SUCCESS THROUGH DIVERSITY Navitas Li mited Annual R eport 2012 1

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SUCCESS THROUGH DIVERSITY ANNUAL REPORT 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 3

DIVERSITY DELIVERS ENDLESS POTENTIAL

Navitas exists to foster relationships Vision and provide people around the world Navitas is universally recognised with the opportunity to realise their as the most trusted global learning ambitions through lifelong education organisation in the world. and training. Mission We do this by anticipating the world’s Navitas is passionate about creating learning needs, creating and opportunities through lifelong delivering a wide and comprehensive learning and being a global leader range of education options and in delivering better learning solutions. equipping people with essential skills and experiences. Values At Navitas, we create success We have conviction to our through diversity. purpose and potential. We demonstrate drive by achieving and advancing together. We are adventurous in mind and spirit. We demonstrate rigour in enhancing our professional reputation and credibility. We are genuine in the way we behave and deliver. We show respect by celebrating, valuing and caring for people and the environment. SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 5

DIVERSITY DELIVERS Colleges, Campuses and GLOBAL Offices Worldwide Navitas offers an extensive range of educational PERSPECTIVE services via more than 100 colleges and campuses across its global network. More information about education opportunities UNITED KINGDOM EUROPE at these locations is available at navitas.com. Aberdeen Geneva Paris Birmingham Athens Hamburg Rotterdam Cambridge Oxford Stockholm Edinburgh Plymouth Berlin Leipzig Stuttgart Portsmouth Bochum Ljubljana Hertfordshire Swansea Madrid Zurich Frankfurt

NORTH AMERICA Miami Boston Nashville Bowling Green New York Dartmouth San Francisco Durham Vancouver ASIA Los Angeles Winnipeg Lowell Colombo Singapore

AFRICA AUSTRALIA/NEW ZEALAND Cape Town Nairobi Geelong Gold Coast Byron Bay Newcastle Cairns Darwin

REGIONAL MARKETING OFFICES Colombia Kenya Turkey China Middle East UK India Pakistan Vietnam Japan South Korea 6 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 7

Highlights and Achievements

Key Highlights Financial Summary

2012 2011 2010 2009 2008 % change Three new colleges commence operations, two in the UK and one in Australia; $000s $000s $000s $000s $000s 12/11

Revenues 688,530 643,812 556,743 470,696 345,438 7% Agreement signed with Birmingham City University for ninth UK College; EBITDA 126,817 121,144 96,700 77,059 63,443 5%

SAE expansion, and importantly, the Title IV accreditation of all SAE USA schools; Profit attributable to members of Navitas 73,149 77,392 64,251 49,191 37,430 -5%

700 688.5 140 80 77. 4 643.8 126.8 73.1 Basic earnings per Share 19.5 cents 21.7 cents 18.8 cents 14.3 cents 10.8 cents -10% Excellent600 SAE TEQSA audit report highlights120 quality of courses121.1 and industry involvement;70 556.7 64.3 60 500 100 Interim dividends per Share 470.7 96.7 (fully franked) 9.4 cents 8.7 cents 8.1 cents 5.5 cents 4.7 cents 8% Navitas English commences delivery of the expanded Commonwealth Government50 AMEP49.2 400 80 77.1 contract regions345.4 and the national distance/e-learning contract; 40 Final dividends per Share 63.4 37. 4 300 60 (fully franked) 10.1 cents 12 cents 10.7 cents 8.8 cents 6.2 cents -16% 30

200 40 EVA® created 38,124 58,630 54,573 40,551 27,288 -35% Continued ACAP growth in the Workforce Division including post graduate offering20 and

online learning;100 and 20 10 Operating cashflows 73,859 69,458 86,504 104,344 78,609 6%

0 0 0

8 9 2 8 9 2 8 9 2 0 0 10 11 1 0 0 10 11 1 0 0 10 11 1 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Total equity The externalF reviewF byF TheF ParthenonF Group affirmedF F theF valueF ofF the core businessF andF F F F 233,560 239,213 103,446 98,576 93,980 -2% identified growth and business improvement opportunities. REVENUE $m EBITDA $m NPAT $m Return on capital employed 9.4% 50.0% 60.0% 47.3% 33.6% -81%

Wealth Created Wealth Distributed Financial Highlights 3% 6% FY12 F Y11 Change $m $m %

700 700 700 688.5 688.5688.5 140 140 140 80 80 80 30% 77. 4 77. 4 77. 4 15% 643.8 643.8643.8 Operating revenue 688.5 634.8 8 126.8 126.8126.8 73.1 73.1 73.1 600 600 600 120 120 120 121.1 121.1121.1 70 70 70 External and services costs (190.5) (160.6) 19 556.7 556.7556.7 64.3 64.3 64.3 60 60 60 Total wealth created 498.1 474.2 5 500 500 500 100 100 100 470.7 470.7470.7 96.7 96.7 96.7 50 50 50 49.2 49.2 49.2 Payments to university and 400 400 400 80 80 80 77.1 77.1 77.1 consortia partners 128.5 136.4 (6) 345.4 345.4345.4 40 40 40 63.4 63.4 63.4 37. 4 37. 4 37. 4 Payments to teaching and 300 300 300 60 60 60 academic staff University Consortium and Partners147.9 122.0 21 20% 30 30 30 Payments to other employees 102.8 96.1 7 200 200 200 40 40 40 Teaching and Academic Employees 20 20 20 Payments to shareholders — 26% dividends 73.3 77.2 (5) Other Employees 100 100 100 20 20 20 10 10 10 Payments to governments — income taxes Shareholders — Dividends 30.5 28.0 9 University Consortium Shareholders — Dividends 0 0 0 0 0 0 0 0 0 and Partners 8 8 9 8 9 9 2 2 2 8 8 9 8 9 9 2 2 2 8 8 9 8 9 9 2 2 2 Reinvested as depreciation, 0 0 0 0 0 10 0 10 11 10 11 1 11 1 1 0 0 0 0 0 10 0 10 11 10 11 1 11 1 1 0 0 0 0 0 10 0 10 11 10 11 1 11 1 1 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Governments — Income Taxes F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F F amortisation and retained earnings 15.1 14.5 4 Teaching and Governments — Income Taxes Total wealth distributedReinvested as Depreciation, 498.1 474.2 5 Academic Employees Amortisation and Retained Earnings Other Employees Reinvested as Depreciation, REVENUEREVENUEREVENUE $m $m $m EBITDAEBITDA $EBITDAm $m $m NPATNPAT $mNPAT $m $m Amortisation & Retained Earnings REVENUE $m EBITDA $m NPAT $m

3% 3% 3% 6% 6% 6%

30% 30% 30% 15% 15% 15%

UniversityUniversity ConsortiumUniversity Consortium Consortium and Partners and Partnersand Partners 20% 20% 20%

TeachingTeaching andTeaching Academic and Academicand Employees Academic Employees Employees 26% 26% 26% Other EmployeesOtherOther Employees Employees

ShareholdersShareholdersShareholders — Dividends — Dividends — Dividends UniversityUniversity ConsortiumUniversity Consortium Consortium Shareholders ShareholdersShareholders — Dividends — Dividends — Dividends and Partnersand Partnersand Partners GovernmentsGovernmentsGovernments — Income — Income Taxes — Income Taxes Taxes TeachingTeaching andTeaching and and GovernmentsGovernmentsGovernments — Income — Income Taxes — Income Taxes Taxes ReinvestedReinvested Reinvestedas Depreciation, as Depreciation, as Depreciation, AcademicAcademic EmployeesAcademic Employees Employees AmortisationAmortisationAmortisation and Retained and Retainedand Earnings Retained Earnings Earnings Other EmployeesOtherOther Employees Employees ReinvestedReinvested Reinvestedas Depreciation, as Depreciation, as Depreciation, AmortisationAmortisationAmortisation & Retained & Retained Earnings& Retained Earnings Earnings 8 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 9

Board of Directors

Peter Campbell Harvey Collins Rod Jones BComm BBus, FCPA, SFFin, FAICD BComm, DEd (Hon), MAICD

Non-Executive Director Non-Executive Chairman Chief Executive Officer co-founders of Navitas and has been instrumental in the expansion and development of the Navitas model into the various markets Appointed Appointed and Managing Director which it now operates. 24 September 2004 9 November 2004 Appointed 18 June 2004 In April 2007, Mr Jones received an honorary Doctor of Education from Edith Cowan University in recognition of his outstanding contribution to the development of the international education sector both in Australia and overseas, and in 2008 was awarded Australian Ernst and Young Entrepreneur of the Year. In 2010, Rod Mr Campbell has had extensive involvement in higher education Mr Collins has extensive executive and board experience in a range Mr Jones has 30 years experience in educational administration was recognised by his colleagues with an International Education since 1970, having held senior positions at major universities in of industries. From 1986 to 1996 he held senior management and has held a number of senior administrative positions within the Excellence Award from the International Education Association of Melbourne. His involvement with the marketing of courses and roles in Western Australian regional bank, Challenge Bank Limited, government and the private education sectors. His background Australia for his leadership in the field of international education. recruitment of international students commenced in 1986 with including five years as Chief Financial Officer. From 1997 to covers both secondary and university education including being Rod is a councillor for the Australian Business Arts Foundation the first Austrade Mission to South East Asia. 2002, he was an executive director of listed investment company, Deputy Director of the Tertiary Institutions Service Centre and the and is a member of the Business Council of Australia. Rod is also a Chieftain Securities Limited. He has held board appointments Mr Campbell was appointed as the inaugural director of the Monash Secondary Education Authority in Western Australia. supporter of the West Australian Ballet and the Art Gallery of WA. in industries as diverse as financial services, health insurance, International Office in 1987 and subsequently initiated the Monash Mr Jones has been involved in international education since telecommunications, equipment hire, mining services, franchising During the past three years, Mr Jones has not served as a director University Foundation Year in collaboration with Taylor’s College. 1987 and is recognised as one of the leaders in the successful and electricity. He is a past member of the WA State Council of the of any other listed companies. Following rapid growth in enrolments at Monash, he was appointed establishment of the sector in Australia. He is one of the Australian Institute of Company Directors. Director of International Programs at LaTrobe University in 1993. His current non-executive directorships include Bank of Western In October 1996, Mr Campbell left LaTrobe to establish MIBT on Australia Limited (Bankwest) (Chairman) and Verve Energy the Deakin University Toorak campus. Mr Campbell has also been (Electricity Generation Corporation) (Deputy Chairman). involved in the development of the HIBT and LIBT colleges in the UK. During the past three years Mr Collins has served as a director of During the past three years, Mr Campbell has not served as a the following other listed companies: director of any other listed companies. Brierty Limited (from 25 October 2007 to 22 February 2010) James King Dr Peter Larsen Ted Evans Tracey Horton BComm, FAICD AAP, B AppSc, BEd, MEd, PhD, DEd (Hon) AC, BEcon (Hons), D.Uni (Grif.), FAICD BEcon (Hons), MBA, Prof Emer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Appointed Appointed 9 November 2004 18 June 2004 Appointed Appointed 9 November 2004 13 June 2012

Mr King brings to the Board of Navitas over thirty years of Dr Larsen has been a professional educator for in excess of thirty management and board experience with major multinational years. He has been a teacher, head of department, Principal Mr Evans has extensive experience in the financial sector, having Ms Horton has extensive international business and education corporations in Australia and internationally. and Executive Director. He has worked in both the government worked with the Australian Treasury from 1969 to 2001, including experience most recently as Winthrop Professor and Dean of the and private education sectors. His fields of academic expertise as Secretary to the Treasury from 1993 to 2001. From 1976 to University of Western Australia’s Business School where she was Until 2003, Mr King was with Foster’s Group Limited and was are mathematics, mathematics education and educational 1979 he was a member of the Australian Permanent Delegation responsible for leading more than 200 faculty and staff and around Managing Director Carlton & United Breweries and Managing measurement. He is one of the co-founders of the Navitas group to the OECD in Paris and, from 1989 to 1993, executive director 5,000 students. Director Foster’s Asia. Prior to joining Foster’s in 1997, Mr King was of colleges. Dr Larsen developed the original academic framework on the board of the International Monetary Fund, representing President of Kraft Foods (Asia Pacific) and resided in Hong Kong for Prior to this role she completed executive or senior management within which Navitas pathway colleges now operate. Australia and a number of other countries, mainly in the Asia six years from 1991. roles in North America with Bain & Company and across Australia Pacific region. He was a director of the Reserve Bank of Australia In March 2008 Dr Larsen was awarded an honorary Doctor of with Poynton and Partners and the Reserve Bank of Australia. Mr King is currently a non-executive director of JB Hi-Fi Limited, from 1993 to 2001 and the Commonwealth Bank of Australia from Education from Edith Cowan University for his founding role in Pacific Brands Limited and The Trust Company Limited. He is also 1993 to 1996. Ms Horton has significant governance experience currently serving increasing participation rates in higher education for national and currently on the Council of Xavier College Melbourne and is also a on a number of boards including ASX listed Skilled Group and international students. During the past three years, Mr Evans has also served as a director past Chairman of the Juvenile Diabetes Research Foundation (Vic). Automotive Holdings Group, as well as Cullen Wines and D’Orsogna. of the following other listed companies: During the past three years, Dr Larsen has not served as a director Ms Horton chairs both of the Boards for not-for-profit Western Mr King is a Fellow of the Australian Institute of Company Directors. of any other listed companies. Westpac Banking Corporation (from 5 November 2001 to Australian Museum Foundation and Presbyterian Ladies College. During the past three years, Mr King has served as a director of the 15 December 2011) and as Chairman from April 2007 to During the past three years Ms Horton has served as a director of following other listed companies: December 2011. the following other listed companies: JB Hi-Fi Limited* (from 10 May 2004) Skilled Group* (from 10 February 2011) Pacific Brands Limited* (from 4 September 2009) Automotive Holdings Group Limited* (from 3 May 2012) The Trust Company Limited* (from 1 February 2007) *Denotes current directorship *denotes current directorship 10 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 11

