PRO MEDICUS LIMITED — Annual Report 2012

Oct 16, 2012

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1 Highlights 2011/2012

• 3 CEO and Chairman’s Letter

• 5 Financial Summary

• 7 Business Background

• 9 Global Leadership Team

• 11 The Year in Review

• 13 Into the Future

• 15 Financial Statements

• 16 Director’s Report

• 60 Director’s Declaration

• 62 Independent Audit Report

• 64 AXS Additional Information

• 65 Corporate Governance 71 Corporate Information

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• Profit after tax of $1.79 million – up 256.1%

• ▶ Revenue of $14.39 million – up 2.3%

• Cash reserves of $5.19 million – increase of 59.2%

• Company remains debt free

• Dividend of 1.5c per share – fully franked

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• New Management Team

• Increase in Visage 7 product sales – up 50.2%

• Release of New RIS Technology Platform in August 2012

• ▶ Sale of Amira business for€€12.1M

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ANNUAL REPORT 2012 1

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Dr Sam Hupert
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Dear Shareholders,

The 2012 financial year saw the beginning of the company’s turnaround after a difficult 2011. Whilst sales were still impacted by delays in the release of our new RIS technology platform, profit increased from $.5M to $1.79M due to a number of factors including ongoing cost reduction in the US. This, combined with increased cash reserves, has enabled the company to resume distributing dividends with the company declaring a .5c interim and a 1c final dividend both of which were fully franked.

During the year significant progress was made on the development of the company’s new RIS technology platform however last minute delays in releasing the product impacted new sales, particularly in Australia. The company is pleased to announce that the new RIS technology platform was commercially released in late August after it had been operating successfully in a fully comprehensive radiology practice for over a month. The new product was showcased at the recent RANZCR conference in Sydney in early September and feedback from client demonstrations has been very positive. This, plus the initial orders we have received for the new technology has confirmed our belief that this new system represents a quantum improvement over anything currently in the market.

The company has also continued investing in ongoing R & D of the Visage 7 suite of products which, based on the company’s unique thin client technology, combines conventional 2D x-ray imaging with the new 3D volume rendering of

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Peter Kempen
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images. Despite difficult trading conditions in both Europe and the US, sales of Visage technology have increased steadily over the past year.

In June of 2012 the company announced the sale of the Amira business to French company Visualization Sciences Group (VSG) which was completed in July for a sum of €12.1 million. Whilst the loss of Amira revenue will be felt initially, your directors believe this was our best opportunity to maximise the value of the Amira asset whilst at the same time provide the company with a high degree of balance sheet flexibility. Proceeds from the Amira sale will also provide significant additional resources to grow the base for the company’s Radiology Practice Management and Visage 7® suite of products.

Our aim has always been to integrate our new RIS technology platform with visage 7.0 thereby creating the first fourth-generation end-to-end singlevendor ‘thin client’ PACS/RIS solution in the market. With the release of our new technology platform in August we believe we are now positioned to achieve this aim enabling us to address the needs of a much broader market which includes both private imaging groups and hospitals of all sizes in the three global regions we service.

The company was pleased to acknowledge the inspirational legacy of our founding chairman Mel Ward AO who passed away in late 2010 with the inaugural presentation of the Mel Ward scholarship awarded annually to the two most promising students studying for their Masters of Telecommunications Engineering at the University of Melbourne’s School of Engineering.

Over the past year we have seen increased adoption of a pay per use pricing model. Whilst this does not have the same degree of upfront payment as an outright purchase (capital) model, it provides a growing revenue stream which longer term will provide greater predictability of future earnings.

The company continues to see the benefits resulting from management changes made late in 2010 with the return of Dr Sam Hupert as CEO as well as the new management structure put in place in North America in 2011. We anticipate these will continue to be instrumental in maintaining the company on a long term course of profitable growth.

We would also like to express our sincere thanks to our fellow directors and to the energetic team we have at both Pro Medicus and Visage Imaging, each of whom has contributed to a year that will put us on a solid path for the future.

Yours faithfully,

Pro Medicus has cash of $5.19 million as at the end of June 2012, up from $3.26 million in June 2011 an increase of 59.2%. This provides sufficient reserves to fund the anticipated growth of the business from internal sources. Peter Kempen Dr Sam Hupert The company remains debt free. CHAIRMAN CHIEF EXECUTIVE OFFICE

ANNUAL REPORT 2012

ANNUAL REPORT 2012 3

YEAR ENDED 30 JUNE 2012 All figures in $A thousands unless otherwise stated

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	2012	2011
	$’000	$’000
Revenues from Continuing Operations	11,379 +1.8%	11,180
Revenues from Discontinued Operations (Amira)	3,013 +4.3%	2,890
Total Revenues	14,392 +2.3%	14,070 -27.7%
Operating Proft Before Interest and Income Tax	2,525 +321.5%	599 -88.9%
Net Proft After Tax	1,791 +256.1%	503 -87.2%
Total Assets 30 June	23,144	23,108
Shareholders’ Funds 30 June	16,002	15,198
Net Tangible Assets per Share at 30 June(cents)	5.0	2.0
Earnings per Share (cents)	1.8 +260.0%	0.5 −87.2%

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ANNUAL REPORT 2012

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PRO MEDICUS IS A LEADING PROVIDER OF IT PRODUCTS AND SERVICES TO THE HEALTHCARE INDUSTRY. WORKING TOGETHER WITH OUR CLIENTS WORLDWIDE, PRO MEDICUS IS HELPING TO SOLVE OUR CLIENT’S DAILY CHALLENGE OF DELIVERING IMPROVED LEVELS OF HEALTH CARE BY MAKING SURE OUR USERS HAVE THE RIGHT INFORMATION AT THE RIGHT TIME, AND ARE ABLE TO PUT IT TO USE IN THE MOST EFFICIENT MANNER. BUILDING ON OUR CLINICAL AND PRACTICE WORK FLOW EXPERTISE, WE HAVE FOUND INCREASINGLY INNOVATIVE WAYS TO DELIVER VALUE TO OUR CLIENTS.

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In February of 2009, the company acquired Visage Imaging in the US which has expanded the Pro Medicus product portfolio into the clinical imaging space as well as providing the company with its own presence in both Europe and the US.

The suite of Pro Medicus solutions which previously comprised of practice management, e-health and digital imaging integration products now includes 2-D and 3D digital radiology (PACS) and advanced visualisation clinical products plus a comprehensive range of services centred on the company’s numerous offerings. These include training and installation, hardware configuration and ongoing technical and end user support.

In addition to the 2-D PACS and 3-D/advanced visualisation products, the Visage Imaging acquisition brought with it a number of other revenue streams including OEM (original equipment manufacturer) and dealer relationships as well as to the Amira business which provides a 3-D imaging toolkit to educational and research institutions in the life sciences field throughout the world.

The activities of Pro Medicus in the financial year ending June 30, 2012 can be characterised by the following revenue streams:

system and a number of 3rd party PACS/digital imaging 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.

Radiology Information Systems (RIS)/Practice Management

The 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.

3-D Advanced Visualisation

Advanced visualisation allows CT and MRI images to be reconstructed in 3D and 4D (3D with motion). A growing number of specialist areas are being revolutionised by this technology including cardiology, where it provides 3-D reconstruction of coronary arteries from high definition CT images, PET CT (oncology) and advanced areas of stroke treatment and neuroradiology. This product can be interfaced to a broad range of thirdparty PACS Systems is sold as a 3-D “plug in“. Revenue is derived by sale of licences and ongoing 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. Over 26,000 Australian doctors are registered users of promedicus.net.

The Visage 7 Enterprise Viewer

The Visage 7 Enterprise Viewer combines the 3D/4D and advanced visualisation capabilities with the full gamut of 2D reading functionality creating a truly unique thin client streaming Universal viewing platform that enables radiologist to read anything from a 2-D chest x-ray to a complicated 3-D cardiac study all within the one viewer. The Enterprise viewer can be interfaced with a broad range of third party image archiving and distribution products. These include other 3rd party PACS systems upon which Visage technology can be overlaid as well as the growing industry

Integration products

Digital Radiology or PACS (Picture Archive and Communication Systems) radiology images are acquired digitally and viewed on high-resolution monitors without the need to convert the images to x-ray film. Images, clinical documents and the subsequent diagnostic report are stored and linked electronically.

Pro Medicus has developed a range of highly modular integration products which provide a seamless interface between the Pro Medicus

trend for vendor neutral archives (VNA). Traditionally revenue for this product has been generated from sale of licences and ongoing support however we are seeing the increased adoption of a pay per use licensing model which is helping to build growing annuity revenue streams for the company in both the US and Europe.

Visage 3D PACS

As a result of the extensive R & D undertaken post the Visage Imaging acquisition, the company now has its own comprehensive 2D-3D / PACS offering which combines the Visage 7 Enterprise Viewer with the ability to store and archive radiological images creating one of the world’s first “3-D PACS”. The company is now selling this solution in Australia, North America and select countries within Europe.

Due to the highly modular nature of our product offering, Visage technology can be successfully deployed in the vast majority of radiology environments including private imaging centres, remote reading/teleradiology groups as well as community and large teaching hospitals opening up markets previously not available or only partially accessible to us.

Life Sciences — Research

Amira, acquired as part of Visage Imaging, is a division that sells software toolkits via a Web store to universities and research institutions working in the life sciences area. The product enables these institutions to produce complex 3-D models via the toolkit. Revenue is derived from the sale of the licences and ongoing support contracts.

The Amira business was sold to Visualization Sciences Group (VSG) in July for a sum of €12.1 million.

ANNUAL REPORT 2012

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Key Personnel

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Danny Tauber General Manager Australia

After graduating in 1986 Danny Tauber started his career with chartered accountants Warnocks gaining experience in taxation and general accounting. He then started his own property development company and spent a number of years gaining project management and general finance skills. An interest in IT led Danny into the computer industry where he worked for a company producing hotel management systems. Danny joined Pro Medicus in 1993 and has been with the company 19 years. Danny has progressed through the company to his current position of General Manager — Australia which he assumed on the 1st of January 2011.

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Malte Westerhoff

Brad Levin

General Manager Europe

General Manager North America & Global Vice President of Marketing

Malte Westerhoff is the General Manager for Visage Imaging GmbH, Brad Levin’s broad experience has the European branch of Visage spanned a variety of leadership roles, Imaging. He is also the Chief including government, consulting, Technical Officer and is responsible and marketing. While in government, for product management and the Brad worked as a PACS subject R&D groups of Visage Imaging matter expert for the renowned US globally. He has more than ten years Department of Defence’s Digital of experience in medical imaging Imaging Network–Picture Archiving and software development, holding and Communications System (DINpositions in research and industry. PACS) initiative, as well as consulting Dr. Westerhoff holds a master’s for top healthcare institutions across degree in physics from Technical the US. University, Berlin, and a PhD in After leaving his consulting role, computer science and mathematics Brad went on to spearhead marketing from Free University, Berlin. for two web-based PACS start-ups, Mr. Westerhoff is one of the founders first AMICAS, and then Dynamic of Indeed - Visual Concepts GmbH Imaging. Both firms experienced and author and co-author of rapid commercial growth leading to many scientific papers in scientific acquisition, by Vitalworks and GE visualization and high-performance Healthcare, respectively. In his most computing as was instrumental in recent role prior to Visage, Brad developing many of the patented was GE Healthcare’s commercial and patent pending technologies that Marketing Director, where he had form the basis of Visage Imaging’s radiology and cardiology marketing product portfolio. Prior to joining the responsibility for their RIS, PACS Pro Medicus group, he has served and CVIT product portfolios. Most at Mercury Computer Systems and recently, Brad published articles in Indeed — Visual Concepts in senior 2012 editions of the Journal of Digital positions. Before that, he has worked Imaging and the SIIMshare Blog, at Zuse Institute Berlin (ZIB) as continuing his influential voice in the scientist in brain research. world of imaging.

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ANNUAL REPORT 2012

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IN ADDITION TO THE MELBOURNE-BASED AUSTRALIAN OPERATION AND HEAD OFFICE, THE COMPANY HAS TWO OFFSHORE OFFICES:

Visage GmbH Berlin

This is the company’s European headquarters and houses 41 staff, the majority which are involved in product research and development and ongoing product support. This office also forms the base of the company’s European operations including order administration and both direct and indirect sales activities.

Visage Imaging Inc San Diego

This is the company’s US headquarters and is the base for 10 staff who are involved in sales, marketing, training/implementation and applications support for both the Visage Imaging offerings and the existing Pro Medicus products.

THE MEL WARD SCHOLARSHIP IS AWARDED ANNUALLY TO TWO HIGH ACHIEVING STUDENTS UNDERTAKING THE ONE YEAR MASTER OF TELECOMMUNICATIONS ENGINEERING COURSE AT MELBOURNE UNIVERSITY FACULTY OF ENGINEERING.

THE SCHOLARSHIP HAS BEEN ESTABLISHED IN MEMORY OF MEL WARD AO THE COMPANYS FOUNDING CHAIRMAN WHO PASSED AWAY IN OCTOBER OF 2010.

Australia

The Australian business recorded fewer than anticipated sales largely due to last minute delays in the release of the company’s new technology platform which was commercially released in August 2012. These delays also impacted sales of Visage technology as groups looked to purchase fully integrated Practice Management / Digital Imaging solutions. Sales are expected to improve now that the company’s new technology platform has been released.

E-health revenues were slightly down, but overall this segment held up very well in a highly competitive environment.

United States

The group employs 10 people in North America to fulfill the sales marketing and professional services roles. Revenue from North America declined by 3.8% compared to the previous year much of this decline attributable to currency fluctuations. The company made a number of changes in the group’s US management and operations during the past year including a significant decrease in overall running costs. These include the appointment of a new technical director/head of customer experience. The US also extended its market reach with the sale of the Visage 7 Enterprise Viewer to a key client in the rapidly growing remote reading/teleradiology market. The company believes these changes will have a positive impact on the performance of the North American division.

Europe

Revenue from our European operations increased by 24.6% compared to the previous year making it a solid contributor to our overall result despite the increasingly difficult business environment in this region. This was primarily due to the increased revenue from OEM, Amira and some direct sales. Whilst in the short term revenues may be impacted due to the sale of Amira, we remain optimistic about the future growth potential in Europe which we believe will come about by alliances with new business partners and a stronger focus on direct sales.

