervene in proceedings to which the Company is a party, for the purposes of taking responsibility on behalf of the Company for all or part of those proceedings.

Environmental Regulation The consolidated entity’s operations are not subject to any significant Commonwealth or State environmental regulations or laws.

Directors’ Interests in Contracts Directors’ interests in contracts are disclosed in Note 23(d) to the financial statements.

Rounding of Amounts In accordance with ASIC Class Order 98/100 dated 10 July 1998, amounts shown in the directors’ report and the financial report have been rounded off to the nearest thousand dollars.

Signed in accordance with a resolution of the Board of Directors made pursuant to section 298 (2) of the Corporations Act 2001. On behalf of the Directors,

Andrew Moffat Chairman Melbourne, 28 September 2011

For

per

sona

l use

onl

y

19

�

�

��

��

�

��

�� !�� "�� "�� #�

• ��$��%�� &��

��

• ��$$�� $�� '�

(��$�� !��

$��'�

�

�

��

)��

�

�� !�"�#�� $% ��&� "'��"!�

�

)��*��$�� + ��

�

For

per

sona

l use

onl

y

20

��!��!��"�� !�"�()��("�"��"�� *�(��+� ��+��"�(��", �(-�� "�!�

, ��"�� $��!� ��$�� $��

�� $�� $��"��

�� !��%��

�� !� ��!�$��-$��.��

�� $��!�� $��.��

� �� !�� '�

��

(�� $��$�� $��$�� $��

��$�� !��/��!��!�

��$��0�� '�(��$�� !��

� ��!��"��$��$�� $�� $��

�� &��!��$$��!�

�$$��$��!�$��&�� !��!��

�� '�� !��1��

�� $��

�� '�

�! ��

2 ��$�� -$��$�� $�� '�, ��

�� !��'�(��!��%��

�� $�� "��%�� !��!�!�� $��$��

�� $�� '��

��"��"��$�� !�$�� "��

�� $��'�(��$��$��.��3��!�� !��

�� $�� '�

�� !�� "��.��

$��$�� $�� $��!��$��

�$$��$�� $��$�� -$��!��$�� "��

� ��.��'��"��!��$$��$�� !�

$�� !��

�"��!��"��$�� $��'�

, �� "��"�� "�� $$��$��$��"��

��$��'�

��

��!�� "�� $�� $��%��

�� '�, �� $�� !"��

��.��$�� '�

�

For

per

sona

l use

onl

y

21

� !�"�()��

��$��#�

/�0 �� $��

��!#�

/0 �!"�!�� "�� .�� $��

�� $�� &��

/0 �� $��!�� !��/��!��!�

��$��0��4��$��5�!��&��

/ 0 �� $�� $��

��'�

��("��"�� (�"��("�

, ��"��5�� 5�$��$�!��6�� .��$��

��'�(�� $��$�� $��$��

$�� 5�� 5�$��

��"

2 ��$�� -$��$��5�� 5�$��

�� !��'�

� !�"�()��

��$��5�� 5�$��

�� $�� "

�

�

�� !�"�#�� $% ��&� "'��"!�

�

�

��

)��

�

+ �� *��$��

For

per

sona

l use

onl

y


22

ANNUAL REPORT 2010

Directors’ Declaration In the Directors’ opinion

a) the financial statements and notes set out on pages 23 to 64 are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance, as represented by the results of operations, changes in equity and cash flows, for the financial year ended on that date; and

(ii) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(iii) As stated in Note 1, the consolidated financial statements also comply with International Financial Reporting Standards.

b) 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

c) the Directors’ have been given the declarations required by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011.

d) the remuneration disclosures included at pages 10 to 17 of the Directors’ Report (the Audited Remuneration Report) for the year ended 30 June 2011, comply with section 300A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors’ made pursuant to section 295 (5) of the Corporations Act 2001. On behalf of the Directors,

Andrew Moffat Chairman Melbourne, 28 September 2011

For

per

sona

l use

onl

y


23

ANNUAL REPORT 2011

Consolidated Statement of Comprehensive Income

for the Financial Year Ended 30 June 2011

Notes Consolidated

2011 2010 $'000 $'000

REVENUE 2 13,167 13,205 Sales and marketing expenses (3,324) (3,715)

Occupancy expenses (542) (481)

Administration expenses (2,453) (2,388)

Technical expenses (5,618) (5,406)

Corporate expenses (624) (641)

Licence value impairment 13 (788) -

Share of net profit of associates and joint venture partnerships accounted for using the equity method 2 179 -

EXPENSES (13,349) (12,631)

(LOSS) / PROFIT BEFORE INCOME TAX (3) 574 Income tax benefit 5 828 110 NET PROFIT AFTER INCOME TAX 825 684 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 825 684 EARNINGS PER SHARE - Basic (cents per share) 18 1.5 1.3

- Diluted (cents per share) 18 1.5 1.3

The financial statements should be read in conjunction with the accompanying notes on pages 27 to 64.

For

per

sona

l use

onl

y


24

ANNUAL REPORT 2011

Consolidated Statement of Financial Position as at 30 June 2011

Consolidated 2011 2010 Notes $'000 $'000 CURRENT ASSETS Cash and cash equivalents 2,528 2,132

Trade and other receivables 9 3,775 3,352

TOTAL CURRENT ASSETS 6,303 5,484 NON-CURRENT ASSETS Property, plant and equipment 10 802 826

Deferred tax assets 11 937 108 Receivables 12(b) 590 598

Investments accounted for using the equity method 12 202 23 Intangibles 13 8,421 9,256 TOTAL NON-CURRENT ASSETS 10,952 10,811

TOTAL ASSETS 17,255 16,295 CURRENT LIABILITIES Trade and other payables 14 2,080 1,607 Provisions 15 326 161

TOTAL CURRENT LIABILITIES 2,406 1,768

TOTAL LIABILITIES 2,406 1,768 NET ASSETS 14,849 14,527

EQUITY Contributed equity 16 52,419 52,484 Share based payment reserve 538 441 Accumulated losses 17 (38,108) (38,398) TOTAL EQUITY 14,849 14,527


For

per

sona

l use

onl

y


25

ANNUAL REPORT 2011

Consolidated Statement of Changes in Equity for the Financial Year Ended 30 June 2011

Notes

Contributed Equity $'000

Share Based Payment Reserve

$'000

Accumulated Losses $'000

Total

$’000

BALANCE AT 01 JULY 2009 52,484 310 (39,082) 13,712

Transactions with owners in their capacity as owners:

Issue of share capital - - - -

Share options granted to staff - 131 - 131

Total comprehensive income 17 - - 684 684

BALANCE AT 30 JUNE 2010 52,484 441 (38,398) 14,527

Notes

Contributed Equity $'000

Share Based Payment Reserve

$'000

Accumulated Losses $'000

Total

$’000 BALANCE AT 01 JULY 2010 52,484 441 (38,398) 14,527

Transactions with owners in their capacity as owners:

Share buy back scheme 16 (65) - - (65)

Dividends paid 17 - - (535) (535)

Issue of share capital - - - -

Share options granted to staff - 97 - 97

Total comprehensive income 17 - - 825 825

BALANCE AT 30 JUNE 2011 52,419 538 (38,108) 14,849


For

per

sona

l use

onl

y


26

ANNUAL REPORT 2011

Consolidated Statement of Cash Flows for the Financial Year Ended 30 June 2011

Consolidated

Inflows / (Outflows)

2011 2010 Notes $’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 15,563 14,008

Payments to suppliers and employees (14,355) (13,804)

Interest received 147 42

Interest and other costs of finance paid - -

Net cash provided by operating activities 24(b) 1,355 246

CASH FLOWS FROM INVESTING ACTIVITIES Payment for property, plant and equipment (359) (342)

Net cash used in investing activities (359) (342)

CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (535) -

Payment for buy back of equity securities (65) - Net cash provided by financing activities (600) - NET INCREASE/ (DECREASE) IN CASH EQUIVALENTS 396 (96) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,132 2,228

CASH AND CASH EQUIVALENTS AT END OF YEAR 24(a) 2,528 2,132


For

per

sona

l use

onl

y


Notes to the Financial Statements for the year ended 30 June 2011

27

ANNUAL REPORT 2011

1. Summary of Accounting Policies Basis of Preparation

The financial statements have been prepared on the basis of historical costs and except where stated, does not take into account changing money values or fair values of assets. All amounts are presented in Australian dollars, unless otherwise stated.

