Pro medicus

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Annual Report

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2007

highlights 2006/2007

financial highlights

Profit after tax a record $7.05 million, up 15.3% on prior year
Revenue a record $13.03 million, up 11.9%
$3.1 million revenue from North America up 34%
Operating margins increased to 77.6%
Final dividend of 3 cents per share fully franked
Special dividend of 1 cent per share fully franked
Record total dividend for the year of 7 cents fully franked (up 27%)
Strong balance sheet with cash reserves of $11.1 million and no debt (after paying previous dividend of 5.5 cents)

1 Highlights 2006/2007 2 Financial Summary 4 CEO & Chairman’s Letter 6 Business Background 8 The Year 2007 in Review 10 Into the Future 12 Financial Statements 14 Directors’ Report 63 Directors’ Declaration

64 Independent Audit Report 66 ASX Additional Information 68 Corporate Governance

business highlights

US Agfa deal delivering results with revenue up 40% on the previous year
Agfa’s Imaging Centre team continues to successfully target the 8,500 Imaging Centres and community hospitals throughout the US. The growing percentage of leads converted to sales in the past six months indicates increased acceptance of the solution in the marketplace
Launch of advanced billing module for the US extends product offering to a broader segment of the market
Take-up of digital integration software in the Australian private radiology market continues with over 40 practices now using the technology, up from 25 a year ago
Continued steady growth of promedicus.net, the company's e-health offering. Over 25,300 doctors are now registered to use the network, which carried over 3.1 million transactions for the year an increase of 7%

Pro medicus Annual Report 2007 page 1 >

financial

summary

page 2 > Pro medicus Annual Report 2007

FINANCIAL SUMMARY

FINANCIAL SUMMARY
Year ending 30 June 2007
All figures in $A thousands unless otherwise stated
	2007	2006
	$’000	$’000
Revenues from Continuing Operations	13,199	11,860
	+11.2%
Revenue	13,035	11,645
	+11.9%
Operating Profit Before Interest and Income Tax	9,081	8,049
	+12.8%
Net Profit After Tax	7,052	6,115
	+15.3%
Total Assets 30 June	17,554	15,512
Shareholders’ Funds 30 June	14,257	13,206
Net Tangible Assets per Share at 30 June (cents)	12.0	12.0
Earnings per Share (cents)	7.1	6.1
	+16.4%
Franked Dividends per Share (cents per share)	7.0	5.5
	+27.2%

Pro medicus Annual Report 2007 page 3 >

ceo & chairman’s letter

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page 4 > Pro medicus Annual Report 2007

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Dear Shareholders,

It is our pleasure to report on another record and highly productive year for our company. The 2006/2007 year has produced record sales, profits and dividends and has seen Pro Medicus strengthen its position as a leading provider of medical IT solutions to the local and international medical markets.

Our profit after tax of $7.05 million was a record for the company, up 15.3% on last year, the company’s 3rd successive record profit. Revenue of $13.03 million, also a record, was up 11.9% on last year. We are continuing to enjoy the benefits of our successful overseas growth strategy with revenue from North America increasing by 34% to $3.1 million. This equates to 24% of overall revenue, a trend we anticipate will continue in the coming year.

The company is pleased to report that it continues to make solid progress in the US with revenues from the Agfa North American contract increasing by 40%. Feedback from Agfa’s specialised imaging centre team has been positive with signs that are indicative of increased market acceptance of the product.

During the past year, the company has also introduced a number of new capabilities into its US offering including the recently released advanced US billing module as well as the integration of Agfa's Talk Technology voice recognition product. These developments enable Agfa sales force to address a broader segment of the market which will further enhance sales in the coming year.

We are also encouraged by the strong contribution from Canada over the period with revenue increasing by 20% as a result of additional licence fees and recurring service revenues. In addition, the company deployed its Electronic Master Patient Index (EMPI) interface which the company believes could be successfully used in other large-scale operations that require electronic verification of patient records.

In addition to increased offshore activity, we have seen good growth in sales of our digital integration technology in the Australian market with the number of sites now using the technology increasing to over 40 practices, up from 25 the previous year.

It is also pleasing to report that the growth in our e-health offering, promedicus.net, is continuing. We now have 25,300 Australian doctors generating over 3.1 million transactions annually on the network.

Our financial position remains very strong. Pro Medicus is debt free with cash reserves of $11.1 million. The Board has declared a fully franked final dividend of 3 cents per share and a special dividend of 1 cent per share, also fully franked. This brings the total dividend for the year to a record 7 cents per share fully franked, an increase of 27% on the previous year.

Looking forward, the company expects revenue from the Agfa North American alliance to increase over the course of this financial year as more imaging centres convert to our digital offering. It is also expected that the penetration of our digital technology into the Australian radiology market will increase significantly as a "tipping point" is reached within the industry.

Having now established positions in digital radiology in the largest English speaking markets in the world, a key area of focus for our company this year is on building our share in these markets to maximise our returns from the current relationships we have in place.

In closing, we would like to express our sincere thanks to our fellow directors and to the small but highly talented team at Pro Medicus for their invaluable personal contributions to what has been another outstanding year for our company.

Yours faithfully,

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Dr Sam Hupert CHIEF EXECUTIVE OFFICER

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Mel Ward AO CHAIRMAN

Pro medicus Annual Report 2007 page 5 >

business background

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page 6 > Pro medicus Annual Report 2007

Pro Medicus is a leading provider of IT solutions and services to the private healthcare industry.

Established in 1983 by Dr Sam Hupert, and Anthony Hall, Pro Medicus aimed to provide a class-leading range of products and services to address the specific IT needs of the healthcare industry.

Pro Medicus now provides healthcare IT solutions to large Australian corporate groups as well as specialist physicians and surgeons, GPs and allied health professionals. In 2003, the company successfully expanded overseas, completing its first installation in the UK where it now has 18 sites. In the 2004/2005 year Pro Medicus entered the North American market with a large digital imaging contract with AltaPACS in Canada and a three-year contract with Agfa to market digital technology to the private imaging centre market. The overseas growth continued in 2006/2007 with the company now deriving over 24% of its revenues from North America.

The suite of products comprises core and e-health applications and digital radiology (PACS) integration products, plus a comprehensive suite of services centred on the company's product offerings. These include training and installation, hardware configuration and ongoing technical and end user support.

The activities of Pro Medicus in the financial year ending June 30, 2007 can be characterised by the following revenue streams:

DIGITAL IMAGING

CORE BUSINESS

Digital Radiology or PACS (Picture Archive and Communication Systems) radiology images (X-rays) are acquired digitally and viewed on high-resolution monitors without the need to convert these images to x-ray film. Images and the subsequent diagnostic report are stored and linked electronically. This new way of managing a radiology practice is forecast to revolutionise the diagnostic imaging business by significantly improving efficiency of radiographic/technical staff and radiologists as well as facilitating the sharing of the diagnostic images, leading to better quality of care and patient outcomes.

The Company’s core business consists of a range of integrated software applications and services that are designed to aid the management of medical practices. The primary products in this area include medical accounting, clinical reporting, appointments/scheduling and marketing/management information applications. Services include network design and implementation, hardware sourcing and configuration, staff and management training and ongoing technical and end user support.

E-HEALTH

Pro Medicus’ Internet-based e-health offering, promedicus.net, enables referring doctors to receive encrypted clinical reports via the Internet to a centralised "In-Tray" run on a doctor’s computer. These reports are then electronically incorporated into the patients’ medical record, doing away with the need for double handling or manual filing. Promedicus.net currently integrates with over 50 clinical desktop products and is supported on both Microsoft Windows and Apple Macintosh platforms. Over 25,000 Australian doctors are registered users of promedicus.net.

Pro Medicus has developed a range of highly modular digital imaging (PACS) integration products. These integration products provide a seamless interface between the Pro Medicus system and a range of leading PACS products allowing large diagnostic imaging providers to incrementally implement this technology across their enterprise. Revenue is generated from the sale of software licenses for the integration modules, implementation services and ongoing support. The Pro Medicus digital integration products are now being offered and sold to radiology practices in Australia, USA, Canada and the United Kingdom.

Pro Medicus provides “end to end” management of the delivery process ensuring that both the sending of the result by the diagnostic provider and its receipt by the referring doctor are logged. This assists in fulfilling duty-of-care requirements and in so doing provides significant added value to the process.

Pro medicus Annual Report 2007 page 7 >

year in review

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Pro medicus Annual Report 2007

page 8 >

australia

CORE BUSINESS

The core business continued to perform well during the past year with the majority of core revenue coming from ongoing service and support. This has provided the company with a growing recurring revenue stream.

E-HEALTH

The company’s e-health business, promedicus.net, continued to grow solidly, reinforcing its position as the largest and clearly preferred system for the electronic delivery of diagnostic imaging reports. Over 25,300 doctors now subscribe to the network, which carried over 3.1 million transactions for the year. Revenue is generated from a transaction charge for each report that is delivered as well as one-off connection fees and recurring subscriptions.

DIGITAL IMAGING

The migration of Australian private radiology providers from an analogue to a fully digital system increased pace during the past financial year. Pro Medicus maintained its status as the market leader in radiology digital integration technology in Australia. The company now has over 40 sites enjoying the productivity and clinical benefits that an integrated digital environment delivers, up from 25 sites a year ago.

united states

The company continues to make very solid progress in the US with revenues from the Agfa North American contract increasing by 40% over the past 12 months as a result of increased market penetration by Agfa’s specialist imaging centre team. Strike rate as measured by the percentage of leads converted to sales has increased by 15-20% over the past six months indicative of increasing market acceptance of the product. Agfa is continuing to grow its sales funnel and has recorded several new wins over the last months including its first sale to a large imaging centre group ranked in the Top 50 in the US.

A number of new capabilities have been introduced into the US product offering throughout the year including the recently released advanced US billing module as well as the integration of Agfa's Talk Technology voice recognition product. These developments further differentiate the product offering in a market where many imaging centres spend large amounts outsourcing their billing and transcription.

canada

Revenue from the AltaPACS contract increased during the period driven by new licence sales, recurring support revenue and the release of a new electronic patient master index (EMPI) interface. The EMPI software allows electronic verification of patient demographics against the regional records. This has enabled the construction of a single repository for all patients’ diagnostic images in the province. This software has been developed using international standards and will be applicable to other markets.

Pro medicus Annual Report 2007 page 9 >

into the

future

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page 10 > Pro medicus Annual Report 2007

In the coming year, the company is looking to maximise the opportunities it has created with digital imaging integration in Australia as well as the significant growth opportunity with the Agfa North American contract.

The move to digital radiology in Australia is at a "tipping point" and the company predicts that it will continue to benefit as an increasing number of practices transition to this technology.

Market penetration in the US is also expected to accelerate throughout the 2008 financial year with revenues from the Agfa North American contract increasing over the next 12 months as Agfa continue to build on the solid base that has been created.

As well as maximising its returns from existing overseas contracts, Pro Medicus will continue to explore other overseas opportunities, both in terms of new markets and of other products and opportunities in existing markets.

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----- Start of picture text -----

US EXPANSION CANADIAN
EXPANSION
NEW
PROMEDICUS.NET INTERNATIONAL
Pro medicus
MARKETS
DIGITAL IMAGING NEW PRODUCTS
----- End of picture text -----

key growth strategies for 2008

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Pro medicus Annual Report 2007 page 11 >

financial statements

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page 12 > Pro medicus Annual Report 2007

Directors’ Report	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 14	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 14
Auditor’s Independence Declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 27
Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 28
Balance Sheet	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 29
Statement of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 30
Cash Flow Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 31
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 32
Note 1	Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 32
Note 2	Summary of Significant Accounting Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 32
Note 3	Segment Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 40
Note 4	Income and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 41
Note 5	Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 42
Note 6	Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 43
Note 7	Dividends Paid and Proposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 43
Note 8	Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 44
Note 9	Trade and Other Receivables (Current). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 45
Note 10	Inventories (Current). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 45
Note 11	Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 45
Note 12	Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 48
Note 13	Trade and Other Payables (Current). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 49
Note 14	Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 50
Note 15	Contributed Equity and Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 50
Note 16	Share based Payment Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 51
Note 17	Financial Risk Management Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 51
Note 18	Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 52
Note 19	Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 53
Note 20	Events after the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 53
Note 21	Auditors’ Remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 53
Note 22	Director and Executive Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 54
Directors’ Declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 63
Independent Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 64
ASX Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 66
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 68
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .page 72

Pro medicus Annual Report 2007 page 13 >

directors’ report

Your Directors submit their report for the year ended 30 June 2007. The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. Directors were all in office for this entire period.

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Melvyn Keith Ward A.O. CHAIRMAN B.E.(Hons), M.Eng.Sc., F.I.E(Aust), F.T.S., F.A.I.M., I.V.A.

