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Estate Agents Co-operative Limited ABN 52 079 055 637

Financial Statements

EAC Annual Report 2010

For the Year Ended 30 June 2010

Estate Agents Co-operative Limited ABN 52 079 055 637

For the Year Ended 30 June 2010

CONTENTS Page

EAC Annual Report 2010

Financial Statements Notice of Annual General Meeting Chairman's Report 2010 Directors' Report Auditors Independence Declaration under Section 307C of the Corporations Act 2001 Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report

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Estate Agents Co-operative Limited ABN 52 079 055 637

Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of Shareholders will be held at: Estate Agents Co-operative Ltd 274 Miller Road VILLAWOOD NSW 2163 On Wednesday 27 October, 2010 at 10.00am.

BUSINESS • To confirm Minutes of the 2009 Annual General Meeting.

•

To receive the report of the Board of Directors.

•

To receive the financial statements for the year ended 30th June 2010 and the report of the Auditors thereon.

•

To announce the appointment of Directors for the ensuing period and to fix their remuneration.

•

To appoint the Co-operative’s Auditors for the ensuing year.

•

Any other business – notice of which has been given in accordance with the rules.

BY ORDER OF THE BOARD

EAC Annual Report 2010

JOHN G CARSON COMPANY SECRETARY

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Estate Agents Co-operative Limited Chairman's Report 2010 I am pleased to present the 2010 annual report and to inform you of a year of significant achievements made by our Co-operative.

In the financial year 2009 – 2010 we advanced our stated objectives to return the Co-operative to profit while expanding and enhancing our portfolio of goods and services for our members in particular and for the benefit of the real estate industry in general.

Due to continuing uncertainty in world financial markets brought on by the Global Financial Crisis, the 2009 – 2010 financial year was not the easiest year for real estate practitioners. Whilst not all areas experienced the same conditions, increased interest rates and the first home buyers’ grants returning to normal levels saw a slowing in market activity. This resulted in fewer listings and even less buyers and, with the Reserve Bank tipped to further raise interest rates, it is unlikely market conditions will change in the short term.

However despite this, and as a result of initiatives put in place over the last two to three years by the EAC Board and Management, including significant restructuring and investment in existing and new goods and services, I am pleased to report that in the financial year 2009 – 2010 the Co-operative returned to profit.

This year’s profit of $253,470 represents an improvement of $680,524 over the previous year and $1,144,495 when compared to the 2007 – 2008 year.

With many of the non productive distractions that have consumed significant time a cost now behind us it is anticipated that the Co-operative will continue to improve on this year’s excellent result.

EAC Annual Report 2010

It is with a great deal of pride that I also advise that the EAC was named in the inaugural “Australia’s Top 100 Co-operatives, Credit Unions and Mutuals by Annual Turnover” published by Co-operatives Australia on behalf of the Co-operatives Federation of Australia.

During the last financial year we saw the following developments.

• One of the aforementioned non productive and costly distractions experienced during the financial year was an investigation by the Australian Competition and Consumer Commission (ACCC) into the relationship between the Co-operative and the Real Estate Institute of NSW (REINSW) for the provision of printed and electronic real estate forms. The investigation arose as a result of the REINSW’s decision (for reasons best known to itself) to seek a determination as to whether the joint venture with EAC was in fact a breach of the Trade Practices Act. The ACCC determined that no action was required and closed its file on the matter. The finalisation of this matter ended all outstanding commercial matters with the REINSW and all prior relationships between EAC and REINSW are now formally at an end. As a result of this your Co-operative re-entered the market with its own suite of real estate forms and agreements – EAC Easy Forms. The uptake of our forms by real estate practitioners has even exceeded our best expectations and continues to grow.

• EAC launched an updated version of realestateworld.com.au with a new fresh look and feel. The new site included several enhancements based on consumer and agent feedback. In addition to the new look and feel, the site also now caters for Agent banner advertising to assist with the building of members profiles in the new online world of marketing.

• EAC launched its new eac.com.au web site that is purely agent centric and provides a single place where members and agents can find out anything they want to know about EAC. • More additions to Red Square 7 including new CMA and Buyers Tour features as well as a new web based Mapping module and several other enhancements to the Red Square product.