Group Leadership Team

Tony Cullen Lyndell Fraser Bryce Houghton BA (Hons), Grad Dip Ed BEcon (Hons), MEcon, MBA BCA, ICANZ, INFINZ, MAICD

Group General Manager, Executive General Manager, Chief Financial Officer Marketing and Sales Workforce 7 years at Navitas 10 years at Navitas 3 years at Navitas

Tony joined the Navitas Group in June 2002 as Director of Lyndell joined the Navitas Group in April 2009 and has overall Bryce joined Navitas in January 2005 as CFO and is responsible Marketing and Business Development for QIBT and has over responsibility to lead and grow the operations of Navitas’ for board and external financial reporting, capital management, 25 years experience in international education. Workforce Division. tax planning, investor relations, performance measurement and advising on mergers and acquisitions. Tony has been involved in international education since 1987 when Lyndell has held senior appointments in the financial services he worked for the British Council in Hong Kong. On returning to industry with key line and portfolio responsibilities in banking He has previously held positions at Price Waterhouse, National Australia, Tony joined The Martin College Group where he and general insurance with major Australian institutions as Bank of New Zealand Ltd and Fonterra Cooperative Group Ltd. managed the English Language Training Centres before assuming well as in areas of strategy, distribution and corporate and Bryce holds a Bachelor of Business of Commerce and responsibility for all international marketing across the group which government relations. Administration from Victoria University of Wellington and has also now included the campuses of Education and Training Australia. She has served on the board of the Insurance Council of Australia completed Columbia University’s Senior Executive Program. He is Prior to joining the Navitas Group Tony was the Director of Sales and on various taskforces of the Australian Bankers’ Association, a member of the Australian Institute of Company Directors, the and Marketing, Asia Pacific for Study Group. and currently is a board member of the environmental organisation, New Zealand Institute of Chartered Accountants and the Institute Planet Ark. of Finance Professionals New Zealand Inc. Since the consolidation of the group in 2004, Tony heads up the Group Marketing Unit. In his role Tony is responsible for the development and implementation of the strategic marketing plan across the Group incorporating e-marketing and brand management, working closely with the college and business unit marketing teams and managing the network of in-country offices.

Hugh Hangchi Neil Hitchcock Scott Jones Jenny Michel LLB, BComm, GAICD AAICD BComm, GAICD BA Dip Ed, Grad Dip Ed, MeD, MBA

Company Secretary Group General Manager, Executive General Manager, Group General Manager, and Group General Counsel IT and Facilities Student Recruitment Human Resources 7 years at Navitas 16 years at Navitas 11 years at Navitas 6 years at Navitas

Hugh is a practising lawyer and has experience in providing advice Neil has been involved with the Navitas Group since 1996. With a Scott joined Navitas in April 2001 and has overall responsibility to Jenny joined the Navitas Group in July 2006 and as the Group to directors of listed and unlisted public companies in relation to background in Finance and Administration, Neil was involved in direct and grow the operations of the Navitas Student Recruitment General Manager, Human Resources is responsible for leading the directors’ duties, the Corporations Act, the ASX Listing Rules and the set-up team which oversaw the establishment of operational Division. This Division currently comprises 41 offices in India, development and co-ordination of the Group’s HR strategy. corporate governance. structure, systems and processes in many Navitas businesses. Europe, China and Australia. Prior to joining the Navitas Group, Jenny worked in senior HR roles Hugh holds a Bachelor of Laws and a Bachelor of Commerce When the Navitas Group consolidated in November 2004, Neil took Scott has extensive sales and management experience previously across a variety of industries including education, banking and from the University of Western Australia. He has completed the the role of Group General Manager, IT and Facilities. Within the holding positions with Coca-Cola Amatil, Lloyds of London Press finance, media, medical, building and construction. Company Directors Course Diploma and is a Graduate Member of IT context this includes the setting of Group policies and guiding and Uncle Bens of Australia, a subsidiary of Mars Corporation. Jenny holds an MBA from the Macquarie Graduate School of the Australian Institute of Company Directors. the management, dissemination, structure and use of information Scott currently sits on the board of listed integrated financial Management, a MA (Education) from Macquarie University, a by all stakeholders to enhance decision making processes. He is services provider Yellow Brick Road in the capacity of non- Prior to joining Navitas, Hugh was a senior associate at a Graduate Diploma in Educational Studies from the University also responsible for the strategic development and management executive director. national law firm where he specialised in capital raisings, of Technology Sydney, a Bachelor of Arts (with a triple major in of the information and knowledge systems that are used by the mergers and acquisitions and regulated takeovers. He has Scott holds a Bachelor of Commerce from Curtin University. Economics, Psychology and History) and a Diploma in Education Navitas Group. also worked as a solicitor with the Australian Securities and He has completed the Company Directors Course Diploma and is a from the University of New South Wales. Investments Commission. Neil is additionally responsible for strategies and controls related Graduate Member of the Australian Institute of Company Directors. to the use, occupation and development of property within the Navitas Group. 12 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Group Leadership Team (continued)

John Wood Helen Zimmerman BEcon (Hons), D.Phil B.A. (Hons), Grad Dip Ed, Grad Dip Adult Ed, FAICD

Executive General Manager, Executive General Manager, English University Programs 7 years at Navitas 5 years at Navitas

John has overall responsibility to lead and grow the operations Helen has worked in leadership roles in Australian education for of Navitas’ University Programs division and also oversees the thirty years. She is accountable for the leadership and growth of relationships with Navitas’ partner universities. Navitas’ English language and settlement programs. She is currently a board member of the International Education Association of He was the Deputy Vice-Chancellor at Edith Cowan University and Australia Inc and the Australian Business and Community Network previously the Foundation Dean of the College of Business at the Inc, as well as secretary of the not-for-profit children’s charity University of Notre Dame, Perth, Western Australia, where he was foundations.au. also the Deputy Vice-Chancellor (Academic). From 2002 to 2008 Helen was a member of the NSW Vocational John graduated with first class honours in Economics from the Education and Training Board. She has also been a director of the University of Western Australia and from Oxford with a Doctorate in National ELT Accreditation Scheme and of the peak industry body Economics and he has undertaken Harvard’s strategic management English Australia. In 2004 and 2005 Helen served on an industry programme. He has taught at universities throughout the world, advisory body, appointed by the then Minister for Education, including at Oxford, the American International University of Europe Science and Training, to advise on strategic issues of national and Stanford. significance facing international education in Australia. John is an international author in economic and management Helen graduated with first class honours in Asian Studies from the thought. He has published two books and edited 155 volumes on Australian National University. She holds a Diploma in Education great economists and management thinkers and his articles have and a Graduate Diploma in Adult Education. She is a Fellow of appeared in the Scottish Journal of Political Economy, the Journal the Australian Institute of Company Directors and has a Diploma of Law and Economics and Australian Economic Papers. His works in Company Directorship. In 2000 Helen won the Private Sector have been reviewed in many journals, including The Economist. He Award for the Telstra NSW Businesswoman of the Year. In 2010 was awarded an Honorary Doctorate from the Thai Royal Prince for she was one of five national finalists for the Equal Opportunity for his contribution to global economic thought and is a life member of Women in the Workplace Agency’s award of Leading CEO for the the Oxford Business Alumni. Advancement of Women. She was also named as a Paul Harris John has held executive leadership positions including in the Office Fellow by the Rotary Foundation of Rotary International in 2010. of the Prime Minister and in State Government in the Departments of Premier and Cabinet; Transport, Employment and Training; State Development and Commerce and Trade. He has served Ministers from all major political parties. He also held senior private sector positions, including a period as Chief Economist and Strategist with Ernst & Young.

John also served on a range of boards as the chair of Perth Education City, the WA Chair of the Committee of Economic Development of Australia and was on the Board on HBF for 11 years. In 2011 John was appointed by the State and Federal Ministers to the Australian Qualifications Framework Council. 14 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 15

Chairman’s Letter

Dear Shareholder Group revenue increased by 7% to Growth — Acquisitions This will make it increasingly hard for HARVEY COLLINS, CH AIRMAN $688.5m with EBITDA growth of 5% Navitas to pay fully franked dividends. and Organic “As a lways Na vitas to $126.8m for the year. However net Accordingly the Board has reviewed remains co mmitted to On behalf of the Board, profit after tax decreased by 5% to The Company continued to invest in new quality a cademic Navitas’ dividend policy and approved a $73.1m following significant increases businesses, opening three new University outcomes f or its I present the Navitas planned reduction in the dividend payout in depreciation and interest expenses Programs colleges and two SAE schools in students a nd clients , ratio to 80% of tax paid earnings with 2012 Annual Report resulting from the SAE acquisition. the year. Navitas also signed an agreement strong a nd m utually effect from the interim dividend payment beneficial university Net profit in the prior year had also been to open its ninth UK University Programs to shareholders. in February 2013. Annual and interim partnerships, its boosted by a $3.3m one off tax refund. college, this one in partnership with dividends will be maintained at current diversity a nd m ost o f Birmingham City University. all its dedic ation to its The Company declared a final dividend of absolute levels until the 80% payout ratio The 2012 financial year mission o f cre ating 10.1 cents per Share representing 100% New University Programs enrolments, is reached. opportunities through was the most challenging of undistributed earnings which takes the impacted by the regulatory environment in lifelong le arning.” fully franked full year dividend to 19.5 cents the two key markets of Australia and the The Board in Navitas’ history, with a per Share. UK for several years, are now starting to range of local and global show signs of improvement with further Navitas’ Board has been a stable and supportive presence over the last Creating Opportunity recovery expected in the coming year. As issues converging to in previous years, continued strong growth eight years as the Company expanded create a difficult operating through Diversity in Canada and Singapore highlighted the rapidly, in terms of its size, offering and As noted in my speech to the AGM in importance of Navitas’ diversity strategy. geographic diversity. environment. I outline the November 2011, Navitas’ sustained Both SAE and the English Division In recognition of such changes within record of strong growth has been slowed main challenges below and improved significantly in the second Navitas I was pleased to welcome a new somewhat by a number of external factors half of the 2012 financial year following non-executive member to the Board in comment on the action such as global economic uncertainty, disappointing results in the previous half. the year with the appointment of Tracey government policy changes in key markets the Company took both Continued improvement is expected Horton. Tracey joins us with a wealth of and unfavourable currency movements. to mitigate the immediate across both Divisions’ moving forward as international business and education Without a doubt the most significant SAE fully accesses Title IV funding in the experience and brings significant value threats and to build further impact has occurred through policy and USA and the English Division maintains its and diversity to the Navitas Board. the competitive strength regulatory changes in Australia and the current growth trajectory. UK which aim to ensure the quality and The Workforce Division again Moving Forward for the future. sustainability of international education in demonstrated strong earnings growth, As discussed in this letter and throughout both countries. especially from its ACAP and Professional the annual report, Navitas has been Navitas has engaged with government and Year programs as they strive to meet challenged by significant external factors the sector in these countries to provide areas of skills shortages. The Student over the recent years. The Company has feedback on many of these initiatives and Recruitment Division’s Study Overseas worked hard to mitigate these challenges to manage the effect of these changes. business in India continued to be and we are now pleased to be seeing Much of this regulatory change has been affected by visa changes in the UK which early signs of improvement in our external now implemented, and although the full impacted earnings. operating environment and in demand. effect of the changes are still to flow Navitas has also continued to invest in new through, there are signs of stability and Shareholder Value colleges and programs to underpin growth some growth returning to these markets. well into the future. Navitas utilises the economic value added Navitas has also initiated a number of (EVA®) framework to assess Shareholder As always, Navitas remains committed strategies to underpin growth and business value with EVA® being a measure of to quality academic outcomes for its performance including investing in new returns over and above the Group’s students and clients, strong and mutually colleges and reducing controllable costs. weighted average cost of capital for funds beneficial university partnerships, its employed by the business. In a challenging diversity and most of all its dedication to its The Company also conducted an year EVA® for FY12 was $38.4 million, mission of creating opportunities through extensive external review of its strategy compared to $57.9 million in FY11. Further lifelong learning. and operations through which the value details about the calculation of EVA® can of its core businesses was affirmed and be found on pages 24, 25 and 115 to 120 of opportunities for growth and business Thanks this report. improvement were identified. The review I would like to thank my fellow Directors for also delivered considerable industry Since listing in 2004 Navitas has their ongoing commitment and support. data, not widely published, which will declared a dividend equating to 100% of The Board and I would also like to express underpin a better informed decision distributable income in the form of fully our appreciation to the CEO, Rod Jones, making framework. franked dividends. However this practice the senior leadership team and all Navitas is becoming unsustainable as Navitas staff for their strong commitment and has expanded, and international earnings special efforts on behalf of the Company Harvey Collins increase as a proportion of total earnings. throughout a challenging year. Chairman 16 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 17