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Muhammad Usman receiving the inaugural Mel Ward scholarship from Dr Sam Hupert Pro Medicus CEO.

ANNUAL REPORT 2012

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THE BOARD AND MANAGEMENT BELIEVE THE COMPANY IS WELL POSITIONED TO BUILD ON THE SOLID PROGRESS IT HAS MADE THROUGHOUT THE 2012 FINANCIAL YEAR. DESPITE DIFFICULT TRADIN G CONDITIONS IN NORTH AMERICA AND EUROPE, IT IS ANTICIPATED THAT THE NEW RIS TECHNOLOGY PLATFORM COUPLED WITH THE EXPANDED VISAGE PRODUCT SUITE WILL PROVIDE THE COMPANY WITH THE FOUNDATION FOR GROWTH IN ITS THREE KEY MARKETS HELPING OFFSET THE EXPECTED DECREASE IN REVENUE DUE TO THE SALE OF THE AMIRA BUSINESS.

Key factors predicted to dr ive growth include:

Expanded geographical footprint

enhance its business partner and third party channels thereby availing itself of a cost-effective means of product distribution in areas not addressable by a direct sales force.

The company is looking to build on its presence in North America and Europe as well as consolidate its position in Australia. In Europe and America, we believe our strategy of developing direct sales and complementary third party business channels will result in an increasing proportion of the company’s revenues being generated in these regions.

The company believes that the trend towards a pay per use licensing model will continue to increase as more and more clients opt for an operational model. This has the potential to build growing annuity revenue streams to supplement the upfront capital licence model that has traditionally been used.

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New fully integrated product offering

Release of New Technology

With the release of our new RIS technology platform in August of this year, we have now fulfilled our aim of fully integrating our new RIS/ Practice Management platform with our leading edge Visage 7.0 suite of products thereby creating the first fourth-generation, end-to-end singlevendor ‘thin client’ PACS/RIS solution in the market. This comprehensive suite of products will enable us to address the needs of a much broader market which includes both private imaging groups and hospitals of all sizes in the three global regions

The company has now released its New Technology RIS Platform. This platform, the culmination of over four years of intense R & D effort will see Pro Medicus cement its position at the forefront of radiology information system (RIS) and practice management technology. A key feature of this technology is the ability for clients to configure business-specific workflow and rules to suit their needs without the need to customize the program, a new concept for the radiology industry.

we service.

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Multiple channels and licencing models

In both the European and North American markets, the company has adopted a hybrid approach of direct and indirect channels to market. The company looks to continue to

The company will also continue to make significant investments in R&D for its flagship Visage 7 suite of products which it believes will further help differentiate our offering in both the PACS and 3-D advanced visualisation space.

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ANNUAL REPORT 2012

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CONTENTS
Directors’ Report ................................................................................................................16
Auditor’s Independence Declaration ..................................................................................24
Statement of Comprehensive Income ................................................................................25
Statement of Financial Position ..........................................................................................26
Statement of Changes in Equity .........................................................................................27
Statement of Cash Flows ...................................................................................................28
Notes to the Financial Statements .....................................................................................29
Note 1 Corporate Information .......................................................................................29
Note 2 Summary of Signifcant Accounting Policies ....................................................29
Note 3 Signifcant Accounting Judgements, Estimates and Assumptions ..................38
Note 4 Financial Risk Management Objectives and Policies .......................................39
Note 5 Operating Segments .........................................................................................41
Note 6 Income and Expenses ......................................................................................43
Note 7 Income Tax ........................................................................................................44
Note 8 Non Current Asset held for Sale ......................................................................45
Note 9 Earnings per Share............................................................................................46
Note 10 Dividends Paid and Proposed ..........................................................................46
Note 11 Cash and Cash Equivalents ..............................................................................47
Note 12 Trade and Other Receivables (Current) .............................................................48
Note 13 Inventory ...........................................................................................................48
Note 14 Plant and Equipment ........................................................................................49
Note 15 Intangible Assets ...............................................................................................50
Note 16 Trade and Other Payables (Current) ..................................................................51
Note 17 Provisions ..........................................................................................................51
Note 18 Contributed Equity and Reserves ....................................................................52
Note 19 Share based Payment Plan ..............................................................................53
Note 20 Commitments ..................................................................................................55
Note 21 Events after the Balance Sheet Date ................................................................55
Note 22 Auditors’ Remuneration ....................................................................................55
Note 23 Key Management Personnel .............................................................................55
Note 24 Related Party Disclosure ...................................................................................58
Note 25 Contingencies ...................................................................................................59
Note 26 Parent Entity Information ..................................................................................59
Directors’ Declaration .........................................................................................................60 Independent Auditor’s Report ............................................................................................62 ASX Additional Information ................................................................................................64
Corporate Governance Statement .....................................................................................65 Corporate Information ........................................................................................................71

ANNUAL REPORT 2012 15

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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:

Dr Sam Aaron Hupert M.B.B.S.

Managing Director and Chief Executive Officer

Co–founder of Pro Medicus Limited in 1983, Sam Hupert is a Monash Peter Terence Kempen University Medical School graduate F.C.A, F.A.I.C.D who commenced General Practice Chairman in 1980. Realising the significant potential for computers in medicine Peter Kempen joined Pro Medicus he left general practice in late 1984 to as a Director on 12 March 2008. devote himself full time to managing He is Chairman of Ivanhoe Grammar the Group.

Peter Kempen joined Pro Medicus as a Director on 12 March 2008. He is Chairman of Ivanhoe Grammar School and Chairman of Australasian Leukaemia and Lymphoma Group. He is also a Director of the Yara Pilbara group of companies.

Sam served as CEO from the time he co–founded the company until October 2007 at which time he stepped down to become an executive director. Sam resumed full time CEO activities in October of 2010.

Peter has previously been Chairman of Patties Food Limited, Chairman of Danks Holdings Limited and Managing Partner of Ernst & Young Corporate Finance Australia.

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Peter is a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Australian Institute of Company Directors.

Peter became Chairman in August 2010 before which he served as a non executive Director of the company.

Anthony Barry Hall B.Sc. (Hons), M.Sc.

Peter is also Chairman of the audit committee.

. Executive Director and Technology Director

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 product development and plan the future technical direction of the Group.

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Roderick Lyle LL.B., B.Com, LL.M (Lond), MBA (Melb)

Non Executive Director

Roderick joined Pro Medicus Limited as a Director on 23 November 2010. He is a Senior Partner of Clayton Utz and is former Managing Partner of the Melbourne office.

Roderick is a member of the Law Institute of Victoria, a member of the Law Society of New South Wales and a member of the Law Society London. Roderick is recognised as one of Australia’s leading commercial lawyers. He has been a key advisor in a large number of significant mergers and acquisitions and equity capital markets transactions. Roderick also serves on the audit committee.

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Clayton James Hatch

B.Comm, ASA

Chief Financial Officer and Company Secetary

Clayton was appointed Company Secretary on 1 July 2009.

Clayton has strong experience in financial and management accounting having worked in a Finance role for several years. Clayton joined Pro Medicus in June 2008 and has progressed through the company to his current position of Chief Financial Officer which he assumed on the 1st July 2012.

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:

	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 NIL
	S. A. Hupert 30,072,660 NIL P. T. Kempen 328,082 200,000 R. Lyle 100,000 200,000
	EARNINGS PER SHARE Cents Basic earnings per share 1.8 Diluted earnings per share 1.8
	DIVIDENDS ORDINARY SHARES CENTS $’000
	Final dividends recommended: Normal dividend plan 1.0 1,002 Dividends paid in the year: Interim for the year 0.5 501 Final dividend for 2011 shown as recommended in the 2011 report: Normal dividend plan – –

OPERATING AND FINANCIAL REVIEW

Corporate Structure

In January 2009, Pro Medicus Limited ▶ Training, installation and acquired Visage Imaging Inc (US professional services; operations) and Visage Imaging ▶ GmbH (Germany Operations) from Mercury Computer Systems in the ▶ US. The acquisition was funded from cash reserves.

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

• Support and service products;

Nature of operations and principal activities

• The sale of advanced visualisation toolkits to academic and research institutions (Amira).

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

This acquisition of Visage Imaging has enabled the group to significantly broaden its product offering to now include:

The acquisition of Visage Imaging in January 2009 saw the group extend its R&D base to Europe where the bulk of the R&D for the Visage Imaging product set is carried out. The company has continued development of the Visage 7.0 product line throughout the period.

• Innovative clinical software that provides radiologist with advanced visualisation capability for viewing 3-D and 4-D images;

• Innovative proprietary medical software for practice management (RIS);

• PACS/Digital imaging software that is sold both direct and to original equipment manufacturers (OEM).

• Training, installation and professional services;

• After sale support and service products;

• Promedicus.net secure email; and

• Digital radiology integration products

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ANNUAL REPORT 2012 17

DIRECTORS’ REPORT cont.

REVIEW AND RESULTS OF OPERATIONS

European operations. Revenue from our European operations increased by 24.6% compared to the previous year.

Investment Activities

due to delays in commercialisation of the company’s new RIS technology platform to market.

Surplus funds are invested by the Group in a cash management account to maximise the interest return.

Promedicus.net, the company’s e-health offering, continued to hold its strong market position recording revenue of $1.75 million despite increasing competition.

Financials

Performance Indicators

Full year revenue from continuing operations, rose from $11.18 million to $11.38 million, an increase of 1.8% with net margin as defined by profit before tax to revenue from operating activities rising from (9.0%) to 9.0%.

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

North America

The group employs 10 people in North America to fulfil the sales marketing and professional services roles. Revenue from North America declined by 3.8% compared to the previous year. The company made a number of changes in the group’s US management and operations during the past year including a significant decrease in overall running costs. The company believes these changes will have a positive impact on the performance of the North American division.

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 Group’s performance.

Profit after tax for the period was $1.79 million an increase of 256.1% from the previous year reflecting higher margins and decreased ongoing costs.

Shareholder Returns

The directors are confident that the holdings of reserve cash is sufficient to underpin the development and expansion needs of the company as the business looks to increase its penetration of existing markets and new product development.

Europe

Dynamics of the Business

Pro Medicus established a presence in Europe with the acquisition of Visage Imaging GmbH in late January 2009. The group has 41 employees in its Berlin office who undertake research and development of Visage Imaging products worldwide as well as sales, marketing and service/ support functions for the group’s

Australia

The group employs 28 people in Australia who undertake research and development of Pro Medicus products as well as sales and service/support functions.

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.

The group’s Australian revenue declined over the period by 6.75%

Basic earnings per share — reported (cents) Return on assets (%) Return on equity (%) Dividend payout ratio (%) — normal dividend plan Dividend payout ratio (%) — total dividend Available franking credits ($’000)	2012 1.8 11.3 11.2 84.0 84.0 2,638	2011 0.5 3.0 3.3 0.0 0.0 2,921	2010 3.9 23.8 23.5 51.2 51.2 4,821	2009 5.1 33.4 38.5 59.0 59.0 4,042	2008 7.9 57.9 50.4 75.8 75.8 5,516

Investments for Future Performance

The Company will continue to direct resources into the development of new products and is committed to the continued development of its new RIS technology platform as well as the ongoing development of the Visage Imaging range of products.

It is anticipated that this strategy of ongoing development will continue to position Pro Medicus as a market leader and enable the group to leverage its expanded product portfolio and geographical spread.

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

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

REVIEW OF FINANCIAL CONDITION

Capital Structure

The company has a sound capital structure with a strong statement of financial position, with no debt.

Treasury Policy

With the increase in overseas operations there is an increased currency risk as a consequence of contracts written in and cash being held in foreign currencies. Whilst this is offset to a degree by having operations in North America and Europe, this change in risk profile has been noted by the board and action is being taken to manage this risk.

The treasury function, co-ordinated within Pro Medicus Limited, is limited to maximising interest return on surplus funds and 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.

Cash from Operations

Net cash flows from operating activities for the current period was a positive $5.57m, with receipts from customers totalling $16.11m compared with payments of $8.72m to suppliers and employees. The group continued to hold total cash assets of $5.19 million and increase of 59.5% from last year.

Liquidity and Funding

The Group is cash flow positive, has adequate 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 Group’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 SIGNIFICANT EVENTS

for areas such as risk management, AFTER THE BALANCE DATE environmental issues, occupational A Final Dividend of 1.0 cents per share health and safety or treasury.

A Final Dividend of 1.0 cents per share has been declared post 1 July. Please refer Note 10.

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:

On 31 July 2012, the Group publicly announced that Amira, the asset held for sale (Note 8) was sold to a Visualization Sciences Group (VSG). The consideration for the sale of Amira was €12.1m (approx $14.1m) and after deducting transaction costs and the carrying value of the intangible asset, the profit after tax is estimated to be $8.1m. Please refer to Note 21.

• Board approval of strategic plans, which encompass the company’s vision, mission and strategy statements, designed to meet stakeholder needs and manage business risk;

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

• Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPIs; and

The Directors foresee that the 2013 financial year will be a year of continued growth in both the local and overseas markets. It is anticipated this will result from:

• Overseeing of appropriate backup procedures for important company data

• The group’s expanded product portfolio that includes advanced visualisation, PACS (Digital Imaging) 3-D and 4-D capability.

• Routine review by key executives of its established Quality Assurance program and corrective action recommendations stemming from it

• The increased adoption of advanced visualisation and 3-D capability throughout the radiology profession.

Corporate Governance

In recognising the need for the ▶ The ability of the new expanded highest standards of corporate product set to address the needs behaviour and accountability, the of large public hospitals in the US directors of Pro Medicus Limited Europe and Australia in addition to support and have adhered to the private radiology market. the principles of good corporate governance. Please refer to the ▶ The increase geographical presence separate “Corporate Governance” and selling capability of Pro Medicus section for more details of in North America and Europe. specific policies. ▶ The commercialisation of the

• The increase geographical presence and selling capability of Pro Medicus in North America and Europe.

• The commercialisation of the Pro Medicus New Technology RIS platform.

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.

As a result, it is anticipated that the 2013 financial year will show continued improvement in profits. However, this is dependant on many market factors over which the directors have limited or no control.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

ENVIRONMENTAL REGULATION AND PERFORMANCE

Shareholders’ equity increased by 5.3% from $15.20m to $16.00m. This movement was largely the result of profit during the year and retaining cash in the business.

