realestate.com.au Ltd GREAT RESULTS

Transcription

1 realestate.com.au Ltd GREAT RESULTS REA GROUP ANNUAL REPORT

2 CHAIRMAN S LETTER Every year since 2001, the chairman of the REA Group has had the pleasure of announcing that the current year s results are the best ever achieved in the company s history. The year was no different. And, on behalf of the Board of Directors, management and staff I am happy to announce to our shareholders record revenues, EBITDA and profitability. Revenue was up 45% to $156 million. EBITDA increased by 56% to $37 million. Net Profit After Tax and Minority Interest was up 48% to $22 million. Cash from operations (excluding tax payments) increased by 35% to 33 million. Not only has the company performed well, but it has outperformed comparable investments in Total Shareholder Return since 2005, including Google, EBay, Seek, Yahoo, Amazon and the ASX 200. Good corporate governance is directly related to the protection and creation of shareholder value. In the past year we have strengthened governance in four key areas: We have updated the Corporate Governance Statement in this report to comply with new best practices from the Australian Stock Exchange. We have established new governance policies on Market Disclosure, Risk Management, Share Trading and Shareholder Communication. Our new Risk Management Charter gives more autonomy to our risk management team, so they can make better decisions, faster. We have also completed the director review procedure, ensuring that members of the Board are accountable and assessed for their performance. In August the Board decided to replace Simon Baker as CEO of the company. We are grateful to Simon for his many contributions, and feel it is time for new leadership to take the business to the next level. On 8 September, Greg Ellis joined the company as the new CEO. He has extensive knowledge of the online industry. The Board intends to constantly improve the success with which we oversee the business on behalf of its owners. But it is to the company s 667 employees that all shareholders especially owe thanks for the excellent returns of the past year. Richard J Freudenstein Chairman $8.1m FY05 $8.2m FY06 $2.4m FY04 CONTENTS Results Highlights 2 Revenue and Operations 4 Australian Business Summary 6 Overseas Business Summary 8 Growth 10 The Shift to Online 11 Audited Financial Statements 15 realestate.com.au Limited and its subsidiary companies are known as the REA Group and traded on the Australian Securities Exchange under the symbol REA. REA Group Annual Report

3 $22.3m FY08 $15.1m FY07 STRONG PROFITS 48% Net profit after tax and minority adjustments 1

4 RESULTS HIGHLIGHTS The REA Group this year delivered significant growth on all key indicators: Overall revenues grew by 45% to $156 million. EBITDA increased by 56% to $37 million. EBITDA margins improved from 22% in to 24% in. In Australia, the source of 78% of total revenues, the EBITDA margin increased from 46% to 51%. Net Profit after tax and minority interest increased to $22 million, up by 48% compared to last year. Unique browsers across the entire network grew by 15% to a new high of 8.2 million in June. 22,478 agents (and 2,892 agents on trial subscriptions) now advertise on our sites their 1.6m property listings (up from 17,011 agents and 1.1m listings). We now operate 22 consumer-facing websites, compared to 16 at the end of, and 7 publications. $ ,478 $ $37 17, $60 $24 10, $13 5,207 6,414 $ $6 $ $3 $m m $mm FY 04 FY FY FY FY EBITDA UNIQUE BROWSERS PAYING AGENTS UNIQUE REVENUE BROWSERS 15% 32% 45% UNIQUE BROWSERS PAYING AGENTS REVENUE The REA Group continues to build strong year on year growth across all key metrics. 2 REA Group Annual Report

5 22, $37 17, $24 10,713 $13 5,207 6, $6 1.0 $3 $m m FY FY FY EBITDA PAYING AGENTS UNIQUE BROWSERS 56% EBITDA INCREASED THE BUSINESS MODEL The REA Group has its strong home base in Australia as the operator of the country s most popular residential and commercial real estate websites. The REA Group is Australia s sixth largest online publisher by revenue, according to BRW magazine in April,. When compared to online real estate classifieds peers, the Group ranks second worldwide in revenues. According to publicly reported figures, first is Move Inc. in the USA, with A$312 million in revenue in calendar year. The REA Group s growth is supported by industry fundamentals, especially the structural shift from print classifieds and old media advertising to online. In four out of the five past years, online classifieds spending in Australia has increased at a rate no lower than 54% per annum (Interactive Advertising Bureau Australia / PriceWaterhouseCoopers), while the Group s revenue has grown at rates of 45.1% to 100.1% per annum in the same period. Besides benefiting from sector growth, the company can tap opportunities to increase market share with new products, as it has done in Australia with the acquisition of homeguru.com.au in and also with the launch of realcommercial.com.au in 2003, realholidays.com.au in and ozhomevalue.com.au in. The success of its proven business model in Australia has permitted the REA Group to dedicate a portion (20%) of its cash flow to expand outside of Australia since Now, two and a half years into its international growth and 13 years after getting started in a garage in Doncaster East, Victoria, the company has operations in 10 countries, on three continents. Overseas operations already account for a quarter of revenue and are rapidly growing. Investments in countries such as Italy have the potential to deliver good returns in future years as those markets catch up to where Australia is today in internet usage and spending. Our international expansion also cuts the risk of being dependent on a single market. 3

6 REVENUE AND OPERATIONS FIVE YEAR OVERVIEW FINANCIAL COMPARATIVE DATA IN FY 2004 FY2005 FY2006 FY FY Growth Revenues from Services 18,997 33,416 60, , % Operating Expenses (16,274) (26,951) (47,048) (83,793) (119,058) 42% EBITDA 2,723 6,465 13,343 23,500 36,575 56% EBITDA Margin 14% 19% 22% 22% 24% Depreciation and Amortisation (369) (1,051) (2,297) (4,974) (7,336) 47% EBIT 2,354 5,414 11,046 18,526 29,239 58% Net Interest (Expense) / Income (462) (69) (139) 101% Earnings Before Tax 2,477 5,620 10,584 18,457 29,100 58% Income Tax (Expense) 2,472 (3,943) (7,469) (13,337) 79% Minority Interest (net of taxes) 1,581 4,076 6,581 61% Profit attributed to members of parent 2,477 8,092 8,222 15,064 22,344 48% Closing no of Employees (FTE) % Subscribing Paying Agents (closing no) 5,207 6,414 10,713 17,011 22,478 32% 77% of the REA Group s total revenue is derived from residential and commercial real estate agents. These customers sign contracts for a year or longer, buy premium advertising upgrades and purchase software products designed to help them manage their businesses. The large online audience that the company aggregates, 8.2 million in June, is also attractive to advertisers from outside the real estate industry: consumer brands, banks and financial institutions, not-for-profit organizations, electronics manufacturers, etc. This type of advertising generated $20 million and 13% of total revenue in, an increase of 38% from. The Group derives 5% of its revenues from print. However, it does not see print as a goal in itself or a medium to be protected from the internet s growth. All of our print publications were acquired in acquisitions to increase the profile of its websites. 4 REA Group Annual Report

7 ONLINE PROPERTY PORTALS AUSTRALIA 1 NEW ZEALAND 2 EUROPE 4 CLOSED JAN CLOSED MAR ASIA 3 GLOBAL CLOSED JAN 5

8 AUSTRALIAN BUSINESS SUMMARY AUSTRALIA $120.7m 78% OF REA REVENUE Residential site, Commercial site, Holiday Rental site, Agent office solutions The group operates six consumer-oriented websites in Australia, including some that represent new products with new revenue streams. realestate.com.au has been Australia s most popular real estate website since October of 2000 (NNR). It was used by 4.1 million unique browsers in June, more than the 15 next largest competitors combined, according to Nielsen//NetRatings. Over 95% of Australian residential real estate agents advertise more than 430,000 properties for rent and sale on the site. property.com.au is the only Australian residential real estate website to ask what you think. It s a beta, or test site to try out new search and display technology. It is the only Australian real estate site to be named an Official Honoree of the Webby Awards. realcommercial.com.au is Australia s largest commercial real estate site. It is used by 97% of commercial real estate agents, as well as business brokers. Together, these groups advertise more than 86,000 commercial properties and businesses for sale or for lease more than any other (estimate). HomeGuru.com.au and ozhomevalue.com.au generate leads for agents by providing homebuyers with free market reports on their homes. They are majority owned by the REA Group. realholidays.com.au is a new product developed from holiday rental listings that had been on realestate.com.au. Agents now subscribe to it separately. New categories like holidays and commercial real estate increase the overall profit margin because they are built on existing infrastructure and have minimal startup costs. The group also offers real estate agent back office services via its HubOnline and Clarke Computers. These businesses help real estate agencies improve every aspect of their business, including websites, marketing, bookkeeping, trust funds management, recruiting, business development, office management and sales. 6 REA Group Annual Report

9 $ 900 APRA (AVERAGE REVENUE PER AGENT) FOR AUSTRALIA 800 $ $ JUL 05 NOV 05 MAR 06 JUL 06 NOV 06 MAR 07 JUL 07 NOV 07 MAR 08 JUL JUL 05 NOV 05 MAR 06 JUL 06 NOV 06 MAR 07 JUL 07 NOV 07 MAR 08 JUL 08 UNIQUE BROWSERS IN AUSTRALIA 5m 4m realestate.com.au 5m 3m 4m 2m 3m 1m domain.com.au (#2 player) 2m JAN 01 JAN 02 JAN 03 JAN 04 JAN 05 JAN 06 JAN 07 JAN 08 1m PAYING JAN 01 AGENTS JAN 02 IN JAN AUSTRALIA 03 JAN 04 JAN 05 JAN 06 JAN 07 JAN 08 10,000 9,190 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 JAN 01 JAN 02 JAN 03 JAN 04 JAN 05 JAN 06 JAN 07 JAN

10 OVERSEAS BUSINESS SUMMARY For the business as a whole, the overseas expansion diversifies the risks of single-market dependence and creates new revenue streams. Overseas revenue accounted for 22% of total revenues in, up from 20% for. ITALY In Italy, casa.it has extended its lead as the biggest real estate portal. It leads its competitors in terms of paying agent subscribers and revenues. In FY agent customers rose from 3,511 to 5,514, an increase more than in any other country in any year in the company s history. Sales to real estate developers and non-real estate advertisers were also successful. Approximately half of all Italian real estate agents advertised their properties on casa.it by June, up from 19% when the REA Group acquired the business in February. UK The UK property market was in decline during much of the financial year, making agents more careful with their marketing spending. This trend has benefited propertyfinder.com, with the high value and low cost of its products. The acquisition of the hotproperty.co.uk real estate portal in March and the UKpropertyshop agent directory portal in July improved this offering and revenue opportunities. Today, growth in UK users, subscribing agent customers and revenue has moved propertyfinder.com to a clear second place after Rightmove. In FY, agency customers rose from 3,919 to 5,633. In March, The Connells Group the UK s second largest real estate agency operator began advertising on the site. Connells has about 500 offices across the UK, operating under 15 different brands and listing approximately 30,000 properties. In May, Glasglow Solicitor Property Center brought 272 agent offices to propertyfinder.com. In addition, 500 international agents advertise on the UK sites. KEY OPERATIONAL HIGHLIGHTS Country Revenue in EBITDA in Margin FY Australia 120,719 61,946 51% United Kingdom 22,071 (10,057) (46%) Italy 5,401 (2,819) (52%) Luxembourg 3,532 1,054 30% Other countries 3,910 (3,602) (92%) Loss of associate (homeguru.com.au) (185) Unallocated overhead (9,762) Total 155,633 36,575 24% FY Australia 85,745 39,314 46% United Kingdom 17,891 (8,180) (46%) Italy 1, % Luxembourg 1, % Other countries 1,093 (107) (10%) Loss of associate (homeguru.com.au) (226) Unallocated overhead (7,674) Total 107,293 23,500 22% 8 REA Group Annual Report

11 LUXEMBOURG In Luxembourg, there continues to be strong take-up by real estate agents and the athome.lu site maintains its leadership position, with EBITDA margins increasing from 22% to 30%. OTHER COUNTRIES The athome team is also expanding region by region into neighbouring countries and is already the market leader in terms of number of subscribing agents and property listings in those areas. In, it launched new businesses in Alsace, France and the south of Belgium. athome already operated in Lorraine, France and Mosel, Germany. In Belgium alone, athome signed up 150 new customers, from a base of zero. In both Dubai and Hong Kong, the Group s local businesses launched new websites in and have increased revenue, users and subscribing agents throughout the year. The New Zealand residential website, allrealestate.co.nz grew on all indicators. The Group also launched a new commercial property website in New Zealand, realcommercial.co.nz 9

12 GROWTH When expanding, the company looks for opportunities (organic growth or acquisition) that fall into three basic categories: To consolidate a marketplace where we operate To enter an important market for the first time in an attractive position To enter an emerging market in a long-term investment The company made new acquisitions of $23.4 million during the financial year, of which $8.2 million were injected by minority shareholders. The financial year was an important one, with the acquisition of real estate media businesses in four countries: Hong Kong (entry in an emerging market) Dubai (entry in an emerging market) United Kingdom (a consolidation move) Australia (a consolidation move) June June Residential Online Advertising realestate.com.au realestate.com.au property.com.au property.com.au homesite.com.au homesite.com.au (until March ) homeguru.com.au homeguru.com.au ozhomevalue.com.au allrealestate.co.nz allrealestate.co.nz propertyfinder.com propertyfinder.com hotproperty.co.uk ukpropertyshop.co.uk (since July ) casa.it casa.it athome.lu athome.lu athome.be athome.be athomelorraine.fr athomelorraine.fr athomealsace.fr athome.de athome.de homesolution.lu squarefoot.co.hk propertyfinder.ae allglobalproperties.com Residential Holiday Rental Advertising Residential Print Advertising London Property News Commercial Property Advertising realcommercial.com.au / propertylook.com.au realcommercial.co.nz / propertylook.co.nz atoffice.lu Agent Back Office Solutions Hub Online Web Design Services Clarke Computers Altowin (Belgium) realholidays.com.au London Property News HotProperty / Renting Squarefoot / Inside Discovery Bay Publications athome magazine and athome new homes (Lux) realcommercial.com.au (including propertylook.com.au) realcommercial.co.nz (including propertylook.co.nz) atoffice.lu Hub Online Web Design Services Clarke Computers Altowin (Belgium and Luxembourg) 10 REA Group Annual Report

13 THE SHIFT TO ONLINE Australian classified online spending ,000,000 Growth ,000,000 43% ,000,000 53% ,000,000 56% ,000,000 45% 357,000,000 19% Source: PWC / IAB From its beginning, the REA Group has benefited from the shift of users and advertising dollars from print to the web. While hardly a single dollar was spent for online advertising a decade ago, 12% of all advertising dollars in Australia are now spent online (Interactive Advertising Bureau Australia / PriceWaterhouseCoopers, Goldman Sachs JBWere). More importantly, this shift is not over. Far from it. It is driven by pull factors that include online s greater ease of use, convenience and depth of freely available information. It is also driven by the lower cost of advertising online. For consumers, use of the web to search for property is free, compared to the approximately $2 price of a typical weekend metro newspaper. The average real estate agent pays about $17 to advertise a property online via a subscription, compared to the several hundred dollars for a one-time ad in a typical suburban newspaper. Advertisers expect to dedicate a steadily increasing share of their marketing budget online in the foreseeable future. DIGITAL SHARE OF ADVERTISING (AU, F) 25% 20% 15% On-line real estate classifieds 16% Newspaper real Estate classifieds 84% 10% 5% Source: CEASA, Credit Suisse estimates On-line real estate classifieds 11% Newspaper real Estate classifieds 89% 400% 300% Companies have been rebased to 100 REA AU EQUITY 11

14 THE SHIFT TO ONLINE (CONTINUED) PRICE COMPARISON Why it matters: Advertising real estate on sites operated by the REA Group is relatively inexpensive. This is one reason for its success with real estate agent customers, together with its reach, power and flexibility. Investors can use this data to estimate the potential for increased agent spending on realestate.com.au and the cost pressures that may help encourage agents to shift more of the advertising efforts to the web. ADVERTISING ON OUR WEBSITES IN AUSTRALIA Average total monthly spend per agent $885 Average number of listings per agent 53 Average spend per listing $16.70 ADVERTISING IN PRINT Applied cost for a 1/4 page newspaper advertisement ranges from $400 to $2,000* *Average advertising rates per insertion when buying 4 insertions at rack rate, August. $17 AD ON OUR WEB AVERAGE SPEND PER LISTING DISPLAYED FOR A MONTH $400 UP TO $2,000 NEWSPAPER AD AVERAGE 1/4 PAGE AD COST* APPEARING 4 TIMES 12 REA Group Annual Report

15 INTERVIEW ANDREW COLE CORPORATE RELATIONS MANAGER, REACH The REA Group is a proud Major Sponsor of Reach. We use our network of people in every Australian state to help Reach expand from its Victoria base and inspire kids all over the country. Q. What is Reach all about? A. Reach runs workshops, weekends away and large-scale events that give 57,000 teenagers a year reasons to believe in themselves. Q. How did you get started? A. The Reach Foundation (Reach) was established in 1994 by Jim Stynes (AFL Brownlow Medalist, youth motivator, and Victorian of the Year 2003) and Paul Currie (drama coach and film director). Q. Can you share a success story about how Reach has changed someone s life? A. Independent research has shown that our programs help teenagers to improve overall levels of self-esteem, optimism, and feelings of control over their lives. In particular, I think of a very angry young man who was unexpectedly given a birthday cake on a Reach weekend camp. He was summoned up on the stage to blow out the candles and say a few words about his 18th birthday, but at first he was too overwhelmed with emotion to speak. Then, the tears started flowing down his cheeks as he said that Reach is where he had learnt about love. When he was given a birthday present, he excitedly raised his arms in the air and looked out at the 70 or so people in the room and said, I deserve it. It was probably the first time in his life that he felt that way. Q. How can people reading this help out? A. The best way to help Reach is by sending young people to our programs, making donations and getting our name and message out there! Visit

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17 FINANCIAL STATEMENTS For the year ended 30 June MORE GREAT RESULTS 15

18 CONTENTS Directors Report 17 Income Statement 31 Balance Sheet 32 Cash Flow Statement 33 Statement of changes in equity 34 Notes to the Financial Statements 35 Independent Audit Report 79 Directors Declaration 80 ASX Additional Information 81 Corporate Governance Statement REA Group Annual Report