Chief Executive Officer’s Report

The 2012 financial year As a result the Company has recorded SAE recorded EBITDA of $26.4m with Now after several years of changes, ROD JONES, CEO slowing EBITDA growth of 5% to performance improving markedly in the stability is slowly returning to both the “Navitas h as continued to m eet has proven to be one of $126.8m (FY11: $121.1m) underpinned second half of FY12 (H2 FY12: $14.6m) Australian and UK sectors as policy the ch allenges o f this most challenging periods by a 7% increase in revenue to $688.5m following a disappointing first half (H1 amendments are implemented and bedded difficult environment (FY11: $643.8m) for FY12. FY12 profit FY12: $11.8m). SAE’s Australian and down. Many of these positive changes offer through a r ange o f str ategies in the Company’s history decreased by 5% to $73.1m (FY11: $77.4m) German schools continued to perform significant opportunity for Navitas in the including rigorous with the result being impacted by well though earnings were impacted by longer term. management of controllable with financial performance costs, effective stakeholder significant increases in depreciation and investment in new schools and delays Major changes have been made by the engagement c ampaigns a nd a being constrained by interest expenses resulting from the SAE gaining US Title IV accreditation which Australian Government in its response significant revie w o f gro wth acquisition. The prior year comparison has only recently occurred for all six opportunities. I n a ddition the regulatory impacts in key to the Knight Review of the student visa period was also boosted by a $3.3m one USA schools. company h as ma intained its system. Key aspects of the Government’s markets and continuing off tax refund. diversification str ategy w ith The English Division also delivered changes include: ongoing investment investment costs. Earnings per Share decreased by 10% stronger second half growth with H2 • The streamlining of visa processing for in ne w colleges and regions .” to 19.5 cents per Share and the full year EBITDA of $4.4m (H1 FY12: $0.8m) higher education students studying at dividend has also decreased to 19.5 cents following improvement across Government public universities so they are all treated per Share fully franked (FY11: 20.7 cents Programs as delivery settled into normal as Assessment Level 1. This will reduce per Share). patterns in the expanded AMEP contract the time and effort required to gain regions. Full year EBITDA was 24% down to a visa; Navitas has continued to meet the $5.2m (FY11: $6.8m) with ELICOS volumes challenges of this difficult environment • An enhanced post study work visa remaining suppressed. through a range of strategies including regime for university graduates; and rigorous management of controllable The Workforce Division continued its • Allowing English language students costs, effective stakeholder engagement trend of delivering strong EBITDA growth to apply for a visa without meeting a campaigns and a significant review of with a 24% increase on pcp to $6.1m. minimum language requirement. growth opportunities. In addition the ACAP and the Professional Year program Company has maintained its diversification again contributed significantly to this These initiatives are now being strategy with ongoing investment in new result with expanded offerings across implemented with Streamlined Visa colleges and regions. both businesses. Processing (SVP) for universities commencing in March 2012. All Navitas The Student Recruitment Division Business Operations partner universities have opted into SVP continued to be affected by regulatory and all Australian Navitas colleges have As in previous years the University changes in the UK recording a 54% been included in partner universities SVP Programs Division contributed strongly decrease in EBITDA to $0.6m in a arrangements. In addition the Government to Group earnings though the Division’s challenging operating environment. has announced plans to expand SVP to low EBITDA did decrease by 5% to $104.9m risk private providers in FY13 which could for the year. Operating Environment see Navitas, if eligible, utilise SVP across all of its Divisions. This was predominantly due to changes in The international education sector, and government policy in the UK and Australia Navitas, continued to be affected by Though too early to accurately quantify, which reduced sector-wide demand significant regulatory and government these changes are beginning to provide although strong enrolments in Canada policy changes instigated in the key some benefit. However there are some and Singapore partially offset this impact. markets of Australia and the UK over the challenges in implementation and it will EBITDA was also reduced by $7.5m last two years. These changes were aimed take some time for the full outcomes and (FY11: $4.0m) of investment costs incurred at maintaining the quality and standards of implications to be known. from the eight new colleges opened by the the education systems in these countries Division in the last two years. and will ultimately contribute to the The international education sector in the country’s attractiveness as an education UK has also experienced more certainty Strategic Developments and business improvement opportunities. The new US colleges continued to with Navitas University Programs The review has also delivered considerable destination into the future. As announced by the Chairman at the improve with steady enrolments across colleges all completing Quality Assurance industry data which has helped the 2011 Annual General Meeting, Navitas the five colleges in the second semester These ongoing changes, and global Agency audits with the results due soon. Company to develop a more robust commenced an external review by of 2012. Although growing slowly, and economic instability, created uncertainty The colleges have also secured the business decision making framework. below expectations, academic outcomes for future students and led to a decrease required Highly Trusted Sponsorship or The Parthenon Group (Parthenon) in Using this foundation Navitas will and progression rates are pleasing and in enrolments in Australia and the UK Branch sponsorship status and United FY12 to identify and prioritise future continue to pursue its diversification Navitas remains committed to working as students sought quality education Kingdom Border Authority audits have growth opportunities for the Company. strategy and will begin to explore with university partners to improve the outcomes in countries with more stable been completed. This review was largely in recognition of the discussions with future partners for new performance of these colleges. Offers policy environments. significant growth in Navitas’ geographic made for the September 2012 intake are With the number of global tertiary college agreements in the USA, and in Navitas has worked with governments diversity and offering and, equally showing good growth against the prior enrolments and globally mobile students other key markets. and the sector to engage in policy set to keep increasing due to demographic importantly, the rapid growth of the sector corresponding period (pcp). Above all else Navitas will continue discussion and consultation processes to and economic drivers, I believe Navitas and participation rates globally. to pursue excellence in academic contribute to sustainable and competitive remains well positioned to realise The Parthenon review has already outcomes and remains committed to a international education sectors. significant growth opportunities from the confirmed the value of Navitas’ core long-term approach to investment and growing demand for high quality education. business and identified potential growth shareholder returns. 18 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Chief Executive Officer’s Report (continued)

Navitas and its Communities As a geographically diverse organisation Navitas is fortunate to be a part of many vibrant communities around the world. We have always been very active in these communities usually at a local level and directly involving the wide number of stakeholders with whom we regularly engage. This has resulted in a great range of community and charity focused initiatives such as local fundraisers, being a UNICEF Corporate Champion, to participating in mentoring programs for at-risk youth via the Australian Business and Community Network. For several years Navitas has also enthusiastically participated in the Global Corporate Challenge, a health and wellness program for our staff.

I am pleased to report that Navitas is now taking a more holistic approach to corporate citizenship and the Board has recently approved the first stage of a Navitas-wide corporate social responsibility strategy with the founding of the Navitas Education Trust. This sustainable trust will be utilised to support education-related causes both across and Australia as well as the development of The Student Recruitment Division Australia and overseas with clear and further opportunities in key markets. anticipates a marginal decline in earnings in accountable outcomes. The Corporate FY13 predominantly due to the continued Social Responsibility strategy will be The SAE Division is expected to grow impacts of migration changes in the UK on further progressed in FY13. EBITDA beyond FY12 due to enrolment the Study Overseas business in India. growth, cost efficiencies, fee increases and Outlook investment in new schools. Appropriately utilising Title IV funding in the USA and Conclusion Following more than two years of a widening product offerings to creative I believe that tough times can bring out the challenging operating environment with media should also present an opportunity best in people and that has certainly been regulatory reforms in several key markets, for SAE to expand revenue streams. the case at Navitas this year. Navitas is now seeing a re-emergence of more favourable conditions as significant Navitas English anticipates revenue and I continue to be impressed with the can-do reforms are implemented. profit improvement in FY13 with the attitude of our staff around the world and Division continuing the progress evident firmly believe that our commitment to Though there is an ongoing need to better in the H2 FY12 result. There are also quality outcomes has actually increased understand the effect of these changes opportunities for growth from classroom despite such challenges. on the international education sector, and and online delivery as well as implementing how they influence students, there are further operational efficiencies. I would also like to thank our Chairman, emerging trends of improving demand Harvey Collins, and the Navitas Board for which should reflect positively for Navitas Sound growth is anticipated from the their support, guidance and wisdom. in FY13 and beyond. Workforce Division in FY13 building on investments in e-learning, marketing and This positive outlook is not just due to a in educational offerings — particularly more stable regulatory environment. It is health and nursing. However demand for also a result of significant work by the Professional Year programs, directed at Company to create efficiencies, control international graduates, is anticipated to costs, diversify revenue and to develop soften as a result of amended government future growth opportunities. policy though this may be somewhat The University Programs Division expects offset by increasing demand for domestic growth in FY13 and beyond with enrolment graduates work ready skills. improvement expected in all markets. Rod Jones Improved return is also expected from Chief Executive Officer investments in new colleges in the USA, UK 20 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 21

Chief Financial Officer’s Report

We are pleased to Navitas Financial Performance Group EBITDA rose 5% to $126.8m BRYCE HOUGHTON, C FO (FY11: $121.1m) for the same reasons with Navitas’ results for the year ended 30 June 2012 and the pcp are shown below. “In a challenging provide the following a 5% decline in University Programs EBITDA environment Na vitas report detailing another to $104.9m (FY11: $110.6m) mitigated maintained its tr ack Year ended Year ended Change by SAE’s $26.4m full year contribution record o f revenue a nd year of revenue and 30 June 2012 30 June 2011 % (FY11: $17.2m) and a 24% increase EBITDA gro wth w hile Total revenue ($m) 688.5 643.8 7 in EBITDA from Workforce to $6.1m. recording a s mall EBITDA growth in a tough decrease in N PAT f or (FY11: $4.9m). operating environment. EBITDA ($m) 126.8 121.1 5 the f irst ti me.” NPAT ($m) 73.1 77.4 (5) The Group EBITDA margin decreased by 0.4% to 18.4% (FY11: 18.8%). EPS (cents) 19.5 21.7 (10) Full year dividend (cents) 19.5 20.7 (6) Divisional EBITDA results are as shown in the second table on the previous page.

