Gilgandra Financial Services Limited

as at

30 June 2010

GilgandraFinancial Services Limited

Financial Statements

Gilgandra Financial Services LimitedABN 27 120 289 741

Directors' Report

Directors

Maxwell Ian Zell Lorraine Margaret HutchisonChairman SecretaryAge: 64 Age: 42Farmer Home duties

Interests in shares: 5,001


Kim Louise O'Donnell Douglas Richard BattenTreasurer DirectorAge: 42 Age: 56Solicitor Commodity trader

Interests in shares: 1 Interests in shares: 5,001

Donald Kingsley Kennaugh Michael Charles BowmanDirector Director Age: 69 Age: 57Semi retired Grazier

Runs own family farm business. Involved withTooraweenah community groups.Interest in shares: 10,000


Dorothy Lorraine Burrell Michael Allan JohnsonDirector Director Age: 64 Age: 39Motelier Butcher

Interests in shares: 1,000 Interests in shares: 1,500

Robyn Edna Cook Anthony John GardinerDirector DirectorAge: 61 Age: 41Accountant Maintenance SupervisorBachelor of Business Studies, involved with junior Moved to Gilgandra in 2006. Owned and operated hiscricket and SES. own business in Sydney for over 15 years. Has his Interests in shares: Nil own Refrigeration / Air-conditioning business, and is

also maintenance supervisor at the Gilgandra MPHS.Interests in shares: Nil

Your directors submit the financial statements of the company for the financial year ended 30 June 2010.

The names and details of the company's directors who held office during or since the end of the financial year:

Directors were in office for this entire year unless otherwise stated.

Involvement in various farming organisations, variousoffice positions held in the Curban Farmers CooperativeLtd, Chairman of the Gilgandra Marketing CooperativeLtd, previous board member of the NSW Wheat andBarley Research Committee, trustee of the PlantBreeding Institute at Narrabri, Chairman of NETCO anddirector of Sunprime Seeds. Prior Deputy President,President and Mayor of Gilgandra Shire.

No directors have material interests in contracts or proposed contracts with the company.

President of CWA, Board Member of Disability Services and Meals on Wheels volunteer.

Board Member of Gilgandra Golf Club.

Owned and operated a retail business withhusband as well as being a qualified TAFEteacher in the field of fashion. LibrarianAssistant and Workplace Assessor. Hasqualifications in Business Administration,Fashion Technology and Workplace

Background in local government and in the bankingindustry, active member of various community groups.Principal of own legal firm.

17 years experience as a director of a industry based credit union after 20 years with Australia Post and Telecom in administrive

42 years at Telstra as Principal Technical Officer - Power and Alarms Western Districts. Past president of Gilgandra Rotary Club and is a Paul Harris Fellow. Also awarded 'Senior Citizen of the Year' for 2006.

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Directors' Report

Company Secretary

Principal Activities

Operating Results

Year ended Year ended30 June 2010 30 June 2009

$ $(89,198) (145,119)

There are no Executives within the company whose remuneration is required to be disclosed.

Dividends

Significant Changes in the State of Affairs

Matters Subsequent to the End of the Financial Year

The company secretary is Lorraine Margaret Hutchison, who was appointed to the position of secretary on 20 June 2006. Lorraine is aTAFE Teacher, Workplace Assessor and Librarian Assistant. She has also developed state teaching standards and assessments forvarious TAFE courses. These courses have then gone on further to be nationally accredited. Lorraine and her husband Garth owned andoperated their own retail business in Gilgandra for 20 years.

There are no matters or circumstances that have arisen since the end of the financial year that have significantly affected or maysignificantly affect the operations of the company, the results of those operations or the state of affairs of the company, in future years.

The company Secretary and Treasurer received payments for reimbursements of expenses incurred and their time spent on companyafairs, details of which are disclosed in note 20 of the accompanying financial statements. No Director of the company receivesremuneration for services as a company director or Committee member.

The principal activities of the company during the course of the financial year were in facilitating community banking services undermanagement rights to operate a franchised branch of Bendigo and Adelaide Bank Limited.

No dividends were declared or paid for the previous year and the directors recommend that no dividend be paid for the current year.

In the opinion of the directors there were no significant changes in the state of affairs of the company that occurred during the financialyear under review not otherwise disclosed in this report or the financial statements.

