PRO MEDICUS LIMITED - Annual Report 2015

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ANNUAL REPORT 2015

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HIGHLIGHTS

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FINANCIAL SUMMARY

X NPAT $3.22 million for continuing operations up from $1.51 million
X Revenue of $17.58 million – increase of 21.7%
X Cash reserves of $12.94 million
X Strong balance sheet
debt free
X Dividend of 2.0c per share unfranked

BUSINESS HIGHLIGHTS

X Increased revenue from major US contracts
X Three major new US contract wins in last 12 months
X Contracted revenue stream increased to $50 million plus over next five years

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X Visage 7 – increasing momentum in US market
X Australian business improved

1. Highlights 2014/2015

3. CEO and Chairman’s Letter

5. Financial Summary

7. Business Background

9. Global Leadership Team

11. The Year in Review 63. Independent Audit Report 13. Into the Future 65. ASX Additional Information 15. Financial Statements 66. Corporate Governance 16. Director’s Report 73. Corporate Information

62. Director’s Declaration

PROMEDICUS ANNUAL REPORT 2015

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Dr Sam Hupert Peter Kempen
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Dear Shareholders,

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CEO & CHAIRMAN LETTER

This has been an exciting year as we saw our significant investments in Research and Development being rewarded. We were pleased to report a net profit after tax of $3.22 million from our continuing operations in 2015. This was a major improvement on the previous year, when we reported a profit of $1.51 million.

Our revenue rose to $17.58 million in 2015, an increase of 22 percent, with much of the growth coming from our North American business. 2015 saw revenue from the US Department of Veteran Affairs continue along with the first revenue from the large US Health System, Wellspan Health, Zwanger-Pesiri and University of Florida commencing during the year.

The demand for our technology is currently driven by two significant trends. Firstly the worldwide drive towards the electronic medical record has meant that healthcare institutions have been encouraged to provide unified access to their silos of medical information. This has resulted in the move towards a single, vendor neutral archive for all medical images (VNA). At the same time the size and complexity of medical images created by new technologies and equipment is increasing rapidly. These two factors have created a very large and growing volume of image data created that cannot be readily accessed by simply extending the monolithic single vendor systems of the past.

This has led to a new, modular approach known as “Deconstructed PACS®” of which Visage 7 is a core component. Results to date have been extremely encouraging and have shown that our solution has been able to overcome these challenges in our largest market, North America.

Building on our large sale to a major US Health Network in May last year we commenced FY 15 with a sale to Wellspan Health, a large regional health network in the north-eastern United States, further endorsing Visage 7 technology as a core component of new enterprise imaging systems for such institutions.

In a different sector of the Healthcare Industry we saw the adoption, in January 2015, of Visage 7 technology by a leading private radiology group and outpatient imaging provider, Zwanger-Pesiri, on New York’s Long Island.

Finally in April 2015 a large multi-campus University Hospital (University of Florida Health) chose Visage 7 for it’s health system –for primary diagnosis across its network, as well as for clinical distribution of diagnostic images to thousands of physicians in the network.

These major sales, each solving a problem in a different sector of the Healthcare Industry, are a strong endorsement of our leading edge technology.

Visage 7 technology has not stood still over the year with new versions of the Visage Enterprise Imaging platform as well as the FDA approval of Visage Ease Pro making Visage one of the first companies to provide diagnostic interpretation for the full gamut of medical images with the exception of mammography on mobile devices.

In Australia, Visage RIS, the company’s Radiology Information System platform, was also significantly enhanced with major new versions and is increasingly being adopted by our clients. Over the next 12 months we plan to migrate the remainder of our clients on our traditional RIS/Practice management product onto Visage RIS. We believe this will create opportunities for further take-up of Visage PACS in the Australian market as clients learn about the compelling benefits of the integrated product.

Pro Medicus continued to generate positive cash flow from operations in 2015, and finished the year with cash in hand of $12.94 million. This was down from $15.26 million a year earlier, primarily due to the payment of dividends of $2.0 million and a tax payment on the sale of the Amira business of $3.71 million. The company remains debt free and we believe we have sufficient reserves to internally fund the organic growth of the business.

Accordingly, your board was pleased to declare dividends of 2.0 cents per share, unfranked, for the year. We believe our strong balance sheet positions us well to grow the business in the years ahead as well as support our dividend policy.

Finally we would like to thank our fellow directors and the capable and hard-working teams at Pro Medicus and Visage Imaging, all of whom have made valued contributions to our progress in 2015 positioning us strongly for the future.

Yours faithfully,

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Peter Kempen Dr Sam Hupert CHAIRMAN CHIEF EXECUTIVE OFFICE

PROMEDICUS ANNUAL REPORT 2015

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YEAR ENDED

30 JUNE 2015

	ALL FIGURES IN $A	ALL FIGURES IN $A
	THOUSANDS	UNLESS
	OTHERWISE	STATED
	2015	2014
	$’000	$’000
Revenues from Continuing Operations	17,577 +21.7%	14,447 +27.0%
Total Revenues	17,557 +21.7%	14,447 +23.5%
Operating Proft Before Interest and Income Tax	5,025 +121.1%	2,273 -69.0%
Net Proft After Tax	3,217 +113.2%	1,509 –70.6%
Total Assets 30 June	29,749	29,223
Shareholders’ Funds 30 June	21,938	20,707
Net Tangible Assets per Share at 30 June (cents)	13.0	13.0
Earnings per Share (cents)	3.2 +113.2%	1.5 -70.6%

FINANCIAL SUMMARY

PROMEDICUS ANNUAL REPORT 2015

Pro Medicus is a leading provider of health informatics solutions which include Radiology Information system (RIS) / Practice Management software, e-health and 2D/3D PACS digital imaging products and services to the healthcare industry. The acquisition of Visage Imaging in 2009 transformed the Company, bringing to our product offering best-in-class 2D and 3D digital radiology (PACS) and advanced visualisation clinical capabilities in the form of the Visage 7 suite of products. Pro Medicus also provides a comprehensive range of services centred on these products, including training and installation, hardware configuration and ongoing technical and end user support.

REVENUE STREAMS IN THE FINANCIAL YEAR ENDING JUNE 30, 2015 WERE GENERATED BY THE FOLLOWING PRODUCTS AND SERVICES:

Visage 7 combines 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 radiologists to read any type of examination from a 2D chest x-ray to a complicated 3D cardiac study all within the one viewer.

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BUSINESS BACKGOUND

RADIOLOGY

INFORMATION SYSTEMS (RIS)/PRACTICE MANAGEMENT Pro Medicus offers software applications and services designed to aid the management of medical practices. The software includes medical accounting, clinical reporting, appointments/scheduling and marketing/management information modules and can be integrated with thirdparty applications. The Visage RIS provides enterprise level scalability coupled with powerful search capability and configurable business-specific workflow and rules to meet customer’s needs. Services include implementation, hardware sourcing and configuration, staff and management training and ongoing technical and end user support.

E-HEALTH

The Company’s 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 the doctor’s computer. These reports are then electronically incorporated into the patients’ medical records, 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 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 radiologists to read any type of examination from a 2D chest x-ray to a complicated 3D cardiac study all within the one viewer. The Enterprise viewer can be interfaced with a broad range of third-party image archiving (VNA) and worklist products as part of a Deconstructed PACS® solution. Revenue for this product is now largely derived by the adoption of a transaction based (operational) pay per use model which is helping to build a growing annuity revenue stream for the Company.

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 3D PACS. The Company is now selling this solution in North America, Australia, and select countries within Europe.

Due to the scalability and highly modular nature of the Visage 7 product offering, our technology is ideally suited to the vast majority of radiology environments including large Enterprise hospitals, private imaging centres and remote reading/tele-radiology groups enabling us to address segments of the radiology market previously not available or only partially accessible to us.

VISAGE EASE PRO

Visage Ease Pro provides mobile app technology for diagnostic interpretation of medical images using iOS based mobile devices. It is US Food and Drug Administration (FDA) 510 (k) certified for all imaging modalities apart from mammography which requires higher screen resolution than current iOS devices can support. Incorporating the ability to quickly check the calibration of the screen of an iOS device means that radiologists and allied physicians that require full diagnostic capability on the go can now have it on their mobile device. This enables them to securely interpret images no matter how large they are anywhere using Visage technology. Visage Ease Pro includes numerous image manipulation features, display of non-DICOM (and non-diagnostic) images such as photos, support for recording voice memos, and the ability to upload photo attachments to studies on Visage 7.

PROMEDICUS ANNUAL REPORT 2015

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GLOBAL LEADERSHIP TEAM

KEY PERSONNEL

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MALTE

DANNY TAUBER General Manager Australia

WESTERHOFF

General Manager Europe and Global Chief Technology Officer

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 for over 20 years. Danny has progressed through the company to his current position of General Manager – Australia which he assumed on the 1st of January 2011.

Malte Westerhoff is the General Manager for Visage Imaging GmbH, the European branch of Visage Imaging. He is also the Chief Technical Officer and is responsible for product management and the R&D groups of Visage Imaging globally. He has more than eleven years of experience in medical imaging and software development, holding positions in research and industry. Malte holds a master’s degree in physics from Technical University, Berlin, and a PhD in computer science and mathematics from Free University, Berlin.

Malte was one of the founders of Indeed – Visual Concepts GmbH and author and co-author of many scientific papers in scientific visualization and highperformance computing and is instrumental in developing many of the patented and patent pending technologies that form the basis of Visage Imaging’s product portfolio. Prior to joining the Pro Medicus group, he has served at Mercury Computer Systems and Indeed - Visual Concepts in senior positions. Before that, he has worked at Zuse Institute Berlin (ZIB) as a scientist in brain research.

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BRAD LEVIN

General Manager

North America and Global Head of Marketing

Brad Levin’s broad experience has spanned a variety of leadership roles, including government, consulting, and marketing. While in government, Brad worked as a PACS subject matter expert for the renowned US Department of Defence’s Digital Imaging Network–Picture Archiving and Communications System (DIN-PACS) initiative, as well as consulting for top healthcare institutions across the US.

After leaving his consulting role, Brad went on to spearhead marketing for two web-based PACS start-ups, first AMICAS, and then Dynamic Imaging. Both firms experienced rapid commercial growth leading to acquisition, by Vitalworks and GE Healthcare, respectively. In his most recent role, Brad was GE Healthcare’s commercial Marketing Director, where he had radiology and cardiology marketing responsibility for their RIS, PACS and CVIT product portfolios.

PROMEDICUS ANNUAL REPORT 2015

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THE YEAR IN REVIEW

AUSTRALIA

The Group’s Australian employees undertake research and development of Pro Medicus products (RIS) as well as sales and service/support functions.

The Group’s Australian revenue was 1.9% above last year as a result of new sales of both the Visage PACS and Visage RIS products with many sales being for the combined product offering. Promedicus.net, the company’s e-health offering, continued to hold its strong market position despite increasing competition.

NORTH AMERICA

The growing North American team fulfil sales, marketing and professional services roles. Revenue from North America increased by 67.2% compared to the previous year. This was attributable to new sales and an increase in transaction based revenue from sales of Visage technology as more contracts came on stream. During the period, the company won three major contracts namely Wellspan Health, Zwanger Pesiri and University of Florida (Shands & Jacksonville). These contracts have significantly extended the Company’s footprint in the North American market and will contribute to the growing revenue stream from this region in the coming years.

EUROPE

The Group’s employees in its Berlin office undertake research and development of Visage Imaging products worldwide as well as sales, marketing and service/support functions for the Group’s European operations. Revenue from our European operations decreased by 16.3% from last year, due to lower OEM sales.

COMPANY OFFICES

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

VISAGE GMBH – BERLIN

This is the company’s European headquarters and houses employees who are primarily involved in product R&D and ongoing product support. This office also forms the base of the company’s European operations including order administration and both direct and OEM sales activities.

VISAGE IMAGING INC – SAN DIEGO

This is the company’s North American headquarters and is the base for staff involved in sales, marketing, training/implementation and applications support for both the Visage Imaging and Pro Medicus products.

PROMEDICUS ANNUAL REPORT 2015

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EXPANDED PRODUCT PAY PER USE PORTFOLIO LICENSING MODEL

GROUND BREAKING VISAGE 7 TECHNOLOGY

NEW RIS TECHNOLOGY PLATFORM

ADDRESSING ENTERPRISE/ HOSPITAL MARKETS

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CONTINUED
US EXPANSION
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INTO THE
FUTURE
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THE BOARD AND MANAGEMENT BELIEVE THE COMPANY IS EXTREMELY WELL POSITIONED FOR GROWTH AFTER MAKING STRONG PROGRESS IN THE 2015 FINANCIAL YEAR, PARTICULARLY IN THE NORTH AMERICAN MARKET.

The number of major contract wins in North America doubled in the past 9 months, the vast majority of which are based on the transaction model thereby significantly increasing our guaranteed minimum level of contracted revenue over the next five years as well as providing potential upside as contracted transaction numbers grow and new contracts are won.

Industry recognition of the Company in North America has increased significantly with the winning of major contracts. The pipeline of sales opportunities that the company is actively pursuing has grown accordingly.

In addition, we believe the continued roll-out of the new Visage RIS technology platform in Australia has helped us consolidate our position as the premium provider of RIS systems in this market and opens further opportunities for growth as clients come to understand the benefits of the integrated Visage RIS-PACS package.

