realestateworld.com.au

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Estate Agents Co-operative LimitedABN 52 079 055 637

Financial Statements

For the Year Ended 30 June 2010

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CONTENTS

Page

Financial Statements

Notice of Annual General Meeting 1

Chairman's Report 2010 2

Directors' Report 4

Auditors Independence Declaration under Section 307C of the Corporations Act 2001 7

Statement of Comprehensive Income 8

Statement of Financial Position 9

Statement of Changes in Equity 10

Statement of Cash Flows 11

Notes to the Financial Statements 12

Directors' Declaration 27

Independent Audit Report 28

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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 Ltd274 Miller RoadVILLAWOOD 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

JOHN G CARSONCOMPANY SECRETARY

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Estate Agents Co-operative LimitedChairman's Report 2010

I am pleased to present the 2010 annual report and to inform you of a year of significant achievementsmade by our Co-operative.

In the financial year 2009 – 2010 we advanced our stated objectives to return the Co-operative to profitwhile expanding and enhancing our portfolio of goods and services for our members in particular and for thebenefit 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 experiencedthe same conditions, increased interest rates and the first home buyers’ grants returning to normal levelssaw a slowing in market activity. This resulted in fewer listings and even less buyers and, with the ReserveBank 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 EACBoard and Management, including significant restructuring and investment in existing and new goods andservices, 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 isanticipated that the Co-operative will continue to improve on this year’s excellent result.

It is with a great deal of pride that I also advise that the EAC was named in the inaugural “Australia’s Top100 Co-operatives, Credit Unions and Mutuals by Annual Turnover” published by Co-operatives Australia onbehalf 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.

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As a result of these initiatives I am pleased to report a steady growth in membership numbers, includingbranch offices, which are further expected to increase in the current financial year.

Innovation continues to be the driving force in the Co-operative and in this regard at its Annual Planning Dayin May, your Board and Management reviewed the operations of the Co-operative over the last twelvemonths, its Strategic Plan and the budget for the new financial year. The Strategic Plan was updated withsome forty items were we believe we can and need to do better as well as with some exciting new servicesthat will further enhance the benefit derived from being a member of the Co-operative. The list of goods andservices available through the Co-operative continues to grow on a regular basis and I encourage membersto review their participation in same and to discuss these with the Account Manager for their respectivedesignated area.

As always, paramount in our endeavours is to ensure that the best interests of our members and the realestate industry as a whole are always top of mind. In this regard the Co-operative has entered intodiscussions with the Real Estate Institute of Australia (REIA). The REIA is the national association forAustralia’s real estate profession. REIA is a politically non-aligned organisation that provides research andwell-informed advice to the Federal Government, Opposition, members of the real estate profession, mediaand the public on a range of issues affecting the property market.

To date these discussions has resulted in EAC members receiving valuable real estate resources fromREIA including a weekly newsletter. Discussions are continuing in relation to possibly having somerepresentation for EAC members at a national level.

In closing I would like to express my gratitude to:

• all our loyal members that have continued to support the Co-operative during some very difficult

times over the last few years. Your dedication to the Co-operative is acknowledged and greatly

appreciated;

• my fellow Directors for their ongoing commitment, counsel and support. These dedicated people

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

• the dedicated team of Management and Staff at our Sydney and Wollongong offices, without

whose extraordinary commitment and dedication, an organisation such as ours could not possibly

function.

Dale WhittakerCHAIRMAN

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As a result of these initiatives I am pleased to report a steady growth in membership numbers, includingbranch offices, which are further expected to increase in the current financial year.

Innovation continues to be the driving force in the Co-operative and in this regard at its Annual Planning Dayin May, your Board and Management reviewed the operations of the Co-operative over the last twelvemonths, its Strategic Plan and the budget for the new financial year. The Strategic Plan was updated withsome forty items were we believe we can and need to do better as well as with some exciting new servicesthat will further enhance the benefit derived from being a member of the Co-operative. The list of goods andservices available through the Co-operative continues to grow on a regular basis and I encourage membersto review their participation in same and to discuss these with the Account Manager for their respectivedesignated area.