In a challenging environment Navitas Total revenue increased by 7% to $688.5m Despite a decline in FY12 the University maintained its track record of revenue and (FY11: $643.8m) with decreases in Programs Division continued to be the EBITDA growth while recording a small University Programs, English and Student driving force of the Group with strong decrease in NPAT for the first time. Recruitment revenues due to declining performances by colleges in Canada student volumes offset by SAE’s first full and Singapore mitigating the impacts of The full year dividend of 19.5 cents per year contribution and continued growth lower student volumes in Australia and Share represents 100% of tax paid earnings in Workforce. the UK due to regulatory and government for the year. The final dividend for the year policy changes. is 10.1 cents per Share (FY11: 12.0 cents per Share). The $5.7m decline in divisional EBITDA included a $3.5m increase in start-up losses from new colleges. Notwithstanding student volume changes, the University Year ended Year ended 30 June 2012 30 June 2011 Change Change Programs Division achieved average A$ fee DIVISIONAL EBITDA $m $m $m % growth of 4.2%. University Programs 104.9 110.6 (5.7) (5) SAE contributed $26.4m of EBITDA with SAE 26.4 17.2* 9.2 53 second half EBITDA of $14.6m improving significantly on the first half performance English 5.2 6.8 (1.6) (24) of $11.8m. Composition of earnings by Workforce 6.1 4.9 1.2 24 key segment is as shown in the table on Student Recruitment 0.6 1.3 (0.7) (56) this page. Divisional EBITDA 143.2 140.8 2.4 2 The English Division delivered a 24% Corporate costs & consolidation items (16.4) (19.7) 3.3 (17) decrease in EBITDA against pcp however this represents a significant second half Group EBITDA 126.8 121.1 5.7 5 turnaround. H2 FY12 EBITDA of $4.4m (H1 FY12: $0.8m) was also $0.4m higher * half year contribution only than pcp. This resulted from improvement across Government Programs as delivery settled into established patterns in the 700 700700 688.5 688.5688.5 140 140 140 80 80 80 77. 4 77. 477. 4 expanded AMEP contract regions. The 643.8 643.8643.8 126.8 126.8126.8 73.1 73.173.1 Division faced depressed demand in Year ended Year ended 600 600600 120 120 120 121.1 121.1121.1 70 70 70 ELICOS and TESOL with volumes down 30 June 2012 30 June 20111 Change Change 64.3 64.364.3 556.7 556.7556.7 approximately 16% on pcp due to ongoing SAE EBITDA $m $m $m % 60 60 60 500 500500 100 100 100 regulatory change. Southern2 14.8 7.6 7.2 95 470.7 470.7470.7 96.7 96.796.7 50 50 50 49.2 49.249.2 Workforce earnings continued to improve, Europe 13.9 6.7 7.2 107 400 400400 80 80 80 77.1 77.177.1 growing by 24% in the period with USA 0.2 1.1 (0.9) (82) 345.4 345.4345.4 40 40 40 37. 4 37. 437. 4 strong contributions from ACAP and the 63.4 63.463.4 Licensing 1.2 1.6 (0.4) (25) 300 300300 60 60 60 Professional Year program as the Division 30 30 30 sought to meet skills shortages in key Divisional costs (2.7) (1.0) (1.7) (170) 200 200200 40 40 40 areas of demand. 3 20 20 20 27.4 16.0 11.4 71 Despite improvement in FY11, the Student 4 100 100 100 20 20 20 One off prior period items (1.0) 1.2 (2.2) n/a 10 10 10 Recruitment Division was impacted by SAE EBITDA 26.4 17.2 9.2 53 policy changes in the UK which included 0 0 0 0 0 0 0 0 0 earnings in SOL based in India. Accordingly 8 89 8 9 9 2 2 2 8 89 8 9 9 2 2 2 8 89 8 9 9 2 2 2 1 Results for the half year to 30 June 2011 only 0 00 0 010 0 1011 10 111 11 1 1 0 00 0 010 0 1011 10 111 11 1 1 0 00 0 010 0 1011 10 111 11 1 1 Y YY Y YY Y YY Y YY Y Y Y Y YY Y YY Y YY Y YY Y Y Y Y YY Y YY Y YY Y YY Y Y Y F FF F FF F FF F FF F F F F FF F FF F FF F FF F F F F FF F FF F FF F FF F F F EBITDA of just $0.6m was recorded for 2 Includes SAE Australia, NZ, Singapore, Indonesia and South Africa the year. 3 Includes $1.1m of start up losses from new schools 4 In FY11 includes $0.7m earnings from SAE (subsequently divested) REVENUEREVENUEREVENUEREVENUE $m $m $m$m EBITDAEBITDAEBITDA $EBITDAm $m $m $m NPATNPAT $m NPAT$mNPAT $m $m

3% 3% 3% 6% 6% 6%

30% 30%30% 15% 15%15%

UniversityUniversity ConsortiumUniversity Consortium Consortiumand Partners and and Partners Partners 20% 20%20%

TeachingTeaching andTeaching Academic and and Academic Employees Academic Employees Employees 26% 26%26% Other EmployeesOtherOther Employees Employees

ShareholdersShareholdersShareholders — Dividends — Dividends — Dividends UniversityUniversity ConsortiumUniversity Consortium Consortium Shareholders ShareholdersShareholders — Dividends — Dividends — Dividends and Partnersandand Partners Partners GovernmentsGovernmentsGovernments — Income — TaxesIncome — Income Taxes Taxes TeachingTeaching andTeaching and and GovernmentsGovernmentsGovernments — Income — TaxesIncome — Income Taxes Taxes ReinvestedReinvested asReinvested Depreciation, as Depreciation, as Depreciation, AcademicAcademic EmployeesAcademic Employees Employees AmortisationAmortisationAmortisation and Retained and and Retained Earnings Retained Earnings Earnings Other EmployeesOtherOther Employees Employees ReinvestedReinvested asReinvested Depreciation, as Depreciation, as Depreciation, AmortisationAmortisationAmortisation & Retained & Retained Earnings & Retained Earnings Earnings 22 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 23

Chief Financial Officer’s Report (continued)

Dividend The Directors have declared a fully franked final dividend of 10.1 cents per Share (FY11: 12.0 cents) representing 100% of undistributed earnings. This takes the full year dividend to 19.5 cents down 6% (FY11: 20.7 cents).

Since listing in 2004 Navitas has declared a dividend equating to 100% of distributable income in the form of fully franked dividends. However as noted in the Company’s FY12 half year results, this practice is becoming unsustainable as Navitas has expanded and international earnings increase as a proportion of total earnings. This has made it increasingly hard for Navitas to pay fully franked dividends.

Accordingly the Directors have reviewed Navitas’ dividend policy and approved a planned reduction in the dividend payout ratio to 80% of tax paid earnings with effect from the interim dividend payment in February 2013. Annual and interim dividends will be maintained at current absolute levels until the 80% payout ratio is reached.

Where does the wealth created FY12 F Y11 Change by Navitas go? $m $m % As a leading global provider of education services, Navitas plays a vital economic Operating revenue 688.5 634.8 8 role in its communities. Annually wealth External and services costs (190.5) (160.6) 19 generated by Navitas is distributed as shown in the table on this page. Total wealth created 498.1 474.2 5

Affirming Navitas’ commitment to its partners, 26% of generated wealth is Payments to university and consortia partners 128.5 136.4 (6) channelled to university and consortia Payments to teaching and academic staff 147.9 122.0 21 partners under royalty and contract agreements. Following these payments Payments to other employees 102.8 96.1 7 university partners stand to generate Payments to shareholders — dividends 73.3 77.2 (5) Corporate At 0.92x EBITDA, net debt remains modest Cash Flows substantial further income as approximately in relation to the cash generation capability Payments to governments — income taxes 30.5 28.0 9 Corporate costs were 17% lower than pcp Operating cash flows for the year ended 90% of students graduating from Navitas of the business and is substantially lower Reinvested as depreciation, amortisation and at $16.4m (FY11: $19.7m). Favourable 30 June 2012 were $73.9m compared to colleges enter partner university programs. 15.1 14.5 4 than levels covenanted with financiers. retained earnings variances were recorded in lower EVA $69.5m in FY11; an increase of $4.4m or Highlighting Navitas’ focus on academic Total wealth distributed 498.1 474.2 5 costs ($3.1m) and the movement in foreign Shareholders’ funds at 30 June 2012 were 6%. After excluding an additional $4.5m outcomes and commitment to quality, exchange gain/loss ($1.9m). Offsetting $233.6m (30 June 2011: $239.2m). The of interest costs from funding of the SAE 30% of wealth is paid to academic and this was the one off cost of the Parthenon marginal decrease is due to the lower level acquisition, operating cash flow was $8.9m teaching staff, a 21% increase on FY11. review ($1.4m). After adjusting for these of H2 FY12 earnings relative to pcp which or 13% higher. A further 20% of wealth created is paid to items, underlying corporate costs rose by flows into the retained earnings balance. Capex for the year was $19.4m (FY11: other employees. $0.3m or 2%. Deferred revenue at 30 June 2012 was $11.0m). While substantially higher than Payments to shareholders via dividends $174.0m (30 June 2011: $169.5m). The 3% pcp, this did include a full year of SAE relating to FY12 equates to 15% of Balance Sheet positive variance reflects the upward trend where depreciation runs at ~$2.75m per wealth distribution. Net debt at 30 June 2012 is $117.0m in new enrolments in the core University half year. There was also $3.5m of capex Payments to governments via income tax (30 June 2011: $102.8m). The $14.2m Programs business, notwithstanding that on new SAE schools and a further $2m represent 6% of wealth distribution and increase is essentially attributable to total volumes at 30 June 2012 remain spent on Group IT projects (principally the depreciation and amortisation costs equal dividend payments being $6.4m greater marginally lower than prior years. Salesforce CRM). Excluding these one off, 3%. This breakdown is illustrated in the Bryce Houghton than operating cash flows and capex being long run investment items, maintenance chart on this page. Chief Financial Officer $5.3m greater than the depreciation shield. capex equated to the depreciation shield. The ValueShare Scheme shares out success with staff The ValueSharewhich in turnScheme further shares drives out our success success. with staff which in turn further drives our success.

Align the interests Help attract Alignof staff the with interests those andHelp retain attract high ofof staff shareholders with those andquality retain staff high of shareholders quality staff

Fairly share with 24 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 25 staffFairly the share financial with successstaff the wefinancial enjoy success we enjoy ValueShare Incentive Scheme

Rewards are unlimited for some staff, An important part of the The ValueShare Incentive Scheme in turn As a result, in good years, our staff may for on-target performance. But for senior but canRewards be lost are if performanceunlimited for fallssome significantly staff, helps drive the success of the Company at earn more than what is on offer elsewhere managers who can have higher than 20% but can be lost if performance falls significantly spirit of Navitas has always three important levels. It: in the sector. But in disappointing years, incentives the rewards can be uncapped if Incentive declared been sharing the success • helps attract and retain high they may earn less. This performance- performance targets are met, or equally, a Incentive declared quality staff; based approach to remuneration helps us negative reserve can be carried into future that the business enjoys, attract a more entrepreneurial workforce years if performance is poor. For these • supports a merit-based culture by fairly which has been one of the key drivers of staff, two-thirds of any reward above the Two-thirds of above with the staff that make sharing with staff the financial success target declarations are our success. on-target amount is subject to deferral deferredTwo-thirds and can ofbe above lost if we enjoy; and target declarations are that success possible. and can be forfeited if performance performance falls significantly It also means that one of our largest deferred and can be lost if • rewards sustained gains and so deteriorates significantly, or the staff performance falls significantly expenses — employment costs — rises and aligns the interests of staff with those member leaves the Scheme. Over the past seven years, of shareholders. falls with the performance of each of our the primary way that we business units. If performance is good, The formulaic nature of the Scheme we can afford to share with our staff that helps support the merit based culture Negative declarations reduce future payments Performance have shared our success Helps Attract and Retain High success, but if our profitability falls, then that Navitas has encouraged and once Negative declarations Quality Staff our employment costs fall with it. This again, tends to attract and support a more reduce future payments Performance with staff is through the variability in our cost base has helped us entrepreneurial workforce. Target The success of our business ultimately successfully negotiate some of the strong Target Navitas ValueShare rests with the quality and the dedication of headwinds that the Group has faced in the the people who work at Navitas. Aligns the Interests of Staff Incentive Scheme. current financial year. To attract the best people, we need with those of Shareholders to offer an engaging and enjoyable Fairly Shares with Staff the While it is important to offer competitive, workplace where the best in the education performance-based pay to attract and industry can pursue their careers. But Financial Success we Enjoy retain the best quality staff, we also Economic Value Added measures the value we create for shareholders we also need to offer a competitive level We believe that high quality staff are understand that the ongoing success Economic Value Added measures the value we create for shareholders of remuneration. attracted to a transparent, objective and sustainability of the business is process for sharing the success that the dependent on providing good returns to Many of the educational institutions that business enjoys, one that reflects the merit our shareholders. we compete with for staff offer high levels based culture that Navitas has encouraged Economic Value Added of fixed remuneration (eg salary plus If the business is unable to generate an since its inception. (theEconomic profit above Value and beyond Added what investors could expect to earn elsewhere) superannuation). We try to match that by attractive return on the capital entrusted (the profit above and beyond what offering the opportunity to share in the To that end, rewards under the ValueShare to it, shareholders will look to place their investors could expect to earn elsewhere) financial success of our business, via the Scheme are determined by a formula money elsewhere, starving the business of ValueShare Incentive Scheme. set for each business unit by the Board, the capital it may need to grow. once every three years. This incentive Profit investors For most participants in the Scheme, if As a result, when we measure our formula clearly sets out the rewards that Profit made by could expect to performance targets are met, an incentive performance for the purposes of the Profit investors will be earned by participants at each level Profitthe business made by earncould elsewhere expect to at of 10% of their salary will be earned. But ValueShare Scheme, we take into account during the year comparable risk of performance. the business earn elsewhere at for senior managers, the on-target reward not just the profits of the business, but during the year comparable risk can be 20% or higher, reflecting their higher For most staff, rewards are limited at what investors could expect to earn level of responsibility within the Group. twice the amount that they would receive elsewhere on the capital entrusted to us, at comparable levels of risk.