KEY FACTORS PREDICTED TO DRIVE GROWTH INCLUDE:

EXPANDED GEOGRAPHICAL FOOTPRINT

The Company is looking to further build on its presence in North America as well as consolidate its position in Australia. In North America, our strategy of direct sales has been highly successful with an increasing percentage of the Company’s revenue coming from this region, a trend we believe will continue given the major contracts won in the past two years.

FULLY INTEGRATED PRODUCT OFFERING

Our Visage RIS technology platform integrates fully with our leading edge Visage 7 product suite, thereby creating the first fourth-generation, end-to-end single-vendor ‘thin client’ PACS/RIS solution in the market. In Australia, most of our sales to new clients have been for the integrated product suite, providing confirmation of our multiproduct strategy. As our existing Australian RIS clients transition to Visage RIS, we believe there is potential for further take-up of the integrated product suite.

TRANSACTION BASED LICENCING MODEL

Over the last two years, the Company has seen a significant increase in the transaction based (pay per use) licensing model in both Australia and North America creating significant ongoing revenue stream for the company.

HIGHLY DIFFERENTIATED TECHNOLOGY

The Company continues to maintain its significant ongoing investment in R&D for its flagship Visage 7 suite of products which we believe will continue to differentiate our offerings in the Deconstructed PACS®, Enterprise viewer, 2D/3D PACS advanced visualisation space.

The Visage RIS platform is the culmination of many years of intense R&D effort and positions Pro Medicus at the forefront of RIS and practice management technology. It is differentiated by its scalability, powerful search capability and ability to allow clients to configure their own businessspecific workflow and rules to meet their needs.

INDUSTRY TRENDS

The Company believes the North American market has reached a tipping point as a result of two significant industry trends that combined, will continue to drive demand for Visage 7 products. The first is the explosion in the size of the image files generated by modern radiology equipment. With developments in imaging technology such as positron emission tomography (PET) and high density 640 slice computed tomography (CT) it is not uncommon for a single examination image file to be in the order of 1.5 to 2 Gigabytes or larger in size. The introduction of Digital Breast Tomosynthesis (DBT), a new form of 3D breast imaging, has added to the data explosion problem producing image files as large as 4 to 6 Gigabytes per examination. Traditional PACS/Digital Imaging technology requires these files to be transferred across the network to the radiologist desktop in order to be visualised. This has created significant network bottlenecks which has limited the widespread adoption and use of these new imaging technologies.

Visage 7, with its unique server side thin-client streaming technology, enables the radiologist or referring clinician to instantly visualize even the largest examinations without having to move the images to their desktop thereby overcoming the bandwidth/ network bottleneck issue.

This has created a paradigm shift in the way customers are purchasing PACS/Digital Imaging technology, moving away from a monolithic, single vendor solution to a best in breed or Deconstructed PACS® approach whereby multiple components from different vendors are integrated into a single solution. Unlike systems from traditional PACS systems, Visage 7, with its highly modular and scalable design is ideally suited to this new paradigm resulting in a growing pipeline of opportunities that the company is actively pursuing.

PROMEDICUS ANNUAL REPORT 2015

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FINANCIAL REPORT

ANNUAL FINANCIAL REPORT 30 JUNE 2015

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30 JUNE 2015	30 JUNE 2015
Directors’ Report		16
Auditor’s Independence Declaration		27
Statement of Comprehensive Income		28
Statement of Financial Position		29
Statement of Changes in Equity		30
Statement of Cash Flows		31
Notes	to the Financial Statements	32
Note	1 Corporate Information	32
Note	2 Summaryof Signifcant AccountingPolicies	32
Note	3 Signifcant AccountingJudgements,Estimates and Assumptions	44
Note	4 Financial Risk Management Objectives and Policies	45
Note	5 OperatingSegments	47
Note	6 Income and Expenses	49
Note	7 Income Tax	49
Note	8 Earningsper Share	50
Note	9 Dividends Paid and Proposed	51
Note	10 Cash and Cash Equivalents	52
Note	11 Trade and Other Receivables(Current)	52
Note	12 Inventory	53
Note	13 Plant and Equipment	53
Note	14 Intangible Assets	54
Note	15 Trade and Other Payables	55
Note	16 Provisions	55
Note	17 Contributed Equityand Reserves	56
Note	18 Share based Payment Plan	57
Note	19 Commitments	59
Note	20 Events after the Balance Sheet Date	59
Note	21 Auditors’ Remuneration	59
Note	22 KeyManagement Personnel	60
Note	23 Related PartyDisclosure	60
Note	24 Contingencies	61
Note	25 Parent EntityInformation	61
Directors’ Declaration		62
Independent Auditor’s Report		63
ASX Additional Information		65
Corporate Governance Statement		66
Corporate Information		73

PROMEDICUS ANNUAL REPORT 2015

DIRECTORS’ REPORT

Your Directors submit their report for the year ended 30 June 2015.

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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:

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RODERICK LYLE

DR SAM AARON HUPERT

LL.B., B.Com, LL.M (Lond), MBA (Melb) Non Executive Director

M.B.B.S. Managing Director and Chief Executive Officer

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.

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

PETER TERENCE KEMPEN

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.

F.C.A, F.A.I.C.D Chairman

Peter Kempen joined Pro Medicus Limited 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.

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.

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. Peter is also Chairman of the audit committee.

ANTHONY

CLAYTON JAMES HATCH

BARRY HALL

CPA

B.Sc. (Hons), M.Sc. Executive Director and Technology Director

Chief Financial Officer and

Company Secetary

Co-founder of Pro Medicus Limited in 1983, Anthony Hall has been principal architect and developer of the core software systems. His current focus is the transition to and development of the company’s next generation RIS systems.

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 1 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:

		Options Over
	Ordinary Shares	Ordinary Shares
A. B. Hall	30,068,500	NIL
S. A. Hupert	30,107,660	NIL
P. T. Kempen	478,082	200,000
R. Lyle	140,000	200,000
EARNINGS PER SHARE
		Cents
Basic earnings per share		3.21
Diluted earnings per share		3.14
DIVIDENDS
ORDINARY SHARES	CENTS	$’000
Final dividends recommended:
Normal dividend plan	1.0	1,002
Dividends paid in the year:
Interim for the year	1.0	1,002
Final dividend for 2014 shown as recommended in the 2014 report:
Normal dividend plan	1.0	1,002

OPERATING AND FINANCIAL REVIEW

CORPORATE STRUCTURE

Visage 7.0

Radiology Information Systems Visage 7.0 (RIS) ▶ Innovative medical imaging Innovative proprietary software that provides medical software for practice radiologist and clinicians management (RIS); with advanced visualisation capability for rapidly viewing ▶ Training, installation and 2-D, 3-D and 4-D medical professional services; images;

Pro Medicus Limited is a

company limited by shares that is incorporated and domiciled in Australia.

Nature of operations and principal activities.

principal activities. ▶ Training, installation and 2-D, 3-D and 4-D medical The principal activities of the professional services; images; Group during the year were the ▶ After sale support and supply of product and services ▶ PACS/Digital imaging service products; to diagnostic imaging groups software that is sold directly and a range of other entities ▶ Promedicus.net secure and to original equipment predominately within the private email; and manufacturers (OEM). medical market. These products ▶ Digital radiology ▶ Training, installation and and services include: integration products professional services; ▶ Service and support products;

The Company undertakes R&D in Australia for its Practice Management (RIS) and promedicus.net products including R&D for Visage RIS, its new technology platform.

The R&D for the Visage Imaging product set is carried out in Europe. The Company has continued HIGHLIGHTSdevelopment of both the RIS products and the Visage 7.0 product line throughout the period.

PROMEDICUS ANNUAL REPORT 2015

DIRECTORS’ REPORT CONT.

REVIEW AND RESULTS OF OPERATIONS

Investment Activities

Surplus funds which are held in several currencies are invested by the Group in a cash management account and term deposits to maximise the interest return.

Performance Indicators

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

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

Dynamics of the Business Australia

The Group’s Australian employees undertake research and development of Pro Medicus products (RIS) as well as sales and service/support functions.

The Group’s Australian revenue was 1.9% above last year as a result of new sales of both the Visage PACS and Visage RIS products with many sales being for the combined product offering.

Promedicus.net, the company’s e-health offering, continued to hold its strong market position despite increasing competition.

North America

The growing North American team fulfil sales, marketing and professional services roles. Revenue from North America increased by 67.2% compared to the previous year. This was largely attributable to new sales and an increase in transaction based revenue from sales of Visage technology as more contracts came on stream.

Europe

Financials

Reported profit after tax for the period was $3.22m an increase of $1.71m (113.2%) from the previous year.

Full year revenue of the Group increased from $14.45m to $17.58m, an increase of 21.67%.

The key driver of the profit increase was the significant improvement in the performance of the North American operations supplemented by a modest increase in Australian sales.

As the Group’s costs are relatively fixed, an increase in sales has a positive impact on profitability.

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 Visage RIS, its new RIS technology platform as well as the ongoing development of the Visage 7.0 product set.

It is anticipated that this strategy of ongoing development will continue to position Pro Medicus as a market leader and enable the Group to further 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 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 $4.18m, with receipts from customers totalling $16.99m compared with payments of $8.61m to suppliers and employees. During the year the Company paid out a total of $2.01m in dividends and tax on the sale of Amira of $3.74m, the net result being total cash assets of $12.94m; a decrease of 15.2% 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 for areas such as risk management, environmental issues, occupational health and safety or treasury.

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

Board approval of strategic plans, which encompass the Company’s vision, mission and strategy statements, designed to meet stakeholder needs and manage business risk;
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPIs;
Overseeing of appropriate backup procedures for important company data; and
Routine review by key executives of its established Quality Assurance program and corrective action recommendations stemming from it.

Corporate Governance

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

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Shareholders’ equity increased by 5.9% from $20.71m to $21.94m. This movement was largely the result of profit during the year, offset by dividends paid out during the year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

A Final Dividend of 1.0 cents per share has been declared post 1 July. Please refer Note 9.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Directors anticipate that the 2016 financial year will see more opportunity crystallise for the company due to improved prospects in North America and the continued commercialisation and roll out of Visage RIS, the company’s new technology RIS platform.

Key components that are likely to affect the performance of the company are:

Increased revenue being generated from recently won transaction based contracts which are scheduled to come on stream in the 2016 financial year.
Strong interest in the Visage 7 suite of products in the North American market has resulted in a number of sales opportunities that the Company is actively pursuing.
The ability of the expanded Visage 7 product set to address key market segments such as large Health Systems and Hospitals in addition to the private radiology and teleradiology markets.
Market dynamics that favour the adoption of Visage 7 technology such as the trend towards “deconstructed” or best in breed solutions.
Improved sales prospects for Visage RIS, the company’s new technology RIS as the rollout of this new platform continues.
As a result, it is anticipated that the 2016 financial year will show a continuing improvement in operational results, however this is dependent upon many market factors over which the Directors have limited or no control.

ENVIRONMENTAL REGULATION AND PERFORMANCE

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.

SHARE OPTIONS

Un-issued Shares

As at the date of this report, there were 1,675,000 un-issued ordinary shares under options refer to Note 18 of the financial statements for further details of the options outstanding.

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

PROMEDICUS ANNUAL REPORT 2015

DIRECTORS’ REPORT CONT.

Shares Issued as a Result of the Exercise of Options

During the financial year, no share options were exercised by current employees. During the financial year no 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.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the year, Pro Medicus Limited 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 Pro Medicus Limited.

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.

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

INDEMNIFICATION OF AUDITORS

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

REMUNERATION REPORT (audited)

This remuneration report for the year ended 30 June 2015 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.

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.

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

(iii) Other Executives

Danny Tauber General Manager – Pro Medicus Limited Malte Westerhoff Managing Director – Visage Imaging GmbH Brad Levin General Manager – Visage Imaging Inc

Remuneration committee

Remuneration and nomination issues are handled at the full Board level. Due to the small number of Directors no Committee has been established for this purpose.

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. 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 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.

Remuneration philosophy

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.

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 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 they sit. The Non-Executive Directors of the Company participate in the Employee Share Incentive Scheme [Option based] which was established in 2000 to provide incentive for participants.

The remuneration of Non-Executive Directors for the period ended 30 June 2015 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.

The Board has not used any external consultants to undertake a review of the remuneration of Executives.

Fixed Remuneration

Objective

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

Fixed remuneration is reviewed annually and the process consists of a review of 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)

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 expired under the scheme on 25 August 2010.

Roderick Lyle was granted options on becoming a Director of the company in 2011 under a separate agreement. The share options have a 5 year vesting period and expire in 2021.

PROMEDICUS ANNUAL REPORT 2015

DIRECTORS’ REPORT CONT.

REMUNERATION REPORT (audited) (continued)

Performance Rights

A long term incentive plan was established during 2011-12 whereby Senior Executives of the Group were offered performance rights over the ordinary shares of Pro Medicus Limited. The performance rights, issued for nil consideration, are offered over a 5 year period and vest 4 years after granting date on completion of service. This long term incentive plan includes performance hurdles related to profitability (EBIT – 75%) which is set on an annualised basis by the Board and individual performance (25%). These measures have been selected and set to align to Company performance and to reflect individual contribution to the Company.

Executives

(excluding Executive Directors)

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.

Remuneration of key management personnel of the Company and the Group

The table below outlines the proportion of LTI that were granted since the plan was established.

Table 1: Remuneration of key management personnel for the year ended 30 June 2015

	2015	2014	2013	2012
75% EBIT targets met	80%*	90%	0%	60%
25% Individual targets met	60-100%*	87%	96%	60%
* subject to Board approval

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 2015

For the 2015 financial year, the total amount of STI cash bonus either paid or accrued at year end was $239,653. The maximum amount payable under STI was $239,653.