Mel Ward joined Pro Medicus Limited as a Director on 4 April, 2000. He is a director of a number of companies including Coca-Cola Amatil Ltd, Macquarie Communications Infrastructure Group, Western Australian Newspapers Holdings Limited and Transfield Services Limited. He was also a director of AXA Asia Pacific Holdings until April 2003, and of Insurance Manufacturers of Australia until July 2006. After a long career in the communications sector, he retired as Managing Director of Telecom Australia (Telstra) in 1992. Mel is Chairman and serves on the audit committee.

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Dr Peter David Jonson DEPUTY CHAIRMAN B.Comm(Hons), M.A.(Hons), PhD, F.A.I.C.D., F.A.A.S.S.

Peter Jonson joined Pro Medicus as a Director on 4th April 2000. He is Chairman of the Australian Institute for Commercialisation, Australian Aerospace and Defence Innovations Ltd and Bionomics Ltd. Dr Jonson is also Chair of the Federal Government’s CRC Committee. He is a director of Village Roadshow Ltd, Sequoia Capital Management Ltd and Metal Storm Limited. He is Chair Emeritus of the Melbourne Institute, having served as the Chair of its Advisory Board from 1992 to 2002. In his previous career, Peter was an economist at the Reserve Bank of Australia for 17 years, including 7 years in its most senior economics post, then called Head of Research. He subsequently worked in the private finance industry for 12 years including CEO of Norwich Financial Services Ltd and Managing Director and then Chairman of ANZ Funds Management. Peter is a fellow of the Australian Institute of Company Directors and of the Academy of the Social Sciences in Australia. Peter is Deputy Chairman and serves on the audit committee.

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Dr Sam Aaron Hupert MANAGING DIRECTOR & CEO M.B.B.S.

Co-founder of Pro Medicus Limited in 1983, Sam Hupert is a Monash University Medical School graduate who commenced General Practice in 1980. Realising the significant potential for computers in medicine he left general practice in late 1984 to devote himself full time to managing the Company.

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Anthony Barry Hall EXECUTIVE DIRECTOR & TECHNOLOGY DIRECTOR B.Sc.(Hons), M.Sc.

Co-founder of Pro Medicus Limited in 1983, Anthony Hall has been principal architect and developer of the core software systems. His current role is to oversee all product development and plan the future technical direction of the Company.

page 14 > Pro medicus Annual Report 2007

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Philip Gregory Molyneux NON-EXECUTIVE DIRECTOR B.Econ, F.C.A.

Philip Molyneux joined Pro Medicus Limited as a Director on 4 April, 2000. He is Chairman of Anadis Limited, and Equity Trustees Limited, a director of Centre for Eye Research Australia Limited and Australian National Academy of Music. He was also a director of Corps of Commissionaires (Victoria) Limited until April 2005 and a director of Sundowner Motor Inns Limited from July 2003 to June 2004.

He is also a trustee of Monash University Accident Research Foundation. Philip is Chairman of the audit committee.

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Sean Collins COMPANY SECRETARY B.Bus, M.Acc, MBA, CPA

Sean became CFO / Company Secretary on 6 July 2007. Besides having strong academic qualifications, he has significant management, accounting and finance experience having worked in senior roles in a range of organisations including the ANZ Banking Limited, Monash University, IAS Limited, and the GPI Group of companies.

Geoff Holden (RETIRED)

Geoffrey Holden remained company secretary during the financial year 2006/2007 and retired on the 6 July 2007 after being company secretary for 7 years. Geoffrey has been a registered Chartered Accountant for over 30 years.

Pro medicus Annual Report 2007 page 15 >

directors’ report

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

As at the date of this report, the interests of the directors in the shares and options of the Company were:

	Ordinary Shares	Options over
		Ordinary Shares
A. B. Hall	30,068,500	425,000
S. A. Hupert	30,072,660	425,000
M. K. Ward	50,000	400,000
P. D. Jonson	50,000	200,000
P. G. Molyneux	25,000	200,000

EARNINGS PER SHARE

	CENTS
Basic earnings per share	7.1
Diluted earningsper share	7.0

DIVIDENDS

ORDINARY SHARES	CENTS	$’000
Final dividends recommended:
Normal dividend plan	3.00	3,000
Special Dividend1.00	1.00	1,000
Dividends paid in the year:
Interim for the year	2.50	2,501
Special Dividend	0.50	500
Final dividend for 2006 shown as recommended in the 2006 report:
Normal dividend plan	2.00	2,000
Special Dividend	1.00	1,000

OPERATING AND FINANCIAL REVIEW

CORPORATE INFORMATION

Corporate Structure

Pro Medicus Limited is a company limited by shares that is incorporated and domiciled in Australia.

Nature of operations and principal activities

The principal activities of the Company during the year were the supply of product and services to diagnostic imaging groups and a broad range of groups within the private medical market. These products and services include:

Innovative proprietary medical software;
Training, installation and professional services;
Support and service products;

page 16 > Pro medicus Annual Report 2007

directors’ report

Promedicus.net secure email; and
Digital radiology integration products & services aimed at facilitating the transition from an analogue to a fully digital environment.

In addition the company has been engaged in ongoing new product development:

A number of new capabilities have been introduced into the US product offering throughout the year including the recently released advanced US billing module, as well as the integration of Agfa's Talk Technology voice recognition product.

In Canada Pro Medicus released new electronic patient master index (EMPI) software that allows electronic verification of patient demographics against the regional records. This has enabled the construction of a single repository for all patients’ diagnostic images in the province. This software has been developed using international standards and will be applicable to other markets.

REVIEW AND RESULTS OF OPERATIONS

INVESTMENT ACTIVITIES

Surplus funds are invested by the Company in commercial bills to maximise the interest return.

PERFORMANCE INDICATORS

Management and the Board monitor overall performance, from the strategic plan through to the performance of the Company against operating plans and financial budgets.

The Board, together with management, have identified key performance indicators (KPIs) that are used to monitor performance. Key management monitor these KPIs on a regular basis and Directors receive appropriately structured board reports for review prior to each monthly Board meeting allowing them to actively monitor the Company’s performance.

DYNAMICS OF THE BUSINESS

The company’s local Australian operations performed well over the past year with revenue increasing by approximately 3.4% from 9.1M to 9.4M. Promedicus.net, the company’s e-health offering, continued its growth in both the number of doctors registered as well as transaction volumes with the network carrying 3.1 million transactions for the year, a 7.2% increase on the previous year.

The number of doctors registered to use promedicus.net increased from 22,000 doctors to 25,300 an increase of 15% compared to the same time last year, and the company intends to leverage its relationship with them to cross-sell its other products and services.

Building on the success of the first digital imaging installation at Lake Imaging, the company has now installed the technology at an increasing number of sites, covering private, large corporate and public radiology providers. Increased levels of market interest reinforce the company’s confidence that the efficiency and clinical benefits the technology offers will inevitably drive the radiology industry towards a fully digital environment.

The past year has also seen the company continue to make significant inroads into overseas markets particularly the US and Canada with revenue from overseas operations increasing from $2.308 million to 3.092 million a 33.96% increase.

The North American market provided approximately 24% of the total revenue and Pro Medicus aims to continue to expand within this lucrative market by leveraging Agfa’s substantial presence in the US and by extending its product offering.

Canada has also continued to provide ongoing opportunity for the company providing approximately 10.4% of the total revenue.

Pro medicus Annual Report 2007 page 17 >

directors’ report

OPERATING RESULTS FOR THE PERIOD

Pro Medicus reported an after tax profit of $7,052 million making this which is the most profitable year in Pro Medicus history. Revenue also rose to a record $13,035 million an increase of 11.9% on the previous year.

Throughout the year, the company continued its focus on higher margin software sales, e-health and services. Net margin as defined by profit before tax to revenue from operating activities increased from 75.8% in 2006 to 77.6% in 2007.

SHAREHOLDER RETURNS

The Company is pleased to report a dividend return to shareholders of a total of 7.0 cents per share which is an increase of 1.5 cents over the previous period and represents the largest dividend payout in the company’s history. This is made up of a final dividend of 3.00 cents plus a special dividend of 1.00 cent per share plus the interim dividend of 2.50 cents plus a special interim of 0.5 cents.

The directors are confident that the holdings of reserve cash after paying out both the second half and special dividends is sufficient to safeguard the development and expansion needs of the company as the business looks to increase its penetration of existing markets and new product development.

Despite extra dividend payments the company has maintained cash holdings and the increased return on net assets and equity as shown in the table below, reflects the increased level of profit in the current period.

	2007	2006	2005	2004	2003
Basic earnings per share – reported (cents)	7.1	6.1	5.5	3.6	4.5
Basic earnings per share - restated (cents)	n/a	n/a	n/a	4.4	3.7
Return on assets (%)	55.5	55.5	49.9	38.4	51.3
Return on equity (%)	49.5	46.3	42.9	32.3	42.3
Net debt / equity ratio (%)	Nil	Nil	Nil	1.2	1.8
Dividend payout ratio (%) – normal dividend plan	77.5	65.4	77.4	97.9	71.5
Dividend payout ratio (%) – total dividend	98.5	89.9	86.5	97.9	71.5
Availablefranking credits [taxpaid basis] ($’000)	5,582	5,268	5,362	4,910	4,840

INVESTMENTS FOR FUTURE PERFORMANCE

The Company will continue to direct resources into the development of new products and in particular is committed to the research being undertaken within the core RIS/PACS offerings for the Australian, US and Canadian markets, and the expansion of Promedicus.net. It is anticipated this will translate into an increase in and improvement in the bottom line of the operation. The company is also undertaking a major redevelopment aimed at transitioning some of the company’s core technology to the latest software platforms.

Despite significant increases in development and business activity over the past year as a result of the US and Canadian developments, staff numbers have relatively remained unchanged.

The directors express their gratitude for the efforts of all employees in achieving this year’s result.

The Company remains committed to providing staff with access to appropriate training and development programs, together with the resources to complete their duties.

page 18 > Pro medicus Annual Report 2007

directors’ report

REVIEW OF FINANCIAL CONDITION

CAPITAL STRUCTURE

The company has a sound capital structure with a debt/equity ratio, which has remained at zero in the current year.

The directors believe that the debt to equity ratio for the Company could increase, if the need for expansion or acquisition required extra funds sourced from borrowings.

TREASURY POLICY

The Company has limited exposure to foreign exchange rate fluctuations as a consequence of contracts written in and cash being held in foreign currencies. The Company uses derivative financial instruments in the form of forward currency contracts, to hedge its risk associated with foreign currency fluctuations.

The treasury function, co-ordinated within Pro Medicus Limited, is limited to maximising interest return on surplus funds and now managing currency risk. The treasury operates within policies set by the Board, which is responsible for ensuring that management’s actions are in line with board policy.

During the financial period, surplus cash was deposited to various bank instruments and Cash Management accounts to maximise the interest earned. At balance date there was $11.1m of cash assets available to the company.

CASH FROM OPERATIONS

Net cash flows from operating activities was a positive $5.81m for the current period, attributed by a $10.5m collection of receipts from customers compared with payments of $2.96m to suppliers and employees. The company continued to hold total cash assets of over $11 million.

LIQUIDITY AND FUNDING

The Company is cash flow positive, has substantial cash reserves and has no overdraft facility. Sufficient funds are held to finance operations.

Risk Management

The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board.

The Company believes that it is crucial for all Board members to participate in this process, as such the Board has not established separate committees for areas such as risk management, environmental issues, occupational health and safety or treasury.

The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the Board. These include the following:

Board approval of strategic plans, which encompass the company’s vision, mission and strategy statements, designed to meet stakeholder needs and manage business risk;
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPIs; and
Overseeing of appropriate backup procedures for important company data.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Pro Medicus Limited support and have adhered to the principles of good corporate governance. Please refer to the separate “Corporate Governance” section for more details of specific policies.

Pro medicus Annual Report 2007 page 19 >

directors’

report

STATEMENT OF COMPLIANCE

The above report is based on the guidelines in The Group of 100 Incorporated publication Guide to the Review of Operations and Financial Condition .

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Shareholders’ equity increased by 7.96% from $13.206m to $14.257m. This movement was largely the result of higher profit and retaining cash in the business. Increased dividend payout has limited the growth in cash funds this year but directors consider funds on hand sufficient to cover any anticipated requirements.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

A Final Dividend of 3.00 cents per share has been declared post 1 July. Please refer Note 7. This Final Dividend was based on the Directors’ decision to increase the total dividend payout from the last financial year.

In addition a Special dividend of 1.00 cent per share has been declared post 1 July. Please refer Note 7.

No other significant post balance date events have been identified.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Directors foresee that the 2008 financial year will be a year of growth in both the local and overseas markets.