As always, paramount in our endeavours is to ensure that the best interests of our members and the realestate industry as a whole are always top of mind. In this regard the Co-operative has entered intodiscussions with the Real Estate Institute of Australia (REIA). The REIA is the national association forAustralia’s real estate profession. REIA is a politically non-aligned organisation that provides research andwell-informed advice to the Federal Government, Opposition, members of the real estate profession, mediaand the public on a range of issues affecting the property market.

To date these discussions has resulted in EAC members receiving valuable real estate resources fromREIA including a weekly newsletter. Discussions are continuing in relation to possibly having somerepresentation for EAC members at a national level.

In closing I would like to express my gratitude to:

• all our loyal members that have continued to support the Co-operative during some very difficult

times over the last few years. Your dedication to the Co-operative is acknowledged and greatly

appreciated;

• my fellow Directors for their ongoing commitment, counsel and support. These dedicated people

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

• the dedicated team of Management and Staff at our Sydney and Wollongong offices, without

whose extraordinary commitment and dedication, an organisation such as ours could not possibly

function.

Dale WhittakerCHAIRMAN

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Directors' Report


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 otherwisestated.

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 operationsshow that it remains in a position to meet the long term objectives previously set by the Board (also refer toChairman's Report). Following significant restructuring the Directors have continued reviewing expenditureand this, combined with expected increased levels of income has resulted in the preparation of a budgetwhich anticipates an increased operating profit for the financial year 2010/2011. Without the distraction ofany further unforeseen issues the Co-operative’s Board and Management can now focus and devote theirfull 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 financialyear:

- The decision by the Real Estate Institute of NSW to enter into a Deed of Release in respect to theprovision of printed and electronic real estate forms resulted in the Co-operative re-entering the realestate forms market with its own suite of forms and agreements.

- EAC introduced a new insurance service through its endorsement of OAMPS Insurance Brokers as itspreferred 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:

* listing management and aggregation;

* property sales information and mapping;

* property sales reports and statistics;

* website design and hosting.

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Directors' Report


- 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 ormay significantly affect the operations of the company, the results of those operations, or the state of affairsof the company in future financial years.

The likely developments in the operations of the Co-operative and the expected results of those operationsin future financial years are as follows:

- The Board continues to look at ways to develop its suite of goods and services offered to meet theneeds 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 thecurrent 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 willbenefit members and reduce costs. It looks to working with members to develop services andsystems which allow a greater control by members of their business overheads and at the same timeassisting members in meeting their legislative compliance responsibilities.

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

No options over issued shares or interests in the company were granted during or since the end of thefinancial 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 anyproceedings to which the company is a party for the purpose of taking responsibility on behalf of thecompany for all or any part of those proceedings.

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

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Directors' Report


Auditor's Independence Declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act2001 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

Dated this_______day of________________________2010

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15th October

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Statement of Comprehensive Income


Note

2010

$

2009

$

Revenue 8,095,911 8,407,621

Other revenue 94,482 58,291

Raw materials and consumables used (386,556) (398,462)

Employee benefits expense (3,164,784) (3,434,012)

Depreciation and amortisation (246,236) (292,988)

Finance costs (56,532) (68,917)

Administrative expenses (4,082,815) (4,698,587)

Profit/(Loss) before income tax 253,470 (427,054)

Income tax expense 3 - -

Profit/(Loss) for the year 253,470 (427,054)

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 statements8

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Statement of Financial Position

As At 30 June 2010

Note

2010

$

2009

$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 4 58,822 58,622

Trade and other receivables 5 1,232,158 1,290,972

Inventories 6 57,736 21,050

Other current assets 7 40,308 128,019

TOTAL CURRENT ASSETS 1,389,024 1,498,663

NON-CURRENT ASSETS

Trade and other receivables 5 198,028 -

Financial assets 8 31,053 31,053

Property, plant and equipment 9 2,497,244 2,756,637

TOTAL NON-CURRENT ASSETS 2,726,325 2,787,690

TOTAL ASSETS 4,115,349 4,286,353

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 10 1,207,802 1,239,140

Borrowings 11 430,466 703,335

Short-term provisions 12 299,054 279,383

Other Liabilities 13 - 77,591

TOTAL CURRENT LIABILITIES 1,937,322 2,299,449

NON-CURRENT LIABILITIES

Borrowings 11 46,374 90,558

Long-term provisions 12 309,190 277,353

TOTAL NON-CURRENT LIABILITIES 355,564 367,911

TOTAL LIABILITIES 2,292,886 2,667,360

NET ASSETS 1,822,463 1,618,993

EQUITY

Reserves 2,199,172 2,249,172

Retained earnings/(Accumulated losses) (376,709) (630,179)