• EAC’s Agency Practice Support service whereby EAC members are able to call and obtain advice on many of the issues that real estate practitioners face in the day to day operation of their business including compliance, agency agreements etc, • EAC introduced a new insurance service through its endorsement of OAMPS Insurance Brokers as its preferred supplier of insurance products including a PI insurance package that we believe is superior to others in the marketplace.

• The continued development of our realestateworld publications continues to deliver substantial savings to agents who support their industry owned and controlled advertising medium. Discussions are presently well advanced in regard to two new publications entering the regional markets.

2

Estate Agents Co-operative Limited Chairman's Report 2010 As a result of these initiatives I am pleased to report a steady growth in membership numbers, including

Estate Agents Co-operative Limited branch offices, which are further expected to increase in the current financial year.

Chairman's Report 2010to be the driving force in the Co-operative and in this regard at its Annual Planning Day Innovation continues in May, your Board and Management reviewed the operations of the Co-operative over the last twelve As a result of these initiatives ambudget pleased report steady year. growth in Strategic membership including months, its Strategic Plan and Ithe fortothe new afinancial The Plannumbers, was updated with branch offices, which are further expected to increase in the current financial year. some forty items were we believe we can and need to do better as well as with some exciting new services that will further enhance the benefit derived from being a member of the Co-operative. The list of goods and Innovation continues to be the the Co-operative driving force in the Co-operative and in this regard at itsI Annual Planning Day services available through continues to grow on a regular basis and encourage members in and Management reviewed the these operations of the Co-operative the last twelve to May, reviewyour theirBoard participation in same and to discuss with the Account Managerover for their respective months, its area.

Strategic Plan and the budget for the new financial year. The Strategic Plan was updated with designated some forty items were we believe we can and need to do better as well as with some exciting new services thatalways, will further enhanceinthe derivedisfrom being athat member of the Co-operative.

The list ofand goods As paramount ourbenefit endeavours to ensure the best interests of our members the and real services available through the Co-operative continues to grow on a regular basis and I encourage members estate industry as a whole are always top of mind. In this regard the Co-operative has entered into to review their in same and toofdiscuss these with the for their respective discussions withparticipation the Real Estate Institute Australia (REIA).

The Account REIA is Manager the national association for designated area.

Australia’s real estate profession. REIA is a politically non-aligned organisation that provides research and well-informed advice to the Federal Government, Opposition, members of the real estate profession, media As paramount in our endeavours is the to ensure that the best interests of our members and the real andalways, the public on a range of issues affecting property market. estate industry as a whole are always top of mind. In this regard the Co-operative has entered into discussions withdiscussions the Real Estate Institutein of Australia (REIA).

The REIA is the associationfrom for To date these has resulted EAC members receiving valuable realnational estate resources Australia’s real estate profession.

REIA Discussions is a politicallyare non-aligned provides having researchsome and REIA including a weekly newsletter. continuingorganisation in relation that to possibly well-informed to members the Federal Opposition, members of the real estate profession, media representationadvice for EAC at Government, a national level. and the public on a range of issues affecting the property market.

In closing I would like to express my gratitude to: To these discussions hasthat resulted in EAC members receiving valuable real estate resources from • date all our loyal members have continued to support the Co-operative during some very difficult REIA including a weekly newsletter.

Discussions are continuing in relation to possibly having some times over the last few years. Your dedication to the Co-operative is acknowledged and greatly representation for EAC members at a national level. appreciated; •In closing myI would fellowlike Directors for their ongoing to: commitment, counsel and support. These dedicated people to express my gratitude have to give that of their valuable time,totime awaythe from their offices, in order to advance the • all ourcontinued loyal members have continued support Co-operative during some very difficult cause of the Co-operative and to seek benefit for the membership and the industry as a whole; and times over the last few years. Your dedication to the Co-operative is acknowledged and greatly • the dedicated team of Management and Staff at our Sydney and Wollongong offices, without appreciated; whose extraordinary commitment and commitment, dedication, ancounsel organisation such asThese ours could not possibly • my fellow Directors for their ongoing and support. dedicated people function. have continued to give of their valuable time, time away from their offices, in order to advance the cause of the Co-operative and to seek benefit for the membership and the industry as a whole; and Dale Whittaker • the dedicated team of Management and Staff at our Sydney and Wollongong offices, without CHAIRMAN whose extraordinary commitment and dedication, an organisation such as ours could not possibly function.