Key Performance Indicators

Actual STI payments granted to key staff 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.

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.

Table 1:Rem	uneration o	f key man	agement	personnel fo	r the yea	r ended 30 J	une 201	5
									Total
				Post	Long				Performance
		Short-Term		Employment	Term	Share-Based	Payment	Total	Related %
			Non		Long
30 June 2015	Salary & Fees	Cash Bonus	Monetary benefts	Super- annuation	Service Leave	Performance Rights	Options
Directors
P T Kempen	56,360	-	8,640	35,000	-	-	-	100,000	-
S A Hupert	245,000	-	-	35,000	3,655	-	-	283,655	-
A B Hall	245,000	-	-	35,000	3,655	-	-	283,655	-
R. Lyle	45,662	-	-	4,338	-	-	3,084	53,084	-
Executives
D Tauber	315,204	-	-	13,129	11,909	37,626	958	378,826	10.2%
M Westerhof	405,602	179,613	12,981	2,517	-	61,724	-	662,437	36.4%
B Levin	228,152	60,040	-	-	-	15,617	-	303,809	24.9%
	1,540,980	239,653	21,621	124,984	19,219	114,967	4,042	2,065,466

The return on net assets and equity are shown in the table below.

	2015	2014	2013	2012	2011
Basic earnings per share – reported (cents)	3.2	1.5	5.1	1.8	0.5
Return on assets (%)	17.6	8.4	25.6	11.3	3.0
Return on equity (%)	14.7	7.3	24.2	11.2	3.3
Dividend payout ratio (%) – normal dividend plan	62.3	132.8	39.7	84.0	0.0
Dividend payout ratio (%) – total dividend	62.3	132.8	39.7	84.0	0.0
Available franking credits ($’000)	0	782	1,641	2,638	2,921

Employment Contracts

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;
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;
Non-competition during employment and for a period of 12 months thereafter; and
Termination by the Company on six months notice or payment of six months remuneration in lieu of notice or a combination of both (or without notice or payment in lieu in the event of misconduct or other specified circumstances). The agreements may be terminated by the Executives on the giving of six months notice.

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

At reporting date 72,188 shares with a fair value of $59,848 ($0.83 per performance right) were granted as performance rights to Malte Westerhoff with a grant date of 27 October 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

An additional 185,000 shares with a fair value of $126,964 ($0.69 per performance right) were granted as performance rights to Malte Westerhoff in relation to the 2013-14 financial performance with a grant date of 27 March 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

At reporting date 33,750 shares with a fair value of $27,981 ($0.83 per performance right) were granted as performance rights to Danny Tauber with a grant date of 27 October 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

An additional 107,250 shares with a fair value of $73,605 ($0.69 per performance right) were granted as performance rights to Danny Tauber in relation to the 2013-14 financial performance with a grant date of 27 March 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

At reporting date 20,625 shares with a fair value of $17,099 ($0.83 per performance right) were granted as performance rights to Brad Levin with a grant date of 27 October 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

An additional 61,250 shares with a fair value of $42,035 ($0.69 per performance right) were granted as performance rights to Brad Levin in relation to the 2013-14 financial performance with a grant date of 27 March 2014. The performance rights have a 4 year vesting period from grant date and are automatically exercised upon completion of the vesting period.

PROMEDICUS ANNUAL REPORT 2015

REMUNERATION REPORT (audited) (continued)

Table 2: Remuneration of key management personnel for the year ended 30 June 2014

Table 2:Rem	uneration o	f key man	agement	personnel f	or the yea	r ended 30	June 201	4
									Total
				Post	Long				Performance
		Short-Term		Employment	Term	Share-Based	Payment	Total	Related %
			Non		Long
30 June 2014	Salary & Fees	Cash Bonus	Monetary benefts	Super- annuation	Service Leave	Performance Rights	Options
Directors
P T Kempen	41,716	-	8,284	30,000	-	-	-	80,000	-
S A Hupert	255,000	-	-	25,000	4,897	-	-	284,897	-
A B Hall	255,000	-	-	25,000	4,897	-	-	284,897	-
R. Lyle	45,767	-	-	4,233	-	-	6,040	56,040	-
Executives
D Tauber	301,871	-	-	13,129	5,240	12,229	2,374	334,843	4.4%
M Westerhof	423,196	221,745	13,355	2,590	-	15,021	510	676,417	35.1%
B Levin	207,024	54,480	-	-	-	833	-	262,337	21.1%
	1,529,574	276,225	21,639	99,952	15,034	28,083	8,924	1,979,431

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

54,250 shares with a fair value of $13,563 ($0.25 per performance right) were granted as performance rights to Malte Westerhoff with a grant date of 15 September 2013. The performance rights have a 3 year vesting period and are automatically exercised upon completion of the vesting period.

38,750 shares with a fair value of $9,688 ($0.25 per performance right) were granted as performance rights to Danny Tauber with a grant date of 15 September 2013. The performance rights havea 3 year vesting period and are automatically exercised upon completion of the vesting period.

10,000 shares with a fair value of $2,500 ($0.25 per performance right) were granted as performance rights to Brad Levin with a grant date of 15 September 2013. The performance rights have a 3 year vesting period and are automatically exercised upon completion of the vesting period.

For details of the valuation of options, including models and assumptions used please refer to Note 18.

Table 3: Option holdings of Key Management Personnel

Table 3:Optio	n holdings of	Key Manageme	nt Personn	el
	Balance
	at beginning	Granted as	Options	Balance
	of year	Remuneration	Exercised	at end of year
						Vested/
30 June 2015	1 July 2014			30 June 2015	Not vested	Exercisable	Total
Directors
P T Kempen	200,000	-	-	200,000	-	200,000	200,000
S A Hupert	-	-	-	-	-	-	-
A B Hall	-	-	-	-	-	-	-
R. Lyle	200,000	-	-	200,000	80,000	120,000	200,000
Executives
D Tauber	350,000	-	-	350,000	70,000	280,000	350,000
M Westerhof	350,000	-	-	350,000	-	350,000	350,000
B Levin	-	-	-	-	-	-	-
	1,100,000	-	-	1,100,000	150,000	950,000	1,100,000

Table 4: Shareholdings of Key Management Personnel

Table 4:Sharehold	ings of Key Managem	ent Personnel
Shares held in
Pro Medicus Limited	Balance at	Granted as	On Exercise		Balance
(number)	beginning of year	Remuneration	of Options	Net Change Other	30 June 2015
30 June 2015	1 July 2014 Ordinary	Ordinary	Ordinary	Ordinary	Ordinary
Directors
P T Kempen	458,082	-	-	20,000*	478,082
S A Hupert	30,107,660	-	-	-	30,107,660
A B Hall	30,068,500	-	-	-	30,068,500
R. Lyle	140,000	-	-	-	140,000
Executives
D Tauber	150,000	-	-	-	150,000
M Westerhof	-	-	-	-	-
B Levin	-	-	-	-	-
	60,924,242	-	-	20,000	60,944,242

Peter Kempen purchased 20,000 shares throughout the year at the prevailing market share price.

Table 5: Performance Rights of Key Management Personnel

Table 5:Perfor	mance Rights	of Key Mana	gement Pers	onnel
	Balance		Performance
	at beginning	Granted as	rights	Balance
	of year	Remuneration	Exercised	at end of year
						Vested/
30 June 2015	1 July 2014			30 June 2015	Not vested	Exercisable	Total
Directors
P T Kempen	-	-	-	-	-	-	-
S A Hupert	-	-	-	-	-	-	-
A B Hall	-	-	-	-	-	-	-
R. Lyle	-	-	-	-	-	-	-
Executives
D Tauber	146,750	141,000	-	287,750	287,750	-	287,750
M Westerhof	180,250	257,188	-	437,438	437,438	-	437,438
B Levin	10,000	81,875	-	91,875	91,875	-	91,875
	337,000	480,063	-	817,063	817,063	-	817,063

# Includes forfeitures

Loans to Key Management Personnel

No loans are made to Key Management Personnel or staff.

Other transactions and balances with Key Management Personnel

Purchases

During the year lease payments of $169,476 (2014: $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 ‘arm’s length basis’ have been determined by an independent assessment of rental and lease terms.

# Includes forfeitures

PROMEDICUS ANNUAL REPORT 2015

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:	12		2
Number of meetings attended:
P. T. Kempen	12	12	2	2
R. Lyle	11	12	2	2
A. B. Hall	12	12	2	2
S. A. Hupert	12	12	2	2

Committee membership

As at 30 June 2015, the company had an Audit Committee comprising the 2 Non-Executive Directors and 2 Executive Directors.

ROUNDING

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

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

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

NON-AUDIT SERVICES

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

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

Professional services rendered in respect to taxation matters $126,909

Signed in accordance with a resolution of the Directors.

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AUDITOR’S INDEPENDENCE DECLARATION

To the Directors of Pro Medicus Limited

==> picture [64 x 73] intentionally omitted <==

Ernst & Young Tel: +61 3 9288 8000 8 Exhibition Street Fax: +61 3 8650 7777 Melbourne VIC 3000 Australia ey.com/au GPO Box 67 Melbourne VIC 3001

Auditor's Independence Declaration to the Directors of Pro Medicus Limited

In relation to our audit of the financial report of Pro Medicus Limited for the financial year ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [118 x 57] intentionally omitted <==

Ernst & Young

==> picture [95 x 53] intentionally omitted <==

Paul Gower Partner Melbourne 21 August 2015

P T Kempen Director

Melbourne, 21 August 2015

PROMEDICUS ANNUAL REPORT 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		Consolidated
		2015	2014
FOR THE YEAR ENDED 30 JUNE 2015	Notes	$’000	$’000
Revenue	5	17,490	14,268
Finance Revenue		87	179
Revenue		17,577	14,447
Cost of Sales		(223)	(281)
Gross Proft		17,354	14,166
Other Income/(Expenses)	6(a)	1,654	(94)
Accounting and Secretarial Fees		(534)	(399)
Advertising and Public Relations		(757)	(607)
Depreciation and Amortisation	6(b)	(3,116)	(3,266)
Insurance		(528)	(485)
Legal Costs		(580)	(169)
Operating Lease Expense		(375)	(370)
Other Expense		(486)	(441)
Salaries and Employee Benefts Expense	6(b)	(6,863)	(5,283)
Travel and Accommodation		(657)	(600)
Proft before tax		5,112	2,452
Income tax expense	7	(1,895)	(943)
Proft for the year	17	3,217	1,509
Other Comprehensive Income Items that may be reclassifed subsequently to proft and loss
Foreign Currency translation		(363)	186
Other comprehensive income for the year		(363)	186
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX		2,854	1.695
Earnings per share (cents per share)	8
- Basic for net proft for the year		3.2¢	1.5¢
- Diluted for net proft for the year		3.1¢	1.5¢

FINANCIAL POSITION
	Consolidated
AS AT 30 JUNE 2015 Notes 2015 $’000 2014 $’000
ASSETS Current Assets
Cash and cash equivalents 10 12,935 15,259 Trade and other receivables 11 3,731 3,299 Accrued Revenue 210 135 Inventories 12 129 100 Prepayments 321 358
Total Current Assets 17,326 19,151 Non-current Assets
Deferred tax asset 7 509 625 Plant and equipment 13 341 302 Intangible assets 14 11,552 9,145 Prepayments 21 -
Total Non-current Assets 12,423 10,072
TOTAL ASSETS 29,749 29,223 LIABILITIES Current Liabilities
Trade and other payables 15 2,762 1,236 Income tax payable 495 3,748 Provisions 16 1,504 1,340
Total Current Liabilities 4,761 6,324 Non-current Liabilities
Trade and other payables 15 10 `15 Deferred tax liabilities 7 2,953 2,118 Provisions 16 87 59
Total Non-current Liabilities 3,050 2,192
TOTAL LIABILITIES 7,811 8,516
NET ASSETS 21,938 20,707 EQUITY
Contributed equity 17 327 327 Share Reserve 17 666 284 Foreign Currency Translation Reserve 17 (81) 282 Retained earnings 17 21,026 19,814
TOTAL EQUITY 21,938 20,707

PROMEDICUS ANNUAL REPORT 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated

FOR THE YEAR ENDED 30 JUNE 2015

			Foreign
			Currency
	Issued	Share	Translation	Retained	Total
	Capital	Reserve	Reserve	Earnings	Equity
	$’000	$’000	$’000	$’000	$’000
At 1 July 2013	327	226	96	20,310	20,959
Proft for the year	-	-	-	1,509	1,509
Other comprehensive income	-	-	186	-	186
Total comprehensive income for the period	-	-	186	1,509	1,695
Transaction with owners in their capacity as owners
Share Based Payment	-	58	-	-	58
Dividends	-	-	-	(2,005)	(2,005)
At 30 June 2014	327	284	282	19,814	20,707
At 1 July 2014	327	284	282	19,814	20,707
Proft for the year	-	-	-	3,217	3,217
Other comprehensive income	-	-	(363)	-	(363)
Total comprehensive income for the period	-	-	(363)	3,217	2,854
Transaction with owners in their capacity as owners
Share Based Payment	-	382	-	-	382
Dividends	-	-	-	(2,005)	(2,005)
At 30 June 2015	327	666	(81)	21,026	21,938

CONSOLIDATED STATEMENT OF CASH FLOWS

CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015	Notes	Consolidated
		2015	2014
		$’000	$’000
Cash fows from operating activities
Receipts from customers		16,987	13,489
Payments to suppliers and employees		(8,607)	(8,564)
Income tax (paid)/refunded		(4,197)	(692)
Net cash fows from operating activities	10	4,183	4,233
Cash fows from investing activities
Capitalised Development Costs	14	(5,365)	(5,162)
Interest received		87	179
Purchase of plant and equipment	13	(201)	(110)
Proceeds from disposal of plant & equipment	13	5	2
Net cash fows used in investing activities		(5,474)	(5,091)
Cash fows from fnancing activities
Payment of dividends on ordinary shares	9	(2,005)	(2,005)
Net cash fows used in fnancing activities		(2,005)	(2,005)
Net increase/(decrease) in cash and cash equivalents		(3,296)	(2,863)
Net foreign exchange diferences		972	99
Cash and cash equivalents at beginning of period		15,259	18,023
Cash and cash equivalents at end of period	10	12,935	15,259

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015

(b) Statement of compliance with IFRS

1. CORPORATE INFORMATION

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

The financial report of Pro Medicus Limited (the Company) for the year ended 30 June 2015 was authorised for issue in accordance with a resolution of directors on 21 August 2015.