We call the profit above and beyond what The ValueShare Scheme shares out success with staff investors could expect to earn elsewhere which in turn further drives our success. our ‘Economic Value Added’ or EVA for short and rewards under the ValueShare Scheme are linked to year on year growth in EVA.

Navitas’ Executive Key Management Personnel are required to use 50% of Align the interests Help attract any rewards under the plan to purchase of staff with those and retain high shares in Navitas until they hold a of shareholders quality staff beneficial interest equivalent to one year’s fixed remuneration (eg salary plus superannuation).

Outcomes for the 2012 Financial Year Full details of the outcomes of the Fairly share with ValueShare Scheme in 2012 are included in staff the financial success we enjoy the Remuneration Report, included as part of the Directors Report.

Rewards are unlimited for some staff, but can be lost if performance falls significantly

Incentive declared

Two-thirds of above target declarations are deferred and can be lost if performance falls significantly

Negative declarations reduce future payments Performance

Target

Economic Value Added measures the value we create for shareholders

Economic Value Added (the profit above and beyond what investors could expect to earn elsewhere)

Profit investors Profit made by could expect to the business earn elsewhere at during the year comparable risk SUCCESS THROUGH DIVERSITY Navitas Li mited Annu al R eport 2012 27

DIVERSITY DELIVERS A CELEBRATION OF DIFFERENCES

Divisional Review of Operations 28 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 29

Navitas University Programs Division

Key Highlights Financial HighlightsUP SAE English

372.9 113.9 140.9 Three new colleges commence operations, 366.7 140 350 346.8 100 129.8 two in the UK and one in Australia; 123.3 120 300 80 100 Agreement signed with Birmingham City 250 60 University for ninth UK College; 80 200

40 60 150 Tracer studies, benchmarking and 110.6 30 101.7 104.9 40 student surveys confirm continued 100 26.4 excellent academic outcomes across all 20 50 20 colleges; and 13.1 6.8 5.2 0 0 0

2 2 10 11 1 12 10 11 1 Y Y Y Y Y Y Y Contract renewal with the University of F F F F F F F

Hertfordshire and Curtin University. This resulted in a 2% decrease in revenues • Development of new courses and Revenue ($m) Revenue ($m) Overview of OperationsRevenue ($m) to $366.7m (FY11: $372.9m) for the awards across the Division including The University Programs Division is a Division and a 5% decrease in EBITDA to Associate Degree programs, EBITDA ($m) EBITDA ($m) leader in pre‑university, managedEBITDA ($m) campus $104.9m (FY11: $110.6m). Despite this the Pre-Masters and Masters courses; and university pathway programs offering Division continued to diversify strategically students globally the support to create • A focus on increased Australian with further growth in its Canadian and opportunities through lifelong learning. domestic enrolment with an increase of Singaporean colleges offsetting the more than 20% in the key March 2012 In FY12 the Division offered Certificate, overall impact. intake across the Australian network Diploma, Associate Degree, Bachelor and of colleges; Masters programs to more than 18,500 Activities and Achievements • Successful transition of LTM with students in 30 colleges and managed positive outcomes in all regulatory campuses across Australia, Singapore, Business Development registrations and strong growth in the UK, USA, Canada, Sri Lanka and Kenya. Throughout the year the Division student enrolment; and Workforce Student Recruitment The Division’s main focus in FY12 was continued to focus on developing • Creating efficiencies through rigorous opening new colleges in the UK and growth opportunities as well as creating management of controllable costs. Australia, bedding down the five US efficiencies to mitigate the impacts of colleges opened in FY11, and developing tightening enrolments. Highlights include: Student numbers across the Division’s 65.1 19.1 opportunities for future expansion and • Commencement of two colleges in USA colleges remain below expectations 18 60 17. 7creating efficiencies in existing colleges. Scotland (ICRGU and EIC) and NIC but with pleasing academic outcomes and in Australia; high progression rates at all colleges. The 15.8 52.7 Despite a challenging environment the Division is committed to improvement at 15 50 Division also continued to enhance • Contract renewal with the University these colleges and remains confident that of Hertfordshire for HIC until 2017 and 45.1 academic and support services to significant potential exists in current, and students as well as maintain and Curtin University for Curtin College 12 future, partnerships in the region. 40 strengthen academic moderation and until 2016; teaching standards. • Agreement reached with Birmingham Academic Outcomes and 30 9 City University to establish Birmingham Student Services City University International College, Financial Outcomes The Division remains committed to with operations expected to commence FY12 was another challenging year with academic quality and student outcomes 20 6 in the second half of FY13; the effects of significant regulatory and working with partner universities to policy changes in the key markets of • Expansion of QIBT via a new Gold Coast enhance academic and support services to campus with strong enrolments; 10 3 Australia and the UK continuing to impact students. As in previous years, academic 6.1 on enrolments, as well as lower student • Continued growth in Canada with outcomes demonstrated that Navitas 4.9 1.3 2.8 volumes from intakes0.6 in 2010 and 2011. enrolments increasing by 25% students performed as well as international 0 0 -1.4 against pcp; students who had gained direct entry 2 10 11 1 to university. Y Y Y F F F 2 10 11 1 Y Y Y F F F

Revenue ($m)

Revenue ($m) EBITDA ($m)

EBITDA ($m) 30 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Navitas University Programs Division (continued)

Annual academic tracer studies and universities have opted into SVP and all Outlook benchmarking confirm excellent Australian Navitas colleges have been Following significant regulatory change student outcomes with overall quality included in partner universities SVP and reform in recent years the Division of teaching rated at 96%. In addition arrangements. In addition the Government expects moderate earnings growth in FY13 over 95% of respondents to the Navitas has announced plans to expand SVP to low and beyond with enrolment improvement student satisfaction survey rated each risk private providers in FY13 which could expected in all markets. This will be category (teaching, learning environment, see Navitas, if eligible, utilise SVP across largely due to the stabilisation of reforms customer service) as ‘excellent’, ‘good’ all of its Divisions. in Australia and the UK as well as or ‘satisfactory’. The international education sector in the continued global demand for high quality UK has also experienced more certainty tertiary education. The Regulatory Environment with Navitas University Programs The regulatory and policy environment in colleges all completing Quality Assurance Following a period of significant University several key markets remained a challenge Agency audits with the results due soon. Programs growth and expansion from but with some major changes being The colleges have also secured the 2007 to 2010, return is expected on recent implemented in the year, is showing signs required Highly Trusted Sponsorship or investments in new colleges in the USA, UK of improvement. Branch sponsorship status and United and Australia as well as the development of further opportunities in key markets. In Australia, the Government’s Kingdom Border Authority audits have acceptance of the Knight Review’s 41 been completed. recommendations signalled a major All colleges continued to contribute to change in policy to be more supportive of national and state policy discussions, genuine international students and quality including significant government and education providers. departmental consultation around These initiatives are now being international education, education implemented with Streamlined Visa quality, migration and visa conditions Processing (SVP) for universities and for international students. Colleges also packaged course partners commencing continue to work closely with their partner in March 2012. All Navitas partner universities to strengthen and build mutually beneficial relationships. 32 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 33

SAE

Key Highlights UP Financial Highlights*SAE English

372.9 113.9 140.9 All eligible USA schools now accredited 366.7 140 350 346.8 100 129.8 for USA Title IV funding; 123.3 120 300 80 100 New schools in Germany250 and Indonesia; 60 80 200 Excellent SAE TEQSA audit report 40 60 highlighting quality150 of courses and 110.6 30 101.7 104.9 40 industry involvement;100 and 26.4

20 50 20 13.1 Expansion of licensing agreements to 6.8 5.2 0 0 0 Overview of Operations in revenue increases across Australian schools delivering state-of-the-art audio, Libya, Tunisia, Iraq, Morocco, Bahrain 2 2 10 11 1 12 10 11 1 Y Y Y Y Y Y Y schools with further changes in other film and web design courses around F F F F F F F SAE (comprising SAE and Qantm schools) and Saudi Arabia. jurisdictions planned. the world including Australia, UK, USA is one of the world’s largest media and Europe. technology education institutes, with more Another achievement which will contribute Revenue ($m) Revenue ($m) Revenue ($m) than 50 schools across 19 countries. The to significant future growth is the By the end of FY12 SAE recorded 10% Division offers a range of predominantly accreditation of all USA SAE schools growth in enrolments against pcp with EBITDA ($m) EBITDA ($m) EBITDA ($m) Higher Education opportunities to more for Title IV funding. This will allow USA growth partially due to recently introduced than 9,400 students, including Certificate, students to access government supported new courses and qualifications, college *First full year of operation Diploma, Degree and Masters programs funding and contributed significantly to expansion and renewed focus on across three major fields of study: audio enrolment growth when secured by the marketing activities. production, film production and interactive New York school in 2010. media. SAE also licences its programs to Qantm Schools The Division continued to seek expansion third party providers with more than 10 opportunities opening new schools in Qantm is a leading provider of creative existing agreements. Bochum, Germany and Jakarta, Indonesia digital media education with eight schools in FY12. Work is also underway to open a delivering animation, game development Financial Outcomes seventh USA school with a Chicago school and graphic design courses around the world including Australia, Germany, UK Workforce Student Recruitment SAE recorded EBITDA of $26.4m with leased and fitted out. School improvement and Singapore. performance improving markedly in the and renovation work also progressed with second half of FY12 (H2 FY12: $14.6m) relocation to a new school in Brisbane Qantm enrolments have increased by 10% following a disappointing first half allowing SAE and Qantm co-location in FY12 largely due to expansion of existing 65.1 19.1 (H1 FY12: $11.8m). and major refurbishment work to meet colleges and greater co-location with 18 60 17. 7 expanding demand in a number of schools SAE colleges. SAE’s Australian and German schools in Australia and Europe. 15.8 52.7 continued to perform well though 50 15 earnings were impacted by investment The licensing program was also extended Outlook with new agreements signed to open 45.1 in new schools and delays gaining USA The SAE Division is expected to grow SAE branded schools in Libya, Tunisia, Title IV accreditation which has only EBITDA in FY13 and beyond as a result of 40 12 Iraq, Morocco, Bahrain and Eastern recently occurred for all six USA schools enrolment growth, gained efficiencies, Saudi Arabia. in operation. fee increases and investment in new

30 9 Finally, an audit by Australian regulator schools. Title IV funding in the USA should Activities and Achievements TEQSA has resulted in an excellent report also present an opportunity for SAE to highlighting the quality of SAE’s courses, expand revenue streams. In FY12 SAE also The Division continued to progress key 20 6 the opportunities it creates for students invested in additional resources to leverage integration initiatives throughout the year and its industry involvement. Navitas’ international student recruitment including standardisation of financial and network and this is expected to begin 3 student management systems, course 10 SAE Schools making a positive return in FY13. 6.1 offerings, policies and processes with 4.9 1.3 2.8 0.6 efficiency gains now starting to be realised. SAE is one of the largest audio and film 0 0 -1.4 A fee schedule review will also result education networks in the world with 42 2 10 11 1 Y Y Y F F F 2 10 11 1 Y Y Y F F F

Revenue ($m)

Revenue ($m) EBITDA ($m)

EBITDA ($m) 34 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 35

Navitas English Division

UP Key Highlights SAE Financial HighlightsEnglish Overview of Operations The English Division comprises two main areas of operation: Government Programs,

