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CONCISE ANNUAL REPORT 2002
LEVERAGING OUR GLOBAL NETWORK
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Thursday 7 November 2002 at 10:00 am in the Ballroom at the Park Hyatt Hotel, 1 Parliament Square,East Melbourne, Victoria. The Notice of Meeting and Proxy Form are separate items accompanying this 2002 Concise Annual Report.
1
This year has been a redefining year for Computershare.
We have focused on consolidating thenew businesses we have acquired and
implementing a new managementstructure. With this platform now firmly
established, we are well positioned toleverage the unique competitive
advantage we have built through theintegration of products and services
across our global network.Despite the deterioration of capital
markets across the world, we continuedto generate high quality earnings and our
strategy remains in place to drive thebusiness to the next level.
CHRIS MORRIS, CEO, COMPUTERSHARE
COMPUTERSHARE LIMITED ABN 71 005 485 825
BUILDING AN INTEGRATED GLOBAL
2
AUSTRALIA
1992 Ernst & Young becomesa client
1994 Lists on ASX & NZSE
UNITED KINGDOM
1995 Opens London office
GLOBAL
1995 Acquires 49% of FMSC,proprietary technology
GLOBAL
1997 Acquires remaining 51%of FMSC, renamedComputershare Systems
AUSTRALIA
1997 Acquires transfer agencybusiness of clients KPMG &Ernst & Young
UNITED KINGDOM
1997 Allied Irish Bank becomesUnited Kingdom bureau client
UNITED KINGDOM
1998 Acquires Royal Bank of Scotland’s transfer agencybusiness
SOUTH AFRICA
1998 Acquires ConsolidatedShare Registrars and OptimumRegistrars
IRELAND
1998 Acquires transfer agencybusiness of Allied Irish Bankand CMG Registrars
1978-1988 1992-1995 1998
TECHNOLOGY
INVESTORSERVICES
EMPLOYEESHARE PLANS
DOCUMENTSERVICES
ANALYTICS
1997
AUSTRALIA
1978 Founded as a specialist in stock transfer agent software
1980s Growth is driven by Computershare’seconomies of scale
1987 KPMG becomes a client
1988 Coopers & Lybrand becomes a client
OFFERING 1978-2002COMPUTERSHARE EVOLUTION
3
HONG KONG
1999 Acquires 50% stake inCentral Registration of Hong Kong
1999 2000 2001 2002
Australia & New Zealand
United Kingdom
South Africa
Ireland
Hong Kong
United States
Canada
Germany
Global
GLOBAL
2000 Enters several alliances withPacific Stock Exchange
SOUTH AFRICA
2000 Union Alliance Holdingstakes a 15% stake in SouthAfrican operations
UNITED STATES
2000 Acquires the transferagency businesses of Harris Bank
CANADA
2000 Acquires Montreal Trust’sCanadian stock transfer andcorporate trust businesses
2000 Acquires the Trust Company of the Bank of Montreal
UNITED STATES
2000 Acquires the employeestock purchase plan businesses of Merrill Lynch
AUSTRALIA
2000 Acquires Ci Ltd print and mail
UNITED KINGDOM
2000 Acquires Ci Ltd print and mail
AUSTRALIA
2000 Launches Analytics newbusiness
UNITED KINGDOM
2000 Acquires City Watch Ltdfrom Reuters
GLOBAL
2001 Opens Investor Centre,giving shareholders 24-hour globalcoverage
2001 SMARTS MarketSurveillance system goes live inSingapore Exchange
AUSTRALIA
2001 Acquires BT Registries
SOUTH AFRICA
2001 Acquires Mercantile Registrars
HONG KONG
2001 Acquires remaining 50% ofCentral Registration of Hong Kong
GERMANY
2001 Signs joint ventureagreement with Deutsche Börseto provide registry and relatedservices
AUSTRALIA
2001 Acquires RPC Plan Managers
UNITED STATES
2001 Launches Document Services
CANADA
2001 Launches Document Services
UNITED STATES
2001 Acquires Financial DataConcepts
HONG KONG
2002 Forms joint venture with Hong Kong Exchange and increases market share to in excess of 80%
SOUTH AFRICA
2002 Acquires Analytics businessof Mercantile Registrars
4
OUR RESULTS FORECASTS WERE MET, DIVIDENDS HAVE BEEN INCREASED, CASHFLOW FROM OPERATIONS AND BALANCE SHEET REMAIN STRONGPage 71.0
FINANCIAL HIGHLIGHTSPage 81.1CHAIRMAN & CEO’S REVIEWPage 101.2MANAGEMENT DISCUSSION & ANALYSISPage 13
1.3
REPORT AT A GLANCE
REPORT AT A GLANCE
5
OUR BUSINESSCREATING COMPETITIVE ADVANTAGE THROUGH OURINTEGRATED PRODUCT OFFERING Page 152.0
PRODUCTS & SERVICES DEFINITIONSPage 162.1PRODUCTS & SERVICES OVERVIEWLeveraging our core skills across our products and services Page 172.2OUR OFFER AROUND THE WORLDThe Computershare advantage, opportunities and marketposition Page 182.3THE INTEGRATED APPROACHCustomer centric integrated solutions Page 202.4
6
OUR GLOBAL STRATEGYOUR STRATEGY TO BE THE ONLY TRUE GLOBAL PROVIDER OFSHARE REGISTRY, EMPLOYEE SHARE PLANS AND OTHERRELATED SERVICES REMAINS UNIQUE Page 22
EUROPEReview of the operating performance of United Kingdom,Ireland and South Africa Page 233.1NORTH AMERICAReview of the operating performance of United States andCanada Page 273.2ASIA PACIFICReview of the operating performance of Australia, New Zealand and Hong Kong Page 313.3BOARD OF DIRECTORSBoard of Directors now expanded to seven directorsincluding four non-executives Page 343.4
FINANCIALS Page 37
3.0
4.0REGIONAL SENIOR MANAGEMENTPage 363.5
1.0 OUR RESULTS
7
1.0OUR
RESULTSDELIVERED HIGH QUALITY EARNINGS AND
CONSISTENT LEVELS OF PROFITABILITYDESPITE EQUITY MARKET DOWNTURN
2002JUNE 2002 JUNE 2001 % CHANGE
PROFIT (A$000)Sales revenue 758,033 724,613 +4.6%Earnings before interest, depreciation, amortisation and tax 147,564 151,608* -2.6%Profit attributable to shareholders after tax 57,931* 54,916* +5.2%
BALANCE SHEET (A$000)Total assets 959,716 903,994 +6.2%Total shareholders’ equity 655,748 472,902 +38.7%
JUNE 2002 JUNE 2001
PERFORMANCE INDICATORSBasic earnings per share 9.6 cents† 10.2 cents†
Return on shareholders’ equity 11% 8%Net debt to equity 5% 35%Earnings before interest, depreciation, amortisation and tax/interest 15 times† 11 times†
Staff numbers at 30 June 5,321 5,148
* Before non-recurring items† Normalised
8
1.1FINANCIAL HIGHLIGHTS
PERFORMANCE INDICATORS
REGIONAL ANALYSIS
BUSINESS UNIT HEADCOUNT *
30% ASIA PACIFIC
97 98 99 00 01 02
800
700
600
500
400
300
200
100
0
Sales Revenue A$m
21.7
147.
0
293.
9
394.
9
724.
6
757.
1
97 98 99 00 01 02
175
150
125
100
75
50
25
0
EBITDA A$m
10.7
31.2
56.2
91.7
151.
6
147.
6
97 98 99 00 01 02
1000
800
600
400
200
0
Total Assets A$m
43.6
212.
2
248.
3
659.
4
904.
0
959.
7
Total Revenue
31% EUROPE
39% NORTH AMERICA
38% ASIA PACIFIC
EBITDA
34% EUROPE
28% NORTH AMERICA
1200
1000
800
600
400
200
0
1,02
7AU
STRA
LIA
HONG
KON
G
N. Z
EALA
ND UK
IREL
AND
S. A
FRIC
A
UNIT
ED S
TATE
S
CANA
DA
152
78 1,23
3
75 673
514
1,03
3
26% ASIA PACIFIC
42% EUROPE
32% NORTH AMERICA
* Headcount excludes Technology and Corporate Services(10% of total staff numbers)
1.1 FINANCIAL HIGHLIGHTS
9
10
THE REDEFINING YEAR2002 has been a redefining year for Computershare.
• We have delivered steady profit levels
• We maintained strong operating cash flows from all businesses
• We established a new global management structure to generatehigher returns from our continuing global expansion
• We completed a critical evaluation of all areas of the business withrenewed focus on margins and growth opportunities
• We expanded our strategic relationships through joint ventures withDeutsche Börse and Hong Kong Stock Exchange
• We acquired BT Registries in Australia and New Zealand andMercantile Registrars in South Africa
• We received Securities Exchange Commission approval to be anADR agent in the United States
• We increased the breadth and expertise of the Board which nowhas a majority of non-executive directors
• We increased our half year dividend from 0.5 cents to 2.5 cents pershare, fully franked.
At the same time, the company expanded its products and servicesplatform with technology development, particularly in the area ofEmployee Share Plans and also commenced the establishment of its proprietary registry software, SCRIP system, in Hong Kong, the United States and Canada. Of particular importance is that thecompany has continued its prudent approach by expensing researchand development costs totalling $36 million this year, rather than the normal industry practice of capitalising such costs.
Computershare’s long-term strategy remains unchanged and ourcompetitive advantage as the only true global provider of registry and other related services has been further strengthened by ourachievements this year. Our aims are to achieve and maintain marketleadership in countries where we operate, to sustain high rates ofgrowth and attractive returns from our investments and integratedtechnology platform, and to expand geographically.
STRUCTURED FOR SUCCESSA significant feature of this year has been Computershare’sexamination of people, processes and costs across all businesses ineach country. This gave rise to the implementation of a new globalmanagement structure into three operating divisions, Europe (UnitedKingdom, Ireland and South Africa), North America (United States andCanada) and Asia Pacific (Australia, New Zealand and Hong Kong).With this also came a number of substantial new appointments toboost skill levels within all businesses. The regional managingdirectors are Iain Saville (Europe), Steven Rothbloom (North America)and Stuart Crosby (Asia Pacific). They are responsible for profitabilityof all businesses within their region with a focus on marketingComputershare’s core strengths of technology, and global integratedproduct offerings.
Computershare is well equipped to face the future with confidence.Operationally, the company is on track to have its proprietarysoftware, the SCRIP system, live in all three regions by the end of2002. The US migration is now complete and the Canadian migrationhas already commenced. Following this, Computershare will have atruly global registry model which will be able to deliver efficienciesand benefits to the company’s clients across the regions in whichthey operate.
Over the last few months there have been substantial changes tosenior management including new appointments for contact centreand key operations roles. We remain committed and are determinedto win major clients in all businesses globally.
OPERATIONAL ACHIEVEMENTSKey operational achievements during the year include:
Global Registry – Asia Pacific
• Acquisition of BT Registries in Australia and New Zealand
• Selected registrar for over 60% of new IPOs in Australia
• Formation of a joint venture with Hong Kong Exchanges and ClearingLimited to expand our market share and become the dominantprovider of registry and related services to the Hong Kong market
• Appointed the share registrar for the Bank of China HK listing thelargest IPO in Asia this year with nearly 400,000 shareholders
• Selected to advise the China Securities Depository and ClearingCorporation on the Chinese securities registration service1.2
CHAIRMAN & CEO’S REVIEW
1.2 CHAIRMAN & CEO’S REVIEW
11
Global Registry – Europe
• Acquisition of Mercantile Registrars in South Africa, making us thesole provider of registry services in this market
• Formation of a joint venture with Deutsche Börse to provide registry-related services to the German equities market.
Global Registry – North America
• Infrastructure rollout in North America completed
• United States SCRIP conversion 100% complete and now in aposition to market registry to major companies
• On track for Canada conversion to be completed by end March 2003
• Merrill Lynch Employee Share Plan conversion complete
• Approval from United States Securities Exchange Commission to bean ADR agent in the United States
• Strategic alliance with Citigroup to focus on new opportunities andwork together in North America and globally.
Global Document Services
• Operations now established in Australia, United States, Canada andUnited Kingdom with total revenue $88.4 million
• Totally integrated with registry system and ability to leverage off thesame technology platform
• Substantial growth in expanding into commercial (non-registry) workfor Computershare clients
• Major commercial wins in excess of $8 million p.a. in UnitedKingdom alone.
Global Employee Share Plans
Over 1,000 clients globally – truly global provider able to managespecific plans in different countries to take advantage of local taxconcessions
Major wins this year:
• BP Amoco, British American Tobacco
• Eight FTSE 100 company employee share plans
• Home Depot – 95,000 employees
• ANZ and AMP – expanded to full outsource service.
Global Analytics
• Operations now established in Australia, United Kingdom, UnitedStates and most recently in South Africa
• Our proprietary web-based global equity market share ownershipand contacts management system, IRtrack, has now been releasedin Australia, the United Kingdom, and Canada
• The global database will be completed by December 2002
• We have two main business streams – issuers and capital markets –and are expanding into issuer services
• Important new contract with the American Stock Exchange toprovide IRtrack to their 600 listed companies (less than 10% areexisting Computershare clients).
Technology Services
Computershare continues to differentiate itself with its technologicalexpertise and integrated product offering through our registry,employee share plans, document services, and analytics businesses.Significant work to develop new and improved products is continuing.Our achievements this year include:
• Development and implementation of an ESPP system for UnitedStates Plan Managers
• Development of a Global Options System
• Development and implementation of SCRIP in United States, HongKong and Canadian markets
• Set up of communications and data infrastructure for North America
• SMARTS Market Surveillance system purchased by SingaporeExchange and Monetary Authority.
NEW BOARD APPOINTMENTSIn recent months, Computershare expanded the size of the Board,appointing two new directors, taking the total number of directors toseven and the number of non-executive directors to four. We believethat these new appointments strengthen our expertise in the twostrategically important global markets of Europe and North Americaand that their contribution will enhance the increasingly internationalfocus of the Board and the company.
Iain Saville CBE, has a distinguished background in the financialservices industry with extensive United Kingdom capital marketsexpertise. He was founder and CEO of CREST, one of the world’slargest and most sophisticated securities settlement systems and hasjoined Computershare as an executive director responsible for thegroup’s European operations and is Chairman of the company’sTreasury Review Committee. His experience and senior businessrelationships will be of great benefit to us as we continue to capitaliseon the significant growth opportunities we see, particularly in Europe.
Philip DeFeo is Chairman and CEO of the Pacific Exchange, one of theleading stock exchanges in the United States and joined theComputershare Board as a non-executive director in May of this year.Philip’s experience and United States capital markets expertise will beinvaluable to the company as it seeks to expand its market share andfinancial services presence in the United States.
Both gentlemen are standing for re-election as directors at the AnnualGeneral Meeting in November.
CHRIS MORRISCEO
ALEXANDER STUART MURDOCH Chairman
12
OUTLOOK FOR FINANCIAL YEAR 2003Revenues and earnings growth will depend on the recovery of globalequity markets and, in particular, a higher level of corporate actions.Any increase in interest rates will also be revenue and earningspositive. The company will nevertheless remain vigilant in managingits cost base efficiently, given the uncertain outlook going forward toensure it continues to deliver acceptable levels of operating earningsand margins.
The company is also confident that it will be able to lift its dividendfrom current levels and pay a 5 cent per share fully franked dividendfrom the 2002/03 financial year onwards.
On behalf of the Board, we would like to thank Computershare’sshareholders for their continuing support and also thank ouremployees for their dedicated efforts. In what has been a verychallenging year, we are constantly reminded of our achievements to date, and of the high calibre of the company’s people, theirpassionate conviction and pursuit of excellence.
A.S. MURDOCH C.J. MORRIS
Chairman Chief Executive Officer
13
1.3 MANAGEMENT DISCUSSION & ANALYSIS
Computershare delivered a solid profit result in 2002, despite thedeterioration in global equity markets.
Normalised net profit after tax increased 5.5% to $57.9 million,generated from a diversified portfolio of businesses. After accountingfor outside equity interests, net profit for the period was $71.3 million.This includes a $13.4 million profit on the merger with Hong KongExchange.
Normalised earnings per share were 9.6 cents per share. Earnings pershare after non-recurring items were 12.0 cents per share.
A final dividend of 2.5 cents per share takes total dividends for theyear to 3 cents per share fully franked compared with 1 cent per sharelast year.
FINANCIAL PERFORMANCETotal revenues increased by 4% to $781.0 million. Registrymaintenance income remained steady at $348.1 million. Non–registryincome increased 55% to $163.7 million as a result of expansion inPlan Managers and Document Services businesses. Corporate Actionsincome declined 28% to $53.7 million due to reduced corporateactivity in the market place. Margin income declined 25% to $72.5million reflecting historically low interest rate levels.
Operating costs were $631.9 million, the increase being held to 5.5%over last year. Operating costs in the second half of the year were 5%lower than the first half, reflecting an improved discipline on costcontainment.
Cost of Sales increased by 17.7% to $131.9 and personnel costsincreased by 11.5% to $342.5 million. The full year impact of prioryear acquisitions (Merrill Lynch ESPP, Hong Kong Equity and PlanManagers Australia) and the current year acquisition of the BTRegistries business has contributed to these increased costs.Expansion in the Technology businesses to support technologyprojects also contributed to the increase. These included:
• Implementation of SCRIP in United States, Canada and Hong Kong
• Merrill Lynch ESPP conversion
• Infrastructure development in North America
• Development of a Global Options system.
Included in operating costings were $36 million of technologyresearch and development spend that has been expensed rather thancapitalised, as per Computershare policy. Some of the technologyspending also relates to activities designed to reduce dependency onoutsourced bureau services, which over time will save in the order of$27 million per annum.
Operationally, we have been successful in leveraging overhead coststo ensure the cost base of the business is appropriate for theenvironment in which we are currently operating.
EBITDA decreased slightly to $147.6 million after adjusting fornon–recurring items.
Borrowing costs declined by 29% to $10.2 million following repaymentof debt during the year funded by the preference share issue.
Depreciation and amortisation increased 19% to $55.2 million due tocapital acquisitions and acquisition of businesses.
The headline effective tax rate has fallen from 44.5% as at 30 June2001 to 31.0% and the underlying effective tax rate adjusted fornon–recurring items and non–deductible goodwill charges has fallenfrom 30.9% to 25.5%. The improved result is primarily due to:
• A reduction of tax rates in Australia and Canada
• A critical examination of the group’s qualifying research anddevelopment activities
• Expenditure and limiting inefficient transactions where possible.
Computershare has conservatively not booked the benefit of some$4.6 million of income tax losses and a further $18.3 million of capitallosses. The benefit of these losses will be reflected in a lower taxexpense in future periods when their recovery is virtually certain.
Operating margins remained strong at 19%, with Asia Pacific andEurope achieving 24% and 21% respectively, and North America 13%.
REGIONAL PERFORMANCEComputershare has restructured the Group into three operating regionsenabling increased disclosure of geographic financial performance.
Regionally, revenues and operating earnings (EBITDA) were evenlyspread between North America, Asia Pacific, and Europe.
The North American business, which continues to be affected by 40-year low interest rates, generated revenues of $305 million andEBITDA of $41.1 million during the year. A substantial reduction incorporate actions (mergers and acquisitions, initial public offerings,and stock splits) resulted in reduced registry income. However, thiswas offset by a solid contribution from the Plan Managers business,particularly in the first half of the year.
The Asia Pacific region contributed revenues of $237 million andEBITDA of $56.7 million, representing growth of 20% and 39%respectively. These improved results were generated by theacquisition of BT Registries in Australia and New Zealand and the joint venture with Hong Kong Exchanges and Clearing Ltd.
The European region contributed $237 million and $49.3 millionrespectively. The results were impacted by a reduction in corporateactions, and lower interest rates affecting margin income in theregistry business.
1.3MANAGEMENT DISCUSSION & ANALYSIS
OPERATING COSTS
WORKING CAPITALCASHFLOWS
• Gearing on a net debt toequity basis – 5%
• Available financing facilitiesA$250m
FY01
FY02
700
600
500
400
300
200
100
0
Operating Costs A$m
598.
9
631.