It is anticipated this will result from:

Continued penetration of the Radiology Information System and digital imaging integration products in the Australian market, as there are clear signs that the Australian Market has reached the tipping point in the take-up of digital radiology.
Continued installation and use of the Promedicus.net secure email product and Specialist Report Sender;
Continued focus on overseas expansion particularly in Canada and the US; and
The company is looking for further international opportunities for its world class digital radiology integration technology.

As a result, it is anticipated that the 2008 financial year will show improvement in profits. However, this is dependant on many market factors over which the directors have no control.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company has no identified risk with regard to environmental regulations currently in force. There have been no known breaches by the Company of any regulations.

SHARE OPTIONS

UN-ISSUED SHARES

As at the date of this report, there were 2,220,000 un-issued ordinary shares under options (2,450,000 at balance date). Refer to Notes 16 and 22 of the financial statements for further details of the options outstanding.

Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company.

page 20 > Pro medicus Annual Report 2007

directors’ report

SHARES ISSUED AS A RESULT OF THE EXERCISE OF OPTIONS

During the financial year, nil options were exercised. However since the end of the financial year, 230,000 options have been exercised by ex employees. No directors or key management personnel have exercised any option to acquire fully paid ordinary shares in Pro Medicus Limited.

Under the terms of the Share Option Plan 20% of the options vest on each anniversary of the date of commencement 25 August 2000 and can be converted into fully paid shares. All options are now fully vested.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the Company did not indemnify any person for any reason.

During or since the financial year, the Company has paid premiums in respect of a contract for Directors’ & Officers’/Company Re-Imbursement Liability insurance for directors, officers and Pro Medicus Limited for costs incurred in defending proceedings against them.

Terms of this cover are confidential and are not disclosed per Corporations Act 2001.

REMUNERATION REPORT

This report outlines the remuneration arrangements in place for directors and executives of Pro Medicus Limited.

REMUNERATION PHILOSOPHY

The performance of the company depends upon the quality of its directors and executives. To prosper, the company must attract, motivate and retain highly skilled directors and executives.

To this end, the company embodies the following principles in its remuneration framework:
Provide competitive rewards to attract high calibre executives
Link rewards to shareholder value
Portion of executive remuneration ‘at risk’, dependent upon meeting pre-determined performance benchmarks
Establish appropriate, demanding performance hurdles in relation to variable executive remuneration

REMUNERATION COMMITTEE

Remuneration and nomination issues are handled at the full Board level. The Board due to the small number of directors decided this. No Committees for these functions have been established at this time.

Board members, as per groupings detailed below, are responsible for determining and reviewing compensation arrangements.

In order to maintain good corporate governance the Non-Executive Directors assume responsibility for determining and reviewing compensation arrangements for the Chief Executive Officer and Technology Director. The Executive Directors in turn are responsible for determining and reviewing the compensation arrangements for the Non-Executive Directors. The full Board reviews the terms of employment for the Company Secretary and the Board has delegated the responsibility of executive remuneration to the executive management.

The assessment considers the appropriateness of the nature and amount of remuneration of such directors and senior managers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team.

Pro medicus Annual Report 2007 page 21 >

directors’ report

REMUNERATION STRUCTURE

In accordance with best practice corporate governance, the structure of non-executive director and senior manager remuneration is separate and distinct.

NON-EXECUTIVE DIRECTOR REMUNERATION

Objective

The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held on 4 November 2005 when shareholders approved an aggregate remuneration of $500,000 per year.

The amount of the aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Each director receives a fee for being a director of the company. No additional fee is paid for time spent on Audit Committee business.

Non-executive directors have long been encouraged by the board to hold shares in the company (purchased by the director on market). It is considered good governance for the directors to have a stake in the company on whose board he sits. The non-executive directors of the company participate in the Employee Share Incentive Scheme [Option based] which was established in 2000 to provide incentive for participants.

The remuneration of non-executive directors for the period ending 30 June 2007 is detailed in Table 1 page 24 of this report.

SENIOR MANAGER AND EXECUTIVE DIRECTOR REMUNERATION

Objective

The company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company and so as to:

reward executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the company; and
ensure total remuneration is competitive by market standards.

Structure

In determining the level and the make-up of executive remuneration, the executive management consider market levels of remuneration for comparable executive roles.

Employment Contracts have been entered into with the Chief Executive Officer and the Technology Director. No other employment contracts have been executed. Details of these contracts are provided on page 24.

Remuneration consists of the following key elements:

Fixed Remuneration
Variable Remuneration
Short Term Incentive (‘STI’)
Long Term Incentive (‘LTI’)

page 22 > Pro medicus Annual Report 2007

directors’ report

The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) is established for each executive director and senior manager as described under the Remuneration Committee section above.

A STI variable component has been implemented for 2007 and is based on strict performance hurdles. This arrangement replaced the Performance Based Incentive Share Plan which was never activated and has been cancelled.

FIXED REMUNERATION

Objective

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market.

Fixed remuneration is reviewed annually and the process consists of a review of company wide, business and individual performance, relevant comparative remuneration in the market and internal and, where appropriate, external advice on policies and practices. As noted above, the group conducting the review has access to external advice independent of management.

Senior managers are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company.

The fixed remuneration component of the 3 relevant most highly remunerated senior managers is detailed in Table 2 page 25.

VARIABLE PAY – LONG TERM INCENTIVE (LTI)

The LTI described below relates to the prior year.

Objective

The objective of the LTI plan is to reward senior managers and executive directors in a manner which aligns this element of remuneration with the creation of shareholder wealth.

As such LTI grants are only made to executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the Company’s performance.

Structure

LTI grants to executives are delivered in the form of options.

The company granted these options in 2000 and at the time there was no performance hurdle for this long term incentive plan.

Subsequent to this an executive [non-directors] Performance Based Incentive Share Plan was set up but to date no grants have been made and effective 30 June this plan has been cancelled. A cash payout based on performance hurdles was paid on the 30 June 2006.

VARIABLE PAY – SHORT TERM INCENTIVE (STI)

Short term incentives in the form of cash bonuses was payed to key staff based on a mix of company based and personal performance targets.

STI BONUS FOR 2007

For the 2007 financial year, the total amount of the STI cash bonus either paid or accrued at year end was $87,700. The maximum STI cash bonus for the 2007 financial year is $123,750 based on all KPIs being met. The minimum amount of the STI cash bonus assuming that no executives meet their respective KPIs for the 2007 financial year is nil.

Pro medicus Annual Report 2007 page 23 >

directors’ report

KEY PERFORMANCE INDICATORS

Actual STI payments granted to each executive depend on the extent to which specific targets set at the beginning of the financial year are met. The targets consist of a number of Key Performance Indicators (KPIs) covering both financial and non-financial, corporate and individual measures of performance. Included are measures such as contribution to net profit after tax, sales targets, customer service, risk management, product development, and leadership/team contribution. These measures were chosen as they represent the key drivers for short term success of the business and provide a framework for delivering long term value.

Senior management with responsibility for the particular business function assess the achievement of conditions based on performance appraisals against predefined goals.

COMPANY PERFORMANCE

For details of the company’s performance (as measured by Earnings Per Share and other relevant measures) for the current financial year and previous four financial years, refer to page 18 of the Directors’ Report.

EMPLOYMENT CONTRACTS

Executive Service Contracts, on similar terms and conditions, have been prepared for the Chief Executive Officer and Technology Director. These agreements provide the following major terms:

Each executive will receive a remuneration package pa which is to be reviewed annually;
The agreements protect the Company’s confidential information and provide that any inventions or discoveries of an executive become the property of the Company;
Non-competition during employment and for a period of 12 months thereafter; and
Termination by the Company on six months notice or payment of six months remuneration in lieu of notice or a combination of both (or without notice or payment in lieu in the event of misconduct or other specified circumstances). The agreements may be terminated by the executives on the giving of six months notice.

TABLE 1: DIRECTOR REMUNERATION FOR THE YEAR ENDED 30 JUNE 2007

NAME		SHORT TERM	SHORT TERM	POST	SHARE BASED	TOTAL	PERFORMANCE
				EMPLOYMENT	EQUITY		RELATED
	SALARY & FEES		NON	SUPERANNUATION	OPTIONS
			MONETARY
		$	$	$	$	$	%
A B Hall	2007	174,887	5,623	105,113	–	285,623	0.0%
TECHNOLOGY DIRECTOR	2006	223,217	10,721	56,783	1,168	291,889	0.4%
S A Hupert	2007	174,887	8,486	105,113	–	288,846	0.0%
CHIEF EXECUTIVE	2006	223,217	6,566	56,783	1,168	287,734	0.4%
M K Ward	2007	80,000		7,200	–	87,200	0.0%
NON-EXECUTIVE	2006	80,000		7,200	1,099	88,299	1.2%
CHAIRMAN
P D Jonson	2007	29,999		13,601	–	43,600	0.0%
NON-EXECUTIVE	2006	40,000		3,600	550	44,150	1.2%
DEPUTY CHAIRMAN
P G Molyneux	2007	40,000		3,600	–	43,600	0.0%
NON-EXECUTIVE CHAIRMAN	2006	40,000		3,600	550	44,150	1.2%
AUDIT COMMITTEE

page 24 > Pro medicus Annual Report 2007

directors’ report

TABLE 2: REMUNERATION OF THE NAMED EXECUTIVES WHO RECEIVE THE HIGHEST REMUNERATION FOR THE YEAR ENDED 30 JUNE 2007

NAME		SHORT	TERM		POST	SHARE BASED	TOTAL	PERFORMANCE
					EMPLOYMENT	EQUITY		RELATED
		SALARY	STI/LTI	NON	SUPERANNUATION
		& FEES		MONETARY
		$	$	$	$	$	$	%
D Tauber	2007	282,314	47,075		12,686	—	342,075	13.7.%
OPERATIONS	2006	262,861	100,375		12,139	962	376,337	26.9%
OFFICER
B Duscher
SENIOR DEVELOPER	2007	123,853	35,000		11,147	—	170,000	20.5%
G W Holden	2007	69,125	5,625		80,875	—	155,625	3.6%
CHIEF FINANCIAL	2006	95,000	20,075		45,000	234	160,309	12.7%
OFFICER COMPANY
SECRETARY

No options have been granted nor have any options lapsed in the year ended 30 June 2007. G. W. Holden resigned on 6 July 2007.

DIRECTORS’ MEETINGS

The numbers of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows:

	DIRECTORS’	AUDIT COMMITTEE
	MEETINGS
Number of meetings held:	11	3
Number of meetings attended:
A. B. Hall	10	3
S. A. Hupert	11	3
M. K. Ward	11	3
P. D. Jonson	9	3
P.G. Molyneux	11	3

Pro medicus Annual Report 2007 page 25 >

directors’

report

COMMITTEE MEMBERSHIP

As at the 30 June 2007, the company had an Audit Committee comprising the 3 non-executive directors.

The Audit Committee decided, based on the company ownership structure to invite the 2 major shareholder executive directors to be present at the committee meetings as non-voting attendees.

ROUNDING

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The directors received a declaration from the auditor of Pro Medicus Limited (refer page 27).

NON-AUDIT SERVICES

The following non-audit services were provided by the company’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for the auditors imposed by the Corporations Act. The nature and scope of the non-audit service provided means that auditor independence is not compromised.

Ernst & Young received the following amount for the provision of non-audit services: Professional services rendered in respect to taxation matters: $5,500

Signed in accordance with a resolution of the Directors.