Remuneration Report

Operations have continued to perform in line with expectations. The loss of the company for the financial year after provision for incometax was:

There has been no significant changes in the nature of these activities during the year.

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Directors' ReportLikely Developments

Environmental Regulation

Directors' Benefits

Indemnification and Insurance of Directors and Officers

Directors Meetings

The number of directors meetings attended by each of the directors of the company during the year were:

eligible to attend Number attended eligible to attend Number attended

Maxwell Ian Zell 12 11 10 6

Lorraine Margaret Hutchison 12 12 - -

Kim Louise O'Donnell 12 10 - -

Douglas Richard Batten 12 7 9 6

Donald Kingsley Enough 12 11 10 7

Michael Charles Bowman 12 8 10 6

Dorothy Lorraine Burrell 12 10 - -

Michael Allan Johnson 12 9 10 6

Robyn Edna Cook 12 11 - -

Anthony John Gardiner 12 10 10 7

No director has received or become entitled to receive, during or since the financial year, a benefit because of a contract made by thecompany, controlled entity or related body corporate with a director, a firm which a director is a member or an entity in which a directorhas a substantial financial interest.

The company is not subject to any significant environmental regulation.

The company has indemnified all directors and the manager in respect of liabilities to other persons (other than the company or relatedbody corporate) that may arise from their position as directors or manager of the company except where the liability arises out of conductinvolving the lack of good faith.

Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause of the contract ofinsurance. The company has not provided any insurance for an auditor of the company or a related body corporate.

The company will continue its policy of facilitating banking services to the community.

Number of Board Meetings Number of Marketing Meetings

The Board also has a sub-committee for Finance. The Finance sub-committee has formally elected Directors who meet on a required/asneeded basis and present reports/recommendations to the subsequent Board meeting.

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Directors' ReportNon Audit Services

●

●

Auditors' Independence Declaration

Maxwell Ian Zell, Chairman Lorraine Margaret Hutchison, Secretary

none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics forProfessional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-makingcapacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5.

Signed in accordance with a resolution of the board of directors at Gilgandra, New South Wales on 28 September 2010.

The company may decide to employ the auditor on assignments additional to their statutory duties where the auditor's expertise andexperience with the company are important. Details of the amounts paid or payable to the auditor (Andrew Frewin & Stewart) for audit andnon audit services provided during the year are set out in the notes to the accounts.

The board of directors has considered the position, in accordance with the advice received from the audit committee and is satisfied thatthe provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the CorporationsAct 2001.

The directors are satisfied that the provision of non-audit services by the auditor, as set out in the notes did not compromise the auditorindependence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the audit committee to ensure they do not impact on the impartiality and objectivity ofthe auditor;

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Statement of Comprehensive Incomefor the Year Ended 30 June 2010

2010 2009Notes $ $

Revenues from ordinary activities 4 285,459 217,683

Employee benefits expense (204,740) (196,839)

Charitable donations, sponsorship, advertising and promotion (12,008) (10,153)

Occupancy and associated costs (35,506) (39,611)

Systems costs (24,507) (23,655)

Depreciation and amortisation expense 5 (9,515) (17,087)

Finance costs 5 (23,727) (9,881)

General administration expenses (70,604) (65,576)

Loss before income tax credit (95,148) (145,119)

Income tax credit 6 - -

Loss after income tax credit (95,148) (145,119)

Other comprehensive income

Net gain on impairment of fire damaged assets 5,950 -

Total comprehensive income for the year (89,198) (145,119)

Earnings per share (cents per share) c c

- basic for profit for the year 22 (14.15) (23.01)

The accompanying notes form part of these financial statements

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Balance Sheetas at 30 June 2010

2010 2009Notes $ $

ASSETS

Current Assets

Cash and cash equivalents 7 - - Trade and other receivables 8 28,252 20,122

Total Current Assets 28,252 20,122

Non-Current Assets

Property, plant and equipment 9 148,415 156,483 Intangible assets 10 2,667 4,667 Deferred tax assets 11 95,634 95,634

Total Non-Current Assets 246,716 256,784

Total Assets 274,968 276,906

LIABILITIES

Current Liabilities

Trade and other payables 12 9,755 12,302 Borrowings 13 284,839 204,877 Provisions 14 15,704 11,332