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

18 ANNUAL REPORT 2012

ANNUAL REPORT 2012 19

DIRECTORS’ REPORT cont.

SHARE OPTIONS

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

REMUNERATION

REPORT (audited)

Un-issued Shares

This remuneration report for the year ended 30 June 2012 outlines the remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited as required by section 308(3C) of the Act.

As at the date of this report, there were 1,675,000 un-issued ordinary shares under options Refer to Note 19 of the financial statements for further details of the options outstanding.

During the year, PME indemnified Clayton Utz and each one or more of the past, present or future partners of Clayton Utz (other than Mr. Lyle) against any liability (including a liability incurred by Clayton Utz to pay legal costs) arising out of Mr. Lyle’s activities as a Director of PME.

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

The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group.

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.

Shares Issued as a Result of the Exercise of Options

During the financial year, no share options were exercised by ex employees. During the financial year 375,000 share options expired. No directors or key management personnel in the current year have exercised any option to acquire fully paid ordinary shares in Pro Medicus Limited.

Disclosure of the amount of insurance and the terms of this cover is prohibited by the insurance policy.

For the purposes of this report, the term ‘executive’ includes the Chief Executive Officer (CEO), executive directors and other senior executives of the Group.

(i) Non – executive directors

Peter Terence Kempen Chairman Roderick Lyle Director (non-executive)

(ii) Executive directors

Dr Sam Aaron Hupert Managing Director and CEO Anthony Barry Hall Technology Director

(ii) Other Executives

Danny Tauber General Manager – Pro Medicus Limited Malte Westerhoff Managing Director – Visage Imaging GmbH Brad Levin General Manager – Visage Imaging Inc (commenced 8 August 2011)

Remuneration committee

Remuneration philosophy

The Executive Directors in turn are responsible for determining and reviewing the compensation arrangements for the Non-Executive Directors. The CEO, in conjunction with the full Board reviews the terms of employment for all executives.

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.

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

The assessment considers the appropriateness of the nature and amount of remuneration of such executives 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.

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 Executive Directors of the Group.

To this end, the company provides competitive rewards to attract high calibre executives.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and executive’s 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 2012 is detailed in Table 1 of this report.

Executives

(including Executive Directors remuneration)

Objective

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

• align the interests of executives with those of shareholders;

▶ ensure total remuneration is competitive by market standards.

Structure

Employment Contracts have been entered into with all executives of the Group. Details of these contracts are provided on page 22.

Remuneration consists

predominately of fixed remuneration. Variable remuneration is provided occasionally at the board’s discretion including both short term incentives (STI) and long term incentives (LTI).

The Company does not have a policy regarding executives entering into contracts to hedge their exposure to share options granted as part of their remuneration package.

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 consisting of a review of group 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 company conducting the review has access to external advice independent of management.

Executives, including Executive Directors 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 group.

The fixed remuneration is detailed in Table 1 of this report.

Variable Remuneration – Long Term Incentive (LTI)

Roderick Lyle was granted options in the current year under the Employee Share Option Scheme and in the previous year Danny Tauber was granted options under the Employee Share Option Scheme.

The options granted tor Roderick Lyle and Danny Tauber both have a 5 year vesting period.

A long term incentive plan was established during the year whereby Senior Executives of Group were offered performance rights over the ordinary shares of Pro Medicus Limited. The performance rights, issued for nil consideration, are offered for a 5 year period and vest 3 years after granting date on completion of service. This long term incentive plan includes performance hurdles related to the company and investing conditions relating to the employee’s period of service. Refer to Note 19.

Variable Pay

– Short Term Incentive (STI)

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

STI bonus for 2012

For the 2012 financial year, no STI cash bonus either paid or accrued at year end was paid to the Key Management Personnel.

Key Performance Indicators

Actual STI payments granted to Malte Westerhoff depended on the extent to which specific targets set at the time of employment were met. The targets consist of a number of Key Performance Indicators (KPIs) covering both financial (Sales Targets) and non-financial measures of performance.

20 ANNUAL REPORT 2012

ANNUAL REPORT 2012 21

DIRECTORS’ REPORT cont.

Executives (excluding Executive Directors)

Group performance

• The agreements protect the Company and Group’s confidential information and provide that any inventions or discoveries of an executive become the property of the Group;

For details of the group’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.

All executives have rolling contracts. The Group may terminate the executive’s employment agreement by providing six months written notice or providing payment in lieu of the notice period (based on the fixed component of the executive’s remuneration). The Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs the executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination with cause any unvested options will immediately be forfeited.

• Non-competition during employment and for a period of 12 months thereafter; and

Employment Contracts

• 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.

Executive Directors

Executive Service Contracts, on similar terms and conditions, have been prepared for all Executive Directors of the Company.

These agreements provide the following major terms:

• Each executive will receive a remuneration package per annum which is to be reviewed annually;

Remuneration of key management personnel of the company and the Group

Table 1: Remuneration of key management personnel for the year ended 30 June 2012

Table 1:Rem	uneration of key managem	ent personn	el for the	year ended 30 J	une 2012
	SHORT-TERM	POST EMPLOYMENT	LONG TERM	SHARE-BASED PAYMENT	TOTAL	TOTAL PERFORMANCE RELATED %
30 june 2012 salary & fees cash bonus non– monetary benefts super- annuation long service leave shares options
Directors P T Kempen 47,924 – 8,076 24,000 – – 1,040 81,040 –
S A Hupert 115,000 – – 25,000 – – – 140,000 –
A B Hall 115,000 – – 25,000 – – – 140,000 –
R. Lyle 45,872 – – 4,128 – – 23,498 73,498 –
Executives
D Tauber 301,871 – – 13,129 4,830 – 11,554 331,384 –
M Westerhoff 232,412 – – 2,274 – – 3,060 237,746 –
B Levin 162,917 – – – – – – 162,917 –
1,020,996 - 8,076 93,531 4,830 - 39,152 1,166,585

Compensation options granted, vested and exercised during the year as part of remuneration

200,000 shares with a fair value of $45,116 ($0.23 per option) were granted as options to Roderick Lyle with a grant date of 18 November 2011. The share options have an exercise price of $0.55. The options have a first exercise date of 18 November 2012 and can be exercised at anytime through to expiry date of 18 November 2021. The options vest 20% each year over a 5 year period on completion of service.

Table 2: Remuneration of key management personnel for the year ended 30 June 2011

Table 2:Rem	u	neration of keymanagem	entpersonn	el for the	year ended30	June 2011
		SHORT-TER	M POS EMPLOYMEN	T T LONG TERM	SHARE-BASED PAYMENT	TOTAL	TOTAL PERFORMANCE RELATED %
30 june 2012		salary & fees cash bonus non– monetary benefts super annuatio		- n long service leave shares options
Directors P T Kempen		55,046 – – 4,954 – – 2,662 62,662 –
S A Hupert		117,737 – – 22,263 – – – 140,000 –
A B Hall		117,737 – – 22,263 – – – 140,000 –
R. Lyle		27,800 – – 2,502 – – – 30,302 –
M K Ward***		20,000 – – 1,800 – – – 21,800 –
P D Jonson***		15,632 – – – – – – 15,632 –
D Chambers***		378,876 – – 38,805 – – – 417,681 –
Executives D Tauber		291,871 – – 13,129 6,883 – 14,942 326,825 –
M Westerhoff		228,031 25,207 – 2,416 – – 6,333 261,987 9.62%
J Danahy***		219,570 – – 8,107 – – – 227,677 –
		1,472,300 25,207 – 116,239 6,883 – 23,937 1,644,566

• *** Melvyn Ward deceased 1 October 2010

• Peter Jonson retired 23 November 2010 David Chambers resigned 11 October 2010 John Danahy resigned 24 February 2011

Compensation options granted, vested and exercised during the year as part of remuneration

550,000 shares with a fair value of $54,109 ($0.10 per option) were granted as options to Key Executives with a grant date of 25 August 2010. The share options have an exercise price of $1.00. The options have a first exercise date of 25 August 2011 and can be exercised at anytime through to expiry date of 25 August 2020. The options vest 20% each year over a 5 year period on completion of service.

For details of the valuation of options, including models and assumptions used please refer to Note 19.

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’ MEETINGS	ELIGIBLE TO ATTEND	AUDIT COMMITTEE	ELIGIBLE TO ATTEND
	Number of meetings held:	11		2
	Number of meetings attended:
	P. T. Kempen	11	11	2	2
	R. Lyle	11	11	2	2
	A. B. Hall	11	11	2	2
	S. A. Hupert	11	11	2	2

Committee membership

As at the 30 June 2011, the company had an Audit Committee comprising the two non–executive directors and two executive directors.

22 ANNUAL REPORT 2012

ANNUAL REPORT 2012 23

DIRECTORS’ REPORT cont.

ROUNDING

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.

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.

Ernst & Young received the following amount for the provision of non–audit services:

Professional services rendered in respect to taxation matters $21,130 Signed in accordance with a resolution of the Directors.

AUDITOR INDEPENDENCE AND NON–AUDIT SERVICES The directors received a declaration from the auditor of Pro Medicus P T Kempen Limited (refer page 24). Director

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FOR THE YEAR ENDED 30 JUNE 2012 NOTES	CONSOLIDATED 2012 2011
	$’000 $’000
Continuing Operations Revenue	11,313 11,079
Finance Revenue	66 101
Revenue	11,379 11,180
Cost of Sales	(546) (310)
Gross Proft	10,833 10,870
Other Income/(Expenses) 6(a)	812 (698)
Accountingand Secretarial Fees	(419) (356)
Advertisingand Public Relations	(601) (681)
Depreciation and Amortisation 6(b)	(2,936) (2,572)
Insurance	(332) (335)
Legal Costs	(127) (161)
OperatingLease Expense — minimum leasepayments	(360) (403)
Other Expenses	(55) (132)
Salaries and Employee Benefts Expense 6(b)	(5,379) (5,811)
Travel and Accommodation	(417) (727)
Proft before income tax Income tax expense 7	1,019 (1,006) (263) 316
Proft before tax from continuing operations Discontinued operations Proft/(loss)after tax for theyear from discontinued operations 8	756 (690) 1,035 1,193
Proft for the year 18 Other Comprehensive Income Foreign Currencytranslation	1,791 503 (533) (4)
Other comprehensive income for theperiod	(533) (4)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	1,258 499
Earningsper share(centsper share) 9
Basic for netproft for theyear	1.8¢ 0.5¢
Diluted – for netproft for theyear	1.8¢ 0.5¢
Earningsper share for continued operations(centsper share) 9
Basic for netproft for theyear from continued operations	0.8¢ (0.7¢)
Diluted – for netproft for theyear from continued operations	0.8¢ (0.7¢)

24 ANNUAL REPORT 2012

ANNUAL REPORT 2012 25

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AS AT 30 JUNE 2012 NOTES	CONSOLIDATED 2012 2011
	$’000 $’000
ASSETS Current Assets Cash and cash equivalents 11	5,193 3,255
Trade and other receivables 12	1,692 3,849
Income tax receivable	135 -
Inventories 13	101 153
Prepayments	157 199
Assets classifed held for sale	7,278 7,456 2,647 -
Total Current Assets	9,925 7,456
Non-current Assets Deferred tax asset 7	1,596 1,731
Plant and equipment 14	356 388
Intangible assets 15	11,267 13,533
Total Non-current Assets	13,219 15,652
TOTAL ASSETS	23,144 23,108
LIABILITIES Current Liabilities
Trade and otherpayables 16	1,708 1,685
Income taxpayable	- 1,084
Provisions 17	1,224 1,266
Liabilities directlyassociated with the assets classifed as held for sale	2,932 4,035 945 -
Total Current Liabilities	3,877 4,035
Non-current Liabilities Deferred tax liabilities 7	3,234 3,855
Provisions 17	31 20
Total Non-current Liabilities	3,265 3,875
TOTAL LIABILITIES	7,142 7,910
NET ASSETS	16,002 15,198
EQUITY Contributed equity 18	327 330
Share Reserve 18	172 122
Foreign CurrencyTranslation Reserve 18	(1,681) (1,148)
Retained earnings 18	17,184 15,894
TOTAL EQUITY	16,002 15,198

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EOUITY Q
FOR THE YEAR ENDED 30 JUNE 2012	CONSOLIDATED ISSUED CAPITAL SHARE RESERVE FOREIGN CURRENCY TRANSLATION RESERVE RETAINED EARNINGS TOTAL EQUITY
	$’000 $’000 $’000 $’000 $’000
At 1 July 2010 Proft for the year	330 79 (1,144) 17,397 16,662 – – – 503 503
Other comprehensive income	– – (4) – (4)
Total comprehensive income for the period	– – (4) 503 499
Transaction with owners in their capacity as owners Share Based Payment	– 43 – – 43
Dividends	– – – (2,006) (2,006)
At 30 June 2011	330 122 (1,148) 15,894 15,198
At 1 July 2011 Proft for the year	330 122 (1,148) 15,894 15,198 – – – 1,791 1,791
Other comprehensive income	– – (533) – (533)
Total comprehensive income for the period	– – (533) 1,791 1,258
Transaction with owners in their capacity as owners Share Based Payment	– 50 – – 50
Share Buy-Back	(3) (3)
Dividends	– – – (2,006) (501)
At 30 June 2012	327 172 (1,681) 17,184 16,002

26 ANNUAL REPORT 2012

ANNUAL REPORT 2012 27

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FLOW
FOR THE YEAR ENDED 30 JUNE 2012 NOTES	CONSOLIDATED 2012 2011
	$’000 $’000
Cash fows from operating activities Receipts from customers	16,416 15,823
Payments to suppliers and employees	(8,716) (10,167)
Income tax(paid)/refunded	(1,824) 594
Net cash fows from operating activities 11 Cash fows from investing activities Capitalised Development Costs 15	5,876 6,250 (3,354) (4,002)
Interest received	66 100
Purchase ofplant and equipment 14	(129) (172)
Proceeds from disposal ofplant & equipment 14	11 3
Acquisition of subsidiaries	– –
Net cash fows used in investing activities Cash fows from fnancing activities Payment of dividends on ordinaryshares 10	(3,406) (4,071) (501) (2,006)
Net cash fows used in fnancing activities	(501) (2,006)
Net increase/(decrease)in cash and cash equivalents	1,969 173
Net foreign exchange differences	(31) (703)
Cash and cash equivalents at beginning of period	3,255 3,785
Cash and cash equivalents at end of period 11	5,193 3,255

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AAS ~~B~~ 124 ( ~~Re~~ l ~~a~~ t ~~e~~ d ~~Pa~~ rty D ~~i~~ sclosur ~~e~~ s ~~— Re~~ v ~~i~~ s ~~e~~ d)

1. CORPORATE

INFORMATION

The financial report of Pro Medicus Limited (the Company) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of directors on 24 August 2012.