920% RECOVERABLE EXPENSES
Operating Cost Breakdown FY’02
13% OTHER DIRECT
13% TECHNOLOGY
2% CORPORATE
6% OCCUPANCY
46% PERSONNEL
FY’00 FY’01 FY’02
100
80
60
40
20
0
Cashflows from Operations A$m
16%INCREASEIN FY’02
5.5%INCREASE IN FY’02
55.1
56.1
68.3
43.3
79.4
56.9
CASHFLOW FROM OPS
CAPITAL EXPENDITURE
FY’00 FY’01 FY’02
100
80
60
40
20
0
Improved Working Capital Management
87 46 75 33 70 33
RECEIVABLE DAYS
PAYABLE DAYS
14
BALANCE SHEET AND CASHFLOWSThe net financial position of the company remains strong. Total assetswere $959.7 million. Shareholders’ funds increased by 38.7% to$655.7 million, as a result of continued profitability and the preferenceshare issue. Computershare has considerable financial capacity tofund further expansion.
Cashflows from operations increased 16% to 79.4 million through a combination of profit generation and improved working capitalmanagement. Debtor days outstanding reduced from 75 days to 70 days whilst payable days outstanding remained at 33 days.
These cashflows have been applied to funding of capital expenditureacquisitions, which totalled $56.9 million for the year. Capitalexpenditure included occupancy upgrades of $29.1 million; upgradedDocument Services facilities of $7.7 million; and informationtechnology infrastructure of $17.9 million.
Net borrowings decreased by $37.2 million to $34.5 million funded bycashflow from operations and proceeds from the preference shareissue. Gearing – net debt to equity – is now 5%.
Computershare manages funds of, on average, between $3.7 billionand $4.5 billion. Computershare continued to minimise the downsiderisk in the current low interest rate environment. Of these funds, 41% are not exposed to interest rate sensitivity. As at 30 June 2002,effective hedging was in place for 66% of the exposed funds, via both natural hedging and financial instruments.
The group currently has financing facilities totalling $250 million.
POST BALANCE DATEOn 28 August 2002, the company announced:
• It would acquire up to 10% of its ordinary shares through an on-market buy back as part of its continuing focus on capitalmanagement
• It had entered into a strategic alliance with Citigroup. There is nofinancial impact of this transaction in the current year’s results,however, the alliance has the potential to deliver new revenueopportunities to Computershare in the future.
15
2.0 OUR BUSINESS
2.0OUR
BUSINESSCREATING COMPETITIVE ADVANTAGE THROUGH
OUR INTEGRATED PRODUCT OFFERING
16
DEFINITIONS OF PRODUCTSCosmos Technology
COSMOS is Computershare’s technological infrastructure that formsthe basis of existing products and will augment future products.Already supporting a range of services, the client server and object-oriented design enables a modular approach to system customisation.COSMOS’ component-based client server technology and evolutionaryfunctionality ensures a streamlined process and works in harmonywith Computershare’s global registry plan.
SCRIP
The proven registry system SCRIP, forges links with stock exchangesettlement systems around the world and maintains up-to-daterecords of company registers in real-time. Its capabilities include dataentry, inquiries, reporting, company meetings, employee share plans,dividends, rights issues, bonus issues, floats and straight throughprocessing of deals from investor to trade. Its diverse functionalityalso allows for interactive voice recognition (IVR), internet inquiry, andonline updating.
Automated Securities Trading System (formerly known asASTS, now known as X-Stream)
X-Stream is a trading system for global securities exchanges, andquite simply, makes trade happen. Modelled on a high performanceopen platform, X-Stream deploys multi-instrument, multi-currency, andmulti-function trading facilities to more than ten internationalexchanges.
Securities Markets Automated Research Training and Surveillance (SMARTS)
SMARTS is an automated market regulator. It’s a powerful marketsurveillance and information system that alerts authorities to anyimproprieties, and assists in ensuring a fair and efficient market.SMARTS is a complementary product to CHAMP.
CHAMP is a PC-based software system that seamlessly connects ourAustralian brokering and institutional clients to the Australian StockExchange’s CHESS settlement system.
Investor Centre
Investor Centre is based on Cosmos Investor, a sophisticated investoraggregator using Cosmos Technology. The Investor Centre allowsinvestors in companies for whom Computershare acts as shareregistrar/transfer agent to obtain, from our website, the latestinformation concerning their shareholding. Daily stock prices andgraphical representation of figures are also available. Recentinnovations include the ability for investors to obtain a portfolio viewof their shareholdings. Investors are also able to initiate minorchanges to the standing details maintained by our share registry. Seewww.computershare.com for more information.
Issuer Online
Issuer Online is a web-based service that removes the need forcompany personnel to use a dedicated SCRIP terminal to access theircompany register information. Client contacts can therefore obtaindata without the expense of a terminal.
DEFINITIONS OF SERVICES Technology Services (CTS)
CTS is supported by a global group of business and technologyexperts who maintain our existing proprietary share registry systemsand develop, design, enhance, and implement new systems thatsupport our global strategy.
Investor Services (CIS)
Legal and statutory obligations require companies to follow a set ofrules for the management of shareholder registers. Part of this is tokeep shareholders informed and, where applicable, pay dividends, and manage a range of corporate events. Our expert management of company registers means that these tasks are performed by aprofessional share registry, thus relieving a company of this burdenand having to act as the first point of contact for shareholder inquiries.
Computershare is the world’s largest share registry (termed ‘StockTransfer Agent’ in North America), and the only global registrar. Over 5,000 staff manage close to 69 million shareholder accounts for 8,000 companies in eight international locations.
Our impressive network of international operations offers clientsefficient daily management of company share registers and employeeshare plans, and provides assistance in corporate actions such asfloats, rights issues, bonus issues, takeovers, mergers, capitalreconstructions, and dividend reinvestment plans.
Other facilities offered include management of company meetings, proxyprocessing, mailing, document management, initial public offerings(IPOs), demutualisation management, and contact centre services.
Plan Managers (CPM)
Computershare Plan Managers combines the existing share planbusiness run within CIS with the employee plan businesses in the United States and UK. CPM offers a unique globally co-ordinated totalplan management service.
Document Services (CDS)
This service provides clients with the full benefits of our globalpresence. CDS’ employees in Australia, United States, Canada, andthe United Kingdom operate at the forefront of meeting clients’ needsby administering electronic document management to formulatecommunications solutions including laser printing, intelligent mailing,communication design, and electronic document delivery.
Analytics Services (CAS)
Computershare Analytics Services delivers a comprehensive range ofinvestor relations services including share ownership analysis, proxytargeting and solicitation, global peer company ownership, sharetrading analysis, investor relations contacts management databases,investor targeting, and investor relations consulting services to issuersin Australia, New Zealand, Europe, the United Kingdom, Ireland, SouthAfrica, Canada, and the United States.
PRODUCTS& SERVICES DEFINITIONS2.1
17
PRODUCTS
CUSTOMER
COSMOSTECHNOLOGY
SCRIPREGISTRY SYSTEM
CISINVESTORSERVICES
CPMPLAN
MANAGERS
CASANALYTICSSERVICES
CDSDOCUMENTSERVICES
INTEGRATEDSOLUTIONSPECIALIST
X-STREAM SMARTS CHAMP
INVESTOR CENTRE
ISSUER ONLINE
CUSTOMER
CUST
OMER
SERVICES
• INNOVATIVE TECHNOLOGY • SHAREHOLDER & EMPLOYEE RECORDS MANAGEMENT EXPERTISE • MARKET KNOWLEDGE & RELATIONSHIPS
2.2PRODUCTS & SERVICES OVERVIEW
WE ARE NOW WELL POSITIONED TO PROVIDE INTEGRATED SOLUTIONS TO
OUR CLIENTS AROUND THE WORLD
CORE SKILLS
18
TECHNOLOGYSERVICES(CTS)
WHAT WE OFFERTHE COMPUTERSHARE ADVANTAGE
INVESTORSERVICES(CIS)
DOCUMENTSERVICES(CDS)
PLANMANAGERS(CPM)
ANALYTICSSERVICES(CAS)
Global technology and infrastructuresupport for existing Computershareproprietary software, together with a full range of development services for new products.
Trained technology teams who understandthe business needs of our company clients and their shareholders. Skilled,mobile, and flexible teams located in theUK, United States, Australia, and Canada,plus technology/support staff in allbusinesses worldwide, providing full 24/7support.
Our product range encompasses registermaintenance, corporate actionsadministration, nominee services, sharedealing programmes, and customer contactmanagement. We are unique in that we arethe only global registry. Located in everymajor English-speaking country, we haveover 8,000 clients ranging from large multi-nationals to small private companies.
Unique products delivered by a dynamicteam, supported by world-leadingtechnology. Our global infrastructure allowsus to work on solutions 24 hours a day. Todate, we have driven the pace of change inevery country in which we operate – ourinternet products alone have changed theface of shareholder relations.
Creation and delivery of personalised mail,online communications and all varieties ofbilling through our global network ofdistribution centres. Expert development ofcommunication solutions for corporations toincrease the value of their relationship withcustomers, investors and employees,through software development, documentcomposition and targeted marketing.
Unsurpassed service levels delivered by a driven team,unique solutions founded on proprietary technology,world class 24/7 operations and a business thatharnesses intellectual property developed in eachregion for the benefit of clients globally. Our fullyintegrated investor communication products ensuresensitive shareholder information remains secure.Integrity is assured by a closed information loopencompassing data activation, reconciliation, printproduction and audit, standardised file structures,software protocols and rigorous procedures.
The only global provider who can co-ordinate and manage employee shareand option plan schemes. Our approachensures clients’ employee share plan (ESPP)objectives meet remuneration objectives,and operate for, and communicate to,employees efficiently. This value addedservice offering attracts a higher fee margin structure than the mainstreamregistry service.
We combine highly specialised andexperienced staff with leading software, as a fully integrated global service offering.The proprietary software is purpose-built for managing and communicating highlyvaluable share plan benefits to employees,and for capturing all necessary taxationinformation. Our leading contact centres inthree major time zones and web-basedinvestor centre mean 24/7 service – apowerful combination not easily replicated.
Global investor relations and marketintelligence services to issuers and othermarket participants. We help our clientsunderstand their shareholder base andinform them of trends in cross-borderportfolio investments.
Issuers, brokers, investment bankers, andretail investors are able to access shareownership and fund managementcompany/fund profiles on a global basis.Data is single-source and is available instandardised formats. No longer is itnecessary to piece together informationfrom each geographic market to obtain aglobal overview of shareholder bases andmarket activity.
ADELAIDE AUCKLAND BRISBANE BRISTOL CALGARY CHANNEL ISLANDS CHICAGO CLEVELAND DALLAS DENVER DUBLIN EDINBURGH EDMONTON HALIFAX HONG KONG
2.3 OUR OFFER AROUND THE WORLD
19
NEW JERSEY NEW YORK JOHANNESBURG LONDON LOS ANGELES MANILA MELBOURNE MONTREAL PERTH SYDNEY TORONTO VANCOUVER WINNIPEG
OPPORTUNITIES GROWTH OF SECTOR MARKET PENETRATION/POSITION
Continue to research and apply the latesttechnology to support existing and futuretrends in the global marketplace, whichreinforces our leadership position. Theproper application of that technology is asignificant point of difference comparedwith our competitors.
Computershare Technology Servicesprovides services into the Computersharegroup of companies. Its growth is largelydetermined by the needs of our globalbusinesses.
No.1 In terms of breadth, depth, andglobalisation of Computershare’stechnology.
As the world’s only global registrar, weexpect to benefit from the globalisation of the world’s largest corporations byproviding integrated solutions regardless of borders. Cost benefits are gained byspreading development costs across aworldwide network, allowing us to achieve technological superiority over our competitors.
The market is anticipating a quiet year forIPOs, but it is also expecting activity inmergers and acquisitions. The benefits of our global proposition and technicalsuperiority are increasingly understood byclients. We expect to attract a number ofsignificant clients from our competitors next year.
No.1 The largest and only global share registrar.
Technology innovations to be launched inOctober will position CDS as the leader indata centric customer communications,positioning our business to grow our clientbase through leading the market in value-added services. Continuing to distinguishourselves with superior service will deliveradditional business from current clients.
With our aggressive global acquisition path we expect to continue the stronggrowth of document services output for theInvestor Services business andcommunication with customers of relatedclients on a worldwide scale. Entering theNorth American market alone resulted in theannual production of 200 million additionaldocuments laser imaged, producedelectronically, and intelligently mailed.
No.1 Leader in service provision ofpersonalised laser printing, intelligentmailing and online communications, via a global distribution network.
Significant growth is available from thisunder-serviced market. Existing plans arepoorly serviced or coordinated badlythrough a range of different channels,leading to major companies increasinglylooking to outsource the management of their plans. Many other companies also find outsourcing preferable in theabsence of in-house resources. Taxationconcessions in Australia, UK and US arealso fuelling growth.
Concessions and tax incentives in theUnited States, UK, and Australia haveresulted in significant increases in employeeshare and option plans participation. Since1972, the number of United Statesemployees participating in ESPPs has grownfrom 250,000 to over eight million today.
No.1 Leading global provider for themanagement of Employee Plan Schemes.
The growing use of technology in investorcommunications creates opportunities to develop online products. Recentacquisitions of United Kingdom and UnitedStates companies providing online marketintelligence have given us a leading positionin that field.
Demand for our services continues to growaround the world, particularly ascorporations realise the benefits of localaccess to standardised global data.
No.1 Leading global provider of multi-marketissuer specific share ownership analysis.
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COMPUTERSHARE’S PRODUCTS & SERVICESComputershare’s primary competitive advantage is itsability to deliver the full range of technology, financial and investor services globally to companies and theirshareholders. This range of products and services is delivered through Computershare’s main business units:
Computershare Investor Services (CIS)
Computershare Plan Managers (CPM)
Computershare Document Services (CDS)
Computershare Analytics Services (CAS)
Foundation now established – the way forward
Over the last two years, Computershare has acquired andintegrated businesses to drive local and global synergiesand thus has achieved an impressive platform of productsand services that can be consistently offered across all ofour regions. Historically, each business unit hasdeveloped separate business relationships with theirclients based on their specific product requirements.
Going forward, in line with the new time zonemanagement structure, our revenue growth strategy willfurther focus on the development of a unique integratedservice solution for our clients. The implication of thiscross selling approach is that we will bring our globalexpertise across all product and services groups todevelop a one-provider solution for our clients that willseamlessly deliver maximum efficiency and flexibility of offering.
The diagram at right highlights how Computershare could typically interact with its clients during the courseof the year.
ONGOING
RECORD KEEPING SCRIP system for all shareholder details
COMMUNICATION • Movement analysis• Monthly statements • Contact Centre support
REGULAR/PERIODIC
INTERIM & FINAL RESULTS
INTERIM & FINAL DIVIDEND • Calculation & reconciliation
• Cheque production• Banking arrangements
HALF YEARLY & ANNUAL REPORTS Identify shareholders to receive
ANNUAL GENERAL MEETING • Proxy tabulation• Registration• Voting procedures
SPECIAL TRANSACTIONS
CAPITAL RAISING • Allotment of new issue• Update register with
new holders/new class• Banking of receipts
MERGER/TAKEOVER • Administration of offer(cash and shares)
• Update register• Contact Centre support
LAUNCH OF EMPLOYEE SHARE PLAN (ESPP)
INBOUND & OUTBOUND Administer throughTELEPHONE CAMPAIGNS National Contact Centre
SHARE BUYBACK • Register update• Arrange payment• Contact Centre support
INVESTOR ROADSHOWS
LAUNCH OF ADR PROGRAMME Co-ordinate through ComputershareTrust Company of New York
2.4THE INTEGRATED APPROACH
ACTIVITIES CIS
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2.4 THE INTEGRATED APPROACH
Fully integrated systems from record keeping to trade (web/IVR) to CDS
• Investor Centre Monthly • Personalised mailings to customers IRtrack (database • Issuer Online statements • Paper and Online billing & contact management• Shareholder • Design, program, print, intelligently system)
Communication mail process and despatch
Electronic delivery Mail results to shareholders Share ownershipof announcement analysis pre &to shareholders post results
Electronic delivery of Calculation & • Design, program, reconcile, print, dividend statements reconciliation audit, intelligently mail process and
despatch dividends and payments• Standard, corporate or tailored
dividends
Provide documents Mail reports to shareholderselectronically to shareholders
Online proxy AGM docs to • Standard or tailored proxy • Proxy solicitationvoting facility ESPP participants communications services
• Design proxy forms for voting on • Share ownership paper, via electronic data capture, analysisalso telephone and Online
• Program, print, intelligentlymail process and despatchshareholder invitations
• Online prospectus Mail prospectuses on behalf Share ownership analysisapplication of clients – weighting position
• Holder preferences – update on completionupdated electronically
Online acceptance Mail prospectuses • Takeover solicitationapplication services
• Share ownershipanalysis
• Design plan • Design, print and despatch grant awards,• Employee Communication plan member statements and all exercise
program and management correspondence• Ongoing administration • Standard communication products
Online Shareholderbroadcast
Online acceptance • Print and intelligently mail Progressive shareapplications application forms, designed ownership analysis
for electronic data capture• Mail prospectus
• Share ownershipanalysis
• Investor targeting(IRtrack)
CIS web-based services CPM CDS CAS
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3.0OUR
GLOBAL STRATEGY
ALIGNING OUR BUSINESS OBJECTIVES WITH SHAREHOLDER VALUE
EUROPE / NORTH AMERICA / ASIA PACIFIC
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EDINBURGH
LONDON
DUBLIN
BRISTOL
CHANNELISLANDS
JOHANNESBURGEUROPE3.1REVIEW OF OUR OPERATIONS IN UNITED KINGDOM, IRELAND AND SOUTH AFRICA
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REGIONAL REPORTS United Kingdom, Ireland, and South AfricaSome of the highlights in the region during the year include:
• The appointment of Iain Saville CBE as Managing DirectorUK/Europe
• Our joint venture with Deutsche Börse to provide registry–relatedservices to the German market
• Technology development of new products, improved operationalresilience and disaster recovery
• We strengthened our position in the UK registry market with 42%market share up from 36% the previous year and winning in excessof 50% of the IPOs during the year by value
• Growth in CPM business winning more FTSE 100 companyaccounts as well as our first global contract – BP’s employee shareplan and option plan administration worldwide
• Significant growth in non-registry revenue for CDS
• Ireland – won the register of First Active plc (largest register inIreland) and increased services to share dealing, trustee, and fundadministration services
• South Africa – Acquisition of Mercantile Registrars increasing registrymarket share to 90%. We launched CPM and were appointed toadminister the Telkom and other government employee schemes.
UNITED KINGDOMComputershare Investor Services (CIS)
BackgroundCIS United Kingdom has steadily grown its market share year on year.Since its acquisition from RBS Registrars in 1998, market share rosefrom 30% to 36% in June 2001. Market share at the end of this yearwas 42%.
The increase this year is a result of the successful implementation ofour organic growth strategy which focused on the launch of a marketawareness programme. This was complemented by a number ofregional conferences with consistent emphasis placed on personalcontact aimed largely at the existing client base as well as a numberof key prospects. We had good results from cross selling, andtargeted sales and marketing to key clients of competitors.
Significant Transactions During The YearDespite the significant decline in market activity since September 11,CIS successfully managed 123 corporate actions during the yearincluding:
• Friends Provident demutualisation
• Halifax and Bank of Scotland merger
• Barclays stock split
• HMV spin-off
• IPOs – responsible for 56% of the new capital raised in the market.
PrioritiesCritical to our on-going success in developing and marketing deeperand broader relationships with our clients will be the bringing togetherof new and existing non-core products that add value and aredelivered in a seamless integrated manner.
Primary areas are:
• Shareholder Relationship Management – retail shareholder analysis tools
• Electronic Shareholder Communication
• Shareholder Solutions
• Contact Centre – increased functionality of our contact centrecapabilities
• Dealing services provided to small shareholders and ESPP clients
• Computershare Document Services
• ADR Programme Services.
We are also developing a range of services to support companysecretaries.
Computershare Plan Managers (CPM)
BackgroundThe two main jurisdictions for employee share ownership in theregion are the United Kingdom and Continental Europe. We willcontinue to explore routes into France in the period ahead. There aremore than 2.5 million participants in employee share plans in the UK.
The table below shows the total number of plans approved sinceinception in 1979 to 2000.
Plan type Number of plans 1979 – 2000
Profit Sharing 2,334
Savings-Related Share Option Schemes 2,834
Company Share Option Plans 7,400
Major Events During the YearDuring the year we have been extremely successful in growing ourclient base in the high margin areas of Share Incentive Plans andExecutive Share Option Plans.