EAC Annual Report 2010

Dale Whittaker CHAIRMAN

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Estate Agents Co-operative Limited ABN 52 079 055 637

Directors' Report For the Year Ended 30 June 2010 Your directors present their report on the company for the financial year ended 30 June 2010.

The names of the directors in office at any time during or since the end of the year are: Names Appointed/Resigned D.R. Whittaker (Chairman) Appointed 08.10.1998 P.A. Carmont (Vice-Chairman) Appointed 25.06.1997 W. Herrmann Appointed 15.08.1998 J.F. Knight Appointed 10.05.2007 J.P. Ronis Appointed 25.11.2009 J.R. Russell Appointed 26.07.2007 J.F. Sercombe Appointed 18.12.2000 C.M. Todd Resigned 25.11.2009 Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

The profit of the Co-operative for the financial year after providing for income tax amounted to $253,470.

A review of the operations of the co-operative during the financial year and the results of those operations show that it remains in a position to meet the long term objectives previously set by the Board (also refer to Chairman's Report). Following significant restructuring the Directors have continued reviewing expenditure and this, combined with expected increased levels of income has resulted in the preparation of a budget which anticipates an increased operating profit for the financial year 2010/2011. Without the distraction of any further unforeseen issues the Co-operative’s Board and Management can now focus and devote their full energy into achieving the Co-operative’s stated objectives.

The following significant changes in the state of affairs of the co-operative occurred during the financial year: - The decision by the Real Estate Institute of NSW to enter into a Deed of Release in respect to the provision of printed and electronic real estate forms resulted in the Co-operative re-entering the real estate forms market with its own suite of forms and agreements.

-

EAC introduced a new insurance service through its endorsement of OAMPS Insurance Brokers as its preferred supplier of insurance products including a PI insurance package.

The principal activities of the Co-operative during the financial year were: - Information Technology Services covering:

EAC Annual Report 2010

* listing management and aggregation; * property sales information and mapping; * property sales reports and statistics; * website design and hosting.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Directors' Report For the Year Ended 30 June 2010 - realestateworld.com.au website; - Production of several "Realestateworld.com.au" real estate Publications; - Real estate forms and stationary; - Agency practice support services.

No significant change in the nature of these activities occurred during the year.

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

The likely developments in the operations of the Co-operative and the expected results of those operations in future financial years are as follows: - The Board continues to look at ways to develop its suite of goods and services offered to meet the needs of is members within the real estate industry.

- To meet the future needs of the Co-operative the Board is considering a move to new premises as the current premises in Villawood are no longer suitable to the Co-operative’s operations.

- The Board continues to look towards the area of information technology to deliver services that will benefit members and reduce costs. It looks to working with members to develop services and systems which allow a greater control by members of their business overheads and at the same time assisting members in meeting their legislative compliance responsibilities.

The company's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

No options over issued shares or interests in the company were granted during or since the end of the financial year and there were no options outstanding at the date of this report.

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an officer or auditor of the company.

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

EAC Annual Report 2010

The company was not a party to any such proceedings during the year.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Directors' Report For the Year Ended 30 June 2010 Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 7.

Signed in accordance with a resolution of the Board of Directors:

Director: ...............................................................

P.A. Carmont (Vice-Chairman)

Director: ................................................................

W. Herrmann

EAC Annual Report 2010

15th October Dated this_______day of________________________2010

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EAC Annual Report 2010

Estate Agents Co-operative Limited ABN 52 079 055 637 Statement of Comprehensive Income For the Year Ended 30 June 2010 2010

2009

$

$

Note Revenue Other revenue Raw materials and consumables used Employee benefits expense Depreciation and amortisation Finance costs Administrative expenses Profit/(Loss) before income tax Income tax expense

8,095,911 94,482 (386,556) (3,164,784) (246,236) (56,532) (4,082,815)

8,407,621 58,291 (398,462) (3,434,012) (292,988) (68,917) (4,698,587)

253,470 -

(427,054) -

253,470

(427,054)

3

EAC Annual Report 2010

Profit/(Loss) for the year Other comprehensive income Net loss on revaluation of land and buildings Net gain on revaluation of financial assets

-

-

Other comprehensive income for the year, net of tax

-

-

Total comprehensive income for the year

253,470

(427,054)

Profit attributable to members of the entity

253,470

(427,054)

Total comprehensive income attributable to members of the entity

253,470

(427,054)