Party Disclosures (December 2009) simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition, including:

(a) The definition now identifies a subsidiary and an associate with the same investor as related parties of each other

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

(b) Entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

2. SUMMARY OF

(c) The definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other

SIGNIFICANT ACCOUNTING POLICIES

• (a) Basis of Preparation The financial report is a

general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards board. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.

A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures.

AASB 2009-12 (Amendments to Australian Accounting Standards) Makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations.

In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.

(b) Statement of compliance with IFRS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

• (c) New accounting standards and interpretations

• (i) Changes in Accounting policy and disclosures

AASB 2010-5 (Amendments to

Australian Accounting Standards)

The accounting polices adopted are consistent with those of the previous financial year except as follows: The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2011. Adoption of these standards did not have any effect on the financial position or performance of the Group.

— This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.

These amendments have no major impact on the requirements of the amended pronouncements.

AAS ~~B~~ 10 5 4 (Austr ~~a~~ l ~~ia~~ n Add ~~i~~ t ~~i~~ on ~~a~~ l D ~~i~~ sclosur ~~e~~ s)

of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB.

This standard, with AASB 20111 relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas:

• (a) Compliance with Australian Accounting Standards

• (b) The statutory basis or reporting framework for financial statements

• (c) Whether the entity is a for-profit or not-for-profit entity

• (d) Whether the financial statements are general purpose or special purpose

• (e) Audit fees

• (f) Imputation credits

AASB 2010-4 (Amendments to Australian Accounting Standards arising from the Annual Improvements Project)

[AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]

Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments.

Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions.

Clarifies that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account.

28 ANNUAL REPORT 2012

ANNUAL REPORT 2012 29

NOTES TO THE FINANCIAL STATEMENTS cont.

(ii) Accounting Standards and Interpretation issued but not yet effective

ANNUAL REPORT2012 REFERENCE TITLE SUMMARY APPLICATION DATE OF STANDARD IMPACT ON GROUP FINANCIAL REPORT APPLICATION DATE FOR GROUP** AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049] This Standard requires entities to group items presented in other comprehensive income on the basis of whether they might be reclassifed subsequently to proft or loss and those that will not. 1 July 2012 The Group will amend the future fnancial reports to comply with AASB 2011-9 1 July 2012 AASB 10 Consolidated Financial Statements AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated fnancial statements and UIG-112 Consolidation — Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specifc situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Consequential amendments were also made to other standards via AASB 2011-7. 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013 AASB 12 Disclosure of Interests in Other Entities AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non- controlling interests. 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013 AASB 13 Fair Value Measurement AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this defnition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 2011-8. 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013 AASB 119 Employee Benefts The main change introduced by this standard is to revise the accounting for defned beneft plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets. The revised standard changes the defnition of short-term employee benefts. The distinction between short-term and other long-term employee benefts is now based on whether the benefts are expected to be settled wholly within 12 months after the reporting date. Consequential amendments were also made to other standards via AASB 2011-10. 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013 Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2012. These are outlined in the table below. () ccountng tandards and nterpretaton ssued but not yet eectve		REFERENCE TITLE SUMMARY APPLICATION DATE OF STANDARD IMPACT ON GROUP FINANCIAL REPORT APPLICATION DATE FOR GROUP**
		AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The Standard addresses a range of improvements, including the following: ▶repeat application of AASB 1 is permitted (AASB 1); and ▶clarifcation of the comparative information requirements when an entity provides a third balance sheet (AASB 101 Presentation of Financial Statements). 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013
		ANNUAL REPORT2012 AASB 9 Financial Instruments AASB 9 includes requirements for the classifcation and measurement of fnancial assets. It was further amended by AASB 2010-7 to refect amendments to the accounting for fnancial liabilities. These requirements improve and simplify the approach for classifcation and measurement of fnancial assets compared with the requirements of AASB 139. The main changes are described below. (a) Financial assets that are debt instruments will be classifed based on (1) the objective of the entity’s business model for managing the fnancial assets; (2) the characteristics of the contractual cash fows. (b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in proft or loss and there is no impairment or recycling on disposal of the instrument. (c) Financial assets can be designated and measured at fair value through proft or loss at initial recognition if doing so eliminates or signifcantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. (d) Where the fair value option is used for fnancial liabilities the change in fair value is to be accounted for as follows: ▶The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ▶The remaining change is presented in proft or loss If this approach creates or enlarges an accounting mismatch in the proft or loss, the effect of the changes in credit risk are also presented in proft or loss. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10. 1 January 2013 The Group is in the process of determining the extent of the impact of the amendments, if any 1 July 2013

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ANNUAL REPORT 2012 31

NOTES TO THE FINANCIAL STATEMENTS cont.

(d) Basis of consolidation

The consolidated financial statements comprise the financial statements of Pro Medicus Limited and its subsidiaries as at 30 June each year (the group).

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intragroup transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non–controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values.

The difference between the above items and the fair value of the consideration (including the fair value of any pre– existing investment in the acquiree) is goodwill or a discount on acquisition.

A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction.

Non–controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.

Losses are attributed to the non– controlling interest even if that results in a deficit balance.

If the Group loses control over a subsidiary, it

• Derecognises the assets (including goodwill) and liabilities of the subsidiary.

• Derecognises the carrying amount of any non–controlling interest.

• Derecognises the cumulative translation differences, recorded in equity.

• Recognises the fair value of the consideration received.

• Recognises the fair value of any investment retained.

• Recognises any surplus or deficit in profit or loss.

• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.

(e) Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non–controlling interest in the acquiree. For each business combination, the acquirer measures the non–controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition–related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured.

(f) Operating segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues.

Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team.

The group aggregates two or more operating segments when they have similar economic characteristics and the segments are similar in each of the following respects:

• Nature of the products and services

• Type or class of customer for the products and services

• Nature of the regulatory environment

Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements

Information about other business

activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “all other segments”.

(g) Revenue recognition

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

Rendering of services

Revenue from the installation and ongoing support of software applications and services is recognised by reference to the stage of completion of a contract or contracts in progress. Stage of completion is measured by completion of identifiable service segments as a percentage of the total services to be provided for each contract, which is determined by a quotation with the customer.

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

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

Licences

License revenue is recognised when control of the right to be compensated for the license can be reliably measured. License revenue is recognised when ownership of the goods have passed to the buyer, which is usually after the software application has been installed and is ready for use by the buyer.

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.

(h) 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.

Group 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 statement of comprehensive income on a straight–line basis over the lease term.

(i) Cash and cash equivalents

Cash and cash equivalents in the

statement of financial position comprise cash at bank and in hand and short term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes of value.

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

(j) Trade and other receivables

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

A provision for impairment is made when there is objective evidence that Pro Medicus will not be able to collect the debts. Financial difficulty of the debtors is considered objective evidence by the Group. Bad debts are written off when identified.

(k) 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.

(l) Derivative financial instruments and hedging

The Group has not transacted any derivative financial instruments to hedge its risk associated foreign currency and interest rate fluctuations.

(m) Investments and other financial assets

Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as either financial assets at fair value through profit or loss, loans and receivables, held–to–maturity investments, or available–for–sale financial assets. The classification depends on the purpose for which the investments were acquired or originated. Designation is re– evaluated at each reporting date, but there are restrictions on reclassifying to other categories. When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

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ANNUAL REPORT 2012 33

NOTES TO THE FINANCIAL STATEMENTS cont.

Recognition and derecognition

All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or when the entity transfers substantially all the risks and rewards of the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has transferred control of the assets.

Subsequent measurement

(i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial assets held for trading are recognised in profit or loss and the related assets are classified as current assets in the statement of financial position.

(ii) Loans and receivables

Loans and receivables including loan notes and loans to key management personnel are non–derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. These are included in current assets, except for those with maturities greater than 12 months after reporting date, which are classified as non–current.

(n) Foreign currency translation

• (i) Functional and presentation currency

Both the functional and presentation currency of Pro Medicus Limited and its Australian subsidiaries are Australian dollars ($). The United States subsidiaries’ functional currency is United States Dollars. The subsidiary in Germany has a functional currency of Euro. Foreign subsidiaries are translated to presentation currency (see below for consolidated reporting).

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency by applying 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 reporting date.

Non–monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non–monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(iii) Translation of Group Companies’ functional currency to presentation currency

The results of the United States and German subsidiaries are translated into Australian dollars (presentation currency) using an average exchange rate for the trading period. Assets and liabilities are translated at exchange rates prevailing at reporting date.

Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity.

On consolidation, exchange differences arising from the translation of the net investments in foreign subsidiaries are taken to the foreign currency translation reserve. If a foreign subsidiary were sold, the proportionate

share of exchange differences would be transferred out of equity and recognised in the statement of comprehensive income.

(o) 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 reporting date.

Deferred income tax is provided on all temporary differences at the reporting 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.

▶ when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

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.

• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred

income tax assets is reviewed at each reporting 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.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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 reporting date.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

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

Tax consolidation legislation

Pro Medicus Limited and its wholly– owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2009.

The head entity, Pro Medicus Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach to determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

In addition to its own current and deferred tax amounts, Pro Medicus also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Pro Medicus Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 January 2009. Pro Medicus Limited is the head entity of the tax consolidated group. An allocation of income tax liabilities between the entities of the tax consolidated group will be made should the head entity default on its tax payment obligations. No such amounts have been recognised in the financial statements on the basis that the possibility of default is remote.

(p) 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.

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

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.

(q) Plant and equipment

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:

	PropertyImprovements	2012 2 to 7years	2011 2 to 7years
	Motor Vehicles Offce Equipment	4 to 5years 2 to 7years	4 to 5years 2 to 7years
	Furniture and Fittings Research and Development Equipment	5years 3 to 4 years	5years 3 to 4 years

An item of 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 de–recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income 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.

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ANNUAL REPORT 2012 35

NOTES TO THE FINANCIAL STATEMENTS cont.

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.

(r) Intangible assets

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at date of acquisition. Following initial recognition, intangible assets with a finite life are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Amortisation is calculated on a straight–line basis over the estimated useful life of the asset.

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 unit level. The recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying value.

The amortisation period and method is renewed at each financial year end 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 group 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 on a straight line basis over the period of expected benefit from the related project (5 years).

Development expenditure includes costs of materials and services and salaries and wages and other employee related costs arising from the generation of the intangible asset.

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.

Intellectual Property – Software

Three separately identifiable intangible assets, in the form of software intellectual property, have previously been identified in the business acquisition of Visage Imaging;

▶ Visage CS

▶ Visage PACS and

▶ Amira

Following initial recognition, Intellectual property is measured at cost less any accumulated amortisation. A useful life of 5 years has been determined.

Software Licenses

The Group identified a separate intangible asset in the form of software licenses, in the business acquisition of Visage Imaging.

Following initial recognition, software licenses are measured at cost less any accumulated amortisation. A useful life of 4 years has been determined.

Customer List

The Group identified a separate intangible asset in the form of a customer list, in the business acquisition of Visage Imaging.

Following initial recognition, the customer list is measured at cost less any accumulated amortisation. A useful life of 4 years has been determined.

(s) Trade and other payables

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

(t) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date.

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.

(u) Employee leave benefits

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

(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 respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non–accumulating sick leave are recognised when the leave is taken and are measured at the rates paid.

(ii) Long Service Leave

The liability for long service leave is recognised 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, using the projected unit credit method. Consideration is given to expected future 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.

(v) Share based payment transactions

(i) Equity settled transactions:

The Group provides benefits to its employees (including KMP) in the form of share–based payments, 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:

• The Employee Share Option Plan (ESOP), which provides benefits to directors and senior executives.

The cost of these equity–settled transactions with employees (for awards granted after 7 November 2002 that were unvested at 1 January 2005) is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in note 19.

In valuing equity–settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of Pro Medicus Limited (market conditions) if applicable.

The cost of equity–settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of:

• (i) The grant date fair value of the award;

(ii) For options with non–market

vesting conditions, the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non–market performance conditions being met; and

(iii) The expired portion of the vesting period.

The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied.

If the terms of an equity–settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share– based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity–settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (see note 9).

(w) 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.

(x) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the Group, 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.

36 ANNUAL REPORT 2012

ANNUAL REPORT 2012 37

NOTES TO THE FINANCIAL STATEMENTS cont.

Diluted earnings per share is calculated as net profit attributable to members of the Group 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 and

– Dilutive potential ordinary shares adjusted for any bonus element.

and then divided by the weighted average number of ordinary shares.

(y) Comparatives

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

(z) Government Grants

Research and Development tax credits are recognized in accordance with AASB 120: Accounting for Government Grants and Government Assistance. The Research and development tax credit is recognised when there is reasonable assurance that the grant will be received and all conditions have been complied with. The Grant is recognised as a reduction to the cost base of the intangible and released to income as a reduction in amortization expense over the expected useful life of the related asset. The amount recognized for the period to 30 June 2012 is $463,242.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

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

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

(i) Significant accounting judgements

Recovery of deferred tax assets:

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

Capitalisation of Development costs:

Development costs are only capitalised by the Group when it can be demonstrated that the technical feasibility of completing the intangible asset is valid so that the asset will be available for use or sale.

Impairment of non–financial assets

The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is determined. Given the current uncertain economic environment management considered that the indicators of impairment were significant enough and as such these assets have been tested for impairment in this financial period.

Taxation

The Group’s accounting policy for taxation requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from un–recouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.