19 DIRECTORS REPORT Your directors submit their report for the year ended 30 June DIRECTORS The names and details of the company s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Names, qualification, experience, and special responsibilities Mr Richard J Freudenstein Age 43 (Non-executive Chairman) BEc, LLB (Hons) Mr Freudenstein is the Chief Executive Officer of News Digital Media (the digital division of News Limited), which includes digital properties, News.com.au, truelocal.com.au, CareerOne.com.au, CARSguide.com.au and moshtix.com.au and related activities involving News Limited newspaper and magazine websites, including vogue.com.au and taste.com.au. Mr Freudenstein is on the board of News Limited and The Bell Shakespeare Company. Mr Freudenstein returned to Australia in August 2006 after seven years at British Sky Broadcasting, the last six as Chief Operating Officer. Mr Freudenstein has worked for News Corporation and related companies since Mr Roger Amos Age 60 (Non-executive Director) FCA, MAICD Mr Amos is an independent Director of Espreon Limited and Austar United Communication Limited and Chairman of Proteome Systems Limited. He also has a non-executive role as Chairman Asia Pacific for Management Consulting Group Plc. Mr Amos had a long and distinguished career with international accounting firm KPMG, retiring in June 2006 after 25 years as a partner in the Assurance and Risk Advisory Services Division. In addition to his portfolio of clients, focused on the Information, Communications and Entertainment Industry (ICE), Mr Amos held various roles in the KPMG Global ICE industry groups, including Global Chairman of the Communications Industry Group. Mr Amos also serves as a Director of the Opera Foundation of Australia which supports the development of emerging opera talent through awards and scholarships. Mr Simon T Baker Age 41 (Managing Director / CEO) (until 4 August ) BSc, MBA Mr Baker was the Managing Director and Chief Executive Officer of realestate.com.au Limited until 4 August. Prior to becoming CEO, Mr Baker was Chief Business Development Officer at News Interactive, was Chief Technology Officer in a US start up and spent five years with McKinsey and Company providing strategic and organisational advice to Senior Management at major Australian and International companies. Mr Baker holds a Bachelor of Computer Science degree from Monash University as well as an MBA from the Melbourne Business School. Ms Kathleen Conlon Age 44 (Non-executive Director) BA (ECON) (DIST), MBA, MAICD Ms Conlon is a professional non-executive Director. She is a non-executive Director of CSR Limited (since 2004), where she serves on the Safety Health and Environment and Remuneration committees. She is also a non-executive director of DLA Phillips Fox and a member of Chief Executive Women. She is also a NSW Council Member of the Australian Institute of Company Directors. Ms Conlon brings over 20 years of professional consulting experience to her boards. She is a recognised thought leader in strategy and business improvement, and has advised leading companies across a range of industries and countries. In her seven years as a partner and director of the Boston Consulting Group (BCG), Ms Conlon led BCG s Asia Pacific Operational Effectiveness Practice Area and, previously, the Sydney Office. In 2003, Ms Conlon was awarded a Centenary Medal for service to business. Mr Alasdair MacLeod Age 47 (Non-executive Director) Mr MacLeod is the Managing Director of News Limited s NSW publishing company, Nationwide News, and sits on the Board of News Limited. Nationwide News publishes The Daily Telegraph, Sunday Telegraph, The Australian, Weekend Australian, mx and Sportsman. Mr MacLeod joined News Limited in 2002 as Managing Director of the company s community newspapers division which publishes over 120 titles throughout Australia. He relocated to Australia after thirteen years with News International in the UK where he held a number of senior positions including Managing Director of online division News Network and General Manager of Times Newspapers, the publisher of The Times and The Sunday Times. Prior to joining the News Group, Mr MacLeod worked with Citibank Limited in Sydney and in Hong Kong. Mr John D McGrath Age 45 (Non-executive Director) Mr McGrath founded McGrath Estate Agents in He has taken the company to Australia s largest property services group, selling over $3.5 billion in residential property in Sydney last year. The company became the first real estate company to be ranked on BRW s Australia s Fastest-Growing Private Companies List and is a 3-time recipient of BRW s Fast 100. McGrath Estate Agents also owns Oxygen Home Loans, its mortgage broking business, as well as Total Real Estate Training that provides training programs and seminars for the real estate industry. Mr McGrath is a Director of McGrath Group of Companies and the Rawson Group. In 2003, he was awarded a Centenary Medal for service to business. His latest book, The Ultimate Guide to Real Estate, published in June 2005, ranked as the No. 1 Business Book within a few weeks. 17

20 DIRECTORS REPORT CONTINUED Mr Stephen P Rue Age 42 (Non-executive Director) CA, BBS, DPA Mr Rue is the Chief Financial Officer of News Limited, the Australian arm of News Corporation. He was appointed to his current role in May 2003, and previously was the company s Group Finance Manager. Mr Rue first joined News Limited in 1996 and moved into the role of Treasurer and Special Projects Manager prior to being appointed Group Finance Manager. Mr Rue s experience includes 8 years at Arthur Andersen where he held the position of Senior Manager in their Audit and Business Advisory division. Mr Rue is Chairman of Community Newspaper Group Limited and a Director of News Limited and Australian Associated Press Pty Limited. Mr Rue is a Chartered Accountant and holds a Bachelor of Business Studies and a Diploma in Professional Accounting. Mr Sam R White Age 37 (Non-executive Director) B.Com, LL.B. Mr White was appointed to the Board of Ray White Real Estate in 1998 and later as Deputy Chairman of the Group. He joined Ray White Real Estate in 1991, initially in its research department, moving through a number of areas in the company including residential sales and home loan consultancy. Mr White currently oversees all areas of the Ray White Group, including its agency operations as well as its finance and insurance businesses. Mr White has a Bachelor of Commerce and a Bachelor of Law from the University of Queensland. COMPANY SECRETARY Mr Nicholas J V Geddes FCA, FCIS Mr Geddes is the principal of Australian Company Secretaries, a company secretarial practice, which he formed in Mr Geddes is a Vice President of the National Council of Chartered Secretaries Australia and a former Chairman of the NSW Council of that Institute. His previous experience, as a Chartered Accountant and Company Secretary, includes investment banking and development and venture capital in Europe, Africa, the Middle East and Asia. Officers who were previously partners of the audit firm There were no officers in the company during the financial year who were previously partners of the current audit firm, Ernst & Young, at a time when Ernst & Young undertook an audit of the company. 18 REA Group Annual Report

21 DIRECTORS MEETINGS The number of directors meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: Director Directors Meetings Number of meetings held while a director Number of meetings attended Audit Risk and Compliance Meetings Number of meetings held while a director Number of meetings attended Remuneration and Nomination Committee Meetings Number of meetings held while a director Number of meetings attended Richard J Freudenstein Roger Amos Simon T Baker 7 7 Kathleen Conlon John D McGrath Alasdair MacLeod 7 6 Stephen P Rue Sam R White Committees The current members of each committee are: Audit Risk and Compliance Committee Mr Amos (Chairman), Ms Conlon, Mr Rue Remuneration and Nomination Committee Mr Amos (Chairman), Mr Freudenstein, Mr McGrath, Mr White Tax Consolidation Following advice from tax advisers, the Board has decided to enter into tax consolidation in Australia from 1 July 2006 onwards. Interests in Shares As at the date of this report, the interests of the directors in the shares and options of the company and related bodies corporate were: Interest in Shares Ordinary Shares fully paid Richard J Freudenstein Roger Amos 2,363 Kathleen Conlon John D McGrath 2,139,086 Alasdair MacLeod Stephen P Rue Sam R White 16,249,045 Simon T Baker (until 4 August ) 3,108,206 DIVIDENDS No dividend has been paid or recommended in the current or prior year. SHARE PRICE The closing market share price at the end of the previous financial year was $5.94 per ordinary share and at market close on 30 June was $4.38. CORPORATE INFORMATION Corporate structure realestate.com.au Limited is a company limited by shares that is incorporated and domiciled in Australia. realestate.com.au Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year. The ultimate parent entity is News Limited. It has the following wholly-owned subsidiaries: Netwide Solutions Pty Limited, Australia; property.com.au Pty Limited, Australia; Property Look Pty Limited, Australia; Hub Online Global Pty Limited, Australia; NL / HIA JV Pty Limited, Australia ( homesite.com.au ); REA Group Europe Limited (United Kingdom) consolidating all European operations; REA Group Hong Kong Limited (HK); and the following partially owned subsidiary: REA Group FZ LLC (United Arabian Emirates) Nature of operations and principal activities The principal activity during the year of the entities within the consolidated entity was the provision of online advertising services. This activity consists of the following services: Online advertising of residential properties for sale and rent in multiple countries Online advertising of commercial properties for sale and lease in multiple countries Provision of online display advertising space for advertisers in various industries Provision of website development services to the real estate industry Software licensing of estate agent back office solutions Print publications to advertise properties for sale and rent in multiple countries Other services, such as training services via the REA Knowledge Network or data services There have been no significant changes in the nature of these activities during the year. Employees The consolidated entity employed 667 employees as at 30 June (: 479 employees). 19

22 DIRECTORS REPORT CONTINUED OPERATING AND FINANCIAL REVIEW realestate.com.au Limited and its subsidiaries (referred to herein as the REA Group ) successfully continued its international expansion in online real estate advertising. As at June, the REA Group operated 21 websites in ten countries, with most of the sites either first or second in each of its market. The group has also announced or completed three strategic acquisitions: Hong Kong, United Arab Emirates, and a step-up in the investment in homeguru.com.au. Areas of operations June June Residential Online Advertising realestate.com.au property.com.au homesite.com.au homeguru.com.au allrealestate.co.nz propertyfinder.com casa.it athome.lu athome.be athomelorraine.fr athome54.de realestate.com.au property.com.au homesite.com.au (until March ) homeguru.com.au ozhomevalue.com.au allrealestate.co.nz propertyfinder.com hotproperty.co.uk ukpropertyshop.co.uk (since July ) casa.it athome.lu athome.be athomelorraine.fr athomealsace.fr athome54.de / athome.de homesolution.lu squarefoot.co.hk propertyfinder.ae allglobalproperties.com Residential Holiday Rental Advertising realholidays.com.au Residential Print Advertising London Property News London Property News HotProperty / Renting Squarefoot / Inside Discovery Bay Publications athome magazine and athome new homes Commercial Property Advertising realcommercial.com.au / propertylook.com.au realcommercial.co.nz / propertylook.co.nz atoffice.lu realcommercial.com.au / propertylook.com.au * realcommercial.co.nz / propertylook.co.nz * atoffice.lu Agent Back Office Solutions Hub Online Web Design Services Clarke Computers Altowin (Belgium) Hub Online Web Design Services Clarke Computers Altowin (Belgium and Luxembourg) * propertylook.com.au and propertylook.co.nz operated as separate websites until January. All traffic is redirected to realcommercial.com.au or realcommercial.co.nz. 20 REA Group Annual Report

23 While the acquisitions are an investment in future growth, the REA Group has yet again successfully delivered organic growth across its operations. The financial performance of the REA Group is summarised below: Financial Comparative Data in FY 2004 FY 2005 FY 2006 FY FY Growth FY07 to FY08 Revenues from Services* 18,997 33,416 60, , ,633 45% Operating Expenses (16,274) (26,951) (47,048) (83,793) (119,058) 42% EBITDA 2,723 6,465 13,343 23,500 36,575 56% EBITDA Margin 14% 19% 22% 22% 24% Depreciation and Amortisation (369) (1,051) (2,297) (4,974) (7,336) 47% EBIT 2,354 5,414 11,046 18,526 29,239 58% Net Interest (Expense) / Income (462) (69) (139) 101% Earnings Before Tax 2,477 5,620 10,584 18,457 29,100 58% Income Tax (Expense) 2,472 (3,943) (7,469) (13,337) 79% Minority Interest (net of taxes) 1,581 4,076 6,581 61% Profit attrib. to members of parent 2,477 8,092 8,222 15,064 22,344 48% Employees (FTE) % Subscribing Paying Agents 5,207 6,414 10,713 17,011 22,478 32% * = Excludes Interest Income Performance Indicators Management and the Board monitor the group s overall performance, from the implementation of its mission statement and strategic plan through to the performance of the company against operating plans and financial budgets and forecasts. The Board, together with management, have identified key performance indicators (KPI s) that are used regularly to monitor performance. Dynamics of the Business realestate.com.au Limited primarily operates in the online real estate classified advertising market for residential and commercial property. Over the last fiscal years, realestate.com.au Limited extended its market leading position from Australia to other countries such as the UK, Italy, the Luxembourg region, United Arab Emirates, Hong Kong, and New Zealand through acquisitions and organic growth. The three key drivers of advertising revenue for the company are: The number of real estate offices within any particular market, which determines the number of subscriptions purchased. The number of listings within any particular market, which primarily determines the take up of additional advertising products. The number of visitors to the site, which determines the effectiveness of the classified advertising and determines the take up of display advertising revenue by developer and third party advertisers. According to analysts, the underlying housing market depends on certain macro-economic factors such as population growth, international migration, regional population growth, GDP growth, and annual house sales growth. Key Financial Highlights The key financial highlights for FY08 included: Revenues of $155.6 million, up by 45 per cent over the last financial year. Operating expenses of $119.1 million, up by 42 per cent over the last financial year. The key driver of operating expenses continues to be employees and commission payments to staff and media agencies. It contributes $62.1 million or 52 per cent of the overall operating expenses. Staff numbers increased from 479 as at June to 667 as at June. The majority of new staff members were employed in sales and marketing positions and were focused on signing up new agents or serving existing customers, thus driving greater take up of additional advertising products and services. EBITDA of $36.6 million, up by 56 per cent over the last financial year. The group has increased its EBITDA margin from 22 per cent to 24 per cent. Property Listings across all sites increased to 1,624,392 listings as at June, up by 534,067 listings compared to June. Subscribing Paying Agents increased from 17,011 as at 30 June to 22,478 as at 30 June. 21

24 DIRECTORS REPORT CONTINUED Key operational highlights on a country basis: Country Revenue in EBITDA in Margin FY Australia 120,719 61,946 51% United Kingdom 22,071 (10,057) (46%) Italy 5,401 (2,819) (52%) Luxembourg 3,532 1,054 30% Other countries 3,910 (3,602) (92%) Loss of associate (homeguru.com.au) (185) Unallocated overhead (9,762) Total 155,633 36,575 24% FY Australia 85,745 39,314 46% United Kingdom 17,891 (8,180) (46%) Italy 1, % Luxembourg 1, % Other countries 1,093 (107) (10%) Loss of associate (homeguru.com.au) (226) Unallocated overhead (7,674) Total 107,293 23,500 22% Australia The Australian operations continue to be the key driver of value within the REA Group. The Australian business operates four websites realestate.com.au, property.com.au, realcommercial.com.au and realholidays.com.au as well as providing agents with market leading software through HubOnline and Web Design Services. In FY08, the Australian has further expanded its market leadership position: The number of subscribing agents across all portals increased to 9,190 up from 8,410 as at 30 June approximately 95 per cent of the Australian agents is using the group s residential or commercial site. Average revenue per month from Australian agents increased to $885 by 30 June, up from $667 in June. Additional advertising sold to agents now represents 38 per cent (compared with 31 per cent as at 30 June ) of the overall revenue with residential agents. It is generated from sales of Banner Advertising, Feature Properties, Guaranteed Top Spot, ebrochures, and Feature Agent advertising products. The other 62 per cent (69 per cent) of the overall revenue from residential agents represents subscription revenue. A significant growth in revenues from the property developer and third party segment compared to previous periods. Overseas Growth Businesses In September 2005, the company commenced a global expansion plan that saw it acquire sites in the United Kingdom, Italy, the Greater Luxembourg Region, Hong Kong and the United Arab Emirates. In addition the company has launched new sites into New Zealand, Belgium and the Alsace Region of France. United Kingdom In November 2005, the REA Group acquired Propertyfinder.com, the then number four site in the United Kingdom. Since its acquisition, Propertyfinder has moved to being the number two site in the United Kingdom and this position has been enhanced through two further acquisitions hotproperty.co.uk (April ) and UKPropertyshop. co.uk (July ). At acquisition, Hotproperty had 0.4 million Unique Browsers and 692 unique agents while UKPropertyShop had 0.6 million Unique Browsers. The key performance measures: Increase in revenues of 23 per cent over the previous year. Almost all of this was organic growth as Hotproperty was acquired late in the year. An increase in total UK paying agent numbers from 3,919 (30 June ) to 5,633 (30 June ). propertyfinder.com and hotproperty.co.uk is now used by approximately one third of the UK estate agents. Strong significant growth in revenues from the property developer and third party segment compared to previous periods. The turn-around of Propertyfinder Publications into a break-even publishing business supporting the online brand. 22 REA Group Annual Report

25 Italy In February, the REA Group acquired approximately 59 per cent of casa.it. Casa.it is the leading residential real estate site in the Italian market. During FY08, the REA Group increase its stake in casa.it to approximately 69 per cent through the acquisition of 10 per cent from Antonio Fregnan, the founder of the business. The remaining 31% is owned by SkyItalia. During FY08, the Group ramped up the performance of the casa.it business through investment in sales and marketing. The result was a loss for the year, however there has been strong top line growth. In particular, paying agent numbers increased significantly, from 3,511 as at 30 June to 5,514 as at 30 June. Including the 2,412 agents on trial subscriptions, casa.it is the clear leader in the Italian market with 7,926 agents using the site. Luxembourg In February, the REA Group also acquired the athome Group. The athome Group comprised the number one player in Luxembourg, athome.lu plus sites in Belgium, France and Germany. The Luxembourg business has significantly improved its margins from 22 per cent to 30 per cent in FY08 while further strengthening its dominant market position. All other countries In September 2005, the REA Group launched allrealestate.co.nz in New Zealand. Over the last 12 months, agents subscribing to the site increased from 496 to 527 thus being used by 36 per cent of agents. As part of the athome acquisition in February, the REA Group acquired sites in Germany, France, and Belgium. The last 12 months has seen the number of agents using these sites increase from 181 as at 30 June 07 to 519 as at 30 June 08. In September the Hong Kong businesses Squarefoot Limited and Primedia Limited were acquired and a couple of months later the first portal launched. In March, the REA Group acquired 51% of propertyfinder.ae in United Arab Emirates. The business is making solid progress in the UAE market and has increased agent numbers by 90 per cent since acquisition. Unallocated Overhead The group allocates the costs incurred in its Corporate Centre and its Product Service Group (IT department) across all the countries and reflects those costs in the EBITDA figures shown in the segment report. Unallocated costs include costs of corporate affairs, the group finance function, the corporate development function, the Board and Secretarial function, ASX Listing fees, parts of the costs for the office of the CEO and R&D related IT development costs for a group IT platform. Traffic on Websites Many of the 21 websites of the REA Group continue to be leaders in online real estate advertising in their regions / countries. According to independent rating auditors Nielsen//NetRatings and Omniture (UK), the monthly readership (measured in Unique Visitors) of all websites increased by 15 percent from 7.1 million in June to 8.2 million in June. The Australian residential website realestate.com.au had 4.1 million Unique Visitors and the gap to the second placed website domain. com.au increased to a record 2.3 million visitors. Also according to Nielsen//NetRatings and Omniture, the overall number of pages of information (page impressions) viewed by readers of the group s websites increased by 46 percent from 473 million in June to 592 million in June. Cash Flow Excluding corporate tax payments, operating cash flow has increased from $24.2m in FY07 to $32.7m in FY08. Corporate income tax paid is up from $3.2 million to $16.9 million due to FY07 and FY08 tax installments being paid in the first half-year of FY08. Investment for Future Performance The company will continue to invest in building and expanding its businesses in both online advertising and in other related sectors of the real estate industry. Rounding of Amounts The company has applied the relief available to it in ASIC Class Order 98/100, and, accordingly, amounts in the financial statements and the directors report have been rounded to the nearest thousand dollars. 23