(c) New accounting standards and interpretations

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

(i) Changes in Accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous financial year except as follows:

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

The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2014. Adoption of these standards did not have any effect on the financial position or performance of the Group. The necessary disclosures have been updated to reflect amended accounting

2. SUMMARY OF 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.

		Application date	Application date
Reference	Title	of standard*	for Group*
AASB 2012-3	Amendments to Australian Accounting Standards - Ofsetting	1 January 2014	1 July 2014
	Financial Assets and Financial Liabilities
	AASB 2012-3 adds application guidance to AASB 132_Financial_ _Instruments: Presentation_to address inconsistencies identifed in applying some of the ofsetting criteria of AASB 132, including
	clarifying the meaning of “currently has a legally enforceable right of set-of” and that some gross settlement systems may
	be considered equivalent to net settlement.
AASB 2013-3	Amendments to AASB 136 – Recoverable Amount Disclosures for	1 January 2014	1 July 2014
	Non-Financial Assets
	AASB 2013-3 amends the disclosure requirements in AASB 136
	Impairment of Assets. The amendments include the requirement to
	disclose additional information about the fair value measurement
	when the recoverable amount of impaired assets is based on fair
	value less costs of disposal.
AASB 2013-5	Amendments to Australian Accounting Standards – Investment	1 January 2014	1 July 2014
	Entities
	[AASB 1, AASB 3, AASB 7, AASB 10, AASB 12, AASB 107, AASB 112,
	AASB 124, AASB 127, AASB 132, AASB 134 & AASB 139]
	These amendments defne an investment entity and require that,
	with limited exceptions, an investment entity does not consolidate
	its subsidiaries or apply AASB 3 Business Combinations when it
	obtains control of another entity.
	These amendments also introduce new disclosure requirements
	for investment entities to AASB 12 and AASB 127.
AASB 2013-7	Amendments to AASB 1038 arising from AASB 10 in relation to	1 January 2014	1 July 2014
	consolidation and interests of policyholders [AASB 1038]
	AASB 2013-7 removes the specifc requirements in relation to
	consolidation from AASB 1038, which leaves AASB 10 as the
	sole source of consolidation requirements applicable to life
	insurance entities.

		Application date	Application date
Reference	Title	of standard*	for Group*
AASB 1031	Materiality	1 January 2014	1 July 2014
	The revised AASB 1031 is an interim standard that cross-references
	to other Standards and the Framework (issued December 2013)
	that contain guidance on materiality.
	AASB 1031 will be withdrawn when references to AASB 1031 in all
	Standards and Interpretations have been removed.
	AASB 2014-1 Part C issued in June 2014 makes amendments to
	eight Australian Accounting Standards to delete their references to AASB 1031. The amendments are efective from 1 July 2014*.
AASB 2013-9	Amendments to Australian Accounting Standards – Conceptual
	Framework, Materiality and Financial Instruments
	The Standard contains three main parts and makes amendments
	to a number of Standards and Interpretations.	1 July 2014	1 July 2014
	Part A of AASB 2013-9 makes consequential amendments arising
	from the issuance of AASB CF 2013-1.
	Part B makes amendments to particular Australian Accounting Standards to delete references to AASB 1031 and also makes	1 July 2014	1 July 2014
	minor editorial amendments to various other standards.
	Part C makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6_Hedge Accounting_	1 July 2015	1 July 2015
	into AASB 9_Financial Instruments._
AASB 2014-1	AASB 2014-1 Part A: This standard sets out amendments to	1 July 2014	1 July 2014
Part A	Australian Accounting Standards arising from the issuance by the
Annual	International Accounting Standards Board (IASB) of International
Improvements 2010–2012	Financial Reporting Standards (IFRSs)Annual Improvements to IFRSs 2010–2012 Cycle_and_Annual Improvements to IFRSs
Cycle	2011–2013 Cycle.

Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items:

AASB 2 - Clarifies the definition of ‘vesting conditions’ and ‘market condition’ and introduces the definition of ‘performance condition’ and ‘service condition’.
AASB 3 - Clarifies the classification requirements for contingent consideration in a business combination by removing all references to AASB 137.

AASB 8 - Requires entities to disclose factors used to identify the entity’s reportable segments when operating segments have been aggregated. An entity is also required to provide a reconciliation of total reportable segment assets to the entity’s total assets.

AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation does not depend on the selection of the valuation technique and that it is calculated as the difference between the gross and net carrying amounts.
AASB 124 - Defines a management entity providing KMP services as a related party of the reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of AASB 124 Related Party Disclosures for KMP services provided by a management entity. Payments made to a management entity in respect of KMP services should be separately disclosed.

Annual Improvements to IFRSs 2011–2013 Cycle addresses the 1 July 2014 1 July 2014 following items:

AASB 2014-1 Part A Annual Improvements 2011–2013 Cycle

AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132.
AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is the acquisition of a group of assets or a business combination in the scope of AASB 3 that includes an investment property. That judgment is based on guidance in AASB 3

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

Reference Title Application date of standard Application date for Group Amendments to AASB 1053 Transition to and between Tiers, and related Tier 2 Disclosure Re- quirements [AASB 1053] The Standard makes amendments to AASB 1053 Application of Tiers of Australian Accounting Standards to: • clarify that AASB 1053 relates only to general purpose fnancial statements; • make AASB 1053 consistent with the availability of the AASB 108_Accounting Policies, Changes in Accounting Estimates_ and Errors_option in AASB 1_First-time Adoption of Australian Accounting Standards; • clarify certain circumstances in which an entity applying Tier 2 reporting requirements can apply the AASB 108 option in AASB 1; permit an entity applying Tier 2 reporting requirements for the frst time to do so directly using the requirements in AASB 108 (rather that applying AASB 1) when, and only when, the entity had not applied, or only selectively applied, applicable recognition and measurement requirements in its most recent previous annual special purpose fnancial statements; and • specify certain disclosure requirements when an entity resumes the application of Tier 2 reporting requirements. 1 July 2014 1 July 2014 ii) Accounting Standards and Interpretation issued but not yet efective Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet ef- fective have not been adopted by the Group for the annual reporting period ending 30 June 2015. These are outlined in the table below. Reference Title Summary Application date of standard Impact on Group* fnancial report Application date for Group* AASB 9 Financial Instruments AASB 9 (December 2014) is a new standard which replaces AASB 139. This new version supersedes AASB 9 issued in December 2009 (as amended) and AASB 9 (issued in December 2010) and includes a model for classifcation and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting. AASB 9 is efective for annual periods beginning on or after 1 January 2018. However, the Standard is available for early adoption. The own credit changes can be early adopted in isolation without otherwise changing the accounting for fnancial instruments. Classifcation and measurement AASB 9 includes requirements for a simpler approach for classifcation and measurement of fnancial assets compared with the requirements of AASB 139. There are also some changes made in relation to fnancial liabilities. AASB 9 also removes the volatility in proft or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This change in accounting means that gains or losses attributable to changes in the entity’s own credit risk would be recognised in OCI. These amounts recognised in OCI are not recycled to proft or loss if the liability is ever repurchased at a discount. Impairment The fnal version of AASB 9 introduces a new expected- loss impairment model that will require more timely recognition of expected credit losses. Specifcally, the new Standard requires entities to account for expected credit losses from when fnancial instruments are frst recognised and to recognise full lifetime expected losses on a more timely basis. Hedge accounting Amendments to AASB 9 (December 2009 & 2010 editions and AASB 2013-9) issued in December 2013 included the new hedge accounting requirements, including changes to hedge efectiveness testing, treatment of hedging costs, risk components that can be hedged and disclosures. 1 January 2018 No impact 1 July 2018	Reference Title Summary Application date of standard Impact on Group fnancial report Application date for Group**
	AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations [AASB 1 & AASB 11] AASB 2014-3 amends AASB 11_Joint Arrangements_to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendments require: a. the acquirer of an interest in a joint operation in which the activity constitutes a business, as defned in AASB 3_Business Combinations_, to apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards except for those principles that confict with the guidance in AASB 11; and b.the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations. This Standard also makes an editorial correction to AASB 11 1 January 2016 No impact 1 July 2016
	AASB 2014-4 Clarifcation of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 and AASB 138) AASB 116 Property Plant and Equipment and AASB 138 _Intangible Assets_both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefts of an asset. The IASB has clarifed that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally refects factors other than the consumption of the economic benefts embodied in the asset. The amendment also clarifed that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefts embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. 1 January 2016 No impact 1 July 2016
	AASB 15 Revenue from Contracts with Customers AASB 15_Revenue from Contracts with Customers_replaces the existing revenue recognition standards AASB 111 Construction Contracts, AASB 118_Revenue_and related Interpretations (Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers, Interpretation 131 Revenue— Barter Transactions Involving Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry). AASB 15 incorporates the requirements of IFRS 15 Revenue from Contracts with Customers issued by the International Accounting Standards Board (IASB) and developed jointly with the US Financial Accounting Standards Board (FASB). AASB 15 specifes the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or fnancial instruments).The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that refects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: a. Step 1: Identify the contract(s) with a customer b. Step 2: Identify the performance obligations in the contract c. Step 3: Determine the transaction price d. Step 4: Allocate the transaction price to the performance obligations in the contract e. Step 5: Recognise revenue when (or as) the entity satisfes a performance obligation Currently, AASB 15 is efective for annual reporting periods commencing on or after 1 January 2017. Early application is permitted. (Note A) AASB 2014-5 incorporates the consequential amendments to a number Australian Accounting Standards (including Interpretations) arising from the issuance of AASB 15. 1 January 2017 The Group will continue to assess the impact on the change in standard, if any 1 July 2017

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

				Impact on
			Application date of	Group fnancial	Application date for
Reference	Title	Summary	standard*	report	Group*
AASB 2014-9	Amendments	AASB 2014-9 amends AASB 127_Separate Financial_	1 January	No impact	1 July 2016
	to Australian	Statements,_and consequentially amends AASB 1_First-	2016
	Accounting	_time Adoption of Australian Accounting Standards_and
	Standards –	AASB 128_Investments in Associates and Joint Ventures_, to
	Equity Method	allow entities to use the equity method of accounting for
	in Separate Financial	investments in subsidiaries, joint ventures and associates in their separate fnancial statements.
	Statements	AASB 2014-9 also makes editorial corrections to AASB 127.
		AASB 2014-9 applies to annual reporting periods beginning
		on or after 1 January 2016. Early adoption permitted.
AASB 2014-10	Amendments	AASB 2014-10 amends AASB 10_Consolidated Financial_	1 January	No impact	1 July 2016
	to Australian	_Statements_and AASB 128 to address an inconsistency	2016
	Accounting	between the requirements in AASB 10 and those in AASB
	Standards –	128 (August 2011), in dealing with the sale or contribution of
	Sale or	assets between an investor and its associate or joint venture
	Contribution of
	Assets between
	an Investor and
	its Associate or
	Joint Venture
AASB 2015-1	Amendments	The subjects of the principal amendments to the Standards	1 January	The Group	1 July 2016
	to Australian	are set out below:	2016	will amend
	Accounting Standards – Annual Improvements to Australian	AASB 5_Non-current Assets Held for Sale and Discontinued_ Operations: • Changes in methods of disposal – where an entity reclassifes an asset (or disposal group) directly from		the future fnancial reports to comply with AASB 2015-1
	Accounting Standards	being held for distribution to being held for sale (or visa versa), an entity shall not follow the guidance in
	2012–2014	paragraphs 27–29 to account for this change.
	Cycle	AASB 7_Financial Instruments: Disclosures:_
		• Servicing contracts - clarifes how an entity should
		apply the guidance in paragraph 42C of AASB 7 to
		a servicing contract to decide whether a servicing
		contract is ‘continuing involvement’ for the purposes
		of applying the disclosure requirements in paragraphs
		42E–42H of AASB 7.
		• Applicability of the amendments to AASB 7 to condensed interim fnancial statements - clarify that
		the additional disclosure required by the amendments to AASB 7_Disclosure–Ofsetting Financial Assets and_ _Financial Liabilities_is not specifcally required for all
		interim periods. However, the additional disclosure is required to be given in condensed interim fnancial
		statements that are prepared in accordance with AASB
		134_Interim Financial Reporting_when its inclusion
		would be required by the requirements of AASB 134.
		AASB 119_Employee Benefts:_
		• Discount rate: regional market issue - clarifes that the
		high quality corporate bonds used to estimate the discount rate for post-employment beneft obligations
		should be denominated in the same currency as the liability. Further it clarifes that the depth of the market
		for high quality corporate bonds should be assessed
		at the currency level.
		AASB 134_Interim Financial Reporting:_
		• Disclosure of information ‘elsewhere in the interim
		fnancial report’ - amends AASB 134 to clarify the
		meaning of disclosure of information ‘elsewhere in the interim fnancial report’ and to require the inclusion of a cross-reference from the interim fnancial statements
		to the location of this information.
AASB 2015-2	Amendments	The Standard makes amendments to AASB 101_Presentation_	1 January	The Group	1 July 2016
	to Australian	_of Financial Statements_arising from the IASB’s Disclosure	2016	will amend
	Accounting Standards – Disclosure	Initiative project. The amendments are designed to further encourage companies to apply professional judgment in determining what information to disclose in the fnancial		the future fnancial reports to
	Initiative: Amendments to	statements. For example, the amendments make clear that materiality applies to the whole of fnancial statements and		comply with AASB 2015-2
	AASB 101	that the inclusion of immaterial information can inhibit the
		usefulness of fnancial disclosures. The amendments also
		clarify that companies should use professional judgment
		in determining where and in what order information is presented in the fnancial disclosures.