The consolidated financial statements include the information contained in the financial statements of Pacific Star Network Limited and each of its controlled entities as from the date the parent entity obtains control until such time as control ceases.

Separate financial statements for Pacific Star Network Limited as an individual entity are no longer presented as a consequence of a change to the Corporations Act 2001. However, limited financial information for this individual entity is included in Note 25.

Pacific Star Network Limited is a company limited by shares and domiciled in Australia, whose shares are publicly traded on the Australian Stock Exchange. Statement of compliance with IFRS

This report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

This report is to be read in conjunction with any other public announcements made by Pacific Star Network Limited during the reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the Australian Stock Exchange Listing Rules.

Australian Accounting Standards include International Financial Reporting Standards (IFRS) as adopted in Australia. The financial statements and notes of Pacific Star Network Limited comply with International Financial Reporting Standards (IFRS).

Critical accounting judgements and key sources of estimation uncertainty

In the application of accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised, in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. F

or p

erso

nal u

se o

nly



28

ANNUAL REPORT 2011

1. Summary of Accounting Policies Cont’d

Adoption of new and revised Accounting Standards and Interpretations

In the current year, the Company has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2011:

Standard Effective for annual reporting periods

beginning on or after

Applied this financial year

AASB 2009-5 “Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process”

1 January 2010 ��

AASB 2009-10 “Amendments to Australian Accounting Standards – Classification of Rights Issues”


AASB 2010-3 “Amendments to Australian Accounting Standards arising from Annual Improvement Project”

1 July 2010 ��

AASB 2010-4 “Further Amendments to Australian Accounting Standards arising from Annual Improvement Project”


Interpretation 19 “Extinguishing Financial Liabilities with Equity Instruments.”

1 July 2010 ��

Details of the impact of the adoption of these new accounting standards where applicable are set out in the individual accounting policy notes on the following pages.

Standards and Interpretations issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory or material for the 30 June 2011 reporting period. The application of these standards is not expected to materially affect the amounts recognised in the current or future period financial statements. These standards included:

AASB 9: Financial Instruments

AASB 10: Consolidated Financial Statements

AASB 11: Joint Arrangements

AASB 13: Fair Value Measurements

Significant Accounting Policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

For

per

sona

l use

onl

y



29

ANNUAL REPORT 2011


The following is a summary of material accounting policies adopted by the consolidated entity in the preparation and presentation of the financial report.

a) Principles of Consolidation

The consolidated financial statements are those of the consolidated entity, comprising Pacific Star Network Limited (the parent entity) and all entities which the parent entity controlled from time to time during the year and at balance date.

The financial statements of controlled entities are prepared for the same reporting year as the parent entity, using consistent accounting policies. All inter-company balances and transactions have been eliminated in full. A list of controlled entities appears in Note 21 of the financial statements.

b) Accounts Payable

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services. Accounts payable are initially measured at fair value, and subsequently at amortised cost.

c) Borrowing costs

Borrowing costs are recognised as an expense when incurred.

d) Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given and liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree.

Acquisition related costs are recognised in the profit and loss account as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 “Non-current Assets held for Resale and Discontinued Operations” which are recognised at their fair value less costs to sell. Goodwill arising in a business combination is recognised as an asset at the date at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If after reassessment, the interest in the fair value of the acquiree’s net assets exceeds the sum of the consideration transferred, the amount of any non controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit and loss.

For

per

sona

l use

onl

y



30

ANNUAL REPORT 2011


e) Cash and cash equivalents

For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

f) Changes in Accounting Policies

There have been no changes in accounting policies since the last financial period.

g) Employee Entitlements

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

A liability and expense for bonuses is recognised where contractually obliged or where there is a past practice that has created a constructive obligation.

Provisions made in respect of wages and salaries, annual leave, sick leave, and other employee entitlements expected to be settled within twelve months, are measured at their nominal values.

Provisions made in respect of other employee entitlements which are not expected to be settled within twelve months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees to the reporting date.

h) Earnings per share

I. Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary share issues during the year.

II. Diluted earnings per share

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

or p

erso

nal u

se o

nly



31

ANNUAL REPORT 2011


i) Goods and Services Tax

Revenues, expenses, and assets are recognised net of the amount of goods and services tax (GST), except:

I. where the amount of GST incurred is not recoverable from the Australian Taxation Office, it is recognised as part of the cost of acquisition of an asset or part of an item of expense;

II. for receivables and payables which are recognised inclusive of GST; and III. the net amount of GST recoverable from, or payable to, the Australian Taxation Office is

included as part of receivables or payables.

Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the Australian Taxation Office is classified as an operating cash flow.

j) Hire Purchase and Leased Assets

Assets acquired under finance leases are classified as property, plant and equipment. The amount initially brought to account is the present value of minimum hire purchase payments.

A finance lease is one which effectively transfers from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased property.

Capitalised leased assets are amortised on a straight line basis over the estimated useful life of the asset. Finance lease payments are allocated between interest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.

Operating lease payments are recognised as an expense on a basis which reflects the pattern in which economic benefits from the leased asset are consumed.

k) Interest Bearing Loans and Borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the loans and borrowings.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in the profit and loss when the liabilities are derecognised as well as through the amortisation process.

l) Income Tax

Under AASB 112: “Income Taxes”, Pacific Star is required to use the balance sheet method to account for deferred taxes, which focuses on the tax impact of the transactions and other events affecting amounts recognised in the statement of financial position and a tax based equivalent statement of financial position.

For

per

sona

l use

onl

y



32

ANNUAL REPORT 2011


(l) Income Tax Cont’d

Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the Australian Taxation Office. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the financial reporting date.

No deferred tax asset or liability is recognised in relation to temporary differences arising from the initial recognition of an asset or liability, if they arose in a transaction other than a business combination that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

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

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

m) Investments in controlled entities, associates and joint ventures

Investments in controlled entities are recorded at cost less any impairment losses in the parent entity disclosures in Note 25.

Investments in associates and joint ventures are accounted for in the financial statements by applying the equity method of accounting. Investments in associates and joint ventures is carried in the Statement of Financial Position at cost plus any post-acquisition changes in the company’s share of net assets of the associate and joint venture less any impairment in value.

In accordance with the legal agreement that governs the joint venture arrangements with Macquarie Radio Network Limited (MRN), for the running of Melbourne Radio Operations Pty Ltd, the company established to provide programming content to Melbourne Talk Radio (MTR), the Statement of Comprehensive Income does not reflect nor is it required to reflect a share of the losses incurred to date in the operation of this joint venture.

When the Company has significant influence over an entity that is not jointly controlled it is deemed an associate. A joint venture is one which the company controls with other parties in equal proportions.

n) Intangible Assets

Radio licences are stated at cost. The radio licences are renewable every five years under the provisions of the Broadcasting Services Act 1992. Licences are a tradeable commodity and have an underlying value which is ultimately determined by agreement between vendor and purchaser.

The directors understand that the revocation of a radio licence has never occurred in Australia and have no reason to believe the licences have a finite life. These licences are not amortised since, in the opinion of the directors the licences have an indefinite useful life.

For

per

sona

l use

onl

y



33

ANNUAL REPORT 2011


n) Intangible Assets Cont’d

Patents and trademarks are not amortised because they are related to the useful life of the licences. Intangible assets with a finite life such as websites are amortised over their expected useful life.

The following estimated useful life is used in determining the amortisation cost for tangible assets with a finite life:

o websites - 5 years

o) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired.

Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash flows from other assets or groups of assets (cash generating units).

Non financial assets other than goodwill that have been impacted by impairment are reviewed for possible reversal of the impairment at each reporting date.

Radio licences are tested for impairment at cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis and an assessment of the recoverable amount of the licence is made each reporting period to ensure this is not less than its carrying amount.

p) Property, Plant and Equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow and the cost of the item can be measured reliably.

The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.