TOTAL EQUITY 1,822,463 1,618,993


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Statement of Changes in Equity


2009

RetainedEarnings/

(AccumulatedLosses)

$

CapitalProfits

Reserve

$

AssetRevaluation

Surplus

$

ShareRedemption

Reserve

$

Total

$

Balance at 1 July 2008 (203,125) 1,153,637 753,695 216,840 1,921,047

Profit/(loss) attributableto equity shareholders (427,054) - - - (427,054)

Revaluation increment(decrement) - - 125,000 - 125,000

Balance at 30 June2009 (630,179) 1,153,637 878,695 216,840 1,618,993

2010

RetainedEarnings/

(AccumulatedLosses)

$

CapitalProfits

Reserve

$

AssetRevaluation

Surplus

$

ShareRedemption

Reserve

$

Total

$

Balance at 1 July 2009 (630,179) 1,153,637 878,695 216,840 1,618,993

Profit/(loss) attributableto equity shareholders 253,470 - - - 253,470

Revaluation increment(decrement) - - (50,000) - (50,000)

Balance at 30 June2010 (376,709) 1,153,637 828,695 216,840 1,822,463


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Statement of Cash Flows


Note

2010

$

2009

$

CASH FROM OPERATING ACTIVITIES:

Receipts from customers 8,133,044 9,165,140

Payments to suppliers and employees (7,728,262) (8,996,755)

Interest received 845 2,094

Finance costs (56,532) (68,917)

Net cash provided by (used in) operating activities 16(a) 349,095 101,562

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of plant and equipment 5,000 23,637

Payments to acquire property, plant and equipment (36,843) (54,290)

Payments for investments - (18,537)

Net cash used by investing activities (31,843) (49,190)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issue of shares 1,780 120

Proceeds from borrowings - 19,900

Repayment of borrowings (42,395) (29,008)

Net cash used by financing activities (40,615) (8,988)

Net increase in cash held 276,637 43,384

Cash and cash equivalents at beginning of financial year (602,318) (645,702)

Cash and cash equivalents at end of financial year 4(a) (325,681) (602,318)


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Notes to the Financial Statements


1 Summary of Significant Accounting Policies

Estate Agents Co-operative Limited is a registrable Australian Corporation, incorporated and domiciled inAustralia.

Reporting Basis and Conventions

The directors have prepared the financial statements on the basis that the company is a non-reporting entitybecause there are no users dependent on general purpose financial statements. The financial statementsare therefore special purpose financial statements that has been prepared in order to meet therequirements of the Corporations Act 2001, the Co-operatives Act 1992 and the Co-operatives Regulation2005.

The financial statements has been prepared in accordance with the mandatory Australian AccountingStandards applicable to entities reporting under the Corporations Act 2001 and the significant accountingpolicies disclosed below which the directors have determined are appropriate to meet the needs ofmembers. 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 unlessotherwise stated in the notes. The material accounting policies have been adopted in the preparation ofthese statements are as follows:

Accounting Policies

(a) Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) anddeferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable incomecalculated 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 liabilitybalances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead ofthe 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 betweenthe tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferredtax assets also result where amounts have been fully expensed but future tax deductions areavailable. 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 theperiod when the asset is realised or the liability is settled, based on tax rates enacted or substantivelyenacted at reporting date. Their measurement also reflects the manner in which managementexpects to recover or settle the carrying amount of the related asset or liability.

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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 tothe extent that it is probable that future taxable profit will be available against which the benefits of thedeferred 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 thereversal of the temporary difference can be controlled and it is not probable that the reversal willoccur in the foreseeable future.