The Computershare brand is quickly becoming recognised in themarket for its leading-edge technology, full product range, globalcapability, and the ‘can do’ attitude of its staff.
Several high profile wins during the year included:
• BP (our first global employee share plan and option plan contract)
• Scottish and Newcastle
• Mmo2
• British American Tobacco
• National Grid
• Rolls-Royce
• Smith and Nephew.
All of the above companies are FTSE 100 companies, and all exceptRolls-Royce are registration clients of a competitor.
The MarketWe are benefiting from, and encouraging a trend for clients tooutsource the administration of share and (especially) option plans toa single provider.
It is estimated that approximately 12% of the adult populationparticipates in an employee share plan of one form or another. Thereis, therefore, significant growth potential for the UK market, especiallyin the high margin areas of Executive Option Plans and ShareIncentive Plans. This growth potential is underpinned by continuedGovernment support of employee share ownership through significanttax breaks for certain employee share plans.
3.1 EUROPE
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Europe also represents a major opportunity for CPM. Europe has apopulation of over 350 million and there is increasing interest in shareplans, especially with companies with international workforces. Theincreasing globalisation of companies also provides opportunities forCPM to leverage its global network and provide a total solution foremployee share plan management.
Computershare Document Services (CDS)
BackgroundCDS has a significant presence in the registry fulfilment market, andbenefits from the growth in other parts of the business. When thebusiness was set up three and a half years ago it was physicallyintegrated into the site at Bristol with the registry operations. Webenefit from this efficiency in servicing registry clients and continue toraise our profile in financial mailing more generally.
Major Events During the YearCDS achieved a record growth in revenue of 40% over the prior year.Some of the year’s highlights and new contracts include:
• Bristol and Wessex – billing over three million documents per year
• JP Morgan Fleming – documents for OEIC conversion EGMs,managed by CIS
• Friends Provident – three million images, one million mailpacks
• HBOS (Merger of Halifax and Bank of Scotland) – three millionmailpacks
• Equitable Life – five million images, five hundred thousandmailpacks.
The MarketThe reduction in registry activity and hence the reduction in mailingactivity due to market conditions increased our focus on revenuegeneration from the external/commercial side of the business. Weachieved outstanding success in this area with commercial salesrepresenting 24.5% of total sales, up 57% year on the prior year.
Many United Kingdom companies are reviewing in-house printoperations and are investigating lower-cost outsource solutions henceproviding CDS with business opportunities.
Priorities• Accomplish Total Print Management – one-stop shop from stock and
data through to print, mail, and dispatch
• Increase efficiency & economies of scale – double production floorspace and complete a 50% increase in cut sheet printing capacity
• Introduce colour print technology & expand design capabilities
• Implement of online bill presentment, bulk emailing, CD archive andretrieval, contact centre application and data mining
• Achieve ISO 9001 accreditation
Computershare Analytics Services (CAS)
BackgroundOur clients rely on CPU Analytics to analyse United Kingdom businessthrough our market-leading product, Citywatch. Since its acquisition in2000, CAS has maintained its position as market leader in theprovision of United Kingdom equity ownership information.
Our primary clients are members of the investment banking industry.Over the last year we have witnessed further consolidation in theindustry as well as high numbers of redundancies at these bankswhich has reduced our target audience.
PrioritiesThe CAS service delivery initiative is geared towards analysing everyglobal publicly traded equity. We envisage that this will lead toCitywatch Global selling global licenses to the major globalinvestment banks.
In addition we are also focused on marketing the extensive databasefunctionality to our corporate clients as an important investor relationstool to track and understand the composition of their investor base.
Computershare Technology Services (CTS)
BackgroundComputershare Technology Services works in tandem with each ofComputershare’s business units. Technological capability plays a vitalpart in gaining new business and expanding existing business. Wepride ourselves on providing a seamless integrated service with ourtechnological expertise providing the backbone to the products andservices suite.
New Products and Services Launched this YearNew products and services over the last twelve months include:
• Employee share plan developments
• SCRIP developments for United Kingdom corporate actions andemployee schemes
• CREST development
• Web-based enquiry package for clients using Issuer Online.
Technological developments and advancements over the yearcontributed to a general improvement in operational resilience anddisaster tolerance. Specific developments include:
• Improved resilience, speed and uptime with the introduction of thenew Open VMS mainframe processors
• Migration of data storage to a rapid access fibre-optic network –allows much faster access to large amounts of data across LANsand WANs.
Priorities• Interactive Voice Response (IVR) technology for call handling
capabilities in the United Kingdom contact centres
• Improved employee plan and option plan management softwarewith global functionality
• Enhancements to our existing imaging and workflow technology
• Ongoing web-based enhancements for issuers and their shareholders
• Internal service level agreements and closer logging of internalincident logging is about to be established
• Expansion of a staff education programme and the CTS graduatescheme.
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IRELANDBackgroundComputershare entered the Irish market in July 1998 by acquisition ofAIB and CMG National share registries representing 50% of theregistry market. Since then, further growth and the acquisition of theBank of Ireland share registry business means that market share hasgrown to 72%.
We have handled all major corporate transactions in the Irish market.In addition, we have been successful in winning new clients from ourcompetitors because of the quality of our service, our superiortechnology, and the wide range of products we bring to themarketplace. This was evident in winning First Active plc, now thelargest share register in Ireland.
We are market leaders in Traded Fund Administration and will beseeking to build on this. There are currently 2,500 funds listed on theIrish Stock Exchange and as market requirements grow for thesefunds to settle in CREST, Computershare is in a strong position toobtain a large slice of the market, particularly as we are fully regulatedand approved by the Central Bank of Ireland.
Computershare Market Share • Registry – 72%
• Employee Share Plans – 18%
• Exchange Traded Funds – 95%.
Major Events During the Year• We acted for both of the rival bidders for eircom plc, which was the
largest takeover in the history of the Irish stock market with a valueof 5 billion Euros
• We won the registration business of First Active plc, which has thelargest share register in Ireland of 160,000 shareholders
• We were also appointed administrators to the ESB (Electricity Board)to provide services for their Employee Share Option Plan (ESOP).This was the largest ESOP contract awarded in the past 12 months,with nearly 12,000 employees
• We have begun offering a range of services to the Irish marketincluding share dealing and trustee and fund administration services.
SOUTH AFRICABackgroundComputershare entered the South African market in 1998 when Old Mutual appointed Computershare Australia to carry out itsdemutualisation. The businesses of Consolidated Share Registrars(previously owned by Anglo American) and Optimum Registrars(previously owned by Rand Merchant Bank) were acquired to providethe necessary infrastructure. Computershare Investor Services Ltd had60% of the South African registry market (by market capitalisation)and employed 300 staff members to administer 1.2 millionshareholder accounts on behalf of 210 listed companies.
The introduction of STRATE (Share Transactions Totally Electronic) forced change in the custody and settlement functions of thoseJohannesburg Stock Exchange (JSE) Securities Exchange memberswho wished to have control of their clients’ assets. Computershareestablished Computershare Outsourcing in March 2001.
Computershare Outsourcing is an approved Custody and SettlementMember of the JSE Securities Exchange and acts as an agent inconducting back office functions for stockbrokers. Our client base hasgrown from three clients and R1,4 billion at 30 June 2001, to 12clients and R12,3 billion on 1 July 2002.
The MarketBusiness ConditionsConsistent with all other regions, market activity and volumessignificantly reduced in South Africa post-September 11. This saw thepostponement of the Telkom IPO as well as other merger andacquisition activity. Business conditions were also exacerbated by thedramatic fall in the rand against all major currencies in the latter partof the year, resulting in high inflation.
Important Regulatory ChangesThe South Africa Securities industry has undergone rapid change inthe past year. The majority of the STRATE Project was introducedbetween August 2001 and January 2002 causing job losses across the industry. In May of this year, the JSE introduced SETS, the LSEsTrading Platform to replace JET.
New Products• E-IPO was successfully launched as a joint venture between
Computershare and the JSE Securities Exchange of South Africa.The website offers companies an efficient cost-effective alternativedelivery mechanism for their prospectus and online application forshares by investors. The product was used in the flotation of SATRIX(Exchange Traded Funds)
• To ensure retention of the shareholder base, Issuer SponsoredNominee (ISN) was designed and implemented. Custodial Servicesprovided a vehicle for private shareholders to enter the electronicenvironment whilst retaining their names on register, or secure anongoing revenue stream. The ISN registers are maintained on theSCRIP system.
Major Events During the Year• Computershare successfully acquired the registry and custody
business of Mercantile Registrars Limited and Mercantile BankLimited, our biggest competitor, increasing registry market share toin excess of 90%. The acquisition also positioned ComputershareCustodial Services as the fourth-largest custodian in South Africa
• Effective 1 July 2002, Computershare Outsourcing provides servicesto 12 stockbrokers
• Computershare Plan Managers was launched with Telkom andcertain government employee schemes as launch clients.
Priorities• Migrate Mercantile registers to SCRIP
• Continue to aggressively market to obtain the business of dual listedregisters currently not within the group
• Leverage products and services offered by group companies
• Provide electronic shareholder services, which includes proxies andannual reports
• Introduce workflow which will eliminate the paper flow in thebusiness and enhance efficiencies
• Commence rollout of Analytics products in South Africa.
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MONTREALTORONTO
WINNIPEG
CLEVELANDCHICAGO
DENVER
LOS ANGELES
VANCOUVERCALGARY
EDMONTON
HALIFAX
NEW YORKNEW JERSEY
ROCKVILLE
DALLAS
NORTH AMERICA3.2REVIEW OF OUR ACTIVITIES IN THE UNITED STATES AND CANADA
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Our North American Region comprises operations in theUnited States and Canada.
UNITED STATES BackgroundInvestor Services (CIS)Our important entry into the United States market took place with theacquisition of the Harris Bank transfer agency (registry) in January 2000.
Part of the initial acquisition phase focused on the integration ofacquisitions into Computershare’s business base which includedstabilising back-end operations to ensure uninterrupted servicedelivery for certificate/dividend processing, client services, and thecontact centre.
Critical to retaining our initial market share position of 5% and buildingthe Computershare brand was the implementation of dedicatedcustomer relationship initiatives. Our success in this area has beenreflected in client retention and the establishment of strongrelationships with all clients including large corporations such asWalgreens, Agilent, and Texas Instruments.
Despite previously operating on a third party software system wehave grown our client base, adding 34 new clients including majorcompanies such as Harley Davidson and ADC Telecommunications,as well as a number of small- to mid-sized companies. With the SCRIPsystem now in place we are very excited about our futureopportunities.
Employee Stock Purchase Plans (ESPP)Another important area of growth for Computershare is the employeestock purchase plan (ESPP) and stock option plan (SOP) businesses.Our introduction in North America began with the acquisition of theHarris Bank United States ESPP business, gaining 1.3% market sharefor employee stock purchase plans and 0.6% market share of stockoption plans.
Later in 2000, we acquired the Merrill Lynch ESPP book of businessbringing our share of the United States ESPP business to 8% andincludes clients such as Walgreens and Roadway.
Analytics (CAS)Computershare’s Analytics business began through its acquisition ofFinancial Data Concepts, a strategic market intelligence companybased in Maryland in 2001. Since then, the following new initiativeshave been launched:
• IRtrack, a new global market intelligence and investor relations toolin October 2001; subscribed top clients such as ConsolidatedEdison and Canadian Natural Resources
• Continued data redistribution and/or private labelling work withcurrent clients including Microsoft Money, Multex, Shareholder.com,and Standard and Poor’s
• Intensified marketing of streetsight.net, another market intelligenceproduct, targeting firms involved in money management and capitalmarkets.
Document Services (CDS)As part of Computershare’s strategy in achieving economies of scale inits print and mail operations, a new facility was set up in Burr Ridge,Illinois, with advanced technology to commence operations. As a result,high volume print and mail jobs are undertaken for our employee plansand registry (transfer agent) clients. High profile transactions during theyear included:
• More than 800,000 plan statements for various employee planclients
• Over 180,000 customised proxy cards for the Compaq-HP mergerfor their critical annual meeting within a 48-hour turnaround
• Approximately 140,000 mailpacks for shareholders of JM Smuckerson the Procter and Gamble spin-off.
Approved ADR Depository Following approval from the United States Securities ExchangeCommission in July of this year, Computershare is now an approvedADR Depository. Earlier this year, development work on the ADRoffering had begun and was complemented by informal promotion ina pre-market launch. We have received a high degree of interest fromthe global marketplace and since receiving approval have added ournew ADR services to our client offering.
Market Trends OverviewThe events of September 11, and an outbreak of corporate accountingmalpractices and financial scandals have caused unprecedentedhavoc in the United States economy, propelling a sharp economicdownturn. This has severely hampered new business developmentefforts.
IPO activity has substantially reduced, and stock splits and mergersand acquisitions have been virtually non-existent due to a depressedstate of the stock market overall.
Regarding proxy administration, the SEC approved amendments tothe NYSE rules to reduce large issuers’ fees for street-name proxyadministration. The change lowers proxy unit fees by 20%.The approval supports Computershare’s push for an open market forthese services. Computershare was invited by the Securities andExchange Commission to make a presentation to them and otherindustry participants on this issue.
External activities connected with employee plans have presentedComputershare with business opportunities, for example, delayedFICA legislation is having a positive result on the employee planindustry. Furthermore, the Internal Revenue Service issued guidanceto impose taxes on the exercising of qualified ESPPs and statutoryISOs, as of 1 January, 2003.
Market trends indicate that 43% of companies outsource theadministration of their employee share plans, 14% of companiesexpect to increase the amount of stock in their employees’ totalcompensation packages, and that 12% of companies intend toincrease their use of ESPPs in the coming year.
Focus on Customer Relationship InitiativesOur outstanding success in developing customer relationships haslargely been attributed to introducing significant improvements inservice levels.
In order to address the key areas, we have sourced an independentconsulting firm to hold monthly shareholder satisfaction surveys topulse shareholder satisfaction and also instituted an internal qualityassurance programme focusing on critical processes to quicklyresolve shareholder concerns. Comparative results show dramaticincrease in satisfaction in just one year:
• Overall Service – 92%, up from 79% (industry average – 86%)
• Account Service – 92%, up from 79% (industry average – 86%)
• Certificate Service – 92%, up from 79% (industry average – 85%)
• Telephone Service – 86%, up from 80% (industry average – 81%).
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3.2 NORTH AMERICA
Our ongoing service level monitoring includes:
• A client advisory board comprising representatives from our clientbase to generate feedback on quality of services and give clientperspectives on company strategy and direction
• Focus groups on specific areas such as annual meeting procedures,investment plans, and employee plans, for example, to gain input onimproving service delivery
• Measuring issuer satisfaction via the independent industry surveys.
We are also pro-actively communicating with clients through our newclient magazine Insight and have realigned our clientservices/relationship management structure to place greater emphasison responsiveness to client needs and ensuring a better fit of staffcapabilities to fulfil client service requirements.
Significant Transactions in 2002 Investor Services (CIS)
We continued our focus on growing the business despite economicslowdown, and won 36 new clients taking our total number of clientsto 1,000.
Based on number of shareholder accounts, we currently have a 5%share of the United States stock transfer agent market.
Significant, high profile transactions during the year include:
• Partnership with Citibank Agency and Trust to provide securitiesprocessing and related services in handling global mergers andacquisitions, debt exchanges, and other types of reorganisationswhich started with the Nestle-Ralston-Purina acquisition
• HP-Compaq merger – provided reorganisation services, performedtransfer of shares, annual meeting and proxy voting services, andprint and document delivery services
• JM Smuckers (spin-off of Procter and Gamble brands Jif® and Crisco®)– performed spin off, dividend processing, and print and mail services.
Plan Managers (CPM)
Computershare continues to maintain 8% of the United States marketshare for ESPP and 0.6% for SOP. We signed 22 new share planclients bringing our total number of clients to 350. The majorachievement during the period was the successful conversion of allESPP clients from their existing system to the newly developedComputershare SCRIP system.
High profile transactions with new clients during the year include:
• Home Depot – ESPP
• BP Amoco (UK-based) – new option scheme software beingdeveloped.
Technology Enhancements for North America
By building on our business acumen in technology we haveenhanced capabilities with the completed migration of US clients toSCRIP and the commencement of our Canadian SCRIP migration.
• New telephony systems have been installed and have resulted inincreased shareholder satisfaction that has been reflectedthroughout our ratings. Features of the system include:
– Faster and more precise response to customer issues
– Less wait time for callers because of automated features (fasteraccess to account information and auto-enrolment features)
– Easier call flow even during peak hours
• Web and IVR (interactive voice recognition) capabilities have now beeninstalled for use by ESPP participants, giving them access to accountinformation and the ability to perform transactions at any time
• Workflow and electronic data capture technology have beenimplemented across all aspects of operations resulting in moreefficient work processes.
Priorities• Enhancement of SCRIP to the United States registry business
• Continued focus on service quality to issuers and shareholders
• Improved operational efficiency across the expanded NorthAmerican region
• Continuation of enhancing web capabilities
• Continued focus on quality by implementing service improvementsto achieve steady and high-level client and shareholder satisfactionin all aspects of the business
• Focus on gaining new business, and realigning sales, marketing andclient services
• Technology
– Revolutionise the Computershare website
– Further develop COSMOS, our stock option system and nextgeneration ESPP system.
Internally, priorities are to:
• Roll out the Employee Stock Purchase Plan to employees
• Launch full intranet for North America
• Develop and coordinate national focus groups to respond to globalopinion survey responses
• Develop different training functions to better support remote offices.
CANADABackgroundComputershare entered the Canadian transfer agency market in 2000when it acquired the Bank of Montreal’s stock transfer business aswell as the stock transfer business of Montreal Trust and AmericanSecurities Transfer and Trust.
Since its acquisition, Computershare Trust Company of Canada hasretained its dominant position in the market and currently has 62%market share. Market share of Employee Plans market is much morecompetitive with five major competitive groups participating in theCanadian marketplace.
We have always focused on client retention efforts and winning newtransfer agency business, and have set down foundations forimproved operational efficiency and the introduction of newtechnologies in 2002.
Recognition of the Computershare brand in the Canadian market isestablished and we continue to build on this. Our most recentcustomer relationship initiatives include:
• The introduction of monthly shareholder satisfaction surveys thattracked satisfaction ratings with measurable goals and targets
• Increased focus on operational efficiencies and improving delivery of services to issuers and investors.
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Significant Transactions During the YearThe critical success factors that have been a major feature of the highprofile contracts this year include:
• Key relationships with existing clients and market place advisors
• Reputation for technological expertise and ability to executecomplicated transactions
• Competitive pricing
• Integrated global offering.
Outlined below are some of the high profile corporate actions that wehave been involved with during the year:
• Canadian Pacific Limited Plan of Arrangement where CP Limited split into five different public companies, including Canadian PacificRailway, Canadian Pacific Ships, Fording Coal, Fairmont Hotels, and Pan Canadian Petroleums. We were selected to handle thereorganisation for four of the five new companies with the exceptionof Pan Canadian Petroleums. The deal was effective October 2001with 32,000 shareholders and a value of 17.0 billion CDN.
• Agricore merger with United Grain Growers. The date ofamalgamation was November 2001. Reorganisation fees plusrecurring annual income increased.
• Duke Energy Corporation Plan of Arrangement with WestcoastEnergy Ltd. It has a value of 8.5 billion CDN. The offer details are50% cash and 50% in either share of Duke Canada or Duke Energyat the option of the holder.
• Purchase of Centura Bank by Royal Bank of Canada (RBC). The effectivedate was June 2001 (not included in last year’s annual report) andincluded 17,000 shareholders with a value of 3.0 billion CDN.
• Boralex Power Income Fund IPO. The issue on the TSX was 25million units at $10 a unit, which was the cash value of the offeringthat took place on 21 February, 2002. This was one of the largestsingle transaction wins for the Montreal branch.
• Canada Mortgage Bonds. We were selected as Central Paying Agentand document custodian for the new bond programme. CanadaMortgage Bonds closed for a record-breaking $2.5 billion and totalpool issuances exceeded records by closing with 25 new NHA MBSpools totalling $2.7 billion.
Global Offering Contracts• Franco-Nevada plan of arrangement with Newmont Mining. This
deal was effective 15 February, 2002 and the 1,300 shareholders ofFranco-Nevada could elect to receive either 0.80 of exchangeableshares of Newmont or 0.80 of United States common stock ofNewmont Mining Corp. It was an international deal whereComputershare Canada was the transfer agency for Franco-Nevadaand Computershare Australia was the transfer agency for Normandy,which was taken over by Newmont.