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

For

per

sona

l use

onl

y



34

ANNUAL REPORT 2011


p) Property, Plant and Equipment Cont’d

Depreciation is provided on a straight line basis so as to write off the cost of assets in use, net of residual values, over their expected useful life. The following estimated useful lives are used in the calculation of depreciation: o Plant and equipment - 3 to 10 years o Motor vehicles - 4 years

q) Provisions

Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount can be measured reliably.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is probable that the recovery will be received and the amount of the receivable can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

r) Receivables

Trade receivables and other receivables are recorded at original invoice amount less any allowance for doubtful debts.

An estimate of doubtful debts is made when collections of the full amount is no longer probable.

Bad debts are written off as incurred.

s) Revenue Recognition

I. Broadcasting income

Broadcasting operations derive revenue primarily from the sale of advertising time to local and national advertisers. Revenue is recognised on invoice when the commercial announcements are broadcast. Other regular sources of operating revenue are derived from commercial production for advertisers and the sale of programming. Revenue from commercial production and programming sale is recognised on invoice at the time of completion of the commercial or sale.

II. Interest income

Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.

For

per

sona

l use

onl

y



35

ANNUAL REPORT 2011


t) Rounding of amounts

The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission (ASIC), relating to “rounding off” of amounts in the financial report.

Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

u) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments.

v) Share Based Payments

I. Executive Share Option Plan Benefits are provided to employees / consultants in the form of share based payment transactions, whereby employees / consultants render services in exchange for shares or rights over shares (equity settled transactions).

The cost of these equity settled transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The cost of such transactions are recognised as an expense, together with a corresponding increase in equity, over the period in which the performance conditions (where applicable) are fulfilled, ending on the date on which the relevant employee / consultant becomes fully entitled to the award ('vesting date').

The fair value of options included in the remuneration report was determined using the binomial approximation model. This model takes into account at grant date the exercise price, expected life of the option, vesting criteria, current price of the underlying share and its expected volatility, dividends and the risk free interest rate for the expected life of the option.

Options are issued pursuant to the Employee Share Option Plan (ESOP) and have expiry dates of up to 36 months from their date of grant. The option pricing model values each vesting portion and accordingly the amortised share based compensation disclosed in the remuneration report includes the apportioned value of any options issued during the financial year.

The cumulative expense recognised for equity settled transactions at each reporting date until vesting reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors, will ultimately vest.

The charge for a period represents the difference in the cumulative expense recognised at the beginning and end, of that period and is reflected in Note 2.

For

per

sona

l use

onl

y



36

ANNUAL REPORT 2011


v) Share Based Payments Cont’d

II. Share Based Payments for Services

In the normal course of business, options are issued to third parties as consideration for entering into longer term contracts such as rights agreements. Due to the nature of these agreements, it is not always possible to value these rights by reference to the fair value of the services received and therefore the costs associated with these rights are based upon the fair value of options granted.

The fair value of options issued under these arrangements, is determined using a binomial approximation model. This model takes into account at grant date, the exercise price and expected life of the option, the vesting criteria, the current price of the underlying share and its expected volatility, expected dividends and the risk free interest rate for the expected life of the option.

The fair value of options issued under such arrangements is expensed to the profit and loss and where applicable is detailed in Note 2.

At reporting date, there were no options on issue as share based payments for services.

For

per

sona

l use

onl

y



37

ANNUAL REPORT 2011

Consolidated 2011 2010 $'000 $'000

2. Profit from Continuing Operations

Profit from continuing operations before income tax includes the following revenue and expenses:

a) Revenue from Continuing Activities Sales revenue 13,000 13,026 13,000 13,026

Non-Operating Revenue Interest revenue: Other entities 98 88 Joint venture revenue: Melbourne Digital Radio Pty Ltd 179 - Other 69 91 346 179

Revenue from continuing operations 13,346 13,205

b) Expenses

Bad and doubtful debts – trade receivables 123 145 Depreciation of non-current assets: Property, plant and equipment 287 274 Operating lease rental expenses: Minimum lease payments - premises 349 315 Employee benefits expense 6,947 6,690 Defined contribution superannuation expense 414 408 Share based payments: Employee share option plan 97 131

For

per

sona

l use

onl

y



38

ANNUAL REPORT 2011

3. Critical accounting judgements / key sources of uncertainty

Management is required to make judgements, estimates, and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

Management makes certain estimates and assumptions concerning the future, which by definition will seldom represent actual results.

Estimates and assumptions that have a significant inherent risk in respect of estimates based on future events and which could have a material impact on the assets and liabilities in the next financial year, are outlined below: o Valuation of share options (Note 7). o Impairment testing of inter-company receivable balances of the parent entity (Note 9). o Impairment testing of intangible assets with indefinite useful lives (Note 13).

4. Financial Risk Management

Financial instruments consist mainly of cash and short term deposits with banks, accounts receivable and payable and loans to and from subsidiaries.

- There were no derivative instruments or borrowings at reporting date.

- The board reviews and agrees policies for each of these risks as summarised below.

Risk Exposures and Responses

The main risks the Company is exposed is interest rate, liquidity and credit risk.

Interest rate risk

Interest rate risk arises from term deposits and at call monies. As interest rates varied during the financial year, so too did interest income.

The interest rate sensitivity is that for every 1% change in interest rates upwards or downwards for a full financial period, this would increase / decrease the Company’s trading result by $15 thousand.

At reporting date, the Company and parent entity had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are not designated in cash flow hedges:

Consolidated 2011 2010 $’000 $’000

Financial Assets Cash and cash equivalents 2,528 2,132

2,528 2,132 Financial Liabilities Bank loans - - - - Net exposure 2,528 2,132

For

per

sona

l use

onl

y



39

ANNUAL REPORT 2011

4. Financial Risk Management Cont’d

The Company analyses its interest rate exposure and consideration is given to potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.

Foreign currency risk

The Company’s operations are located in Australia and there is minimal transactional currency exposure. Where exposures do arise, they relate to sales or purchases by an operating entity in currencies other than the functional currency. At 30 June 2011, exposure to foreign currency trade receivables not designated in cash flow hedges is Nil (2010: Nil).

At reporting date, there were no significant committed foreign currency purchases and no significant foreign currency denominated financial assets or liabilities and income and operating cash flows are not materially exposed to changes in foreign currency movements.

On this basis, management has concluded that it is not necessary to use sensitivity analysis to monitor risks.

Liquidity risk

The Company manages liquidity risk by forecasting and monitoring cash flows on an ongoing basis. The primary objective is to maintain a balance between continuity of funding and flexibility.

There were no borrowings at reporting date and the contractual maturity of financial liabilities of $2.1 million is predominantly less than six months.

The maturity analysis for financial assets / liabilities is based on contractual obligations as set out in the table below:

The risk implied from the values shown in the table that follows reflects a balanced view of cash inflows and outflows, trade payables, contract agreements and other financial liabilities which originate from the financing of assets used in ongoing operations such as property, plant, equipment and investments in working capital such as trade receivables. These assets are considered in assessing overall liquidity risk.

For

per

sona

l use

onl

y



40

ANNUAL REPORT 2011

4. Financial Risk Management Cont’d

� 6 6-12 1-5 > 5 2011 months months years years Total $’000 $’000 $’000 $’000 $’000

Financial Assets Cash & cash equivalents 2,528 - - - 2,528 Trade & other receivables 3,775 - - - 3,775

6,303 - - - 6,303

Financial Liabilities Trade & other payables (2,080) - - - (2,080) Trade & other payables (2,080) - - - (2,080)

Net maturity 4,223 - - - 4,223

� 6 6-12 1-5 > 5 2010 months months years years Total $’000 $’000 $’000 $’000 $’000

Financial Assets Cash & cash equivalents 2,132 - - - 2,132 Trade & other receivables 3,352 - - - 3,352

5,484 - - - 5,484

Financial Liabilities

Trade & other payables (1,607) - - - (1,607)

(1,607) - - - (1,607)

Net maturity 3,877 - - - 3,877

For

per

sona

l use

onl

y



41

ANNUAL REPORT 2011

4. Financial Risk Management Cont’d Fair value The methods for estimating fair value are outlined in the relevant notes to the financial statements. Credit risk

Credit risk arises from financial assets such as cash and cash equivalents, trade and other receivables. The maximum exposure to credit risk at balance date, to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. Exposure at reporting date where applicable, is addressed in each applicable note.