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

(b) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of manufacturedproducts includes direct materials, direct labour and an appropriate portion of variable and fixedoverheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned onthe 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, anyaccumulated depreciation and impairment losses.

Property

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

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

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

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(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 inexcess of the recoverable amount from these assets. The recoverable amount is assessed on thebasis of the expected net cash flows that will be received from the assets employment andsubsequent disposal. The expected net cash flows have been discounted to their present values indetermining recoverable amounts.

Depreciation

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

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 ofeach reporting period.

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

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 revaluedassets are sold, amounts included in the revaluation reserve relating to that asset are transferred toretained earnings.

(d) Leases

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

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

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(d) Leases continuedliability and the lease interest expense for the period.

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

Lease payments for operating leases, where substantially all of the risks and benefits remain with thelessor, 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 thecontractual provisions to the instrument. For financial assets, this is the equivalent to the date that thecompany 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 theinstrument is classified 'at fair value through profit or loss', in which case transaction costs areexpensed to profit or loss immediately.

Classification and subsequent measurement

Finance instruments are subsequently measured at either of fair value, amortised cost using theeffective interest rate method, or cost. Fair value represents the amount for which an asset could beexchanged or a liability settled, between knowledgeable, willing parties. Where available, quotedprices in an active market are used to determine fair value. In other circumstances, valuationtechniques are adopted.

Amortised cost is calculated as: (i) the amount in which the financial asset or financial liability ismeasured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulativeamortisation of the difference, if any, between the amount initially recognised and the maturity amountcalculated 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 relevantperiod 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 (orwhen this cannot be reliably predicted, the contractual term) of the financial instrument to the netcarrying amount of the financial asset or financial liability. Revisions to expected future net cash flowswill necessitate an adjustment to the carrying value with a consequential recognition of an income orexpense in profit or loss.

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(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 beclassified into other categories of financial assets due to their nature, or they are designated as suchby management. They comprise investments in the equity of other entities where there is neither afixed maturity nor fixed or determinable payments.

(ii) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured atamortised cost.

(iii) Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniquesare applied to determine the fair value for all unlisted securities, including recent arm's lengthtransactions, 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 assetsto determine whether there is any indication that those assets have been impaired. If such anindication exists, the recoverable amount of the asset, being the higher of the asset's fair value lesscosts to sell and value in use, is compared to the asset's carrying value. Any excess of the asset'scarrying 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 companyestimates the recoverable amount of the cash-generating unit to which the asset belongs.

Derecognition

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

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(g) Employee Benefits

Provision is made for the company's liability for employee benefits arising from services rendered byemployees to balance date. Employee benefits that are expected to be settled within one year havebeen 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 estimatedfuture 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 ofpast events, for which it is probable that an outflow of economic benefits will result and that outflowcan be reliably measured.

(i) Cash and Cash Equivalents

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

(j) Revenue and Other Income

Revenue is measured at the fair value of the consideration received or receivable after taking intoaccount any trade discounts and volume rebates allowed. Any consideration deferred is treated asthe provision of finance and is discounted at a rate of interest that is generally accepted in the marketfor similar arrangements. The difference between the amount initially recognised and the amountultimately received is interest revenue.

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

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

Revenue recognition relating to the provision of services is determined with reference to the stage ofcompletion of the transaction at the end of the reporting period and where outcome of the contractcan be estimated reliably. Stage of completion is determined with reference to the services performedto date as a percentage of total anticipated services to be performed. Where the outcome cannot beestimated 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).

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(k) Borrowing Costs

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

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 amountof GST incurred is not recoverable from the Tax Office. In these circumstances the GST isrecognised 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 GSTcomponent 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 currentfinancial 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 StandardsAASB 101:Presentation of Financial Statements, which became mandatory. The adoption of this standard hasimpacted the recognition, measurement and disclosure of certain transactions. The following is anexplanation of the impact the adoption of this standard has had on the financial statements of EstateAgents Co-operative Limited.

AASB 101: Presentation of Financial Statements

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 financialstatements. Below is an overview of the key changes and the impact on the company's financialstatements.