26 DIRECTORS REPORT CONTINUED REVIEW OF FINANCIAL CONDITION Capital structure At the end of the period, 127,255,057 (: 127,255,057) ordinary shares were outstanding. The group is equity financed as at 30 June with an undrawn credit line of $21 million for short term financing needs, which will expire in September. Treasury policy Excess funds are currently invested in an overnight professional funds account. Cash from Operations During the financial year, the group delivered $15.9 million (: $21.1 million) in operating cash flows. The main driver were income tax payments for the amount of $16.9 million (: $3.2 million). At the same time, the group invested $29.1 million (: $32.9 million) out of which $23 million were spent on acquisitions. Liquidity and Funding The company has sufficient funds to finance its operations. Risk Management The company takes a proactive approach to risk management. The Board is responsible for ensuring that risk and opportunities are identified on a timely basis and that the company s objectives and activities are aligned with the risks and opportunities identified by the Board. The mechanisms for risk management include approval of a strategic plan by the Board, the approval of operating budgets and their regular review against actual financial data. Significant Changes in the State of Affairs Throughout the reporting period there have been no significant changes in the state of affairs other than acquisitions (see note 24). Significant Changes after the Balance Sheet Date None Environmental Regulation and Performance The company is complying with all environmental regulations and is not subject to any particular environmental requirements. SHARE OPTIONS Unissued shares Between 30 June and 30 June, there were no unissued ordinary shares under options. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS For FY08, the company paid premiums totalling $19,419 in respect of contracts insuring all the directors of realestate.com.au Limited against costs incurred in defending proceedings for conduct involving: 1. a wilful breach of duty; or 2. a contravention of Sections 182 or 183 of the Corporations Act (2001), as permitted by section 199B of that Act. realestate.com.au Limited has entered into a standard form deed of indemnity, insurance and access with the independent directors against liabilities they may incur in the performance of their duties as directors of realestate.com.au Limited, except liabilities to realestate.com.au Limited or a related body corporate, liability for a pecuniary penalty or compensation order under the Corporations Act, and liabilities arising from conduct involving a lack of good faith. realestate.com.au Limited is obliged to maintain an insurance policy in favour of independent directors for liabilities they incur as directors of realestate.com.au Limited and to grant them a right of access to certain company records. In addition, each Director is indemnified, as authorised by the Constitution, on a full indemnity basis and to the full extent permitted by law, for all losses or liabilities incurred by the Director as a director of a member of the group. The indemnity operates only to the extent that the loss or liability is not covered by insurance. Up to 11 November 2005 (when News Limited increased its share in realestate.com.au Limited to a controlling shareholding) the company held a Directors and Officer s Liability Insurance Policy on behalf of current directors and officers of realestate.com.au Limited and its controlled entities. On 11 November 2005, this policy was converted into a seven year run-off cover. realestate.com.au Limited is now covered by a D&O insurance for the News Corporation Group of companies. This cover excludes claims brought by major shareholders (News Limited). 24 REA Group Annual Report

27 REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for directors and executives of realestate.com.au Limited the company and the group is in accordance with the requirements of the Corporations Act 2001 and its regulations. Remuneration philosophy The performance of the company depends upon the quality of its directors and executives. To prosper, the company must attract, motivate and retain highly skilled directors and executives. To this end, the company embodies the following principles in its remuneration framework: Provide competitive rewards to attract high calibre executives Significant portion of executive remuneration at risk, dependent upon meeting pre-determined performance benchmarks Establish appropriate, demanding performance hurdles in relation to variable executive remuneration Remuneration and Nomination Committee The Remuneration and Nomination Committee of the Board of Directors of the company is responsible for determining and reviewing compensation arrangements for the directors, the Chief Executive Officer (CEO) and the senior management team. The committee assesses the appropriateness of the nature and amount of remuneration of directors and senior managers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and senior manager remuneration is separate and distinct. Non-executive director remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held in November 2006 when shareholders approved an aggregate remuneration of $350,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The remuneration of non-executive directors for the period ending 30 June is detailed in Table 1 of this report. Senior manager and executive director remuneration Objective The company aims to reward executives with a level / mix of remuneration commensurate with their position and responsibilities within the company and so as to: Reward executives for performance against targets set by reference to appropriate benchmarks; Align the interests of executives with those of shareholders; Link reward with the strategic goals and performance of the company; and Ensure total remuneration is competitive by market standards. Structure Remuneration consists of the following key elements: Fixed Remuneration Variable Remuneration Table 2 gives details the variable component of the five most highly remunerated senior managers. Fixed Remuneration Objective The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually. All contracts for new senior management have to be approved by the Remuneration and Nomination Committee. In addition, deviations from the budgeted salary increases also require approval. Structure Senior managers are given the opportunity to receive part of their fixed (primary) remuneration in fringe benefits such as motor vehicles and education expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company. The fixed remuneration component of the five most highly remunerated senior managers is detailed in Table

28 DIRECTORS REPORT CONTINUED Variable Remuneration Short Term Incentives = STI Objective The objective of the STI program is to link the achievement of the company s operational targets with the remuneration received by the executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the senior manager to achieve the operational targets and such that the cost to the company is reasonable in the circumstances. Structure Actual STI payments granted to each senior manager depend on the extent to which specific operating targets set at the beginning of the financial year are met. The operational targets consist of a number of Key Performance Indicators (KPI s) covering both financial and non-financial measures of performance. Typically included are measures such as contribution to revenues, profitability, customer service, risk management, product management, and leadership / team contribution. The company has approved predetermined benchmarks which must be met in order to trigger payments under the short term incentive scheme. Payments made are usually delivered as a cash bonus. STI bonus for FY07 and FY08 For FY07, 100% of the STI cash bonus of $519,630 as previously accrued in that period vested to executives and was paid in the financial year. There were no forfeitures. The maximum STI cash bonus for the financial year is $619,058. This amount has been accrued on the basis that it is probable that all executives will meet their respective KPI s for the period. Any adjustments between the actual amounts and the amounts accrued will be adjusted in FY09. The minimum amount of the STI cash bonus assuming that no executives meet their respective KPIs for the financial year is nil. Variable Remuneration Long Term Incentives = LTI Objective The objective of the LTI plan is to link the achievement of the company s long term targets with the remuneration received by the executives charged with meeting those targets. The total potential LTI available is set at a level so as to provide sufficient incentive to the senior manager to achieve the long term targets and such that the cost to the company is reasonable in the circumstances. Structure Planned LTI payments granted to each senior manager depend on the extent to which specific targets set at the beginning of plan are met. The targets are revenue and profitability related targets in the third year after the initiation of the plan. Payments made are usually delivered as rights to company shares. The company does not encourage entering into arrangements to protect the value of unvested LTI awards. This includes entering into contracts to hedge the exposure to options or shares granted as part of their remuneration package. Group Performance The graph below shows the group s profitability (EBITDA margin) for the past five years. 25% 20% 15% 10% 5% The group performance is also reflected in the movement of the group s earnings per share (EPS) over time. The table below shows the group s basic EPS history for the past five years (including the current period). FY 2004 FY 2005 FY 2006 EBITDA MARGIN FY2004 FY2005 FY2006 FY FY FY FY Earnings per share (cents) Participation in Employee Share Purchase Plan Executives (and all other employees) can also participate in a company sponsored share purchase plan that purchases shares on the market and is open to every employee of REA who meets certain basis criteria. 26 REA Group Annual Report

29 Managing Director & CEO Employment Contract The MD / CEO, Mr Simon Baker, left the company on 4 August. Mr Baker received a termination payment in accordance with his employment contract comprising of a payment of $315k (representing 6 months of base salary), as well as a payout of $315k (representing his 6 month notice period) and a pro-rata bonus of $189k for the time up to end of the notice period (1 July - 4 February 2009). Directors Directors of realestate.com.au Limited Mr Richard J Freudenstein (Non-executive Chairman) Mr Roger Amos (Non-executive Director) Mr Simon T Baker (Managing Director and Chief Executive Officer) (until 4 August ) Ms Kathleen Conlon Mr Alasdair MacLeod Mr John D McGrath Mr Stephen P Rue Mr Sam R White Director remuneration Directors Roger Amos (Non-executive Director) (Non-executive Director) (Non-executive Director) (Non-executive Director) (Non-executive Director) Salary & Fees Short term Post employment Cash Bonus Other Superannuation Long Term Share based payments Long Service Leave LTIP* Total (% performance related) 77,982 7,018 85,000 (0%) 63,103 5,679 68,782 (0%) Simon Baker (CEO / MD) 530, ,000 47,700 42,689 15, ,461 (34%) 405, ,000 39,724 36,476 24, ,240 (33%) Kathleen Conlon 64,220 5,780 70,000 (0%) John McGrath 94,037 8, ,500 (0%) 100,000 9, ,000 (0%) * Long Term Incentive Plan Directors fees are paid only to independent or executive directors. All other directors, not being independent, did not receive any directors fees during the financial period. 27

30 DIRECTORS REPORT CONTINUED Executives The key management personnel and the names of the 5 executives who receive the highest remuneration for the year ended 30 June were Mr Georg Chmiel Chief Financial Officer Mr Shaun Di Gregorio General Manager Asia Pacific Ms Gillian Kent General Manager United Kingdom (since January ) Mr Jamie Pride Country Manager Australia (since April ) Mr Andy Sheats General Manager Corporate Development Ms Christine Vulovic Chief Information Officer Mr Warren Bright ** General Manager Advertising United Kingdom (until February ) Mr Patrick Kersten ** General Manager Greater Luxembourg region Mr Antonio Fregnan ** General Manager Italy (until November ) Remuneration of the key management personnel and the 5 named executives who receive the highest remuneration for the year ended 30 June Executives Georg Chmiel Salary & Fees Short term Post employment Cash Bonus Other Superannuation Long Term Share based payments Long Service Leave LTIP* Total (% performance related) 310,000 55,000 30,401 19,040 11, ,745 (16%) 250,000 28,500 25,065 10, ,850 (9%) Shaun Di Gregorio 263,333 80,000 30,308 33,706 9, ,389 (21%) 200,000 70,000 24,300 16, ,192 (22%) Gillian Kent 154,399 49,669 39,597 4, ,956 (22%) Jamie Pride 70,770 36,889 6,369 1,148 3, ,266 (34%) Andy Sheats 210,000 60,000 22,428 9,706 3, ,902 (21%) 187,076 40,000 20,437 5, ,144 (16%) Christine Vulovic 259,616 37,500 25,970 22,792 7, ,414 (13%) 230,000 25,000 22,950 17, ,132 (8%) Warren Bright ** 371,756 72,420 34, ,937 (15%) Patrick Kersten ** 60,679 33,710 94,389 (36%) Antonio Fregnan ** 73,479 73,479 (0%) * Long Term Incentive Plan (see note 23). No elements of the Long Term incentive plan have vested at the date of the report. ** These key management personnel for financial year have not been considered as key management personnel for financial year 28 REA Group Annual Report

31 Rights granted and vested during the year 30 June Granted Number Grant date Fair value per right at grant date Terms and Conditions for each right Exercise price per right Expiry date Simon Baker 38, May n/a Georg Chmiel 29, May n/a Shaun Di Gregorio 23, May n/a Gillian Kent 16, May n/a Jamie Pride 11, May n/a Andy Sheats 9, May n/a Christine Vulovic 19, May n/a TOTAL 147,689 First exercise date 30 September September September September September September September 2009 Vested Last exercise date No. % 30 September September September September September September September The terms director and officer have been treated as mutually exclusive for the purposes of this disclosure. The elements of emoluments have been determined on the basis of the cost to the company and the consolidated entity. Options granted as part of remuneration There were no options granted as part of remuneration for the year ended 30 June. SUBSEQUENT EVENTS Please refer to note

32 AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES The directors received the following declaration from the auditor of realestate.com.au Limited Ernst & Young Building 8 Exhibition Street Melbourne VIC 300 Australia GPO Box 67 Melbourne VIC 3001 Tel: Fax: Auditor s Independence Declaration to the Directors of realestate.com.au Limited In relation to our audit of the financial report of realestate.com.au Limited for the financial year ended 30 June, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Mr David McGregor Partner Melbourne 25 August Non-audit Services The following non-audit services were provided by the entity s auditor Ernst & Young. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services: Advisory Services (Due Diligence) $198k Advisory Services (Agreed upon procedures review) $36k Signed in accordance with a resolution of the Directors. Mr Richard Freudenstein Chairman Sydney 25 August 30 REA Group Annual Report

33 INCOME STATEMENT For the year ended 30 June Notes Consolidated realestate.com.au Ltd Revenues from services 155, ,293 Salaries and employee benefits expense 6(c) (59,503) (40,598) Sales commission (4,749) (3,264) Marketing related expense (19,351) (15,801) Administration related costs (5,897) (4,426) (869) (837) Share of loss of associate (185) (226) Other expenses 6(a) (29,373) (19,478) (415) (122) Profit / (Loss) before tax, interest, depreciation and amortisation (EBITDA) 36,575 23,500 (1,284) (959) Depreciation and amortisation expense (7,336) (4,974) Profit / (Loss) before tax and interest (EBIT) 29,239 18,526 (1,284) (959) Interest income Interest expense 6(b) (898) (742) (527) (235) Profit / (Loss) before income tax (EBT) 29,100 18,457 (1,153) (870) Income tax (expense) / income 7 (13,337) (7,469) Net profit / (loss) for the period 15,763 10,988 (433) (633) Loss attributable to minority interest 6,581 4,076 Profit / (Loss) attributable to members of parent 22,344 15,064 (433) (633) Earnings per share (cents per share) Basic EPS for profit for the year attributable to ordinary equity holder of the parent Diluted EPS for profit for the year attributable to ordinary equity holder of the parent

34 Balance Sheet As at 30 June Notes Consolidated realestate.com.au Ltd As at 30 June $ 000 As at 30 June $ 000 As at 30 June $ 000 As at 30 June $ 000 ASSETS Current assets Cash and cash equivalents 9 8,882 9, ,046 Trade and other receivables 10 27,763 20,367 1,072 4,893 Other current assets 11 2,972 2, Total current assets 39,617 32,196 1,446 6,003 Non-current assets Receivables from related parties Investment in associates 24(b) 394 Investment in subsidiaries 12 97,962 70,290 Property, plant and equipment 13 5,052 4,836 Deferred tax asset 7 1,599 1, Intangible assets (excluding Goodwill) 14 18,940 16,315 Goodwill 14, 15 93,238 78,450 Total Non-current assets 118, ,994 98,232 71,736 TOTAL ASSETS 158, ,190 99,678 77,739 LIABILITIES Current liabilities Payables 16 19,660 17,518 1,944 1,390 Interest bearing loans and borrowings 17 1,193 6,160 Provisions 19 2,317 1,579 Current tax liabilities 7 6,218 8,394 5,887 8,086 Other current liabilities 18 9,817 8,800 Total current liabilities 39,205 42,451 7,831 9,476 Non-current liabilities Payables to related parties ,978 15,909 Interest bearing loans and borrowings ,590 Deferred tax liabilities 7 3,368 3, Provisions Total Non-current liabilities 4,417 6,687 40,037 16,020 TOTAL LIABILITIES 43,622 49,138 47,868 25,496 NET ASSETS 114,824 85,052 51,810 52,243 EQUITY Contributed equity 20(a) 56,002 56,002 56,002 56,002 Foreign currency translation reserve 20(c) (4,609) (1,210) Business combination reserve 20(c) 568 Other reserve 20(c) (1,703) Retained earnings / (Accumulated losses) 20(c) 35,483 13,139 (4,192) (3,759) Parent interests 87,444 66,228 51,810 52,243 Minority interests 20(d) 27,380 18,824 TOTAL EQUITY 114,824 85,052 51,810 52, REA Group Annual Report

35 Cash Flow Statement For the year ended 30 June Notes Consolidated realestate.com.au Ltd Cash flows from operating activities Receipts from customers 163, ,726 Payments to suppliers and employees (130,754) (88,668) (494) Interest received Borrowing costs (Interest paid) (726) (483) (527) (235) Income Tax paid (16,877) (3,162) (16,586) Net cash flows from operating activities 9 15,871 21,086 (17,233) (176) Cash flows from investing activities Purchase of property, plant and equipment (2,992) (3,246) Purchase of intangible assets (2,749) (2,289) Proceeds from sale of property, plant and equipment 46 3 Loan to related party (1,001) (1,880) Repayment of loan from JV Investment in associate (620) Acquisition of subsidiary, net of cash acquired 24(e) (23,390) (27,172) (22,500) (18,945) Net cash flows used in investing activities (29,085) (32,905) (23,501) (20,406) Cash flows from financing activities Proceeds from issue of ordinary shares in subsidiary 13,771 6,029 Proceeds from borrowings 3,114 39,847 18,201 Payment of finance lease liabilities (1,298) (686) Net cash flows from financing activities 12,473 8,457 39,847 18,201 Net (decrease) in cash and cash equivalents (741) (3,362) (887) (2,381) Net foreign exchange difference (201) (6) Cash and cash equivalents at beginning of period 9,824 13,192 1,046 3,427 Cash and cash equivalents at end of period 9 8,882 9, ,046 Non cash transactions During the current financial year, the working capital loan of $4,892k from News International to the group s UK operations was converted to equity. At the same time, the working capital loan of $4,893k from realestate.com.au Limited to the group s UK operations was also converted to equity. 33