==> picture [141 x 59] intentionally omitted <==

M K Ward

DIRECTOR

Melbourne, 14 September 2007

page 26 > Pro medicus Annual Report 2007

auditor’s independence declaration

to the Directors of ProMedicus Ltd

==> picture [534 x 98] intentionally omitted <==

==> picture [534 x 308] intentionally omitted <==

==> picture [513 x 46] intentionally omitted <==

Pro medicus Annual Report 2007 page 27 >

income statement

AS AT 30 JUNE 2007	Notes	2007	2006
		$’000	$’000
Sale of Goods	4(a)	347	305
Cost of Sales		(164)	(215)
GROSS PROFIT		183	90
Rendering of Services	4(a)	7,673	7,346
Licence Revenue	4(a)	4,519	3,647
Finance Revenue	4(a)	660	562
REVENUE		13,035	11,645
Other Income	4(b)	9	121
Accounting & Secretarial Fees		(167)	(174)
Advertising and Public Relations		(48)	(90)
Consulting Expenses		(87)	(82)
Depreciation & Amortisation	4(c)	(82)	(86)
Insurance		(150)	(129)
Finance costs	4(c)	—	—
Legal Costs		(4)	(13)
Operating Lease Expenditure - minimum lease payments		(179)	(149)
Other Expenses		(80)	(62)
Research & Development Costs (incl amortisation)	4(c)	(746)	(710)
Salaries and Employee Benefits Expense	4(c)	(1,670)	(1,608)
Travel and Accommodation		(172)	(138)
PROFIT BEFORE INCOME TAX		9,741	8,611
Income tax expense	5	(2,689)	(2,496)
NET PROFIT FOR THE PERIOD	16	7,052	6,115
Earnings per share (cents per share)	6
- Basic for net profit for the year		7.1¢	6.1¢
- Diluted –for net profit for the year		7.0¢	6.1¢
- Franked dividends per share (cents per share)		7.0¢	5.5¢
Dividends per share (cents per share)	7
- Interim dividend paid per share		2.5¢	2.00¢
- Special interim dividend paid per share		0.5¢	0.50¢
- Final dividend per share		3.0¢	2.00¢
- Special final dividend per share		1.0¢	1.00¢

page 28 > Pro medicus Annual Report 2007

balance sheet

AS AT 30 JUNE 2007	Notes	2007	2006
		$’000	$’000
CURRENT ASSETS
Cash and cash equivalents	8	11,135	11,441
Trade and other receivables	9	4,335	2,346
Inventories	10	–	31
Prepayments		53	40
TOTAL CURRENT ASSETS		15,523	13,858
NON-CURRENT ASSETS
Deferred income tax asset	5	294	281
Plant and equipment	11	214	228
Intangible assets	12	1,523	1,145
TOTAL NON-CURRENT ASSETS		2,031	1,654
TOTAL ASSETS		17,554	15,512
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	13	613	619
Income tax payable		1,413	470
Provisions	14	644	637
TOTAL CURRENT LIABILITIES		2,670	1,726
NON-CURRENT LIABILITIES
Deferred tax liabilities	5	331	321
Provisions	14	296	259
TOTAL NON-CURRENT LIABILITIES		627	580
TOTAL LIABILITIES		3,297	2,306
NET ASSETS		14,257	13,206
EQUITY
Contributed equity	15	32	32
Retained earnings	15	14,225	13,174
TOTAL EQUITY		14,257	13,206

Pro medicus Annual Report 2007 page 29 >

statement of changes in equity

FOR THE YEAR ENDED 30 JUNE 2007	ISSUED	RETAINED	TOTAL
	CAPITAL	EARNINGS	EQUITY
	$’000	$’000	$’000
AT 1 JULY 2005	9	12,809	12,818
Profit for the year	—	6,115	6,115
Conversion of Options to Shares	23	—	23
Equity dividends	—	(5,750)	(5,750)
AT 30 JUNE 2006	32	13,174	13,206
AT 1 JULY 2006	32	13,174	13,206
Profit for the year	—	7,052	7,052
Conversion of Options to Shares	—	—	—
Equity dividends	—	(6,001)	(6,001)
AT 30 JUNE 2007	32	14,225	14,257

page 30 > Pro medicus Annual Report 2007

cash flow statement

AS AT 30 JUNE 2007	Notes	2007	2006
		$’000	$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		10,512	12,764
Payments to suppliers and employees		(2,957)	(3,127)
Borrowing costs		—	—
Income tax paid		(1,750)	(2,727)
NET CASH FLOWS FROM OPERATING ACTIVITIES	8	5,805	6,910
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised Development Costs	12	(712)	(605)
Interest received	4(a)	660	562
Purchase of property, plant and equipment	11	(58)	(105)
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(110)	(148)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares	15	–	23
Payment of dividends on ordinary shares	7	(6,001)	(5,750)
NET CASH FLOWS USED IN FINANCING ACTIVITIES		(6,001)	(5,727)
Net increase/(decrease) in cash and cash equivalents		(306)	1,035
Cash and cash equivalents at beginning of period		11,441	10,406
CASH AND CASH EQUIVALENTS AT END OF PERIOD	8	11,135	11,441

Pro medicus Annual Report 2007 page 31 >

notes to the financial statements for the year ended 30 June 2007

1. CORPORATE INFORMATION

Pro Medicus Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian stock exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The Appendix 4E report has been prepared in accordance with the Accounting Policies disclosed.

(b) Statement of compliance

Except for the amendments to AASB 101 Presentation of Financial Statements and AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments, which the Company has early adopted, Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Company for the annual reporting period ending 30 June 2007. These are outlined in the table below.

REFERENCE	TITLE	SUMMARY	APPLICATION	IMPACT ON COMPANY	APPLICATION
			DATE OF	FINANCIAL REPORT	DATE FOR
			STANDARD*		COMPANY*
AASB	Amendments to Australian	Amending standard issued	1 January 2007	AASB 7 is a disclosure	1 July 2007
2005-10	Accounting Standards [AASB	as a consequence of AASB 7		standard so will have no direct
	132, AASB 101, AASB 114,	Financial Instruments:		impact on the amounts included
	AASB 117, AASB 133, AASB	Disclosures.		in the Company’s financial
	139, AASB 1, AASB 4, AASB			statements. However, the
	1023 & AASB 1038]			amendments will result in
				changes to the financial
				instrument disclosures included
				in the Company’s financial
				report.
AASB	Amendments to Australian	Amending standard issued	1 March 2007	This is consistent with the	1 July 2007
2007-1	Accounting Standards arising	as a consequence of AASB		Company's existing accounting
	from AASB Interpretation 11	Interpretation 11 AASB 2 –		policies for share-based
	[AASB 2]	Company and Treasury		payments, so the standard is
		Share Transactions.		not expected to have any
				impact on the Company's
				financial report.
AASB	Amendments to Australian	Amending standard issued	1 January 2007	The Company currently has	1 July 2007
2007-2	Accounting Standards arising	as a consequence of AASB		no service concession
	from AASB Interpretation 12	Interpretation 12 Service		arrangements or public-private-
	[AASB 1, AASB 117, AASB	Concession Arrangements.		partnerships (PPP), so the
	118, AASB 120, AASB 121,			standard is not expected to
	AASB 127, AASB 131			have any impact on the
	& AASB 139]			Company's financial report.
AASB	Amendments to Australian	Amending standard issued	1 January 2009	AASB 8 is a disclosure	1 July 2009
2007-3	Accounting Standards arising	as a consequence of AASB		standard so will have no direct
	from AASB 8 [AASB 5,	8 Operating Segments.		impact on the amounts included
	AASB, AASB 6, AASB 102,			in the Company's financial
	AASB 107, AASB 119,			statements. However the
	AASB 127, AASB 134,			standard is expected to have an
	AASB 136, AASB 1023			impact on the Company’s
	& AASB 1038]			segment disclosures as segment
				information included in internal
				management reports is more
				detailed than that currently
				reported under AASB 114
				Segment Reporting.

page 32 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

REFERENCE	TITLE	SUMMARY	APPLICATION	IMPACT ON COMPANY	APPLICATION
			DATE OF	FINANCIAL REPORT	DATE FOR
			STANDARD*		COMPANY*
AASB 2007-5	Amendments to Australian	This Standard makes	1 January 2007	This amendment only relates	1July 2007
	Accounting Standard	amendments to AASB 102		to Not-for-Profit Entities and
	– Inventories Held for	Inventories.		as such is not expected to
	Distribution by Not-for-Profit			have any impact on the
	Entities [AASB 102]			Company's financial report.
AASB 2007-6	Amendments to Australian	Amending standard issued	1 January 2009	The amendments to AASB	1 July 2009
	Accounting Standards arising	as a consequence of revisions		123 require that all borrowing
	from AASB 123 [AASB 1,	to AASB 123 Borrowing		costs associated with a qualifying
	AASB 101, AASB 107,	Costs.		asset be capitalised.
	AASB 111, AASB 116 &			The Company has no borrowing
	AASB 138 and Interpretations			costs associated with qualifying
	1 & 12]			assets and as such the
				amendments are not expected
				to have any impact on the
				Company's financial report.
AASB 2007-7	Amendments to Australian	Amending standards for	1 January 2007	The amendments are minor	1 July 2007
	Accounting Standards	wording errors, discrepancies		and do not affect the r
	[AASB 1, AASB 2, AASB 4,	and inconsistencies.		ecognition, measurement or
	AASB 5, AASB 107 &			disclosure requirements of the
	AASB 128]			standards. Therefore the
				amendments are not expected
				to have any impact on the
				Company's financial report.
AASB 7	Financial Instruments:	New standard replacing	1 January 2007	Refer to AASB 2005-10	1 July 2007
	Disclosures	disclosure requirements of		above.
		AASB 130 Disclosures in the
		Financial Statements of Banks
		and Similar Financial
		Institutions and AASB 132
		Financial Instruments:
		Disclosure and Presentation.
AASB 8	Operating Segments	New standard replacing AASB	1 January 2009	Refer to AASB 2007-3 above.	1 July 2009
		114 Segment Reporting,
		which adopts a management
		approach to segment reporting.
AASB 123	Borrowing Costs	The amendments to AASB	1 January 2009	Refer to AASB 2007-6 above.	1 July 2009
(amended)		123 require that all borrowing
		costs associated with
		a qualifying asset must be
		capitalised.
AASB	Interim Financial Reporting	Addresses an inconsistency	1 November 2006	The prohibitions on reversing	1 July 2007
Interpretation	and Impairment	between AASB 134 Interim		impairment losses in AASB 136
10		Financial Reporting and the		and AASB 139, which are to
		impairment requirements relating		take precedence over the more
		to goodwill in AASB 136		general statement in AASB 134,
		Impairment of Assets and		are not expected to have any
		equity instruments classified		impact on the Company’s
		as available for sale in AASB		financial report.
		139 Financial Instruments:
		Recognition and Measurement.

Pro medicus Annual Report 2007 page 33 >

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

REFERENCE	TITLE	SUMMARY	APPLICATION	IMPACT ON COMPANY	APPLICATION
			DATE OF	FINANCIAL REPORT	DATE FOR
			STANDARD*		COMPANY*
AASB	Company and Treasury	Addresses whether certain	1 March 2007	Refer to AASB 2007-1 above.	1 July 2007
Interpretation	Share Transactions	types of share-based payment
11		transactions with employees
		(or other suppliers of good
		and services) should be
		accounted for as equity-settled
		or as cash-settled transactions
		under AASB 2 Share-based
		Payment. It also specifies the
		accounting in a subsidiary’s
		financial statements for
		share-based payment
		arrangements involving equity
		instruments of the parent.
AASB	Service Concession	Clarifies how operators	1 January 2008	Refer to AASB 2007-2 above.	1 July 2008
Interpretation	Arrangements	recognise the infrastructure
12		as a financial asset and/or
		an intangible asset – not as
		property, plant and equipment.

*designates the beginning of the applicable annual reporting period. This financial report complies with Australian Accounting Standards which include Australian equivalents to International Financial reporting Standards (AIFRS). The Financial report also complies with International Financial Reporting Standards (IFRS).

(c) Significant accounting judgements, estimates and assumptions

(i) Significant accounting estimates and assumptions

The carrying amounts of certain assets are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets within the next annual reporting period are:

Recovery of deferred tax assets:

Deferred tax assets recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences.

(d) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.

Rendering of services

Where the contract outcome can be reliably measured, control of the right to be compensated for the services and the stage of completion can be reliably measured. Stage of completion is measured by completion of identifiable service segments.

page 34 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Service Revenue is recognised over the term of the contract. Where revenue is received in advance, revenue is recognised in the period during which service was provided.

Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent that costs have been incurred.

Licences

Control of the right to receive licensing fees.

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(e) Government Grants

Government grants are recognised when there is a reasonable assurance that the grant will be received and all attaching conditions will be complied with.

(f) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependant on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

(i) Company as a lessee

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(g) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

(h) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that Pro Medicus will not be able to collect the debts. Bad debts are written off when identified.

(i) Inventories

Inventories are valued at the lower of cost and net realisable value. The cost of finished goods represents the purchase cost.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Pro medicus Annual Report 2007 page 35 >

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

(j) Derivative financial instruments and hedging

The Company uses derivative financial instruments in the form of forward currency contracts, to hedge its risk associated with foreign currency fluctuations. Fair value adjustments are deemed to be immaterial and any gains or losses arising from changes in the fair value are taken directly to net profit or loss for that year.

(k) Derecognition of financial Instruments

The derecognition of a financial instrument takes place when the Company no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

(l) Foreign currency translation

Both the functional and presentation currency of Pro Medicus Limited is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

(m)Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

(n) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.

page 36 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(o) Property, plant and equipment

Property plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

	2007	2006
Property Improvements	2 to 7 years	2 to 7 years
Motor Vehicles	4 to 5 years	4 to 5 years
Office Equipment	2 to 7 years	2 to 7 years
Furniture and Fittings	5 years	5 years
Research and Development Equipment	3 to 4 years	3 to 4 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(p) Intangible assets

Separately acquired intangible assets

Intangible assets acquired separately are capitalised at cost.

Pro medicus Annual Report 2007 page 37 >

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Amortisation is calculated on a straight-line basis over the estimated useful life of the asset. The useful life of the capitalised software licence was assessed to be 5 years.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred.