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 notexpected to impact the financial performance or financial position of the company

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(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 fromtransactions with owners in their capacity as owners to be presented separately from non-ownerchanges in equity. Owner changes in equity are to be presented in the statement of changes inequity, with non-owner changes in equity presented in the statement of comprehensive income. Theprevious version of AASB 101 required that owner changes in equity be presented in the incomestatement.

Statement of comprehensive income - The revised AASB 101 requires all income and expenses to bepresented in either one statement, the statement of comprehensive income, or two statements, aseparate income statement and a statement of comprehensive income. The previous version ofAASB 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 'othercomprehensive income' which comprises of income and expenses that are not recognised in profit orloss as required by other Australian Accounting Standards. Items of other comprehensive income areto be disclosed in the statement of comprehensive income. Entities are required to disclose theincome tax relating to each component of other comprehensive income. The previous version ofAASB 101 did not contain an equivalent concept.

The impact of this requirement is the disclosure within Note 3 to the financial statements, whichreflects the grossed up value of each item of other comprehensive income and the income taxexpense/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 havemandatory application dates for future reporting periods. The company has decided against earlyadoption of these standards.

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

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2 Profit for the Year

(a) Expenses

2010

$

2009

$

Depreciation of property, plant and equipment 246,236 292,988

Remuneration of auditor

- audit or review 38,250 37,500

- other services 597 4,550

38,847 42,050

Rental expense on operating leases

- contingent rentals - 18,333

(b) 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 -

(c) Significant Revenue and Other Income and Expenses

The following significant revenue and expense items arerelevant in explaining the financial performance:

Bad debts 41,652 18,624

Doubtful debts (19,007) (17,123)

3 Income Tax Expense

Income tax expense - -

4 Cash and Cash Equivalents

Cash on hand 900 700

Cash at bank 38,400 38,400

Short-term bank deposits 19,522 19,522

58,822 58,622

(a) Reconciliation of cash

Cash at the end of the financial year as shown in the cash flowstatement is reconciled to items in the balance sheet as follows:

Cash and cash equivalents 58,822 58,622

Bank overdraft (384,503) (660,940)

(325,681) (602,318)

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5 Trade and Other Receivables

2010

$

2009

$

CURRENT

Trade receivables 1,124,607 1,160,803

Provision for impairment of receivables (29,248) (48,256)

1,095,359 1,112,547

Other receivables 136,799 178,425

1,232,158 1,290,972

NON-CURRENT

Other receivables 198,028 -

198,028 -

6 Inventories

CURRENT

Merchandise - At Cost 57,736 21,050

7 Other Current Assets

CURRENT

Prepayments 36,464 125,012

Share Capital Unpaid 3,844 3,007

40,308 128,019

8 Financial Assets

Available for sale financial assets 8(a) 31,053 31,053

(a) Available-for-sale Financial Assets Comprise:

Unlisted investment, at recoverable amount

shares in other corporations at cost 31,053 64,053

Less: impairment provision - (33,000)

Total available-for-sale financial assets 31,053 31,053

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9 Property, Plant and Equipment

2010

$

2009

$

Land and buildings

Wollongong at independent valuation 2009 500,000 550,000

Miller Road at independent valuation 2008 2,220,000 2,220,000

Less accumulated depreciation (759,385) (718,977)

Total land and buildings 1,960,615 2,051,023

Plant and equipment

Plant and equipment at cost 547,647 529,905


Total plant and equipment 273,129 289,550

Furniture, fixture and fittings

Furniture, Fixtures and Fittings 200,176 197,902


Total furniture, fixture and fittings 76,274 85,291

Motor vehicles

Motor Vehicle at cost 35,712 35,712

Motor Vehicle under lease 155,407 184,781


Total motor vehicles 18,490 68,589

Office equipment

Office equipment at cost 75,317 74,267


Total office equipment 2,091 2,504

Computer equipment

Computer equipment at cost 2,230,582 2,220,078

Less accumulated depreciation (2,063,937) (1,979,734)

Total computer equipment 166,645 240,344

Computer software

Computer software at cost 103,046 97,773


Total computer software - 19,335

Total plant and equipment 536,629 705,613

Total property, plant and equipment 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 wascredited/debited to an asset revaluation reserve in equity.