36 Statement of Changes in Equity For the year ended 30 June Attributable to equity holders of the parent Minority interest Total equity CONSOLIDATED Issued capital Retained earnings / (Accumulated losses) Other reserve Currency translation reserve Total At 1 July ,002 (1,925) ,752 16,446 71,198 Foreign Currency translation differences (1,885) (1,885) (749) (2,634) Profit / (Loss) for the period 15,064 15,064 (4,076) 10,988 Recognition of Put option for remaining share in casa.it held by founder (1,703) (1,703) (1,703) Minority interest on acquisition of subsidiary 7,203 7,203 At 30 June 56,002 13,139 (1,703) (1,210) 66,228 18,824 85,052 At 1 July 56,002 13,139 (1,703) (1,210) 66,228 18,824 85,052 Foreign Currency translation differences (3,399) (3,399) (1,893) (5,292) Business Combination Reserve Profit / (Loss) for the period 22,344 22,344 (6,581) 15,763 De recognition of put option due to step up 1,703 1,703 1,703 Buyout of 10% minority interest in casa.it (184) (184) Equity injections of minority interest holders 9,664 9,664 Minority interest on acquisition of subsidiary 7,550 7,550 At 30 June 56,002 35, (4,609) 87,444 27, ,824 realestate.com.au Limited Issued capital Retained earnings / (Accumulated losses) Total At 1 July ,002 (3,126) 52,876 Profit / (Loss) for the period (633) (633) At 30 June 56,002 (3,759) 52,243 At 1 July 56,002 (3,759) 52,243 Profit / (Loss) for the period (433) (433) At 30 June 56,002 (4,192) 51, REA Group Annual Report

37 Notes to the Financial Statements 1) Corporate information The financial report of realestate.com.au Limited for the year ended 30 June was authorised for issue in accordance with a resolution of the directors on 25 August. realestate.com.au Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. For information pertaining to the nature of operations refer to the Directors Report. 2) Basis of preparation and significant accounting policies (a) Basis of preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars. (b) Statement of compliance Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the group for the annual reporting period ending 30 June. Reference Title Summary AASB 8 and AASB -3 AASB 123 (Revised) and AASB -6 AASB 101 (Revised) and AASB -8 AASB -1 AASB 3 (Revised) Operating Segments and consequential amendments to other Australian Accounting Standards Borrowing Costs and consequential amendments to other Australian Accounting Standards Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards Amendments to Australian Accounting Standard Sharebased Payments: Vesting Conditions and Cancellations Business Combinations New standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting. The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised. Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements. The amendments clarify the definition of vesting conditions, introducing the term non-vesting conditions for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The revised standard introduces a number of changes to the accounting for business combinations, the most significant of which allows entities a choice for each business combination entered into to measure a noncontrolling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively. Application date of standard 1 January January January January 2009 Impact on Group financial report AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group s financial statements, although it may indirectly impact the level at which goodwill is tested for impairment. In addition, the amendments may have an impact on the Group s segment disclosures. These amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised. The Group has no borrowing costs associated with qualifying assets and as such the amendments are not expected to have any impact on the Group s financial report. These amendments are only expected to affect the presentation of the Group s financial report and will not have a direct impact on the measurement and recognition of amounts disclosed in the financial report. The Group has not determined at this stage whether to present a single statement of comprehensive income or two separate statements. The Group has share-based payment arrangements that may be affected by these amendments. However, the Group has not yet determined the extent of the impact, if any. 1 July 2009 The Group may enter into some business combinations during the next financial year and may therefore consider early adopting the revised standard. The Group has not yet assessed the impact of early adoption, including which accounting policy to adopt. Application date for Group 1 July July July July July

38 Notes to the Financial Statements CONTINUED Reference Title Summary AASB 127 (Revised) AASB -3 Amendments to International Financial Reporting Standards Amendments to International Financial Reporting Standards Consolidated and Separate Financial Statements Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Improvements to IFRSs Under the revised standard, a change in the ownership interest of a subsidiary (that does not result in loss of control) will be accounted for as an equity transaction. Amending standard issued as a consequence of revisions to AASB 3 and AASB 127. The main amendments of relevance to Australian entities are those made to IAS 27 deleting the cost method and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity s separate financial statements (i.e., parent company accounts). The distinction between pre- and postacquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value. The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact. Application date of standard Impact on Group financial report 1 July 2009 If the Group changes its ownership interest in existing subsidiaries in the future, the change will be accounted for as an equity transaction. This will have no impact on goodwill, nor will it give rise to a gain or a loss in the Group s income statement. 1 July 2009 Refer to AASB 3 (Revised) and AASB 127 (Revised) above. 1 January January 2009 except for amendments to IFRS 5, which are effective from 1 July Recognising all dividends received from subsidiaries, jointly controlled entities and associates as income will likely give rise to greater income being recognised by the parent entity after adoption of these amendments. In addition, if the Group enters into any group reorganisation establishing new parent entities, an assessment will need to be made to determine if the reorganisation meets the conditions imposed to be effectively accounted for on a carry-over basis rather than at fair value. The Group has not yet determined the extent of the impact of the amendments, if any. Application date for Group 1 July July July July 2009 Since 1 July the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 July. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group. AASB 7 Financial Instruments: Disclosures AASB Amendments to Australian Accounting Standards (AASB 132, 101,114, 117, 133,139, 1, 4, 1023 and 1038) AASB -4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments AASB -7 Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 & AASB 128] Interpretation 8 Scope of AASB 2 Share-based Payment Interpretation 9 Reassessment of Embedded Derivatives Interpretation 10 Interim Financial Reporting and Impairment Interpretation 11 Amendments to Australian Accounting Standards arising from AASB Interpretation 11 [AASB 2] In order to increase the comparability of the Income Statement in an international context, interest income is shown separately from sales revenue in order to show EBITDA as a subtotal of the results. The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. 36 REA Group Annual Report

39 Rounding of amounts The company has applied the relief available to it in ASIC Class Order 98/100, and, accordingly, amounts in the financial statements and the directors report have been rounded to the nearest thousand dollars. (c) Basis of consolidation The consolidated financial statements comprise the financial statements of realestate.com.au Limited and its subsidiaries as at 30 June each year (the group). Subsidiaries are all those entities over which the group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. The financial statements of the subsidiaries are prepared for the same reporting period as the realestate.com.au Limited company, using consistent accounting policies. In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group. The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Minority interests not held by the group are allocated their share of net profit after tax in the consolidated income statement and are presented within equity in the consolidated balance sheet, separately from parent shareholder equity. (d) Business combinations The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of the exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the business combination over the net fair value of the group s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the group s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the exchange. The discount rate used is the entity s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. (e) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: i) Rendering of services Revenue is recognised where the contract outcome can be estimated reliably and control of the right to be compensated for their services and the stage of completion can be reliably measured. Advance billings are deferred and released in the appropriate period when the service is delivered. Prepayments are capitalised and released in the appropriate period when service is delivered. ii) Interest income Interest income is recognised where control of the right to receive interest payments can be reliably measured. (f) Borrowing costs Borrowing costs are recognised as an expense when incurred. (g) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense. (h) Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 37

40 Notes to the Financial Statements CONTINUED (i) Trade and other receivables Trade receivables, which in most cases have 2 week terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when there is objective evidence that the group will not collect the debt. Bad debts are written off when identified. (j) De-recognition of financial assets and financial liabilities A financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets is derecognised when: the rights to receive cash flows from the asset have expired; the group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement; or the group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (k) Foreign currency translation Both the functional and presentation currency of realestate.com.au Limited and its Australian subsidiaries is Australian dollars ($). Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. The functional currency of REA Group Europe Limited which consolidates the operations in the UK, Italy, and the Greater Luxembourg region, is British Pounds (GBP). The functional currency of the Italian (casa.it) and the Greater Luxembourg region operations (athome Group) is Euro. As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation currency of realestate.com.au Limited at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rate for the period. The exchange differences arising on the translation are taken directly to a separate component of equity. (l) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. 38 REA Group Annual Report

41 (m) Other taxes Revenues, expenses and assets are recognised net of the amount of GST or VAT except: when the GST or VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST or VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST or VAT included. The net amounts of GST or VAT recoverable from, or payable to, the taxation authorities are included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST or VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authorities are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST or VAT recoverable from, or payable to, the taxation authorities. (n) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Leasehold improvements the lease term Plant and equipment over 2 to 10 years The assets residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. i) Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. There are no assets which generate largely independent cash inflows. So the recoverable amount is determined for the cash-generating units to which the asset belongs to. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. ii) De-recognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (o) Investments and other financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. (p) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: represents the lowest level within the group at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the group s primary or the group s secondary reporting format determined in accordance with AASB 114 Segment Reporting. 39

42 Notes to the Financial Statements CONTINUED Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. (q) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. A summary of the depreciation / amortisation policies applied to the group s intangible assets is as follows: Software / Software Intellectual Property: 3 years with annual impairment tests, if required Acquired customer lists / domain names / brand names / advertising relationships: 5 to 11 years with annual impairment tests, if required Revenue guarantees in Customer Contracts which are recognised as a result of a business combination: Over the term of the contract Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. There were no intangible assets with indefinite lives in the group. (r) Impairment of assets The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at re-valued amount (in which case the impairment loss is treated as a revaluation decrease). (s) Trade & other payables Trade and other payables are stated at their amortised cost. They are non interest bearing and are normally settled on terms of up to 60 days. (t) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised. (u) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. 40 REA Group Annual Report

43 (v) Employee benefits Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries and annual leave. Liabilities arising in respect of wages and salaries, including non monetary items, annual leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities that have terms to maturity approximating the terms of the related liability are used. Employee entitlements are arising in respect of the following categories: Wages and salaries, non-monetary benefits, annual leave, long service leave and other leave entitlements, and other types of employee entitlements are charged against profits on a net basis in their respective categories. The liability for long service leave (LSL) is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wages and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. (w) Share-based payment transactions (i) Equity settled transactions: The group provides benefits to its employees (including key management personnel) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). There is currently one plan in place to provide these benefits, the Long Term Incentive Plan (LTIP), which provides benefits to executives identified by the Board. The fair value of each performance right is estimated at grant date using a Monte Carlo simulation. The valuation was performed independently by KPMG. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and / or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the income statement is in accordance with the valuation conditions as set out under the group s Long Term Incentive Plan (note 23). Equity-settled awards granted by realestate.com.au Limited to employees of subsidiaries are recognised in the subsidiaries separate financial statements as an expense with a corresponding credit to equity. As a result, the expense recognised by the group is the total expense associated with all such awards. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. The dilutive effect, if any, of outstanding rights is considered as immaterial for the current financial year and consequently is not reflected as additional share dilution in the computation of diluted earnings per share. (ii) Cash settled transactions: The group currently does not provide benefits in the form of cash settled share-based payments. (x) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (y) Earnings per share Basic earnings per share are calculated as net profit attributable to members of the parent (realestate.com.au Limited), adjusted to exclude any costs of servicing equity other than dividends and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share are calculated as net profit attributable to members of the parent, adjusted for: costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 41

44 Notes to the Financial Statements CONTINUED 3) Financial Risk Management Objectives and Policies The group seeks to manage risk in ways that will generate and protect shareholder value. Management of risk is a continual process and an integral part of business management and corporate governance. The group s risk management strategy is aligned with the corporate strategy and company vision, to ensure that the risk management strategy contributes to corporate goals and objectives. The risk management program has been designed to establish a system of risk oversight and management and internal controls by having the framework in place to identify, assess, monitor and manage risk. The risk management methodology has been developed in line with the Australia / New Zealand Risk Management Standard (AS / NZ 4360). The program and methodology seek to promote awareness of risks and intelligent risk taking and management in, and among, all levels of the business. The Board determines the group s tolerance for risk, after taking into account the strategic objectives and other factors including shareholder expectations, financial and reporting requirements and the financial position, organisational culture and the experience or demonstrated capacity in managing risks. Management is required to analyse its business risk in the context of Board expectations, specific business objectives and the organisation s risk tolerance. One of the key areas of the group s risk management focus is on financial risk management. The group s principal financial instruments comprise receivables, payables, finance leases, bank and intercompany loans, and cash and short-term deposits. The main purpose of these financial instruments is to raise and distribute funds for the group s operations. The group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the period, the group s policy that no trading in financial instruments shall be undertaken. The main risks arising from the group s financial instruments are Foreign currency risk as a result of foreign operations Interest rate risk as a result of short term funding and finance leases Liquidity risk as a result of short term funding Credit risk as a result of trading RISK EXPOSURE AND RESPONSES Foreign currency risk The consolidated group is exposed to foreign currency risk on sales, purchases, and funding transactions that are denominated in a currency other than the AUD. Approximately 22% (: 19%) of the group s revenues are denominated in currencies other than the reporting currency of the group. The currencies which give rise to this risk are primarily the British Pound, Euro, New Zealand Dollar, HK Dollar, and Dirham (UAE). Due to the nature and the legal structure of the businesses the group is operating, it is not the group s policy to hedge against foreign exchange risks. As at 30 June, the group had the following exposure to various foreign currencies: Consolidated realestate.com.au Ltd Financial assets Cash and cash equivalents 3,464 1,782 Trade and other receivables 7,111 8,702 1,025 4,893 10,575 10,484 1,025 4,893 Financial liabilities Trade and other payables 13,733 13,324 1,723 1,834 Interest bearing loans and borrowings related parties 1,049 9,784 Interest bearing loans and borrowings others ,818 23,121 1,723 1,834 Net exposure (4,243) (12,637) (698) 3, REA Group Annual Report

45 The following sensitivity is based on the foreign exchange risk exposure in existence at balance sheet date. 10% or 5% movements are key indicators of a significant change in the impact of financial risks for the UK, New Zealand, and all European locations and are based on available historic movements. For other locations (such as Hong Kong and Dubai) a higher tolerance was allowed to reflect the higher volatility of these currencies. As at 30 June, had the Australian Dollar moved, with all other variables held constant, post tax profit and equity would have been affected as illustrated in the table below. Management have assessed the closing net positions of each entity s assets in the table below for movements in currency to highlight the potential impact on the net asset position. There were no material impacts identified based on the parameters used. Consolidated realestate.com.au Ltd Net Profit After Tax Higher / (Lower) AUD +10% versus 1 GBP (1,534) (518) 306 AUD -5% versus 1 GBP (153) AUD +10% versus 1 EUR (329) (110) 102 (110) AUD -5% versus 1 EUR (51) 55 AUD +10% versus 1 NZD AUD -5% versus 1 NZD (11) (51) AUD +20% versus 1 HKD (485) (345) AUD -10% versus 1 HKD AUD +20% versus 1 AED (137) AUD -10% versus 1 AED 69 Equity Higher / (Lower) AUD +10% versus 1 GBP 6,584 5, AUD -5% versus 1 GBP (3,292) (2,641) (153) AUD +10% versus 1 EUR 1,808 1, (110) AUD -5% versus 1 EUR (904) (753) (51) 55 AUD +10% versus 1 NZD AUD -5% versus 1 NZD (11) (51) AUD +20% versus 1 HKD 261 (345) AUD -10% versus 1 HKD (130) 172 AUD +20% versus 1 AED 309 AUD -10% versus 1 AED (154) Given the funding structure of the group, the relative immaterial impact of FX movements, the group policy does not include a need for foreign currency hedging. Management believe the balance sheet date risk exposures are representative of the risk exposure inherent in the financial instruments. 43

46 Notes to the Financial Statements CONTINUED Interest rate risk The group s exposure to the risk of change in market interest rates relates primarily to the group s short term debt obligations of a floating interest rate loan as described in note 21. Domestic interest rate movements contribute to 100% (: 100%) of overall interest rate risk exposure, therefore no further analysis of the impact of foreign interest rate changes was necessary. As at 30 June, the group had the following financial assets and liabilities exposed to interest rate risk*: Consolidated realestate.com.au Ltd Financial assets Cash and cash equivalents 8,882 9, ,046 Trade and other receivables 1,022 4,893 8,882 9,824 1,181 5,939 Financial liabilities Trade and other payables Interest bearing loans and borrowings related parties 4,892 Interest bearing loans and borrowings others 1,560 2,858 1,560 7,750 Net exposure 7,322 2,074 1,181 5,939 * For a breakdown between variable and fixed interest rate exposure refer to note 21: The group has managed its interest rate risk by the use of fixed rate instruments (finance lease) and by maximising the interest earned from funds balanced against the working capital needs. The following sensitivity is based on the interest rate risk exposure in existence at balance sheet date and was based on historic movements in interest rates. As at 30 June, with all other variables held constant, post tax profit and equity would have been affected as illustrated in the table below. Consolidated realestate.com.au Ltd Post Tax Profit Higher / (Lower) +1.0% (100 basis points) % (100 basis points) (89) (98) (2) (10) Management believes the risk exposure at balance sheet date is representative of the risk exposure inherent in the financial instruments. There is uncertainty in the market if interest rates will rise further or drop in the near future. Management has consequently chosen the above variation which is representative for the annual average interest rate increases of the last couple of years. 44 REA Group Annual Report

47 Liquidity risk The group s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank and related party loans, and finance leases contracts. All funding requirements are coordinated and established via corporate head office in Australia for all group operations, thereby enabling a centralised treasury management approach. The group minimises liquidity risk by maintaining a sufficient level of cash and equivalents, as well as ensuring the group has access to short term credit facilities as required. Assuming all variables are equal, no long-term facilities are required. Maturity analysis of financial assets and liabilities Most instruments mature in the short term. The group is cash flow positive without any material long term cash commitments other than those disclosed under commitments and contingencies. As a result of this, external funding usually matures within one year, therefore the two maturity bands as shown below were chosen, which focus on the first 12 months. Year end 30 June CONSOLIDATED <6 months 6-12 months >1 year TOTAL Financial assets Cash and cash equivalents 8,882 8,882 Trade and other receivables 27,763 27,763 36,645 36,645 Financial liabilities Trade and other payables 19,660 19,660 Interest bearing loans and borrowings others ,560 20, ,220 Net maturity 16,404 (612) (367) 15,425 Year end 30 June CONSOLIDATED <6 months 6-12 months >1 year TOTAL Financial assets Cash and cash equivalents 9,824 9,824 Trade and other receivables 20, ,649 29, ,473 Financial liabilities Trade and other payables 16, ,348 Interest bearing loans and borrowings related parties 4,892 4,892 Interest bearing loans and borrowings others ,590 2,858 22,306 1,372 2,420 26,098 Net maturity 7,603 (1,090) (2,138) 4,