372.9 113.9 140.9 and ELICOS and TESOL Programs. The 366.7 140 Commenced delivery of the expanded Division’s core purpose is building and 350 346.8 100 129.8 creating futures across cultures through Commonwealth Government AMEP 123.3 120 the provision of English language training 300 contract regions and the national for international students, migrants 80 and humanitarian entrants, settlement Distance/e-learning contract; 100 250 services, and teacher training. 60 Programs include delivery of the 80 The Division provided AMEP classroom The Australian TESOL Training Centre, AMEP, HSS, and LLNP and courses for 200 and distance learning, and LLNP tuition, to one of the largest teacher training centres Expanded AMEP pathways to work international students who are pathwaying 40 more than 19,900 clients, a 68% increase outside the UK, trained 620 teachers and 60 into Australian tertiary institutions, 150 programs with pleasing experience and on FY11. The new Distance/e-learning learners across Australia and offered a new preparing for external tests, enhancing contract also saw tuition delivery to Certificate IV in TESOL. 110.6employment results;30 their career options or preparing 101.7 104.9 40 1,806 clients compared to 729 in FY11. 100 for employment. In terms of student outcomes, more 26.4 In addition 326 new Australians were than 75% of Navitas English international Navitas English operates 22 colleges settled under the HSS program. 20 20 students that undertook Academic English 50 across Australia and one in Singapore. Continued excellent international student 13.1 Navitas English also opened an additional programs progressed into their preferred 6.8 The Division also provides curricula and 5.2 Employment Pathway Unit in NSW. Across tertiary entry program at a tertiary partner 0 satisfaction ratings with0 many Navitas 0 support to Navitas’ other operations in Sydney more than 660 clients enrolled institution, with more than 50% enrolling 2 2 10 11 1 12 10 11 1 Y Y Y Y Y Y Y Australia, UK, Indonesia and the US. F F EnglishF centres ranked in the top 15F F F F in AMEP pathways to work programs and in post-graduate courses. Navitas English English Language Centres nationally; and gained work experience placements with centres also achieved outstanding Financial Outcomes 25% of clients securing employment as a student satisfaction ratings in the leading Revenue ($m) Revenue ($m) Revenue ($m) The Division continued to operate in result of the program. independent iGraduate English Language Barometer survey of 9,000 students at a challenging environment recording In partnership with AMES Victoria, Navitas EBITDA ($m) EBITDA ($m) EBITDA ($m) 49 Australian public and private ELICOS Created efficiencies through a 5% decrease in revenue to $123.3m English also developed online learning colleges with seven Navitas English centres (FY11: $129.8m) and a 24% decrease in resources for Distance Learning national management of costs. ranked in the top 15 nationally. EBITDA to $5.2m (FY11: $6.8m). delivery as well as e-learning modules for Although still down on pcp this result use by all AMEP clients across Australia. As in FY11 ELICOS and TESOL programs reflects a significant improvement in the In FY13 these resources will be piloted in faced a difficult external environment second half of FY12 with EBITDA of $4.4m virtual learning environments for AMEP which has continued to be heavily (H1 FY12: $0.8m) following improvement clients, especially those in regional areas. impacted by a broad range of market across Government Programs as delivery forces that have affected the sector settled into normal patterns in the ELICOS and TESOL since 2009. These include changes to the expanded AMEP contracts which took Navitas English, through its ELICOS and Australian student visa regime, a strong Workforce Student Recruitment effect from 1 July 2011. The program had TESOL programs, provides General and Australian dollar, student safety and well a slow start due to the complexities of Academic English, and Exam Preparation being concerns and increased activity from the new delivery model and significant courses for international students at competitor countries. These impacts were one-off costs which were incurred centres in Sydney, Brisbane, Perth, Cairns somewhat mitigated through effective cost 65.1 19.1 in the establishment of new colleges and Darwin, the latter in partnership with control measures. 18 60 17. 7 and systems. Charles Darwin University, and operates Hawthorn-Melbourne, which is endorsed Outlook 15.8 The Division continued to face depressed 52.7 by the University of Melbourne as a 15 demand in the international education Navitas English anticipates revenue and 50 provider of English language preparation sector with volumes in FY12 approximately profit improvement in FY13 with the 45.1 courses for academic studies. 16% down on FY11 though the earnings Division continuing the progress evident 40 12 impact of this downturn was somewhat Navitas English delivered approximately in the H2 FY12 result. There are also mitigated through effective cost 100,000 student weeks of tuition to opportunities for growth from classroom control measures. ELICOS and TESOL students in FY12, a and online delivery as well as implementing 9 30 significant achievement though down on further operational efficiencies. FY11. Demand for IELTS tests in Sydney Activities and Achievements The evolving regulatory and visa regime, and Melbourne remained strong with more 20 6 and currency movements, affecting the than 21,250 candidates tested in FY12 Government Programs Australian English language sector will and the Division expanded its language FY12 saw a significant expansion continue to impact on enrolments but testing capability with Navitas English now 10 3 of Government Programs as new there are early signs of improvement in 6.1 a Cambridge Testing Centre and Pearson 4.9 1.3 AMEP contracts secured in FY11 student demand. 2.8 0.6 commenced operations. Testing Centre. This allows Navitas English 0 0 -1.4 Testing Centres to provide a full suite of 2 10 11 1 Y Y Y testing products to students and clients. F F F 2 10 11 1 Y Y Y F F F

Revenue ($m)

Revenue ($m) EBITDA ($m)

EBITDA ($m) UP SAE English

372.9 113.9 140.9 366.7 140 350 346.8 100 129.8 123.3 120 300 80 100 250 60 80 200

40 60 150

110.6 30 101.7 104.9 40 100 26.4

20 50 20 13.1 6.8 5.2 0 0 0

2 2 10 11 1 12 10 11 1 Y Y Y Y Y Y Y F F F F F F F

Revenue ($m) Revenue ($m) Revenue ($m)

EBITDA ($m) EBITDA ($m) EBITDA ($m) 36 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 37

Navitas Workforce Division

Key Highlights FinancialWorkforce Highlights Student RecruitmentOverview of Operations The Workforce Division provides quality higher and vocational education across

65.1 19.1 Australia with an emphasis on areas of Growth in the ACAP business including skills shortage and capability building. 18 17. 7 post graduate offering and online learning; 60 The Division operates nationally, with three colleges and15.8 in the 2012 year catered to the 52.7 education of approximately 15,000 people. 50 15

45.1 The key areas of focus are in nursing and Record number of Professional Year health care, counselling and psychology, 40 12 enrolments and expansion to project management, transport and include Engineering; logistics, accounting, occupational 30 9 health and safety, criminal justice, and management. The Division places emphasis on accessibility with delivery 20 6 in distance and face-to-face modes Health Skills Australia campus expansion providing the flexibility needed to allow and accreditation to offer Diploma of more organisations and individuals to 10 3 acquire skills. A diversity of learning Nursing; and 6.1 4.9 approaches1.3 also meets needs in terms of 2.8 different age cohorts,0.6 skills backgrounds Training Services invested in student 0 0 -1.4 ACAP and access which allows for work and 2 management systems, improved learner 10 11 1 ACAP expanded offerings in Psychological Y Y Y F F F family commitments. resources and expanded course offerings 2 Science in Sydney and launched the Expansion of training contract delivery to 10 11 1 Y Y Y to Diploma level in Accounting and F F Programs suchF as Professional Year Diploma of Elite Athlete Mentoring in Management. These latter programs will corporate clients in both NSW and WA. for computer science, engineering Melbourne. The College has also expanded Revenue ($m) deliver further growth in FY13. Corporate and accounting graduates and Career its e-learning delivery with use of lecture training delivery contracts improved on RevenueAdvantage ($m) programs for undergraduates capture and collaborative technologies — EBITDA ($m) the prior financial year particularly in WA give students and graduates work ready bringing students and educators together. EBITDA ($m) and NSW. skills and valuable work placements. Enrolments in ACAP have continued to grow and student satisfaction is at NCPS Financial Outcomes high levels. NCPS has continued investment in The Division achieved EBITDA of $6.1m in HSA curricula and teaching including bringing FY12, an increase of 24% on the previous The first Diplomas in Nursing commenced on new e-learning platforms which have year (FY11: $4.9m). Revenue also grew 23% with classes in Melbourne and Brisbane, contributed to increased enrolments to $65.1m (FY11: $52.7m). an important step in expanding offerings and an improved learning experience. This pleasing result was driven by strong into this growing field. This expansion Student feedback has been positive, in growth in the Professional Year and ACAP required significant investment in particular with workplace placements programs with expanded offerings across curriculum and facilities. Integration work providing reinforcement of learning and both areas proving popular. in systems and platforms also continues to industry experience. create efficiencies for HSA and enhance The Division also created efficiencies by productivity and the client experience. Outlook optimising co-location opportunities in Brisbane with ACAP, HSA and Workforce Sound growth is anticipated in FY13 Workforce Solutions Training sharing facilities and resources building on investments in e-learning, including classrooms, student facilities Careers and Internships enjoyed a record marketing and segmentation and in and library services. Similar plans are well number of enrolments in the Professional educational offerings — particularly health advanced for the Division’s Melbourne Year program which is designed to give and nursing. Recent investment and focus facilities in FY13. work readiness and specific discipline on NCPS is also anticipated to see it return placements to international graduates to profit. in the areas of Computer Science, Activities and Achievements Engineering and Accountancy. To date Demand for Professional Year programs, The Division’s objective is to be the leading the program is producing excellent directed at international graduates, Australian life stage learning and career employment rates for students with 70% of is anticipated to soften as a result of management provider. In 2012 progress participants securing employment in their amended government policy however was made towards this goal with expansion profession within six months of program increasing demand for domestic graduates of courses, investment in e-learning, new completion and 96% having secured work ready skills will provide some offset. facilities and enhanced marketing. employment in an Australian workplace Strong demand for Counselling and after six months. Psychological Science is anticipated and for sectors in the resource and aligned support areas. UP SAE English

372.9 113.9 140.9 366.7 140 350 346.8 100 129.8 123.3 120 300 80 100 250 60 80 200

40 60 150

110.6 30 101.7 104.9 40 100 26.4

20 50 20 13.1 6.8 5.2 0 0 0

2 2 10 11 1 12 10 11 1 Y Y Y Y Y Y Y F F F F F F F

Revenue ($m) Revenue ($m) Revenue ($m)

EBITDA ($m) EBITDA ($m) EBITDA ($m) 38 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 39

Navitas Student Recruitment Division

Key HighlightsWorkforce FinancialStudent Highlights Recruitment

Recruitment of more than65.1 3,800 19.1 18 students60 to universities in Australia, 17. 7 15.8 UK, US and Canada;52.7 50 15

45.1 Expansion40 of the number of schools within 12 the Training and Learning Division of 30 9 EduGlobal bringing the number of students in the program to just over 2,000; and 20 6

10 3 6.1 Studylink processed4.9 more than 25,000 1.3 on student recruitment, mobility and 2.8 0.6 Overview of Operations English, GMAT and GRE testing and applications0 for the first time. 0 -1.4 training. The Division also continued to earnings. Increased investment in the US

2 The Student Recruitment Division is 10 11 1 focus on achieving key organic growth in recruitment, and Learning and Training Y Y Y F F F comprised of three business units: 2 core recruitment operations, through a Division, of SOL proved rewarding with 10 11 1 Y Y Y EduGlobal, SOL and StudyLink. These F F F structural review of systems and process. revenue growth on FY11. businesses are primarily involved in the Further office expansion in India was Revenue ($m) recruitment and promotion of universities postponed due to adverse regulatory StudyLink to international students and offer advice Revenue ($m) changes that are not expected to abate in EBITDA ($m) on education options as well as visa advice StudyLink provides a searchable database the medium term. of courses being offered by educational EBITDA ($m) and university application assistance. institutions in Australia, Europe, India, Both SOL and EduGlobal are also EduGlobal Singapore and the US. In addition to its involved with the delivery and training With more than 17 years experience comprehensive search database StudyLink of English language, GMAT and GRE in in student recruitment and 18 offices also offers Australian and international their respective countries. The Division currently covering 10 provinces, EduGlobal educational institutions student admissions operates 33 offices in three countries and is one of the largest recruitment agencies and recruitment technologies. sends more than 3,800 students abroad in China. EduGlobal recruits for all major StudyLink has made a positive contribution each year. Western countries including Australia, UK, to the Division’s EBITDA in FY12 following US and Canada. a strategic review of existing operations Financial Outcomes In FY12, the US operations along with in the first half of FY11. A subsequent The Student Recruitment Division the Learning and Training Division restructure to focus on core business and continued to be affected by regulatory of EduGlobal, achieved good growth technology saw submitted applications changes in the UK, specifically SOL whilst the UK and Australian operations through existing Studylink Connect clients in India, recording a 11% decrease in continued to be impacted by regulatory increase by 28% on FY11 as well as paid for revenues to $15.8m (FY11: $17.7m) and changes. Some of this effect was mitigated submitted applications exceeding 25,000 a 54% decrease in EBITDA to $0.6m by a diversified portfolio of institutions for the first time. (FY11: $1.3m). and countries, coupled with the Learning and Training division moving into a Following a review of EOL (an arm of Outlook profitable position. SOL based in London) a decision was It is anticipated that the Student made to re-focus on core activities and SOL Recruitment Division will see a marginal subsequently EOL activities were phased decline in earnings in FY13 predominantly Founded in 1996 and now operating down with the business concluding due to the continued impacts of regulatory from 12 offices, SOL is one of the largest in FY12. and migration changes in the UK. The education consultancies in India. SOL effect of Knight Review changes in currently recruits more than 1,400 Australia are still unfolding. Activities and Achievements students a year and is a market leader A broad review of operations and strategy in India for education counselling and Investment will continue in the US which was conducted in China and India student services. recruitment businesses in India and China in FY11 was implemented in FY12 with a as well as further expansion of the Learning SOL had a difficult year with both view to reduce investment in infrastructure and Training business units that are Australian and UK regulatory changes and reinvest in key initiatives such as proving profitable. continuing to have a negative impact SUCCESS THROUGH DIVERSITY Navitas Li mited Annu al R eport 2012 41