• Canada Life’s NYSE listing requirement that they have a full servicetransfer agent in the United States and in Canada. We were able toprovide a unique solution due to our complementary businesscapabilities on both sides of the border. Computershare United Statesnow supports United States shareholders of Canada Life – asopposed to the traditional co-agency relationship. This allows CanadaLife to issue book entry positions in the United States and support adirect purchase programme if they choose.
The Market We have seen a general decline in the number of IPOs and mergers andacquisitions activity over the period. The number of IPOs in 2001 on theTSE was 97. At present, Computershare has a market share of 62.80%.
Shareholders continue to demand electronic solutions such as IVRand internet access. The internet is playing a key role in thedevelopment of services by industry players and their usage byclients. Flexibility, access 24/7, and user ease and convenience aremajor market drivers.
Important Legislative ChangesThe most significant regulatory change this past year was theapproval of National Instrument (NI) 54-101. Acceptance of NI 54-101provides transfer agencies with access to a select market of beneficialholders known as NOBOs (non-objecting beneficial owners). As aresult of this policy change, issuers will gain access to informationabout their NOBOs and have the ability to communicate with themdirectly. Starting in September 2002, issuers will be able to accessNOBO data for purposes other than the distribution of proxy-relatedmaterial. By September 2004 (or possibly earlier) issuers will be ableto deliver proxy-related material to NOBOs and then directly see theresults of their voting. This change puts the United States market in aunique position where similar legislation has not been approved.Computershare is working with the NYSE to introduce similar changesin the United States following Canada’s lead.
Other legislative changes include the introduction of a national policy governing the electronic distribution of proxy materials toshareholders and the ability for shareholders to vote electronically (e-voting and e-delivery were approved in Canada).
Direct share purchase plans, which allow individual investors topurchase stock directly from sponsoring companies without brokerintervention, have been approved in Ontario under Rule 32-501.However, DPPs have limited scope given that they are only available inOntario. We are meeting with other provincial securities commissionsto gain approval on a national basis.
Employee share plan outsourcing is on the rise. The reasons for thisare that prior to 2000, tax treatment was neutral and did not present aparticular advantage to offering share plans. Most Canadian provinceshave legislation providing substantial tax credits (up to 40%) forinvestment in employer stock. Several hundred companies have takenadvantage of this process.
Priorities • Expansion of our client service offering:
– Delivery of new services for corporate actions in the last quarter of 2002
– NOBO data made available for non-proxy related purposes,September 2002
– Electronic Proxy Voting through both the internet and InteractiveVoice Response (IVR) telephony
– NOBO data made available for proxy related purposes, bySeptember 2004
• Electronic Data Capture and workflow technology to be fullyimplemented across Canada
• Conversion of all Canadian accounts to SCRIP by March 2003 (Bank of Montreal book of business completed)
• Improved efficiency of Client Contact Centre to be now serviced byI3 telephony technology at new state-of-the-art facility in Montreal
• Pursue additional revenue opportunities from launch of CDS andAnalytics (IRtrack product)
• Promote increased functionality now offered through web-basedShareholder Communications.
31
HONG KONG
BRISBANE
SYDNEYPERTH
ADELAIDE
AUCKLANDMELBOURNE
ASIA PACIFIC3.3REVIEW OF OUR OPERATIONS IN AUSTRALIA,NEW ZEALAND AND HONG KONG
32
The Asia Pacific Region comprises Australia, New Zealand,and Hong Kong.
AUSTRALIAInvestor Services
BackgroundComputershare acquired its Australia investor services business in1997, at which point our market share was approximately 50%. Sincethen, we have amassed growth in our business, organically, and byacquisition. Today, Computershare manages 65% of the investorservices equities market, and a further 4% of the market is servicedby our bureau service.
Our success to date has been based on pricing, pro-activity, qualityservices, employee expertise, and innovative technology –fundamentals that underpin our business.
Performance this YearInitial public offerings were limited, however, takeover activity wassteady with Computershare handling the majority of these. Severalimportant takeovers were won as a result of our global presenceincluding Newmont’s takeover of Normandy, and Singtel’s takeover of Optus.
The acquisition of BT Registries was a key area of growth during theyear. The acquisition added approximately one million securityholderaccounts, including equity, fixed interest, and rental bond accounts.Since the acquisition of BT, over 98% of clients acquired signedcontracts with Computershare for ongoing registry services and 70%of BT Registries staff were incorporated into the business to ensurecontinuity of relationship management to existing clients.
Computershare welcomed several new clients during the year,including Leighton Holdings and Macquarie Airports. With theacquisition of BT Registries, we are now the biggest fixed interestservice provider in Australia, managing 100% of Australia’s centralborrowing authority businesses.
Whilst service-related issues in our Australian registry business didhamper our performance this year, these issues have now beenaddressed. Over the last few months there have been substantialchanges to senior management including new appointments forcontact centre and key operations roles. A change in the role ofRelationship Managers (RMs) was also instigated, shifting away froman operational role to a more client liaison and sales role to include allproducts and services within the group. We are very confident that wenow have a significantly strengthened management team in place andremain committed and determined to win major clients in Australia.
Products and ServicesProducts and services were continually enhanced during the year.Several significant product launches occurred, including the launch ofthe web-based product, Investor Centre, which allows investors toenquire and update their holding details maintained by Computershare.
Operating Efficiency Infrastructure
Infrastructure developments included the completion of the nextstage of Computershare’s workflow and Electronic Data Capturesystem, with infrastructure and software installed across all Australianoffices. Workflow and Electronic Data Capture significantly improveprocessing accuracy, provide managers with more control overprocessing resources, and improve our ability to store and retrievecorrespondence, resulting in better customer service. Anotherimportant infrastructure enhancement was the expansion andimprovement of our internal intranet facility.
Employee Share Plans
BackgroundComputershare acquired RPC Plan Managers in April 2001 and thebusiness continues to be the only provider of a combined shareregistry and plans outsource business, allowing us to provide the onlyfully outsourced ‘names on register’ plan management system.
Performance this YearThe business grew considerably during the year:
Clients rose by 40%, employees managed grew by 223%, and fundsunder management grew by 81%. We now have 75,000 employeeaccounts from both Australia and New Zealand, with 58 outsourcedclients in Australia and four outsourced clients in New Zealand.
Our recent wins of the plan management business of AMP and ANZillustrate this shift. Further enhancements to plan managementsystems and services continued throughout the year, strengtheningthe quality of our products.
Work on our global share option system, COSMOS Options,continues. The system will allow high level centralised administrationof global plans but will be flexible enough to cater for tax laws in eachtarget country, significantly increasing our competitive advantage.
Document Services
BackgroundComputershare established its Document Services business (CDS)when it acquired the print and mail distribution operations of Ci Ltd in 2000.
Major clients in Australia include:
IAG Insurance Royal Sun Alliance
Qantas Airways OneSteel
Woolworths Allianz Insurance
National Australia Bank Health Insurance Commission
AXA Asia Pacific Norwich Union
AGL Bendigo Bank
Performance this YearAs well as its vital role to service our client companies, CDS alsooffers commercial (non-registry) services. Despite the downturn incapital markets this year, which has affected our registry-related work,CDS has successfully grown the commercial side of its business.
CDS’ Australian revenue contribution was $49.2 million representing anincrease of 14% with an outstanding growth in EBITDA.
We remain optimistic that strong growth and profitability will continuein the CDS business through the expansion of our services andincreased focus on operating efficiencies.
Analytics
BackgroundComputershare Analytics was launched as a new business in early2001. This business specialises in share ownership analysis andrelated investor relations services.
Factors that have contributed to a growth in demand for shareanalysis services include:
• A local share market that experienced greater share price volatility
• Declining equity markets that caused takeover concerns for localcompanies
• A general perception that companies should understand their registers
3.3 ASIA PACIFIC
33
• Increased trends toward greater disclosure
• An increase in professional communications with investors
• An increase in the trend towards greater transparency.
Our growth has been achieved as a result of increasing marketawareness of our product as well as the development of additionalproducts and services. Our core register analysis product has alsobeen expanded to include multi-register analysis for dual listedcompanies such as BHP Billiton and Rio Tinto.
Performance this YearAnalytics services approximately 55% of the ASX Top 100 and hasexperienced growth of about 400% over the year. Exciting eventsinclude recent work for WMC, AMCOR, and Macquarie. Systemenhancements continued, in particular, we launched our new web-based global share ownership and contact management systemIRtrack earlier in the year, which has been received well by our clients.
Technology Enhancements
Computershare Technology Service’s Global Research andDevelopment centre is based in Australia. The expansion ofComputershare’s Registry operations to over nine countries hasresulted in the development of strategies aimed at providing globalservices to shareholders and issuers. The key to these strategies istwofold; to provide a registration system capable of operating acrossinternational boundaries, and to leverage off this information toprovide value added services to our customers. The developments inAustralia include internet functionality, our Cosmos suite of productsincluding Investor, Company Billing, and Cosmos Options, SCRIP,ESPP, Workflow, Electronic Data Capture, and Document Storage.
NEW ZEALANDWe continue to be the dominant provider of registry services in NewZealand. The bond registration market is growing considerably and ourNew Zealand registry business has enhanced its bond managementsystem to cater for increased demand. Using our compelling profileand strong industry relationships we expect to pick up much of thisnew business.
Structurally, the New Zealand stock exchange has recently indicatedits intentions to further develop local capital markets, includingintroducing dematerialised SCRIP into the market. These changesshould see increased activity in the market and with our SCRIP systemin place, Computershare is perfectly positioned to cater for increasesin the registry business.
Performance this YearMarket activity in New Zealand was generally better than expected.Our main growth was attributed to a significant increase in thenumber of bond issues by companies such as Tower, FernzCorporation, and Guinness Peat Group. Whilst the level of capitalraisings and takeovers were lower than previous years, our majorhighlights were the Frucor takeover by the Peat Group and theMontana takeover by Millstream.
Going forward, our primary focus is to renew efforts in servicecommitments and consistency of processes.
HONG KONGBackgroundThe Hong Kong business, acquired in 1999, is the dominant marketplayer with over 80% of the market. Our main competitors in the HongKong market are significantly smaller and continue to occupy the lowerend of the market while Computershare has an established reputationas a registry provider at the mid- to high-end of the industry. Sinceacquisition, the business has continued to be the first choice for large-scale capital raisings and registration services in Hong Kong.
From 1999 to 2001, the Hong Kong business won large quantities of capital raising business, including a large proportion of newtechnology stock listings such as HongKong.com, and we continue to manage these businesses. Profile, contacts, and strategicrelationships have been key factors in winning business. MTRCorporation, which added about 700,000 shareholders to our system,was one of the largest IPOs in the region in 2001. Our impressiveexecution of this transaction substantially boosted our reputation forcustomer service and technology expertise in the market.
Performance this YearIn April 2002, Computershare merged its existing registry operationswith the registry operations of Hong Kong Exchanges and Clearing(HKEx). The newly formed joint venture is owned 76% byComputershare and 24% by HKEx. This merger increased our marketshare to in excess of 80% further consolidating our dominance. Offurther strategic importance is the strengthening of our relationshipwith HKEx which has historically managed most of the registry-relatedbusiness coming out of mainland China.
Hong Kong capital markets experienced a significant downturn overthe year and this was reflected in lower levels of business activitygenerally. We carried out several corporate actions however, includingthe listing of Bank of China HK, the largest IPO in Asia this year, withnearly 400,000 new shareholders added to our registry system.
As evidence of our expanding relationships and leading position asthe global expert on market structures, we recently announced thatwe had been selected by the Chinese Government to evaluate andmake recommendations for the future clearing, settlement, andregistration system for China. Work began on this assignment inAugust 2002. In addition to the potential opportunities in China, thisconsulting assignment is strategically important for our Hong Kongbusiness as many mainland China companies are planning to list inHong Kong. Further, there are currently over 60 million securityholdersin the Chinese share market and we expect that this number willincrease during the short- to mid-term as Chinese companies’ demandfor capital remains at high levels.
With the May implementation of our SCRIP software, we are now in aposition to explore prospects for introducing employee share planmanagement and share ownership analysis services. We look forwardto being a major force in the growth in the industry as well asexploring more opportunities in other regions.
REGIONAL PRIORITIES • Refine the recently introduced regional structure
• Maximise cross selling opportunities locally and globally
• Continue to improve workflow and further control our resources
• Increase focus on customer service levels
• Improve the seamlessness of our systems between divisions
• Maintain competitive advantage in established markets
• Continue to implement cost-saving initiatives
• Continue to enhance our web-based products
• Introduce I3 Telephony which has IVR and better routing capabilities
• Realise the benefits of our investment in technology
• Develop global databases allowing clients to access globalownership and market intelligence
• Instigate business processes in line with the merger of the HongKong Registrars business
• Explore other Asian opportunities such as Korea, Taiwan, Japan,China, and Malaysia.
34
TONY WALESNon-Executive Director
PENELOPE MACLAGANExecutive Director
BOARD OF DIRECTORS
CHRIS MORRISChief Executive Officer
PETER GRIFFINDeputy Chairman
3.4
ALEXANDER STUART MURDOCH Chairman
PHILIP DeFEONon-Executive Director
IAIN SAVILLEExecutive Director
3.4 BOARD OF DIRECTORS
35
ALEXANDER (SANDY) STUARTMURDOCH DDA, BEC, ASA, ASIA
Chairman, age 61
Sandy Murdoch joined the Board ofComputershare as non-executive Chairmanwhen the company listed in 1994. Hisprevious experience included five years withmerchant bank Chase NBA Group Limited incorporate finance and lending, and 12 yearsas the Chief Executive Officer of LinfoxTransport Group. He is an active participant in senior executive meetings, and his wealthof knowledge and leadership skills are highly valued.
Sandy is also chairman of ERG Limited andQ-Vis Limited.
CHRISTOPHER JOHN MORRIS Chief Executive Officer, age 54
Chris Morris is a founding member ofComputershare and was appointed ChiefExecutive Officer in 1990. Chris’ extensiveknowledge of the securities industry and itsuser requirements from both a national andinternational perspective coupled with his passion and long-term strategic visionhave been instrumental in developingComputershare into the world’s largest andonly global share registrar and a leadingtechnology provider for the global securitiesindustry.
PETER JOHN GRIFFIN B.COMM (MELB), ASIA
Deputy Chairman, age 62
Peter Griffin joined the Board ofComputershare as non-executive DeputyChairman in 1994. Peter has over 35 years’investment banking experience, both as afounding partner of one of the seniorAustralian stockbroking firms and as ChiefExecutive of one of the leading investmentgroups in Australia. Peter is an active andinvolved member of the company, where heregularly attends and participates in seniorexecutive meetings. His background,experience and understanding ofinternational markets are highly valued both at board level and within the seniormanagement of Computershare.
Peter also serves on the Board of GrandHotel Company Ltd and is Director of the N M Rothschild Australia Holdings PtyLimited group of companies.
PENELOPE JANE MACLAGAN BSC (HONS),DIP. ED
Executive Director, age 50
Penny Maclagan joined Computershare in1983 and was appointed to the Board as anexecutive director in May 1995.
In her role as Managing Director ofComputershare Technology Services, Pennyis responsible for planning, developing andexecuting technology across the world insupport of our global strategy. Throughouther career with Computershare, Penny hasbeen involved with all aspects of technologysupport and development. Her detailedunderstanding of Computershare’sproprietary technology and of the globalsecurities industry and processinginfrastructure has greatly contributed to the establishment of Computershare’scompetitive advantage in the globalmarketplace.
ANTHONY NORMAN WALES FCA, FCIS
Non-Executive Director, age 58
Tony has been involved with Computersharesince 1981 and was appointed Executive(Finance) Director in 1990. On 30 September2001, Tony relinquished his executiveresponsibilities and remained on the Boardas a non-executive director.
During his time as Finance Director, Tony wasinstrumental in much of the strategicexpansion of the group.
Tony continues to be actively involved withthe company and regularly attends andparticipates in senior executive meetings andchairs the group’s Risk and Audit Committee.His background and understanding of thecompany and international markets arevalued highly by both the Board and seniormanagement.
NEW BOARD APPOINTMENTSDuring the year the Computershare Boardwas expanded with the appointment ofexecutive director, Iain Saville and non-executive director, Philip DeFeo.
Both appointments complement theexpertise of the existing Board and signifythat relationships leveraged to optimise ourpenetration in new markets are critical to thecompany’s international expansion progress.
IAIN DAVID SAVILLE D.Phil (Oxon), CBE
Executive Director, age 54
Dr Iain Saville CBE joined the Board ofComputershare in January 2002 as anexecutive director. In his role as ManagingDirector Europe, Iain is responsible forComputershare’s expansion into Europe aswell as the existing operations of UK, Irelandand South Africa.
Dr Saville is a recognised securities industryleader and director of the Securities Institute.During his distinguished career with the Bankof England he managed substantial portfoliosin the bond and money markets.
Dr Saville designed, built and (as ChiefExecutive) ran CREST, the new securitiessettlement system for the United Kingdomand Ireland, from 1993 until joiningComputershare. CREST is one of the world’slargest, safest and most technicallysophisticated systems in the world. It wasdelivered on time and to budget in 1996, andhas provided excellent service since delivery.
Dr Saville holds an honours degree inMathematical Physics from St Andrews and adoctorate from Magdalen College, Oxford.The Queen appointed him CBE in 1999.
PHILIP DANIEL DEFEO BA ECONOMICS (IONA, USA)
Non-Executive Director, age 56
Philip DeFeo joined the Board ofComputershare in May of this year as a non-executive director. Philip’s highly respectedreputation in the United States marketplaceand financial services industry, furtherstrengthens the company’s expansionefforts, particularly in North America.
Philip is currently Chairman and ChiefExecutive Officer of the California-basedPacific Exchange (PCX), one of the world’sleading derivatives markets and the country’smost innovative securities exchange.
Prior to to taking up his role at PCX, Philip was President and CEO of Van EckAssociates Corp., a diversified global mutual fund.
Some of Philip’s outstanding appointmentsduring his distinguished career includeExecutive Vice President and Director ofMarketing at Cedel International, the second-largest provider of Eurobond clearance andcustody services; Senior Vice President ofFMR Corporation (parent of FidelityInvestments); Managing Director forWorldwide Equities Operations and Systemsat Lehman Brothers.
He graduated with a BA degree in Economicsand International Finance from Iona Collegein the USA.
36
REGIONAL SENIORMANAGEMENT
3.5IAIN SAVILLEManaging Director – Europe, age 54
In his role as Managing Director Europe, Iainis responsible for Computershare’s expansioninto Europe as well as the existing operationsof UK, Ireland and South Africa.
Iain joined the Board of Computershare inJanuary 2002 and his biography appears onpage 35.
STUART CROSBYManaging Director – Asia Pacific, age 46
In his new role as Managing Director –Asia Pacific, Stuart is responsible forComputershare’s operations in Australia,New Zealand and Hong Kong.
Prior to his appointment to this newly createdposition, Stuart was head of Computershare’sstrategic business development incontinental Europe and Asia with primeresponsibility for negotiating andimplementing major contracts, alliances andacquisitions within the region. In this roleStuart demonstrated his extensive experienceand expertise. Of particular note this yearwas his key involvement in the negotiationsof our joint venture with Deutsche Börse,the merger with Hong Kong Exchanges andClearing, and the current consultingassignment for the Chinese Government.
Prior to joining Computershare in 1999, Stuart was ASX’s national head of listings (‘94 - ‘99), and was also actively involved inASX’s demutualisation and listing. Stuart hasalso worked in Hong Kong where he ran the Hong Kong-based Securities and FuturesCommission’s (SFC) intermediary licensingdivision and was a director of enforcement.
STEVEN ROTHBLOOMManaging Director – North America,age 47
In his new role as Managing Director –North America, Steven is responsible forComputershare’s operations in the UnitedStates and Canada.
Prior to his appointment to this newly createdposition, Steven was president ofComputershare Investor Services USA withdirect responsibility for the registry and stocktransfer businesses across all our UnitedStates offices as well as our United Statesemployee plan services and optionsbusiness.
Steven was part of the Executive Team thatcame across to Computershare following theHarris Bank acquisition in 2000. He joinedHarris in 1986 and after a series of seniorappointments, became Executive VicePresident in 1998.