The Company only trades with recognised, creditworthy third parties. Collateral is not requested nor is it the policy to securitise trade and other receivables. Trade receivables are monitored on an ongoing basis to minimise potential exposure and consequently bad debts as a percentage of sales is not considered as significant. The consolidated entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the consolidated entity.

Capital Risk Management

The objective in managing capital is to safeguard the ability to continue as a going concern, so that the Company can continue to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

Capital is monitored through current business operations and cash flow requirements.

For

per

sona

l use

onl

y



42

ANNUAL REPORT 2011

Consolidated 2011 2010 $'000 $'000

5. Income Tax

a) The prima facie income tax expense on pre tax accounting profit reconciles to the income tax benefit in the financial statements as follows:

Profit from Operations (3) 574 Income tax (benefit) / expense calculated at 30% (1) 172

Add: Non allowable expenses 1 -

1 - Deferred tax on losses not brought to account - - Tax losses recouped for which deferred tax asset

not previously recognised

828 282

Income tax benefit 828 110

b) Deferred tax assets not brought to account

Non-utilised tax losses for which no deferred tax asset is yet recognised

17,027 19,787

Potential tax benefits at 30% 5,108 5,936

For

per

sona

l use

onl

y



43

ANNUAL REPORT 2011

5. Income Tax Cont’d

The benefits of deferred tax losses not brought to account will only be realised in the future if:

o assessable income is derived of a nature, and of an amount sufficient to enable the benefit from the deductions to be realised;

o conditions for deductibility imposed by the law are complied with; and o no changes in tax legislation adversely affect the realisation of the benefit from the deductions. Pacific Star Network Limited implemented the tax consolidation legislation effective from 2004-05.

On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing arrangement that limits the joint and several liability of the wholly owned entities in the case of a default by the parent entity, Pacific Star Network Limited.

The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate the parent entity for any current tax payable assumed and are compensated for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to the parent entity under the tax consolidation legislation.

In conjunction with our tax advisers, we have confirmed that $3.12 million of historic tax losses are available to be utilised against future year taxable profits. Accordingly, a deferred tax asset of $937 thousand has been brought to account this reporting period and work continues to identify further available tax losses.

The future benefits of deferred tax losses not brought to account will only be realised in the future if a number of conditions are met. Based on advice received to date, there is likelihood that not all of the tax losses of $17,027 million will be realised in the future, however the final determination of available tax losses has not yet been finalised.

6. Key Management Personnel a) Details of Key Management Personnel

The Key Management Personnel of Pacific Star Network Limited during the year were:

o Ronald Hall o Andrew Moffat o Gary Pert

o Barrie Quick o Mark Johnson o Stephen Sweeney o Gordon Moore o David Hung o Anthony Smyth

For

per

sona

l use

onl

y



44

ANNUAL REPORT 2011

6. Key Management Personnel b) Compensation of Key Management Personnel


Post Employment Benefits

Share-Based Payments


Total

$ $ $ $ $ 2011 1,228,411 101,041 56,367 183,878 1,569,697

2010 1,067,400 80,300 117,730 285,186 1,550,616

Detailed remuneration disclosures are included in the directors’ report in accordance with section 300A of the Corporations Act 2001.

c) Share Holdings

The number of ordinary shares in the Company held directly or beneficially during the financial year by each director of Pacific Star Network Limited and other Key Management Personnel including their personally related parties is set out below. No share options are held by directors.

2011

Held at beginning of the year

ESOP Shares Issued

1 for 10 Share Consolidation

Held at reporting

date

R Hall 158,779,682 - (142,901,714) 15,877,968 A Moffat 7,046,288 - (6,341,659) 704,629 G Pert - - - - B Quick 8,775 - (7,898) 877 M Johnson 500,000 500,000 (900,000) 100,000 S Sweeney 500,000 500,000 (900,000) 100,000 D Hung 1,083,764 1,000,000 (1,875,388) 208,376 Total 167,918,509 2,000,000 (152,926,659) 16,991,850

For

per

sona

l use

onl

y



45

ANNUAL REPORT 2011

6. Key Management Personnel Cont’d

c) Share Holdings Cont’d

2010

Held at beginning Of the year

ESOP Shares Issued

Other changes during the year

Held at reporting date

R Hall 158,779,682 - - 158,779,682 P Quattro 8,835,750 - (8,835,750) - A Moffat 6,403,255 - 643,033 7,046,288 G Pert - - - - B Quick 8,775 - - 8,775 M Johnson - 500,000 - 500,000 S Sweeney - 500,000 - 500,000 D Hung - 1,000,000 83,764 1,083,764

Total 174,027,462 2,000,000 (8,108,953) 167,918,509

d) Option Holdings The number of options held during the financial year by each current / previous director and other Key Management Personnel including their personally related parties is set out below.

Name


year

Granted as compensation

Lapsed Exercised during the

year

Balance at the end of the year

Vested and exercisable

Unvested

2011

Directors of Pacific Star Network Limited

R Hall - - - - - - -

A Moffat - - - - - - -

G Pert - - - - - - -

Sub-total - - - - - - -

Other Key Management Personnel of the Group

B Quick - - - - - - -

M Johnson 200,000 50,000 - (50,000) 150,000 - 150,000

S Sweeney 200,000 50,000 - (50,000) 150,000 - 150,000

G Moore 100,000 - - - 100,000 - 100,000

D Hung 500,000 100,000 - (100,000) 400,000 - 400,000

A Smyth 50,000 - - - 50,000 - 50,000

Sub-total 1,050,000 200,000 - (200,000) 850,000 - 850,000

Total 1,050,000 200,000 - (200,000) 850,000 - 850,000

For

per

sona

l use

onl

y



46

ANNUAL REPORT 2011

6. Key Management Personnel Cont’d

d) Option Holdings Cont’d

Name


year

Granted as compensation

Other changes

Exercised during the

year

Balance at the end of the

year


Unvested

2010

Directors of Pacific Star Network Limited

R Hall - - - - - - - P Quattro - - - - - - -

A Moffat - - - - - - -

G Buschman 500,000 - (500,000) - -

G Pert - - - - - - -

Sub-total 500,000 - (500,000) -

Other Key Management Personnel of the Group

B Quick 300,000 - (300,000) - - - -

G Meadows 300,000 - (300,000) - - - - M Johnson 250,000 - - (50,000) 200,000 - 200,000 S Sweeney 250,000 - - (50,000) 200,000 - 200,000 G Moore 100,000 - - - 100,000 - 100,000 D Hung 600,000 - - (100,000) 500,000 - 500,000

A. Smyth 50,000 - - - 50,000 - 50,000

Sub-total 1,850,000 - (600,000) (200,000) 1,050,000 - 1,050,000

Total 2,350,000 - (1,100,000) (200,000) 1,050,000 - 1,050,000

There was a 1 for 10 share consolidation for the year and all option numbers for both 2011 and 2010 are stated on a post-consolidation basis.

7. Share-Based Payments a) Employee Share Option Plan

The Company operates an Employee Share Option Plan (ESOP) for the benefit of staff. The ESOP is designed to provide short and long-term incentives for staff of Pacific Star Network Limited and its associated companies, by allowing them to participate in future growth and provide them with an incentive to contribute to increased profitability and improved returns to shareholders.

Under the existing plan, directors may in their absolute discretion, offer to grant options to eligible recipients. The options will be granted for no consideration and will carry the right in favour of the option holder to subscribe for one ordinary share for each option issued.

For

per

sona

l use

onl

y



47

ANNUAL REPORT 2011

7. Share-Based Payments Cont’d a) Employee Share Option Plan Cont’d

Staff joining after commencement of the plan are eligible recipients and all shares issued upon exercise of options rank parri-passu in all respects with issued shares. Details on the ESOP have been included in the directors’ report section of the annual report. There was a 1 for 10 share consolidation during the year and all option numbers quoted for 2010 and 2011 are stated on a post-consolidation basis.