				Impact on
			Application date of	Group fnancial	Application date for
Reference	Title	Summary	standard*	report	Group*
AASB 2015-3	Amendments	The Standard completes the AASB’s project to remove	1 July 2015	No impact	1 July 2015
	to Australian	Australian guidance on materiality from Australian
	Accounting	Accounting Standards.
	Standards
	arising from
	the Withdrawal
	of AASB 1031
	Materiality
AASB 2015-4	Amendments	The amendment aligns the relief available in AASB	1 July 2015	No impact	1 July 2015
	to Australian	10_Consolidated Financial Statements_and AASB 128
	Accounting Standards	I_nvestments in Associates and Joint Ventures_in respect of the fnancial reporting requirements for Australian groups
	– Financial	with a foreign parent
	Reporting
	Requirements
	for Australian
	Groups with a
	Foreign Parent
AASB 2015-5	Amendments	This makes amendments to AASB 10, AASB 12_Disclosure_	1 July 2015	No impact	1 July 2015
	to Australian	_of Interests in Other Entities_and AASB 128 arising from
	Accounting	the IASB’s narrow scope amendments associated with
	Standards –	Investment Entities.
	Investment
	Entities:
	Applying the
	Consolidation
	Exception

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains a control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

(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). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect

those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

Rights arising from other contractual arrangements
−Derecognises the assets (including goodwill) and liabilities of the subsidiary.
The Group’s voting rights and potential voting rights
−Derecognises the carrying amount of any non-controlling interest.
−Derecognises the cumulative translation differences, recorded in equity.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

−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 OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

(e) Business combinations

Business combinations are accounted for using the acquisition method. 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. 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 Financial Instruments: Recognition and Measurement 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 generated from pay-per-view contracts is recognised based on the number of image views undertaken by the customer, multiplied by the contracted view rate.

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 Statement of Cash Flows, 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 reevaluated 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.

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.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

(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 profit or loss.

(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.

• receivables and payables are stated with the amount of GST included.

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.

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.

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

Cash flows are included in the Statement of Cash Flows 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.

Tax consolidation legislation

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

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

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.

(q) Non-current assets held for sale and

discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

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.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

(p) Other taxes

(r) Plant and equipment

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

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

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

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

2015	2014
Property Improvements 2 to 7 years 2 to 7 years Motor Vehicles 4 to 5 years 4 to 5 years Ofce Equipment 2 to 7 years 2 to 7 years Furniture and Fittings 5 years 5 years Research and Development Equipment 3 to 4 years 3 to 4 years An item of plant and equipment is derecognised upon disposal or when no future economic benefts 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.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

Impairment

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

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

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

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

(s) Intangible assets

Intangible assets acquired separately 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 PACS
Visage MagicWeb 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.

(t) 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.

(u) 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.

(v) Employee leave benefits

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

(i) Annual leave and sick leave

The liability for annual 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 high quality corporate bonds with terms to maturity and currencies that match, as closely as possible the estimated future cash outflows.

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 high quality corporate bonds with terms to maturity and currencies that match, as closely as possible the estimated future cash outflows.

(w) 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 are currently two plans in place to provide these benefits:

The Employee Share Option Plan (ESOP), which provides benefits to directors and senior executives.
The Long Term Incentive Plan (LTIP), 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 using a Black Scholes 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.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

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).

(x) 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.

(y) 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.

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.

(z) Comparatives

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

(aa) Government Grants

Research and Development tax credits are recognised 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 amortisation expense over the expected useful life of the related asset. The amount recognised for the period to 30 June 2015 is $436,918 (2014:$642,403).

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 un-recouped tax losses and 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.

Assumptions about the generation of future

taxable profits and repatriation of retained earnings

depend on management’s estimates of future cash flows. 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 financial 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.

Net investment in Foreign Operations

The Group maintains inter-company loans it assesses to represent a part of its net investment in its foreign operations. The judgements made in assessing these loans to represent net investments are on the basis the loans are neither planned nor likely to be settled within the foreseeable future, the loans do not include trade receivables or trade payable and the loans represent a return of funds from their investment in the respective subsidiaries.

(ii) Significant 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.

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. Estimating fair value for sharebased payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option/performance rights, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value of share-based payment transactions are disclosed in Note 18.

4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

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.

Foreign currency risk

The Group has transactional currency exposure, which arise from sales made in currencies other than the Group’s functional currency.

Approximately 64% (2014: 57%) 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.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

At 30 June the Group had the following exposure to GBP£ foreign currency that is not designated in cash flow hedges or recorded in the subsidiary currency.

At 30 June the Group had the following exposure to US$ foreign currency that is not designated in cash flow hedges or recorded in the subsidiary currency.

Consolidated 2015 $’000 2014 $’000 Financial assets Cash and cash equivalents 640 329 640 329 Financial liabilities Trade and other payables - - Net exposure 640 329 At 30 June the Group had the following exposure to CAD$ foreign currency that is not designated in cash fow hedges or recorded in the subsidiary currency. Consolidated 2015 $’000 2014 $’000 Financial assets Cash and cash equivalents 847 917 847 917 Financial liabilities Trade and other payables - - Net exposure 847 917	Consolidated 2015 $’000 2014 $’000
	Financial assets Cash and cash equivalents 390 720
	390 720 Financial liabilities
	Trade and other payables - -
	Net exposure 390 720 At 30 June the Group had the following exposure to EUR€ foreign currency that is not designated in cash fow hedges or recorded in the subsidiary currency.
	Consolidated
	2015 $’000 2014 $’000
	Financial assets Cash and cash equivalents 3,226 8,694
	3,226 8,694 Financial liabilities
	Trade and other payables - -
	Net exposure 3,226 8,694

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 Proft Higher/(Lower)		Other Comprehensive Income Higher/(Lower)	Other Comprehensive Income Higher/(Lower)
	2015	2014	2015	2014
	$’000	$’000	$’000	$’000
AUD/USD +10%	(64)	(33)	(70)	(18)
AUD/USD – 5%	32	16	35	9
AUD/CAD +10%	(85)	(92)	-	-
AUD/CAD – 5%	42	46	-	-
AUD/GBP +10%	(39)	(72)	-	-
AUD/GBP – 5%	20	36	-	-
AUD/EUR +10%	(323)	(869)	(126)	(127)
AUD/EUR – 5%	161	435	63	64

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

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

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

Credit risk

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.

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

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. Cash and cash equivalents are held with several fnancial institutions, with the majority held with the Westpac Banking Corporation, a AA rated bank. ik	The remaining contractual maturities of the Group’s fnancial liabilities are: Consolidated 2015 $’000 2014 $’000
	<30 days 688 572
	31-60 days 135 81
	61-90 days 145 26
	Over 90 days 1,804 572
	TOTAL 2,772 1,251

Interest risk

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

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.

Cash and Cash equivalents in the Group ($’000’s) $12,935 (2014: $15,259).

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.

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

At 30 June 2015, 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:

Impairment is not monitored at segment level.

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.

		Consolidated	Consolidated
			Other
Judgements of reasonably possible movements:	Post Tax Proft Higher/(Lower) 2015 2014		Comprehensive Income Higher/(Lower) 2015 2014
	$’000	$’000	$’000 $’000
+1% (100 basis points)	129	153	- -
– 0.5% (50 basis points)	(65)	(76)	- -

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.

Liquidity risk

The Group has minimal liquidity risk as it has cash reserves of $12.9m, with no borrowings.

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.

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

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 2015.

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

6. INCOME AND EXPENSES

NOTES TOFIN	ANCIAL S	ANCIAL S	TATEM	EN	TS cont.	TS cont.
Operating Segments	Australia		Europe		North America		Total Operations
	2015	2014	2015	2014	2015	2014	2015	2014
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Revenue
Sales to external customers	6,261	6,147	2,352	2,811	8,877	5,310	17,490	14,268
Inter-segment Sales	4,158	2,615	4,718	4,504	–	–	8,876	7,119
Total segment revenue	10,419	8,762	7,070	7,315	8,877	5,310	26,366	21,387
Inter-segment elimination							(8,876)	(7,119)
Total consolidation revenue							17,490	14,268
Results
Segment Result	3,718	1,182	1,227	734	80	357	5,025	2,273
Interest Revenue							87	179
Non segment expenses
Income Tax Expense							(1,895)	(943)
Net Proft							3,217	1,509
Assets
Non-Current Assets	15,562	13,133	158	178	74	37	15,794	13,348
Deferred Tax Asset	395	491	-	-	114	134	509	625
Current Assets	26,663	29,798	20,485	23,128	10,470	6,413	57,618	59,339
Segment Assets	42,620	43,422	20,643	23,306	10,658	6,584	73,921	73,312
Inter-segment elimination							(44,172)	(44,089)
Total Assets							29,749	29,223
Liabilities
Segment Liabilities	36,975	37,906	1,190	4,683	10,201	5,825	48,366	48,414
Inter-segment elimination							(40,555)	(39,898)
Total Liabilities							7,811	8,516
Other segment information
Capital expenditure	5,122	4,803	353	442	86	26	5,561	5,271
Depreciation and amortisation	2,693	2,788	374	449	49	29	3,116	3,266
Cash fow information
Net cash fow	7,815	5,268	(6,349)	(2,871)	2,717	1,836	4,183	4,233
from operating activities
Net cash fow	(5,035)	(4,624)	(353)	(442)	(86)	(25)	(5,474)	(5,091)
from investing activities
Net cash fow from fnancing activities	(2,005)	(2,005)	-	-	-	-	(2,005)	(2,005)

Product information

Product information
Revenue from external customers	Consolidated
	2015	2014
	$’000	$’000
Radiology Information Systems (RIS)	6,245	5,939
Picture Archiving Communications Systems (Visage 7/PACS)	11,223	8,311
Other income	22	18
Total revenue per statement of comprehensive income	17,490	14,268

6. INCOME AND EXPENSES
(a) Other Income	Notes	Consolidated
		2015	2014
		$’000	$’000
Net Currency Gains		2,029	1,681
Net Currency (Loss)		(380)	(1,782)
Other		5	7
Total Other Income		1,654	(94)
(b) Expenses
Depreciation and Amortisation
Motor vehicles	13	3	3
Ofce equipment	13	144	126
Furniture and fttings and property improvements	13	11	11
Amortisation on capitalised development costs	14	2,955	2,905
Amortisation on computer software	14	3	5
Amortisation on intellectual property	14	-	216
Total Depreciation and Amortisation Expense		3,116	3,266
Salaries and Employee Benefts Expense
Wages & Salaries		5,581	4,302
Long service leave provision		50	60
Share-based payment		382	58
Defned contribution plan expense		850	863
Total Salaries and Employee Benefts Expense		6,863	5,283
7. INCOME TAX
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
Current income tax charge/(beneft)		949	330
Prior year adjustment		(5)	(66)
Deferred income tax
Relating to origination and reversal of temporary diferences		951	679
Income tax expense/(beneft) reported in the statement		1,895	943
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		5,112	2,452
At the applicable statutory income tax rate in each country
– Australia		1,142	354
– United States of America		27	122
– Germany		370	170
Prior year adjustment		(5)	(66)
Expenditure not allowable for income tax purposes		315	168
Other		46	195
Income tax (beneft)/expense reported in the statement		1,895	943
of comprehensive income

Revenue from major customers

No one party contributed more than 10% to the Group’s revenue for 2015 (2014:11.4% from one party).

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

NOTES TOFINANCIAL S	TATEMENT	S c	ont.	ont.
Deferred income tax	Consolidated Statement Financial Position	of	Consolidated Statement of Comprehensive Income
Deferred income tax at 30 June relates	2015	2014	2015	2014
to the following:	$’000	$’000	$’000	$’000
Deferred Tax liabilities
Foreign Currency Exchange Gain	914	545	(369)	16
Intellectual Property expenses	(345)	(364)	(19)	46
Capitalised development expenses	2,384	1,935	(449)	(277)
Other	-	2	2	-
Deferred income tax liabilities	2,953	2,118	(835)	(215)
Deferred tax assets
Employee Entitlements	326	295	31	12
Tax Losses in Subsidiaries	114	299	(185)	(487)
Audit Fee Accrual	24	27	(3)	11
Other	45	4	41	-
Deferred income tax assets	509	625	(116)	(464)

Unrecognised temporary differences

At 30 June 2015, there are no temporary differences associated with the Group’s investments in subsidiaries being recognised as the parent is able to control the timing of the reversal of any temporary differences and it is not probable any temporary difference will reverse in the foreseeable future.