Steven has more than 22 years of experiencein the securities industry, including 6 years inthe brokerage community with Merrill Lynch.He holds a BA from Queens College, NewYork, and an MBA in Financial Management(with distinction) from Pace University in New York. STEVEN ROTHBLOOM
IAIN SAVILLE
STUART CROSBY
The 2002 Concise Financial Report has been derived from Computershare Limited’s Financial Report 2002. The financial statements included inthe Concise Financial Report cannot be expected to provide as full an understanding of Computershare Limited’s performance, financial positionand financial and investing activities as provided by the Financial Report 2002.
1 All amounts within section 4 of this report are in Australian dollars unless otherwise stated.
CORPORATE GOVERNANCE STATEMENT DIRECTORS’ REPORT
STATEMENT OF FINANCIAL POSITIONSTATEMENT OF CASHFLOWS
NOTES TO THE FINANCIAL STATEMENTSAUDITOR’S REPORT
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR200228 AUGUST ANNOUNCEMENT OF RESULTS FOR THE COMPANY’S 2002 FINANCIAL YEAR12 SEPTEMBER BOOKS CLOSE FOR FINAL DIVIDEND 26 SEPTEMBER PAYMENT OF FINAL DIVIDEND 7 NOVEMBER ANNUAL GENERAL MEETING – MELBOURNE
20036 MARCH ANNOUNCEMENT OF RESULTS FOR THE HALF YEAR ENDING 31 DECEMBER 2002
4.0FINANCIALS
1
37
The Board of Directors of Computershare Limited is responsible for the corporate governance of the Computershare group. The Board ofDirectors is also responsible for setting the strategic direction of the Computershare group and ensuring it is effectively managed. The Boardkeeps its own processes under review with the aim to achieve global best practice in matters of corporate governance. To assist in theexecution of its responsibilities, the Board has established several Board committees and a framework for the management of theComputershare group.
THE BOARDThe Board is currently comprised of four non-executive directors and three executive directors ensuring independence and objectivity. The chairman is a non-executive director. Details of each current member of the Board and their respective shareholdings are set out in theDirectors’ Report.
BOARD COMMITTEESThe Board has created a number of committees including the nomination committee, the risk and audit committee and the remunerationcommittee.
It is the Board’s policy that committees dealing with corporate governance matters should be chaired by a non-executive director and have atleast a majority of members being non-executive directors. Any director or committee of the Board is entitled to obtain independentprofessional or other advice at the cost of the Company, unless the Board determines otherwise, and is entitled to obtain such resources andinformation from the Company, including direct access to employees of and advisers to the Company, as they may require.
NOMINATION COMMITTEEThe composition of the Board is reviewed at least annually by the nomination committee to ensure that the Board has the appropriate range ofexpertise and experience. Any selection of suitable candidates for the position of director must stand for election at the general meeting ofshareholders. The nomination committee is comprised of Sandy Murdoch, Peter Griffin, and Tony Wales.
RISK AND AUDIT COMMITTEEThe principal functions of the risk and audit committee include reviewing and making recommendations to the Board and assisting it in thedischarge of its responsibilities relating to accounting policy and disclosure. It is responsible for assessing the adequacy of accounting, financialand operating controls, reviewing the performance of external auditors and examining their evaluation of internal controls and management’sresponse.
The audit committee is chaired by Tony Wales and has two other members being Sandy Murdoch and Peter Griffin. The managing director, chieffinancial officer, and the Company’s external auditors are invited to risk and audit committee meetings at the discretion of the committee. Thecommittee meets at least twice each year.
REMUNERATION COMMITTEEThe Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the chief executiveofficer and the executive team.
The senior executive management of the Company comprising the founders and major shareholders, have specifically expressed the view thattheir remuneration should take some account of the significant equity holding they have in the Company. In this light, the remunerationcommittee has allowed remuneration for such personnel to be retained at a rate below market level and at a level that does not fully recognisetheir significant contribution to the Company.
As a policy, the Company seeks to remunerate staff in accordance with market conditions and reflective of their contribution. The Board is keento encourage equity holdings by employees to align staff interest with that of shareholders. Many staff have participated in the Company’svarious share and option plans and the directors believe this has been a significant contributing factor to the Company’s success.
ANNUAL REVIEWIn order to ensure that the Board continues to discharge its duties effectively the performance of all directors is reviewed at least annually bythe Chairman. The Board also annually reviews the performance of senior management.
38
CORPORATE GOVERNANCE STATEMENT
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
4.0 FINANCIALS
39
CONFLICTS OF INTEREST AND INDEPENDENT ADVICEIf there is a potential conflict of interest, conflicted directors must abstain from deliberations on such matters. Such directors are not permittedto exercise any influence over other board members nor receive relevant board papers.
Computershare permits directors to obtain advice about transactions or matters of concern at the Company’s cost. Approval of directorsseeking independent advice is subject to the approval of the Chairman.
ETHICAL STANDARDSThe Company recognises the need for directors and staff to observe the highest standard of behaviour and business ethics when engaging incorporate activity.
The Board has adopted a code of ethics that sets out the principles and standards with which all officers and employees are expected tocomply in the performance of their respective functions. A key element of that code is the requirement that officers and staff act in accordancewith the law and with the highest standards of propriety. The code and its implementation are to be reviewed each year. A copy of the code isavailable to shareholders upon request.
IDENTIFICATION AND MANAGEMENT OF SIGNIFICANT BUSINESS RISKThe Board and senior management work actively to identify significant areas of potential business and legal risk. The identification, monitoring,and management of significant risk to the Company are highlighted in the bi-annual business plan presented to the Board by the managingdirector. The Board reviews and approves the parameters under which such risks will be managed before adopting the business plan.
MARKET DISCLOSURE POLICYThe Board has approved a market disclosure policy to ensure the fair and timely disclosure of price sensitive information to the investmentcommunity. Computershare’s Company Secretary has been appointed the disclosure officer and as such is required to collate and whereappropriate disclose share price sensitive information.
CODE OF PRACTICE FOR BUYING AND SELLING COMPUTERSHARE SECURITIESThe freedom of directors and executives to deal in Computershare’s securities is restricted in a number of ways – by statute, by common law,and by the requirements of the listing rules of the ASX. In addition to these restrictions, the Company has adopted a code of practice for buyingand selling Computershare securities. The Code of Practice contains additional restrictions on dealing. The Code of Practice provides thatdirectors or executives may only deal in Computershare securities, after notifying the Chairman, in the four weeks immediately following theCompany’s half year and full year financial results announcements and, if relevant, any Annual General Meeting announcement.
EQUITY PARTICIPATION BY NON-EXECUTIVE DIRECTORSThe Board encourages non-executive directors to own shares in the Company.
SHAREHOLDER RELATIONSThe Board of Directors aims to ensure that shareholders are informed of all information necessary to assess the performance of the directors.Information is communicated to the shareholders through:
• The annual report which is distributed to all shareholders
• The annual general meeting and other meetings so called to obtain approval for board action as appropriate
• Making available all periodic financial reports and announcements of material developments on the Company’s website.
All shareholders who are unable to attend general meetings of the Company are encouraged to communicate issues or ask questions by writingto the Company.
The Board of Directors of Computershare Limited has pleasure in submitting its report in respect of the financial year ended 30 June 2002.
DIRECTORSThe names of the directors in office at the date of this report are:
A.S. Murdoch (Chairman)
C.J. Morris (Managing Director)
P.D. DeFeo
P.J. Griffin
P.J. Maclagan
I.D. Saville
A.N. Wales
The qualifications, experience and responsibilities of directors are outlined on pages 34-35 of the 2002 Concise Annual Report.
DIRECTORS’ INTERESTS At the date of this report, the direct and indirect interests of the directors in the shares of the Company are:
Name Number of options Number of Number of Reset Ordinary Shares Preference Shares
P.D. DeFeo – – –
P.J. Griffin – 2,000,000 –
P.J. Maclagan – 16,367,525 1,330
C.J. Morris – 54,635,042 –
A.S. Murdoch – 609,800 –
I.D. Saville – 100,000 –
A.N. Wales – 32,592,384 –
DIRECTORS’ MEETINGSThe number of meetings of the Board of Directors (and of Board committees) and the number of meetings attended by each of the directorsduring the financial year are:
Audit Nomination RemunerationDirectors’ Committee Committee CommitteeMeetings Meetings Meetings Meetings
A B A B A B A B
A.S. Murdoch 6 6 3 3 2 2 1 1
P.D. DeFeo – 1 – – – – – –
M.E. Elliott* 3 3 – – – – – –
P.J. Griffin 6 6 3 3 2 2 1 1
P.J. Maclagan 5 6 – – – – – –
C.J. Morris 5 6 1** – – – – –
I.D. Saville 1 1 – – – – – –
A.N. Wales 6 6 3 3 2 2 1 1
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
* M.E. Elliott is no longer a director and resigned on 8 November 2001
** Attended by invitation
40
DIRECTORS’ REPORT
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
PRINCIPAL ACTIVITIES The principal activities of the consolidated entity during the course of the financial year were the operation of computer technology services,operation of share registries, including the administration of employee share and option plans and the provision of software specialising inshare registry, financial and stock markets. In addition, the group also offers corporate trust services and acts as trustee for clients’ debtofferings in certain markets and provides share ownership and other investor relations services through its Analytics businesses and print andmail distribution services through its Document Services businesses.
Computershare is a registered securities transfer agent. In addition, certain subsidiaries are Trust companies whose charters include the powerto accept deposits, primarily acting as an escrow and paying agent on behalf of customers. In certain jurisdictions the group is subject toregulation by certain federal and state agencies and undergoes periodic examinations by those regulatory agencies.
There were no other significant changes in the nature of the activities of the consolidated entity during the year.
CONSOLIDATED PROFITThe consolidated profit of the consolidated entity for the financial year was $71,293,536 after income tax and outside equity interests.This represents an 84% improvement on the 2001 result of $38,734,474. Consolidated profit of the consolidated entity for the financial yearexcluding non-recurring items was $57,930,984 after income tax and outside equity interests. This represents a 5% improvement on the 2001results of $54,915,845. Profit before non-recurring items is determined as follows:
Consolidated2002 2001
$000s $000s
Net profit 71,293 38,734Exclusion of Write down investment in Etrade, net of tax – 20,244Exclusion of sale of SUMMIT, net of tax – (4,062)Exclusion of Hong Kong equity transaction (13,362) –
Net profit excluding non-recurring items (refer note 2b) 57,931 54,916
DIVIDENDSThe following dividends of the consolidated entity have been paid, declared or recommended since the end of the preceding financial year:
Ordinary Shares
• A final ordinary dividend of half a cent per share amounting to $2,745,651 fully franked at 30% in respect of the year ended 30 June 2001 waspaid on 28 September 2001
• An interim ordinary dividend of half a cent per share amounting to $2,766,217 fully franked at 30% in respect of the half year ended 31December 2001 was paid on 19 March 2002
• A final dividend recommended by the directors of the Company in respect of the year ended 30 June 2002, to be paid on 26 September 2002,is an ordinary dividend of two and a half cents per share amounting to $13,856,959 franked at 30%.
Reset Preference Shares
• A reset preference dividend of $2.8027 per share amounting to $4,204,040.17 franked at 30% in respect of the six months ended 30 May2002 was paid on 31 May 2002.
• A reset preference share dividend of 5.5% per annum amounting to $678,083 has been accrued in respect of the period 1 June 2002 to 30 June 2002.
REVIEW OF OPERATIONS The group has recorded an operating profit before tax and non-recurring items of $83.8 million for the year ended 30 June 2002 (2001: $90.9million). The result was achieved on revenue of $781.0 million (2001: $754.3 million). Before non-recurring items the group’s earnings beforeinterest, tax, depreciation and amortisation (EBITDA) decreased by 3% to $147.6 million (2001: $151.6 million). We are pleased to have met theforecast we outlined in February, particularly given the challenging conditions currently existing in the core registry business, which continues tobe affected by low interest rates and subdued corporate activity. The quality of our earnings remain high as evidenced by strong cash flowsfrom all businesses, an improved discipline across the group on cost containment and our continuing prudent approach of expensing softwaredevelopment which this year totalled $36 million.
The results for the year represent a significant achievement for the group given the volatility of financial markets and world economicconditions. These factors impacted the business through subdued corporate actions and lower margin income, although growth wasexperienced in non-registry businesses.
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4.0 FINANCIALS
Regionally, revenues and operating earnings (EBITDA) were relatively evenly spread between North America, Asia Pacific and Europe.
The North American business, which continues to be affected by 40 year-low interest rates, generated revenues of $305 million and EBITDA of $41.1 million during the year. A substantial reduction in corporate actions (mergers and acquisitions, initial public offerings and stock splits)resulted in reduced registry income, however, this was offset by a solid contribution from the Plan Managers business, particularly in the firsthalf of the year.
The Asia Pacific region contributed revenues of $237 million and EBITDA of $56.7 million, representing growth of 20% and 39% respectively.These improved results were generated by the acquisition of BT Registries in Australia and New Zealand and the joint venture with Hong KongExchanges and Clearing Ltd. The European region (including South Africa) contributed $237 million and $49.3 million respectively.
The results were impacted by a reduction in corporate actions, and lower interest rates affecting margin income in the registry business.
Operating margins remained strong at 19%, with Asia Pacific and Europe achieving 24% and 21% respectively and North America 13%.
Computershare Technology Services has been extremely active as it implements technology and infrastructure to support the expansion of theglobal registry network. For the year ended 30 June 2002 total technology expenses (including external bureau services) rose by 19% over thespend in the prior 2001 financial year. This increase in costs is a direct result of major projects such as: development and implementation of anESPP system for United States Plan Managers; development of a Global Options System; development and implementation of SCRIP in UnitedStates, Hong Kong and Canadian markets and set up of communications and data infrastructure for North America.
Other operational highlights include:
• Selected registrar for over 60% of new IPOs in Australia
• Increased market share in Hong Kong to in excess of 80% through the formation of a joint venture with Hong Kong Exchanges and ClearingLimited
• Became the sole provider of registry services in South Africa through our acquisition of Mercantile Registrars
• Our first entry into continental Europe through our joint venture with Deutsche Börse to provide registry-related services to the German market
• Appointed the share registrar for the Bank of China HK listing the largest IPO in Asia this year with nearly 400,000 shareholders
• Selected to advise the China Securities Depository and Clearing Corporation on the Chinese securities registration service
• Sale of the SMARTS Market Surveillance system to the Singapore Exchange and Monetary Authority
• Infrastructure rollout in North America completed
• United States SCRIP conversion 100% completed which now enables us to market registry to major companies
• Canada conversion to SCRIP remains on track for completion by end March 2003
• Merrill Lynch Employee Share Plan conversion complete
• Contract with BP to manage their employee share plan globally
• Involvement with an increasing number of major cross border transactions in Canada and the United States
• Substantial growth in commercial (non-registry) document services business worldwide.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the affairs of the consolidated entity during the financial year which are reported in the consolidated financialstatements were:
In September 2001, Computershare acquired BT Registries in Australia and New Zealand, adding approximately 1.0 million securityholderaccounts including equity, fixed interest and rental bond accounts.
In November 2001, Computershare announced the acquisition of the Mercantile Registrars business in South Africa which was successfullycompleted in April 2002. Computershare is now the sole provider of registry services in the South African market.
As part of Computershare’s capital management strategy to strengthen its balance sheet and diversify its equity funding base, the companyraised $150.0 million through the issue of $100 Reset Preference Shares. A preferential non-cumulative fully franked dividend of 5.5% perannum is fixed for the first five years and paid semi-annually in arrears in May and November. The Preference Shares have an ability to convertto ordinary shares at a 2.5% discount to the ordinary share price at the reset dates, with the first reset date being 30 November 2006.
In December 2001, it was announced that Computershare had taken a 49% interest in a newly formed joint venture with Deutsche Börse toprovide share registration and related services to the German equities market and at a later stage to the equities market in continental Europe.
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DIRECTORS’ REPORT (continued)
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
In May 2002, Computershare announced that it would re-organise its global management structure into three main operating regions of Europe(including UK, Ireland and South Africa), North America (United States and Canada) and Asia Pacific (Australia, New Zealand and Hong Kong). Allsenior appointments have been made and the new structure was in place prior to the end of this financial year.
In June 2002 Computershare merged its Hong Kong registry business with that of Hong Kong Exchanges and Clearing Limited. The jointventure is 76% owned by Computershare and currently has in excess of 80% market share. The aim of the joint venture is to provide shareregistry and related services to the Hong Kong market and to explore further opportunities in Asia, particularly in China.
New Appointments to the Board
• In December 2001, the Board appointed Iain Saville to the Board as an executive director. At the same time Iain was appointed to the newlycreated position of Managing Director – Europe, responsible for the operations and growth of the United Kingdom, continental Europe andSouth Africa. Iain’s appointment took the number of executive directors to three.
• In May 2002, Philip DeFeo was appointed to the Board as non-executive director. Phil is currently chairman of the California-based PacificExchange (PCX), one of the leading stock exchanges in the United States. Philip’s appointment takes the total number of non-executivedirectors to four.
In the opinion of the directors there were no other significant changes in the affairs of the consolidated entity during the financial year underreview that are not otherwise disclosed in this report or the consolidated accounts.
SIGNIFICANT EVENTS AFTER YEAR ENDNo matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidatedfinancial statements, that has significantly affected or may significantly affect the operations of the consolidated entity, the results of thoseoperations or the state of affairs of the consolidated entity in subsequent financial years, other than:
On 30 July 2002, Computershare announced that it had obtained approval from the United States Securities and Exchange Commission to bean ADR agent in the United States and that it intends to now market this service to its non-United States-based clients.
On 28 August 2002, Computershare announced that it had formed a strategic alliance with Citigroup Global Investments to focus on newopportunities and work together in North America and globally. As part of this agreement Citibank has been provided with an option over12,081,633 shares in Computershare at an exercise price of $1.83. As at 30 June 2002 no financial impact from this new strategic alliance hadbeen reflected in either the Statement of Financial Performance or the Statement of Financial Position.
On 28 August 2002, Computershare also announced that it would acquire up to 10 percent of its shares through an on-market buyback thatwould be funded by its existing facilities. The buyback commenced on 11 September 2002 and at the date of this report, 300,000 shares hadbeen purchased. The buy-back is in place for a six month period ending on 11 March 2003.
LIKELY DEVELOPMENTS AND FUTURE RESULTSThe Directors remain confident of the consolidated entity’s immediate future. Operationally, the Company is on track to have its proprietarysoftware, the SCRIP system, live in all three regions by the end of 2002. Following this Computershare will have a truly global registry modelwhich will be able to deliver efficiencies and benefits to the Company’s clients across the regions in which they operate.
The Company also expects the strong growth in its Employee Share Plan business to continue. This business, which currently represents 8% ofconsolidated revenue, has grown significantly over the last year.
Revenues and earnings growth will depend on the recovery of global equity markets, and in particular a higher level of corporate actions. Anyincrease in interest rates will also be revenue and earnings positive. The company will nevertheless remain vigilant in managing its cost baseefficiently given the uncertain outlook going forward to ensure it continues to deliver acceptable levels of operating earnings and margins.
The Company is confident that it will be able to pay a 5 cent per share fully franked dividend from the 2002/03 financial year onwards.
SHARE OPTIONSDetails of options granted to directors or relevant officers as part of their remuneration are set out in the section of this report headed Directors’and Officers’ Remuneration. Details of shares under option, or issued during or since the end of the financial year due to the exercise of anoption, are set out in Note 19 to the detailed financial report. The names of the employees who currently hold options are entered in theRegister of Options kept by the company pursuant to section 170 of the Corporations Act 2001. The register may be inspected free of charge.
DIRECTORS’ AND OFFICERS’ REMUNERATIONRemuneration of directors and senior executives of the Company is established by the Remuneration Committee. Remuneration is determinedas part of an annual performance review, having regard to market factors and a performance evaluation process. For executive directors andofficers, remuneration packages generally comprise salary and superannuation. Executives are also provided with longer-term incentivesthrough the employee share ownership and option schemes, which act to align the executives’ actions with the interests of the shareholders.
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4.0 FINANCIALS
The Board meets annually to review its own performance. The non-executive directors are responsible for evaluating the performance of theChief Executive, who in turn evaluates the performance of all other senior executives.