Total Current Liabilities 310,298 228,511

Non-Current Liabilities

Provisions 14 10,325 4,852

Total Non-Current Liabilities 10,325 4,852

Total Liabilities 320,623 233,363

Net Assets (45,655) 43,543

Equity

Issued capital 15 600,298 600,298 Accumulated losses 16 (645,953) (556,755)

Total Equity (45,655) 43,543


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Statement of Changes in Equityfor the Year Ended 30 June 2010

Issued Retained TotalCapital Earnings Equity

$ $ $

Balance at 1 July 2008 600,298 (411,636) 188,662

Total comprehensive income for the year - (145,119) (145,119)

Transactions with owners in their capacity as owners:

Shares issued during period - - -

Costs of issuing shares - - -

Dividends provided for or paid - - -

Balance at 30 June 2009 600,298 (556,755) 43,543

Balance at 1 July 2009 600,298 (556,755) 43,543

Total comprehensive income for the year - (89,198) (89,198)

Transactions with owners in their capacity as owners:

Shares issued during period - - -

Costs of issuing shares - - -

Dividends provided for or paid - - -

Balance at 30 June 2010 600,298 (645,953) (45,655)


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Statement of Cashflowsfor the Year Ended 30 June 2010

2010 2009Notes $ $

Cash Flows From Operating Activities

Receipts from customers 364,116 231,231 Payments to suppliers and employees (351,186) (351,343)Interest paid (23,727) (9,881)Costs incurred in fire damage (43,527) - Proceeds from insurance recovery 38,380 -

Net cash used in operating activities 17 (15,944) (129,993)

Cash Flows From Investing Activities

Payments for property, plant and equipment (64,018) -

Net cash used in investing activities (64,018) -

Cash Flows From Financing Activities

Proceeds from borrowings - -

Net cash provided by financing activities - -

Net decrease in cash held (79,962) (129,993)

Cash and cash equivalents at the beginning of the financial year (204,877) (74,884)

Cash and cash equivalents at the end of the financial year 13(a) (284,839) (204,877)


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Notes to the Financial Statementsfor the Year Ended 30 June 2010

Note 1.

Economic dependency - Bendigo and Adelaide Bank Limited

• training for the branch manager and other employees in banking, management systems and interface protocol; • methods and procedures for the sale of products and provision of services;• security and cash logistic controls;• calculation of company revenue and payment of many operating and administrative expenses

Bendigo Bank provides significant assistance in establishing and maintaining the Community Bank® branch franchiseoperations. It also continues to provide ongoing management and operational support, and other assistance and guidance inrelation to all aspects of the franchise operation, including advice in relation to:

• advice and assistance in relation to the design, layout and fit out of the Community Bank® branch;

• the formulation and implementation of advertising and promotional programs; and

The branch operates as a franchise of Bendigo Bank, using the name “Bendigo Bank” and the logo and system of operationsof Bendigo Bank. The company manages the Community Bank® branch on behalf of Bendigo Bank, however all transactionswith customers conducted through the Community Bank® branches are effectively conducted between the customers andBendigo Bank.

All deposits are made with Bendigo Bank, and all personal and investment products are products of Bendigo Bank, with thecompany facilitating the provision of those products. All loans, leases or hire purchase transactions, issues of new credit ordebit cards, temporary or bridging finance and any other transaction that involves creating a new debt, or increasing orchanging the terms of an existing debt owed to Bendigo Bank, must be approved by Bendigo Bank. All credit transactions aremade with Bendigo Bank, and all credit products are products of Bendigo Bank.

Comparative figures

Summary of Significant Accounting Policies

Where required by Australian Accounting Standards comparative figures have been adjusted to conform with changes inpresentation for the current financial year.

The company has entered into a franchise agreement with Bendigo and Adelaide Bank Limited that governs the managementof the Community Bank® branch at Gilgandra, New South Wales.

a) Basis of Preparation

These financial statements and notes comply with IFRS International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board.

The financial statements have been prepared under the historical cost convention on an accruals basis as modified by therevaluation of financial assets and liabilities at fair value through profit or loss and where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, otherauthoritative pronouncements of the Australian Accounting Standard Boards and the Corporations Act 2001.