Intangible assets are tested for impairment where an indicator of impairment exists, either individually or at the cash generating level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Research and development costs

Research costs are expensed as incurred.

An intangible asset arising from development expenditure on an internal project is recognised only when the company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for sale or use, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following initial recognition of the development expenditure, the cost model is applied requiring the asset be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefit from the related project.

The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use, or more frequently when an indication of impairment arises during the reporting period.

(q) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

(r) Provisions

Dividends payable are recognised when a legal or constructive obligation to pay the dividend arises, typically following approval of the dividend at a meeting of directors.

(s) Employee leave benefits

Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date.

Liabilities arising in respect of wages and salaries and annual leave, expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.

(i) Wages salaries, annual leave and sick leave

Liabilities for wages and salaries and annual leave, expected to be settled within twelve months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave are recognised when the leave is taken and measured at the rates paid.

(ii) Long Service Leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future

page 38 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible the estimated future cash outflows.

(t) Share based payment transactions

The company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity settled transactions’).

There is currently one plan in place to provide these benefits being the Employee Share Incentive Scheme, which provides benefits to directors and staff by way of options to shares in the Company.

As these options were granted prior to 7 November 2002 they are exempted from the requirements of AASB 2 “Share-based Payment.” As such no expense has been recorded in the income statement.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(u) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(v) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the Company adjusted for

Costs of servicing equity (other than dividends)
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
Other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares divided by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus element.

(w) Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

Pro medicus Annual Report 2007 page 39 >

notes to the financial statements for the year ended 30 June 2007

3. SEGMENT INFORMATION

The Company operates predominantly in one industry being, information technology within the health care industry and in two geographical areas being Australia and North America.

Geographic Segments	Geographic Segments
Australia North America Pro Medicus Ltd 2007 2006 2007 2006 2007 2006 $’000 $’000 $’000 $’000 $’000 $’000
REVENUE Sales to customers outside the company 9,455 9,110 3,093 2,309 12,548 11,419 Total segment revenue 9,455 9,110 3,093 2,309 12,548 11,419 Interest Revenue 660 562 Total Revenue 13,208 11,981 RESULTS Segment Result 7,278 6,932 2,463 1,679 9,741 8,611 Non segment expenses Income Tax Expense (2,689) (2,496) Net Profit 7,052 6,115 ASSETS Segment Assets 12,618 10,876 4,642 4,355 17,260 15,231 Non segment assets Income Tax Assets 294 281 Total Assets 17,554 15,512 LIABILITIES Segment Liabilities 1,553 1,515 — — 1,553 1,515 Non segment liabilities Tax Liabilities 1,744 791 Total Liabilities 3,297 2,306
Non segment assets Income Tax Assets Total Assets LIABILITIES Segment Liabilities 1,553 1,515 — —
	17,554 15,512
	1,553 1,515 1,744 791
Non segment liabilities Tax Liabilities Total Liabilities
	3,297 2,306

page 40 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

		Notes	2007	2006
			$’000	$’000
4.	INCOME AND EXPENSES
	Income and expenses
	(a) Revenue
	Sale of goods		347	305
	Rendering of services		7,673	7,346
	Licence revenue		4,519	3,647
	Finance revenue		660	562
			13,199	11,860
	Breakdown of finance revenue
	Bank and deposit interest receivable		660	562
			660	562
	(b) Other income
	Government Grants		9	60
	Net Foreign Exchange Differences		–	61
			9	121
	An Export Market Development Grant [EMDG]
	has been received for expenses incurred in 2004/5
	in developing overseas markets.
	(c) Other Expenses
	Finance costs		—	–
	Total borrowing costs expensed		—	–
	Depreciation and Amortisation
	Motor Vehicles		20	24
	Office Equipment		21	21
	Furniture and Fittings		11	4
	Research & Development Equipment		20	18
	Intangible Asset		15	15
	Total Depreciation and Amortisation Expenses		87	82
	Costs of inventories recognised as an expense		31	18
	Research and Development Expense
	Research expenses		427	586
	Amortisation on capitalised development costs	12	319	124
			746	710
	Salaries and Employee Benefits Expense
	Wages & Salaries		1,532	1,475
	Long service leave provision		54	18
	Defined contribution plan expense		84	115
	Total Salaries and Employee Benefits Expense		1,670	1,608
	Foreign Exchange Loss		(40)	–

Pro medicus Annual Report 2007 page 41 >

notes to the financial statements for the year ended 30 June 2007

	2007	2006
	$’000	$’000
5. INCOME TAX
The major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge	2,881	2,583
Adjustments in respect of current income tax of previous years	(189)	(9)
Deferred income tax
Relating to origination and reversal of temporary differences	(3)	(78)
Income tax expense reported in the income statement	2,689	2,496
A reconciliation between tax expense and the product of
accounting profit before income tax multiplied by the Company’s
applicable income tax rate is as follows:
Accounting profit before tax from continuing operations	9,741	8,611
At the Company’s statutory income tax rate of 30% (2006: 30%)	2,922	2,583
Adjustments in respect of current income tax of previous years	(189)	(9)
Expenditure not allowable for income tax purposes	42	52
Other	(86)	(130)
Income tax expense reported in the income statement	2,689	2,496
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Capitalised development expenses	331	321
Deferred income tax liabilities	321	321
Deferred tax assets
Employee Entitlements	282	269
Audit Fee Accrual	12	12
Deferred income tax assets	294	281

page 42 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

Notes	2007	2006
	$’000	$’000
6. EARNINGS PER SHARE
The following reflects the income and share data used in the basic
and diluted earnings per share computations:
Net Profit attributable to ordinary equity holders from continuing operations	7,051,732	6,114,959
Weighted average number of ordinary shares for basic earnings per share	100,020,000	100,000,603
Effect of dilution:
Share options	727,184	727,184
Weighted average number of ordinary shares adjusted for the effect of dilution	100,747,184	100,727,787
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion
of these financial statements
	2007	2006
	$’000	$’000
7. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2006: 3.00 cents (2005: 3.25 cents)	3,000	3,250
Interim franked dividend for 2007: 3.00 cents (2006: 2.50 cents)	3,001	2,500
	6,001	5,750
Proposed for approval by directors
(not recognised as a liability as at 30 June):
Dividends on ordinary shares:
Final franked dividend for 2007: 3.00 cents (2006: 2.00 cents)	3,000	2,000
Final franked special dividend for 2007: 1.00 cent (2006: 1.00 cent)	1,000	1,000
Total dividends proposed	4,000	3,000
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
- franking account balance as at the end of the financial year at 30% (2006: 30%)	4,169	4,793
- franking credits that will arise from the payment of income tax payable as at the end of the financial year	1,413	475
- franking debits that will arise from the payment of dividends as at the end of the financial year	—	—
-franking credits that the entity may be prevented from distributing in the subsequent financial year	—	—
	5,582	5,268
The amount of franking credits available for future reporting periods:
- impact on the franking account of dividends proposed or declared before the financial report
was authorised for issue but not recognised as a distribution to equity holders during the period	(1,715)	(1,286)
	3,867	3,982
The tax rate at which paid dividends have been franked is 30%, (2006: 30%).
Dividends proposed will be fully franked.

Pro medicus Annual Report 2007 page 43 >

notes to the financial statements for the year ended 30 June 2007

	Notes	2007	2006
		$’000	$’000
8. CASH AND CASH EQUIVALENTS
Cash at bank and in hand		1,793	2,901
Short-term deposits		9,342	8,540
		11,135	11,441
Cash at bank earns interest at floating rates based on daily bank	deposit rates
Short term deposits are made for varying periods of between 20	days and 35 days,
depending on the immediate cash requirements of the Company, and earn interest
at the respective short-term deposit rates.
The fair value of cash and cash equivalents is $11,135,000 (2006: $11,441,000)
The fair value approximates carrying value due to the short term nature of cash
at bank and short term deposits.
Reconciliation of net profit after tax to net cash flows from operations
Net profit		7,052	6,115
Adjustments for:
Depreciation of non-current assets		72	66
Amortisation of Intangible Asset		334	139
Interest Received classified in Investing Activities		(660)	(562)
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables		(1,989)	1,491
(Increase)/decrease in inventory		31	(13)
(Increase)/decrease in future income tax benefit		(13)	(2)
(Increase)/decrease in prepayments		(13)	(29)
(Decrease)/increase in deferred income		9	(138)
(Decrease)/increase in trade and other creditors		(94)	80
(Decrease)/increase in tax provision		943	(365)
(Decrease)/increase in deferred income tax liability		10	135
(Decrease)/increase in goods and services tax payable		79	(16)
(Decrease)/increase in employee entitlements		44	9
Net cash flow from operations		5,805	6,910

page 44 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

Notes	2007	2006
	$’000	$’000
9. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables	4,335	2,346
Allowance for doubtful debts	—	—
	4,335	2,346
Terms and conditions relating to the above financial instruments
Trade receivables are on 30 day trading terms.
Fair value approximates carrying value due to the short term nature of trade receivables.
10. INVENTORIES (CURRENT)
Finished goods
At cost	—	31
Total inventories at lower of cost and net realisable value	—	31
11. PLANT AND EQUIPMENT
Property Improvements
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	56	2
Additions	—	54
Disposals	—	—
Depreciation charge for the year	(11)	—
At 30 June 2007, net of accumulated depreciation and impairment	45	56
At 1 July 2006
Cost	238	184
Accumulated depreciation and impairment	(182)	(182)
Net carrying amount	56	2
At 30 June 2007
Cost	238	238
Accumulated depreciation and impairment	(194)	(183)
Net carrying amount	44	55

Pro medicus Annual Report 2007 page 45 >

notes to the financial statements for the year ended 30 June 2007

Notes	2007	2006
	$’000	$’000
11. PLANT AND EQUIPMENT (CONT)
Motor Vehicles
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	86	110
Additions	—	—
Disposals	—	—
Depreciation charge for the year	(20)	(24)
At 30 June 2007, net of accumulated depreciation and impairment	66	86
At 1 July 2006
Cost	480	480
Accumulated depreciation and impairment	(394)	(370)
Net carrying amount	86	110
At 30 June 2007
Cost	480	480
Accumulated depreciation and impairment	(413)	(394)
Net carrying amount	67	86
Office Equipment
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	55	41
Additions	6	35
Disposals	—	—
Depreciation charge for the year	(20)	(21)
At 30 June 2007, net of accumulated depreciation and impairment	41	55
At 1 July 2006
Cost	207	172
Accumulated depreciation and impairment	(152)	(131)
Net carrying amount	55	41
At 30 June 2007
Cost	213	207
Accumulated depreciation and impairment	(172)	(152)
Net carrying amount	41	55

page 46 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

Notes	2007	2006
	$’000	$’000
11. PLANT AND EQUIPMENT (CONT)
Furniture & Fittings
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	2	6
Additions	3	—
Disposals	—	—
Depreciation charge for the year	(1)	(4)
At 30 June 2007, net of accumulated depreciation and impairment	4	2
At 1 July 2006
Cost	216	216
Accumulated depreciation and impairment	(214)	(210)
Net carrying amount	2	6
At 30 June 2007
Cost	219	216
Accumulated depreciation and impairment	(215)	(214)
Net carrying amount	4	2
Research & Development Equipment
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	29	31
Additions	49	16
Disposals	—	—
Depreciation charge for the year	(20)	(18)
At 30 June 2007, net of accumulated depreciation and impairment	58	29
At 1 July 2006
Cost	135	119
Accumulated depreciation and impairment	(106)	(88)
Net carrying amount	29	31
At 30 June 2007
Cost	184	135
Accumulated depreciation and impairment	(126)	(106)
Net carrying amount	58	29

Pro medicus Annual Report 2007 page 47 >

notes to the financial statements for the year ended 30 June 2007

Notes	Notes	2007	2006
		$’000	$’000
11. PLANT AND EQUIPMENT (CONT)
TOTAL PLANT AND EQUIPMENT
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment		228	190
Additions		58	105
Disposals		—	—
Depreciation charge for the year		(72)	(67)
At 30 June 2007, net of accumulated depreciation and impairment		214	228
At 1 July 2006
Cost		1,276	1,171
Accumulated depreciation and impairment		(1,048)	(981)
Net carrying amount		228	190
At 30 June 2007
Cost		1,334	1,276
Accumulated depreciation and impairment		(1,120)	(1,048)
Net carrying amount		214	228
$’000		$’000	$’000
Development		Software	Total
Costs		Licences
12. INTANGIBLE ASSETS
At 1 July 2006
Cost (gross carrying amount)	1,224	75	1,299
Accumulated amortisation and impairment	(124)	(30)	(154)
Net carrying amount	1,100	45	1,145
Year ended 30 June 2007
At 1 July 2006, net of accumulated amortisation and impairment	1,100	45	1,145
Additions – internal development	712	—	712
Amortisation	(319)	(15)	(334)
At 30 June 2007, net of accumulated amortisation and impairment	1,493	30	1,523
At 30 June 2007
Cost (gross carrying amount)	1,936	75	2,011
Accumulated amortisation and impairment	(443)	(45)	(488)
Net carrying amount	1,493	30	1,523

Development costs have been capitalised at cost. This intangible asset has been assessed as having a finite life and is amortised using the straight line method over a period of 5 years. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount. Software licences have been assessed as having a finite life and are amortised using the straight line method over a period of 5 years.

page 48 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

	$’000	$’000	$’000
Development		Software	Total
	Costs	Licences
12. INTANGIBLE ASSETS (CONT)
At 1 July 2005
Cost (gross carrying amount)	619	75	694
Accumulated amortisation and impairment	—	(15)	(15)
Net carrying amount	619	60	679
Year ended 30 June 2006
At 1 July 2004, net of accumulated amortisation and impairment	619	60	679
Additions – internal development	605	—	605
Amortisation	(124)	(15)	(139)
At 30 June 2005, net of accumulated amortisation and impairment 1,100		45	1,145
At 30 June 2006
Cost (gross carrying amount)	1,224	75	1,299
Accumulated amortisation and impairment	(124)	(30)	(154)
Net carrying amount	1,100	45	1,145
	Notes	2007	2006
		$’000	$’000
13. TRADE AND OTHER PAYABLE (CURRENT)
Trade payables		93	110
Other creditors and accruals		424	422
		517	532
Deferred Income		96	87
		613	619

(i) Trade payables are non-interest bearing and are normally settled on 30-day terms.