Details of remuneration provided to directors and the five most senior executive officers of the consolidated entity for the year ended 30 June 2002 are as follows:
Total Value of Total Other Excluding Options Including
Base Salary Director’s Fee Superannuation Bonus Benefits Options Granted 3 Options$ $ $ $ $ $ $ $
Directors
A.S. Murdoch – 115,000 11,500 – – 126,500 – 126,500
P.D. DeFeo – – – – – – – –
M.E. Elliott5 169,565 – 16,957 – – 186,522 – 186,522
P.J. Griffin – 100,000 10,000 – – 110,000 – 110,000
P.J. Maclagan 348,333 – 42,000 – 9,817 400,150 – 400,150
C.J. Morris 348,333 – 38,000 – – 386,333 – 386,333
I.D. Saville 138,351 – 27,670 – 329,4422 495,463 – 495,463
A.N. Wales1 83,750 75,000 15,875 – 204,4621 379,087 – 379,087
Officers4
S. Rothbloom 572,410 – 5,724 – – 578,134 320,000 898,134
R. Waterhouse 572,410 – – – – 572,410 320,000 892,410
E. Stockdale 517,986 – 18,938 28,943 – 565,867 271,080 836,947
S. Crosby 336,381 – 8,803 – 165,388 510,572 222,160 732,732
P. Conn 381,607 – – 79,204 – 460,811 64,000 524,811
1 A.N. Wales became a non-executive director on 1 October 2001. Other benefits paid to A.N. Wales relate primarily to the payment of unused annual and long service leave. 2 Other benefits paid to I.D. Saville relate to a grant of ordinary shares.3 Options have been valued as at the date of issue using the Black-Scholes option pricing model.4 The officers included in this disclosure are those executives having, during the year, the greatest authority for managing the Group. Other executives who have not had such
authority may have received remuneration at a level in excess of that shown for the executives named above.5 Resigned as director on 8 November 2001.
INDEMNIFICATION OF OFFICERS During the period, the Company paid an insurance premium to insure directors and officers of the Company and its controlled entities againstliability. The directors of the Company are as detailed earlier in the report and the contract also covers all executive officers and directors andexecutive officers of controlled entities.
Disclosure of the amount of insurance premium payable and a summary of the nature of liabilities covered by the insurance contract isprohibited by a confidentiality clause in the contract.
ROUNDING OF AMOUNTSThe parent entity is a company of the kind specified in the Australian Securities and Investments Commission class order 98/0100. Inaccordance with the class order, amounts in the consolidated financial statements and the Directors’ Report have been rounded to the nearestthousand dollars unless specifically stated to be otherwise.
Signed in accordance with a resolution of the directors.
A.S. MURDOCH C.J. MORRISChairman Chief Executive Officer
12 September 2002
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DIRECTORS’ REPORT (continued)
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
4.0 FINANCIALS
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2002
45
Consolidated Parent entityNote 2002 2001 2002 2001
$000s $000s $000s $000s
RevenuesSales revenue 2 757,055 731,262 – 2,135Other revenues from ordinary activities 2 23,911 23,056 84,735 29,703
Total revenue 2 780,966 754,318 84,735 31,838
ExpensesDirect services 536,972 525,922 – 3,159Technology services 79,850 60,888 – –Corporate services 15,097 12,128 15,446 20,688Depreciation and amortisation 2 55,130 46,318 1,151 2,257Borrowing costs 2 10,169 14,402 6,759 13,302Write down investment in E*Trade (“ETR”) 2(b) – 21,264 – 21,264Total expenses 697,218 680,922 23,356 60,670
Share of net profit of associates accounted for using the equity method – 2,383 – –
Profit/(Loss) from ordinary activities before income tax expense 83,748 75,779 61,379 (28,832)Income tax (expense)/benefit relating to ordinary activities 3 (25,995) (33,695) (2,823) 2,402
Net profit/(loss) 57,753 42,084 58,556 (26,430)Net (profit)/loss attributable to outside equity interests 2(b) 13,540 (3,350) – –
Net profit/(loss) attributable to members of the parent entity 4 71,293 38,734 58,556 (26,430)
Net exchange difference on translation of financialreport of self-sustaining foreign operations (24,365) 29,599 – –
Total revenues, expenses and valuation adjustments attributable to members of theparent entity recognised directly in equity (24,365) 29,599 – –
Total changes in equity other than those resulting from transactions with owners as owners 46,928 68,333 58,556 (26,430)
Basic earnings per share (cents per share) 5 12.0 7.2Normalised Basic earnings per share (cents per share) 5 9.6 10.2Diluted earnings per share (cents per share) 5 12.2 7.1Normalised Diluted earnings per share (cents per shares) 5 9.9 10.0
This statement should be read in conjunction with discussion and analysis included in the Directors’ Report.
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COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
STATEMENT OF FINANCIAL POSITIONFOR THE YEAR ENDED 30 JUNE 2002
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
CURRENT ASSETSCash assets 74,327 66,276 9,542 9,497Receivables 150,210 160,927 2,965 1,456Other financial assets 41,526 152 – –Inventories 3,355 5,218 – –Tax assets 1,731 – – –Other 11,092 11,507 862 1,445
Total Current Assets 282,241 244,080 13,369 12,398
NON-CURRENT ASSETSReceivables 595 709 348,309 389,366Other financial assets 7,543 8,096 311,551 210,637Property, plant and equipment 146,958 118,878 4,738 5,389Deferred tax assets 39,804 27,615 5,181 11,277Intangibles – goodwill 479,461 502,473 – –Other 3,114 2,143 285 344
Total Non-Current Assets 677,475 659,914 670,064 617,013
Total Assets 959,716 903,994 683,433 629,411
CURRENT LIABILITIESPayables 117,910 98,316 11,090 33,512Interest bearing liabilities 5,975 2,486 994 1,863Tax liabilities 19,825 38,442 114 3,592Other provisions 32,182 25,894 15,052 3,542Other 566 22,156 – –
Total Current Liabilities 176,458 187,294 27,250 42,509
NON-CURRENT LIABILITIESInterest bearing liabilities 102,824 230,130 108,994 228,419Deferred tax liabilities 17,206 6,699 538 3,139Other provisions 4,685 6,345 224 263Other 2,795 624 – –
Total Non-Current Liabilities 127,510 243,798 109,756 231,821
Total Liabilities 303,968 431,092 137,006 274,330
Net Assets 655,748 472,902 546,427 355,081
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4.0 FINANCIALS
Members of the Parent entity Outside Equity Interests2002 2001 2002 2001
$000s $000s $000s $000s
EQUITYContributed equity – ordinary shares 361,693 354,603 361,187 354,097Contributed equity – reset preference shares 147,205 – 147,205 –Reserves 6,414 30,778 545 545Retained profits 133,781 83,993 37,490 439
Parent entity interest (a) 649,093 469,374 546,427 355,081Outside equity interest (a) 6,655 3,528 – –
Total Equity 655,748 472,902 546,427 355,081
(a) Interest in the equity of the consolidated entity:Contributed equity – ordinary shares 361,693 354,603 5,862 –Contributed equity – reset preference shares 147,205 – – –Reserves 6,414 30,778 (1,028) (106)Retained profits 133,781 83,993 1,821 3,634
Total Interest in Equity 649,093 469,374 6,655 3,528
This statement should be read in conjunction with discussion and analysis included in the Directors’ Report.
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COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers 796,816 713,325 9,607 19,266Payments to suppliers and employees (654,645) (603,063) (16,041) (12,419)Dividends received 276 3,603 41,512 –Interest paid and other costs of finance (11,222) (13,598) (8,286) (13,056)Interest received 4,181 3,850 12,069 626Australian net GST (paid)/refunded (7,976) (5,541) 758 1,821Income taxes paid (48,076) (30,297) (2,476) (5,222)
Net operating cash flows 79,354 68,279 37,143 (8,984)
CASH FLOWS FROM INVESTING ACTIVITIESPurchase of controlled entities (12,496) (59,294) – –Purchase of businesses (17,945) (40,362) – –Investment in subsidiaries – – (99,776) (19,421)Investment in listed entities (1,128) (2,576) (1,137) (2,576)Investment in unlisted entities – (1,823) – –Payments for property, plant and equipment (56,886) (43,301) (492) (223)Security deposit on premises 1,200 (1,200) 1,200 (1,200)Loans granted to other entities 290 (264) – –Net loan repayments from/(grants to) controlled entities – – 57,877 (148,980)Loan repayments received – 23 1 ––Proceeds from sale of property, plant and equipment 646 1,994 1 3,159Proceeds from sale of property, plant and equipment to related entity – – 102 4Proceeds from sale of SUMMIT – 6,653 – –Proceeds from sale of investments 8,520 3,685 – –
Net investing cash flows (78,379) (136,465) (42,224) (169,237)
CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issues of ordinary shares 7,090 8,581 7,090 8,581Proceeds from issue of reset preference shares 150,000 – 150,000 –Costs of issue of reset preference shares (2,795) – (2,795) –Proceeds from borrowings 57,265 215,861 19,295 215,861Repayment of borrowings (176,000) (72,266) (158,000) (50,500)Loans from controlled entities – – – 1,107Dividends paid – ordinary shares (5,504) (5,406) (5,504) (5,406)Dividends paid – reset preference shares (4,204) – (4,204) –Repayment of finance leases (1,816) (2,630) (756) (1,140)Other – settlement of deferred acquisition (12,597) (59,822) – –Other – (518) – –
Net financing cash flows 11,439 83,800 5,126 168,503
Net increase/(decrease) in cash held 12,414 15,614 45 (9,718)Cash at the beginning of the financial year 65,453 47,533 9,497 19,215Exchange rate variations on foreign cash balances (3,540) 2,306 – –
Cash at the end of the financial year 74,327 65,453* 9,542 9,497
* Net of bank overdraft included in current liabilities.This statement should be read in conjunction with discussion and analysis included in the Directors’ Report.
STATEMENT OF CASHFLOWSFOR THE YEAR ENDED 30 JUNE 2002
4.0 FINANCIALS
49
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared as a general purpose financial report that complies with the requirements of the Corporations Act2001, Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and Urgent IssuesGroup Consensus Views. The accounting policies used are consistent with those adopted in the previous year. The financial statements havealso been prepared in accordance with the historical cost convention and do not take account of changes in either the general purchasingpower of the dollar or in the prices of specific assets except for certain assets that, where noted, are at valuation.
Principles of consolidation
The consolidated financial statements include the financial statements of the parent entity, Computershare Limited, and its controlled entities,referred to collectively throughout these financial statements as the “Consolidated entity”.
All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased.
Financial statements of foreign controlled entities presented in accordance with overseas accounting principles are, for consolidation purposes,adjusted to comply with group policy and generally accepted accounting principles in Australia.
Foreign currency transactions
Foreign currency transactions are converted to Australian dollars at exchange rates approximating those in effect at the date of eachtransaction. Amounts payable and receivable in foreign currencies at balance date are converted to Australian dollars at the average of the buyand sell rates available on the close of business at balance date. Revaluation gains and losses are brought to account as they occur. Thefinancial statements of all foreign operations are translated using the current rate method, as they are considered self-sustaining.
Exchange differences relating to monetary items are included in the Statement of Financial Performance, as exchange gains or losses, in theperiod when the exchange rates change. Where the exchange difference relates to hedging part of the net investment in a self-sustainingforeign operation the exchange difference is transferred to the foreign currency translation reserve on consolidation.
Income tax
The financial statements apply the principles of tax-effect accounting. The income tax expense in the Statement of Financial Performancerepresents tax on the pre-tax accounting profit adjusted for income and expenses never to be assessed or allowed for taxation purposes. Theprovision for deferred income tax liability and the future income tax benefit include the tax effect of differences between income and expenseitems recognised in different accounting periods for book and tax purposes, calculated at the tax rates expected to apply when the differencesreverse.
The benefit arising from estimated carry forward tax losses is recorded as a future income tax benefit only where realisation of such benefit isconsidered to be virtually certain. The benefit arising from timing differences is recorded as a future income tax benefit where realisation ofsuch benefit is beyond reasonable doubt.
No provision is made for withholding tax on unremitted earnings of applicable foreign incorporated controlled entities, as there is currently no intention to remit these earnings to the parent entity.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is assigned on a first-in first-out basis.
Prepaid inventory is recorded at cost and is bought on behalf of the Company’s clients. As the inventory is used, the costs are billed.
Recoverable amount of non-current assets
All non-current assets are reviewed at least annually to determine whether their carrying amounts require write down to recoverable amount.Recoverable amounts for all non-current assets are determined using net cash flows that have not been discounted to present values.
Property, plant and equipment
The amounts at which property, plant and equipment are stated in these financial statements are regularly reviewed. Where revaluations aremade they are based on reports by independent valuers.
The gain or loss on disposal of revalued assets is calculated as the difference between the carrying amount of the asset at the time of disposaland the proceeds on disposal and is included in the profit and loss of the consolidated entity in the year of disposal. Any related revaluationincrement in the asset revaluation reserve at the time of disposal is transferred to retained earnings.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2002
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COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation
Items of property, plant and equipment, excluding freehold land and leasehold plant and equipment, are depreciated on a straight line basis atrates calculated to allocate their cost or valuation, less estimated residual value, against revenue over their estimated useful life. Additions anddisposals are depreciated for the period held in the year of acquisition or disposal. Depreciation expense has been determined based on thefollowing rates of depreciation - Buildings (2.5% per annum), Plant and Equipment (10% to 50% per annum), Fixtures and Fittings (13% to 50%per annum) and Motor Vehicles (15% to 40% per annum).
Investments
Controlled entitiesThe investments in the controlled entities are carried in the Company’s financial statements at the lower of cost and recoverable amount.Dividends from controlled entities are brought to account in the Statement of Financial Performance when they are proposed by thecontrolled entities.
Associated entitiesInterests in material associated entities are brought to account using the equity method. Under this method the investment in associates isinitially recognised at its cost of acquisition and its carrying value is subsequently adjusted for increases or decreases in the investor’s share ofpost-acquisition results and reserves of the associate. The investment in associated entities is decreased by the amount of dividends receivedor receivable. Investments in associates are carried at the lower of cost and recoverable amount in the accounts of the parent entity.
Other financial assetsBroker client deposits and all other investments are carried in the accounts at the lower of cost or recoverable amount. Dividend income is brought to account when received.
Leases
Assets acquired under finance leases are capitalised and amortised over the life of the relevant lease, or where ownership is likely to beobtained on expiration of the lease, over the life of the asset. Lease payments are allocated between interest expense and reduction in thelease liability.
Operating lease assets are not capitalised and rental payments are charged as against operating profit in the period in which they are incurred.
Software development costs
Internally developed software and related costs are expensed in the year in which they are incurred.
Goodwill
On acquisition of a controlled entity, the difference between the purchase consideration plus incidental expenses and the fair value ofidentifiable net assets acquired is initially brought to account as goodwill or discount on acquisition.
In establishing the fair value of the identifiable net assets acquired, a liability for restructuring costs is only recognised at the date of acquisitionwhere there is a demonstrable commitment and a detailed plan. The liability is only recognised where there is little or no discretion to avoidpayments to other parties in settlement of costs of the restructuring and a reliable estimate of the amount of the liability as at the date ofacquisition can be made.
Revisions in the estimated amount of restructuring costs, which are recognised as a liability as at the date of acquisition, are accounted for byadjusting the amount of the liability and the amount of goodwill. These adjustments are made in the reporting period in which the revision inthe estimate occurs. Consequential adjustments to reflect the cumulative effect of revisions on the amount of amortisation of goodwill arerecognised in the Statement of Financial Performance in the reporting period in which the revision in estimate occurs.
Purchased goodwill is amortised on a straight-line basis over the period during which the benefits are expected to arise. These periods havebeen individually assessed on an entity-by-entity basis and vary between 5 to 20 years from the date of gaining control. The unamortisedbalance of goodwill is reviewed at each balance date and charged to profit and loss to the extent that applicable future benefits are no longer probable.
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
4.0 FINANCIALS
51
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee entitlements
Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave, long service leave, workers’compensation and vested sick leave. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave takenindicates that accumulated non-vesting sick leave will never be paid.
All on-costs, including payroll tax, workers’ compensation premiums and fringe benefits tax are included in the determination of provisions.Vested sick leave, annual leave and the current portion of long service leave are measured at their nominal amounts.
The non-current portion of the long service leave provision is measured at the present value of estimated future cash flows, discounted by theinterest rate applicable to Commonwealth Government securities maturing in the period the liability is expected to fall due. A 4% per annumrate of increase in employee wage and salary rates was assumed in the present value calculations.
Retirement benefitsContributory superannuation and pension plans exist to provide benefits for the consolidated entity’s employees and their dependants onretirement, disability or death. The plans are accumulation plans. The employee sponsors contribute to the plans at varying rates of contributiondepending on the employee classification. The contributions made to the funds by group entities are charged against profits.
Employee share and option ownership schemesCertain employees are entitled to participate in share and option ownership schemes. No remuneration expense is recognised in respectof employee shares and options issued.
Operating revenue
Sales revenueSales revenue comprises registry and bureau revenue, sale of software licences and associated development, installation and maintenance fees(net of returns, discounts and allowances) and document processing services.
Registry and bureau revenue includes all revenue earned on the provision of regular services to customers, primarily fixed monthly maintenancefees and transaction processing fees. Additionally, sales revenue includes all associated revenue earned from managing various client corporateactions, such as capital raisings, demutualisations and takeovers, which occur periodically. Revenue derived from both sources of sales revenueincludes variable margin income earned on administered funds, including Save As You Earn Schemes.
In relation to the recognition of any profits and losses on the corporate actions which span reporting periods, where they can be reliablymeasured, revenue and expenses arising from the project are recognised in the Statement of Financial Performance by reference to the stageof completion of the project as at balance date.
Software licence sales and associated development, installation and maintenance fees are recognised in accordance with written customeragreements so as to match revenue with expenses.
Document processing revenues include revenue from the provision of paper and electronic document needs for issuers, investors and manycorporations. This includes design, document composition and programming, through to various production and distribution methods.
Other revenueOther revenue includes interest income on short-term deposits controlled by the economic entity, royalties and dividends received from other persons.
Insurance recoveries
The consolidated entity recognises amounts receivable under its insurance policies, net of any relevant excess amounts, upon indemnity beingacknowledged by the insurers.
Financial instruments included in equity
Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders.
Reset preference shares earn a preferential non-cumulative dividend fixed for the first five years of 5.5% per annum.
Financial instruments included in liabilities
Loans are recognised when issued at the amount of the net proceeds received, with any premium or discount on issue amortised over theperiod to maturity. Interest is recognised as an expense on an effective yield basis.
52
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments included in assets
Trade debtorsTrade debtors are initially recorded at the amount of the contracted sale proceeds.
Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered less than likely. Any provision established is based on a review of all outstanding amounts at balance date.
Forward exchange contractsForward currency exchange contracts are initially recognised as either an asset or liability, at an amount equal to the premium or discount onthe forward currency exchange contracts. The assets and liabilities recognised are subsequently remeasured by reference to exchange rates at balance date. The gain or loss on remeasurement is brought to account in the Statement of Financial Performance unless the contracts areentered to hedge anticipated future transactions, in which case the gain or loss is deferred and included in the initial measurement of theanticipated item being hedged.
The premium or discount on the forward currency exchange contracts is amortised over the period of the contracts, unless the contracts areentered to hedge anticipated future transactions, in which case the premium or discount is included in the initial measurement of anticipateditems being hedged.
Bank deposits and loansBank deposits and loans are carried at cost. Interest revenue is recognised on an effective yield basis.
Other investmentsOther investments, including equity interests in non-subsidiary, non-associated corporations are included in investments at the lower of cost or recoverable amount. Dividend income is brought to account when received.
Hedge accounting
The economic entity applies the principles of hedge accounting as set out in the relevant Australian Accounting Standards and UIGpronouncements, using both interest rate and foreign currency swaps and options. To the extent that hedging instruments are required to bemarked to market and become ineffective as a hedge of the intended risk all gains and losses are recognised immediately in the Statement ofFinancial Performance.
Cash
For the purposes of the Statement of Cashflows, cash includes deposits at call with financial institutions and other highly liquid investmentswith short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net ofoutstanding bank overdrafts. Cash excludes Broker Client Deposits carried on the balance, that are recorded as other current financial assets.
Earnings per share
Diluted earnings per share in previous years adjusted the figures used in the determination of basic earnings per share by taking into accountearnings that would have arisen had the dilutive options been exercised during the financial year rather than adjusting the weighted averagenumber of shares to include potential ordinary shares assumed to have been issued for no consideration.