Tax Consolidation

8. EARNINGS PER SHARE	Consolidated	Consolidated
The following refects the income and share data used in the basic and diluted	2015	2014
earnings per share computations:	$’000	$’000
Net Proft attributable to ordinary equity holders	3,217,197	1,509,443
	Number	Number
Weighted average number of ordinary shares for basic earnings per share	100,263,406	100,263,406
Efect of dilution:
Share options	463,889	-
Performance rights	1,752,036	-
Weighted average number of ordinary shares adjusted for the efect of dilution	102,479,330	100,263,406

9. DIVIDENDS PAID AND PROPOSED	Consolidated
	2015	2014
Declared and paid during the year:	$’000	$’000
Dividends on ordinary shares
Final franked dividend for 2014: 1.0 cent (2013: 1.0 cent)	1,003	1,003
Interim unfranked dividend for 2015: 1.0 cent (2014: 1.0 cent franked)	1,002	1,002
	2,005	2,005
Proposed for approval by directors (not recognised as a liability as at 30 June):
Dividends on ordinary shares:
Final unfranked dividend for 2015: 1.0 cents (2014: 1.0 cents franked)	1,002	1,002
Total dividends proposed	1,002	1,002
Franking credit balance
−franking account balance as at the end of the fnancial year at 30% (2014: 30%)	–	782
−franking credits that will arise from the payment of income tax payable as at the end of the fnancial year	–	–
−franking debits that will arise from the payment of dividends as at the end of the fnancial year	–	–
−franking credits that the entity may be prevented from distributing in the subsequent fnancial year	–	–
−prior period adjustment	–	(436)
	–	346
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		(346)
as a distribution to equity holders during the period
	–	–

The tax rate at which paid dividends have been franked is 0% (2014: 30%). Dividends proposed will be unfranked.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

NOTES TOFINANCIAL STATEMENTS c	ont.
10. CASH AND CASH EQUIVALENTS	Consolidated
	2015	2014
	$’000	$’000
Cash at bank and in hand	12,935	13,152
Short-term deposits	–	2,107
	12,935	15,259

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short term deposits are made for varying periods of between 30 days and 120 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.

At June 30, the ageing analysis of trade receivables is as follows:

		Total	days	31-60 days	61-90 days	+91 days	+91 days
				PDNI*	PDNI*	PDNI*	CI**
2015	Consolidated	3,155	2,167	410	277	161	140
2014	Consolidated	2,513	2,013	81	192	227	97

Past due not impaired (‘PDNI’)
** Considered Impaired (‘CI’)

Payment terms on $138,519 (2014: $60,795) of trade receivables have been renegotiated. The Company has been in direct contact with these debtors and is satisfied that payment will be received in full.

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

The fair value of cash and cash equivalents is their carrying value. Reconciliation of net proft after tax to net cash fows from operations
Net proft	3,217	1,509
Adjustments for:
Depreciation of Property Plant and Equipment	158	140
Amortisation of Intangible Assets	2,958	3,126
Interest Received classifed in Investing Activities	(87)	(179)
Foreign currency (gain)/loss	(1,649)	101
Share option expense	382	58
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables	(432)	(651)
(Increase)/decrease in inventory	(29)	13
(Increase)/decrease in deferred tax asset	116	464
(Increase)/decrease in prepayments	16	(257)
(Increase)/decrease in accrued revenue	(75)	(135)
(Decrease)/increase in deferred income	440	100
(Decrease)/increase in trade and other payables	1,394	92
(Decrease)/increase in tax provision	(3,253)	(428)
(Decrease)/increase in deferred income tax liability	835	215
(Decrease)/increase in employee entitlements	192	65
Net cash fow from operations	4,183	4,233
11. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables	3,155	2,513
Provision for impairment	(140)	(97)
	3,015	2,416
Research & development tax receivable	437	642
Other receivables	279	241
	3,731	3,299

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:

a) Allowance for impairment loss Movements in the provision for impairment loss were as follows:
At 1 July	97	65
Charge to/(write back of) provision for the year	43	32
Foreign exchange translation	–	–
At 30 June	140	97

12. INVENTORIES (CURRENT)	Consolidated
	2015	2014
	$’000	$’000
Finished goods (at lower of cost and net realisable value)	129	100
Inventory write downs recognised as an expense total nil (2014: nil)

13. PLANT & EQUIPMENT

Year ended 30 June 2015	Consolidated
	Property Improvements Motor Vehicles Ofce Equipment Furniture & Fittings Research & Development Equipment Total
	$’000 $’000 $’000 $’000 $’000 $’000

At 1 July 2014 net of accumulated depreciation Additions Disposals Exchange diferences Depreciation charge for the year	25 8 240 29 – 302 – 43 141 2 – 186 – – – (1) – (1) 1 – 11 – – 12 (4) (3) (144) (7) – (158)
At 30 June 2015 net of accumulated depreciation At 30 June 2015	22 48 248 23 – 341
Cost Accumulated depreciation and impairment	328 488 2,036 346 209 3,407 (306) (440) (1,788) (323) (209) (3,066)
Net carrying amount Year ended 30 June 2014	22 48 248 23 – 341
At 1 July 2013 net of accumulated depreciation Additions Disposals Exchange diferences Depreciation charge for the year	29 11 259 35 – 334 – – 104 – – 104 – – (2) – – (2) – – 5 1 – 6 (4) (3) (126) (7) – (140)
At 30 June 2014 net of accumulated depreciation At 30 June 2014	25 8 240 29 – 302
Cost Accumulated depreciation and impairment	328 480 1,861 344 209 3,222 (303) (472) (1,621) (315) (209) (2,920)
Net carrying amount	25 8 240 29 – 302

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

NOTES TOFINANCIAL ST	ATEMENTS cont.
Notes Year ended 30 June 2015 14. INTANGIBLE ASSETS	Consolidated
	Intellectual Property i) Development Costs ii) Software Licenses iii) Total
	$’000 $’000 $’000 $’000

At 1 July 2014 net of accumulated amortisation and impairment Additions - internal development Disposals Exchange diferences Amortisation charge for the year	– 9,139 6 9,145 – 5,365 – 5,365 – – – – – – – – – (2,955) (3) (2,958)
At 30 June 2015 net of accumulated depreciation At 30 June 2015	– 11,549 3 11,552
Cost Accumulated amortisation and impairment	1,848 27,048 288 29,184 (1,848) (15,499) (285) (17,632)
Net carrying amount Year ended 30 June 2014	– 11,549 3 11,552
At 1 July 2013 net of accumulated amortisation and impairment Additions - internal development Disposals Exchange diferences Amortisation charge for the year	216 6,882 12 7,110 – 5,162 – 5,162 – – – – – – (1) (1) (216) (2,905) (5) (3,126)
At 30 June 2014 net of accumulated amortisation and impairment At 30 June 2014	– 9,139 6 9,145
Cost Accumulated amortisation and impairment	1,848 21,684 288 23,820 (1,848) (12,545) (282) (14,675)
Net carrying amount	– 9,139 6 9,145

The Group undertook an impairment assessment of the capitalised development costs as at 30 June 2015. The recoverable amount of development costs have been determined based on a value in use calculation using cash flow projections from financial budgets approved by the Board of Directors covering a five-year period. The projected cash flows were updated to reflect the change in forecast revenues and a post-tax discount rate of 17% (30 June 2014:18%) was applied. Cash flows beyond a 5 year period have been extrapolated using a 2.5% growth rate (30 June 2014:2.5%). All other assumptions remained consistent with those disclosed in Note 2(s). The Groups recoverable value was in excess of the carrying value using the value in use calculation and as such no impairment charges were recorded at 30 June 2015.

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. These intangible assets have been assessed as having a finite life and have been fully amortised using the straight line method over a period of 5 years, commencing February 2009. Amira was sold in July 2012.

ii) 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. As at 30 June 2015 the carrying values of capitalised development costs are Visage PACS ($7,439,447) RIS ($3,531,222) and Visage MagicWeb ($578,058), all sit within the Australian operating segment.

Sensitivity to changes in assumptions

Key assumptions used in value in use calculations

With regard to the assessment of value in use of development costs, the estimated recoverable amount is in excess of its carrying value for each product, however adverse changes in assumptions could result in an impairment loss. Management has considered the possible change in each of the key assumptions applied to the respective capitalised development costs recoverable amount assessments. A reasonably possible adverse change in the revenue forecasts for the RIS product could have the potential to give rise to circumstances where the recoverable amount may be lower than the carrying amount. To illustrate the sensitivity of this assumption, if forecast revenues were to decrease materially, that is in the range of 5 – 10%, across the five year forecast period without the implementation of mitigation plans, cost reductions or restructure which management would look to do if such decreases were to arise, this could lead to a future impairment write-down of approximately $0.5 - $2.0 million.

The calculation of value in use for development costs is most sensitive to the following assumptions:

−Revenue forecasts
−Discount rates
−Growth rates used to extrapolate cash flows beyond the forecast period

Revenue forecasts – Revenue forecasts are based on current year consolidated budgets for each geographical segment. Estimated growth rates are then used to forecast the following four years revenue for each product used in each geographical segment. Total forecast segment growth rates range from (15%) to 25% across the 4 year period.

Discount rates – The discount rate applied to the cash flow projections have been assessed to reflect the time value of money and the perceived risk profile of the industry in which each cash generating unit (CGU) operates. The post-tax discount rate applied was 17% (2014:18%).

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

Growth rate estimates – rates are based on industry based customer price index (CPI) forecasts. The long term rate of 2.5% was used in the current assessment.

15. TRADE AND OTHER PAYABLES	Note	Consolidated 2015 $’000 2014 $’000
Current
Trade payables		404 177
Other payables and accruals		1,611 757
		2,015 934
Deferred Income		747 302
		2,762 1,236
Non Current		10 15
Deferred Income		10 15

(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.

16. PROVISIONS	Consolidated
	2015	2014
	$’000	$’000
Current
Long service leave	535	513
Annual leave	969	827
	1,504	1,340
Non Current	87	59
Long service leave	87	59

(i) Long Service Leave

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

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

NOTES TOFINANCIAL STATEMENTS	cont.
17. CONTRIBUTED EQUITY AND RESERVES	Consolidated
	2015	2014
	$’000	$’000
(i) Ordinary shares	327	327
	327	327

Issued and fully paid

Fully paid ordinary shares carry one vote per share and carry the right to dividends (ii) Movements in shares on issue

(ii) Movements in shares on issue
		2015
	Number of Shares	$’000
At 1 July 2014	100,263,406	327
Cancellation for share buy-back	-	-
Issued for cash on exercise of options	-	-
At 30 June 2015	100,263,406	327

		2014
	Number of Shares	$’000
At 1 July 2013	100,263,406	327
Cancellation for share buy-back	-	-
Issued for cash on exercise of options	-	-
At 30 June 2014	100,263,406	327
	Consolidated
	2015	2014
	$’000	$’000
*Share Reserve (i)*
Balance at 1 July	284	226
Share options expensed	5	11
Performance rights expensed	377	47
Balance at 30 June	666	284
*Foreign Currency Translation Reserve (ii)*
Balance at 1 July	282	96
Foreign Currency Movement	(363)	186
Balance at 30 June	(81)	282
*Retained Earnings*
Balance at 1 July	19,814	20,310
Net proft for the year	3,217	1,509
Dividends	(2,005)	(2,005)
Balance at 30 June	21,026	19,814

(ii) Foreign Currency translation reserve

(i) Share Reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and for exchange differences arising from long term loan accounts resulting from net investment in subsidiaries.

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 18 for further details of these plans.

all options had vested. No options were exercised during the year.

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.

900,000 shares were granted as options to key Visage Imaging employees 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 725,000 (81%) options had vested and 175,000 (19%) options had expired. No options were exercised during the year.

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.

550,000 shares were granted as options to Key Executives 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 440,000 (80%) options had vested. No options were exercised during the year.

During the year, the company paid dividends of $2,005,268 (2014: $2,005,268).

18. 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.

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 120,000 (60%) options had vested. No options were exercised during the year.

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

Information with respect to the numbers granted under the employee Share Option Scheme is as follows:

	2015	2015		2014
	Number of	Weighted average	Number of	Weighted average
	Options	exercise price	Options	exercise price
Outstanding at the beginning of the year	1,675,000	$0.98	1,675,000	$0.98
- granted	-	-	-	-
- forfeited	-	-	-	-
- exercised	-	-	-	-
- expired	-	-	-	-
Outstanding at the end of the year	1,675,000	$0.98	1,675,000	$0.98
Exercisable at end of year	1,485,000	$0.98	1,190,000	$0.98

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

the ordinary shares of Pro Medicus Limited. The performance rights, issued for nil consideration, are offered for a 5 year period and vest 4 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 vesting conditions relating to the employee’s period of service.

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 2015 is represented by:

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

At reporting date 397,469 performance rights had been granted during the year with a grant date of 27 October 2014. 247,469 performance rights vest over 4 years from grant date on completion of service. The fair value of the 247,469 performance rights at grant date was $205,166 ($0.83 per performance right). The remaining 150,000 performance rights vest in September 2015 and the fair value of these rights was $133,737 ($0.89 per performance right).