(ii) Other creditors are non-interest bearing and have an average term of 1 month.

Fair value approximates carrying value due to the short term nature of trade and other payables

Pro medicus Annual Report 2007 page 49 >

notes to the financial statements for the year ended 30 June 2007

	Annual Leave	Long Service Leave	Total
	$’000	$’000	$’000
14. PROVISIONS
At 1 July 2006	519	377	896
Arising during the year	131	68	199
Utilised	(141)	(14)	(155)
	509	431	940
Current 2007	509	135	644
Non-current 2007	—	296	296
	509	431	940
Current 2006	519	118	637
Non-current 2006	—	259	259
	519	377	896
	Notes	2007	2006
		$’000	$’000
15. CONTRIBUTED EQUITY AND RESERVES
(i) Ordinary shares		32	32
Issued and fully paid		32	32
Fully paid ordinary shares carry one vote
per share and carry the right to dividends

(ii) Movements in shares on issue

(ii) Movements in shares on issue
		2007
	Number of shares	$’000
At 1 July 2006	100,020,000	32
	–	–
At 30 June 2007	100,020,000	32
		2006
	Number of shares	$’000
At 1 July 2005	100,000,000	9
Issued on 20 June 2006 for cash
on exercise of options	20,000	23
At 30 June 2006	100,020,000	32
	2007	2006
	$’000	$’000
Retained earnings
Balance 1 July	13,174	12,809
Net profit for the year	7,052	6,115
Dividends	(6,001)	(5,750)
Balance 30 June 2007	14,225	13,174

page 50 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

16. SHARE BASED PAYMENT PLAN

Employee Share Option Scheme

An employee share incentive scheme was established on 25th August 2000 whereby directors and staff of the Company were issued with options over the ordinary shares of Pro Medicus Limited. The options, issued for nil consideration, have an exercise price of $1.15. Options vest at 20% per annum commencing on the first anniversary of issue. The options cannot be transferred and will not be quoted on the ASX. There are currently 14 staff members, 2 executive directors and 3 non-executive directors eligible for this scheme.

Information with respect to the number of options granted under the employee share incentive scheme is as follows:

	2007		2006
	NUMBER	WEIGHTED	NUMBER	WEIGHTED
	OF OPTIONS	AVERAGE	OF OPTIONS	AVERAGE
		EXERCISE PRICE		EXERCISE PRICE
Outstanding at the beginning of the year	2,450,000	$1.15	2,470,000	$1.15
- granted	—	—	—	—
- forfeited	—	—	—	—
- exercised	—	—	(20,000)	$1.15
- expired	—	—	—	—
Outstanding at the end of the year	2,450,000	$1.15	2,450,000	$1.15
Exercisable at end of year	2,450,000	$1.15	2,450,000	$1.15

All options above have not been recognised in accordance with AASB 2 as the options were granted before 7 November 2002. These options have not subsequently been modified and therefore do not need to be accounted for in accordance with AASB 2. The weighted average remaining contractual life for share options outstanding at 30 June 2007 is 3.2 years (2006: 4.2 Years)

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The company’s principal financial instruments are cash and short-term deposits.

The main purpose of these financial instruments is to raise finance for the Company’s operations. The Company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Company also enters into derivative transactions, including principally forward currency contracts. The purpose is to manage the currency risks arising from the Company’s operations and its source of finance. It is, and has been throughout the period under review, the Company’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Company’s financial instruments are foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Foreign currency risk

The Company has transactional currency exposure, which arise from sales made in currencies other than the company’s functional currency. The company is economically hedging but does not qualify for hedge accounting. As a result gains and losses on re-measurement of forward currency contracts to fair value are recognised directly in the income statement.

As at 30 June, the company had no forward currency contracts outstanding with a material fair value.

Pro medicus Annual Report 2007 page 51 >

notes to the financial statements for the year ended 30 June 2007

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT)

Approximately 22% of the Company’s sales are denominated in currencies other than the functional currency but there are no significant currency risk exposures on costs.

Forward Exchange contracts are established for amounts in excess of $50,000 at the time the transaction is recognised in the books.

The forward currency contract must be in the same currency as the hedged item.

It is the Company’s policy not to enter into forward contracts until a firm commitment is in place.

It is the Company’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.

Credit risk

The Company trades only with recognised, credit worthy third parties.

It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit assessment.

In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant.

As the Company trades predominantly within the Diagnostic Imaging market there is a concentration of credit risk. Given the underlying Government funding support for Radiology, recent amalgamations and the commercial successes achieved, credit risk is considered to be minimal.

Liquidity risk

The Company has no liquidity risk as it has significant cash reserves.

18. FINANCIAL INSTRUMENTS

Fair Values

Set out below is a comparison by category of carrying amounts and fair values of all the Company’s financial instruments recognised in the financial statements.

Interest Rate Risk

The following table sets out the carrying amount, by maturity, of the financial instruments exposed to interest rate risk:

YEAR ENDED 30 JUNE 2007	< 1 YEAR	TOTAL	WEIGHTED AVERAGE EFFECTIVE
			INTEREST RATE
	$’000	$’000	%
FINANCIAL ASSETS
Floating rate
Cash assets	11,135	11,135
Weighted average effective interest rate	5.2%		5.2%

page 52 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

18. FINANCIAL INSTRUMENTS (CONT)

YEAR ENDED 30 JUNE 2006	< 1 YEAR	TOTAL	WEIGHTED AVERAGE EFFECTIVE
			INTEREST RATE
	$’000	$’000	%

FINANCIAL ASSETS
Floating rate
Cash assets	11,441	11,441
Weighted average effective interest rate	5.3%		5.3%

Interest on financial instruments classifies as floating rate is repriced at intervals of less than one year. The other financial instruments of the company are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.

19. COMMITMENTS AND CONTINGENCIES

Operating lease commitments – Company as lessee

The Company has entered into a commercial property lease for office premises. This lease has a life of 5 years with an option for a further 5 year period. There is no restriction placed upon the lessee by entering into this lease. Please refer Note 22(h) Director and Executive Disclosures.

		2007	2006
		$’000	$’000
(a)	Future minimum rentals payable under non-cancellable
	operating lease as at 30 June are as follows:
	- Within one year	182	176
	- After one year and not more than five years	731	557
	-More than five years	—	—
		913	733

20. EVENTS AFTER THE BALANCE SHEET DATE

On 24 August 2007, the directors of Pro Medicus Limited declared a final dividend on ordinary shares in respect of the 2007 financial year. This dividend comprises a normal dividend of 3.0 cents per share and a special dividend of 1.0 cent per share. The total amount of the dividend is $4,000,800 which represents a fully franked dividend of a total of 4.0 cents per share. The dividend has not been provided for in the 30 June 2007 financial statements.

21. AUDITORS’ REMUNERATION

	2007	2006
	$’000	$’000
Amounts received or due and receivable by Ernst & Young for:
- an audit or review of the financial report of the Company	71,000	66,105
-other services in relation to the Company	5,500	15,221
	76,500	81,326

Pro medicus Annual Report 2007 page 53 >

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of Key Management Personnel

(i) Directors

Melvyn Keith Ward Chairman (non-executive) Dr Peter David Jonson Deputy Chairman (non-executive) Philip Gregory Molyneux Chairman Audit Committee (non-executive) Dr Sam Aaron Hupert Managing Director and CEO Anthony Barry Hall Executive Director and Technology Director

(ii) Executives

Geoffrey William Holden Chief Financial Officer & Company Secretary (Retired) Danny Tauber Chief Operations Officer Bernard Duscher Senior Developer

(b) Compensation of Key Management Personnel

(i) Compensation Policy

The performance of the Company depends on the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives.

To this end, the Company embodies the following principles in its compensation framework:

Provide competitive rewards to attract high calibre executives;
Link executive rewards to shareholder value;
Portion of executive compensation ‘at risk’, dependent upon meeting pre-determined performance benchmarks;
Establish appropriate, demanding performance hurdles in relation to variable executive compensation; and
Mandatory requirement for directors to acquire shares in the Company at market price

(A)Remuneration Committee

Given the small number of Directors the board decided it was more appropriate to handle board nomination and remuneration issues at board level. In order to maintain good corporate governance the non-executive directors have assumed authority for determining and reviewing compensation arrangements for the Chief Executive Officer and Technology Director who will in turn review remuneration for the non-executive directors.

The full board is responsible for the review of the Company Secretary remuneration and the board has delegated the responsibility of executive remuneration to the management.

The assessment process includes reviewing the appropriateness of the nature and amount of compensation of key management personnel on a periodic basis by reference to relevant employment and market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company.

To assist in achieving these objectives, the reviewing parties link the nature and amount of executive directors’ and officers’ emoluments to the company’s financial and operational performance. All directors and executives have the opportunity to qualify for participation in the Employee Share Option Plan which currently provides incentives where specified criteria are met including criteria related to profitability, cash flow and share price growth. There were no options granted or vested in 2007.

page 54 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(b) Compensation of Key Management Personnel (cont)

(B) Compensation Structure

In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct.

(C) Non-executive Director Compensation

Objective

The executive directors seek to set the aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

Structure

Each director receives a fee for being a director of the company. No additional fee is paid for time spent on Audit Committee business.

Non-executive directors have long been encouraged by the board to hold shares in the company (purchased by the director on market). It is considered good governance for the directors to have a stake in the company on whose board they sit. The non-executive directors of the company participate in the Employee Share Incentive Scheme [Option based] which was established in 2000 to provide incentive for participants.

The remuneration of non-executive directors for the period ending 30 June 2007 is detailed on page 58 of this report.

(D)Executive Compensation

Objective

The company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the company and so as to:

reward executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the company; and
ensure total compensation is competitive by market standards.

Structure

In determining the level and the make-up of executive Compensation, the executive management consider market levels of compensation for comparable executive roles.

Pro medicus Annual Report 2007 page 55 >

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(b) Compensation of Key Management Personnel (cont)

Compensation consists of the following key elements:

Fixed Compensation
Variable Compensation
Short Term Incentive (‘STI’)
Long Term Incentive (‘LTI’)

The proportion of fixed compensation and variable compensation (potential short term and long term incentives) is established for key management personnel as described under (A) Remuneration Committee section above. Note 22 below details the variable component (%) of the remuneration of key management personnel of the Company.

STI variable component is currently paid to key staff in the form of cash bonuses based on company & personal performance targets.

(E) Fixed Compensation

Objective

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market.

Fixed remuneration is reviewed annually and the process consists of a review of company wide, business and individual performance, relevant comparative compensation in the market and internally and, where appropriate, external advice on policies and practices. As noted above, the group conducting the review has access to external advice independent of management.

Structure

The fixed compensation component of the 3 relevant most highly remunerated senior managers is detailed below.

(F) Variable Pay – Long Term Incentive (LTI)

The LTI described below relates to the prior year.

Objective

The objective of the LTI plan is to reward senior managers and executive directors in a manner which aligns this element of compensation with the creation of shareholder wealth.

As such LTI grants are only made to executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the Company’s performance.

Structure

LTI grants to executives are delivered in the form of options.