The accompanying notes form part of these financial statements 8

Estate Agents Co-operative Limited ABN 52 079 055 637

Statement of Financial Position As At 30 June 2010 2010

2009

$

$

Note ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets

4 5 6 7

58,822 1,232,158 57,736 40,308

58,622 1,290,972 21,050 128,019

1,389,024

1,498,663

198,028 31,053 2,497,244

31,053 2,756,637

TOTAL NON-CURRENT ASSETS

2,726,325

2,787,690

TOTAL ASSETS

4,115,349

4,286,353

1,207,802 430,466 299,054 -

1,239,140 703,335 279,383 77,591

1,937,322

2,299,449

46,374 309,190

90,558 277,353

355,564

367,911

TOTAL LIABILITIES

2,292,886

2,667,360

NET ASSETS

1,822,463

1,618,993

EQUITY Reserves Retained earnings/(Accumulated losses)

2,199,172 (376,709)

2,249,172 (630,179)

TOTAL EQUITY

1,822,463

1,618,993

TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Financial assets Property, plant and equipment

5 8 9

LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Short-term provisions Other Liabilities

10 11 12 13

TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Long-term provisions

11 12

EAC Annual Report 2010

TOTAL NON-CURRENT LIABILITIES

The accompanying notes form part of these financial statements 9

Estate Agents Co-operative Limited ABN 52 079 055 637

Statement of Changes in Equity For the Year Ended 30 June 2010 2009

Balance at 1 July 2008 Profit/(loss) attributable to equity shareholders Revaluation increment (decrement) Balance at 30 June 2009

Retained Earnings/ (Accumulated Losses)

Capital Profits Reserve

$

$

Asset Share Revaluation Redemption Surplus Reserve $

$

Total $

(203,125)

1,153,637

753,695

216,840

1,921,047

(427,054)

-

-

-

(427,054)

-

-

125,000

-

125,000

(630,179)

1,153,637

878,695

216,840

1,618,993

2010

Balance at 1 July 2009 Profit/(loss) attributable to equity shareholders Revaluation increment (decrement)

EAC Annual Report 2010

Balance at 30 June 2010

Retained Earnings/ (Accumulated Losses)

Capital Profits Reserve

$

$

(630,179)

Asset Share Revaluation Redemption Surplus Reserve $

$

Total $

1,153,637

878,695

216,840

1,618,993

253,470

-

-

-

253,470

-

-

(50,000)

-

(50,000)

(376,709)

1,153,637

828,695

216,840

1,822,463

The accompanying notes form part of these financial statements 10

Estate Agents Co-operative Limited ABN 52 079 055 637

Statement of Cash Flows For the Year Ended 30 June 2010 2010

2009

$

$

Note CASH FROM OPERATING ACTIVITIES: Receipts from customers Payments to suppliers and employees Interest received Finance costs

8,133,044 (7,728,262) 845 (56,532)

9,165,140 (8,996,755) 2,094 (68,917)

349,095

101,562

CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of plant and equipment Payments to acquire property, plant and equipment Payments for investments

5,000 (36,843) -

23,637 (54,290) (18,537)

Net cash used by investing activities

(31,843)

(49,190)

CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings

1,780 (42,395)

120 19,900 (29,008)

Net cash used by financing activities

(40,615)

(8,988)

276,637 (602,318)

43,384 (645,702)

(325,681)

(602,318)

Net cash provided by (used in) operating activities

16(a)

Net increase in cash held Cash and cash equivalents at beginning of financial year

EAC Annual Report 2010

Cash and cash equivalents at end of financial year

4(a)

The accompanying notes form part of these financial statements 11

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies Estate Agents Co-operative Limited is a registrable Australian Corporation, incorporated and domiciled in Australia.

Reporting Basis and Conventions The directors have prepared the financial statements on the basis that the company is a non-reporting entity because there are no users dependent on general purpose financial statements. The financial statements are therefore special purpose financial statements that has been prepared in order to meet the requirements of the Corporations Act 2001, the Co-operatives Act 1992 and the Co-operatives Regulation 2005.

The financial statements has been prepared in accordance with the mandatory Australian Accounting Standards applicable to entities reporting under the Corporations Act 2001 and the significant accounting policies disclosed below which the directors have determined are appropriate to meet the needs of members. Such accounting policies are consistent with the previous period unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs unless otherwise stated in the notes. The material accounting policies have been adopted in the preparation of these statements are as follows: Accounting Policies (a)

Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date.

Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

EAC Annual Report 2010

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (a)

Income Tax continued Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of setoff exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

(b)

Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs.

(c)

Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Property

EAC Annual Report 2010

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the statement of comprehensive income.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (c)

Property, Plant and Equipment continued Plant and equipment Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation The depreciable amount of all fixed assets, excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to company commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Buildings 2.5% Plant and Equipment 5% - 40% Computer Equipment 12.5% - 40% Computer Software 12.5% - 40% Other Property, Plant and Equipment 5% - 40% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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

EAC Annual Report 2010

Gains and losses on disposals are determined by comparing proceeds with the carrying amount.

These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (d)

Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the company are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease 14

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (d)

Leases continued liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as expenses on a straight line basis over the life of the lease term.

(e)

Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is the equivalent to the date that the company commits itself to either purchase or sale of the asset (ie trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transactions costs, except where the instrument is classified 'at fair value through profit or loss', in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement Finance instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

EAC Annual Report 2010

Amortised cost is calculated as: (i) the amount in which the financial asset or financial liability is measured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (iv) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (e)

Financial Instruments continued (i)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. (ii) Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. (iii) Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm's length transactions, reference to similar instruments and option pricing models. (f)

Impairment of Assets At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

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

EAC Annual Report 2010

Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

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Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (g)

Employee Benefits Provision is made for the company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs.

Employee benefits payable later than one year have been measured at present value of the estimated future cash outflows to be made for those benefits.

(h)

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

(i)

Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held-at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

(j)

Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

EAC Annual Report 2010

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instruments. Dividend revenue is recognised when the right to receive a dividend has been established.

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extend that related expenditure is recoverable.

All revenue is stated net of the amount of goods and services tax (GST).

17

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (k)

Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in income in the period in which they are incurred.

(l)

Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(m)

Comparative Figures Comparative figures have been adjusted to conform to changes in presentation for the current financial year where required by accounting standards or as a result of a change in accounting policy.

(n)

Adoption of New and Revised Accounting Standards During the current year, the company has adopted the revised Australian Accounting Standards AASB 101: Presentation of Financial Statements, which became mandatory. The adoption of this standard has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact the adoption of this standard has had on the financial statements of Estate Agents Co-operative Limited.

AASB 101: Presentation of Financial Statements

EAC Annual Report 2010

In September 2007 the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the company's financial statements.

Disclosure impact Terminology changes - The revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements. These changes are not expected to impact the financial performance or financial position of the company

18

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

1

Summary of Significant Accounting Policies continued (n)

Adoption of New and Revised Accounting Standards continued AASB 101: Presentation of Financial Statements continued Reporting changes in equity - The revised AASB 101 requires all changes in equity arising from transactions with owners in their capacity as owners to be presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of changes in equity, with non-owner changes in equity presented in the statement of comprehensive income. The previous version of AASB 101 required that owner changes in equity be presented in the income statement.

Statement of comprehensive income - The revised AASB 101 requires all income and expenses to be presented in either one statement, the statement of comprehensive income, or two statements, a separate income statement and a statement of comprehensive income. The previous version of AASB 101 required only the presentation of a single income statement.

The company's financial statements now contain a statement of comprehensive income.

Other comprehensive income - The revised version of AASB 101 introduces the concept of 'other comprehensive income' which comprises of income and expenses that are not recognised in profit or loss as required by other Australian Accounting Standards. Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities are required to disclose the income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.

The impact of this requirement is the disclosure within Note 3 to the financial statements, which reflects the grossed up value of each item of other comprehensive income and the income tax expense/benefit attributed to the item.

(o)

New Accounting Standards for Application in Future Periods The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The company has decided against early adoption of these standards.

EAC Annual Report 2010

The company does not anticipate early adoption of any of the above accounting standards.