4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Assumptions about the generation of future taxable profts and repatriation of retained earnings depend on management’s estimates of future cash fows. These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of fnancial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the statement of comprehensive income. (ii) Signifcant accounting estimates and assumptions Capitalisation of development costs The capitalisation of development costs includes an overhead rate which has been estimated from total costs. The estimated development overheads rate has been calculated by dividing the development labour costs over total labour costs to give a percentage of development labour rate. The development labour rate is then applied against the total overheads of the company, to give an estimate of the amount of overheads that relates to development.	4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The group’s principal fnancial instruments are cash and short–term deposits. The main purpose of these fnancial instruments is to provide fnance for the Group’s operations. The Group has various other fnancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s fnancial instruments are foreign currency risk, interest risk and credit risk. The Board manages each of these risks as detailed below. Foreign currency risk The Group has transactional currency exposure, which arise from sales made in currencies other than the Group’s functional currency. Approximately 62% (2011: 58%) of the Group’s sales are denominated in currencies other than the functional currency, and these sales would be predominately offset by currency exposure on costs. Foreign bank accounts have also been established, to create a natural hedge and reduce the need for regular transfers from the functional currency (AUD) cash holdings. At 30 June the Group had the following exposure to US$ foreign currency that is not designated in cash fow hedges CONSOLIDATED 2012 2011 $000 $000	4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The group’s principal fnancial instruments are cash and short–term deposits. The main purpose of these fnancial instruments is to provide fnance for the Group’s operations. The Group has various other fnancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s fnancial instruments are foreign currency risk, interest risk and credit risk. The Board manages each of these risks as detailed below. Foreign currency risk The Group has transactional currency exposure, which arise from sales made in currencies other than the Group’s functional currency. Approximately 62% (2011: 58%) of the Group’s sales are denominated in currencies other than the functional currency, and these sales would be predominately offset by currency exposure on costs. Foreign bank accounts have also been established, to create a natural hedge and reduce the need for regular transfers from the functional currency (AUD) cash holdings. At 30 June the Group had the following exposure to US$ foreign currency that is not designated in cash fow hedges CONSOLIDATED 2012 2011 $000 $000	4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The group’s principal fnancial instruments are cash and short–term deposits. The main purpose of these fnancial instruments is to provide fnance for the Group’s operations. The Group has various other fnancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s fnancial instruments are foreign currency risk, interest risk and credit risk. The Board manages each of these risks as detailed below. Foreign currency risk The Group has transactional currency exposure, which arise from sales made in currencies other than the Group’s functional currency. Approximately 62% (2011: 58%) of the Group’s sales are denominated in currencies other than the functional currency, and these sales would be predominately offset by currency exposure on costs. Foreign bank accounts have also been established, to create a natural hedge and reduce the need for regular transfers from the functional currency (AUD) cash holdings. At 30 June the Group had the following exposure to US$ foreign currency that is not designated in cash fow hedges CONSOLIDATED 2012 2011 $000 $000
			$000 $000
	Financial assets
	Cash and cash equivalents		56 13
			56 13
	Financial liabilities
	Trade and otherpayables		– –
	Net exposure At 30 June the Group had the following exposure that is not designated in cash fow hedges	56 13 to CAD$ foreign currency CONSOLIDATED 2012 2011
		$000 $000
	Financial assets
	Cash and cash equivalents	1,185 905
		1,185 905
	Financial liabilities
	Trade and otherpayables	– –
	Net exposure At 30 June the Group had the following exposure that is not designated in cash fow hedges	1,185 905 to GBP₤ foreign currency CONSOLIDATED 2012 2011
		$000 $000
	Financial assets
	Cash and cash equivalents	420 325
	Financial liabilities
	Trade and otherpayables	– –
	Net exposure	420 325

The main purpose of these financial instruments is to provide finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s financial instruments are foreign currency risk, interest risk and credit risk. The Board manages each of these risks as detailed below.

Approximately 62% (2011: 58%) of the Group’s sales are denominated in currencies other than the functional currency, and these sales would be predominately offset by currency exposure on costs. Foreign bank accounts have also been established, to create a natural hedge and reduce the need for regular transfers from the functional currency (AUD) cash holdings.

38 ANNUAL REPORT 2012

ANNUAL REPORT 2012 39

NOTES TO THE FINANCIAL STATEMENTS cont.

At 30 June the Group had the following exposure to EUR€ foreign currency that is not designated in cash flow hedges

	CONSOLIDATED 2012 2011
	$000 $000
Financial assets
Cash and cash equivalents	57 501
Financial liabilities	–
Trade and otherpayables	– –
Net exposure	57 501

At 30 June, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding retained profits) would have been affected as follows:

JUDGEMENTS OF REASONABLY POSSIBLE MOVEMENTS:	POST TAX PROFIT HIGHER/(LOWER) OTHER COMPREHENSIVE INCOME HIGHER/(LOWER)
	2012 2011 2012 2011
	$’000 $’000 $’000 $’000
AUD/USD +10%	(6) (1) – –
AUD/USD – 5%	3 1 – –
AUD/CAD +10%	(118) (90) – –
AUD/CAD – 5%	59 45 – –
AUD/GBP +10%	(42) (32) – –
AUD/GBP – 5%	21 16 – –
AUD/EUR +10%	(6) (50) – –
AUD/EUR – 5%	3 25 – –

Management believe the reporting date risk exposures are representative of the risk exposure inherent in the financial instruments.

Credit risk

At 30 June 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding retained profits) would have been affected as follows:

Credit risk arises from the financial instruments of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential defaults of the counter–party, with a maximum exposure equal to the carrying amount of the financial assets.

CONSOLIDATED
JUDGEMENTS OF REASONABLY POSSIBLE MOVEMENTS:	POST TAX PROFIT HIGHER/(LOWER) OTHER COMPREHENSIVE INCOME HIGHER/ (LOWER)
	2012 2011 2012 2011
	$’000 $’000 $’000 $’000
+1%(100 basispoints)	52 33 – –
– 2% (200 basis points)	(104) (65) – –

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

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

Liquidity risk

The Group has minimal liquidity risk as it has cash reserves of $5.2m, with no borrowings.

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

These cash reserves are deemed to be adequate and the Board believes they will underpin the ongoing growth of the business.

As the Group trades predominantly within the Diagnostic Imaging market there is a concentration of credit risk. Given the underlying Government funding support for Radiology in Hospital settings and the Imaging Centre and Diagnostic Imaging market, and the commercial successes achieved by the Group to date, credit risk is considered to be minimal.

The table below reflects all contractually fixed pay–offs for settlement and repayments resulting from recognised financial liabilities. Cash flows for financial liabilities without fixed amount of timing are based on the conditions existing at 30 June 2012.

The remaining contractual maturities of the Group’s financial liabilities are:

y p , risk is considered to be minimal. Cash and cash equivalents are held with several fnancial institutions, with the majority held with the Westpac Banking Corporation, a AA rated bank. Interest risk The Group exposure to market interest rates relates primarily			CONSOLIDATED 2012 2011
			$000 $000
		<30 days	889 1,098
		31–60 days	– –
		61–90 days	– –
		Over 90 days	819 587
		TOTAL	1,708 1,685

The Group exposure to market interest rates relates primarily to the company’s cash and cash equivalents.

5. OPERATING SEGMENTS

The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on country of origin. Discrete financial information is reported to the executive management team on at least a monthly basis.

Types of products and services

The Group produces integrated software applications for the health care industry. In addition, the Group provides services in the form of installation and support.

Accounting policies and inter–segment transactions

The accounting policies used by the Group in reporting segments internally is the same as those contained in note 2 to the financial statements and in the prior periods except as detailed below:

Inter–entity sales

Inter–entity sales are recognised based on an internally set transfer price. The price aims to reflect what the business operation could achieve if they sold their output and services to external parties at arm’s length.

At reporting date, the Group had the following financial assets exposed to Australian Variable interest rate risk that are not designated in cash flow hedges:

Cash and Cash equivalents in the Group ($’000’s) $5,193, (2011: $3,255).

The Group’s policy is to place cash balances in either 30 day term deposits or commercial bills that earn higher interest rates.

40 ANNUAL REPORT 2012

ANNUAL REPORT 2012 41

NOTES TO THE FINANCIAL STATEMENTS cont.

5. OPERATING SEGMENTS (C�ONT)

Product information

Revenue from external customers

OPERATING SEGMENTS	AUSTRALIA EUROPE NORTH AMERICA TOTAL OPERATIONS
	2012 2011 2012 2011 2012 2011 2012 2011
	$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Revenue Sales to external customers	5,428 5,821 3,625 2,909 2,260 2,349 11,313 11,079
Inter–segment Sales	1,755 776 3,263 3,604 – – 5,018 4,380
Total segment revenue	7,183 6,597 6,888 6,513 2,260 2,349 16,331 15,459
Inter–segment elimination	(5,018) (4,380)
Total consolidation revenue	11,313 11,079
Results Segment Result	509 (1,040) 624 746 (180) (813) 953 (1,107)
Interest Revenue	66 101
Non segment expenses
Income Tax Expense	(263) 316
Net Proft	756 (690)
Assets Non–Current Assets	11,344 13,562 225 317 55 43 11,624 13,922
Deferred Tax Asset	663 841 – – 933 890 1,596 1,731
Current Assets	(1,301) 1,663 6,619 4,552 1,959 1,240 7,277 7,455
Segment Assets	10,706 16,066 6,844 4,869 2,947 2,173 20,497 23,108
Total Assets	20,497 23,108
Liabilities Segment Liabilities	982 3,951 1,171 3,627 4,044 332 6,197 7,910
Total Liabilities	6,197 7,910
Other segment information Capital expenditure	2,445 3,083 988 1,058 39 32 3,472 4,173
Depreciation and amortisation	2,521 2,160 952 820 28 18 3,501 2,998
Cash fow information Net cash fow from operating activities	5,449 7,398 (1,267) (1,227) 1,384 79 5,566 6,250
Net cash fow from investing activities	(2,398) (3,032) (969) (1,007) (39) (32) (3,406) (4,071)
Net cash fow from fnancing activities	(501) (2,006) – – – – (501) (2,006)

Product information Revenue from external customers
NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
RadiologyInformation Systems(RIS)	4,025 4,880
Picture ArchivingCommunications Systems(PACS)	5,471 4,361
Dotnet Email Transactions	1,753 1,893
Other income	64 (55)
Total revenue per statement of comprehensive income	11,313 11,079
6. INCOME AND EXPENSES
(a) Other Income
Net CurrencyGains	812 –
Net Currency Losses	– (698)
	812 (698)
(b) Expenses Depreciation and Amortisation
Motor Vehicles 14	4 8
Offce Equipment 14	133 107
Furniture and Fittings and PropertyImprovements 14	6 24
Research & Development Equipment 14	7 10
Amortisation on capitalised development costs 15	2,354 1,928
Intangible assets 15	432 495
Total Depreciation and Amortisation Expense Salaries and Employee Benefts Expense	2,936 2,572
Wages & Salaries	4,526 4,919
Longservice leaveprovision	18 33
Share–basedpayment	50 43
Defned contributionplan expense	785 816
Total Salaries and Employee Benefts Expense	5,379 5,801

42 ANNUAL REPORT 2012

ANNUAL REPORT 2012 43

NOTES TO THE FINANCIAL STATEMENTS cont.

NOTES TO THEFINANCIAL STATEMENTScont.
NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
7. INCOME TAX The major components of income tax expense are: Statement of Comprehensive Income Current income tax Current income tax charge	68 (32)
Prior year adjustment Deferred income tax Relatingto origination and reversal of temporarydifferences	– 110 195 (394)
Income tax expense reported in the statement of comprehensive income A reconciliation between tax expense and the product of accounting proft before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting proft before tax	263 (316) 2,591 700
At the applicable statutoryincome tax rate in each country	875 286
Prioryear adjustment	– (110)
Discontinued operations	(537) (513)
Expenditure not allowable for income taxpurposes	81 77
R& D Allowance	– (84)
Other	(156) 28
Income tax expense reported in the statement of comprehensive income	263 (316)

Deferred income tax

Deferred income tax at 30 June relates to the following:

Deferred tax liabilities
Foreign Currency Exchange Gain	435	203
Intellectual Property expenses	(115)	85
Capitalised development expenses	3,593	3,565
Liabilities directly associated with the assets classifed as held for sale	(681)	–
Other	2	2
Deferred income tax liabilities	3,234	3,855
Deferred tax assets
Employee Entitlements	300	296
Tax Losses in Subsidiaries	1,274	1,412
Audit Fee Accrual	18	23
Other	4	–
Deferred income tax assets	1,596	1,731

Unrecognised temporary differences

At 30 June 2012, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries, as the Group has no liability for additional taxation should unremitted earnings be remitted.

Tax Consolidation

Pro Medicus Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 January 2009. Pro Medicus Limited is the head entity of the tax consolidated group. An allocation of income tax liabilities between the entities of the tax consolidated group will be made should the head entity default on its tax payment obligations. No such amounts have been recognised in the financial statements on the basis that the possibility of default is remote.

8. NON CURRENT ASSET HELD FOR SALE

On 2 July 2012, the Group publicly announced the decision of its Board of Directors to sell its life sciences division of Visage Imaging, Amira. The business division of Amira is considered non–core to the operations of the Group and an offer to purchase the business was made from a French IT company, Visualization Sciences Group (VSG). The disposal of Amira was completed on 31 July 2012, and as at 30 June 2012, Amira was classified as a non current asset held for sale. The results of Amira for the year are presented below:

NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
Revenue	3,013 2,890
Cost of Goods Sold	(252) (146)
Gross Proft	2,761 2,744
Operating Expenses Proft/(loss)before tax from a discontinued operation	(1,189) (1,038) 1,572 1,706
Income tax expense	(537) (513)
Proft/(loss) for the year from a discontinued operation	1,035 1,193

The major classes of assets and liabilities of Amira classified as held for sale as at 30 June 2012 are as follows: Assets

	Assets
	Intellectual Property	367	599
	Capitalised Development costs	1,902	1,584
	Debtors	378	314
	Assets classifed as held for sale	2,647	2,497
	Liabilities
	Creditors	(264)	(80)
	Deferred Tax Liability	(681)	(655)
	Liabilities directlyassociated with assets classifed as held for sale	(945)	(735)
	Net assets directly associated with disposal group	1,702	1,762
	The net cash fows incurred by Amira are as follows:
	Operating	1,069	1,029
	Investing	(651)	(658)
	Financing	–	–
	Net cash (outfow)/infow	418	371
	Earning per share	CENTS	CENTS
	Basic,proft/(loss)for theyear, from asset held for sale	1.1	1.0
	Diluted, proft/(loss) for the year, from asset held for sale	1.1	1.0

44 ANNUAL REPORT 2012

ANNUAL REPORT 2012 45

NOTES TO THE FINANCIAL STATEMENTS cont.