DIVERSITY DELIVERS STRENGTH AND STABILITY

Corporate Governance Statement 42 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 43

Corporate Governance Statement

Introduction The ASX Corporate Governance Council’s The Role of the Board Certain functions have been delegated (Council) “Corporate Governance to the CEO under the Board Charter The Company has established the Principles and Recommendations” and the Delegation of Authority Policy functions reserved to the Board pursuant The Board of Navitas (Principles and Recommendations) and Procedures Manual. The CEO is to the Board Charter approved on articulate eight core corporate governance responsible for the ongoing management Limited is responsible for 6 December 2005 and the Delegation of Principles, with commentary about of the Company in accordance with Authority Policy and associated Procedures the corporate governance implementation of those Principles in the the strategy, policies and programs Manual adopted on 31 July 2007. of Navitas and its subsidiary form of Recommendations. approved by the Board. The CEO’s Under the Board Charter, the Board is responsibilities include: Under ASX Listing Rule 4.10.3, Navitas companies. The Board responsible for, and has the authority is required to provide a statement • developing with the Board, a consensus to determine, all matters relating to the determines all matters in its annual report disclosing the for the Company’s vision and direction; strategic direction, policies, practices, extent to which it has followed the • constructing, with the Company’s relating to the strategic establishing goals for management and the Recommendations in the reporting period. management team, programs to operation of the Company. Without limiting direction, academic quality Where a Recommendation has not been implement this vision; this general role, the specific functions and followed, the fact must be disclosed, and governance, policies, responsibilities of the Board include: • appointing the senior together with reasons for departure from management team; practices, management and the Recommendation. In addition, a • oversight of the Company, including its number of the Recommendations require control and accountability systems; • providing strong leadership to, and operations of Navitas with effective management of, the Company the disclosure of specific information in • input into the final approval of in order to: the aim of protecting the the corporate governance statement of the management’s development -- encourage co-operation interests of its Shareholders annual report. of corporate strategy and performance objectives; and teamwork; Navitas’ corporate governance statement is and other stakeholders, structured with reference to the Council’s • reviewing and ratifying systems of risk -- build and maintain staff morale at a including employees, Principles and Recommendations, which management and internal compliance high level; and Principles are as follows: and control, codes of conduct and -- build and maintain a strong sense students and partners, and legal compliance; of staff identity with, and a sense of Principle 1 creating value for them. • monitoring senior management’s allegiance to, the Company; Lay solid foundations for management performance and implementation of • ensuring a safe workplace for and oversight strategy, and ensuring appropriate all personnel; • risk management plans across the • appointment of new staff, promotions, resources are available; • ensuring a culture of compliance Navitas Group; remuneration adjustments and Principle 2 redundancies not detailed in the entity’s • approving and monitoring the progress generally, and specifically in relation to • official Navitas publications for external Structure the Board to add value rolling plan; of major capital expenditure, capital environmental matters; use specific to the Navitas Group; management and acquisitions and • industrial relations matters including Principle 3 • carrying out the day-to-day • forecasts and rolling plans for divestitures; and appointment of mediators and Promote ethical and responsible management of the Company; Navitas’ Divisions; • approving and monitoring financial and resolution of equal opportunities or decision-making • keeping the Board informed, at an other reporting. • operating expenditure in relation industrial disputes; appropriate level, of all the activities of to more than one entity within the • entity risk management plans; Principle 4 Under the Delegation of Authority Policy the Company; Navitas Group; • new occupational health and safety Safeguard integrity in financial reporting and Procedures Manual, authority has • ensuring that all personnel act with • capital expenditure up to a maximum policies and amendments; been reserved to the Board with respect to the highest degree of ethics and of $1m or where such expenditure is in Principle 5 various matters, including: probity; and relation to more than one entity within • forecasts and rolling plans for Navitas Make timely and balanced disclosure • activities relating to strategic planning • reporting performance and profit the Navitas Group; business units; for the Group as a whole; figures, and undertaking all other public • media contact and media releases; and • media releases, editorials and articles Principle 6 relations activities. with respect to positive media coverage; • activities relating to governance; • marketing and advertising material at Respect the rights of Shareholders • joint venture or partnering agreements; The Board has also formally delegated the Navitas Group level. • marketing and advertising material at the power to the CEO to authorise all the Divisional level; and Principle 7 • Group-wide policies related to The Company has also established those treasury, corporate governance, risk expenditures as approved in the budget, • entity specific governance Recognise and manage risk functions delegated to senior executives subject to certain exceptions. Under and compliance; pursuant to the Delegation of Authority arrangements, quality assurance the Delegation of Authority Policy and processes and staffing profile. • purchase of businesses outside the Policy and associated Procedures Principle 8 Procedures Manual, authority has been Navitas Group; Manual, including: Remunerate fairly and responsibly delegated to the CEO with respect to The Board Charter, the Delegation • annual report; and various matters, including: • activities relating to strategic planning of Authority Policy and Delegation Details of Navitas’ compliance with for individual business units; of Authority Procedures Manual • forecasts and rolling plans for the • activities relating to strategic planning the Recommendations for the year are all publicly available on the ended 30 June 2012 are disclosed in Navitas Group. for the Group’s individual Divisions; • Navitas Group policies other than those requiring Board or CEO approval; Company’s website: this statement. • significant administrative changes navitas.com/investor_centre.html. • establishment and/or amendment of For further information on the corporate affecting more than one entity within any rules and/or regulations specifying governance policies adopted by Navitas, the Navitas Group; the governance of specific Navitas please refer to the Company’s website: • Group-wide policies related to ASX/ entities, as well as facilities; navitas.com/investor_centre.html. ASIC governance; 44 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 45

Corporate Governance Statement (continued)

Structure, Composition and Performance Evaluation takes into account the extent to which Board decisions are made in the best the executive’s behaviour is aligned with interests of Navitas; Operation of the Board The performance of the Board and its Navitas’ values. The outcome of the review • monitoring, on an ongoing basis, The skills, experience and expertise individual Directors is reviewed regularly. then provides the basis for a professional the time required for non-executive relevant to the position of Director held by The Chairman of the Board conducts development plan for the key executive. Directors to adequately fulfil their each Director in office at the date of this individual performance evaluations of the As noted above, performance evaluations duties and the extent to which non- report are included in the Directors’ Report Directors, involving an assessment of each executive Directors are meeting these on pages 114 to 123. for individual Directors and key Board member’s performance. During the executives were conducted during the time requirements; reporting period, performance evaluations reporting period in accordance with the • implementing an effective induction of each Board member were conducted in Independence of Directors above processes. process for new Board appointees and accordance with this process. A Director is considered to be independent key executives; where he or she is a non-executive The Board review process is currently Remuneration • evaluating and reviewing the Director, is not a member of management handled internally whereby the performance of the Board as a whole It is Navitas’ objective to provide maximum and is free of any relationship that could, performance of the Board is assessed and individual Directors against both stakeholder benefit from the retention or could reasonably be perceived to, against its objectives and responsibilities measurable and qualitative indicators; of a high quality Board by remunerating materially interfere with the independent as set out in the Board Charter. The current Directors fairly and appropriately with • providing the Board with advice exercise of their judgment. The existence process consists of a questionnaire, an reference to relevant market conditions. and recommendations regarding of the following relationships may affect immaterial if it is equal to or less than 5% The term in office held by each Director informal discussion, and one-on-one an executive remuneration policy, independent status, if the Director: of the appropriate base amount, being the in office at the date of this statement is meetings between the Chairman and For a full discussion of Navitas’ incentive schemes, non-executive monetary value of the transaction or item as follows: individual Directors. An evaluation of the • is a substantial Shareholder of Navitas remuneration philosophy and framework remuneration and termination and in question. It is presumed to be material or an officer of, or otherwise associated performance of the Board was conducted and the remuneration received by redundancy policies; directly with a substantial Shareholder (unless there is qualitative evidence to Name Term in office during the reporting period in accordance Directors in the current period please the contrary) if it is equal to or greater • reviewing and providing of Navitas (as defined in section 9 of the Harvey Collins 7 years with this process. refer to the remuneration report, which is recommendations to the Board Corporations Act); than 10% of the appropriate base amount. contained at pages 114 to 123 of the Peter Campbell 7 years The process for evaluating the with respect to the remuneration Qualitative factors considered include Director’s Report. • is employed, or has previously been performance of the Nomination and whether a relationship is strategically Ted Evans 7 years packages of senior management and employed in an executive capacity by important, the competitive landscape, Remuneration Committee and the Audit There is no scheme to provide retirement executive directors; the Navitas Group, and there has not Rod Jones 8 years the nature of the relationship and the and Risk Committee involves an internal benefits, other than statutory been a period of at least three years • maintaining a framework to ensure contractual or other arrangements Tracey Horton Less than 1 year review by the relevant committee of its superannuation, to non-executive Directors. between ceasing such employment and that employees of Navitas do not governing it. performance against its objectives and serving on the Board; James King 7 years unduly influence any remuneration responsibilities as set out in the relevant recommendation a remuneration In accordance with the definition of Peter Larsen 8 years Nomination and • has within the last three years been committee charter. The Nomination and consultant may provide; a principal of a material professional independence above, and the materiality Risk Committee conducted an internal Remuneration Committee thresholds set, the Board reviewed the review evaluating its performance against • reviewing the relative proportion of adviser or a material consultant to Role of the Nomination and the Navitas Group, or an employee positions and associations of each of the Retirement and its objectives and responsibilities as set women and men in Navitas’ workforce Remuneration Committee on an annual basis; and materially associated with the seven Directors in office at the date of this Re-election of Directors out in the Charter of the Nomination and services provided; statement and considers that four of the Remuneration Committee. Following that The Board established a Nomination and • providing the Board with advice Directors are independent as follows: Rule 5.1 of the Constitution requires Remuneration Committee on 18 February • is a material supplier or customer review, the Nomination and Remuneration and recommendations regarding that at each annual general meeting of 2005 that operates under a charter of the Navitas Group, or an officer Committee is of the view that its remuneration by gender. the Company, one third (or the number approved by the Board. The purpose of the of or otherwise associated directly Name Position composition, operations and discharge nearest to but not exceeding one third) of Nomination and Remuneration Committee The Nomination and Remuneration or indirectly with a material supplier Harvey Collins Non-Executive Chairman of its responsibilities are consistent with the Directors and any Director who has is to provide advice, recommendations and Committee comprised the or customer; Principles 2 and 8. Ted Evans Non-Executive Director held office for three years or more must assistance to the Board with respect to following members: The Audit and Risk Committee • has a material contractual relationship Tracey Horton Non-Executive Director retire from office and no Director may nomination and remuneration matters. • Ted Evans (Chair) with the Navitas Group other than as retain office for more than three years conducted an internal review evaluating James King Non-Executive Director The Nomination and Remuneration • Harvey Collins a Director. without submitting himself or herself for its performance against its objectives Committee is responsible for: re-election. Rule 5.4 of the Constitution and responsibilities as set out in the • Peter Campbell Directors are expected to bring The Board will assess the independence provides that a retiring director is eligible Charter of the Audit and Risk Committee. • identifying specific individuals for independent views and judgement to the For details of Directors’ attendance of new Directors upon appointment, and for re-election without the necessity of Following that review, the Audit and nomination for directorship and key Board’s deliberations. The Board Charter at meetings of the Nomination and the independence of other Directors, as giving any previous notice of his or her Risk Committee is of the view that its executive roles and providing advice requires that at least one half of the and recommendations to the Board with Remuneration Committee, please refer to appropriate. Following the appointment intention to submit him or herself for composition, operations and discharge Directors of Navitas will be non-executive respect to the appointment and removal page 114 of the Directors’ Report. of Tracey Horton, the majority of Board re-election. The Managing Director is not of its responsibilities are consistent with (preferably independent) Directors and of Directors and key executives; is independent. To facilitate independent subject to retirement by rotation. The Principle 4. that the Chair will be an independent, The Charter of the Nomination and judgement in decision-making, each resolution for re-election of a Director • providing the Board with advice and non-executive Director. The performance of key executives is Remuneration Committee is publicly recommendations regarding identifying, Director has the right to seek independent is included in the Company’s notice of reviewed internally on an annual basis available on the Company’s website: assessing and enhancing Director In the context of Director independence, professional advice at Navitas’ expense. annual general meeting and voted upon by pursuant to a Navitas-wide performance navitas.com/investor_centre.html. competencies and a succession plan; “materiality” is considered from both However, prior approval from the Shareholders at that meeting. planning and review process. Key the Company and individual Director Chair is required, which may not be The relevant Board policy, entitled performance indicators are agreed on an • ensuring that the Board is of a size and perspective. The determination of unreasonably withheld. “Procedures governing the Selection and individual basis for such executives and composition that allows for decisions materiality requires consideration of both Appointment of Directors” is publicly performance against these indicators to be made expediently, a range of quantitative and qualitative elements. available on the Company’s website: is then reviewed by the Chief Executive different skills and perspectives are An item is presumed to be quantitatively brought to Board deliberations and navitas.com/investor_centre.html. Officer. The performance review also 46 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 47