48 Notes to the Financial Statements CONTINUED Year end 30 June realestate.com.au Ltd <6 months 6-12 months >1 year TOTAL Financial assets Cash and cash equivalents Trade and other receivables 1,072 1,072 1, ,231 Financial liabilities Trade and other payables 1,944 1,944 Intercompany payables 39,978 39,978 Interest bearing loans and borrowings related parties Interest bearing loans and borrowings others 1,944-39,978 41,922 Net maturity (713) - (39,978) (40,691) Year end 30 June realestate.com.au Ltd <6 months 6-12 months >1 year TOTAL Financial assets Cash and cash equivalents 1,046 1,046 Trade and other receivables 4,893 4,893 5, ,939 Financial liabilities Trade and other payables 1,390 1,390 Intercompany payables 15,909 15,909 Interest bearing loans and borrowings related parties - Interest bearing loans and borrowings others - 1,390-15,909 17,299 Net maturity 4,549 - (15,909) (11,360) Credit risk Receivable balances are monitored on an ongoing basis. The group s exposure to bad debts is not significant. There are no significant concentrations of credit risk with single counterparties within the group. Since the group trades only with recognised third parties, there is no requirement for collateral. The consolidated group s maximum exposures to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the balance sheet. In the history of the group, there have not been significant write-offs of trade debtors. Our policies determine on an individual debtor basis, the likelihood for default. The monthly analysis performed of the trade debtor portfolio does not suggest any material credit risk exposure. With respect to credit risk arising from the other financial assets of the group, which comprise cash and cash equivalents, the group s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Fair values All assets and liabilities recognised in the balance sheet whether carried at cost or at fair value are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated. 46 REA Group Annual Report

49 4) Significant Accounting Judgements, Estimates and Assumptions In applying the group s accounting policies, management continually evaluates judgements, estimates and assumptions based on experience and on other factors, including expectations of future events that may have an impact on the group. All judgements, estimates and assumptions are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below: Significant accounting judgements Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences where management considers that it is probable that future taxable profits will be available to utilise those temporary differences. Impairment of non-financial assets other than goodwill The group assesses impairment of all assets at each reporting date by evaluating conditions specific to the group and to the particular asset that may lead to impairment. Significant accounting estimates and assumptions Impairment of goodwill The group determines whether goodwill is impaired at least on an annual basis. The assumptions used in the estimation of recoverable amount and the carrying amount of goodwill are discussed in note 15. Long Service Leave Provision As discussed in note 2, the liability for long service leave provision is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance sheet date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account. Estimation of useful lives of assets The estimation of useful lives of assets has been based on historic experience, lease terms, and turnover policies. 47

50 Notes to the Financial Statements CONTINUED 5) Segment Information Geographical Regions The group s geographical segments are determined based on the location of the group s assets. The following tables present revenue, expenditure and certain asset information regarding geographical segments for the years ended 30 June and 30 June. Year ended 30 June Australia UK Italy Luxembourg Others TOTAL Revenue Sales - external customers 120,719 22,071 5,401 3,532 3, ,633 Intersegment revenues 569 Total segment revenue 156,202 Intersegment elimination (569) Total consolidated revenue 155,633 Result Segment result 61,946 (10,057) (2,819) 1,054 (3,602) 46,522 Unallocated expenses* (9,762) Share of loss of associate (185) EBITDA 36,575 Depreciation and amortisation (7,336) Net Finance costs (139) Profit before income tax 29,100 Income tax expense (13,337) Net Profit for the year 15,763 Assets and Liabilities Segment assets 69,550 53,787 23,476 2,009 6, ,401 Investment in associate Unallocated assets 3,045 Total assets 158,446 Segment liabilities 14,872 9,867 3,812 2,863 1,063 32,477 Unallocated liabilities 11,145 Total liabilities 43,622 Other segment information Capital expenditure 5, , REA Group Annual Report

51 Year ended 30 June Australia UK Italy Luxembourg Others TOTAL Revenue Sales external customers 85,745 17,891 1,337 1,227 1, ,293 Intersegment revenues 449 Total segment revenue 107,742 Intersegment elimination (449) Total consolidated revenue 107,293 Result Segment result 39,314 (8,180) (107) 31,400 Unallocated expenses* (7,674) Share of loss of associate (226) EBITDA 23,500 Depreciation and amortisation (4,974) Net Finance costs (69) Profit before income tax 18,457 Income tax expense (7,469) Net Profit for the year 10,988 Assets and Liabilities Segment assets 48,055 46,229 20,552 9, ,116 Investment in associate 394 Unallocated assets 8,680 Total assets 134,190 Segment liabilities 13,617 8,602 3,293 1, ,516 Unallocated liabilities 21,622 Total liabilities 49,138 Other segment information Capital expenditure 5, ,535 * The group allocates its back office function consisting of the IT development activities for the online portals and agent solutions business, delivering online advertising and agent solution products, as well as certain central head office functions. Unallocated costs include corporate affairs, the group finance function, the corporate development function, the majority of the costs of the office of the CEO, R&D development costs, costs of Board and the Company Secretarial function. Business Segments The group has only one significant business segment, which is the provision of advertising services to the Real Estate industry. Major customers The group has a number of customers to which it provides both products and services. The group does not rely on any of these customers and none of them amount to 10% or more of external revenue. 49

52 Notes to the Financial Statements CONTINUED 6) Expense Accounts Consolidated realestate.com.au Ltd (a) Other expenses Consultants and contractor expenses 5,792 3, Property expenses 3,480 2, Technology expenses 4,318 2,892 Travel expenses 3,382 2, Print and Distribution expenses of publications 5,301 4,017 Recruitment expenses 2,562 1,159 Reversal of provision for diminution of loan to JV (419) All other expenses 4,538 3, Total other expenses 29,373 19, (b) Finance costs Bank loans and overdrafts Finance charges paid under finance leases Net foreign exchange loss on loans Related party loan (News International) Total finance costs (c) Salaries and employee benefits expense Wages and salaries 55,912 37,991 Workers compensation costs Defined contribution plan expense (Superannuation) 3,234 2,334 Long service leave provision Total salaries and employee benefits expense 59,503 40, REA Group Annual Report

53 7) Income Tax The major components of income tax expense are: Income Statement Consolidated realestate.com.au Ltd Income tax expense Current income tax Current income tax charge 14,568 8,394 14,428 8,086 Adjustment for current income tax of previous years 17 (390) (309) Provision balances of subsidiary members transferred to head entity (14,920) (9,029) Tax losses (recognised) / utilised (83) (606) (83) 226 Foreign exchange adjustment on benefit of tax losses recognised (56) Deferred income tax Benefit of tax losses recognised (850) Origination and reversal of temporary differences (687) Adjustments for income tax of previous years 428 (5) (97) (36) Income tax expense reported in the income statement 13,337 7,469 (720) (237) A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the group s applicable income tax rate is as follows: Accounting profit before income tax 29,100 18,457 (1,153) (870) At the group s statutory income tax rate of 30% (: 30%) 8,730 5,537 (346) (261) Effect of foreign tax rate (174) 10 Foreign subsidiary losses not recognised in the group (a) 5,001 2,501 Foreign branch tax losses not recognised (New Zealand) Effect of tax losses recognised (885) (40) Change due to forming a tax consolidated group (157) Non-deductible amortisation of intangibles (19) 233 Research and Development deduction (342) (481) (6) (22) Legal fees 37 Other 67 Income tax expense on pre-tax net profit 12,580 7,865 (314) (201) Timing differences not recognised in prior years 757 (396) (406) (36) Income tax expense on pre-tax net profit 13,337 7,469 (720) (237) Current income tax liability Consolidated current income tax liability 6,218 8,394 5,887 8,086 (a) This figure includes unrecognised tax losses for the European operations during this fiscal year. It consists of tax losses, with a tax effect of $3,235k (: $2,428k) for REA UK Group, $1,150k (: $35k) for REA Italia Group, $511k (: $38k) for the Greater Luxembourg operations, and $106k (: nil) for REA Group Hong Kong. 51

54 Notes to the Financial Statements CONTINUED Recognised deferred tax assets and liabilities Deferred income tax at 30 June relates to the following: Balance sheet Income statement CONSOLIDATED Deferred tax liabilities Intangibles (3,070) (3,047) 887 (755) Receivables (2) (136) Property, plant and equipment (114) (447) Unrealised foreign exchange gains (59) (4) (55) 4 Prepayments (5) (9) 4 9 Accrued income (118) (132) Deferred income tax liabilities (3,368) (3,775) Deferred tax assets Takeover defence expenditure (81) 96 Investments in Joint Ventures / Associates 68 (68) (68) Provision for doubtful debts Accruals (14) Losses available for offset against future taxable income 83 (83) 401 Property, plant and equipment 7 7 Depreciation - Leasehold improvements 40 Provisions (56) 94 Provision of employee entitlements (155) Prepaid revenues (137) (119) Unrealised foreign exchange losses 6 83 (77) (79) Finance leases (75) 83 (158) (68) Deferred income tax assets 1,599 1,717 Deferred tax (income) / expense 1, realestate.com.au Limited Deferred tax liabilities Unrealised foreign exchange gains (59) (59) Accrued income (111) Deferred income tax liabilities (59) (111) Deferred tax assets Takeover defence expenditure (83) 96 Provision for doubtful debts 65 Accruals (29) Unrealised foreign exchange losses 5 83 (78) (83) Losses available for offset against future taxable income 83 (83) Deferred tax (income) / expense (164) REA Group Annual Report

55 Tax consolidation Following advice from tax advisers, the Board had decided to enter into tax consolidation from 1 July 2006 onwards. (i) Members of the tax consolidation group and the tax sharing arrangement realestate.com.au Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July realestate.com.au Limited is the head of the consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote. (ii) Tax effect accounting by members of the tax consolidated group Measurement method adopted under UIG 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to the members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Nature of the tax funding agreement Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement the allocation of tax within the group is based on accounting profit, which is not an acceptable method of allocation under UIG1052. The tax funding agreement requires payments to / from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount allocated under the tax funding agreement and the allocation under UIG1052, the head entity accounts for these as equity transactions. The amounts receivable or payable under the tax funding agreement are due and payable on demand and are not treated as distributions of profits. Tax consolidation contributions / (distributions) Realestate.com.au Limited has had no tax consolidation contribution adjustments. (iii) Tax related contingencies nil 8) Earnings per share The following reflects the income used in the basic and diluted earnings per share computations: Consolidated Net profit attributable to ordinary equity holders 22,344 15,064 Basic earnings per share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of realestate.com. au Limited by the weighted average number of ordinary shares outstanding during the year. Weighted average number of ordinary shares (Basic EPS) number number Issued ordinary shares as at 1 July 127,255, ,255,057 Weighted average number of ordinary shares as at 30 June (Basic EPS) 127,255, ,255,057 Diluted earnings per share Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of realestate.com.au Limited by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Weighted average number of ordinary shares (Diluted EPS) number number Issued ordinary shares as at 1 July 127,255, ,255,057 Effect of share options on issue during the financial year Weighted average number of ordinary shares as at 30 June (Diluted EPS) 127,255, ,255,057 Other than the potential shares offered as part of the long term incentive plan disclosed in note 23, there have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. There are no instruments excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share. 53

56 Notes to the Financial Statements CONTINUED 9) Current Assets Cash & Cash Equivalents Reconciliation to Cash For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June: Consolidated realestate.com.au Ltd Cash at bank and in hand 8,857 9, ,046 Short term deposits Total Cash & cash equivalents 8,882 9, ,046 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months, depending on the cash requirements of the group, and earn interest at the respective short-term deposit rate. The REA Group has in place a revolving cash advance facility (note 17). Reconciliation of net profit after tax to net cash flows from operations Consolidated realestate.com.au Ltd Net profit / (loss) for the period 15,763 10,988 (433) (633) Adjustments for Depreciation and amortisation 7,336 4,974 Net loss on disposal of property, plant and equipment Interest Expense on Loan converted to Minority Interest 172 Employee option expense adjusted against Minority Interest 54 FX Adjustment on Other payable (202) (191) Reversal of diminution of loan to JV (419) Conversion accrued interest on loan to related party (246) Share of losses of Associate Changes in assets and liabilities (Increase) / decrease in trade and other receivables (7,761) (8,712) (21) (98) (Increase) / decrease in other current assets (691) (555) (151) 15 (Increase) / decrease in deferred tax assets (Decrease) / increase in other current liabilities 698 2, (Decrease) / increase in deferred tax liabilities (1,531) (901) (52) 86 (Decrease) / increase in current tax liabilities (2,217) 5,072 (17,470) (Decrease) / increase in trade and other payables 3,342 6, ,257 (Decrease) / increase in provisions (1,233) Net cash from operating activities 15,871 21,086 (17,233) (176) For disclosure of financing activities refer to note 17 and for disclosure of non-cash financing and investing activities refer to notes 12, 13, and REA Group Annual Report

57 10) Current Assets Trade and other receivables Consolidated Trade debtors (i) 29,841 20,566 Allowance for doubtful debts (2,756) (1,812) realestate.com.au Ltd 27,085 18,754 Related party receivables from related parties (ii) 68 1,296 1,025 4,893 Sundry debtors Total Trade and other receivables 27,763 20,367 1,072 4,893 i) Trade debtors are non-interest bearing and are on 14 to 75 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. An allowance has been recognised as an expense for the current year for specific debtors for which such evidence exists. The amount of the allowance / impairment loss has been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors. ii) The consolidated number of $68k consists of $7k related to News Digital Media and $61k related to SKYItalia a subsidiary of News Corporation. The realestate.com.au Ltd number includes $1,022k related to athome Group S.A. and $3k related REA Group Hong Kong Limited. Details regarding the credit risk and effective interest rate of current receivables are disclosed in note 3 and 21. As at 30 June, the ageing analysis of trade receivables is as follows: Trade debtors - past due date TOTAL Not impaired 0-30 days days 61+ days Considered Impaired CONSOLIDATED 12,396 4,294 2,049 3,297 2,756 CONSOLIDATED 7, ,418 2,423 1,812 realestate.com.au Ltd - realestate.com.au Ltd - Other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. Details regarding foreign exchange and interest rate risk exposure are disclosed in note 3. 11) Current Assets Other current assets Consolidated realestate.com.au Ltd Prepayments and Deposits 2,480 1, Other current assets Total other current assets 2,972 2, ) Non-current Assets - Investment in subsidiaries Consolidated realestate.com.au Ltd Total Investments in controlled entities at cost (see note 22) 97,962 70,

58 Notes to the Financial Statements CONTINUED 13) Non-current Assets Property, plant and equipment Year ended 30 June Leasehold Improvements Consolidated Hardware, Software, & Equipment Total realestate.com.au Limited Leasehold Improvements Hardware, Software, & Equipment Total At 1 July Net of accumulated depreciation and impairment 1,085 3,751 4,836 Additions 302 2,690 2,992 Disposals (429) (429) Accumulated depreciation on disposals Acquisition of a subsidiary - at cost 1,265 1,265 Acquisition of a subsidiary - accumulated depreciation (1,137) (1,137) Depreciation charge for the year (587) (2,181) (2,768) Exchange adjustment - at cost (6) (130) (136) Exchange adjustment - accumulated depreciation At 30 June Net of accumulated depreciation and impairment 799 4,253 5,052 At 1 July At cost 1,704 8,671 10,375 Accumulated depreciation and impairment (619) (4,920) (5,539) Net carrying amount 1,085 3,751 4,836 At 30 June At cost 2,000 12,067 14,067 Accumulated depreciation and impairment (1,201) (7,814) (9,015) Net carrying amount 799 4,253 5,052 The carrying value of systems and hardware held under finance leases at 30 June is $157k (: $383k). Additions during the year include $nil (: $nil) of systems and hardware held under finance leases. Leased assets are pledged as security for the related finance lease liabilities. Impairment of property, plant and equipment There are no indications of a requirement for impairing the property, plant, and equipment position. 56 REA Group Annual Report

59 Year ended 30 June Leasehold Improvements Consolidated Hardware, Software, & Equipment Total realestate.com.au Limited Leasehold Improvements Hardware, Software, & Equipment Total At 1 July 2006 Net of accumulated depreciation and impairment 532 2,930 3,462 Additions 1,006 2,240 3,246 Disposals (73) (112) (185) Accumulated depreciation on disposals Acquisition of a subsidiary - at cost Acquisition of a subsidiary - accumulated depreciation (466) (466) Depreciation charge for the year (431) (1,499) (1,930) Exchange adjustment - at cost (1) (62) (63) Exchange adjustment - accumulated depreciation At 30 June Net of accumulated depreciation and impairment 1,085 3,751 4,836 At 1 July 2006 At cost 772 6,020 6,792 Accumulated depreciation and impairment (240) (3,090) (3,330) Net carrying amount 532 2,930 3,462 At 30 June At cost 1,704 8,671 10,375 Accumulated depreciation and impairment (619) (4,920) (5,539) Net carrying amount 1,085 3,751 4,