9. EARNINGS PER SHARE

The following reflects the income and share data used in the basic and diluted earnings per share computations:

NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
Net Proft attributable to ordinary equity holders of the parent from continuingoperations	756,035 (689,507)
Proft/(loss) attributable to ordinary equity holders of the parent from discontinuingoperations	1,034,523 1,192,864
Net Proft attributable to ordinary equity holders	1,790,558 503,357
Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share options	number number
	100,263,406 100,280,000 – –
Weighted average number of ordinary shares adjusted for the effect of dilution 100,263,406 100,280,000 There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these fnancial statements
10. DIVIDENDS PAID AND PROPOSED Declared and paid during the year: Dividends on ordinary shares Final franked dividend for 2011: nil(2010: 2.0 cents) – 2,006
Interim franked dividend for 2012: 0.5 cents(2011: nil) 501 –
501 2,006 Proposed for approval by directors (not recognised as a liability as at 30 June): Dividends on ordinary shares: Final franked dividend for 2012: 1.0 cents(2011:nil) 1,002 –
Total dividends proposed 1,002 – Franking credit balance The amount of franking credits available for the subsequent fnancial year are: – franking account balance as at the end of the fnancial year at 30%(2011: 30%) 2,638 2,921
– franking credits that will arise from the payment of income tax payable as at the end of the fnancialyear – –
– franking debits that will arise from the payment of dividends as at the end of the fnancialyear – –
– franking credits that the entity may be prevented from distributingin the subsequent fnancialyear – –
2,638 2,921 The amount of franking credits available for future reporting periods: – impact on the franking account of dividends proposed or declared before the fnancial report was authorised for issue but not recognised as a distribution to equityholders duringtheperiod (430) –
1,779 2,921

NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
11. CASH AND CASH EQUIVALENTS Cash at bank and in hand	5,140 3,204
Short-term deposits	53 51
	5,193 3,255

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 Group, and earn interest at the respective short-term deposit rates.

The fair value of cash and cash equivalents is their carrying value.

Reconciliation of net profit after tax to net cash flows from operations

	Reconciliation of netproft after tax to net cash fows from operations
	Net proft	1,791	503
	Adjustments for:
	Depreciation of PropertyPlant and Equipment Amortisation of Intangible Assets	150 3,351	149 2,849
	Interest Received classifed in InvestingActivities	(66)	(101)
	Foreign currency (gain)/loss Share buyback	(812) (4)	698 -
	Share option expense	50	43
	Changes in assets and liabilities (Increase)/decrease in trade and other receivables	2,089	1,386
	(Increase)/decrease in inventory	52	170
	(Increase)/decrease in deferred tax asset (Increase)/decrease inprepayments – (Decrease)/increase in deferred income	135 42 118	(464) (41) (165)
	– (Decrease)/increase in trade and otherpayables	169	(438)
	– (Decrease)/increase in taxprovision	(1,219)	1,074
	– (Decrease)/increase in deferred income tax liability	60	181
	(Decrease)/increase in employee entitlements	(30)	(61)
	Net cash fow from operations	5,876	5,783

The tax rate at which paid dividends have been franked is 30% (2011: 30%).

Dividends proposed will be fully franked.

46 ANNUAL REPORT 2012

ANNUAL REPORT 2012 47

NOTES TO THE FINANCIAL STATEMENTS cont.

NOTES TO THEFINANCIAL STATEMENTScont.
NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
12. TRADE AND OTHER RECEIVABLES (CURRENT) Trade receivables	1,538 3,895
Provision for impairment	(86) (118)
Research & development tax receivable	1,452 3,777 463 –
Asset held for sale	(378) –
Other receivables	155 72
1,692 3,849 Fair value approximates carrying value due to the short term nature of receivables. a) Allowance for impairment loss Movements in the provision for impairment loss were as follows: At 1 July 118 102
Charge to/(write back of) provision for theyear (22) 22
Foreign exchange translation (10) (6)
At 30 June 86 118 At June 30, the ageing analysis of trade receivables is as follows: TOTAL 0-30 DAYS 31-60 DAYS 61-90 DAYS +91 DAYS +91 DAYS PDNI PDNI PDNI *CI 2012 Consolidated 1,538 1,054 277 63 58 *86 2011 Consolidated 3,895 1,947 391 285 1,154 118 CONSOLIDATED NOTES 2012 2011 13. INVENTORIES(CURRENT) $’000 $’000 Finished goods (at net realisable value) 101** 153
2011 Consolidated
NOTES 13. INVENTORIES(CURRENT)
Finished goods (at net realisable value)

Inventory write downs recognised as an expense total $46,095 (2011: Nil)

	CONSOLIDATED
	PROPERTY IMPROVEMENTS MOTOR VEHICLES OFFICE EQUIPMENT FURNITURE & FITTINGS RESEARCH & DEVELOPMENT EQUIPMENT TOTAL $’000 $’000 $’000 $’000 $’000 $’000
14. PLANT & EQUIPMENT Year ended 30 June 2012 At 1 July 2011 net of accumulated depreciation 16 19 293 52 8 388
Additions 8 – 140 – – 148
Disposals – – (11) – – (11)
Exchange differences – (1) (15) (3) – (19)
Depreciation charge for the year (2) (4) (133) (4) (7) (150)
At 30 June 2012 net of accumulated depreciation 22 14 274 45 1 356 At 30 June 2012 Cost 309 550 1,489 325 209 2,882
Accumulated depreciation and impairment (287) (536) (1,215) (280) (208) (2,526)
Net carrying amount 22 14 274 45 1 356 Year ended 30 June 2011 At 1 July 2010 net of accumulated depreciation 31 29 231 59 18 368
Additions – – 179 5 – 184
Disposals – (2) (1) – – (3)
Exchange differences – – (9) (3) – (12)
Depreciation charge for the year (15) (8) (107) (9) (10) (149)
At 30 June 2011 net of accumulated depreciation 16 19 293 52 8 388 At 30 June 2011 Cost 308 557 1,450 333 209 2,857
Accumulated depreciation and impairment (292) (538) (1,157) (281) (201) (2,469)
Net carrying amount 16 19 293 52 8 388 At 1 July 2010 Cost 308 594 1,782 341 209 3,234
Accumulated depreciation and impairment (277) (565) (1,551) (282) (191) (2,866)
Net carrying amount 31 29 231 59 18 368

48 ANNUAL REPORT 2012

ANNUAL REPORT 2012 49

NOTES TO THE FINANCIAL STATEMENTS cont.

15. INTANGIBLE ASSETS	CONSOLIDATED
	INTELLECTUAL PROPERTY I) CUSTOMER LIST II) DEVELOPMENT COSTS III) SOFTWARE LICENSES IV) TOTAL $’000 $’000 $’000 $’000 $’000
Year ended 30 June 2012
At 1 July 2011 net of accumulated amortisation and impairment	1,554 77 11,884 18 13,533
Additions — internal development	– 3,347 – 3,347
Additions	– – – 11 11
Disposals	– – – – –
Asset held for sale	(367) – (1,902) – (2,269)
Exchange differences	– (3) – (1) (4)
Amortisation charge for the year from a discontinued operation	(232) – (333) – (565)
Amortisation charge for theyear	(370) (53) (2,354) (9) (2,786)
At 30 June 2011 net of accumulated amortisation and impairment	585 21 10,642 19 11,267
At 30 June 2012 Cost	3,006 213 20,294 448 23,961
Asset held for sale	(367) – (1,902) – (2,269)
Accumulated amortisation and impairment	(2,054) (192) (7,750) (429) (10,425)
Net carrying amount	585 21 10,642 19 11,267
Year ended 30 June 2011 At 1 July 2010 net of accumulated amortisation and impairment	2,155 149 10,004 71 12,379
Additions — internal development	– – 4,002 – 4,002
Additions	– – – 10 10
Disposals	– – – – –
Exchange differences	– (6) – (3) (9)
Amortisation charge for the year from a discontinued operation	(232) – (194) – (426)
Amortisation charge for theyear	(369) (66) (1,928) (60) (2,423)
At 30 June 2011 net of accumulated amortisation and impairment	1,554 77 11,884 18 13,533
At 30 June 2011 Cost	3,006 245 16,947 595 20,793
Accumulated amortisation and impairment	(1452) (168) (5,063) (577) (7,260)
Net carrying amount	1,554 77 11,884 18 13,533
At 1 July 2010 Cost	3,006 245 12,945 585 16,781
Accumulated amortisation and impairment	(851) (96) (2,941) (514) (4,402)
Net carrying amount	2,155 149 10,004 71 12,379

• i) Intellectual Property was acquired in 2009 through the Visage Imaging business combination and is carried at cost less accumulated amortisation. Three separately identifiable intangible assets, in the form of software intellectual property, have been identified in the business acquisition of Visage Imaging; Visage CS, Visage PACS and Amira. The carrying amounts are Visage CS ($490,144), Visage PACS ($94,961) and Amira ($366,928). These intangible assets have been assessed as having a finite life and are amortised using the straight line method over a period of 5 years, commencing February 2009.

• ii) A Customer List was acquired in 2009 through the Visage Imaging business combination and is carried at cost less accumulated amortisation. This intangible asset has been assessed as having a finite life and is amortised using the straight line method over a period of 4 years, commencing February 2009.

• iii) 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.

• iv) Software Licences have been assessed as having a finite life and are amortised using the straight line method over a period of 4 years.

16. TRADE AND OTHER PAYABLES (CURRENT) NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
Trade payables	454 378
Otherpayables and accruals	730 622
Liabilities directlyassociated with the assets classifed as held for sale	1,184 1,000 (264) –
Deferred Income	788 685
	1,708 1,685

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

(ii) Other payables, other than inter-company payables are non-interest bearing and have an average term of 30 days. Fair value approximates carrying value due to the short term nature of trade and other payables.

17. PROVISIONS

Current

	17. PROVISIONS Current
	Longservice leave	453	446
	Annual leave	771	820
	Non Current Longservice leave	1,224 31	1,266 20
		31	20

i) Long Service Leave

Refer to note 2 (u)(ii) for the relevant accounting policy and a discussion of the significant estimations and assumptions applied in the measurement of this provision.

50 ANNUAL REPORT 2012

ANNUAL REPORT 2012 51

NOTES TO THE FINANCIAL STATEMENTS cont.

NOTES TO THEFINANCIAL STATEMENTScont.	NOTES TO THEFINANCIAL STATEMENTScont.
18. CONTRIBUTED EQUITY AND RESERVES NOTES		CONSOLIDATED
		2012 2011
		$’000 $’000
(i) Ordinary shares		330 330
Cancellation for share buy-back		(3) –
NUMBER OF SHARES $’000 At 1 July2011 100,280,000 330 Fully paid ordinary shares carry one vote per share and carry the right to dividends (ii) Movements in shares on issue Issued and fully paid 327 330
	100,280,000 330
Cancellation for share buy-back	(16,594) (3)
Issued for cash on exercise of options	– –
At 30 June 2012 At 1 July2010	100,263,406 327 2011 NUMBER OF SHARES $’000
	100,280,000 330
Issued for cash on exercise of options	– –
At 30 June 2011 Share Reserve(i)	100,280,000 330 CONSOLIDATED NOTES 2012 2011 $’000 $’000
		2012 2011
		$’000 $’000
Balance at 1 July		122 79
Share options expensed		50 43
Balance at 30 June		172 122
Foreign Currency Translation Reserve (ii) Balance at 1 July		(1,148) (1,144)
Foreign CurrencyMovement		(533) (4)
Balance at 30 June		(1,681) (1,148)
Retained Earnings Balance at 1 July		15,894 17,397
Netproft for theyear		1,791 503
Dividends		(501) (2,006)
Balance at 30 June		17,184 15,894

(i) Share Reserve

The share reserve is used to record the value of share based payments provided to employees, including KMP, as part of their remuneration. Refer to note 19 for further details of these plans.

(ii) Foreign Currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Capital Management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

Management review the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, or issue new shares.

During the year, the company paid dividends of $501,400 (2011: $2,005,600).

19. 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, had an exercise price of $1.15 and 2,100,000 share options expired under the scheme on 25 August 2010. Options vested at 20% per annum commencing on the first anniversary of issue. The options cannot be transferred and will not be quoted on the ASX.

A further 200,000 shares were granted as options to Peter Kempen on becoming a Director of the company in 2008 under a separate agreement. The options had a grant date of 12 March 2008 and an exercise price of $1.25. The fair value of the options at grant date was $40,852 ($0.13 – $0.29 per option). The options have a first exercise date of 12 March 2009 and can be exercised at anytime through to expiry date of 12 March 2018. The options vest over a 5 year period on completion of service. At reporting date 170,000 (85%) options had vested. No options were exercised during the year.

200,000 shares previously granted as options to Mike Tefft on commencement with Pro Medicus expired throughout the year. The shares had a fair value of $3,623 ($0.02 per option)

A further 900,000 shares were granted as options to key Visage Imaging employees during the year under a separate agreement. The options had a grant date of 1 April 2010 and an exercise price of $1.00. The fair value of the options at grant date was $67,278 ($0.07 per option). The options have a first exercise date of 1 April 2011 and can be exercised at anytime through to expiry date of 1 April 2020. The options vest over a 5 year period on completion of service. At reporting date 290,000 (32%) options had vested and 175,000 (19%) options had expired. No options were exercised during the year.

A further 550,000 shares were granted as options to Key Executives during the year under a separate agreement. The options had a grant date of 25 August 2010 and an exercise price of $1.00. The fair value of the options at grant date was $54,109 ($0.10 per option). The options have a first exercise date of 25 August 2011 and can be exercised at anytime through to expiry date of 25 August 2020. The options vest over a 5 year period on completion of service. At reporting date 110,000 (20%) options had vested. No options were exercised during the year.