2011

Grant Date

Expiry Date

Exercise Price

Number


year

Number

Issued during

the year

Number

Exercised during

the year

Number

Lapsed during

the year


Number


at end of the year Number

20 Oct 2008

20 Oct 2012

40 cents 900,000 - - (100,000)15 800,000 -

20 Oct 2008

20 Oct 2012

Nil cents 400,000 - (200,000) - 200,000 -

Total - 1,300,000 - (200,000) (100,000) 1,000,000 -

Weighted Average Exercise Price

- 28 cents Nil cents Nil Cents 40 cents 32 cents -

The weighted average remaining contractual life for all outstanding options at the end of the financial year is 1.3 years (2010: 2.3 years).

2010

Grant Date

Expiry Date

Exercise Price

Number


year

Number

Issued during

the year

Number

Exercised during

the year

Number

Lapsed during

the year


Number


at end of the year Number

13 Jul 2006

13 Jul 2009

35 cents 300,000 - - (300,000) - -

13 Jul 2006

13 Jul 2009

50 cents 500,000 - - (500,000) - -

20 Oct 2008

20 Oct 2012

40 cents 1,325,000 - - (425,000)16 900,000 -

20 Oct 2008

20 Oct 2012

Nil cents 600,000 - (200,000) - 400,000 -

Total - 2,725,000 - (200,000) (1,225,000) 1,300,000 -

Weighted Average Exercise Price

- 42 cents Nil cents Nil Cents 43 cents 28 cents -

15 These options were forfeited as a result of the departure of employees during the year and had a value of $10,914. 16 These options were forfeited as a result of the departure of employees during the year and had a value of $46,383.

For

per

sona

l use

onl

y



48

ANNUAL REPORT 2011

7. Share-Based Payments Cont’d Fair value of options granted

The fair value at grant date is determined using a binomial approximation model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The model inputs for options granted during the financial year ended 30 June 2011 included: I. Options are issued for nil consideration and on vesting are exercisable for up to one year. II. Exercise price for the options issued on specified dates is shown in the table above. Exercise

price for the options issued is 40 cents and the share price at grant date was 36 cents. III. Grant and expiry dates for each option issue is listed in the table above. IV. Expected price volatility of shares is 75%. Volatility was determined using data reports from

the Australian Graduate School of Management (AGSM) and the external consultants to value the options adopted this data.

V. Expected dividend yield – 5% un-franked. VI. Risk free interest rate on 06 November 2009 was 5.62% and on 20 October 2008 was 4.45%.

For

per

sona

l use

onl

y



49

ANNUAL REPORT 2011

7. Share-Based Payments Cont’d Fair value of options granted Cont’d

The weighted average fair value of options granted and exercised during the year was 40 cents (2010: 31 cents).

b) Payments for Services

There were no options issued for services during the year.

Fair value of options granted

2010 Grant Date

Expiry Date

Exercise Price

Number

Balance at start of the year

Number

Granted / during the

year

Number

Lapsed during the

year

Number

Balance at end of the year

Number

Vested and exercisable at / by end of the year Number

01 Jan 09 31 Dec 09 62 cents 1,000,000 - (1,000,000) - - Total 1,000,000 - (1,000,000) - -

Consolidated

2011 2010 $’000 $’000

8. Remuneration of Auditors

During the year, the following fees were paid or are payable for services provided by BDO the auditor.

Audit and assurance services: - Audit and review of the financial

statements 60 57

Other services: - Taxation services 24 7

- Advisory services - 12 24 19

For

per

sona

l use

onl

y



50

ANNUAL REPORT 2011

Consolidated

2011 2010 $’000 $’000

9. Trade and Other Receivables

a) Current Receivables

Trade receivables 3,710 3,351

Less allowance for doubtful debts (417) (294)

3,293 3,057

GST recoverable - 131

Prepayments 458 95

Other 24 69

3,775 3,352

b) Allowance for impairment loss Balance at 1 July 2010 294 217 Charge for the year 123 145

Amounts written back - (68)

Balance at 30 June 2011 417 294

For

per

sona

l use

onl

y



51

ANNUAL REPORT 2011

9. Trade and Other Receivables Cont’d

Trade receivables are non-interest bearing and are predominantly on 30 day credit terms.

A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss provision of $123 thousand (2010: $145 thousand) has been recognised as an expense this financial year.

At reporting date, the ageing analysis of past due but not impaired trade receivables was as follows:

0-30 days 30-60 days 60-90 days +91 days Total $’000 $’000 $’000 $’000 $’000

2011 Consolidated 179 161 40 491 871

179 161 40 491 871

2010 Consolidated 235 93 50 426 804

235 93 50 426 804

Receivables past 91 days that are not considered past due were $139 thousand (2010: $121 thousand) and relate to clients on payment plans or deferred payment terms.

Other balances within trade and other receivables do not contain impaired assets and are not past due and it’s expected that these balances will be settled in full.

Related party receivables The fair value of related party receivables cannot be reliably measured. Whilst these entities make repayments on the balance outstanding, there are no plans to repay the full amount. The receivables of $17,146 thousand (2010: 17,429 thousand) in the parent entity as disclosed in Note 25 are not considered to be impaired for the purposes of this financial report as it has been verified that those entities own assets that are considered to have a monetary value at least equivalent to the amounts owed to the parent entity. These receivables are non-interest bearing and have no fixed terms of repayment.

Fair value and credit risk Due to the short term nature of trade receivables, their carrying value is assumed to approximate to their fair value. The maximum exposure to credit risk is the balance of receivables (net of allowances for doubtful debts). Collateral is not held as security, nor is it the policy to transfer (on-sell) receivables to special purpose entities.

Foreign exchange and interest rate risk

Details relating to foreign exchange and interest rate risk exposure is disclosed in Note 4.

For

per

sona

l use

onl

y



52

ANNUAL REPORT 2011

Consolidated 2011 2010 $000 $000

10. Property, Plant & Equipment

Carrying Amount (at cost)

Balance at start of the year

4,951 4,773

Additions 263 178

Disposals - -

Balance at end of the year 5,214 4,951

Accumulated Depreciation Balance at start of the year 4,125 3,851 Depreciation expense for the year 287 274 Disposals - - Balance at end of the year 4,412 4,125

Net Book Value

Balance at start of the year 826 922 Balance at end of the year 802 826

Depreciation charged during the year is recognised as an expense and disclosed in Note 2 (b).

Following a review of asset balances, it was identified that an amount of $369 thousand was incorrectly classified to the additions category for the purposes of disclosure in the previous year’s financial statements. The correct classification should have been to include $369 thousand in Trade and other receivables in the previous reporting period.

For

per

sona

l use

onl

y



53

ANNUAL REPORT 2011

Consolidated 2011 2010 $000 $000

11. Deferred Tax Assets The balance is attributable to:

Tax losses and temporary differences 937 108

Movements Tax losses Total At 1 July 2009 - - Charged/(credited)

- to profit or loss 108 108

At 30 June 2010 108 108

Charged/(credited)

- to profit or loss 829 829

At 30 June 2011 937 937

12. Investments accounted for using the equity method

Digital Radio Broadcasting Melbourne Pty Ltd 193 14 Melbourne Radio Operations Pty Ltd 9 9

202 23

For

per

sona

l use

onl

y



54

ANNUAL REPORT 2011

12. Investments accounted for using the equity method Cont’d

The interest in Melbourne Radio Operations Pty Limited is accounted for in the financial statements using the equity method of accounting. Information relating to the joint venture is set out below.

Consolidated 2011 2010 $000 $000

Joint venture’s gross assets and liabilities

Current assets 968 2,315

Non-current assets 1,995 493

Total assets 2,963 2,808

Current liabilities (1,126) (3,618)

Non-current liabilities (8,849) -

Total liabilities (9,975) (3,618)

Net liabilities (7,012) (810)

(a) Melbourne Radio Operations Pty Ltd

A joint venture was established with Macquarie Radio Network Limited to develop and provide programming content to MTR1377 (Melbourne Talk Radio) from 19 April 2010 onwards.

Malbend Pty Ltd as owner of the MTR1377 radio licence holds a 50% interest in this entity and provides the infrastructure, studios, support staff, and licensing in return for a guaranteed annual service fee and a 50% share of profits.