Compliance with IFRS

Historical cost convention

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the company's accounting policies. These areas involving ahigher degree of judgement or complexities, or areas where assumptions and estimates are significant to the financialstatements are disclosed in note 3.

Financial statement presentation

The company has applied revised AASB 101 Presentation of Financial Statements which became effective on 1 January2009. The company has elected to present all items of income and expense recognised in the period in a single statement ofcomprehensive income.

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• sales techniques and proper customer relations.

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Note 1.

The following is a summary of the material accounting policies adopted by the company in the preparation of the financialstatements. The accounting policies have been consistently applied, unless otherwise stated.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset andliability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted by reporting date. The measurement of deferred tax liabilities reflects the tax consequences that would follow fromthe manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Going concern

Summary of Significant Accounting Policies (continued)

The company has, as part of its normal operations, obtained a overdraft facility with Bendigo and Adelaide Bank Limited tohelp finance operations. The company has also obtained an undertaking of support from Bendigo and Adelaide Bank Limitedthat it will continue to support the company and its operations for the 2010/11 financial year. This support is provided on thebasis that the company continues to fulfil its obligations under the franchise agreement and continues to work closely withBendigo and Adelaide Bank to further develop its business.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax and when thebalances relate to taxes levied by the same taxation authority and the company entity intends to settle its tax assets andliabilities on a net basis.

Current and deferred tax for the period

Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefit willflow to the company and any specific criteria have been met. Interest and fee revenue is recognised when earned. The gain orloss on disposal of property, plant and equipment is recognised on a net basis and is classified as income rather thanrevenue. All revenue is stated net of the amount of Goods and Services Tax (GST).

b) Revenue

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit orloss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reportingdate. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (orrefundable).

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when itrelates to items credited or debited to equity, in which case the deferred tax is also recognised directly in equity, or where itarises from initial accounting for a business combination, in which case it is taken into account in the determination of goodwillor excess.

c) Income Tax

Current tax

Deferred tax

Deferred tax is accounted for using the balance sheet liability method on temporary differences arising from differencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of thoseitems.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised tothe extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences orunused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if thetemporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of abusiness combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is notrecognised in relation to taxable temporary differences arising from goodwill.

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Note 1.

40 years2.5 - 40 years

4 - 40 years


Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation iscalculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimatedresidual value. Leasehold improvements are depreciated at the rate equivalent to the available building allowance using thestraight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of eachannual reporting period.

Receivables are carried at their amounts due. The collectability of debts is assessed at balance date and specific provision ismade for any doubtful accounts. Liabilities for trade creditors and other amounts are carried at cost that is the fair value of theconsideration to be paid in the future for goods and services received, whether or not billed to the company.

e) Cash and Cash Equivalents

i) Payment Terms

f) Trade Receivables and Payables

g) Property, Plant and Equipment

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulateddepreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the eventthat settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payablein the future to their present value as at the date of acquisition.

d) Employee Entitlements

Provision is made for the company's liability for employee benefits arising from services rendered by employees to balancedate. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to bepaid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured atthe present value of the estimated future cash outflows to be made for those benefits.

The company contributes to a defined contribution plan. Contributions to employee superannuation funds are charged againstincome as incurred.

h) Intangibles

The franchise fee paid to Bendigo and Adelaide Bank Limited has been recorded at cost and is amortised on a straight linebasis over the life of the franchise agreement.

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money marketinstruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on thebalance sheet.

The following estimated useful lives are used in the calculation of depreciation: - leasehold improvements - plant and equipment - furniture and fittings

j) Borrowings

Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90 days.

All loans are initially measured at the principal amount. Interest is recognised as an expense as it accrues.

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Note 1.

(i)

(ii)

(iii)


Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised costusing the effective interest rate method.

Impairment

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market and are subsequently measured at amortised cost using the effective interest rate method.

Held-to-maturity investments

l) Leases

m) Provisions

n) Contributed Equity

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Leasepayments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expensesin the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortisedon a straight-line basis over the life of the lease term.

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legalownership are transferred to the company are classified as finance leases. Finance leases are capitalised by recording anasset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of theminimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction ofthe lease liability and the lease interest expense for the period.

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrificeof economic benefits to other entities as a result of past transactions of other past events, it is probable that a future sacrificeof economic benefits will be required and a reliable estimate can be made of the amount of the obligation.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publiclyrecommended on or before the reporting date.