19

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

2

Profit for the Year (a)

Expenses

Depreciation of property, plant and equipment

38,250 597

37,500 4,550

38,847

42,050

-

18,333

Revenue and Other Income Net gains on disposal of property, plant and equipment

5,000

8,753

Net gain on disposal of investments

6,127

-

41,652

18,624

(19,007)

(17,123)

Significant Revenue and Other Income and Expenses The following significant revenue and expense items are relevant in explaining the financial performance: Bad debts Doubtful debts

3

4

$

292,988

Rental expense on operating leases - contingent rentals

(c)

2009

$

246,236

Remuneration of auditor - audit or review - other services

(b)

2010

Income Tax Expense Income tax expense Cash and Cash Equivalents Cash on hand Cash at bank Short-term bank deposits

-

-

900 38,400 19,522

700 38,400 19,522

58,822

58,622

58,822 (384,503)

58,622 (660,940)

(325,681)

(602,318)

EAC Annual Report 2010

(a) Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows: Cash and cash equivalents Bank overdraft

20

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

5

Trade and Other Receivables

Other receivables

1,095,359 136,799

1,112,547 178,425

1,232,158

1,290,972

198,028

-

198,028

-

57,736

21,050

36,464 3,844

125,012 3,007

40,308

128,019

31,053

31,053

Unlisted investment, at recoverable amount shares in other corporations at cost Less: impairment provision

31,053 -

64,053 (33,000)

Total available-for-sale financial assets

31,053

31,053

Inventories

Other Current Assets

Financial Assets Available for sale financial assets (a)

EAC Annual Report 2010

$

1,160,803 (48,256)

CURRENT Prepayments Share Capital Unpaid

8

$

1,124,607 (29,248)

CURRENT Merchandise - At Cost 7

2009

CURRENT Trade receivables Provision for impairment of receivables

NON-CURRENT Other receivables

6

2010

8(a)

Available-for-sale Financial Assets Comprise:

21

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010 9

Property, Plant and Equipment 2009

$

$

Land and buildings Wollongong at independent valuation 2009 Miller Road at independent valuation 2008 Less accumulated depreciation

500,000 2,220,000 (759,385)

550,000 2,220,000 (718,977)

Total land and buildings

1,960,615

2,051,023

547,647 (274,518)

529,905 (240,355)

273,129

289,550

200,176 (123,902)

197,902 (112,611)

76,274

85,291

35,712 155,407 (172,629)

35,712 184,781 (151,904)

18,490

68,589

75,317 (73,226)

74,267 (71,763)

2,091

2,504

2,230,582 (2,063,937)

2,220,078 (1,979,734)

166,645

240,344

103,046 (103,046)

97,773 (78,438)

Plant and equipment Plant and equipment at cost Less accumulated depreciation Total plant and equipment Furniture, fixture and fittings Furniture, Fixtures and Fittings Less accumulated depreciation Total furniture, fixture and fittings Motor vehicles Motor Vehicle at cost Motor Vehicle under lease Less accumulated depreciation Total motor vehicles Office equipment Office equipment at cost Less accumulated depreciation Total office equipment Computer equipment Computer equipment at cost Less accumulated depreciation Total computer equipment Computer software Computer software at cost Less accumulated depreciation Total computer software

EAC Annual Report 2010

2010

Total plant and equipment Total property, plant and equipment

-

19,335

536,629

705,613

2,497,244

2,756,636

The Co-operative's land and buildings were revalued at 30 June 2010 and 2009 by independent valuers.

Valuations were made on the basis of open market value. The revaluation surplus/deficit was credited/debited to an asset revaluation reserve in equity.

22

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

10 Trade and Other Payables

CURRENT Trade payables Other payables Amount payable to: - Meta Publishing Pty Limited - Members share capital

2010

2009

$

$

738,910 382,012

840,109 323,045

86,880

(6,974) 82,960

1,207,802

1,239,140

384,503 45,963

660,940 42,395

430,466

703,335

32,850 13,524

31,070 59,488

46,374

90,558

384,503 59,488

660,940 101,883

443,991

762,823

11 Borrowings CURRENT Bank overdraft Lease liability

NON-CURRENT Paid up capital Lease liability

(a)

Total current and non-current secured liabilities Bank overdraft Lease liability

The bank overdraft and lease are secured by a first registered mortgage over the freehold land and building at 274 Miller Road, Villawood. The bank overdraft is limited to $600,000.