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

An additional 633,500 performance rights had been granted during the year relating to the 2013-14 financial performance. The performance rights had a grant date of 27 March 2014 and vest over 4 years from grant date on completion of service. The fair value of the performance rights at grant date was $434,766 ($0.69 per performance right).

Weighted average remaining contractual life

The weighted average remaining contractual life for share options outstanding at 30 June 2015 is 4.94 years (2014: 5.94 Years)

Range of exercise price

The range of exercise prices for options outstanding at the end of the year was $0.55 - $1.25 (2014: $0.55 - $1.25).

176,375 performance rights were granted in prior periods in relation to the 2012-13 financial year. The performance rights had a grant date of 15 September 2013 and vest over 3 years on completion of service. The fair value of the performance rights at grant date was $44,094 ($0.25 per performance right).

Weighted average fair value

The weighted average fair value of options granted during the year was nil (2014: nil).

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.

387,000 performance rights were granted in prior periods in relation to the 2011-12 financial year. The performance rights had a grant date of 1 July 2012 and vest over 3 years on completion of service. The fair value of the performance rights at grant date was $96,750 ($0.25 per performance right).

Performance Rights

A long term incentive plan was established on 18th November 2011 whereby Senior Executives of Group were offered performance rights over

Information with respect to the number of performance rights granted under the long term incentive scheme is as follows:

scheme is as follows:
	2015	2014
	Number of	Number of
	Performance Rights	Performance Rights
Outstanding at the beginning of the year	563,375	387,000
- granted	1,030,969	176,375
- forfeited	-	-
- exercised	-	-
- expired	-	-
Outstanding at the end of the year	1,594,344	563,375
Exercisable at end of year	-	-

Weighted average remaining contractual life

The weighted average remaining contractual life for performance rights at 30 June 2015 is 2.4 years (2014: 2.3 Years)

Performance rights pricing model

The fair value of the equity-settled performance rights 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 performance rights were granted.

The following table lists the inputs to the models used for the year ended 30 June 2015

	2015	2014
Dividend yield Expected volatility Risk-free interest rate Expected life of performance rights Performance rights exercise price Weighted average share price at measurement date	2.42%-3.22% 5.66% 0% 70% 0% 5% 1-4 years 3 years $0.00 $0.00 $0.69-$0.89 $0.25

19. 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 are currently renegotiating the option to extend their current property lease for office premises for an additional 5 year period from October 2015. The German operations have entered into a commercial property lease for office premises and can give notice to vacate 6 months prior to 30 April each year, whereby they sign into another 12 months.

The German operations also have several motor vehicle leases which expire at various stages between September 2015 and September 2018.

September 2015 and September 2018.
	Consolidated
	2015	2014
	$’000	$’000
Future minimum rentals payable under non-cancellable operating lease as at 30 June are as follows:
– Within one year	355	368
– After one year and not more than fve years	767	729
– After more than fve years	–	–
	1,122	1,097

20. EVENTS AFTER THE BALANCE SHEET DATE

On 21 August 2015, the directors of Pro Medicus Limited declared a final dividend on ordinary shares in respect of the 2015 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 an unfranked dividend of a total of 1.0 cents per share. The dividend has not been provided for in the 30 June 2015 financial statements.

	Consolidated	Consolidated
21. AUDITOR’S REMUNERATION	2015 $’000	2014 $’000
Amounts received or due and receivable by Ernst & Young (Australia) for:
−an audit or review of the fnancial report of the Company and any other entity	161,445	136,150
in the Consolidated Group
−other services in relation to the Company or Group	126,909	28,650
	288,354	164,800
Amounts received or due and receivable by related practices of Ernst & Young (Australia):
−audit of the fnancial report of Visage Imaging GmbH	63,192	74,376
	351,546	239,176

PROMEDICUS ANNUAL REPORT 2015

NOTES TO FINANCIAL STATEMENTS cont.

22. KEY MANAGEMENT PERSONNEL

22. KEY MANAGEMENT PERSONNEL
(a) Compensation for key management personnel	Consolidated
	2015	2014
	$’000	$’000
Short-term employee benefts	1,802,254	1,827,438
Post-employment benefts	124,984	99,952
Other long-term benefts	19,219	15,034
Share-based payment	119,009	37,007
Total compensation	2,065,466	1,979,431

(b) Loans to Key Management Personnel

No loans are made to Key Management Personnel or staff.

(c) Other transactions and balances with Key Management Personnel

Purchases

23. 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
	2015 2014 2015 2014
Promed (USA) Pty Ltd Australia PME IP Australia Pty Ltd Australia Visage Imaging (Aust) Pty Ltd Australia Pro Medicus (USA) LLC United States Visage Imaging Inc United States Visage Imaging GmbH Germany	100 100 – – 100 100 – – 100 100 – – 100 100 – – 100 100 2,389 2,389 100 100 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 22.

(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.

		Sales to related	Purchases from	Other transactions
		parties	related parties	with related parties
		$000	$000	$000
Related party
Consolidated
Champagne Properties Pty Ltd – Rental lease	2015	–	169	–
Champagne Properties Pty Ltd – Rental lease	2014	–	169	–

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.

24. 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. Nevertheless, 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 23). As disclosed in note 23, 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.

25. PARENT ENTITY INFORMATION	2015	2014
	$000 $000
Current assets Total assets Current Liabilities Total Liabilities Issued capital Retained Earnings Foreign Currency Translation Reserve Share Reserve	26,663 29,798 35,181 38,111 23,973 25,611 24,919 26,404 327 327 11,228 11,902 (1,959) (1,448) 666 284
Total shareholders’ equity Proft/(loss) of the parent entity Total comprehensive income of parent entity	10,262 11,065 689 642 689 642

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.

PROMEDICUS ANNUAL REPORT 2015

DIRECTORS DECLARATION

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

(1) In the opinion of the directors:

(a) the financial 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:

INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2015

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Ernst & Young Tel: +61 3 9288 8000 8 Exhibition Street Fax: +61 3 8650 7777 Melbourne VIC 3000 Australia ey.com/au GPO Box 67 Melbourne VIC 3001

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 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 2015.

On behalf of the Board

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P T Kempen Chairman

Melbourne, 21 August 2015

Independent auditor's report to the members of Pro Medicus Limited

Report on the financial report

We have audited the accompanying financial report of Pro Medicus Limited which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

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

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

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which follows in the directors’ report.

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

PROMEDICUS ANNUAL REPORT 2015

INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2015

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Opinion

In our opinion:

a. the financial report of Pro Medicus Limited is 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 2015 and of its performance for the year ended on that date; and
ii complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the remuneration report

We have audited the Remuneration Report included in pages 7 - 12 of the directors' report for the year 20–25 ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Pro Medicus Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001 .

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Ernst & Young

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Paul Gower Partner Melbourne 21 August 2015

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

ASX ADDITIONAL INFORMATION

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

(a) Distribution of equity securities

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	335	225,692
1,001 – 5,000	620	1,825,378
5,001 – 10,000	261	2,048,912
10,001 – 100,000	322	9,626,577
100,001 and Over	47	86,536,847
	1,585	100,263,406
The number of shareholders holding less than a marketable parcel are:	35	2,099

(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) 2 Mr A Hall (multiple shareholdings) 3 Citicorp Nominees Pty Ltd 4 RBC Dexia Investor Services Australia Nominees P/L 5 Equitas Nominees Pty Ltd 6 J P Morgan Nominees Australia Limited 7 Mr Bram Vander Jagt & Mrs Maaike Vander Jagt 8 Grain Exporters (Australia) Pty Ltd 9 Brazil Farming Pty Ltd 10 Dr Russell Kay Hancock 11 HSBC Custody Nominees (Australia) Limited 12 Mr Peter Terence Kempen & Mrs Elaine Margaret Kempen 13 Mr Alan Graham Rochford 14 Mr Kenneth John Vander Jagt & Mrs Tanya Vander Jagt 15 Mr Evan Philip Clucas & Ms Leanne Jane Weston 16 Mr John Charles Plummer 17 Mr Stephen Geofrey Wilson & Ms Denise Adele Prandi 18 Mr Michael Wu 19 Mr Colin Gregory Organ 20 Indicorp Consulting Group Pty Limited	30,107,660 30.03% 30,068,500 29.99% 5,935,942 5.92% 5,291,962 5.28% 1,394,421 1.39% 1,272,668 1.27% 1,100,000 1.10% 821,663 0.82% 710,000 0.71% 650,000 0.65% 639,747 0.64% 478,082 0.48% 427,000 0.43% 391,544 0.39% 368,217 0.37% 365,000 0.36% 337,537 0.34% 275,912 0.28% 271,000 0.27% 250,000 0.25%
	81,156,855 80.95%

(c) Substantial shareholders

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

the Corporations Law are:
	Number of shares
S. Hupert	30,107,660
A Hall	30,068,500
Commonwealth Bank of Australia	5,935,942
Perpetual Limited RBC Dexia Investor Services Australia Nominees P/L	5,291,962

(d) Voting rights

All ordinary shares carry one vote per share without restriction.

PROMEDICUS ANNUAL REPORT 2015

CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015

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/
Recommendation		Yes/No	explanation
Principle 1 - Lay solid foundations for management and oversight
1.1	A listed entity should disclose:
	a) roles and responsibilities of its board and management; and b) those matters expressively reserved to the board and those delegated	Yes	Page 69
	to management.
1.2	A listed entity should:
	a) undertake appropriate checks before appointing a person, or putting
	forward to security holders a candidate for election, as a director; and	Yes	Page 69
	b) provide security holders with all material information in its possession
	relevant to a decision on whether or not to elect or re-elect a director.
1.3	A listed entity should have written agreement with each director and senior executive setting out the terms of their agreement.	No	Page 69
1.4	The company secretary of a listed entity should be accountable directly
	to the board, through the chair, on all matters to do with the proper	Yes	Page 69
	functioning of the board.
1.5	A listed entity should:
	a) have a diversity policy which includes requirements for the board or
	a relevant committee of the board to set measurable objectives for
	achieving gender diversity and to assess annually both the objectives
	and the entity’s progress in achieving them;
	b) disclose that policy or a summary
	c) disclose as at the end of each reporting period the measurable
	objectives for achieving gender diversity set by the board or a relevant
	committee of the board in accordance with the entity’s diversity policy	Yes	Page 71
	and its progress towards achieving them, and either:
	1) the respective proportions of men and women on the board, in
	senior executive positions and across the whole organisation (including how the entity has defned “senior executive” for these
	purposes); or
	2) if the entity is a “relevant employer” under the Workplace Gender
	Equality Act, the entity’s most recent “Gender Equality Indicators”, as defned in and published under that Act.
1.6	A listed entity should:
	a) have and disclose a process for periodically evaluation the
	performance of the board, its committees and individual directors; and b) disclose, in relation to each reporting period, whether a performance	Yes	Page 70
	evaluation was undertaken in the reporting period in accordance with
	that process.
1.7	A listed entity should:
	a) have and disclose a process for periodically evaluating the
	performance of its senior executives; and
	b) disclose, in relation to each reporting period, whether a performance	Yes	Page 70
	evaluation was undertaken in the reporting period in accordance with
	that process.
Principle 2 – Structure the board to add value
2.1	The board of a listed entity should:
	a) have a nomination committee which:
	1) has at least three members, a majority of whom are independent
	directors; and
	2) is chaired by an independent directors, and disclose
	3) the charter of the committee;
	4) the members of the committee; and
	5) as at the end of each reporting period, the number of times	No	Page 71
	the committee met throughout the period and the individual
	attendances of the members at this meetings; or
	b) if it does not have a nomination committee, disclose the fact and the
	process it employs to address board succession issues and to ensure
	that the board has the appropriate skills, knowledge, experience,
	independence and diversity to enable it to discharge its duties and responsibilities efectively.

		Comply	Reference/
Recommendation		Yes/No	explanation
2.2	A listed entity should have and disclose a board skills matrix setting out
	the mix of skills and diversity that the board currently has or is looking to	Yes	Directors Report
	achieve in its membership.
2.3	A listed entity should disclose:
	a) the names of the directors considered by the board to be independent
	directors;
	b) if a director has an interest, position, association or relationship of
	the type described in Box 2.3 but the board is of the opinion that it	Yes	Page 69
	does not compromise the independence of the director, the nature of
	the interest, position, association or relationship in question and an
	explanation of why the board is of that opinion; and
	c) the length of service of each director.
2.4	A majority of the board of a listed entity should be independent directors.	No	Page 69
2.5	The chair of the board of a listed entity should be an independent
	directors and, in particular, should not be the same person as the CEO of	Yes	Page 69
	the entity.
2.6	A listed entity should have a program for inducting new directors and
	provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as a directors efectively.	Yes	Page 69
Principle 3 - Act ethically and responsibly
3.1	A listed entity should:
	a) have a code of conduct for its directors, senior executives and
	employees; and	Yes	Page 72
	b) disclose that code or a summary of it.
Principle 4 - Safeguard integrity in corporate reporting
4.1	The board of a listed entity should:
	a) have an audit committee which:
	1) has at least three members, all of whom are non-executive directors
	and a majority of whom are independent directors; and
	2) is chaired by an independent director, who is not the chair of the
	board; and disclose
	3) the charter of the committee 4) the relevant qualifcations and experience of the members of the
	committee; and	No	Page 71
	5) in relation to each reporting period, the number of times the
	committee met throughout the period and the individual
	attendances of the members at those meetings; or
	b) if it does not have an audit committee, disclose that fact and the
	processes it employs that independently verify and safeguard the
	integrity of its corporate reporting, including the processes for the
	appointment and removal of external auditor and the rotation of the
	audit engagement partner.
4.2	The board of a listed entity should, before it approves the entity’s fnancial statements for a fnancial period, receive from its CEO and CFO a declaration that, in their opinion, the fnancial records of the entity have been properly maintained and that the fnancial statements comply with the appropriate accounting standards and give a true and fair view of the fnancial position and performance of the entity and	Yes	Page 71
	that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating efectively.
4.3	A listed entity that has an AGM should ensure that its external auditor
	attends its AGM and is available to answer questions from security	Yes	Page 71
	holders relevant to the audit.
Principle 5 - Make timely and balanced disclosure
5.1	A listed entity should:
	a) have a written policy for complying with its continuous disclosure
	obligations under the Listing Rules; and	Yes	Page 71
	b) disclose that policy or a summary of it.
Principle 6 - Respect the rights of security holders
6.1	A listed entity should provide information about itself and its governance to investors via its website.	Yes	Page 72
6.2	A listed entity should design and implement an investor relations program to facilitate efective two-way communication with investors.	No	Page 72
6.3	A listed entity should disclose policies and progress it has in place to facilitate and encourage participation at meetings of security holders.	Yes	Page 72
6.4	A listed entity should give security holders the option to receive
	communications from, and send communications to, the entity and its	Yes	Page 72
	security registry electronically.