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10 Trade and Other Payables

2010

$

2009

$

CURRENT

Trade payables 738,910 840,109

Other payables 382,012 323,045

Amount payable to:

- Meta Publishing Pty Limited - (6,974)

- Members share capital 86,880 82,960

1,207,802 1,239,140

11 Borrowings

CURRENT

Bank overdraft 384,503 660,940

Lease liability 45,963 42,395

430,466 703,335

NON-CURRENT

Paid up capital 32,850 31,070


46,374 90,558

(a) Total current and non-current secured liabilities

Bank overdraft 384,503 660,940


443,991 762,823

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

12 Provisions

CURRENT

Employee benefits 299,054 279,383

NON-CURRENT

Employee benefits 309,190 277,353

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13 Other Liabilities

2010

$

2009

$

CURRENT

Sales in advance - 77,591

14 Capital and Leasing Commitments

(a) Finance Leasing and Hire Purchase Commitments

Payable - minimum lease payments:

- not later than 12 months 46,431 50,703

- between 12 months and 5 years 13,640 62,234

Minimum lease payments 60,071 112,937

Less future finance changes (583) (11,053)

Present value of minimum lease payments 59,488 101,884

The commercial hire purchase on the motor vehicles, which commenced in 2006, 2007 and 2009, are5 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

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 venturearrangements entered into with the Co-operative inregard to the provision of both printed and electronicreal estate forms. The REINSW and the Co-operativehave resolved all outstanding commercial mattersbetween them on mutually acceptable terms. All priorrelationships between the REINSW and the Co-operative are now formally at an end. - 46,000

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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 246,236 292,988

Bad and doubtful debt - 17,123

Net gain on disposal of property, plant and equipment (5,000) (8,753)

Increase in employee benefits - 227,938

Net gain on disposal of investments (6,127) -

Changes in assets and liabilities, net of the effects ofpurchase and disposal of subsidiaries

(Increase)/decrease in trade and term receivables (133,087) 428,804

(Increase)/decrease in prepayments 87,710 290,024

(Increase)/decrease in inventories (36,686) (608)

Increase/(decrease) in trade payables and accruals (108,929) (573,572)

Increase/(decrease) in provisions 51,508 (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

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

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18 Company Details

Registered office

The registered office of the company is:

Estate Agents Co-operative Limited

274 Miller Road

Villawood NSW 2163

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Directors' Declaration

The directors have determined that the company is not a reporting entity and that this special purpose financialreport should be prepared in accordance with the accounting policies described in Note 1 to the financialstatements.

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 CorporationsAct 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 performancefor the year ended on that date in accordance with the accounting policies described in Note 1 to thefinancial statements.

2. In the directors' opinion, there are reasonable grounds to believe that the company will be able to pay itsdebts 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)

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

W. Herrmann

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

27

15th October

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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 AgentsCo-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 theyear 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 andhave determined that the accounting policies described in Note 1 to the financial statements, which form part ofthe financial report, are appropriate to meet the requirements of the Corporations Act 2001 and are appropriateto meet the needs of the members. The directors’ responsibility also includes designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of the financial report that is freefrom material misstatement, whether due to fraud or error; selecting and applying appropriate accountingpolicies; 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 asto whether the accounting policies used, as described in Note 1, are appropriate to meet the needs of themembers. We conducted our audit in accordance with Australian Auditing Standards. These AuditingStandards require that we comply with relevant ethical requirements relating to audit engagements and plan andperform the audit to obtain reasonable assurance whether the financial report is free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial report. The procedures selected depend on the auditor’s judgement, including the assessment of therisks of material misstatement of the financial report, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the company’s preparation and fair presentationof the financial report in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the company's internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates 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 anyreliance on this report or on the financial report to which it relates to any person other than the members, or forany 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 auditopinion.

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 directorsof Estate Agents Co-operative Limited on 27 October 2010, would be in the same terms if provided to thedirectors as at the date of this auditor's report.

Liability limited by a scheme under Professional Standards Legislation 28

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