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred toanother party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated withthe asset.

k) Financial Instruments

Financial instruments are initially measured at fair value plus transaction costs. Financial instruments are classified andmeasured as set out below.

Derecognition

Classification and subsequent measurement

At each reporting date, the entity assesses whether there is objective evidence that a financial instrument has been impaired.Impairment losses are recognised in the statement of comprehensive income.

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinablepayments, and it is the entity’s intention to hold these investments to maturity. They are subsequently measured atamortised cost using the effective interest rate method.

Financial liabilities

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party tothe contractual provisions of the instrument.

Recognition and initial measurement

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Note 1.

Note 2.

(i) Market risk


Interest-bearing assets are held with Bendigo and Adelaide Bank Limited and subject to movements in market interest.Interest-rate risk could also arise from long-term borrowings. Borrowings issued at variable rates expose the company to cashflow interest-rate risk. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited mitigates thisrisk significantly.

(iii) Credit risk

The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to,the taxation authority are classified as operating cash flows.

(v) Cash flow and fair value interest rate risk

(iv) Liquidity risk

The company has no significant concentrations of credit risk. It has policies in place to ensure that customers have anappropriate credit history. The company's franchise agreement limits the company's credit exposure to one financial institution,being Bendigo and Adelaide Bank Limited.

(ii) Price risk

The company is not exposed to equity securities price risk as it does not hold investments for sale or at fair value. Thecompany is not exposed to commodity price risk.

p) Goods and Services Tax

The company has no exposure to any transactions denominated in a currency other than Australian dollars.

The company's activities expose it to a limited variety of financial risks: market risk (including currency risk, fair value interestrisk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The company's overall risk management programfocuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financialperformance of the entity. The entity does not use derivative instruments.

Risk management is carried out directly by the board of directors.

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

Ordinary shares are recognised at the fair value of the consideration received by the company. Any transaction costs arisingon the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Financial Risk Management

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

o) Earnings Per Share

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payableto, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in thestatement of cash flows on a gross basis.

Prudent liquidity management implies maintaining sufficient cash and marketable securities and the availability of funding fromcredit facilities. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited mitigates this risksignificantly.

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Note 2.

(vi) Capital management

(i) (a)

(b)

(ii)

There were no changes in the company's approach to capital management during the year.

Note 3.

Financial Risk Management (continued)

subject to the availability of distributable profits, the relevant rate of return multiplied by the average level of sharecapital of the franchisee over that 12 month period; and

Management has identified the following critical accounting policies for which significant judgements, estimates andassumptions are made. Actual results may differ from these estimates under different assumptions and conditions and maymaterially affect financial results or the financial position reported in future periods.

20% of the profit or funds of the franchisee otherwise available for distribution to shareholders in that 12 monthperiod; and

Estimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that may have a financial impact on the entity and that are believed to be reasonable under thecircumstances.

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall not exceedthe distribution limit.

Judgement is required in assessing whether deferred tax assets and certain tax liabilities are recognised on the balancesheet. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences, arerecognised only where it is considered more likely than not that they will be recovered, which is dependent on the generationof sufficient future taxable profits.

Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. Thesedepend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital managementtransactions. Judgements are also required about the application of income tax legislation.

Critical Accounting Estimates and Judgements

The board's policy is to maintain a strong capital base so as to sustain future development of the company. The board ofdirectors monitor the return on capital and the level of dividends to shareholders. Capital is represented by total equity asrecorded in the balance sheet.

The board is managing the growth of the business in line with this requirement. There are no other externally imposed capitalrequirements, although the nature of the company is such that amounts will be paid in the form of charitable donations andsponsorship. Charitable donations and sponsorship paid for the year ended 30 June 2010 can be seen in the statement ofcomprehensive income.

the relevant rate of return is equal to the weighted average interest rate on 90 day bank bills over that 12 monthperiod plus 5%.

the distribution limit is the greater of:

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,seldom equal the related actual results.

These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes incircumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilitiesrecognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In suchcircumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment,resulting in corresponding credit or charge to the statement of comprehensive income.

Taxation

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financialstatements.

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Note 3.