The change in the basis for calculating earnings per share was made to comply with AASB 1027 Earnings per Share, issued in June 2001. The earnings per share information for the year ended 30 June 2001 has been recalculated to present the comparative amounts on aconsistent basis with the current financial year.
Where material non-recurring items have impacted Net profit the group also discloses Normalised basic earnings per share and Normaliseddiluted earnings per share. These are calculated on the same basis as Basic earnings per share and Diluted earnings per share except that Netprofit has been adjusted to reverse the impact of any material non-recurring items (refer Note 5 for details).
4.0 FINANCIALS
53
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
2. OPERATING PROFITa) Profit from ordinary activities is after crediting the following revenues:
Sales revenueRendering of services 757,055 731,262 – 2,135
Other revenuesNet foreign exchange gains (refer also to Borrowing costs) 802 692 1,169 –Decrease in underwriting liability to controlled entity following novation of financial instruments – – 16,914 –Gain on other financial instruments 1,406 – 1,070 –Amortisation of discount on forward exchange contracts 1,485 – – –Dividends received from:– Other persons 278 214 – –– Controlled entity – – 41,512 –Interest received from:– Other persons 4,161 3,663 456 273– Controlled entities – – 13,189 15,473Rent received 1,947 4,598 – –License fees received from controlled entities – – 5,486 4,780Other fees received from controlled entities – – 4,772 5,993Gross proceeds from the sale of: – Property, plant and equipment 646 1,970 – 4– Investments 8,520 3,689 – –– SUMMIT (refer note 2(b)) – 6,653 – –– Non-current assets to controlled entities – – 102 3,159Other revenue items in total 4,666 1,577 65 21
Total other revenues 23,911 23,056 84,735 29,703
780,966 754,318 84,735 31,838
Total revenues 780,966 756,701 84,735 31,838
Profit from ordinary activities is after charging the following expenses:
Depreciation and amortisationDepreciation of property, plant and equipment 21,951 18,131 406 268Amortisation of:– Leased assets 1,115 1,295 618 967– Leasehold improvements 2,006 874 16 16– Establishment costs 67 5 – –– Premium on forward exchange contract – 1,006 – 1,006– Currency options 37 – 37 –Employee shares 85 – 74 –Goodwill 29,869 25,007 – –
Total depreciation and amortisation 55,130 46,318 1,151 2,257
54
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
2. OPERATING PROFIT (continued)Borrowing costsInterest paid:– to other persons 8,798 11,630 6,456 10,931– on finance leases 344 433 109 173– to controlled entities – – 315 43Exchange (gain)/loss on refinancing of foreign currency loans – 1,277 (853) 1,277Loan facility fees 1,027 1,062 732 878
Total borrowing costs 10,169 14,402 6,759 13,302
Other operating expense itemsOperating lease rentals (a) 27,973 19,373 2,897 2,633Provision for employee entitlements 3,212 4,360 330 265Net charge to/(Reduction in) provision for doubtful trade debts (242) 1,667 (604) –(Profit)/Loss on disposal of investments (1,889) (427) – –Expense from sale of:– Plant and equipment 641 1,630 – –– Plant and equipment to controlled entity – – 102 3,159– Investments 6,631 3,262 – –(Profit)/Loss on sale of property, plant and equipment (5) (340) – 4Net foreign exchange loss on hedges – – – 8,560Net foreign exchange loss on other financial instruments – 397 – 397
(a) Operating lease rentals includes contingent rentals of approximately $786,590.
b) Individually significant items
Revenues
During the year ended 30 June 2001 Computershare Technology Services Pty Limited sold the SUMMIT broker/client accounting system to WilcoInternational (a wholly owned subsidiary of Automatic Data Processing Inc.) for a net gain of $6,155,003 (after tax $4,062,324). Since the sale of SUMMIT to Wilco in February 2001, Computershare Limited has ceased to be a significant technology provider to E*Trade Australia Limited(“ETR”). As a consequence, the significance of the Computershare Limited shareholding in ETR has shifted from being strategic to passive.
Expenses
As at 30 June 2002, Computershare Limited held 11,504,513 shares being 11.84% of the issued capital of ETR. The results for the year ended30 June 2001 reflect a pre-tax write-down of $21,263,673 (after tax $20,243,673) following the directors’ evaluation of the investment at thatdate. No write-down was considered necessary in the year ended 30 June 2002.
In accordance with Australian Accounting Standards the write-down of the investment in ETR in 2001 was only partially tax effected. In theresults for the year ended 30 June 2001, the additional tax expense incurred by not fully tax effecting the write-down was $6,208,000.
Outside equity interest
On 1 June 2002 Computershare Group sold 7.32% of its interest in Computershare Hong Kong Investor Services Limited (‘CHIS’).
In addition, CHIS issued shares to a subsidiary of the Hong Kong Securities Clearing Company Limited (‘MPL’) equivalent to 18% of theexpanded CHIS share capital. These shares were issued in consideration for MPL transferring its interest in its Hong Kong registry operations toCHIS. As part of the above transactions, the terms and conditions of the shares held by the Computershare Group in CHIS were changed toprovide a preferential right to the extent of the retained profits in CHIS as at the transaction date. In accordance with AASB 1024 ConsolidatedAccounts, the movement in the parent entity’s share of net assets of CHIS (arising as a consequence of the issue of new shares in CHIS) hasbeen recorded in the Statement of Financial Performance as a loss to the outside equity interest.
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
4.0 FINANCIALS
55
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
3. INCOME TAXThe difference between income tax expense provided in the financial statements and the prima facie income tax expense is reconciled as follows:
Operating profit/(loss) 83,748 75,779 61,379 (28,832)
Prima facie income tax expense/(benefit) thereon at 30% (2001: at 34%) 25,125 25,765 18,414 (9,803)Tax effect of permanent differences:– Amortisation of goodwill not deductible 4,666 4,084 – –– Research and development allowance (1,548) (823) – –– Depreciation not deductible 538 311 6 7– Non deductible provisions 1,006 314 – –– Benefit of timing difference on ETR not booked – 6,208 – 6,208– Recoupment of tax losses not previously booked – (106) – –– Benefit of tax losses not brought to account 23 61 – –– Dividend from controlled entity – – (12,454) –– Other (781) 881 (212) 184Prior year tax (over)/under provided (2,086) (752) (2,931) 31Restatement of deferred tax balances due to income tax rate changes (572) 303 – 971Effect of different tax rates on overseas income:– Canada 1,819 1,784 – –– Other (2,195) (4,335) – –
Income tax expense/(benefit) on operating profit/(loss) 25,995 33,695 2,823 (2,402)
As at 30 June 2002, companies within the consolidated entity had estimated unconfirmed unrecouped income tax losses of $4,556,000(2001: $3,135,000) available to offset against future years’ taxable income. The benefit of these losses has not been brought to account asrealisation is not virtually certain. The benefit for these tax losses will only be obtained if:(a) the companies derive future assessable income of a nature and of an amount sufficient to enable the benefits from the deductions for the
losses to be realised;(b) the companies continue to comply with the conditions for deductibility imposed by tax legislation; and(c) no changes in the taxation legislation adversely affect the companies in realising the benefit from the deductions for the losses.
56
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Parent entity2002 2001 2002 2001
$000s $000s $000s $000s
4. RETAINED PROFITS AND DIVIDENDS
Retained profitsRetained profits at the beginning of the financial year 83,993 50,734 439 32,344Ordinary dividends provided for or paid (16,623) (5,475) (16,623) (5,475)Reset preference dividends provided for or paid (4,882) – (4,882) –Net profit/(loss) attributable to members of Computershare Limited 71,293 38,734 58,556 (26,430)
Retained profits at the end of the financial year 133,781 83,993 37,490 439
EquityTotal equity at the beginning of the financial year 472,902 386,001 355,081 360,405Total changes in equity recognised in the Statement of Financial Performance 46,928 68,333 58,556 (26,430)Transactions with owners as owners:
Contributed equity – ordinary shares 7,090 26,581 7,090 26,581Contributed equity – reset preference shares, net of costs of issue 147,205 – 147,205 –Dividends – ordinary shares (16,623) (5,475) (16,623) (5,475)Dividends – reset preference shares (4,882) – (4,882) –
Total changes in outside equity interests 3,128 (2,538) – –
Total equity at the reporting date 655,748 472,902 546,427 355,081
Dividends
OrdinaryDividends paid during the financial year in respect of the previous year – fully franked at 34% (2001: 36%) 2,746 2,688 2,746 2,688Dividends paid and proposed in respect of the current financial year – fully franked at 30% (2001: 34%) 16,623 5,475 16,623 5,475
Reset preferenceDividends paid and proposed in respect of the current financial year – fully franked at 30% 4,882 – 4,882 –
Franked dividendsThe franked dividends proposed as at 30 June 2002 will be franked out of existing franking.
Dividend franking accountFranking credits available for subsequent financial years based on a tax rate of 30% (2001: at 34%) 90,223 84,827 59,966 37,931
The above amounts represent the balance of the franking account as at the end of the financial year adjusted for:(a) franking credits that will arise from the payment of current tax liability(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date(d) franking credits that may be prevented from being distributed in subsequent financial years.
4.0 FINANCIALS
57
Calculation of Calculation of Calculation of Calculation ofBasic EPS Diluted EPS Normalised Normalised
Basic EPS Diluted EPS$000s $000s $000s $000s
5. EARNINGS PER SHARE
Year end 30 June 2002Earnings per share (cents per share) 12.0 cents 12.2 cents 9.6 cents 9.9 cents
Net profit 57,753 57,753 57,753 57,753Outside equity interest (profit)/loss 13,540 13,540 13,540 13,540Exclusion of Hong Kong equity transaction (refer Note 2(b)) – – (13,362) (13,362)Dividends on reset preference shares (4,882) – (4,882) –
Net profit 66,411 71,293 53,049 57,931
Weighted average number of ordinary shares used as denominator in calculating basic earnings per share 551,615,920 551,615,920
Weighted average number of ordinary and potential ordinary shares used as denominator in calculating diluted earnings per share 582,348,267 582,348,267
Year end 30 June 2001Earnings per share (cents per share) 7.2 cents 7.1 cents 10.2 cents 10.0 cents
Net profit 42,084 42,084 42,084 42,084Outside equity interest (profit)/loss (3,350) (3,350) (3,350) (3,350)Write-down investment in E*Trade, net of tax (refer Note 2(b)) – – 20,244 20,244Sale of SUMMIT system, net of tax (refer Note 2(b)) – (4,062) (4,062)
Net profit 38,734 38,734 54,916 54,916
Weighted average number of ordinary shares used as denominator in calculating basic earnings per share 540,565,426 540,565,426
Weighted average number of ordinary and potential ordinary shares used as denominator in calculating diluted earnings per share 548,905,414 548,905,414
58
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
6. SEGMENT INFORMATION The consolidated entity operates predominantly in six business segments: Investor services, Plan services, Document services, Analyticsservices, Corporate services and Technology services. The Investor services operations comprise provision of registry services. The Planservices operations comprise the provision and management of employee share plans. Document services operations comprise laser imaging,intelligent mailing, and scanning and electronic delivery. The Asia geographic segment includes Hong Kong and Philippines. Intersegmentalcharges are at normal commercial rates.
Primary Basis – Business Segments2002
Major business Analytics Corporate Document Investor Plan Technology Unallocated/ Consolidated
segments Services Services Services Services Services Services El iminations Total$000s $000s $000s $000s $000s $000s $000s $000s
RevenueExternal revenue 13,160 17,007 43,509 606,504 66,188 31,563 3,034 780,966Intersegmental revenue 50 56,407 44,887 2,129 8 83,839 (187,319) –
Total segment revenue 13,210 73,414 88,396 608,633 66,196 115,402 (184,285) 780,966
Segment resultProfit from ordinary– activities before income tax (1,412) (7,134) 6,421 88,864 (1,415) (7,192) 5,616 83,748Income tax expense (25,995)
Profit from ordinary – activities after income tax 57,753
Depreciation 96 1,816 3,056 8,138 188 15,209 (6,361) 22,142
Amortisation goodwill 966 – 852 23,562 3,007 1,482 – 29,869Other non-cash– expenses 11 (740) 639 1,623 91 10 – 1,634
LiabilitiesTotal segment liabilities 1,820 131,230 8,529 122,249 1,907 9,807 28,426 303,968
AssetsTotal segment assets 21,925 807,451 41,993 785,328 66,555 36,497 (800,033) 959,716
Segment assets acquired during the reporting period:Investments – 1,122 – 30,447 – – – 31,569Property, plant & equipment 51 15,103 4,314 20,441 2,977 14,000 – 56,886
Total 51 16,225 4,314 50,888 2,977 14,000 – 88,455
4.0 FINANCIALS
59
2001
Major business Analyt ics Corporate Document Investor Plan Technology Unallocated/ Consolidated
segments Services Services Services Services Services Services El iminations Total$000s $000s $000s $000s $000s $000s $000s $000s
RevenueExternal revenue 5,183 7,045 38,178 628,327 27,059 44,927 3,599 754,318Inter-segmental revenue – 39,101 28,151 1,268 – 46,212 (114,732) –
Total revenue 5,183 46,146 66,329 629,595 27,059 91,139 (111,133) 754,318Share of net profit of Associates – – – 2,383 – – – 2,383
Total segment revenue 5,183 46,146 66,329 631,978 27,059 91,139 (111,133) 756,701
Segment resultProfit from ordinary activities before income tax (987) (11,506) 5,513 76,272 (5,161) 6,954 4,694 75,779Income tax expense (33,695)
Profit from ordinary activities after income tax 42,084
Depreciation 56 1,359 2,040 10,991 95 9,789 (6,199) 18,131Amortisation goodwill 411 – 532 21,071 1,334 1,659 – 25,007Other non-cash expenses – 1,989 – 889 302 – – 3,180
LiabilitiesTotal segment liabilities 1,464 267,556 19,100 80,595 13,921 6,974 41,482 431,092
AssetsTotal segment assets 23,706 624,025 35,303 699,342 66,330 27,292 (572,004) 903,994
Segment assets acquired during the reporting period:Investments – 4,304 – 148 – – – 4,452Property, plant & equipment 129 4,901 1,416 31,650 – 5,205 – 43,301
Total 129 9,205 1,416 31,798 – 5,205 – 47,753
60
NOTES TO THE FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2002
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
6. SEGMENT INFORMATION (continued)
SECONDARY BASIS – Geographic Segments2002Major geographic United
segments Austral ia & South Kingdom Unallocated/ ConsolidatedAsia New Zealand Canada Africa & Ireland USA Eliminations Total
$000s $000s $000s $000s $000s $000s $000s $000s
RevenueExternal revenue 26,384 210,180 157,369 21,393 215,458 147,148 3,034 780,966
Segment resultProfit from ordinary activities before income tax 8,330 22,936 18,494 1,846 36,289 (9,762) 5,615 83,748
Income tax expense (25,995)
Profit from ordinary activities after income tax 57,753
AssetsTotal segment assets 90,202 912,119 257,832 29,334 181,250 289,012 (800,033) 959,716
Segment assets acquired during the reporting period:Investments 4 13,620 – 17,945 – – – 31,569Property, plant and equipment 163 8,575 12,470 10 20,073 15,595 – 56,886
Total 167 22,195 12,470 17,955 20,073 15,595 – 88,455
2001Major geographic United
segments Austral ia & South Kingdom Unallocated/ ConsolidatedAsia New Zealand Canada Africa & Ireland USA Eliminations Total
$000s $000s $000s $000s $000s $000s $000s $000s
RevenueExternal revenue 9,079 187,788 160,366 25,563 236,956 130,967 3,599 754,318
Segment result Profit from ordinary activities before income tax 4,645 (4,273) 21,586 2,884 62,681 (16,438) 4,694 75,779
Income tax expense (33,695)
Profit from ordinary activities after income tax 42,084
AssetsTotal segment assets 85,456 753,494 228,388 15,708 183,563 209,389 (572,004) 903,994
Segment assets acquired during the reporting period:Investments – 2,576 – 132 1,744 – – 4,452Property, plant and equipment 63 9,471 8,178 749 10,407 14,433 – 43,301
Total 63 12,047 8,178 881 12,151 14,433 – 47,753
4.0 FINANCIALS
61
Segment information is prepared in conformity with the accounting policies of the entity as disclosed in Note 1 and revised segment reportingaccounting standard, AASB 1005 Segment Reporting, which has been applied for the first time in the year ended 30 June 2002. The businesssegments identified in the primary and secondary reporting disclosures are not materially different to the industry and geographical segmentsidentified in the previous year. The comparative information has been restated to present the information on a consistent basis with the currentyear disclosures.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can beallocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash,receivables, inventories, property plant and equipment and goodwill and other intangible assets, net of related provisions. Corporate segmentassets also include financial assets. Segment liabilities consist primarily of trade and other creditors, employee entitlements and otherprovisions. Corporate segment liabilities also include borrowings. Segment assets and liabilities do not include income taxes.
7. SIGNIFICANT EVENTS OCCURRING AFTER REPORTING DATENo matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidatedfinancial statements that has significantly affected or may significantly affect the operations of the consolidated entity, the results of thoseoperations or the state of affairs of the consolidated entity in subsequent financial years, other than:
On 30 July 2002, Computershare announced that it had obtained approval from the United States Securities and Exchange Commission to bean ADR agent in the United States and that it intends to now market this service to its non-United States based clients.
On 28 August 2002, Computershare announced that it had formed a strategic alliance with Citigroup Global Investments to focus on newopportunities and work together in North America and globally. As part of this agreement Citibank has been provided with an option over12,081,633 shares in Computershare at an exercise price of $1.83. As at 30 June 2002 no financial impact from this new strategic alliance hadbeen reflected in either the Statement of Financial Performance or Statement of Financial Position.
On 28 August 2002, Computershare also announced that it would acquire up to 10% of its shares through an on-market buyback that would befunded by its existing facilities. The buyback commenced on 11 September 2002 and at the date of this Report, 300,000 shares had beenpurchased. The buyback is in place for a six-month period ending on 11 March 2003.
8. FULL FINANCIAL REPORTFurther financial information can be obtained from the full financial report, which is available from the Company, free of charge, on request. A copy may be requested by calling (03) 9235-5500. Alternatively, both the full financial report and the concise financial report can be accessedvia the internet at: www.computershare.com.
DIRECTORS’ DECLARATIONThe directors of Computershare Limited declare that in their opinion, the concise financial report of the consolidated entity for the year ended30 June 2002 as set out on pages 45 to 61 complies with Accounting Standard AASB 1039: Concise Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived from the full financial report for theyear ended 30 June 2002.
The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position andfinancing and investing activities of the consolidated entity as the full financial report, which as indicated in Note 8, is available on request.
This declaration is made in accordance with a resolution of the directors.
A.S. MURDOCH C. J. MORRISChairman Director
12 September 2002
AUDITOR’S REPORT
Liability is limited by the Accountant's Scheme under the Professional Standards Act 1994 (NSW)
PricewaterhouseCoopers
ABN 52 780 433 757
333 Collins Street
MELBOURNE VIC 3000
GPO Box 1331L
MELBOURNE VIC 3001
DX 77 Melbourne
Australia
www.pwcglobal.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
Independent audit report to the members of
Computershare Limited
Audit opinion
In our opinion, the concise financial report of Computershare Limited for the year ended 30 June 2002, set out on pages 45 to 61 complies
with Australian Accounting Standard AASB 1039: Concise Financial Reports.
This opinion must be read in conjunction with the following explanation of the scope and summary of our role as auditor.
Scope and summary of our role
The concise financial report – responsibility and content
The preparation and content of the concise financial report for the year ended 30 June 2002 are the responsibility of the directors of
Computershare Limited (the Company).
The auditor’s role and work
We conducted an independent audit of the concise financial report in order to express an opinion on it to the members of the Company. Our
role was to conduct the audit in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the concise
financial report is free of material misstatement.
We have also performed an independent audit of the full financial report of the Company for the financial year ended 30 June 2002. Our audit
report on the full financial report was signed on 12 September 2002, and was not subject to any qualification. Our audit did not involve an
analysis of the prudence of business decisions made by the directors or management.
In conducting the audit of the concise financial report, we carried out a number of procedures to assess whether in all material respects the
concise financial report is presented fairly in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.