A further 200,000 shares were granted as options to Roderick Lyle on becoming a Director of the company in 2011 under a separate agreement. The options had a grant date of 18 November 2011 and an exercise price of $0.55. The fair value of the options at grant date was $45,116 ($0.23 per option). The options have a first exercise date of 18 November 2012 and can be exercised at anytime through to expiry date of 18 November 2021. The options vest over a 5 year period on completion of service. At reporting date 0 (0%) options had vested. No options were exercised during the year.

52 ANNUAL REPORT 2012

ANNUAL REPORT 2012 53

NOTES TO THE FINANCIAL STATEMENTS cont.

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

	2012 2011
	NUMBER OF OPTIONS WEIGHTED AVERAGE EXERCISE PRICE NUMBER OF OPTIONS WEIGHTED AVERAGE EXERCISE PRICE
Outstandingat the beginningof theyear	1,850,000 3,400,000
–granted	200,000 $0.55 550,000 $1.00
– forfeited	– – – –
– exercised	– – – –
– expired	375,000 $1.16 2,100,000 $1.15
Outstandingat the end of theyear	1,675,000 $0.98 1,850,000 $1.06
Exercisable at end of year	570,000 $1.07 510,000 $1.06

All options above have been recognised in accordance with AASB 2 as the options were granted after 7 November 2002. The outstanding balance as at 30 June 2012 is represented by:

▶ 200,000 options over ordinary shares with an exercise price of $1.25 each, exercisable until 12 March 2018

▶ 725,000 options over ordinary share with an exercise price of $1.00 each, exercisable until 1 April 2020

▶ 550,000 options over ordinary share with an exercise price of $1.00 each, exercisable until 25 August 2020

▶ 200,000 options over ordinary shares with an exercise price of $0.55 each, exercisable until 18 November 2021

Performance Rights

A long term incentive plan was established on 18th November 2011 whereby Senior Executives of Group were offered performance rights over the ordinary shares of Pro Medicus Limited. The performance rights, issued for nil consideration, are offered for a 5 year period and vest 3 years after granting date on completion of service. The performance rights cannot be transferred and will not be quoted on the ASX. This long term incentive plan includes performance hurdles related to the company and investing conditions relating to the employee’s period of service. At reporting date no performance rights had been granted.

Weighted average remaining contractual life

The weighted average remaining contractual life for share options outstanding at 30 June 2012 is 7.94 years (2011: 8.5 Years).

Range of exercise price

The range of exercise prices for options outstanding at the end of the year was $0.55 – $1.25 (2011: $1.00 – $1.35).

Weighted average fair value

The weighted average fair value of options granted during the year was $0.23 (2011: $0.10).

Option pricing model

The fair value of the equity–settled share options granted is estimated as at the date of the grant using a Black Scholes Model taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the models used for the year ended 30 June 2012:	2012	2011
Dividendyield	0.0%	3.91%
Expected volatility*	46.0%	40.0%
Risk–free interest rate	5.0%	6.0%
Expected life of options	10 years	10years
Option exerciseprice	$0.55	$1.00
Weighted average shareprice at measurement date	$0.55	$0.57

20 COMMITMENTS

a) Operating lease commitments – Group as lessee

The Parent 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. The US operations have entered into a commercial property lease for office premises from 1 May 2010 for a 5 year period. The German operations have entered into a commercial property lease for office premises and can give notice to vacate 3 months prior to 30 April each year, whereby they sign into another 12 months.

The German operations also have several motor vehicles leases which expire at various stages between August 2012 and February 2015.

NOTES	CONSOLIDATED
	2012 2011
	$’000 $’000
Future minimum rentals payable under non–cancellable operating lease as at 30 June are as follows: – Within oneyear	367 386
– After oneyear and not more than fveyears	805 824
– After more than fveyears	– –
	1,172 1,210

21 EVENTS AFTER THE BALANCE SHEET DATE

On 31 July 2012, the Group publicly announced that Amira, the asset held for sale (Note 8) was sold to a Visualization Sciences Group (VSG). The consideration for the sale of Amira was €12.1m (approx $14.1m) and after deducting transaction costs and the carrying value of the intangible asset, the profit after tax is estimated to be $8.1m.

On 24 August 2012, the directors of Pro Medicus Limited declared a final dividend on ordinary shares in respect of the 2012 financial year. This dividend comprises a normal dividend of 1.0 cents per share. The total amount of the dividend is $1,002,634 which represents a fully franked dividend of a total of 1.0 cents per share. The dividend has not been provided for in the 30 June 2012 financial statements.

22. AUDITOR’S REMUNERATION

22. AUDITOR’SREMUNERATION NOTES Amounts received or due and receivable byErnst & Young (Australia)for:	CONSOLIDATED
	2012 2011
	$’000 $’000
– an audit or review of the fnancial report of the Company and any other entityin the Consolidated Group	132,500 120,030
– other services in relation to the Companyor Group	21,130 31,000
Amounts received or due and receivable by related practices of Ernst & Young (Australia): – audit of the fnancial report of Visage ImagingGmbH	153,630 151,030 63,500 59,850
23. KEY MANAGEMENT PERSONNEL (a) Compensation for key management personnel	217,130 210,880
Short–term employee benefts	1,020,996 1,497,507
Post–employment benefts	93,531 116,239
Other long–term benefts	4,830 6,883
Share–based payment	39,152 23,937
Total compensation	1,158,509 1,644,566

*The expected volatility rate was calculated measuring the standard deviation between the historical share price movements for the past 12 months.

54 ANNUAL REPORT 2012

ANNUAL REPORT 2012 55

NOTES TO THE FINANCIAL STATEMENTS cont.

(b) Option holdings of Key Management Personnel

	BALANCE AT	GRANTED	OPTIONS		NET	BALANCE
	BEGINNING	AS REMU–	EXERCISED	CHANGE		AT END OF
	OF YEAR	NERATION			OTHER	YEAR	VESTED AT 30 JUNE			2012
30 JUNE 2012	1 JULY 2011				#	30 JUNE	NOT
						2012	EXERCISABLE	EXERCISABLE		TOTAL
Directors
P T Kempen	200,000	–	–		–	200,000	30,000	170,000		200,000
S A Hupert A B Hall	– –	– –	– –		– –	– –	– –		– –	– –
R Lyle	–	200,000	–		–	200,000	200,000		–	200,000
Executives
D Tauber	350,000	–	–		–	350,000	280,000		70,000	350,000
M Westerhoff	350,000	–	–		–	350,000	210,000	140,000		350,000
B Levin	–	–	–		–	–	–		–	–
Total	900,000	200,000	–		–	1,100,000	720,000	380,000		1,100,000
# Includes forfeitures
	BALANCE AT BEGINNING	GRANTED AS REMU–	OPTIONS EXERCISED	NET CHANGE		BALANCE AT END OF
	OF YEAR	NERATION			OTHER	YEAR	VESTED AT		30 JUNE	2011
30 JUNE 2011	1 JULY 2010				#	30 JUNE 2011	NOT EXERCISABLE	EXERCISABLE		TOTAL
Directors
P T Kempen S A Hupert	200,000 425,000	– –	– –	– (425,000)		200,000 –	90,000 –	110,000 –		200,000 –
A B Hall	425,000	–	–	(425,000)		–	–		–	–
R Lyle	–	–	–		–	–	–		–	–
M K Ward**	400,000	–	–	(400,000)		–	–		–	–
P D Jonson**	200,000	–	–	(200,000)		–	–		–	–
D Chambers Executives**	–	–	–		–	–	–		–	–
D Tauber	350,000	350,000	–	(350,000)		350,000	350,000		–	350,000
M Westerhoff	350,000	–	–		–	350,000	280,000		70,000	350,000
J Danahy**	–	–	–		–	–	–		–	–
Total	2,350,000	350,000	–	(1,800,000)		900,000	720,000	180,000		900,000
(c) Shareholdings of Key Management			Personnel
SHARES HELD IN	PRO
MEDICUS LIMITED		BALANCE	GRANTED AS		ON	EXERCISE OF	NET CHANGE			BALANCE
(NUMBER)		1 JULY 2011	REMUNERATION			OPTIONS		OTHER		30 JUNE 2012
30 JUNE 2012		ORDINARY	ORDINARY			ORDINARY	ORDINARY			ORDINARY
Directors
P T Kempen		169,647		–		–	158,435*			328,082
S A Hupert		30,072,660		–		–		–		30,072,660
A B Hall		30,068,500		–		–		–		30,068,500
R Lyle		47,987		–		–	52,013*			100,000
Executives
D Tauber		150,000		–		–		–		150,000
M Westerhoff		–		–		–		–		–
B Levin		–		–		–		–		–
Total		60,508,794		–		–	210,448			60,719,242

SHARES HELD IN
PRO MEDICUS	BALANCE	GRANTED AS	ON EXERCISE OF	NET CHANGE	BALANCE
LIMITED (NUMBER)	1 JULY 2010	REMUNERATION	OPTIONS	OTHER	30 JUNE 2011
30 JUNE 2011	ORDINARY	ORDINARY	ORDINARY	ORDINARY	ORDINARY
Directors
P T Kempen	129,647	–	–	40,000*	169,647
S A Hupert	30,072,660	–	–	–	30,072,660
A B Hall	30,068,500	–	–	–	30,068,500
R Lyle	–	–	–	47,897*	47,987
M K Ward**	50,000	–	–	(50,000)	–
P D Jonson**	50,000	–	–	–	50,000
D Chambers**	65,000	–	–	–	65,000
Executives
D Tauber	150,000	–	–	–	150,000
M Westerhoff	–	–	–	–	–
C Murphy**	–	–	–	–	–
Total	60,585,807	–	–	37,987	60,623,794

• Peter Kempen purchased 40,000 shares throughout the year on the prevailing market share price and Roderick Lyle purchased 47,987 shares throughout the year on the prevailing market share price.

• ** Melvyn Ward deceased 1 October 2010 Peter Jonson retired 23 November 2010 David Chambers resigned 11 October 2010 John Danahy resigned 24 February 2011 Colin Murphy resigned 28 February 2010

(d) Loans to Key Management Personnel

No loans are made to Key Management Personnel or staff.

(e) Other transactions and balances with Key Management Personnel

Purchases

During the year lease payments of $169,476 (2011: $169,476) in respect of the Group’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.

• Peter Kempen purchased 158,435 shares throughout the year on the prevailing market share price and Roderick Lyle purchased 52,013 shares throughout the year on the prevailing market share price.

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ANNUAL REPORT 2012 57

NOTES TO THE FINANCIAL STATEMENTS cont.

24. RELATED PARTY DISCLOSURE

(a) Subsidiaries

The consolidated financial statements include the financial statements of Pro Medicus Limited and the subsidiaries listed in the following table.

NAME COUNTRY OF INCORPORATION	% EQUITY INTEREST INVESTMENT $000
	2012 2011 2012 2011
Promed(USA)PtyLtd Australia	100 100 – –
PME IP Australia PtyLtd Australia	100 100 – –
Visage Imaging (Aust)PtyLtd Australia	100 100 – –
Pro Medicus(USA)LLC United States	100 100 – –
Visage ImagingInc United States	100 100 2,389 2,389
Visage ImagingGmbH Germany	100 100 3,638 3,638
	6,027 6,027

(b) Ultimate parent

Pro Medicus Limited is the ultimate Australian parent entity and the ultimate parent of the Group.

(c) Key management personnel

Details relating to KMPs, including remuneration paid, are included in note 23.

(d) Transactions with related parties

The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year (for information regarding outstanding balances on related party trade receivables and payables at year–end.

receivables and payables at year–end.
		SALES TO	PURCHASES FROM	OTHER TRANSACTIONS
		RELATED	RELATED PARTIES	WITH RELATED PARTIES
		$000	$000	$000
Related party
Consolidated
Champagne Properties PtyLtd – Rental lease	2012	–	169	–
Champagne Properties Pty Ltd – Rental lease	2011	–	169	–

25. CONTINGENCIES

Tax related contingencies

Amended assessments from the Australian Taxation Office (ATO)

As a result of the ATO’s program of routine and regular tax audit, the Group anticipates that ATO audits may occur in the future. The Group is similarly subject to routine tax audits in certain overseas jurisdictions. The ultimate outcome of any future tax audits cannot be determined with an acceptable degree of reliability at this time. Newvertheless, the Group believes that it is making adequate provision for its taxation liabilities (including amounts shown as deferred and current tax liabilities) and is taking reasonable steps to address potentially contentious issues with the ATO. However, there may be an impact to the Group of any of the revenue authority investigations results in an adjustment that increases the Group’s taxation liabilities.

Ongoing transactions – transfer pricing

The Group has offshore operations in the United States and Germany (note 24). As disclosed in note 24, there are extra Group transactions, which include the Company and its US and German based subsidiaries Visage Imaging Inc and Visage Imaging GmbH and Pro Medicus Limited. These transactions are on an arm’s length basis and are conducted at normal market prices and on normal commercial terms.

Whilst there are no investigations currently in progress, such transactions are not subject to any statutory limit in Australia.

26. PARENT ENTITY INFORMATION

		2012	2011
	INFORMATION RELATING TO PRO MEDICUS LIMITED	$000	$000
	Current assets Total assets Current Liabilities	15,841 24,487 6,492	14,727 23,907 6,376
	Total Liabilities Issued capital	7,757 327	7,702 330
	Retained Earnings	16,231	15,753
	Share Reserve	172	122
	Total shareholders equity	16,730	16,205
	Proft of theparent entity	980	490
	Total comprehensive income of parent entity	980	490

The parent entity has not entered into any guarantees in relation to the debts of its subsidiaries. There are no contingent liabilities held against the parent entity. The parent entity does not have any contractual commitments for the acquisition of property, plant and equipment.

Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms.

Outstanding balances at year end are unsecured, interest free and payable on demand.

Entities within the group that own the Intellectual Property earn a 50% royalty from the sales made by other entities within the group.

Development costs undertaken by the German operations are reimbursed by the parent on commercial terms.

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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 statements, notes and the additional disclosures included in the directors’ report designated as audited, of the consolidated entity are in accordance with the Corporations Act 2001, including:

  • (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of the performance for the year ended on that date; and

  • (ii) complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• (b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable.

• (c) the financial statements and notes comply with International Financial Reporting Standards (IFRS) as disclosed in Note 2(b).

• (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 year ended 30 June 2012.