The joint venture incurred a loss of $5,806k for the 2011 financial year. Under the joint venture structure agreed between the parties in 2009, the licensee, or its associated entities is not required to incur losses and in this regard is protected from any requirement to recognise losses.

For

per

sona

l use

onl

y



55

ANNUAL REPORT 2011

12. Investments accounted for using the equity method Cont’d

The interest in Digital Radio Broadcasting Melbourne Pty Limited is accounted for in the financial statements using the equity method of accounting. Information relating to the joint venture is set out below.

Consolidated 2011 2010 $000 $000

Joint venture’s gross assets and liabilities

Current assets 2,396 1,796

Non-current assets 2,234 3,046

Total assets 4,630 4,842

Current liabilities 378 791

Non-current liabilities 3,190 3,203

Total liabilities 3,568 3,994

Net assets 1,062 848

Joint venture’s gross revenue, expenses and results

Revenues 1,731 1,935

Expenses (1,028) (692)

Profit before income tax 703 1,243

(b) Digital Radio Broadcasting Melbourne Pty Ltd

As licensees, Malbend Pty Ltd and Victorian Radio Network Pty Ltd own 18.2% of this entity and for the reporting period, took up their respective share of the retained earnings in the joint venture of $179 thousand (2010: Nil).

The licensees invested $612 thousand to assist with establishing operations in this venture.

This investment has since been converted to an interest free loan with no fixed repayment terms.

At reporting date the balance on this loan was $590 thousand (2010: $598 thousand).

For

per

sona

l use

onl

y



56

ANNUAL REPORT 2011

Consolidated

2011 2010

$’000 $’000

13. Intangible Assets

Non-Current Patents and trademarks at cost 113 113 Website – “SportSENtral” 232 232 Wesbite Amortisation (93) (46)

252 299

Radio Licences SEN 1116 AM 3,148 3,148 MTR 1377 AM 5,021 5,809

8,169 8,957

Total Intangible Assets 8,421 9,256

The radio licence intangibles have been allocated to two individual cash generating units for impairment testing as follows:

o Radio SEN 1116 cash generating unit – SEN1116AM and digital licence - $3.148 million; and

o Radio MTR 1377 cash generating unit – MTR1377AM and digital licence - $5.021 million.

The recoverable amount of each cash-generating unit has been determined based on a value in use calculation that utilises uses cash flow projections based on financial budgets approved by the board for the subsequent year.

The key assumptions used in impairment testing the radio licences were as follows:

a) Net cash flows before tax will grow at an annual rate of 3% for 1116SEN;

b) Net cash flows before tax for MTR1377 have been revised to take account of current financial performance and a 3% growth rate for cash flows for subsequent years;

c) No cash outflows are anticipated for income tax in the foreseeable future given the quantum of further potential tax losses available; and

d) A pre / post discount rate of 13.5% is an appropriate rate for the Company. For

per

sona

l use

onl

y



57

ANNUAL REPORT 2011

13. Intangible Assets Cont’d

Directors have reviewed the value in use calculations for the MTR1377 radio licence, and the financial performance of the joint venture entity, Melbourne Radio Operations Pty Ltd, (under the joint venture agreement, the Company is not required to incur operating losses), and have resolved to adopt a lower valuation of $5.021 million. Accordingly an impairment charge of $788 thousand has been brought to account and expensed this reporting period. The recoverable amount was primarily based on the present values of forecast cash flows, however the directors have also had regard to the fair value as a secondary valuation source.

The trademarks relate to the SEN 1116 AM cash generating unit.

Consolidated 2011 2010 $’000 $’000

14. Current Payables

Trade payables 1,038 604

PAYG payable 109 108

GST payable 219 323

Other creditors & accruals 714 572

2,080 1,607

15. Current Provisions

Employee entitlements 326 161

For

per

sona

l use

onl

y



58

ANNUAL REPORT 2011

Consolidated 2011 2010 $’000 $’000

16. Contributed Equity

Contributed Equity

53,591,532 fully paid ordinary shares (2010: 535,914,596)

52,419 52,484

Fully Paid Ordinary Share Capital

2011 2010

No.’000 $’000 No.’000 $’000

Balance at beginning of financial year 535,915 52,484 533,915 52,484 Issue of shares 2,000 - 2,000 - Conversion of options (2,000) (65) - - Shares on issue 535,915 52,419 535,915 52,484 1 for 10 share consolidation (482,323) - - - Balance at end of the financial year 53,592 52,419 535,915 52,484

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on shares held. The fully paid ordinary shares have no par value.

Terms and Conditions of Issued Capital Ordinary Shares

Ordinary shareholders have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number and amounts of paid up shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy at a meeting of the Company.

Details of share options on issue are disclosed in Note 7. F

or p

erso

nal u

se o

nly



59

ANNUAL REPORT 2011

Consolidated 2011 2010 $’000 $’000

17. Accumulated Losses

Balance at beginning of financial year (38,398) (39,082)

Net Profit 825 684

Dividend paid (535) - Balance at end of financial year (38,108) (38,398)

18. Earnings Per Share Basic Earnings per Share The profit and weighted average number of ordinary shares used in the calculation of basic profit per share are as follows:

2011 $’000

2010 $’000

Profit for the year

825

684

Weighted average number of ordinary shares 53,592 53,591

Diluted Earnings per Share

The profit and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted profit per share are as follows:

Profit 825 684

Weighted average number of ordinary shares and potential ordinary shares

53,592 53,392

These options are not dilutive and are therefore excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share.

1,000 1,300

For

per

sona

l use

onl

y



60

ANNUAL REPORT 2011

Consolidated 2011 2010 $’000 $’000

19. Commitments for Expenditure

a) Property Lease Commitments

Not longer than 1 year 327 317 Between 1 and 3 years - 327

327 644

20. Contingent Liabilities The Company and its subsidiaries are not engaged in any litigation proceedings, the outcome of which would have a material impact on the result.

21. Controlled Entities

Ownership Interest

Name of Entity Country of

Incorporation 2011

% 2010

% Parent Entity Pacific Star Network Limited Australia Controlled Entities Victorian Radio Network Pty Ltd Australia 100 100 Malbend Pty Ltd Australia 100 100 Joint Venture Entities Melbourne Radio Operations Pty Ltd

Digital Radio Broadcasting Melbourne Pty Ltd Australia Australia

50 18

50 18

Pacific Star’s investments are all in the ordinary shares of subsidiary / joint venture entities. For

per

sona

l use

onl

y



61

ANNUAL REPORT 2011

22. Segment Information

Segment Revenues

The consolidated group operates in the Media industry in Australia only.

Management has determined that there are two operating segments, being the SEN 1116AM and MTR 1377AM radio stations. This is determined based on reporting provided to the key operating decision makers, the CEO and directors.

Media

30 June 2011 $000

30 June 2010 $000

Total

$000 SEN MTR SEN MTR 2011 2010 External Segment Revenues 11,591 1,688 10,950 2,180 13,279 13,130 Segment Result 1,108 (554) 993 112 554 1,105

A reconciliation of adjusted segment result to operating profit before tax is as follows: Total Segment Result 554 1,105 Interest Revenue 67 75 Other Head Office Expenses (624) (606) Net profit before tax (3) 574

Segment assets and segment liabilities are not disclosed because the information is not reported to the board on a regular basis.

All revenue from external customers relates to sales to customers in Australia and all non current assets are located within Australia.

No one customer represents more than 10% of total revenues.

For

per

sona

l use

onl

y



62

ANNUAL REPORT 2011

23. Related Party Disclosures a) Equity Interests in Related Parties

Equity Interests in Controlled Entities

Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 21 to the financial statements.

b) Remuneration and Retirement Benefits

Details of Key Management Personnel remuneration are disclosed in Note 6 and the directors’ report.

c) Transactions with Key Management Personnel

The Company has a current lease agreement with Infuture One Pty Ltd as trustee for Infuture One Trust (majority unit-holder is Ronald Hall) for premises for the radio stations.