60 Notes to the Financial Statements CONTINUED 14) Non-current Assets Intangible assets and goodwill At 1 July Consolidated realestate.com.au Ltd Brand names, Customer and Advertising Relationships Software Goodwill Total Total Cost (gross carrying amount) 13,414 8,040 78,450 99,904 Accumulated amortisation and impairment (2,136) (3,003) (5,139) Net carrying amount 11,278 5,037 78,450 94,765 Year ended 30 June At 1 July, net of accumulated amortisation and impairment 11,278 5,037 78,450 94,765 Additions 48 2,701 2,749 Acquisition of a subsidiary at cost 5, ,131 25,762 Acquisition of a subsidiary accumulated amortisation (433) (433) Amortisation (1,680) (2,888) (4,568) Exchange adjustment at cost (974) (68) (5,343) (6,385) Exchange adjustment accumulated amortisation At 30 June, net of accumulated amortisation and impairment 13,997 4,943 93, ,178 At 30 June Cost (gross carrying amount) 17,589 11,203 93, ,030 Accumulated amortisation and impairment (3,592) (6,260) (9,852) Net carrying amount 13,997 4,943 93, ,178 The carrying value of software held under finance leases at 30 June is $1,067k (: $1,890k). Additions during the year include $nil (: $1,997k) of software held under finance leases. Leased assets are pledged as security for the related finance lease liabilities. Brand names, customer and advertising relationships include intangible assets acquired through business combinations. These intangible assets have been determined to have useful lives of 5 to 11 years based on historic analysis. No impairment indication has arisen. Software acquired has been capitalised at cost. These intangible assets have been assessed as having a useful life of 3 years and are amortised using the straight line method. No impairment indication has arisen. Goodwill is no longer amortised but subject to annual impairment testing. No impairment loss was recognised for continuing operations in the current financial year. 58 REA Group Annual Report

61 Consolidated realestate.com.au Ltd Brand names, Customer and Advertising Relationships Software Goodwill Total Total At 1 July 2006 Cost (gross carrying amount) 8,382 3,060 54,308 65,750 Accumulated amortisation and impairment (887) (960) (1,847) Net carrying amount 7,495 2,100 54,308 63,903 Year ended 30 June At 1 July 2006, net of accumulated amortisation and impairment 7,495 2,100 54,308 63,903 Additions 114 4,172 4,286 Adjustment of Goodwill for change in purchase price (18) (18) Acquisition of a subsidiary at cost 5, ,130 33,439 Acquisition of a subsidiary accumulated (20) (186) (206) Amortisation (1,264) (1,894) (3,158) Exchange adjustment at cost (550) (33) (2,970) (3,553) Exchange adjustment accumulated amortisation At 30 June, net of accumulated amortisation and impairment 11,278 5,037 78,450 94,765 At 30 June Cost (gross carrying amount) 13,414 8,040 78,450 99,904 Accumulated amortisation and impairment (2,136) (3,003) (5,139) Net carrying amount 11,278 5,037 78,450 94,765 The same principles as in financial year were applied for the comparative financial data of financial year. 59

62 Notes to the Financial Statements CONTINUED 15) Impairment testing of Goodwill Goodwill acquired through business combinations has been allocated to six individual cash generating units for impairment testing as follows: Advertising Australia and New Zealand The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a five year period. The discount rate applied to cash flow projections is 16.0% ( 15.5%) and cash flows beyond the five year period are extrapolated using a 3.5% (: 5.0%) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Advertising United Kingdom The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a ten year period. This longer period was chosen to better reflect the acquisition of Sherlock Publications Limited (note 24d) and the existence of both a print and online business in the UK operations. Management expects the print business to be more affected by economic volatility than the online business. The discount rate applied to cash flow projections is 14.6% (: 12.2%) and cash flows beyond the ten year period are extrapolated using a 2.0% (: 5.0%) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Advertising Italy The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a five year period. The discount rate applied to cash flow projections is 16.4% (: no impairment test performed) and cash flows beyond the five year period are extrapolated using a 3% (: no impairment test performed) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Advertising Greater Luxembourg region The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a five year period. The discount rate applied to cash flow projections is 16.6% (: no impairment test performed) and cash flows beyond the five year period are extrapolated using a 2% (: no impairment test performed) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Advertising Hong Kong The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a five year period. The discount rate applied to cash flow projections is 16.1% (: not applicable) and cash flows beyond the five year period are extrapolated using a 3.0% (: not applicable) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Advertising United Arab Emirates The recoverable amount of this unit has been determined based on a value in use calculation using cash flow projections based on financial forecasts approved by senior management covering a five year period. The discount rate applied to cash flow projections is 12.9% (: not applicable) and cash flows beyond the five year period are extrapolated using a 3.0% (: not applicable) growth rate, which is below the expected industry growth rate but was chosen for a conservative outlook. Carrying amount of goodwill allocated to each of the cash generating units Carrying amount of goodwill Consolidated Advertising Australia / New Zealand 23,289 22,949 Advertising United Kingdom 41,694 34,366 Advertising Italy 17,220 14,275 Advertising Greater Luxembourg region 6,598 6,860 Advertising Hong Kong 2,247 Advertising United Arab Emirates 2,190 realestate.com.au Ltd Total Carrying amount of goodwill 93,238 78, There were no other intangibles with indefinite lives in the books of the company. Key assumptions used in value in use calculations for the Advertising Australia / New Zealand unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in Australia and New Zealand and the expected increase in agent numbers. EBITDA Margin is expected to be at levels consistent with current months. Key assumptions used in value in use calculations for the Advertising United Kingdom unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in the UK and the expected increase in agent numbers. 60 REA Group Annual Report

63 Key assumptions used in value in use calculations for the Advertising Italy unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in Italy and the expected increase in agent numbers Key assumptions used in value in use calculations for the Advertising Great Luxembourg region unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in the Greater Luxembourg region and the expected increase in agent numbers Key assumptions used in value in use calculations for the Advertising Hong Kong unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in Hong Kong and the expected increase in agent numbers Key assumptions used in value in use calculations for the Advertising United Arab Emirates (UAE) unit The following describes each key assumption on which management has based its cash flow projections when determining the value in use of the cash generating unit. For the purpose of this model, revenues are expected to grow at rates reflecting the expected growth of revenue per agent in the United Arab Emirates and the expected increase in agent numbers 16) Current Liabilities Payables Consolidated Trade payables 5,554 5,801 realestate.com.au Ltd Accruals 7,467 4, Payable to put option holder for sale of casa.it 1,703 Payables to related parties (i) 1,718 3,276 1,723 1,286 Other payables 4,921 2,312 Total payables 19,660 17,518 1,944 1,390 (i) Includes trade payables of $1,381k to News International and $337k to SKYItalia. For realestate.com.au Limited the $1,723k consist of the final payment of $1,491k for the acquisitions of Prime Media Limited and Square Foot Limited valued at balance sheet foreign exchange rate and a funding commitment of $232k to REA Hong Kong Limited. Information regarding the effective interest rate and credit risk of current payables is set out in note 3 and

64 Notes to the Financial Statements CONTINUED 17) Current and Non-current Liabilities Interest bearing loans & borrowings Maturity Consolidated realestate.com.au Ltd Current Obligations under finance leases and hire purchase contracts see Note 25 1,193 1,268 Unsecured loans from other related parties On demand 4,892 Non current Obligations under finance leases and hire purchase contracts see Note ,590 1,193 6, ,590 Fair value disclosures: Details of the fair value of the group s interest bearing liabilities are set out in note 21. Financing facilities available: At reporting date, the following financing facilities were available: Consolidated realestate.com.au Ltd Total facility Combined bank loan / overdraft facility (expiring 25 Sep ) 21,000 10,000 21,000 10,000 thereof used at reporting date thereof unused at reporting date 21,000 10,000 21,000 10,000 The facility is secured by a cross guarantee between realestate.com.au Limited, Netwide Solutions Pty Limited, Property Look Pty Limited, and Web Effect Pty Limited. 18) Other current liabilities Consolidated Deferred revenues 9,458 7,940 Prepaid revenues realestate.com.au Ltd Total other current liabilities 9,817 8, REA Group Annual Report

65 19) Current and Non-current Liabilities Provisions Lease Incentive Employment Severance Indemnity Annual Leave Long Service Leave Long term incentive plan Total CONSOLIDATED At 1 July , ,071 Acquisition of subsidiary Arising during the year 125 2, ,736 Utilised (39) (18) (1,752) (28) (1,837) At 30 June , ,999 Current 23 2, ,317 Non current Total , ,999 Current 39 1,540 1,579 Non current Total , ,071 realestate.com.au Ltd nil 20) Contributed equity and reserves Consolidated realestate.com.au Ltd (a) Issued and paid up capital Ordinary shares (issued and fully paid) 56,002 56,002 56,002 56,002 (b) Movement in ordinary shares on issue Number of shares Number of shares As at 1 July 127,255,057 56, ,255,057 56,002 As at 30 June 127,255,057 56, ,255,057 56,

66 Notes to the Financial Statements CONTINUED (c) Parent interests Share Capital Retained Earnings / (Accumulated Losses) Consolidated Other reserve Currency translation reserve Total At 1 July ,002 (1,925) ,752 Total recognised income and expenses 15,064 15,064 Currency Translation Reserve (1,885) (1,885) Casa.it Put Option Reserve (1,703) (1,703) At 30 June 56,002 13,139 (1,703) (1,210) 66,228 At 1 July 56,002 13,139 (1,703) (1,210) 66,228 Total recognised income and expenses 22,344 22,344 Currency Translation Reserve (3,399) (3,399) Business Combination reserve De-recognition of put option due to step up 1,703 1,703 At 30 June 56,002 35, (4,609) 87,444 Business Combination Reserve: This amount is the result of the change in Sky Italia s minority interest from 34% to 30.6% (30 April ) as the group purchased the remaining 10% stake from the founder of casa.it. Sky Italia is a subsidiary of News Corporation. casa.it Put Option Reserve: The amount of $1,703k represented a recognised liability for a put option over the remaining 10% of shares in casa.it Srl held by the founder. This reserve and the corresponding liability were subsequently reversed as a result of the group s purchase of the remaining 10% of the shares from the founder. Currency Translation Reserve: The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of REA Group Europe Limited consolidated and its subsidiaries. Share Capital realestate.com.au Ltd Retained Earnings / (Accumulated Losses) Total At 1 July ,002 (3,126) 52,876 Total recognised income and expenses (633) (633) At 30 June 56,002 (3,759) 52,243 At 1 July 56,002 (3,759) 52,243 Total recognised income and expenses (433) (433) At 30 June 56,002 (4,192) 51,810 (d) Minority interests Interest in: Consolidated Share Capital 39,617 24,480 Current earnings (6,581) (4,076) Retained earnings (5,656) (1,580) realestate.com.au Ltd Total Minority interests 27,380 18, REA Group Annual Report

67 (e) Capital management When managing capital, management s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The group s Dividend Policy provides scope for the Board to determine whether to pay a dividend, the timing of any dividend payment and the amount of any dividend payment. The Board bases its decision on existing financial data, forecasts and existing growth projects. Whilst the Board continues to pursue growth through acquisitions and investments, levels of cash reserves of REA Group in accordance with this policy will be maintained rather than distributed as dividends. Other than through the Long Term Incentive Plan (note 23), management has no current plans to issue further shares on the market. Management monitors capital through the gearing ratio (net debt / total capital). At year end, the group is not in a net-debt position. The REA Group does have in place a revolving cash advance facility of $21million with the group s banker which enables management of the REA Group s working capital needs or acquisition funding. The gearing ratios based on continuing operations at 30 June and were as follows: Consolidated realestate.com.au Ltd Total borrowings 1,560 7,750 Less cash and cash equivalents 8,882 9, ,046 Net debt Not existing Not existing Not existing Not existing Total equity 114,824 85,052 51,810 52,243 Total capital 114,824 85,052 51,810 52,243 Gearing Ratio 0% 0% 0% 0% The group is not subject to externally imposed capital requirements. 65

68 Notes to the Financial Statements CONTINUED 21) Fair value and interest rate risk Fair values All assets and liabilities recognised in the balance sheet whether carried at cost or at fair value are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated. Contingencies The Company and certain controlled entities have potential financial liabilities that may arise from certain contingencies disclosed in note 25. As explained in that note, no material losses are anticipated in respect of any of those contingencies and the fair value disclosed above is the directors estimate of amounts that would be payable by the group as consideration for the assumption of those contingencies by another party. Interest rate risk The following table sets out the carrying amount, by maturity, of the financial instruments exposed to interest rate risk: CONSOLIDATED Less than 1 Year 1-2 years 2-3 years 3-4 years 4-5 years more than 5 years Total Weighted average effective interest rate % Year ended 30 June FINANCIAL ASSETS Fixed rate Nil Floating rate Cash assets 8,882 8, % FINANCIAL LIABILITIES Fixed rate Obligations under finance leases and hire purchase contracts 1, , % Floating rate Nil Year ended 30 June FINANCIAL ASSETS Fixed rate Nil Floating rate Cash assets 9,824 9, % FINANCIAL LIABILITIES Fixed rate Obligations under finance leases and hire purchase contracts 1,268 1, , % Floating rate Loan from related party News International 4,892 4, % 66 REA Group Annual Report

69 realestate.com.au Ltd Less than 1 Year 1-2 years 2-3 years 3-4 years 4-5 years more than 5 years Total Weighted average effective interest rate % Year ended 30 June FINANCIAL ASSETS Fixed rate Nil Floating rate Cash assets % Related Party Loan to athome Group 1,025 1, % Total 1,184 1,184 FINANCIAL LIABILITIES Nil Year ended 30 June FINANCIAL ASSETS Fixed rate Nil Floating rate Cash assets 1,046 1, % Related Party Loan to Propertyfinder Holdings Group 4,893 4, % Total 5,939 5,939 FINANCIAL LIABILITIES Nil 67

70 Notes to the Financial Statements CONTINUED 22) Related party transactions (a) Subsidiaries The consolidated financial statements include the financial statement of realestate.com.au Limited and the subsidiaries listed in the following table: Name - Country of incorporation Equity interest Investment property.com.au Pty Limited Australia 100% 100% 9,186 Netwide Solutions Pty Limited Australia 100% 100% 26,153 5,776 % homeguru Pty Limited 63% 42%* ozhomevalue Pty Limited 100% Property Look Pty Limited Australia 100% 100% 9,526 Hub Online Global Group Australia 100% 100% 6,255 6,255 Web Effect International Pty Limited - Australia 100% 100% NL / HIA JV Pty Limited ( homesite.com.au ) - Australia 100% 100% 1,652 % REA Group FZ LLC UAE 51% 3,580 REA Group Hong Kong Limited Hong Kong 100% 4,154 Square Foot Limited Hong Kong 100% Prime Media Limited Hong Kong 100% REA Group Europe Limited UK 100% 100% 57,820 37,895 REA UK Limited UK 50%** 50%** Propertyfinder Holdings Limited UK (former Asserta Holdings) 100% 95.2% Sherlock Publications Limited (hotproperty.co.uk) UK 100% Asserta Home Limited UK 100% 100% Asserta Business Limited UK 100% 100% Propertyfinder.co.uk Limited UK 100% 100% ~Internet Property Finder Limited UK 100% 100% Propertyfinder Publications Limited UK 100% 100% REA Italia Limited Italy 69.4% 66% casa.it Srl Italy 100% 90% athome Group S.A. Luxembourg 100% 100% athome International S.A. Luxembourg 100% 100% Altowin S.A. Belgium 100% 51% TOTAL 97,962 70,290 * In FY07 and up to the step-up acquisition on 1 October in FY08 homeguru Pty Limited was accounted for as an Investment in Associates. After the step-up acquisition full consolidation was commenced. ** REA Group Europe Limited controls all UK subsidiaries via a majority on the board and consequently has fully consolidated the financial accounts since acquisition date During the businesses of property.com.au Pty, Property Look Pty Ltd and NL / HIA JV Pty Limited ( homesite.com.au ) were transferred to Netwide Solutions Pty Ltd. In the separate financial statements of realestate.com.au Limited, this transfer has been accounted for as an equity distribution from property.com.au Pty, Property Look Pty Ltd and NL / HIA JV Pty Limited ( homesite.com.au ) to realestate.com.au and corresponding equity contribution from realestate.com.au Limited to Netwide Solutions Pty Ltd. The equity distribution / contribution has been measured based on the carrying amounts of the investments in property.com.au Pty, Property Look Pty Ltd and NL / HIA JV Pty Limited ( homesite.com.au ) such that the carrying amount of Netwide Solutions Pty Ltd has been increased by the previous carrying amount of the aforementioned investments. The equity distribution / contribution did not give rise to an impact on realestate.com.au Limited s profit for the period. (b) Ultimate parent entity The ultimate parent entity is News Corporation in the United States of America. 68 REA Group Annual Report

71 (c) Details of Key Management Personnel Directors Mr Richard J Freudenstein (Chairman) Mr Roger Amos (Non-executive Director) Mr Simon T Baker (Chief Executive Officer & Managing Director) until 4 August Ms Kathleen Conlon (Non-executive Director) Mr Alasdair MacLeod (Non-executive Director) Mr John D McGrath (Non-executive Director) Mr Stephen P Rue (Non-executive Director) Mr Sam R White (Non-executive Director) Executives Mr Georg Chmiel Chief Financial Officer Mr Shaun Di Gregorio General Manager Asia Pacific Ms Gillian Kent General Manager United Kingdom (since January ) Mr Jamie Pride Country Manager Australia (since April ) Ms Christine Vulovic Chief Information Officer Mr Andy Sheats General Manager Corporate Development Mr Warren Bright General Manager Advertising United Kingdom (until February ) Mr Patrick Kersten General Manager Greater Luxembourg region Mr Antonio Fregnan General Manager Italy (until November ) For the purpose of this report, only managers with responsibility for more than 10% of the group s revenues are deemed to be most influential employees. (i) Compensation for key management personnel Consolidated Short-term employee benefits 2,653,415 2,500,744 Superannuation benefits 224, ,668 Long service leave 129,081 74,733 Long Term Incentive Plan (LTIP) 54,102 realestate.com.au Ltd Total Compensation 3,060,632 2,754,145 (ii) Contract for Services A contract for the MD / CEO, Mr Simon Baker, was in place until 4 August and was terminated on that date. (iii) Option holdings of Key Management (Consolidated) Other than due to the LTIP (Note 23), there are no other options held by key management. (iv) Loans to Key Management (Consolidated) Nil 69