2010 2009Note 4. $ $

Operating activities: - services commissions 282,159 217,623 - other revenue 3,300 60

Total revenues from ordinary activities 285,459 217,683

Revenue from Ordinary Activities

Critical Accounting Estimates and Judgements (continued)

Impairment of assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the company's share of the net identifiableassets of the acquired branch/agency at the date of acquisition. Goodwill on acquisition is included in intangible assets.Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes incircumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

Goodwill

Estimation of useful lives of assets

The estimation of the useful lives of assets has been based on historical experience and the condition of the asset isassessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made whenconsidered necessary.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset for which the estimates of future cash flows have not beenadjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carryingamount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit orloss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as arevaluation decrease.

At each reporting date, the company reviews the carrying amounts of its tangible and intangible assets that have an indefiniteuseful life to determine whether there is any indication that those assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (ifany). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimatesthe recoverable amount of the cash-generating unit to which the asset belongs.

The calculations require the use of assumptions.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to therevised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed thecarrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generatingunit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset iscarried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

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2010 2009Note 5. $ $

Depreciation of non-current assets: - plant and equipment 2,227 7,284 - leasehold improvements 5,288 7,803

Amortisation of non-current assets: - franchise agreement 2,000 2,000

9,515 17,087

Finance costs: - interest paid 23,727 9,881

Bad debts 931 943

Note 6.

Operating loss (89,198) (145,119)

Prima facie tax on loss from ordinary activities at 30% (26,759) (43,536)

Add tax effect of:- non-deductible expenses 620 782 - timing difference expenses 2,954 1,121 - blackhole expenses (1,816) (1,816)- investment allowance (9,602) -

Tax losses not brought to account 34,603 43,449

- -

Income tax losses:

Future income tax benefits arising form tax losses are not recognised atreporting date as realisation of the benefit is not regarded as virtually certain.

Future income tax benefit carried forward but not bought to account is: 133,772 99,168

Note 7.

Cash at bank and on hand - -

Note 8.

- Trade receivables 24,955 16,825 - Other receivables & accruals 3,297 3,297

28,252 20,122

Trade and Other Receivables

Expenses

Income Tax Expense/Credit

The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax expense as follows:

Cash and Cash Equivalents

18



2010 2009Note 9. $ $

Plant and equipmentAt cost 53,009 49,694 Less accumulated depreciation (23,500) (24,499)

29,509 25,195

Leasehold improvementsAt cost 130,098 151,468 Less accumulated depreciation (11,192) (20,180)

118,906 131,288

Total written down amount 148,415 156,483

Movements in carrying amounts:

Plant and equipmentCarrying amount at beginning 25,195 32,479 Additions 16,589 - Disposals (10,048) - Less: depreciation expense (2,227) (7,284)

Carrying amount at end 29,509 25,195

Leasehold improvementsCarrying amount at beginning 131,288 139,091 Additions 47,428 - Disposals (54,522) - Less: depreciation expense (5,288) (7,803)Carrying amount at end 118,906 131,288

Total written down amount 148,415 156,483

Note 10.

Franchise feeAt cost 10,000 10,000 Less: accumulated amortisation (7,333) (5,333)

2,667 4,667

Note 11.

Deferred Tax Asset- Opening Balance 95,634 95,634

Future income tax benefits attributable to losses - - Deferred tax on provisions - -

- Closing Balance 95,634 95,634

Movement in deferred tax charged to statement of comprehensive income - 43,449

Note 12.

Property, Plant and Equipment

Intangible Assets

Tax

Trade and Other Payables

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Trade creditors 6,025 10,102 Other creditors & accruals 3,730 2,200

9,755 12,302

2010 2009Note 13. $ $

Current:

Bank overdrafts 284,839 204,877

Note 13.(a) Reconciliation of cash

Bank overdraft 284,839 204,877

Note 14.

Provision for annual leave 15,704 11,332

Non-Current:

Provision for long service leave 10,325 4,852

Number of employees at year end 3 3

Note 15.

630,559 Ordinary shares fully paid (2009: 630,559) 630,559 630,559 Less: equity raising expenses (30,261) (30,261)

600,298 600,298

(a) Voting rights

Rights attached to shares

Subject to some limited exceptions, each member has the right to vote at a general meeting.