EAC Annual Report 2010

12 Provisions CURRENT Employee benefits

299,054

279,383

NON-CURRENT Employee benefits

309,190

277,353

23

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

13 Other Liabilities 2010

2009

$

$

CURRENT Sales in advance

-

77,591

46,431 13,640

50,703 62,234

Less future finance changes

60,071 (583)

112,937 (11,053)

Present value of minimum lease payments

59,488

101,884

14 Capital and Leasing Commitments (a)

Finance Leasing and Hire Purchase Commitments Payable - minimum lease payments: - not later than 12 months - between 12 months and 5 years Minimum lease payments

The commercial hire purchase on the motor vehicles, which commenced in 2006, 2007 and 2009, are 5 year leases. The motor vehicles are being leased with lease payment paid monthly.

15 Contingent Liabilities Estimates of the potential financial effect of contingent liabilities that may become payable: Contingent Liabilities

EAC Annual Report 2010

Litigation by Real Estate Institute of New South Wales The decision of the Real Estate Institute of NSW (REINSW) to question the validity of the joint venture arrangements entered into with the Co-operative in regard to the provision of both printed and electronic real estate forms. The REINSW and the Co-operative have resolved all outstanding commercial matters between them on mutually acceptable terms. All prior relationships between the REINSW and the Cooperative are now formally at an end.

-

46,000

24

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

16 Cash Flow Information (a)

Reconciliation of Cash Flow from Operations with Profit after Income Tax 2010 $

2009 $

Net income/loss for the period

253,470

(427,054)

Non-cash flows in profit Amortisation and depreciation Bad and doubtful debt Net gain on disposal of property, plant and equipment Increase in employee benefits Net gain on disposal of investments

246,236 (5,000) (6,127)

292,988 17,123 (8,753) 227,938 -

Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and term receivables (Increase)/decrease in prepayments (Increase)/decrease in inventories Increase/(decrease) in trade payables and accruals Increase/(decrease) in provisions

(133,087) 87,710 (36,686) (108,929) 51,508

428,804 290,024 (608) (573,572) (145,328)

349,095

101,562

17 Reserves (a)

Asset Revaluation Reserve The asset revaluation reserve records revaluations of non current assets.

(b)

Redemption of Shares Reserve The asset realisation reserve records the entrance fees received by members prior to 1979.

(c)

Capital Profits Reserve

EAC Annual Report 2010

The capital profits reserve records gains on sale of properties purchased prior to 19 September 1985.

25

Estate Agents Co-operative Limited ABN 52 079 055 637

Notes to the Financial Statements For the Year Ended 30 June 2010

18 Company Details Registered office

EAC Annual Report 2010

The registered office of the company is: Estate Agents Co-operative Limited 274 Miller Road Villawood NSW 2163

26

Estate Agents Co-operative Limited ABN 52 079 055 637

Directors' Declaration The directors have determined that the company is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies described in Note 1 to the financial statements.

The directors of the company declare that: 1.

The financial statements and notes, as set out on pages 8 to 26, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards; and (b) give a true and fair view of the company's financial position as at 30 June 2010 and of its performance for the year ended on that date in accordance with the accounting policies described in Note 1 to the financial statements.

2.

In the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Director ..................................................................

P.A. Carmont (Vice-Chairman)

15th

Director ..................................................................

W. Herrmann

October

EAC Annual Report 2010

Dated this .............................. day of .............................. 2010

27

Estate Agents Co-operative Limited ABN 52 079 055 637

Independent Audit Report to the members of Estate Agents Co-operative Limited We have audited the accompanying financial report, being a special purpose financial report, of Estate Agents Co-operative Limited (the company), which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, a summary of significant accounting policies, other explanatory notes and the directors' declaration.

The Responsibility of the Director's for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report and have determined that the accounting policies described in Note 1 to the financial statements, which form part of the financial report, are appropriate to meet the requirements of the Corporations Act 2001 and are appropriate to meet the needs of the members. The directors’ responsibility also includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility Our responsibility is to express an opinion on the financial report based on our audit. No opinion is expressed as to whether the accounting policies used, as described in Note 1, are appropriate to meet the needs of the members. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

The financial report has been prepared for distribution to members for the purpose of fulfilling the directors’ financial reporting under the Corporations Act 2001. We disclaim any assumption of responsibility for any reliance on this report or on the financial report to which it relates to any person other than the members, or for any purpose other that that for which it was prepared.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

EAC Annual Report 2010

Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of Estate Agents Co-operative Limited on 27 October 2010, would be in the same terms if provided to the directors as at the date of this auditor's report.

Liability limited by a scheme under Professional Standards Legislation

28

EAC Annual Report 2010