The company granted these options in 2000 and at the time there was no performance hurdle for this long term incentive plan.

Subsequent to this an executive [non-directors] Performance Based Incentive Share Plan has been set up but to date no share allocations have been made.

page 56 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(b) Compensation of Key Management Personnel (cont)

Variable Pay – Short Term Incentive (STI)

Short term incentives in the form of cash bonuses was payed to key staff based on a mix of company based and personal performance targets.

STI bonus for 2007

Key Performance Indicators

Senior management with responsibility for the particular business function assess the achievement of conditions based on performance appraisals against predefined goals.

Company performance

Employment Contracts

Executive Service Contracts, on similar terms and conditions, have been prepared for the Chief Executive Officer and Technology Director.

These agreements provide the following major terms:

Each executive will receive a remuneration package pa which is to be reviewed annually;
The agreements protect the Company’s confidential information and provide that any inventions or discoveries of an executive become the property of the Company;
Non-competition during employment and for a period of 12 months thereafter; and
Termination by the Company on six months notice or payment of six months remuneration in lieu of notice or a
combination of both (or without notice or payment in lieu in the event of misconduct or other specified circumstances). The agreements may be terminated by the executives on the giving of six months notice.

Pro medicus Annual Report 2007 page 57 >

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(b) Compensation of Key Management Personnel (cont)

		SHORT-TERM	SHORT-TERM	POST	LONG-TERM	SHARE-BASED	TOTAL	TOTAL
				EMPLOYMENT		PAYMENT		PERFORMANCE
								RELATED
30 JUNE 2007	SALARY	CASH	NON	SUPER-	INCENTIVE	OPTIONS
	& FEES	BONUS	MONETARY	ANNUATION	PLANS
			BENEFITS
DIRECTORS
M K Ward	80,000			7,200			87,200
P D Jonson	29,999			13,601			43,600
P G Molyneux	40,000			3,600			43,600
S A Hupert	174,887		8,486	105,113			288,486
A B Hall	174,887		5,623	105,113			285,623
EXECUTIVES
G W Holden	69,125	5,625		80,875			155,625	5,625
D Tauber	282,314	47,075		12,686			342,075	47,075
B. Duscher	123,853	35,000		11,147			170,000	35,000
	975,065	87,700	14,109	339,335			1,413,384	87,700
30 JUNE 2006
DIRECTORS
M K Ward	80,000			7,200		1,099	88,299
P D Jonson	40,000			3,600		550	44,150
P G Molyneux	40,000			3,600		550	44,150
S A Hupert	223,217		6,566	56,783		1,168	287,734
A B Hall	223,217		10,721	56,783		1,168	291,889
EXECUTIVES
G W Holden	95,000			45,000	20,075	234	160,309	20,075
D Tauber	262,861			12,139	100,375	962	376,337	100,375
	964,295		17,287	185,105	#120,450	5,731	1,292,868	120,450

#This is a cash payout to replace entitlements for three senior people under the Executive Share Plan which was never activated. No grants were ever made under this plan. Management decided to discontinue this arrangement effective 30 June 2006.

Payout criteria were Company profit after tax growth, commencing at 10% year on year, scaled to full entitlement at 15%. In one case the entitlement was split to include personal achievement targets.

The payout above includes personal achievement success for all three periods, full qualification for all participants in 2005 and partial qualification in 2006, based on the year on year profit growth measure.

page 58 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(b) Compensation of Key Management Personnel (cont)

Fair value of options:

The fair value of each option is estimated on the date of grant using a Black Scholes option-pricing model with the following assumptions used for grants made on 25 August 2000.

Dividend yield	4.68%
Expected volatility	51.9%
Historical volatility	51.9%
Risk-free interest rate	6.37%
Expected life of option	7.0 years
Weighted average fair value	$0.44
Option expiry date	25 August 2010

The dividend yield reflects the assumption that the current dividend payout will continue in line with the policy adopted to determine the 2003 final dividend which was based on a payout of between 60% and 70% of Profit after Tax. No options were exercised until late in the 2006 financial year so the expected life of the options is based on best estimate and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

(c) Compensation options: Granted and vested during the year

During the year no new options were granted.

Please refer to Executive Share Option Plan details as shown above.

	VESTED	VESTED
	30 JUNE 2007	30 JUNE 2005
	NO	NO
DIRECTORS
M K Ward	—	80,000
P D Jonson	—	40,000
P G Molyneux	—	40,000
S A Hupert	—	85,000
A B Hall	—	85,000
EXECUTIVES
G W Holden	—	17,000
D Tauber	—	70,000
TOTAL	—	417,000

(c) Compensation options: Granted and vested during the year (cont)

Share Options

The Option Plan Rules state options are exercisable from the first anniversary from the date of grant with a term of 5 years. During the financial year nil (2006: nil) options were cancelled due to option holding staff leaving employment with Pro Medicus Ltd. The options have an exercise price of $1.15 and each option converts to one fully paid share. Details are provided in Note 16. At the end of the year there were 2,220,000 (2005: 2,470,000) unissued ordinary shares in respect of which options were outstanding.

Pro medicus Annual Report 2007 page 59 >

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(d) Shares issued on Exercise of Compensation Options

No options were exercised for Directors & Executives in either 2006 or 2007.

(e) Option holdings of Key Management Personnel

		BALANCE	GRANTED	OPTIONS	NET CHANGE	BALANCE	VESTED AT 30 JUNE	VESTED AT 30 JUNE	2007
	AT	BEGINNING	AS	EXERCISED	OTHER	AT END
		OF YEAR	REMUNERATION			OF YEAR
		1 JULY 2006			#	30 JUNE	TOTAL	NOT	EXERCISABLE
						2007		EXERCISABLE
30 June	2007
DIRECTORS
M K Ward		400,000	—	—	—	400,000	400,000	—	400,000
P D Jonson		200,000	—	—	—	200,000	200,000	—	200,000
P G Molyneux		200,000	—	—	—	200,000	200,000	—	200,000
S A Hupert		425,000	—	—	—	425,000	425,000	—	425,000
A B Hall		425,000	—	—	—	425,000	425,000	—	425,000
EXECUTIVES
G W Holden		85,000	—	—	—	85,000	85,000	—	85,000
D Tauber		350,000	—	—	—	350,000	350,000	—	350,000
Total		2,085,000	—	—	—	2,085,000	2,085,000	—	2,085,000

Includes forfeitures

		BALANCE	GRANTED	OPTIONS	NET CHANGE	BALANCE	VESTED AT 30 JUNE	VESTED AT 30 JUNE	2006
	AT	BEGINNING	AS	EXERCISED	OTHER	AT END
		OF YEAR	REMUNERATION			OF YEAR
		1 JULY 2005			#	30 JUNE	TOTAL	NOT	EXERCISABLE
						2006		EXERCISABLE
30 June	2006
DIRECTORS
M K Ward		400,000	—	—	—	400,000	400,000	—	400,000
P D Jonson		200,000	—	—	—	200,000	200,000	—	200,000
P G Molyneux		200,000	—	—	—	200,000	200,000	—	200,000
S A Hupert		425,000	—	—	—	425,000	425,000	—	425,000
A B Hall		425,000	—	—	—	425,000	425,000	—	425,000
EXECUTIVES
G W Holden		85,000	—	—	—	85,000	85,000	—	85,000
D Tauber		350,000	—	—	—	350,000	350,000	—	350,000
Total		2,085,000	—	—	—	2,085,000	2,085,000	—	2,085,000

Includes forfeitures

page 60 > Pro medicus Annual Report 2007

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(f) Shareholdings of Key Management Personnel

SHARES HELD	BALANCE	GRANTED AS	ON EXERCISE	NET CHANGE	BALANCE
IN PRO MEDICUS LIMITED	1 JULY 06	REMUNERATION	OF OPTIONS	OTHER	30 JUNE 07
(NUMBER)
	ORDINARY	ORDINARY	ORDINARY	ORDINARY	ORDINARY
30 June 2007
DIRECTORS
M K Ward	50,000	—	—	—	50,000
P D Jonson	50,000	—	—	—	50,000
P G Molyneux	25,000	—	—	—	25,000
S A Hupert	30,072,660	—	—	—	30,072,660
A B Hall	30,068,500	—	—	—	30,068,500
EXECUTIVES
G W Holden	35,000	—	—	—	35,000
D Tauber	413,453	—	—	(263,453)	150,000
TOTAL	60,714,613	—	—	(263,453)	60,451,160
SHARES HELD	BALANCE	GRANTED AS	ON EXERCISE	NET CHANGE	BALANCE
IN PRO MEDICUS LIMITED	1 JULY 05	REMUNERATION	OF OPTIONS	OTHER	30 JUNE 06
(NUMBER)
	ORDINARY	ORDINARY	ORDINARY	ORDINARY	ORDINARY
30 June 2006
DIRECTORS
M K Ward	50,000	—	—	—	50,000
P D Jonson	50,000	—	—	—	50,000
P G Molyneux	25,000	—	—	—	25,000
S A Hupert	40,072,660	—	—	(10,000,000)	30,072,660
A B Hall	40,068,500	—	—	(10,000,000)	30,068,500
EXECUTIVES
G W Holden	35,000	—	—	—	35,000
D Tauber	268,000	—	—	145,453	413,453
TOTAL	80,569,160	—	—	(19,854,547)	60,714,613

Pro medicus Annual Report 2007 page 61 >

notes to the financial statements for the year ended 30 June 2007

22. DIRECTOR AND EXECUTIVE DISCLOSURES (CONT)

(g) Loans to Key Management Personnel

No loans are made to Key Personnel or staff.

(h) Other transactions and balances with Key Management Personnel

Purchases

During the year lease payments of $178,506 (2006: $148,642) in respect of the Company’s operating premises at 450 Swan Street Richmond were paid to Champagne Properties Pty. Ltd., an entity controlled by S. Hupert and A. Hall. Commercial arrangements on an ‘arms length basis’ have been determined by an independent assessment of rental and lease terms.

page 62 > Pro medicus Annual Report 2007

directors’ declaration

In accordance with a resolution of the directors of Pro Medicus Limited, I state that:

(1) In the opinion of the directors:
(a) the financial report and the additional disclosures included in the directors’ report designated as audited, of the company are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the company’s financial position as at 30 June 2007 and of its performance for the year ended on that date; and
- (ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June 2007.

On behalf of the Board

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M K Ward CHAIRMAN

Melbourne, 14 September 2007

Pro medicus Annual Report 2007 page 63 >

independent auditor’s report

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page 64 > Pro medicus Annual Report 2007

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Pro medicus Annual Report 2007 page 65 >

ASX additional information

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 31 August 2007

(a) Distribution of equity securities

The number of shareholders, by size of holding, in each class of share are:

	Ordinary shares
	Number of holders	Number of shares
1 – 1,000	170	118,678
1,001 – 5,000	571	1,845,498
5,001 – 10,000	322	2,608,136
10,001 – 100,000	373	10,014,148
100,001 AND OVER	21	85,663,540
	1,457	100,250,000
The number of shareholders holding less than a marketable parcel of 345 shares are:	23	2,296

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

		Listed ordinary shares	Percentage
		Number of shares	of ordinary shares
1	Dr S Hupert	30,072,660	29.93%
2	Mr A Hall	30,068,500	29.93%
3	RBC Dexia Investor Services Australia Nominees P/L	8,604,857	8.58%
4	Citicorp Nominees Pty Ltd	6,629,248	6.61%
5	RBC Dexia Investor Services Australia Nominees P/L	5,754,680	5.74%
6	Mirrabooka Investments Limited	1,500,000	1.50%
7	Invia Custodian Pty Limited	1,075,000	1.07%
8	ANZ Nominees Limited	258,300	0.26%
9	Mr S G Wilson & Ms D A Prandi	203,000	0.20%
10	Mr Peter Propert Birrell Mrs Dinny Mary Birrell	200,000	0.20%
11	Mrs Tung Yueh-Ying Tsai	173,500	0.17%
12	Mr D Tauber	150,000	0.15%
13	Mr E P Clucas & Mr L J Weston	146,500	0.15%
14	Mr Simon Gautier Hannes	146,250	0.15%
15	Mr Michael Roth + Ms Birgit Roth	130,000	0.13%
16	Mellett Super Pty Ltd	125,000	0.12%
17	Crosbie Holding A/S C/-Per Pontoppidan Moller	120,000	0.12%
18	Mrs Nelly Michelle Cunningham	115,592	0.12%
19	Mrs Ronda Patricia Hall	115,000	0.11%
20	Mr John Charles Plummer	108,523	0.11%
		85,696,610	85.34%

page 66 > Pro medicus Annual Report 2007

(c) Substantial shareholders

The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Law are:

	Number of shares
S. Hupert	30,072,660
A Hall	30,068,500
Perpetual Limited RBC Dexia Investor Services Australia Nominees P/L	14,359,537
Commonwealth Bank of Australia	6,629,248

(d) Voting rights

All ordinary shares carry one vote per share without restriction.