The procedures included:
• testing that the information included in the concise financial report is consistent with the information in the full financial report
• selecting and examining evidence, on a test basis, as required by auditing standards, to support amounts, discussion and analysis, and
other disclosures in the concise financial report which were not directly derived from the full financial report. We did not examine every
item of available evidence
• reviewing the overall presentation of information in the concise financial report.
Our audit opinion was formed on the basis of these procedures.
Independence
As auditor, we are required to be independent of the Company and its controlled entities and free of interests which could be incompatible with
integrity and objectivity. In respect of this engagement, we followed the independence requirements set out by The Institute of Chartered
Accountants in Australia, the Corporations Act 2001 and the Auditing and Assurance Standards Board.
In addition to our statutory audit work, we were engaged to undertake other services for the Company and its controlled entities. In our opinion
the provision of these services has not impaired our independence.
PricewaterhouseCoopers
Russell Sutton Melbourne
Partner 12 September 2002
62
63
This section contains additional information required by the Australian Stock Exchange Limited listing rules not disclosed elsewhere in this report.
SHAREHOLDINGS
Substantial shareholders
The following information is extracted from the Company’s Register of Substantial Shareholders.
Date of notice Number of Number of resetName to Company ordinary shares preference shares
Credit Suisse First Boston Australia (Holdings) Limited and related bodies corporate 7 August 2002 56,409,115
Christopher John Morris 11 July 2002 54,635,042
Anthony Norman Wales 14 September 2000 32,592,384
National Australia Bank 5 June 2002 29,719,843
AMP Limited 5 September 2002 28,027,579
Schroder Investment Management 15 August 2002 27,957,165
Class of shares and voting rights
At 19 August 2002 there were 29,965 holders of ordinary shares in the Company. The voting rights attaching to the ordinary shares, set out inclause 50 of the Company’s Constitution, are:
“(a) every member may vote
(b) on a show of hands every member has one vote, and
(c) on a poll every member has:(i) for each fully paid share held by the member, one vote; and(ii) for each partly paid share held by the member, a fraction of a vote equivalent to the proportion which the amount paid up bears to the
total issue price of the share.”
At 19 August 2002 there were 4,030 holders of reset preference shares in the Company. The voting rights of reset preference share are onevote for each share, but voting rights are limited to matters affecting the rights of reset preference shareholders.
At 19 August 2002 there were 18,731,241 options over ordinary shares issued to eligible employees at the absolute discretion of the Board. The options are generally exercisable 3 years after the date granted or earlier in the case of the employee’s death or retirement.
Distribution of shareholders of shares as at 19 August 2002Ordinary shareholders Reset Preference
Size of holding shareholders
1 – 1,000 9,588 3,9231,001 – 5,000 14,315 85 5,001 – 10,000 3,308 3 10,001 and over 2,754 19
Total shareholders 29,965 4,030
There were 1200 shareholders holding less than a marketable parcel of 271 ordinary shares at 19 August 2002.There was 1 shareholder holding less than a marketable parcel of 5 preference shares at 19 August 2002.
SHAREHOLDER INFORMATION
64
COMPUTERSHARE LIMITED AND ITS CONTROLLED ENTITIES
Twenty largest shareholders of ordinary shares as at 19 August 2002Ordinary Shares
Number %
J P Morgan Nominees Australia Limited 67,668,224 12.21Finico Pty Limited 54,635,042 9.86Westpac Custodian Nominees Limited 46,458,646 8.38National Nominees Limited 34,367,713 6.20Welas Pty Limited 32,592,384 5.88MLC Limited 18,120,189 3.27P. J. Maclagan 16,370,525 2.95M. J. O’Halloran 13,536,529 2.44Citicorp Nominees Pty Limited 10,903,980 1.97AMP Life Limited 10,134,462 1.83Cogent Nominees Pty Ltd 5,821,406 1.05Cogent Nominees Pty Ltd (SMP accounts) 5,757,824 1.04Commonwealth Custodial Services Limited 5,273,737 0.95Australian Foundation Investment Company Limited 5,250,000 0.95Queensland Investment Corporation 4,563,664 0.82RBC Global Services Australia Nominees Pty Limited 3,947,039 0.71ANZ Nominees Limited 3,594,794 0.65Mr Gary Leslie Ryan 3,169,732 0.57Mr Mark Edward Elliott 2,750,000 0.50Government Superannuation Office 2,382,069 0.43
Total 347,297,959 62.66
Twenty largest shareholders of reset preference shares as at 19 August 2002Reset Preference Shares
Number %
Australian Foundation Investment Company Limited 174,602 11.64ARGO Investments Limited 72,594 4.84Djerriwarrh Investments Limited 67,000 4.47Share Direct Nominees Pty Ltd 50,660 3.38Bond Street Custodians Limited 29,500 1.97JB Were Capital Markets Limited 28,896 1.93Tower Trust Limited 17,138 1.14Equity Trustees Limited 16,000 1.07Permanent Trustee Company Limited 15,382 1.03J P Morgan Nominees Australia Limited 14,411 0.96Warana Grange Pty Ltd 13,400 0.89Bond Street Custodians Limited 13,150 0.88Mirrabooka Investments Limited 13,000 0.87Sandhurst Trustees Ltd 12,800 0.85Westpac Financial Services Limited 12,500 0.83Permanent Trustee Australia Limited 10,822 0.72UBS Warburg Private Clients Nominees Pty Ltd 10,800 0.72Permanent Trustee Company Limited 10,550 0.70Mr Gerald Harvey 10,500 0.70Westpac Custodian Nominees Limited 9,109 0.61
Total 602,814 40.20
SHAREHOLDER INFORMATION (continued)
65
ADR American Depository Receipts – a method for investors to enter American financial markets
ASX Australian Stock Exchange
CAS Computershare Analytics Services
CDS Computershare Document Services
CHAMP Connects Australian broking and institutional clients to the Australian Stock Exchange’s CHESSsettlement system
CIS Computershare Investor Services
COSMOS Computershare’s proprietary system that forms the basis of all products
CPM Computershare Plan Managers
CTS Computershare Technology Services
DPP Direct share purchase plan
EDC Electronic Data Capture
EPV Electronic Proxy Voting
ESPP Employee Stock Purchase Plan
HKEx Hong Kong Exchanges and Clearing
Investor Online A web-based service for shareholders to obtain a range of personal shareholding information from theshare register
IPO Initial Product Offering
IRtrack A web-delivered solution for investor relations professionals allowing them to access the most accurateshareholder and market intelligence information available
Issuer Online A web-based service for companies to explore their own share register
IVR Interactive Voice Recognition
JSE Johannesburg Stock Exchange
KPI Key Performance Indicator
NI National Instrument
NOBO Non-objecting beneficial owner
ORMS Order Routing Management System – allows brokers and fund managers to manage and route orders tomultiple markets from a single workstation
Registry See share registry
SCRIP Computershare’s software system that supports the management of company share registers
Share Registry The generic term used to describe the management of a public company share register in Australia,New Zealand and the United Kingdom
SMARTS Securities Markets Automated Research Training and Surveillance – a system that alerts authorities toimproprieties and assists in ensuring a fair and efficient market
STRATE Share Transactions Totally Electronic
TFA Traded Fund Administration
Transfer Agent The generic term used to describe the management of a public company share register in Canada andthe United States of America
Transfer Secretary The generic term used to describe the management of a public company share register in South Africa
X-STREAM (Formerly ASTS) a trading system for global and securities exchanges
GLOSSARY
66
AUSTRALIA
MelbourneCorporate Office
COMPUTERSHARE LIMITED18-62 Trenerry CrescentAbbotsford Victoria 3067AustraliaPO Box 103 Abbotsford Victoria 3067AustraliaTelephone 61 3 9235 5500 Facsimile 61 3 9235 5600www.computershare.com
CIS – Melbourne
COMPUTERSHARE INVESTORSERVICES PTY LIMITEDLevel 12/565 Bourke Street Melbourne Victoria 3000 AustraliaGPO Box 2975EE Melbourne Victoria 3001 AustraliaTelephone 61 3 9611 5711 Facsimile 61 3 9611 5710Investor enquiries 1300 850 505 (for usewithin Australia only)www.computershare.com
Sydney
COMPUTERSHARE INVESTORSERVICES PTY LIMITED Level 3/60 Carrington StreetSydney New South Wales 2000AustraliaGPO Box 7045 Sydney New South Wales 1115AustraliaTelephone 61 2 8234 5000 Facsimile 61 2 8234 5050Investor enquiries 1300 855 080 (for usewithin Australia only)www.computershare.com
Perth
COMPUTERSHARE INVESTORSERVICES PTY LIMITEDLevel 2 Reserve Bank Building 45 St George’s TerracePerth Western Australia 6000AustraliaGPO Box D182Perth Western Australia 6840AustraliaTelephone 61 8 9323 2000Facsimile 61 8 9323 2033Investor enquiries 1300 557 010 (for usewithin Australia only)www.computershare.com
Adelaide
COMPUTERSHARE INVESTORSERVICES PTY LIMITEDLevel 5/115 Grenfell Street Adelaide South Australia 5000AustraliaGPO Box 1903Adelaide South Australia 5001AustraliaTelephone 61 8 8236 2300Facsimile 61 8 8236 2305Investor enquiries 1300 556 161 (for usewithin Australia only)www.computershare.com
Brisbane
COMPUTERSHARE INVESTORSERVICES PTY LIMITEDLevel 27 Central Plaza One 345 Queen Street Brisbane Queensland 4000AustraliaGPO Box 523Brisbane Queensland 4001AustraliaTelephone 61 7 3237 2100 Facsimile 61 7 3229 9860Investor enquiries 1300 552 270 (for usewithin Australia only)www.computershare.com
CTS – Sydney
COMPUTERSHARETECHNOLOGY SERVICES PTYLIMITEDLevel 5/60 Carrington Street Sydney New South Wales 2000AustraliaTelephone 61 2 8234 5400Facsimile 61 2 8234 5455
CAS – Sydney
COMPUTERSHARE ANALYTICSPTY LIMITEDLevel 4/60 Carrington StreetSydney New South Wales 2000AustraliaTelephone 61 2 8234 5000Facsimile 61 2 8234 5450
CPM – Sydney
COMPUTERSHARE PLANMANAGERS PTY LIMITEDLevel 3/60 Carrington StreetSydney New South Wales 2000AustraliaGPO Box 1501Sydney New South Wales 2001AustraliaTelephone 61 2 8234 5000Facsimile 61 2 8235 8208
CHANNEL ISLANDS
Jersey
COMPUTERSHARE INVESTORSERVICES (CHANNEL ISLANDS)LIMITEDPO Box 83 Ordnance House 31 Pier Road St Helier Jersey JE4 8PWChannel IslandsTelephone 44 1534 825 200Facsimile 44 1534 825 250 [email protected]
CANADA Toronto
COMPUTERSHARE TRUSTCOMPANY OF CANADA 11th Floor 100 University AvenueToronto Ontario M5J 2Y1Telephone 1 416 263 9200Facsimile 1 416 263-9261
Calgary
COMPUTERSHARE TRUSTCOMPANY OF CANADA Suite 600, 530 8th Avenue SWCalgary Alberta T2P 3S8 Telephone 1 403 267 6800Facsimile 1 403 267 6529
Edmonton
COMPUTERSHARE TRUSTCOMPANY OF CANADA 970Canadian Western Bank Place10303 Jasper Avenue Edmonton Alberta T5J 3N6 Telephone 1 780 448 7598Facsimile 1 780 426 4032
Halifax
COMPUTERSHARE TRUSTCOMPANY OF CANADA Suite 501,1465 Brenton StreetPost Office Box 36012 Halifax Nova Scotia B3J 3S9 Telephone 1 902 420 3553Facsimile 1 902 420 2764
Montreal
COMPUTERSHARE TRUSTCOMPANY OF CANADA Suite 700, 1500 University StreetMontreal Quebec H3A 3S8Telephone 1 514 982 7888Facsimile 1 514 982 7635
OFFICE LOCATIONS
OFFICE LOCATIONS
67
Vancouver
COMPUTERSHARE TRUSTCOMPANY OF CANADA 2nd Floor, 510 Burrard StreetVancouver British Columbia V6C 3B9 Telephone 1 604 661 9400Facsimile 1 604 669 1548
Winnipeg
COMPUTERSHARE TRUSTCOMPANY OF CANADA 1190-201 Portage AvenueWinnipeg Manitoba R3B 3K6 Telephone 1 204 940 4600Facsimile 1 204 940 4608
HONG KONG COMPUTERSHARE HONG KONGINVESTOR SERVICES LIMITED Rooms 1901-5, 19th floorHopewell Centre 183 Queen’s Road East, Hong Kong Telephone 852 2862 8628Facsimile 852 2865 0990852 2529 6087, 852 2865 [email protected]
IRELANDDublin
COMPUTERSHARE INVESTORSERVICES (IRELAND) LIMITEDHeron House Corrig RoadSandyford Industrial EstateDublin 18 IrelandTelephone 353 1216 3100Facsimile 353 1216 [email protected]
NEW ZEALAND
Auckland
COMPUTERSHARE INVESTORSERVICES LIMITED Level 2/159 Hurstmere RoadTakapuna North Shore CityPrivate Bag 92119 Auckland 1020 Telephone 64 9 488 8700Facsimile 64 9 488 8787Investor enquiries 64 9 488 8777
SOUTH AFRICAJohannesburg
COMPUTERSHARE INVESTORSERVICES LIMITED 70 Marshall Street Johannesburg 2001 PO Box 61051 MarshalltownJohannesburg 2001 Telephone 27 11 370 7865Facsimile 27 11 370 7702Email [email protected]
COMPUTERSHARE CUSTODIALSERVICES70 Marshall Street Johannesburg2001 PO Box 62051Marshalltown Johannesburg2107Telephone 27 11 370 7865Facsimile 27 11 688 7732 Swift CSEVZAJJ [email protected]
COMPUTERSHAREOUTSOURCING LIMITED 70 Marshall Street Johannesburg2001 PO Box 24 Newtown 2113 Telephone 27 11 374 0460Facsimile 27 11 688 [email protected]
COMPUTERSHARE PLANMANAGERS LIMITED70 Marshall Street Johannesburg2001 PO Box 61051Marshalltown Johannesburg 2001Telephone 27 11 370 7865Facsimile 27 11 370 [email protected]
COMPUTERSHARE ANALYTICS(PTY) LIMITEDMedia Mill 2nd Floor* 7 Quince Road Milpark Auckland Park PO Box 536 Auckland Park 2006 Telephone 27 11 381 5401Facsimile 27 11 482 5059Email [email protected]
*Please note:Computershare Analyticswill be moving to 70Marshall StreetJohannesburg duringJanuary 2003. All otherdetails will remainunchanged.
UNITED KINGDOM Bristol
COMPUTERSHARE INVESTORSERVICES PLC
Computershare Analytics (UK)Limited
Computershare DocumentServices Limited
Computershare TechnologyServices (UK) Limited
PO Box 82 The PavilionsBridgewater Road Bedminster Down Bristol BS99 7NH Telephone 44 870 702 0003Facsimile 44 870 703 [email protected]
Edinburgh
COMPUTERSHARE INVESTORSERVICES PLCComputershare TechnologyServices (UK) LimitedPO Box 435 Owen House 8 Bankhead Crossway North Edinburgh EH11 4BR Telephone 44 870 702 0012Facsimile 44 870 703 [email protected]
London
COMPUTERSHARETECHNOLOGY SERVICES (UK)LIMITED
COMPUTERSHARE INVESTORSERVICES PLC
Computershare Analytics (UK)Limited
Computershare Limited
7th Floor, Jupiter House Triton Court 14 Finsbury SquareLondon EC2A 1BR Telephone 44 207 920 0010Facsimile 44 207 920 [email protected]
UNITED STATES OF AMERICA Chicago
COMPUTERSHARE INVESTORSERVICES LLC 2 North LaSalle Street Chicago Illinois 60602 Telephone 1 312 588 4993Facsimile 1 312 601 4332
COMPUTERSHARE PLANMANAGERS2 North LaSalle Street Chicago Illinois 60602Telephone 1 312 588 4993Facsimile 1 312 601 4352
68
COMPUTERSHARE SECURITIESCORPORATION 2 North LaSalle Street Chicago Illinois 60602 Telephone 1 312 588 4992Facsimile 1 312 601 4340
COMPUTERSHARETECHNOLOGY SERVICES 2 North LaSalle Street Chicago Illinois 60602 Telephone 1 312 588 4993Facsimile 1 312 601 4429
COMPUTERSHARE DOCUMENTSERVICES7600 Grant Street Burr Ridge Illinois 60527Telephone 1 630 568 0200Facsimile 1 312 601 4356
Cleveland
COMPUTERSHARE INVESTORSERVICES, LLC 7550 Lucerne Drive Suite 103Cleveland Ohio 44130 Telephone 1 440 239 7351Facsimile 1 440 239 7355
Dallas
COMPUTERSHARE INVESTORSERVICES, LLC Thanksgiving Tower 1601 Elm Street Suite 4340Dallas Texas 75201 Telephone 1 214 665 6031Facsimile 1 214 969 1859
Edison
COMPUTERSHARE PLANMANAGERS Raritan Plaza 3, 101 Fieldcrest Avenue Edison New Jersey 08837 Telephone 1 800 621 3777Facsimile 1 732 491 0451
Golden
COMPUTERSHARE TRUSTCOMPANY, INC.
COMPUTER INVESTORSERVICES, LLC350 Indiana Street Golden Colorado 80401 Telephone 1 303 262 0600Facsimile 1 303 262 0700
COMPUTERSHARE PLANMANAGERS 350 Indiana Street Golden Colorado 80401Telephone 1 800 621 3777Facsimile 1 303 262 0603
Los Angeles
COMPUTERSHARE INVESTORSERVICES, LLC Telephone 1 818 592 6314Facsimile 1 818 710 1550
New York
COMPUTERSHARE TRUSTCOMPANY OF NEW YORK Wall Street Plaza 19th Floor88 Pine StreetNew York, New York 10005 Telephone 1 212 701 7600Facsimile 1 212 701 7664
Rockville
COMPUTERSHARE ANALYTICSN.A. INC. 4954 Wyaconda Road Rockville Maryland 20852 Telephone 1 301 881 2252Facsimile 1 301 881 0287
OFFICE LOCATIONS (continued)
DIRECTORS Alexander Stuart Murdoch(Chairman)
Christopher John Morris (Chief Executive Officer)
Philip Daniel DeFeo
Peter John Griffin
Penelope Jane Maclagan
Iain David Saville
Anthony Norman Wales
COMPANY SECRETARIESPaul Xavier Tobin
Mark Benjamin Davis
REGISTERED OFFICE18-62 Trenerry CrescentAbbotsford Victoria 3067PO Box 103 Abbotsford Victoria Australia 3067Telephone +61 3 9235 5500Facsimile +61 3 9235 5601
STOCK EXCHANGE LISTINGSAUSTRALIAN STOCK EXCHANGELIMITEDTHE NEW ZEALAND STOCKEXCHANGE LIMITED
AMERICAN DEPOSITORYRECEIPTS (ADRS)Computershare has an unlistedADR program in the UnitedStates. Information about ADRs isavailable from the depository,COMPUTERSHARE TRUSTCOMPANY OF NEW YORKWall Street PlazaLevel 19, 88 Pine Street New York, New York 10005
SOLICITORSMINTER ELLISON Level 23, Rialto Towers525 Collins Street Melbourne Victoria 3000
AUDITORSPRICEWATERHOUSECOOPERS333 Collins StreetMelbourne VIC 3000
SHARE REGISTRYCOMPUTERSHARE LIMITED 18-62 Trenerry CrescentAbbotsford Victoria 3067PO Box 103 Abbotsford Victoria 3067Tel : + 61 3 9235 5500Facsimile: +61 3 9235 5600
BANKERSNATIONAL AUSTRALIA BANK LIMITED500 Bourke StreetMelbourne Victoria 3000
AUSTRALIA AND NEW ZEALANDBANKING GROUP LIMITED530 Collins StreetMelbourne Victoria 3000
THE ROYAL BANK OF SCOTLAND PLC135 BishopsgateLondon UK ECM2 3UR
INVESTOR RELATIONSLevel 4, 60 Carrington StreetSydney NSW Australia 2000Telephone: +61 2 8234 5456Facsimile: +61 2 8234 5450Email: [email protected]:www.computershare.com/InvestorRelations
CORPORATE DIRECTORY
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