Current:

Contributed Equity

The directors are currently negating a temporary overdraft limit with the Bendigo and AdelaideBank Limited. The Business Solutions Non-Residential Secured Overdraft facility limit is$380,000 which is still to be formally approved, the Interest Rate is currently 6.49%, varying fromtime to time. It is likely that this facility will need to be increased if it is to be sufficient to meetexpected cash outflows before the branch breaks even. This increase has not yet been appliedfor but the directors believe that such an application would be approved by the Bendigo AdelaideBank.

Borrowings

The purpose of giving each member only one vote, regardless of the number of shares held, is to reflect the nature

Provisions

On a show of hands or a poll, each member attending the meeting (whether they are attending the meeting inperson or by attorney, corporate representative or proxy) has one vote, regardless of the number of shares held.However, where a person attends a meeting in person and is entitled to vote in more than one capacity (forexample, the person is a member and has also been appointed as proxy for another member) that person may onlyexercise one vote on a show of hands. On a poll, that person may exercise one vote as a member and one vote foreach other member that person represents as duly appointed attorney, corporate representative or proxy.

The above figures are reconciled to cash at the end of the financial year as shown in thestatement of cashflows as follows:

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Note 15.

(b)

(c) Transfer

••

•

2010 2009Note 16. $ $

Balance at the beginning of the financial year (556,755) (411,636)Net loss from ordinary activities after income tax (89,198) (145,119)

Generally, dividends are payable to members in proportion to the amount of the share capital paid up on the sharesheld by them, subject to any special rights and restrictions for the time being attaching to shares. The franchiseagreement with Bendigo and Adelaide Bank Limited contains a limit on the level of profits or funds that may bedistributed to shareholders. There is also a restriction on the payment of dividends to certain shareholders if theyhave a prohibited shareholding interest (see below).

Generally, ordinary shares are freely transferable. However, the directors have a discretion to refuse to register atransfer of shares.

Dividends

of the company as a community based company, by providing that all members of the community who havecontributed to the establishment and ongoing operation of the Community Bank® have the same ability to influencethe operation of the company.

Contributed Equity (continued)

Subject to the foregoing, shareholders may transfer shares by a proper transfer effected in accordance with thecompany’s constitution and the Corporations Act.

Prohibited shareholding interest

In the constitution, members acknowledge and recognise that the exercise of the powers given to the board may causeconsiderable disadvantage to individual members, but that such a result may be necessary to enforce the prohibition.

The board has the power to request information from a person who has (or is suspected by the board of having) a legal orbeneficial interest in any shares in the company or any voting power in the company, for the purpose of determining whether aperson has a prohibited shareholding interest. If the board becomes aware that a member has a prohibited shareholdinginterest, it must serve a notice requiring the member (or the member's associate) to dispose of the number of shares the board considers necessary to remedy the breach. If a person fails to comply with such a notice within a specified period (that mustbe between three and six months), the board is authorised to sell the specified shares on behalf of that person. The holder willbe entitled to the consideration from the sale of the shares, less any expenses incurred by the board in selling or otherwisedealing with those shares.

A person must not have a prohibited shareholding interest in the company.

In summary, a person has a prohibited shareholding interest if any of the following applies:

They control or own 10% or more of the shares in the company (the "10% limit").

Accumulated Losses

In the opinion of the board they do not have a close connection to the community or communities in which thecompany predominantly carries on business (the "close connection test").Where the person is a shareholder, after the transfer of shares in the company to that person the number ofshareholders in the company is (or would be) lower than the base number (the "base number test"). The basenumber is 314. As at the date of this report, the company had 349 shareholders.

Where a person has a prohibited shareholding interest, the voting and dividend rights attaching to the shares in which theperson (and his or her associates) have a prohibited shareholding interest, are suspended.

As with voting rights, the purpose of this prohibited shareholding provision is to reflect the community-based nature of thecompany.

21



Balance at the end of the financial year (645,953) (556,755)

2010 2009Note 17. $ $

Loss from ordinary activities after income tax (89,198) (145,119)

Non cash items:

- depreciation 7,515 15,087 - amortisation 2,000 2,000 - loss on sale of fixed assets 64,571 -

Changes in assets and liabilities:

- increase in receivables (8,130) (7,825)- increase/(decrease) in payables (2,547) 1,279 - increase in provisions 9,845 4,585

Net cashflows used in operating activities (15,944) (129,993)

Note 18.