Pro medicus Annual Report 2007 page 67 >

corporate governance

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page 68 > Pro medicus Annual Report 2007

The Board of Directors of Pro Medicus Limited is responsible for the corporate governance of the entity. The Board guides and monitors the business and affairs of Pro Medicus Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

To ensure the Board is well equipped to discharge its responsibilities it supports, and has adopted where considered appropriate, the principles set out in the ASX Corporate Governance Council “Principles of Good Corporate Governance and Best Practice Recommendations” dated March 2003. Pro Medicus Limited corporate governance practices were in place throughout the year ended 30 June 2006 and except where noted in this report, were compliant with the Council’s best practice recommendations.

For further information on corporate governance policies adopted by Pro Medicus Limited, refer to our website: www.promedicus.com.au

STRUCTURE OF THE BOARD

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report.

The composition of the Board was determined in accordance with the following principles and guidelines:

The Board should comprise at least five directors and should maintain a majority of non-executive directors;
The Chairperson must be a non-executive director and not occupy the role of CEO;
The Board should comprise directors with an appropriate range of qualifications and expertise; and
The Board shall meet monthly and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

Directors of Pro Medicus Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement.

In the context of director independence, “materiality” is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the director in question to shape the direction of the company’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of Pro Medicus Limited are considered to be independent:

Name	Position
M K Ward	CHAIRMAN,
	NON-EXECUTIVE DIRECTOR
P D Jonson	DEPUTY CHAIRMAN,
	NON-EXECUTIVE DIRECTOR
P G Molyneux	NON-EXECUTIVE DIRECTOR,
	CHAIRMAN AUDIT COMMITTEE

The board has codified a list of its responsibilities consistent with the recommendations and details are disclosed on the company website.

The Board wishes to advise that it continues to maintain responsibility for the actions of the chief executive officer and any tasks delegated to the management by the Board.

Directors’ Appointment Letters have not been revised in the prescribed format as the board considered this unnecessary given the small number of fairly recently appointed current directors who understand their roles and responsibilities. The board has undertaken that the recommended format should be used for any future director appointments.

The term in office held by each director in office at the date of this report is 4 years however Mr. Sam Hupert and Mr. Anthony Hall were directors in Pro Medicus Pty Ltd since incorporation in 1983.

CODE OF CONDUCT AND SECURITIES TRADING POLICY

The board has developed a “Code of Conduct” and a “Securities Trading Policy” consistent with the recommendations and details are disclosed on the company website.

COMMITTEES

The current Board of five Directors was appointed on April 4, 2000. Due to the small number of Directors, the Board decided

Pro medicus Annual Report 2007 page 69 >

it was more appropriate to handle nomination and remuneration issues at full Board level. No Committees for these functions have been established at this time.

In addition the full Board handles any matters as and when they arise concerning environmental issues, occupational health and safety, finance and treasury.

In order to maintain good corporate governance the Non-Executive Directors will assume responsibility for determining and reviewing compensation arrangements for the Chief Executive Officer and Technology Director who will in turn review the terms for the NonExecutive Directors. The full Board will review the terms of employment for the Company Secretary.

The Board has delegated the responsibility of executive remuneration to the management who will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality executive team. Independent experts have been consulted to provide appropriate information to ensure decisions are soundly based.

The appointment of appropriately skilled NonExecutive Directors, together with a broadly unchanged business base has meant no new director nominations have been required to date.

Strategic planning has been an important objective of the Board. Meetings are scheduled so that all Board members can attend and are conducted in an informal fashion to allow nonexecutive directors to gain enhanced industry, customer, product and research knowledge.

AUDIT COMMITTEE

The board has established an audit committee, which operates under a charter approved by the Board.

It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes. This also includes the safeguarding of assets, the maintenance of proper accounting records, and reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the entity to the audit committee.

The committee also provides the board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the audit committee are non-executive directors.

The members of the audit committee are: P G Molyneux CHAIRMAN M K Ward P D Jonson

The audit committee is also responsible for nomination of the external auditor and reviewing the adequacy of the scope and quality of the annual statutory audit and half yearly audit review.

A copy of the Audit Committee Charter is posted on the company website.

The Company is small with a total staff at present of twenty full time people so it should be understood that the Chief Executive Officer

and Chief Financial Officer play key roles in all financial aspects of the business. Both people will provide a written assurance to the board in the prescribed format.

BOARD RESPONSIBILITIES

As the Board acts on behalf of and is accountable to the shareholders, it seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.

The Board has delegated responsibility for the operation and administration of the entity to the Chief Executive Officer and the executive team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the Chief Executive and the executive team.

The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved. In addition to the establishment of the committee referred to above, these mechanisms include the following:

approval of strategic plans, which encompass the entity’s vision, mission and strategy statements, designed to meet stakeholders’ needs and manage business risk;

page 70 > Pro medicus Annual Report 2007

involvement in developing the strategic plan (a dynamic document) and approving initiatives and strategies designed to ensure the continued growth and success of the entity;
overseeing implementation of operating plans and budgets by management and monitoring of progress against budget - this includes the establishment and monitoring of key performance indicators (both financial and non-financial) for all significant business processes; and
utilising appropriately skilled professionals to provide advice on relevant discussion topics and procedures to allow Directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the Chairman annually reviews the performance of all Directors who will be asked to retire from the board if not performing in a satisfactory manner.

MONITORING OF THE BOARD’S PERFORMANCE AND COMMUNICATION TO

SHAREHOLDERS - CONTINUOUS DISCLOSURE POLICY

The board has developed a written policy to ensure compliance with the ASX Listing Rules on continuous disclosure and has adopted measures to ensure the market and shareholders are fully informed. The measures in place require all potential market sensitive matters are discussed with the Chief Executive Officer who in conjunction with the Chairman and other relevant directors decide whether to make an appropriate announcement to the market.

Only nominated authorised persons have the authority to release these communications to the ASX. This policy is displayed on the company website.

SHAREHOLDER COMMUNICATION

The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the Directors. Information is communicated to the shareholders through:

the annual report which is distributed to all shareholders registered to receive copies;
the annual general meeting and other meetings so called to obtain approval for Board action as appropriate;
an up to date website - www.promedicus.com.au;
email contact with registered users; and
special written communications to shareholders distributed with the dividend notifications.

The company is adopting procedures to ensure that any material given to a particular group is available to all interested parties via the company website. This includes any material presented at the Annual General Meeting.

A representative of the external auditors Ernst & Young will continue to attend the Annual General Meeting.

RISK MANAGEMENT POLICIES

The Company up until late in the financial period was not exposed to any interest rate or significant currency sensitive loans or debts. Given the increase in overseas operations there is now an increased currency risk as a consequence of contracts written in and cash being held in foreign currencies. This change in risk profile has been noted by the board and action is being taken to manage this risk.

The Board oversees appropriate backup procedures for important company data.

Detailed annual review of insurance policies in force to ensure cover is at appropriate levels to safeguard key executives, Company assets and operations.

The Board regularly considers succession planning to ensure staff of appropriate skill and experience are available to the Company.

Pro medicus Annual Report 2007 page 71 >

corporate information

ABN 25 006 194 752

DIRECTORS

The names of the Directors of the Company in office during the year are:

Melvyn Keith Ward Dr Peter David Jonson Dr Sam Aaron Hupert Anthony Barry Hall Philip Gregory Molyneux

CHAIRMAN DEPUTY CHAIRMAN MANAGING DIRECTOR TECHNICAL DIRECTOR NON-EXECUTIVE DIRECTOR

COMPANY SECRETARY

Sean Collins CPA

REGISTERED OFFICE

450 Swan Street Richmond VIC 3121 (03) 9429 8800

INTERNET ADDRESS

www.promedicus.com.au www.promedicus.com

SHARE REGISTRY

Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Australia

Mailing address: Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

SOLICITORS

Madgwicks Innovation Law

BANKERS

Westpac Banking Corporation

Telephone +612 8280 7111 Toll free 1300 554 474 Facsimile +612 9287 0303 Facsimile (proxy forms only) +612 9287 0309 E-mail [email protected] Website: www.linkmarketservices.com.au

AUDITORS

Ernst & Young

page 72 > Pro medicus Annual Report 2007

you can do so much more online

Did you know that you can access – and even update – information about your holdings in Pro Medicus Limited via the Internet.

Visit Link Market Services’ website www.linkmarketservices.com.au and access a wide variety of holding information, make some changes online or download forms. You can:

Check your current and previous holding balances
Choose your preferred annual report delivery option
Update your address details
Update your bank details
Lodge, or confirm lodgement of, your Tax File Number (TFN), Australian Business Number (ABN) or exemption
Check transaction and dividend history
Enter your email address
Check the share prices and graphs
Download a variety of instruction forms
Subscribe to email announcements

You can access this information via a security login using your Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as well as your surname (or company name) and postcode (must be the postcode recorded on your holding record).

Don’t miss out on your dividends

Dividend cheques that are not banked are required to be handed over to the State Trustee under the Unclaimed Monies Act. You are reminded to bank cheques immediately.

Better still, why not have us do your banking for you

Wouldn’t you prefer to have immediate access to your dividend payment? Your dividend payments can be credited directly into any nominated bank, building society or credit union account in Australia as cleared funds on dividend payment date – and we will still mail (or email if you prefer) you a dividend advice confirming your payment details.

Not only can we do your banking for you, but payment by direct credit eliminates the risk of cheque fraud.

Top 5 tips for Pro Medicus Limited investors visiting Link’s (our registry) website

Bookmark www.linkmarketservices.com.au – to bookmark, click on ‘Favourites’ on the menu bar at the top of your browser then select ‘Add to Favourites’
Create a portfolio for your holding or holdings and you don’t have to remember your SRN or HIN every time you visit
Lodge your email via the ‘Communications Options’ and benefit from the online communications options Pro Medicus Limited offers its investors
Check out the ‘FAQs’ page (accessible via the orange menu bar) for answers to frequently asked questions
Use the ‘Client List’ page (accessible via the orange menu bar) to link to Pro Medicus Limited website and the website of the other Link clients in which you invest.

Contact Information

You can also contact the Pro Medicus Limited share registry by calling: 612 8280 7111 or Toll Free 1300 554 474

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Pro Medicus Limited

450 Swan Street, Richmond Victoria 3121 Australia T: 03 9429 8800 F: 03 9429 9455 E: [email protected] www.promedicus.com.au

AI assistant

PRO MEDICUS LIMITED — Annual Report 2007

65579_rns_2007-09-27_07e57144-593e-406e-ac8f-e546f36ec166.pdf

Pro medicus

highlights 2006/2007

financial highlights

contents

business highlights

financial

summary

FINANCIAL SUMMARY

ceo & chairman’s letter

Dear Shareholders,

Yours faithfully,

business background

DIGITAL IMAGING

CORE BUSINESS

E-HEALTH

year in review

australia

CORE BUSINESS

E-HEALTH

DIGITAL IMAGING

united states

canada

into the

future

financial statements

directors’ report

Anthony Barry Hall EXECUTIVE DIRECTOR & TECHNOLOGY DIRECTOR B.Sc.(Hons), M.Sc.

Geoff Holden (RETIRED)

directors’ report

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

EARNINGS PER SHARE

DIVIDENDS

OPERATING AND FINANCIAL REVIEW

CORPORATE INFORMATION

Corporate Structure

Nature of operations and principal activities

directors’ report

REVIEW AND RESULTS OF OPERATIONS

INVESTMENT ACTIVITIES

PERFORMANCE INDICATORS

DYNAMICS OF THE BUSINESS

directors’ report

OPERATING RESULTS FOR THE PERIOD

SHAREHOLDER RETURNS

INVESTMENTS FOR FUTURE PERFORMANCE

directors’ report

REVIEW OF FINANCIAL CONDITION

CAPITAL STRUCTURE

TREASURY POLICY

CASH FROM OPERATIONS

LIQUIDITY AND FUNDING

Risk Management

CORPORATE GOVERNANCE

directors’

report

STATEMENT OF COMPLIANCE

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

ENVIRONMENTAL REGULATION AND PERFORMANCE

SHARE OPTIONS

UN-ISSUED SHARES

directors’ report

SHARES ISSUED AS A RESULT OF THE EXERCISE OF OPTIONS

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

REMUNERATION REPORT

REMUNERATION REPORT

REMUNERATION PHILOSOPHY

REMUNERATION COMMITTEE

directors’ report

REMUNERATION STRUCTURE

NON-EXECUTIVE DIRECTOR REMUNERATION

Objective

Structure

SENIOR MANAGER AND EXECUTIVE DIRECTOR REMUNERATION

Objective

Structure

PRO MEDICUS LIMITED Annual Report 2007