The terms and conditions of the lease are on an arms length basis similar to those negotiable with a non related third party.

d) Other Transactions with Key Management Personnel

The profit before income tax includes the following expense resulting from transactions with directors or their director-related entities:

Consolidated 2011

$ 2010

$ Lease payments 348,738 315,371

e) Parent Entity

o The parent entity in the consolidated entity is Pacific Star Network Limited. o The ultimate parent entity in the wholly-owned group is Pacific Star Network Limited. o The ultimate Australian Parent entity is Pacific Star Network Limited.

For

per

sona

l use

onl

y



63

ANNUAL REPORT 2011

Consolidated

2011 $’000

2010 $’000

24. Note To The Statement of Cash Flows

a) Reconciliation of Cash Cash assets 2,528 2,132

b) Reconciliation of Profit after Income Tax to Net Cash flows From Operating Activities

Net profit after income tax 825 684 Depreciation and amortisation of

non-current assets

287

274 Impairment of intangible assets 788 - (Increase) / decrease in assets: - receivables and other (354) (412) - deferred tax assets (829) (108) Increase/(decrease) in liabilities - payables 473 (227) - provisions 165 35

Net cash from operating activities 1,355 246

For

per

sona

l use

onl

y



64

ANNUAL REPORT 2011

25. Parent Entity Disclosures

Parent Entity

2011 $’000

2010 $’000

Summarised Statement of Comprehensive Income

Result of the parent entity

Profit / (loss) for the year after tax 369 (434)

Other comprehensive income - -

Total comprehensive income for the year 369 (434)

Summarised Statement of Financial Position

Current Assets 1,781 1,358

Total Assets 18,678 18,787

Current Liabilities (86) (61)

Net Assets 18,592 18,726

Total equity of the parent entity comprising:

Share Capital 52,419 52,484

Share Based Payment Reserve 538 441

Retained Earnings (34,365) (34,199)

Total Equity 18,592 18,726

26. Events occurring after reporting date On 21 September 2011, the Company announced that it had entered into a Heads of Agreement with International Publishing Group Pty Ltd, for the acquisition of Inside Football magazine.

�For

per

sona

l use

onl

y


65

ANNUAL REPORT 2011

Corporate Governance Statement Pacific Star has in place an entrenched, well developed governance culture which has its foundations in the ethical values that the board, management, and staff bring to the Company.

ASX Listing rule 4.10.3 requires that Pacific Star Network Limited disclose the extent to which it has followed the recommendations of the ASX Corporate Governance Council’s (‘ASX CGC’) Corporate Governance Principles and Recommendations (2nd Edition) during the financial year. PRINCIPLE 1 – Lay solid foundations for management and oversight

Recommendation 1.1: Formalise and disclose the functions reserved to the board and those delegated to management.

The Pacific Star Network Limited board retains responsibility for the following areas:

a) setting and monitoring of objectives, goals and strategic direction for management with a view to maximising shareholder value;

b) approving an annual budget and monitoring financial performance; c) approving acquisitions and joint ventures; d) ensuring adequate internal controls exist and are appropriately monitored for compliance; e) ensuring significant business risks are identified and appropriately managed; f) approving acquisitions and joint ventures; g) ensuring compliance with regulatory and statutory requirements; h) selecting and appointing new directors; and i) maintaining the highest business standards and ethical behaviour.

The board has delegated authority within the following areas to the Chief Executive Officer:

a) monitoring, and reporting the performance of the business and its and constituent units and management to the Board;

b) recruitment of staff and senior management; c) ensuring that business processes in relation to risk management and assurance are met; and d) approving major capital expenditure (excluding acquisitions).

The board has adopted a formal board charter that details the functions and responsibilities of the board. Recommendation 1.2: Disclose the process for performance evaluation of the board, its

committees and individual directors and key executives.

The principles adopted for performance evaluation of key executives is outlined in the remuneration section of the directors’ report. In the 2011 financial year, executives were evaluated against their approved budgets and key performance indicators which were approved by the Board in the annual budget process. When considering performance, the board has regard to:

a) the responsibilities and accountabilities of the executive; b) annual budgets, stretch targets; c) any communicated key performance indicators; and d) qualitative as well as quantitative measures.

For

per

sona

l use

onl

y


66

ANNUAL REPORT 2011

Corporate Governance Statement Cont’d In relation to directors, the process for evaluating performance is less formal and is based on discussions between the Chairman and each Director.

Directors and key executives have ongoing access to continuing education to enhance their skills and knowledge. The board has access to independent professional advice at the Company’s expense and in addition all directors have access to the Company Secretary who is responsible to the board, through the Chairman for all governance matters. PRINCIPLE 2 – Structure the board to add value

Recommendation 2.1: A majority of the board should be independent directors.

The board comprises of three non-executive directors. Of these, two are considered independent, Andrew Moffat and Gary Pert and thus meet the criteria for director independence, however Ronald Hall is not considered independent as he is a substantial shareholder in the company.

The independence of directors is reviewed periodically. Each of the directors’ are considered to bring experience from different industry sectors including the media, retail, advertising, and the investment community and contribute value to the board by combining their strengths and skills to lead the Company’s strategic direction. The board recognises that directors remain in office for the benefit of and are accountable to shareholders and that shareholders have the voting power to elect members to the board regardless of their standing, independent or otherwise.

The majority of directors are considered as independent under these principles and recommendations.

Recommendation 2.2: The chairperson should be an independent director and;

Recommendation 2.3: The roles of the chairperson and Chief Executive should not be exercised by the same individual.

The current chairman is an independent director and the role of Chairman and Chief Executive Officer is not held by the same person. Recommendation 2.4: The board should establish a nomination committee.

The board considers that this responsibility is best fulfilled by the full board of directors. Recommendation 2.5: Disclose the process for performance evaluation of the board, its

committees and individual directors and key executives.

Refer to Recommendation 1.2. PRINCIPLE 3 – Promote ethical and responsible decision making Recommendation 3.1: Establish a code of conduct to guide the Directors, the Chief Executive

Officer and any other key executives. The Company recognises its corporate regulatory responsibilities and has developed and maintained the necessary systems and operational procedures and protocols to ensure it satisfies those obligations.

For

per

sona

l use

onl

y


67

ANNUAL REPORT 2011

Corporate Governance Statement Cont’d The Company maintains a Corporate Governance Charter. The board believes that a key driver of corporate governance is to communicate key policies to management and staff and embed them throughout all parts of the organisation. These policies are monitored and reviewed on an ongoing basis by the board and include:

a) corporate governance; b) continuous disclosure; c) securities trading; d) employment practices. e) appropriate levels of disclosure and liaison with shareholders.

In addition to the above, all directors and senior management strive to ensure that the Company;

a) complies with laws and regulations, and b) ethical and environmental responsibilities. Additionally, terms and conditions of employment provide detailed instructions as to acceptable standards of behaviour. Recommendation 3.2: Disclose the policy concerning trading in company securities by

directors, officers, and employees. The Company has established a “Transactions in the Securities of the Company Policy”. This Policy applies to all directors, executives and employees nominated by the board, including external resources appointed on a contractual and/or interim basis. The policy is intended to cover: a) directors, company secretaries and senior executives of the company; b) accounting officers; c) staff members who have access to the Company’s financial results. And requires all affected persons to provide the Company with details of any dealings, made by them or related parties, in the company’s securities within three days of each transaction. The policy permits directors and senior executives to trade in securities during the four week period commencing immediately after the date of announcement of results to the ASX, of the half yearly and annual results and after the conclusion of the Annual General Meeting provided that the person is not in possession of price sensitive information and the trading is not for short term or speculative gain.

Trading in securities by directors, executives and employees as nominated is prohibited at all times other than those set out above except that a person may trade outside the allowable period with written authority from the chairman or a non executive director nominated by the chairman.

A written request for approval is required to be submitted before permission will be given for such trading and only then will approval be granted if the proposed transaction is not: a) contrary to any laws; or b) for speculative gain; or c) likely to be perceived as unduly negative or unfair by the public, press, other shareholders or

regulatory bodies.