Operating lease commitmentsNon-cancellable operating leases contracted for but not capitalised in the financial statementsPayable - minimum lease payments- not later than 12 months 18,611 17,895 - between 12 months and 5 years 7,755 25,352 - greater than 5 years - -

26,366 43,247

Note 19.

Amounts received or due and receivable by theauditor of the company for:- audit & review services 3,400 3,400 - non audit services 1,647 2,225

5,047 5,625

Leases

Reconciliation of loss from ordinary activities after tax to net cash used in operating activities

Auditors' Remuneration

Statement of Cashflows

The property lease is a non-cancellable lease with a five-year term, with rent payable monthly in advance. The lease has two 5 year options to renew and is due for renewal on 28 November 2011.

22



Note 20.

The names of directors who have held office during the financial year are:

Maxwell Ian Zell

Lorraine Margaret Hutchison

Kim Louise O'Donnell

Douglas Richard Batten

Donald Kingsley Kennaugh

Michael Charles Bowman

Dorothy Lorraine Burrell

Michael Allan Johnson

Robyn Edna Cook

Anthony John Gardiner

Directors Shareholdings 2010 2009

Maxwell Ian Zell 10,351 10,351

Lorraine Margaret Hutchison 5,001 5,001

Kim Louise O'Donnell 1 1

Douglas Richard Batten 5,001 5,001

Donald Kingsley Kennaugh 10,001 10,001

Michael Charles Bowman 10,000 10,000

Dorothy Lorraine Burrell 1,000 1,000

Michael Allan Johnson 1,500 1,500

Robyn Edna Cook - -

Anthony John Gardiner - -

Note 21.

No Director of the company receives remuneration for services as a company director or Committee member.

There was no movement in directors shareholdings during the year.

Secretary, Lorraine Hutchison received a fee for services for her performance of the Secretary's role. The payment is forreimbursement of time and personal expenses incurred, she received $2,000 (2009: $3,000).

Treasurer, Kim O'Donnell received a fee for services for her performance of the Treasurer's role. The payment is forreimbursement of time and personal expenses incurred, she received $2,000 (2009: $1,000).

Key Management Personnel Disclosures

No other director or related entity has entered into a material contract with the company. No director's fees have been paid asthe positions are held on a voluntary basis.

Director and Related Party Disclosures

23



There are no Executives within the company whose remuneration is required to be disclosed.

2010 2009Note 22. $ $

(89,198) (145,119)

Number Number

630,559 630,559

Note 23.

Note 24.

Note 25.

Note 26.

The registered office and principal place of business is:

Registered Office Principal Place of Business57 Miller Street 57 Miller StreetGilgandra NSW Gilgandra NSW

The economic entity operates in the service sector where it facilitates community banking services in Gilgandra andsurrounding districts of New South Wales pursuant to a franchise agreement with Bendigo and Adelaide Bank Limited.

There have been no events after the end of the financial year that would materially affect the financial statements.

Registered Office/Principal Place of Business

Earnings Per Share

Events Occurring After the Balance Sheet Date

Contingent Liabilities

Segment Reporting

(a) Profit attributable to the ordinary equity holders of the company used in calculating earnings per share

(b) Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

There were no contingent liabilities at the date of this report to affect the financial statements.

24


Notes to the Financial Statements for the Year Ended 30 June 2010Note 27. Financial Instruments

Net Fair Values

Credit Risk

Interest Rate Risk

Financial instrument

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010$ $ $ $ $ $ $ $ $ $ %

Financial AssetsReceivables - - - - - - - - 28,252 20,122 N/AFinancial LiabilitiesInterest bearing liabilities 284,839 204,877 - - - - - - - - 9.41Payables - - - - - - - - 9,755 12,302 N/A

effective in

Fixed interest rate maturing inOver 5 years

rate1 year or less Over 1 to 5 years Non interest bearing

The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the balance sheet. The company does not have any unrecognisinstruments at the year end.

The maximum exposure to credit risk at balance date to recognised financial assets is the carrying amount of those assets as disclosed in the balance sheet andfinancial statements.

There are no material credit risk exposures to any single debtor or group of debtors under financial instruments entered into by the economic entity.

Floating interest Weighted

24


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

2009%

N/A

9.64N/A

nterest rate

sed financial

notes to the

d average

25

Documents

Gilgandra Financial Services Limited