On behalf of the Board

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P T Kempen

Chairman Melbourne, 24 August 2012

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60 ANNUAL REPORT 2012

ANNUAL REPORT 2012 61

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62 ANNUAL REPORT 2012

ANNUAL REPORT 2012 63

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Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.

(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	142 95,829
1,001 – 5,000	358 1,075,970
5,001 – 10,000	242 1,945,072
10,001 – 100,000	312 8,962,323
100,001 and Over	44 88,184,212
	1,098 100,263,406
The number of shareholders holding less than a marketable parcel are:	201 175,405

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:	LISTED ORDINARY SHARES
	NUMBER OF SHARES PERCENTAGE OF ORDINARY SHARES
1 Dr S Hupert(multiple shareholdings)	30,072,660 29.99%
2 Mr A Hall(multiple shareholdings)	30,068,500 29.98%
3 RBC Dexia Investor Services Australia Nominees P/L	10,619,255 10.59%
4 CiticorpNominees PtyLtd	6,204,080 6.19%
5 BNP Parabis Nominees PtyLtd	2,017,704 2.01%
6 Brazil FarmingPtyLtd	660,000 0.66%
7 Dr Russell KayHancock	600,000 0.60%
8 Mr TimothyJohn Hannigan & Mrs Kerrie Helen Hannigan	500,000 0.50%
9 Mr Alan Graham Rochford	464,052 0.46%
10 Mr Ralph Ronald Stadus & Ms Denise Leslie Stadus	455,556 0.45%
11 Mr Evan PhilipClucas & Ms Leanne Jane Weston	368,217 0.37%
12 Mr Stephen GeoffreyWilson & Ms Denise Adele Prandi	337,537 0.34%
13 Mr Peter Terence Kempen & Mrs Elaine Margaret Kempen	328,082 0.33%
14 Mr John Charles Plummer	300,000 0.30%
15 Mr Colin GregoryOrgan	271,000 0.27%
16 IndcorpConsultingGroupPtyLtd	250,000 0.25%
17 Mr Bram Vander Jagt	250,000 0.25%
18 Mr Peter Propert Birrell & Mrs DinnyMaryBirrell	232,000 0.23%
19 Mr Peter Waddington Almond	230,476 0.23%
20 Narlack PtyLtd	226,699 0.23%
	84,455,818 84.23%

(c) Substantial shareholders

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

	of the Corporations Law are:
	S. Hupert A Hall			NUMBER OF SHARES 30,072,660 30,068,500
	Perpetual Limited RBC Dexia Investor Services Australia Nominees	P/L		10,619,255
	Commonwealth Bank of Australia			6,204,080
	(d) Voting rights
	All ordinary shares carry one vote per share without restriction.
	The Board of Directors of Pro Medicus Limited is responsible for the corporate governance of the entity having regard to the ASX Corporate Governance Council (CGC) published guidelines as well as its corporate governance
	principles and recommendations. 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. The table below summaries the Group’s compliance with the CGC’s recommendations. COMPLY REFERENCE/ STATEMENT			ASX LISTING RULE/CGC
	RECOMMENDATION	YES/NO	EXPLANATION	RECOMMENDATIONS
	Principle 1
	Lay solid foundations for management and oversight
	1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and	Yes	Page 69	ASX CGC 1.1
	disclose those functions
	1.2 Companies should disclose the process for evaluating	Yes	Page 68	ASX CGC 1.2
	theperformance of senior executives.
	1.3 Companies should provide the information indicated in theguide to reportingon Principle 1.	Yes		ASX CGC 1.3
	Principle 2
	Structure the board to add value
	2.1 A majorityof the board should be independent directors.	Yes	Page 68	ASX CGC 2.1
	2.2 The chair should be an independent director.	Yes	Page 68	ASX CGC 2.2
	2.3 The roles of chair and chief executive offcer (CEO) should not be exercised bythe same individual. 2.4 The board should establish a nomination committee. 2.5 Companies should disclose the process for evaluating the performance of the board, its committees and	Yes No Yes	Page 68 Page 69 Page 68	ASX CGC 2.3 ASX CGC 2.4 ASX CGC 2.5
	individual directors.
	2.6 Companies should provide the information indicated in	Yes		ASX CGC 2.6
	theguide to reportingon Principle 2.

64 ANNUAL REPORT 2012

ANNUAL REPORT 2012 65

CORPORATE GOVERNANCE STATEMENT cont.

COR	PORATE GOVERNANCESTATEMENTcont.
				ASX LISTING
		COMPLY	REFERENCE/	RULE/CGC
	RECOMMENDATION	YES/NO	EXPLANATION	RECOMMENDATIONS
	Principle 3
	Promote ethical and responsible decision–making
3.1	Companies should establish a code of conduct and disclose the code or a summary of the code as to:			ASX CGC 3.1
	▶The practices necessary to maintain confdence in the company’s integrity.
	▶The practices necessary to take into account their
	legal obligations and the reasonable expectations
	of their stakeholders.
	▶The responsibility and accountability of		Page 68
	individuals for reporting and investigating reports
	of unethicalpractices.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that	Yes	Page 68	ASX CGC 3.2
	policy. The policy should include requirements for the
	board to establish measureable objectives for achieving
	gender diversity for the board to assess annually both
	the objectives andprogress in achievingthem.
3.3	Companies should disclose in each annual report the	Yes		ASX CGC 3.3
	measureable objectives for achieving gender diversity
	set by the board in accordance with the diversity policy
	and progress towards achievingthem.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole			ASX CGC 3.4
	organization, women in senior executive positions and
3.5	women on the board. Companies should provide the information indicated in theguide to reportingon Principle 3.	Yes		ASX CGC 3.5
	Principle 4 Safeguard integrity in fnancial reporting
4.1 4.2	The board should establish an audit committee. The audit committee should be structured so that it:	Yes	Page 69	ASX CGC 4.1
	▶Consists only of non-executive directors.
	▶Consists of a majority of independent directors.
	▶Is chaired by an independent chair, who is not
4.3 4.4	chair of the board. ▶Has at least three members. The audit committee should have a formal charter. Companies should provide the information indicated in	No Yes Yes	Page 69 Page 69	ASX CGC 4.2 ASX CGC 4.3 ASX CGC 4.4
	theguide to reportingon Principle 4.
	Principle 5
	Make timely and balanced disclosure
5.1	Companies should establish written policies designed	Yes	Page 70	ASX CGC 5.1
	to ensure compliance with ASX Listing Rule disclosure
	requirements and to ensure accountability at a senior
	executive level for that compliance and disclose those
	policies or a summaryof those policies.

				ASX LISTING
		COMPLY	REFERENCE/	RULE/CGC
	RECOMMENDATION	YES/NO	EXPLANATION	RECOMMENDATIONS
5.2	Companies should provide the information indicated in	Yes		ASX CGC 5.2
	theguide to reportingon Principle 5.
	Principle 6
	Respect the rights of shareholders
6.1	Companies should design a communications policy for	Yes	Page 70	ASX CGC 6.1
	promoting effective communication with shareholders
	and encouraging their participation at general meetings
	and disclose theirpolicyor a summaryof thatpolicy.
6.2	Companies should provide the information indicated in	Yes		ASX CGC 6.2
	theguide to reportingon Principle 6.
	Principle 7
	Recognise and manage risk
7.1	Companies should establish policies for the oversight	Yes	Page 70	ASX CGC 7.1
	and management of material business risks and
	disclose a summaryof thosepolicies.
7.2	The board should require management to design and	Yes	Page 70	ASX CGC 7.2
	implement the risk management and internal control
	system to manage the company's material business risks
	and report to it on whether those risks are being managed
	effectively. The board should disclose that management
	has reported to it as to the effectiveness of the company's
	management of its material business risks.
7.3	The board should disclose whether it has received	Yes	Page 70	ASX CGC 7.3
	assurance from the CEO [or equivalent] and the
	Chief Financial Offcer (CFO) [or equivalent] that the
	declaration provided in accordance with section 295A
	of the Corporations Act is founded on a sound system
	of risk management and internal control and that the
	system is operating effectively in all material respects in
	relation to fnancial reportingrisks.
7.4	Companies should provide the information indicated in	Yes		ASX CGC 7.4
	theguide to reportingon Principle 7.
	Principle 8
	Remunerate fairly and responsibly
8.1	The board should establish a remuneration committee.	Yes	Page 69	ASX CGC 8.1
8.2	Companies should clearly distinguish the structure of non-executive directors' remuneration from that of executive directors and senior executives.	Yes	Refer to Remuneration Report	ASX CGC 8.2
8.3	Companies should provide the information indicated in	Yes		ASX CGC 8.3
	the guide to reporting on Principle 8.

66 ANNUAL REPORT 2012

ANNUAL REPORT 2012 67

CORPORATE GOVERNANCE STATEMENT cont.

Pro Medicus Limited’s corporate governance practices were in place throughout the year ended 30 June 2012.

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 four directors and should maintain a majority of non–executive directors, or at least a 50/50 ratio of non– executives and 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

P T Kempen Chairman, Non–Executive Director, Chairman Audit Committee

R Lyle Non–Executive Director

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.

Mr. Sam Hupert and Mr. Anthony Hall were directors in Pro Medicus Pty Ltd since incorporation in 1983. Mr. Peter Kempen was appointed in March 2008 and Mr Roderick Lyle was appointed in November 2010.

Performance

The performance of the board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period the board conducted performance evaluations that involved an assessment of each board member’s and key executive’s performance against specific and measurable qualitative and quantitative performance criteria.

The performance criteria against which directors and executives are assessed are aligned with the financial and non–financial objectives of Pro Medicus Limited.

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.

Trading policy

Under the group’s security trading policy, an executive, director, or any employee of the group, must not trade in any securities of the parent company at any time when they are in possession of unpublished, price– sensitive information in relation to those securities.

Before commencing to trade, an executive must first obtain the approval of the Company Secretary to do so and a director must obtain approval of the Chairman.

Only in exceptional circumstances will approval be forthcoming inside of the period which is 30 days after:

• One day following the announcement of the half–yearly and full year results as the case may be.

• One day following the holding of the annual general meeting.

• One day after any other form of earnings forecast update is given to the market.

Code of Conduct

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

Committees

Due to the small number of Directors, the Board decided 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 assume responsibility for determining and reviewing compensation arrangements for the Executive Directors of the Group. The Executive Directors in turn are responsible for determining and reviewing the compensation arrangements for the Non–Executive Directors. The CEO, in conjunction with the full Board reviews the terms of employment for all executives.

The Board has delegated the responsibility of executive remuneration to the management who will assess the appropriateness of the nature and amount of remuneration of such executives 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.

The appointment of appropriately skilled Non–Executive 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 non–executive 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 members of the audit committee are:

P T Kempen Chairman

S A Hupert

A B Hall

R Lyle

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.

Due to the small number of Directors, all members of the Board serve on the Audit Committee, whilst the Board Chairman is also the Audit Committee Chairman as his area of expertise is in Accounting and Finance.

Board Functions

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 group to the Chief Executive Officer and the executive team (as detailed in Note 23). 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;

• 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.

As required by the ASX listing rules, the Group notifies the ASX of any transaction conducted by directors in the securities of the parent company.

68 ANNUAL REPORT 2012

ANNUAL REPORT 2012 69

CORPORATE GOVERNANCE STATEMENT cont.

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;

• through the release of information to the market via the ASX

• 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;

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 takes a proactive approach to risk management. The Board is responsible for ensuring that risks are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks 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 Company is committed to the identification; monitoring and management of risks associated with its business activities and has included in its management and reporting systems a number of risk management controls, such as:

• Annual budgeting and monthly reporting systems for all operations which enable the monitoring of progress against performance targets and to evaluate trends

• Guidelines and limits on capital expenditure and purchasing authority matrix

• Executive approvals for staffing requirements

• Detailed monthly management reports including cash flow reports, and to identify any foreign currency risks associated with contracts written in and cash being held in foreign currencies

In accordance with ASX Principle 7, the Board has received from the Management an assurance that internal risk management and internal control systems are effective. The Board has also received a declaration from the Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act founded on the sound system of risk management an internal compliance and control which is operating effectively in respect to financial reporting risks.

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.

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Registered Office

ABN 25 006 194 752

450 Swan Street Richmond, VIC, 3121 (03) 9429 8800

Directors

The names of the Directors of the Company in office during the year and until the date of this report are:

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

Peter Terence Kempen

Chairman/Non–Executive Director/ Chairman Audit Committee

Solicitors

Dr Sam Aaron Hupert

Sci–Law Strategies

Chief Executive Officer/ Managing Director

Bankers

Anthony Barry Hall Technology Director

Westpac Banking Corporation

Roderick Lyle Non–Executive Director

Auditors

Ernst & Young

Company Secretary

Clayton James Hatch

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

Telephone +612 8280 7111 Toll free 1300 554 474 Facsimile +612 9287 0303 Facsimile (proxy forms only) +612 9287 0309

registrars@linkmarketservices.com.au

www.linkmarketservices.com.au

• email contact with registered users; and

• special written communications to shareholders distributed with the dividend notifications.

70 ANNUAL REPORT 2012

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Don’t miss out on your dividends

▶ Check transaction and dividend history

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

• Enter your email address

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.

• Check the share prices and graphs

Visit Link Market Services’ website www.

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• Download a variety of instruction forms

linkmarketservices.com.

au and access a wide variety of holding information, make some changes online or download forms.

• Subscribe to email announcements

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

You can access this information via a security login using your Security holder 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).

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.

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

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

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FOR PRO MEDICUS LIMITED INVESTORS VISITING LINK’S (OUR REGI ~~STRY) WEBSITE~~ 1 2

3

Create a portfolio for your holding or holdings and you don’t have to remember your SRN or HIN every time you visit.

Bookmark

Lodge your email via the ‘Communications Options’ and benefit from the online communications options Pro Medicus Limited offers its investors.

www.linkmarketservices.com.au – to bookmark, click on ‘Favourites’ on the menu bar at the top of your browser then select ‘Add to Favourites’.

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You can also contact the Pro Medicus Limited share registry by calling +61 2 8280 7111 or Toll Free 1300 554 474

4

5

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.

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PROMEDICUS LIMITED

450 Swan St

Richmond, Victoria, 3121 Phone: +61 3 9429 8800 Fax: +61 3 9429 9544 info@promedicus.com.au www.promedicus.com.au

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