72 Notes to the Financial Statements CONTINUED (v) Shareholdings in realestate.com.au Limited (Consolidated) Directors Balance 01-Jul Granted as remuneration Net change other Balance 30-Jun John McGrath 2,139,086 2,139,086 Sam White 16,249,045 16,249,045 Simon Baker 3,480,511 (372,592) 3,107,919 Roger Amos 2,363 2,363 Total 21,871,005 (372,592) 21,498,413 Executives Balance 01-Jul Granted as remuneration Net change other Balance 30-Jun Georg Chmiel 2, ,795 Shaun Di Gregorio 233,688 14, ,527 Gillian Kent n/a Jamie Pride n/a 1,050 1,050 Chris Vulovic 32,907 3,408 36,315 Total 269,216 19, ,687 All equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the group would have adopted if dealing at arm s length. (d) Transactions within the consolidation group To account for services provided by one entity on behalf of another entity, adjustments and cross charges are made at arm s length between the separate legal entities and branches. In addition to that, Netwide Solutions Pty Limited is licensing to Propertyfinder Holdings Limited in the UK the new propertyfinder.com website which was completed in June A license fee of $569k (: $449k) based on a % of the online advertising revenues was charged by Netwide Solutions Pty Limited during the current financial year. In addition, costs incurred by one group member on behalf of another group are on-charged on commercial terms. (e) Other related party transactions Sales Starting on 28 June, the group has entered into an online advertising agreement on commercial terms for 5 years with an option to extend it for another 10 years with realestate.com.au Financial Services Pty Limited after its disposal to Reva Services Pty Limited. During the year, the company sold residential subscriptions and other advertising products at arm s length terms and conditions to the franchisees and offices of the Ray White Group and to John McGrath Estate Agents. The group also entered into an online advertising agreement on commercial terms with its associate Homeguru Pty Limited. SKYItalia (a News Group entity) has purchased advertising services from the group to the value of $389k (: $0k). News Digital Media subleases an office with the group in Newcastle, Australia, and paid $38k (: $16k) in rent. During the year, Internet Propertyfinder UK (a wholly owned subsidiary of REA UK) sold tax losses for $224k (GBP 102k) to News International under UK tax legislation. Purchases During the year, the group utilised advertising services of the News Limited Group to the value of $140k (: $35k), of SKYItalia to the value of $449k (: $20k), and News International Limited of $1,798k (: $255k), on commercial terms and conditions. Loan to Propertyfinder Holdings Group News International Limited and REA Group Europe Limited both hold a 50% stake in REA UK Limited which holds 100% of the shares in Propertyfinder Holdings Group. REA Group Europe Limited controls REA UK Limited via a majority on the board. On the 18 November 2005, News International Limited first entered into a working capital loan agreement with Asserta Holdings Group (later renamed to Propertyfinder Holdings Group) to make funds available in the form of an interest bearing loan at a rate of 2% over the base lending rate of the Bank of England (BoE). The balance of this loan which was converted to equity including accrued interest at 31 December was $4,892k. (f) Director transactions During the year the directors incurred expenses in connection with carrying out their duties as directors. Where these expenses were reasonable and business related, the company reimbursed them in full. 70 REA Group Annual Report

73 23) Long Term Incentive Plan In the current financial year, the group established and announced a long term incentive plan for executives identified by the Board. The plan is based on the grant of performance rights that vest into shares on a 1 to 1 basis at no cost to the employee subject to performance hurdles. Settlement of the performance rights is made in ordinary shares. The performance measure selected by the Remuneration and Nomination Committee are based upon group revenues and EBITDA or EBIT for all executives responsible for the group, and regional or country revenues and contribution margin (EBITDA before internal allocations) for all other executives. The actual performance is compared to the budgeted measures for the performance period. The initial offer for employees who were employed before 1 July 2006 is a transitional arrangement. It is either based in equal parts on the performance in FY 2009 and on the performance in FY 2010, or for recent additions to the management team only on performance in FY2010. The number of rights granted to the latter group is adjusted (pro-rata) for the number of days in services compared to the total number of days between grant date and vesting date. Subsequently, it is planned that every year a new offer is made with a performance period as the third year after the grant date. If the executive leaves during or before the performance period due to illness, redundancy or death, any granted rights which the Board determines should not vest will lapse. If the executive leaves due to other reasons, the granted rights may be forfeited at the Board s discretion. If the executive leaves for any reason, any rights not yet granted will also be forfeited. Rights are vested after the performance period. In case of under or over performance the eligible rights will be adjusted as per below: Payment Scale Target achieved <80% None % LTIP to be paid 80% 100% 80% 100% vesting 100% 105% 100% vesting >105% 120% >105% 120% vesting >120% 120% vesting There have been no forfeitures during the current year. As the performance periods lie in the future, no options are exercisable (or have been exercised) at balance date. Grant Date Performance Period Vesting date (and earliest exercise date) Number of Rights granted Value of Rights as at grant date $ Plan 1a initial offer 22 May FY July , ,000 Plan 1b initial offer 22 May FY July , ,315 The fair value of each performance right is estimated on the grant date using a Monte Carlo simulation. The valuation was performed independently by KPMG. So far no performance hurdles have been met as the performance period lies in the future. Weighted average share price at measurement date Exercise price Expected volatility Risk-free interest rate Expected life of performance right Plan 1 initial offer $5.15 (22 May ) $ % 6.673% 13 months Plan 2 initial offer $5.15 (22 May ) $ % 6.673% 25 months Simulated share price at vesting date Weighted average fair value per right at grant date Plan 1 initial offer $5.54 $5.16 Plan 2 initial offer $5.92 $5.16 The dividend yield of 0.0% applied reflects the fact that no dividend has been previously paid and that the expected life of the right is up to the vesting date. The expected volatility is based on the company s historic volatility and is designed to be indicative of future trends, which may also not be the actual future outcome. The long term incentive plan resulted in share based compensation expenses of $69,546 (: nil). 71

74 Notes to the Financial Statements CONTINUED 24) Business combinations The key factors contributing to the provisional calculation of goodwill in all acquisitions, relate to the synergies existing within the acquired business and also synergies expected to be achieved as a result of combining with the rest of the group. (a) Acquisition of Prime Media Limited and Square Foot Limited (Hong Kong) On 13 September, realestate.com.au Limited acquired via its fully owned subsidiary REA Group Hong Kong Limited 100% of the shares of Square Foot Limited and Prime Media Limited. The total purchase price was A$3,653k. A$1,716k of the purchase price was paid upfront, the remainder was paid in July. The companies are unlisted print publishing businesses focusing on the real estate market in Hong Kong. The acquired companies contributed revenues of A$1,245k and a net loss of A$701k for the period 13 September to 30 June. A restatement of the pre-acquisition results, thereby providing results as if the combination had taken place at the beginning of the year, is impractical and is therefore not disclosed here. The fair value of the identifiable assets and liabilities as at the date of acquisition are: Consolidated Book value Fair value recognised Cash and cash equivalents Trade and other receivables Other current assets Property, plant and equipment Deferred tax assets Intangible assets* 912 Total Assets 486 1,398 Payables Current tax liabilities Other current liabilities Deferred tax liabilities 159 Total Liabilities Net Assets 348 1,101 Purchase price (a) Cash consideration paid by the acquirer 1,716 (b) Costs associated with the acquisition 244 (c) Cash consideration paid in July 1,693 Total cost of the combination 3,653 Less: Fair value of net assets acquired (1,101) Goodwill on acquisition 2,552 The cash outflow on acquisition is as follows: Cash consideration paid (a) + (b) + (c) 3,653 Less: Net cash acquired with the subsidiary (208) Less: cash consideration paid in July (c) (1,693) Net cash outflow 1,752 * Identifiable intangible assets comprise brand names calculated by the royalty method and which are being amortised over 10 years. 72 REA Group Annual Report

75 (b) Step-up acquisition of homeguru.com.au Pty Limited During FY07, the company via its fully owned subsidiary Netwide Solutions Pty Limited invested $600k in homeguru.com.au Pty Limited which resulted in a 42% share of the voting rights (60% of the economic benefits) and equity accounted for the company as an investment in associates. On 1 October, the company increased both its share of voting rights and economic benefits to a controlling stake of 63% and commenced consolidation from that date. homeguru.com.au Pty Limited is an unlisted company based in Australia which provides an online, interactive marketplace aimed at generating consumer leads for service providers (such as real estate agents, banks and insurance companies) and also giving consumers the ability to find information and be contacted by suitable service providers by logging information on a website. The acquired business contributed revenues of A$1,193k and a net loss of A$350k for the period 1 October to 30 June. The fair value of the identifiable assets and liabilities of homeguru.com.au Pty Limited as at the date of consolidation are: Consolidated Book value Fair value recognised Cash and cash equivalents Trade and other receivables Other current assets Property, plant and equipment Deferred tax assets Intangible assets Total Assets Payables Provisions Total Liabilities Net Assets Purchase price Cash paid by the acquirer 161 TOTAL cost of the acquisition 161 Less: Fair value of net assets acquired (3% of $70k) (2) Goodwill related to previous step ups 167 Goodwill on acquisition 326 The cash outflow on acquisition is as follows: Cash consideration paid 161 Less: Net cash acquired with the subsidiary (71) Net cash outflow

76 Notes to the Financial Statements CONTINUED (c) Acquisition of REA Group FZ LLC On 3 March, realestate.com.au Limited acquired 51% of REA Group FZ LLC in Dubai. The total purchase price was A$3,381k and comprises a payment to the sellers and an equity injection into the business. The company is an unlisted online advertising portal and print publishing businesses focusing on the real estate market in the United Arab Emirates. The acquired business contributed revenues of A$292k and a net loss of A$257k for the period 3 March to 30 June. A restatement of the pre-acquisition results, thereby providing results as if the combination had taken place at the beginning of the year, is impracticable and is therefore not disclosed here. The fair value of the identifiable assets and liabilities of REA Group FZ LLC as at the date of consolidation are: Book value Consolidated Fair value recognised Cash and cash equivalents 1,826 1,826 Trade and other receivables Other current assets Property, plant and equipment Intangible assets* 799 Total Assets 1,991 2,790 Payables Current liabilities Total Liabilities Net Assets 1,925 2,724 Purchase price Cash consideration paid by the acquirer 3,381 Costs associated with the acquisition 199 Total cost of the combination 3,580 Less: Fair value of net assets acquired (2,724) Adjusted for minority interest 1,335 Goodwill on acquisition 2,191 The cash outflow on acquisition is as follows: Cash consideration paid 3,580 Less: Net cash acquired with the subsidiary (1,826) Net cash outflow 1,754 * Identifiable intangible assets comprise brand name which were valued by an independent valuation company and being amortised over 10 years. 74 REA Group Annual Report

77 (d) Acquisition of Sherlock Publications Limited On 9 April, realestate.com.au Limited acquired via its 50% owned but through a board majority controlled subsidiary REA UK Limited. all the shares of Sherlock Publications Limited. The total purchase price was A$11,912k. The company is an unlisted online advertising portal and print publishing business focusing on the real estate market in the UK. At the date of the acquisition, the site was used by 1,300 paying real estate agencies to advertise 170,000 listings. In addition, its publications Hotproperty and Renting had a combined circulation of 120,000 per month. The acquired business contributed revenues of A$1,501k and a net loss of A$301k for the period 9 April to 30 June. A restatement of the pre-acquisition results, thereby providing results as if the combination had taken place at the beginning of the year, is impracticable and is therefore not disclosed here. The fair value of the identifiable assets and liabilities of Sherlock Publications Limited as at the date of consolidation are: Book value Consolidated Fair value recognised Cash and cash equivalents Trade and other receivables Other current assets Property, plant and equipment Intangible assets* 3,446 Total Assets 1,008 4,454 Payables 1,225 1,225 Provisions Other current liabilities Deferred tax liabilities 965 Total Liabilities 1,503 2,468 Net Assets (495) 1,986 Purchase price Cash consideration paid by the acquirer 11,912 Costs associated with the acquisition 681 Total cost of the combination 12,593 Less: Fair value of net assets acquired (1,986) Goodwill on acquisition 10,607 The cash outflow on acquisition is as follows: Cash consideration paid 12,593 Less: Net cash acquired with the subsidiary (282) Net cash outflow 12,311 * Identifiable intangible assets comprise brand name, trade marks, domain name, advertiser and estate agent relationships which were valued by an independent valuation company and being amortised over 8-10 years. 75

78 Notes to the Financial Statements CONTINUED (e) Total net cash outflow due to acquisitions of subsidiaries Net cash outflow for Homesite (Australia, renovate site, final payment) 13 Net cash outflow for casa.it acquisition (Italy, residential site, final payment for 90% of the shares) 1,661 Net cash outflow for Propertyfinder Publications (London Property News) acquisition (UK, print publication, final payment) 1,555 Net cash outflow for Propertyfinder Holdings (formerly Asserta Holdings) acquisition (UK, residential site, acquisition of remaining 4.8% of the shares held by estate agents) 1,405 Net cash outflow for Altowin (Belgium, agent software, acquisition of the remaining 49%) 334 Net cash outflow for additional casa.it (Italy, residential site, acquisition of the remaining 10% of the shares from the founder) 2,515 Net cash outflow from acquisitions of prior years 7,483 Net cash outflow for REA Hong Kong Group acquisition (note 24a) 1,752 Net cash outflow for Home Guru acquisition (note 24 b) 90 Net cash outflow for REA FZ LLC ( propertyfinder.ae ) acquisition (note 24c) 1,754 Net cash outflow for Sherlock Publications ( hotproperty ) acquisition (note 24d) 12,311 Net cash outflow for acquisitions for year ended 30 June 15,907 Total net cash outflow 23,390 The minority shareholders in the UK operations (News International) and the Italian operations (SKY Italia) have contributed $8,200k to the total cash outflow of $23,390k. 25) Commitments and Contingencies Operating lease commitments Group as lessee The group has entered into commercial leases for office property and motor vehicles. These leases have remaining lives of up to 48 months. There are no restrictions placed upon the lessee by entering into these leases. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: Consolidated Within one year 2,552 1,937 After one year but not more than five years 3,384 1,490 More than five years realestate.com.au Ltd Total minimum lease payments 5,936 3, REA Group Annual Report

79 Finance lease commitments - Group as lessee The group has finance leases and hire purchase contracts for various hardware and software components. Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows: Minimum lease payment Present value of lease payments Minimum lease payment Present value of lease payment CONSOLIDATED Within one year 1,240 1,204 1,397 1,360 After one year but not more than five years ,658 1,498 More than five years Total minimum lease payments 1,619 1,560 3,055 2,858 Less amounts representing finance charges (59) (197) Present value of minimum lease payments 1,560 1,560 2,858 2,858 Minimum lease payment Present value of lease payments Minimum lease payment Present value of lease payment realestate.com.au Ltd Total Capital and other commitments Property, plant and equipment Consolidated realestate.com.au Ltd Within one year After one year but no more than 5 years Longer than five years Total Amounts disclosed as remuneration commitments include commitments arising from the service contracts of directors and executives referred to in note 22c that are not recognised as liabilities and are not included in the directors or executives remuneration. Guarantees The loan facility is secured by a cross guarantee between realestate.com.au Limited, Netwide Solutions Pty Limited, Property Look Pty Limited, and Web Effect Pty Limited. 77

80 Notes to the Financial Statements CONTINUED 26) Auditors Remuneration The auditor of realestate.com.au Limited is Ernst & Young. Amounts received or due and receivable by Ernst & Young (Australia) for: Consolidated realestate.com.au Ltd An audit or review of the financial report of the entity and any other entity in the consolidated group Assurance related services in relation to the entity and any entity in the consolidated group Amounts received or due and receivable by related practices of Ernst & Young (Australia) for An audit or review of the financial report of the entity and any other entity in the consolidated group ) Contingent Liabilities Various claims arise in the ordinary course of business against realestate.com.au Limited and its subsidiaries. The amount of the liability (if any) at 30 June cannot be ascertained, and the realestate.com.au Limited entity believes that any resulting liability would not materially affect the financial position of the group. 28) Subsequent events after balance sheet date Acquisition of UK Property Shop Limited On 8 July, the REA Group (ASX:REA, realestate.com.au Ltd and its subsidiary businesses) acquired UK Property Shop Limited (UKPS) for 530,000 (A$1.1 million) through its 50%-owned United Kingdom subsidiary, Propertyfinder Holdings Ltd. Launched in 1999, ukpropertyshop.co.uk is a comprehensive UK estate agent directory, listing the details of 17,000 UK agent offices in 3,000 towns. In April, it was visited by 592,000 people, making it the 7th most visited property site in the UK (ComScore). Propertyfinder Holdings will run ukpropertyshop.co.uk in parallel with its existing propertyfinder.com and hotproperty.co.uk property search portals. Agents who purchase a Propertyfinder subscription will have their property listings displayed on all three sites for the price of one subscription. In addition, agents will have the option of purchasing a priority position to increase the promotion of their business details on ukpropertyshop.co.uk. It is impracticable at this point in time to disclose the accounting for business combination. Departure of MD / CEO On 4 August, Richard Freudenstein, the chairman of the REA Group, announced the departure of Managing Director and Chief Executive Officer Simon Baker, effective immediately. Mr Baker received a termination payment in accordance with his employment contract comprising of a payment of $315k (representing 6 months of base salary), as well as a payout of $315k (representing his 6 month notice period) and a pro-rata bonus of $189k for the time up to end of the notice period (1 July - 4 February 2009). Chief Financial Officer Georg Chmiel has been appointed as acting CEO until a replacement is announced. 78 REA Group Annual Report

81 Independent Audit Report Independent auditor s report to the members of realestate.com.au Limited Ernst & Young Building 8 Exhibition Street Melbourne VIC 300 Australia GPO Box 67 Melbourne VIC 3001 Tel: Fax: Report on the Financial Report We have audited the accompanying financial report of realestate.com.au Limited, which comprises the balance sheet as at 30 June, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2 (b), the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have me the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor s Independence Declaration, a copy of which is included in the directors report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence. Auditor s Opinion In our opinion: 1. the financial report of realestate.com.au Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the financial position of realestsate.com.au Limited and the consolidated entity at 30 June and of their performance for the year ended on that date; and ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. Report on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 18 of the directors report for the year ended 30 June. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300a of the Corporations Act Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor s Opinion In our opinion the Remuneration Report of realestate.com.au Limited for the year ended 30 June, complies with section 300A of the Corporations Act Ernst & Young David McGregor Partner Melbourne 25 August 79

82 Directors Declaration In accordance with a resolution of the directors of realestate.com.au Limited, I state that: In the opinion of the directors: (a) the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company s financial position as at 30 June and of its performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (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. (c) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June. On behalf of the Board Richard J Freudenstein Chairman Sydney, 25 August 80 REA Group Annual Report