For

per

sona

l use

onl

y


68

ANNUAL REPORT 2011

Corporate Governance Statement Cont’d PRINCIPLE 4 – Safeguard integrity of financial reporting Recommendation 4.1: The board should establish an audit committee, and

Recommendation 4.2: Structure the audit committee so that it consists of:

a) only non executive directors b) a majority of independent directors c) an independent chairperson, who is not chairperson of the board d) at least three members, and

Due to the limited size, lack of complexity and relatively small number of directors, the board has adopted the view that this responsibility should be fulfilled by the full board. All matters, which might ordinarily be dealt with by an audit committee are discussed at board meetings, these include:

a) ensuring that an effective internal control framework exists and operates within the Company; b) review the annual report, financial statements and other information distributed externally; c) reviewing audit reports and letters to the board from external auditors; d) liaising with external auditors and ensuring the annual audit and half year review are conducted in

an effective and timely manner; e) nomination of the external auditor and reviewing the adequacy of the scope and quality of the

annual audit and half year review; and f) monitoring compliance with the Corporations Act 2001, ASX Listing Rules, and other matters

outstanding with other regulatory and financial authorities.

Recommendation 4.3: The audit committee should have a formal operating charter. The board has reviewed the terms of reference for audit committees and continues to take the view that this key responsibility is more appropriately fulfilled by the full board. PRINCIPLE 5 – Make timely and balanced disclosure Recommendation 5.1: Establish written policies and procedures designed to ensure compliance

with ASX listing rule disclosure requirements and to ensure accountability at senior management level for that compliance.

The Company has a written policy on continuous disclosure and the chairman, directors’, CEO and company secretary ensures compliance with the continuous disclosure requirements of the ASX Listing Rules and in particular Listing Rule 3.1. PRINCIPLE 6 – Respect the rights of shareholders

Recommendation 6.1: Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings.

For

per

sona

l use

onl

y


69

ANNUAL REPORT 2011

Corporate Governance Statement Cont’d Communications with shareholders include:

a) The annual report is published electronically on our website and a printed copy of the annual report is distributed to shareholders upon request. A copy of the full annual report is available free of charge.

The Board ensures that the annual report includes relevant information about operations during the year, in addition to any other disclosures required by law. The annual report is the primary source of publically available information on Pacific Star Network Limited.

b) The half-year report contains summarised financial information and a review of the operations during the period. The half-year report is prepared in accordance with the requirements of Accounting Standards and the Corporations Act, and is lodged with the Australian Securities and Investments Commission and the Australian Stock Exchange; and

c) The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability with the Company’s strategy and goals. Important issues are presented to the shareholders as separate resolutions.

Recommendation 6.2: Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

All shareholders are invited to attend annual general meetings (AGM) and participate in the proceedings.

Our auditors BDO Audit (NSW-VIC) Pty Ltd are notified of the date and time for the meeting and are requested to attend and make themselves available to answer shareholder questions. PRINCIPLE 7 – Recognise and manage risk Recommendation 7.1: The board or appropriate board committee should establish policies on

risk oversight and management. The Board relies on the advice and expertise of senior management acting in consultation with external advisers. Where appropriate the Board obtains independent advice. The Company’s policy in relation to risk management takes account of:

• Definition of key risks; • Identification of material business risks; • Implementing mitigating actions and reporting on how these are managed. • Pacific Star’s policy defines risk as any adverse exposure to events that could affect the Company’s

ability to discharge its responsibilities to its stakeholders and / or meet its objectives.

Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks.

Risks are managed based on probability of occurrence and the impact of such an event is rated on a scale of impact to the our reputation and / or financial performance to develop a matrix of the material business risks within the business, that require ongoing review and management.

For

per

sona

l use

onl

y


70

ANNUAL REPORT 2011

Corporate Governance Statement Cont’d Risk management is considered part of our day to day processes and comprises an informal system of risk oversight, management and internal controls operating at all levels of the Company. In response to changing conditions, the ranking of certain risks may change and additional risk mitigation activities may be undertaken.

The senior management team manages the process to report risk at different operational levels. Material operational and strategic risks are reported regularly to the Board.

The ongoing effectiveness of the risk management process is regularly reviewed by the Board. Recommendation 7.3: The board should disclose whether it has received assurance from the

Chief Executive Officer and the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

The Chief Executive Officer and the Chief Financial Officer have provided the board with a written opinion on the system of risk management, internal compliance and control systems.

The board’s view is that this recommendation was complied with during the 2011 financial year. PRINCIPLE 8 – Encourage enhanced performance Recommendation 8.1: The board should establish a remuneration committee.

Due to its limited size and lack of complexity, the board considers that a separate remuneration committee is not required to oversee this function but that this role is more appropriately undertaken by all of the board.

The board reviews the remuneration packages and policies applicable to the Chief Executive Officer, and management team on a regular basis. Recommendation 8.2: Clearly distinguish the structure of non-executive directors’ remuneration

from that of executives.

The level of remuneration for each director and specified executive is detailed in the directors’ report and notes to the financial statements. The principles, details of remuneration and terms of contracts are also outlined in the remuneration report section of the directors’ report and the appointment of all senior executives and board members is approved by the full board.

Non-executive Directors are remunerated by way of fees and statutory superannuation contributions only, they do not receive any additional retirement benefits nor do they currently participate in any other incentive arrangement/(s) such as the ESOP.

For

per

sona

l use

onl

y


71

ANNUAL REPORT 2011

Additional Stock Exchange Information

As at 19 September 2011

Number of Holders of Equity Securities Ordinary Share Capital

53,655,000 fully paid ordinary shares held by 651 individual shareholders.

All issued ordinary shares carry one vote per share.

The Company undertook a share consolidation on a 1:10 basis during the financial year.

Options

1,000,000 options held by 7 individual option holders.

Share options do not carry the right to vote.

Distribution of Holders of Equity Securities

Fully Paid Ordinary Shares

Issued Share

Options

1 - 1,000 159 -

1,001 - 5,000 281 -

5,001 - 10,000 87 -

10,001 - 100,000 92 2

100,001 and over 32 5

Total Holders 651 7

Holdings less than a marketable parcel 245 -

Substantial Shareholders No substantial holding notices were received during or since the end of the financial year.

For

per

sona

l use

onl

y


72

ANNUAL REPORT 2011

Additional Stock Exchange Information

As at 19 September 2011

Twenty Largest Holders of Quoted Equity Securities

Rank Name Units % of Units

1. ROSH HAGIBORIM PTY LTD 10,281,001 19.20

2. MR GEOFFREY ROBERT GARROTT + MRS MARGARET GARROTT <THE OPAL A/C> 9,771,003 18.24

3. RADIO 3AW MELBOURNE PTY LIMITED 7,932,357 14.81

4. KARAPHONE PTY LTD 4,327,133 8.08

5. TALKTOEDITH PTY LTD 4,245,746 7.93

6. INSTANT HOLLYWOOD PTY LTD 1,410,000 2.63

7. KEMBLA NO 20 PTY LTD 1,343,750 2.51

8. MASTIFF NOMINEES PTY LTD <RAYLIN DIRECTORS RETIRE A/C> 1,252,621 2.34

9. BELLSET NOMINEES PTY LTD 1,246,000 2.33

10. QUATTRO HOLDINGS PTY LTD <QUATTRO INVESTMENT #2 A/C> 883,575 1.65

11. TRR INVESTMENTS PTY LTD <TONY ROOSENBURG S/F A/C> 822,500 1.54

12. UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD 762,857 1.42

13. COWOSO CAPITAL PTY LTD <THE COWOSO S/F A/C> 701,929 1.31

14. EKSELMAN PTY LTD <HANDK SUPER FUND A/C> 607,227 1.13

15. PAX PASHA PTY LTD 408,575 0.76

16. LOCOPE PTY LTD 395,000 0.74

17. MR WARREN JOHN CASEY 300,000 0.56

18. MR DAVID DAVIDSON 300,000 0.56

19. PAX PASHA PTY LIMITED <PAX PASHA SUPER FUND A/C> 274,427 0.51

20. MR DAVID DAVIDSON + MRS ELIZABETH DAVIDSON <BLACK PRINCE S/FUND A/C> 250,000 0.47

Top 20 holders of ORDINARY FULLY PAID SHARES 47,515,701 88.72

For

per

sona

l use

onl

y

Pacific Star Network Limited - Home - Australian … look forward to keeping you updated on your...

Documents

Transcript of Pacific Star Network Limited - Home - Australian … look forward to keeping you updated on your...