PROMEDICUS ANNUAL REPORT 2015

		Comply	Reference/
Recommendation		Yes/No	explanation
Principle 7 - Recognise and manage risk
7.1	The board of a listed entity should:
	a) have a committee or committees to oversee risk, each of which:
	1) has at least three members, a majority of whom are independent
	directors; and
	2) is chaired by an independent director; and disclose
	3) the charter of the committee
	4) the members of the committee; and	No	Page 71
	5) as at the end of each reporting period, the number of times
	the committee met throughout the period and the individual
	attendances of the members at those meetings; or
	b) if it does not have a risk committee or committees that satisfy (a)
	above, disclose that fact and the processes it employs for overseeing
	the entity’s risk management framework.
7.2	The board or a committee of the board should:
	a) review the entity’s risk management framework at least annually to
	satisfy itself that it continues to be sound; and	Yes	Page 72
	b) disclose, in relation to each reporting period, whether such a review
	has taken place.
7.3	A listed entity should disclose:
	a) if it has an internal audit function, how the function is structured and
	what role it performs; or b) if it does not have an internal audit function, that fact and the	No	Page 72
	processes it employs for evaluation and continually improving efectiveness of its risk management and internal control processes.
7.4	A listed entity should disclose whether it has any material exposure to
	economic, environmental and social sustainability risks and, if it does,	Yes	Page 72
	how it manages or intends to manage those risks.
Principle 8 – Remunerate fairly and responsibly
8.1	The board of a listed entity should:
	a) have a remuneration committee which:
	1) has at least three members, a majority of whom are independent
	directors; and
	2) is chaired by an independent director; and disclose
	3) the charter of the committee
	4) the members of the committee; and 5) as at the end of each reporting period, the number of times	No	Page 71
	the committee met throughout the period and the individual
	attendances of the members at those meetings; or
	b) if it does not have a remuneration committee, disclose that fact
	and the processes it employs for setting the level and composition of
	remuneration for directors and senior executives and ensuring that such
	remuneration is appropriate and not excessive.
8.2	A listed entity should separately disclose its policies and practices
	regarding the remuneration of non-executive directors and the	Yes	Page 71
	remuneration of executive directors and other senior executives.
8.3	A listed entity which has an equity-based remuneration scheme should:
	a) have a policy on whether participants are permitted to enter into
	transactions (whether through the use of derivatives or otherwise)	No	Page 71
	which limit the economic risk of participating in the scheme; and
	b) disclose that policy or a summary of it.

Pro Medicus Limited’s corporate governance practices were in place throughout the year ended 30 June 2015.

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 nonexecutives 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:

Position

Name

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.

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

Executive 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.

Non-Executive Directors and senior executives have a written employment agreement with the Company setting out the terms of their appointment.

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.

Company Secretary

The Company Secretary is accountable to the Board on all matters to do with the proper functioning of the Board. The Company Secretary, who is also the Chief Financial Officer, attends all Board meetings and ensures that the business at Board meetings is accurately captured in the minutes of these meetings.

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 22). 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.

PROMEDICUS ANNUAL REPORT 2015

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

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. These mechanisms include the following:

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.

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

Diversity

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;

The Group recognises the value contributed to the organisation by employing people with varying skills, cultural backgrounds, ethnicity and experience. Pro Medicus believes its diverse workforce is the key to its continued growth, improved productivity and performance.

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

We actively value and embrace the diversity of our employees and are committed to creating an inclusive workplace where everyone is treated equally and fairly, and where discrimination, harassment and inequity are not tolerated. While Pro Medicus is committed to fostering diversity at all levels, gender diversity has been and continues to be a priority for the Group.

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.

The Group has established a diversity policy outlining the board’s measureable objectives for achieving diversity. This is assessed annually to measure the progress towards achieving those objectives.

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 table below outlines the diversity objectives established by the board, the steps taken during the year to achieve these objectives and the outcomes.

Steps taken/Outcome

Objectives

Increase the number of women in the workforce, including senior management positions and at board level

There were no key senior female appointments made during the year as there were no key senior appointments made during the year.
Pro Medicus did not appoint any females in managerial roles as there were no managerial appointments made during the year
As at 30 June 2015, women represented 20% in the Group’s workforce (2014:19%), 20% in key executive positions (2014:20%) and 0% at board level (2014:0%)
Women represented 20% of new hires during the year (2014:67%)
For the upcoming financial year, the Group targets to increase female representation in the Group’s workforce to 25-30%

Promote an inclusive culture that • Pro Medicus has set a zero tolerance policy against discrimination of treats the workforce with fairness employees at all levels. The company also provides avenues for employees and respect. to voice their concerns or report any discrimination.

No cases of discrimination were reported during the year (2014: nil).

Provide career development opportunities for every employee, irrespective of any cultural, gender or other differences.

Whilst Pro Medicus place focus on gender diversity, career development opportunities are equal for all employees.
During the year, representation at training and development programs was based on performance of the employees.

The achievement of the measurable objectives in the current financial year was taken into consideration in assessing bonuses for employees. The Group will continue to review and update the measureable objectives to promote diversity for the upcoming year.

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 NonExecutive 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 Company does not have a policy in regards to whether participants are permitted to enter into transactions (whether through derivatives or otherwise) which limit the economic risk of participating in the scheme, however the Board are in the process of evaluating a policy for such issues.

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, the Committee does not meet the requirements of Recommendation 4.1 as 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.

The number of meetings held and individual attendance of Committee members at those meetings are disclosed in the Directors Report.

Prior to approval of the Company’s annual financial statements, the Board obtains a declaration from the Chief Executive Officer and Chief Financial Officer that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

A representative of the external auditors Ernst & Young will continue to attend the Annual General Meeting and is available to answer questions from security holders relevant to the audit.

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.

PROMEDICUS ANNUAL REPORT 2015

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;
email contact with registered users; and
special written communications to shareholders distributed with the dividend notifications.

The company ensures 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. Shareholders are encouraged to receive communications electronically as requested and can elect to do so through the company’s share registry.

A copy of the Corporate Governance Statement is also available of the Company’s website – www.promedicus.com.au.

The Company has not yet designed a specific investor relations program to facilitate effective two-way communication with shareholders.

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 halfyearly 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.

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.

Whilst the Company has not established and internal audit function, it 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

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.

A review of the Company risk management policy was not undertaken during the year.

The Board does not believe the Company has any material exposure to economic, environmental and social sustainability risks at the present time.

CORPORATE INFORMATION

Registered Office

Mailing address

ABN 25 006 194 752

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

450 Swan Street Richmond, VIC, 3121 Tel: (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:

Internet Address

T: +612 8280 7111 Toll free: 1300 554 474 F: +612 9287 0303

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

Peter Terence Kempen

Chairman/Non-Executive Director/Chairman Audit Committee

F: (proxy forms only) +612 9287 0309

Solicitors

E: registrars@linkmarketservices. com.au

Sci-Law Strategies

Bankers

Dr Sam Aaron Hupert Chief Executive Officer/ Managing Director

www.linkmarketservices.com.au

Westpac Banking Corporation

Auditors

Anthony Barry Hall Technology Director

Ernst & Young

Share Registry

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

Roderick Lyle Non-Executive Director

Company Secretary Clayton James Hatch

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.

PROMEDICUS ANNUAL REPORT 2015

DID YOU KNOW THAT YOU CAN ACCESS — AND EVEN UPDATE — INFORMATION ABOUT YOUR HOLDINGS IN PRO MEDICUS LIMITED VIA THE INTERNET.

NOTES

Visit Link Market Services’ DON’T MISS OUT ON website YOUR DIVIDENDS linkmarketservices.com.au Dividend cheques that are and access a wide variety not banked are required to be of holding information, handed over to the State Trustee make some changes online under the Unclaimed Monies or download forms. Act. You are reminded to bank cheques immediately.

YOU CAN

X Check your current and previous holding balances
X Choose your preferred annual report delivery option
X Update your address details
X Update your bank details

X Lodge, or confirm lodgement of, your Tax File Number (TFN), Australian Business Number (ABN) or exemption

X Check transaction and dividend history
X Enter your email address
X Check the share prices and graphs

BETTER STILL,

WHY NOT HAVE US DO YOUR BANKING FOR YOU Wouldn’t you prefer to have immediate access to your dividend payment? Your dividend payments can be credited directly into any nominated bank, building society or credit union account in Australia as cleared funds on dividend payment date — and we will still mail [(or email if you prefer)] you a dividend advice confirming your payment details. Not only can we do your banking for you, but payment by direct credit eliminates the risk of cheque fraud.

X Download a variety of instruction forms
X Subscribe to email announcements

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).

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PROMEDICUS ANNUAL REPORT 2015

NOTES

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Designed & produced by Kajetan Design Group Pty.Ltd. Melbourne

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ADDRESS:

450 Swan Street Richmond Victoria 3121 Australia www.promedicus.com.au www.promedicus.com www.visageimaging.com

AI assistant

PRO MEDICUS LIMITED — Annual Report 2015

65579_rns_2015-10-15_d3c90e7b-ee87-4cf4-8121-232b8a74881b.pdf

HIGHLIGHTS

FINANCIAL SUMMARY

BUSINESS HIGHLIGHTS

CONTENTS

Dear Shareholders,

CEO & CHAIRMAN LETTER

YEAR ENDED

30 JUNE 2015

FINANCIAL SUMMARY

REVENUE STREAMS IN THE FINANCIAL YEAR ENDING JUNE 30, 2015 WERE GENERATED BY THE FOLLOWING PRODUCTS AND SERVICES:

BUSINESS BACKGOUND

RADIOLOGY

E-HEALTH

THE VISAGE 7 ENTERPRISE VIEWER

VISAGE 3D PACS

VISAGE EASE PRO

GLOBAL LEADERSHIP TEAM

KEY PERSONNEL

MALTE

BRAD LEVIN

THE YEAR IN REVIEW

AUSTRALIA

NORTH AMERICA

EUROPE

COMPANY OFFICES

VISAGE GMBH – BERLIN

VISAGE IMAGING INC – SAN DIEGO

THE BOARD AND MANAGEMENT BELIEVE THE COMPANY IS EXTREMELY WELL POSITIONED FOR GROWTH AFTER MAKING STRONG PROGRESS IN THE 2015 FINANCIAL YEAR, PARTICULARLY IN THE NORTH AMERICAN MARKET.

KEY FACTORS PREDICTED TO DRIVE GROWTH INCLUDE:

EXPANDED GEOGRAPHICAL FOOTPRINT

FULLY INTEGRATED PRODUCT OFFERING

TRANSACTION BASED LICENCING MODEL

HIGHLY DIFFERENTIATED TECHNOLOGY

INDUSTRY TRENDS

FINANCIAL REPORT

ANNUAL FINANCIAL REPORT 30 JUNE 2015

DIRECTORS’ REPORT

RODERICK LYLE

DR SAM AARON HUPERT

LL.B., B.Com, LL.M (Lond), MBA (Melb) Non Executive Director

M.B.B.S. Managing Director and Chief Executive Officer

PETER TERENCE KEMPEN

F.C.A, F.A.I.C.D Chairman

ANTHONY

CLAYTON JAMES HATCH

BARRY HALL

CPA

B.Sc. (Hons), M.Sc. Executive Director and Technology Director

Chief Financial Officer and

Company Secetary

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

OPERATING AND FINANCIAL REVIEW

CORPORATE STRUCTURE

Visage 7.0

DIRECTORS’ REPORT CONT.

REVIEW AND RESULTS OF OPERATIONS

Investment Activities

Performance Indicators

Dynamics of the Business Australia

North America

Europe

Financials

Investments for Future Performance

REVIEW OF FINANCIAL CONDITION

Capital Structure

Treasury Policy

Cash from Operations

Liquidity and Funding

Risk Management

Corporate Governance

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

ENVIRONMENTAL REGULATION AND PERFORMANCE

SHARE OPTIONS

Un-issued Shares

DIRECTORS’ REPORT CONT.

PRO MEDICUS LIMITED Annual Report 2015