83 ASX Additional Information 127,255,057 fully paid ordinary shares are held by 2,119 individual shareholders. All issued ordinary shares carry one vote per share and carry the rights to dividends. There are no options outstanding as at 16 September. The number of shareholders, by size of holding, in each class as at 31 July was: Holding Range Name of 20 largest shareholders No. of holders No. of shares held % held 100,001 and over (top 20) News Ltd 1 74,256, % Songpan Pty Ltd 1 16,184, % Mr Simon Timothy Baker or STB Holdings Pty Ltd 1 3,108, % HSBC Custody Nominees (Australia) Ltd 1 2,948, % UBS Nominees Pty Ltd 1 2,631, % RP Prospects Pty Ltd 1 2,387, % Fondorru Pty Ltd 1 1,999, % ANZ Nominees Ltd 1 1,950, % National Nominees Ltd 1 1,888, % Effie Holdings Pty Ltd 1 1,275, % J P Morgan Nominees Australia Ltd 1 1,073, % M F Custodians Ltd 1 768, % National Ski Pty Ltd 1 748, % Harley Clarke Enterprise Pty Ltd 1 620, % Merumpa Pty Ltd 1 564, % Citicorp Nominees Pty Ltd 1 548, % Mirrabooka Investments Ltd 1 444, % Denzel Pty Ltd 1 318, % Holdex 1 300, % Amcil Limited 1 287, % 100,001 and over others 21 2,873, % 10, , ,556, % 5,001 10, ,958, % 1,001 5, ,177, % 1 1, , % TOTAL 2, ,255, % Number of shareholders holding less than a marketable parcel 52 2, % Substantial Shareholders Name No. of shares held % held News Limited 74,256, % Songpan Pty Limited 16,184, % TOTAL 90,440, % 81

84 Corporate Governance Statement The Corporate Governance arrangements for the group (REA) are set by the Board having regard to the particular circumstances of the group and the best interests of shareholders. REA is committed to best practice in corporate governance where these practices are appropriate and add value to REA. The Board and management of REA maintain a constant interest in governance, including assessing the guidelines of regulatory and investor bodies and considering other national and international practices. This leads to the governance arrangements being reviewed regularly to ensure compliance with legal requirements, to meet the expectations of shareholders and to best address the circumstances of REA. During, all existing Board and Committee Charters were reviewed and revised by the Board as deemed necessary. The tabular information on the following pages shows compliance by REA Group Limited against the recommendations of the ASX Corporate Governance Council in accordance with Listing Rule This statement also provides information on other governance practices adopted by REA Group Limited. This statement is current as at the date of the Directors Report and, unless otherwise indicated, the information was true for the whole of the financial year commencing on 1 July. The information provided below contains references to the REA web site ( This statement should be read in conjunction with this web site and with the Directors Report. Recommendation Compliance Section Companies should establish the functions reserved to the board and those delegated to senior executives 4 and disclose those functions The Board has adopted a Charter that details the functions and responsibilities of the Board, which is available on the REA Group web site. Management of REA s day-to-day operations is undertaken by the Managing Director and Chief Executive Officer, subject to specified delegations of authority approved by the Board. The Board has also adopted the practice of formal letters of appointment for all new directors. The letter sets out the key terms and conditions of the director s appointment. 1.2 Companies should disclose the process for evaluating the performance of senior executives 4 On two fronts, for senior management reporting to the Board, the Remuneration Committee oversees the performance and determines performance assessment. For all line managers and senior management staff in a non-board reporting capacity, a formal performance review framework is in place to monitor outcomes, set KPI s and review achievements against set goals. Section A majority of the Board should be independent directors 5 A majority of the Board are not independent directors. Due to the size of the company, and the strategic relationships, the directors have determined that it is inappropriate to increase the number of directors to a size where there can be a majority of independent directors. This decision does not however limit the size of the Board, nor preclude the appointment of additional directors. The matters and thresholds considered by the Board in assessing the independence of directors are set out in the Board s Charter, which is available on REA s web site. The definition of independent director does not depart from that recommended by the ASX Corporate Governance Council. Materiality thresholds have been determined by the Board. The Board makes an assessment of the independence of each director upon appointment and in August of each year. Directors are required on an ongoing basis to disclose to the Board relevant personal interests and conflicts of interest. Upon any such disclosure, a director s independence is reassessed. 2.2 The Chairperson should be an independent director 5 The current chairperson, Richard J Freudenstein, is not assessed as independent. His appointment is seen as a reflection of his significant experience and industry knowledge. 2.3 The roles of the Chairperson and Chief Executive Officer should not be exercised by the same individual 4 82 REA Group Annual Report

85 Recommendation 2.4 The Board should establish a nomination committee The Board has a Remuneration and Nomination Committee which at all times must comprise of at least three directors, all of which will be non-executive and independent if there are a sufficient number, and a Chairperson who is also Chairperson of the Board of Directors of the REA Group. The Committee is however composed of 4 members, only two of which are independent and therefore, REA does not comply fully with this principle. It is not possible, with the composition of the Board, to have a majority of independent directors on the Committee in the past financial year. The Board has adopted a Charter for the committee which reflects the matters set out in the commentary and guidance to recommendation 2.4, a copy of which is available on REA s website. 2.5 Companies should disclose the process for evaluating the performance of the Board, its committees and individual directors. The Board of Directors initiated a formal review of the individual Director s and the performance of the Board and its committees during. Compliance X 4 Section Companies should establish a code of conduct and disclose the code or a summary of the code REA has adopted a Code of Conduct to guide the standards of ethical behaviour expected of REA directors and employees in the performance of their work. A copy of the REA Code of Conduct is available on REA s website. 3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary of that policy The REA Share Trading Policy is available on the REA website. 4 4 Section The Board should establish an audit committee The Board has established an Audit Risk and Compliance Committee that operates under a charter approved by the Board. 4.2 The audit committee should be structured so that it: consists of only non-executive directors consists of a majority of independent directors is chaired by an independent chair, who is not chair of the Board has at least three members 4.4 The Audit Committee should have a formal charter A copy of the Charter of the Audit Committee is available on the REA website Section Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose those policies or a summary of those policies 4 The Board has adopted the REA Market Disclosure Policy, which sets out the key obligations of the Board and senior management to ensure that REA complies with its disclosure obligations under the ASX Listing Rules and the Corporations Act 2001 (Cth). A copy of the REA Market Disclosure Policy is available on the REA website. Section Companies should design a communications policy for promoting effective communication with shareholders and encouraging participation at general meetings and disclose their policy or a summary of that policy 4 The Board has adopted a REA Shareholder Communications Policy, a copy of which is posted on the REA website. 83

86 Corporate Governance Statement CONTINUED Recommendation Section Companies should establish policies for oversight and management of material business risks and disclose a summary of those policies The Audit Risk and Compliance Committee has included within its terms of reference, a section dealing with the monitoring and establishment of policies regarding risk management and overseeing. 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 and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company s management of its material business risks REA has adopted a risk management framework throughout its operations to proactively and systematically identify, assess and address events that could potentially impact upon business objectives. Under the Risk Management Policy, which supports the risk management framework, there is regular reporting to the Board and the Audit Risk and Compliance Committee. REA has an internal audit function which reports to both the Audit Risk and Compliance Committee and the Managing Director and Chief Executive Officer. The Audit Risk and Compliance Committee oversees the internal audit function and the appointment of the Internal Audit Manager. The Internal Audit Manager meets with both the Chairman of the Audit Committee and the Audit Committee as a whole in the absence of management. This function has full access to personnel and information and is independent of the external auditor. 7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) 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 Board receives a written declaration prior to the acceptance of the annual financial statements. Section The Board should establish a remuneration committee The Board has a Remuneration and Nomination Committee that considers the remuneration arrangements for employees and directors of REA. The Committee is however composed of 4 members, only two of which are independent and therefore, REA does not comply fully with this principle. It is not possible, with the composition of the Board, to have a majority of independent directors on the Committee in the past financial year. The Board has adopted a Charter for the Committee, a copy of which is available on REA s website. 8.2 Companies should clearly distinguish the structure of the non-executive directors remuneration from that of executive directors and senior executives As discussed in the Remuneration Report contained in the Directors Report, 100% of the remuneration of non-executive directors is fixed and non-executive directors do not participate in any incentive plan. Remuneration paid to executives in included fixed and variable components, as detailed in the Remuneration Report. Compliance REA Group Annual Report

87 Structure of the Board The directors in office are: Name Position Period in office at 30 June Mr John D McGrath Non-executive director 7 years, 9 months Mr Sam R White Non-executive Director 5 years, 10 months Mr Alasdair MacLeod Non-executive Director 5 years, 4 months Mr Stephen P Rue Non-executive Director 4 years, 10 months Mr Simon T Baker Managing Director & CEO 2 years 3 months Mr Roger Amos Non-executive Director 2 years Mr Richard Freudenstein Chairman, Non-executive Director 1 year 7 months Ms Kathleen Conlon Non-executive Director 1 year 3 days The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors Report. Directors of realestate.com.au Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement. In the context of director independence, materiality is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the director in question to shape the direction of the company s strategy. In accordance with the definition of independence above, and the materiality thresholds set, the following directors of realestate.com.au Limited are considered to be independent: Roger Amos Kathleen Conlon John D McGrath There are procedures in place, agreed by the Board, to enable directors, in furtherance of their duties, to seek independent professional advice at the company s expense. The Board s prior consent to obtaining such advice is required. The Board considers the appointment or retirement of directors, where appropriate, and with regard to the size of the company. The director concerned does not participate in the decision. Board Functions The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board. The responsibility for the operation and administration of the Company is delegated, by the Board, to the CEO and the executive management team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the CEO and the executive management team. Whilst at all times the Board retains full responsibility for guiding and monitoring the Company, in discharging its stewardship it makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and provide informed feedback to the Board. To this end the Board has established the following committees: Audit Risk and Compliance Nomination and Remuneration The roles and responsibilities of these committees are discussed throughout this Corporate Governance Statement. 85

88 Corporate Governance Statement CONTINUED The Board is responsible for ensuring that management s objectives and activities are aligned with the expectations and risk identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including: Board approval of a strategic plan designed to meet stakeholders needs and manage business risk; Ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the continued growth and success of the entity; and Implementation of budgets by management and monitoring progress against budget - via the establishment and reporting of both financial and non financial key performance indicators. Other functions reserved to the Board include: Approval of the annual and half-yearly financial reports; Approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures; Ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored; and Reporting to shareholders. Audit Risk and Compliance Committee The Board has established an Audit Risk and Compliance Committee that operates under a charter approved by the Board. It is the Board s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information as well as non-financial considerations such as benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the consolidated entity to the Audit Risk and Compliance Committee. The committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in all financial reports. All members of the Audit Risk and Compliance Committee are non-executive directors. The members of the Audit Risk and Compliance Committee during the year and up to the date of this statement were: Mr Roger Amos (Chairman) Ms Kathleen Conlon Mr Stephen P Rue Qualifications of Audit Risk and Compliance Committee members Mr Roger Amos was a senior partner in the KPMG Information, Communication, and Entertainment Group of Assurance and Risk Advisory Services and was a partner with KPMG for 25 years. Ms Kathleen Conlon is a recognised thought leader in strategy and business improvement, and has advised leading companies across a range of industries and countries. Mr Stephen P Rue, the Chief Financial Officer of News Limited, has extensive financial experience in financial aspects of the media industry and the accounting profession. For details of the number of meetings of the Audit Risk and Compliance Committee held during the year, and the attendees at those meetings, refer to Directors Meetings in the Directors Report. The committee meets at least twice a year with the external auditors to discuss the results of their work, fee arrangements and other work performed. To ensure that the auditor remains independent at all times, all non audit work is authorised by the Audit Risk and Compliance Committee. Remuneration and Nomination Committee The Board has established a Remuneration and Nomination Committee, which meets at least once annually, to ensure that the Board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of director. The Remuneration and Nomination Committee comprises non-executive directors. This Committee comprised the following members: Mr Roger Amos (Chairman) Mr John D McGrath Mr Sam R White Mr Richard J Freudenstein For details on the amount of remuneration and all monetary and non-monetary components for each of the five highest paid executives during the year and for the directors, refer to the Remuneration report in the Directors Report. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the company and the performance of the individual during the period. There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. The Remuneration and Nomination Committee is responsible for establishing and maintaining an appropriate framework for remuneration issues within the company. This function includes the determination of remuneration policies and of executives remuneration based on individual performances and the financial and operating performance of the company. For details on the number of meetings of the Remuneration and Nomination Committee held during the year and the attendees at those meetings, refer to Directors Meetings in the Directors Report. 86 REA Group Annual Report

89 Risk The Board determines the Company s risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Company s process of risk management and internal compliance and control includes: establishing the Company s goals and objectives, and implementing and monitoring strategies and policies to achieve these goals and objectives; continuously identifying and measuring risks that might impact upon the achievement of the Company s goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks; formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk management policies and internal controls; monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an annual assessment of the effectiveness of risk management and internal compliance and control. To this end, comprehensive practices are in place that are directed towards achieving the following objectives: effectiveness and efficiency in the use of the Company s resources; compliance with applicable laws and regulations; preparation of reliable published financial information. The Board oversees an annual assessment of the effectiveness of risk management and internal compliance and control. The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Management is required by the Board to assess risk management and associated internal compliance and control procedures and report back on the efficiency and effectiveness of risk management by benchmarking the Company s performance to the Australia / New Zealand Standard on Risk Management (AS / NZ 4360). CEO and CFO Certification The acting Chief Executive Officer and the acting Chief Financial Officer have provided a written statement to the Board that their view provided on the Company s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and that the Company s risk management and internal compliance and control system is operating effectively in all material respects. Performance The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the Nomination Committee conducted performance evaluations that involved an assessment of each Board member s and key executive s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which directors and executives are assessed are aligned with the financial and non-financial objectives of REA Group Limited. Directors whose performance is consistently unsatisfactory may be asked to retire. Ethical Standards The directors and other employees are expected to act lawfully, in a professional manner, and with the utmost integrity and objectivity in their dealings with clients, contractors, candidates and competitors, the community and each other, striving at all times to enhance the reputation and performance of the company. Shareholders The Board of Directors of the company aims to ensure that the shareholders are informed of all major developments affecting the company s state of affairs. Information is communicated to shareholders as follows: The Annual Report is distributed to all shareholders and includes relevant information about the operations of the company during the year, changes in the state of affairs of the company and details of future developments, in addition to other disclosures required by the Corporations Law; Announcements are made to the Australian Stock Exchange in respect of annual and half-yearly results and on other occasions when the company becomes aware of information that might materially affect the price of its units; and The website is used to publish releases by the company. 87

90 CORPORATE INFORMATION ABN These financial statements cover both realestate.com.au Limited as an individual entity and the consolidated entity comprising realestate.com.au Limited and its subsidiaries. The group s functional and presentation currency is AUD ($). A description of the group s operations and of its principal activities is included in the directors report. The directors report is not part of the financial report. Directors Mr Richard J Freudenstein Mr Roger Amos Ms Kathleen Conlon Mr John D McGrath Mr Alasdair MacLeod Mr Stephen P Rue Mr Sam R White (Chairman of the Board) (Non-executive Director) (Non-executive Director) (Non-executive Director) (Non-executive Director) (Non-executive Director) (Non-executive Director) Company secretary Mr Nicholas J V Geddes (Australian Company Secretaries Pty Limited) Registered office C/o Australian Company Secretaries Pty Limited Level 5, 255 George Street SYDNEY, NSW 2000 Australia Tel: Fax: Principal place of business Level 2, 678 Victoria Street RICHMOND, VIC 3121 Australia Tel: Fax: Solicitors Mallesons Stephen Jaques Level 50, Bourke Place, 600 Bourke Street MELBOURNE, VIC 3000 Australia Bankers National Australia Bank Limited ANZ Bank Limited Share register Computershare Registry Services Pty Limited Yarra Falls 452 Johnson Street ABBOTSFORD, VIC 3067 Australia Tel: Fax: Auditors Ernst & Young 8 Exhibition Street MELBOURNE, VIC 3000 Australia Internet address 88 REA Group Annual Report

91 INTERNATIONAL OFFICES AUSTRALIA Melbourne Corporate Headquarters Level 1, 678 Victoria Street Richmond VIC 3121 Australia Ph: Fax: Sydney Level 5, Westfield Towers 100 William Street East Sydney NSW 2010 Ph: Fax: Brisbane Level 1, 535 Milton Road Toowong QLD 4066 Ph: Fax: Adelaide Level 2, 170 Greenhill Road Parkside SA 5063 Ph: Fax: Perth Unit 3, Grand Central 26 Railway Road Subiaco WA 6008 Ph: Fax: BELGIUM Brussels athome Belgique Square de Meeus, 37 B-1000 Bruxelles Ph: +32 (0) Fax: +352 (0) Ans Altowin rue de Francais 373 Ans B-4430 Ph: Fax: UAE Dubai propertyfinder.ae Sh. Essa Tower 601Sh. Zayed Road P.O. Box Dubai UAE Ph: Fax: FRANCE Lorraine athome Lorraine 89, route des Romains BP F-57105, Thionville Ph: +33 (0) Fax: +33 (0) Alsace athome Alsace Immeuble Sébastopol 3, quai Kiéber 6700 Strasbourg Ph: +33 (0) Fax: +33 (0) GERMANY Trier athome Deutschland Max-Planck-Strasse, 12 D Trier Ph: Fax: HONG KONG Squarefoot.com.hk Suite 802 Level 8, Wyndham Street Central, Hong Kong Ph: Fax: ITALY Treviso casa.it S.r.l. Piazza Matteotti, Treviso Ph: +39 (0) Fax: +39 (0) Milano casa.it S.r.l. Via Ugo Bassi, 8/A Milano Ph: +39 (0) Fax: +39 (0) LUXEMBOURG athome Group S.A , Boulevard de la Petrusse L-2320 Luxembourg Ph: Fax: NEW ZEALAND Auckland allrealestate.co.nz Level 5, 182 Broadway Newmarket Auckland NZ Ph: +64 (0) Fax: +64 (0) UNITED KINGDOM London propertyfinder.com, hotproperty.co.uk, UKpropertyshop.co.uk Union House, Union Street London UK SE1 0LH Ph: +44 (0) Fax: +44 (0)

92 The REA Group is committed to reducing its greenhouse gas emissions by 20% by It is also committed to offsetting its carbon emissions to carbon neutral in the fiscal year Visit