Corporate Governance Statement (continued)

Each candidate for election as a accountable to the Board for ensuring the Navitas has achieved its targets in relation Director must: Diversity Policy is implemented throughout to Board appointments, and full-time and • be proposed by a person entered in the the Navitas’ workforce. Senior executives part-time employees during the year. There register of members as a member for and all personnel involved in recruitment were no vacancies for senior executive the time being of the Company, or its are expected to ensure this Policy is appointments during the year. implemented and integrated into all of nominated representative in the case of Of seven Board positions, six (85.7%) were a corporate member; and Navitas’ activities. held by men, and one (14.3%) was held by • be seconded by another member or the Navitas recognises that a talented and a woman. nominated representative of another diverse workforce is a key competitive Of 59 senior executive positions, 41 corporate member. advantage and the Navitas’ success (69.5%) were held by men and 18 (30.5%) is a reflection of the quality and skills A nomination of a candidate for election were held by women. of its people. Navitas is committed to by a member must be in writing; be signed promoting a workplace that recognises Of 2,314 full-time employees, 1,351 by the candidate; and be signed by the and embraces the skills, characteristics (58.4%) were women and 963 (41.6%) proposer and seconder. A nomination of and experiences that people bring to the were men. Of 549 part-time employees, a candidate for election must be received Group. Accordingly, Navitas has adopted 329 (59.9%) were women and 220 (40.1%) at the registered office of the Company a diversity strategy document for the were men. not later than 5.00pm on the day which purposes of implementing initiatives to is 35 business days prior to the annual As at 30 June 2012, the proportion of achieve greater diversity. general meeting at which the candidate women employed by the Navitas Group is seeks election. The diversity strategy document outlines set out in the second table below. measurable objectives to achieve gender The Board may also appoint a Director to Following the adoption of the Diversity diversity. During the year, Navitas fill a casual vacancy, or as an addition to Policy, regular updates on the progress of developed and adopted the Diversity the existing Directors at any time, provided achieving various strategies, initiatives and Policy, assigned responsibility for the that any such Director holds office only targets are to provided to the Board and Diversity Policy and its administration, until the next annual general meeting and Nomination and Remuneration Committee. Selection and Appointment to enable it to determine whether it Following receipt of nominations for monitoring and review, reviewed and is eligible for re-election at the meeting. of New Directors is necessary to recruit any additional Directorship from candidates, the amended the Charter of the Nomination The Diversity Policy is publicly available on Directors to the Board or desirable to Nomination and Remuneration Committee Each candidate must also deliver to the and Remuneration Committee to reflect its the Company’s website: A description of the procedure for the reduce the number of existing Directors. may prepare a short list of candidates to Company a consent to act as Director of obligations in relation to gender diversity, navitas.com/investor_centre.html. selection and appointment of new The Committee reports to the Board determine the candidates in their opinion the Company. The Company must receive and investigated the reporting capacity Directors and of the Board’s policy for the setting out the results of these reviews. who best fulfil the Director competencies. this no later than (if applicable) the date of business units for the purposes of nomination and appointment of Directors The Committee will interview each of the If the Nomination and Remuneration of appointment of the candidate as a determining diversity targets. is set out below. short listed candidates and require each Committee determines that it is necessary Director. The consent to act as a Director candidate to disclose the nature and extent The Board has set specific gender diversity The Nomination and Remuneration to recruit an additional Director to the must include all details required by the of their other appointments, commitments targets as follows: Committee, at least twice each Board, or the Board so determines, Corporations Act and Listing Rules. and activities. year, reviews: the Committee: As announced to the ASX on 13 June When considering candidates for Target Date for completion • the composition of the Board • will determine the particular skills, 2012, the Board appointed Emeritus appointment as a Director, the Committee taking into account the number of experience, expertise and personal Professor Tracey Horton as a Non- At least one of the next two Board When it is appropriate to expand or values candidates who contribute to the appointed Directors; qualities required to best complement Executive Director. In accordance with appointments desirably should be female refresh the Board diversity of the Board and demonstrate with appropriate skills and attributes • the performance of the Board and the Board’s effectiveness; Rule 8.2 of the Constitution, Tracey Horton skills, experience and knowledge of individual Directors of the Company; • will determine the most appropriate will hold office until the termination of At least 50% of the next senior executive* When it is appropriate to expand or the industry, market and regulatory formal and transparent procedure to the next annual general meeting unless appointments desirably should be female refresh the senior executive team • the business and strategic objectives environment in which the Company identify candidates with the skills and otherwise re-elected at the meeting. with appropriate skills and attributes and needs of the Company; operates. The Board considers that skills, experience required by the Board; and Tracey Horton, being eligible, will offer experience and knowledge in education, At least 33% of employees should be female Annually by 30 June each year • the skills, experience, knowledge and herself for re-election at the next annual • may engage the services of an finance, governance, management or with appropriate skills and attributes. diversity required on the Board and the general meeting. extent to which each competency is independent consultant to perform an marketing are relevant. represented, maintained and developed advisory role in relation to its review *Senior executives are defined as members of the Group Leadership Team as well as the senior direct reports to the The Nomination and Remuneration Executive General Managers of the operating Divisions. by the Board; considerations and the required Diversity Director competencies. Committee will provide an update to the • the opportunities to appoint non- Board at all appropriate times during the On 20 March 2012, Navitas adopted executive Directors and obtain The Committee seeks to achieve a balance selection process and provide the Board a Diversity Policy and set measurable Number of employees the services of particular persons between long serving Directors with objectives for achieving gender diversity. with an opportunity to meet with the Full time Part time Casual Total Proportion with desirable skills, experience an extensive understanding of Navitas’ preferred candidate(s). The Committee The Nomination and Remuneration and knowledge at the time of businesses and corporate history, and new shall make a formal recommendation to the Committee is accountable to the Board their availability; Directors who bring fresh perspectives Board concerning appropriate candidates for ensuring the Diversity Policy is Female 1,351 329 1,196 2,876 59.3% • the need to cater for the replacement to the role. The Board values diversity, to fill any vacancy for consideration by implemented in respect of the Board and Male 963 220 793 1,976 40.7% or scheduled retirement of Directors including gender and differences in the Board. the process for identifying and selecting ahead of each annual general background and life experience, education, new Directors. The Managing Director is meeting; and communication styles, and problem- Total 2,314 549 1,989 4,852 100.0% solving skills. • succession planning for the Board, 48 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 49

Corporate Governance Statement (continued)

Audit and Risk Committee Harvey Collins BBus, FCPA, SFFin, of the factors listed above. Removal of FAICD has extensive executive and the auditor may result if the auditor fails Role of the Audit and Risk Committee board experience in a range of industries to demonstrate satisfactory outcomes in The Board established an Audit and Risk including financial services, health relation to the above factors. insurance, telecommunications, equipment Committee on 28 January 2005 that Auditor appointment will be made by the hire, mining services franchising and operates under a charter approved by the Board at the Audit and Risk Committee’s electricity. He is a member of the Audit and Board. The purpose of the Audit and Risk recommendation after the successful Risk Committee. Committee is to assist the Board in fulfilling completion of the selection process, and in its corporate governance and oversight For details on the number of meetings conjunction with statutory guidelines. responsibilities by: of the Audit and Risk Committee held In respect of the rotation of external • monitoring and reviewing the: during the year and the attendees at those audit engagement partners, it is the meetings, please refer to page 114 of the -- integrity of the financial statements; Company’s policy that a partner should Directors’ Report. -- effectiveness of internal not serve the Company in the position of financial controls; The Charter of the Audit and Risk audit client service partner for more than Committee is publicly available on the five successive years. A partner should -- independence, objectivity and Company’s website: not be re-assigned to the Company in competency of internal and external auditors; navitas.com/investor_centre.html. the role of audit partner for at least two years after reaching the maximum period -- policies on risk oversight Selection, Appointment and of continuous service. Further, a partner and management; should not be re-assigned to the Company Rotation of External Auditor • ensuring that the Navitas Group has an Internal audit is responsible for managing • This information underpins senior -- execution of the treasury and in the role of audit client service partner effective risk management system and the risk management system and collating management’s control self-assessment insurance functions; and The procedures for the selection, if this would equate to the partner serving that macro risks to the Navitas Group the business units’ risk assessments and certificates, which are used to provide appointment and rotation of external audit in this role for more than five out of seven • making recommendations to the are reported at least twice a year to tolerance for periodic reports to the Audit assurance to the Board that they engagement partners are as follows. successive years. As part of the audit Board in relation to the appointment the Board; and Risk Committee. Internal audit also are managing risks appropriately, plan presented to the Audit and Risk facilitates twice-yearly assessments by and enables Group Internal Audit of external auditors and approving The Audit and Risk Committee re-evaluates • evaluating the process Navitas has in Committee, the audit partner considers senior management of strategic risks. to concentrate its activities on the remuneration and their terms the appointment of its external auditors place for assessing and continuously the need for rotation in accordance with material risks and adapt its approach of engagement. on a regular basis, and considers whether improving internal controls, particularly these policies. The Board has required management to accordingly. The Audit and Risk it is appropriate to tender the audit as it those related to areas of significant risk; The Audit and Risk Committee is design and implement a risk management Committee approves the annual audit deems necessary. Such re-evaluations are The relevant policies, entitled “Selection responsible for providing the Board with • assessing whether management has and internal control system to manage plan, as amended from time to time performed no less than once every five and Appointment of External Auditor advice and recommendations regarding controls in place for unusual types Navitas’ material business risks, and to to reflect the dynamic nature of the years, and may be considered annually Policy” and “Rotation of External Audit the ongoing development of risk oversight of transactions and/or any potential report to it on whether those risks are business, and receives all audit reports; post the completion of the audit process Engagement Partners” are available on the transactions that may carry more than being managed effectively. and management policies that set out the • Senior management and the Audit and (as part of the audit debrief process). As a Company’s website: an acceptable degree of risk; and roles and respective accountabilities of the minimum, the re-evaluations and decisions navitas.com/investor_centre.html. In summary, the Navitas risk management Risk Committee regularly review the risk Board, the Audit and Risk Committee and • ensuring the continuous development of register to ensure that material risks to put the audit to tender (if any) will take and internal control system comprises: the internal audit function. risk management in the Navitas Group are correctly identified, that the target into account such factors as: Risk Management and for supervising the implementation • A Group Risk Management Policy risks are acceptable and any remedial The Audit and Risk Committee comprised • service delivery; of risk management in compliance Statement and methodology based Navitas recognises the importance of action is in progress. The Audit and Risk the following members: with the risk management policy on the International Standard for Risk • quality of service; risk management and has a formal risk Committee reports every six months to • James King (Chair) and guidelines. Management ISO 31000. This Policy has the Board on the management of the • independence of the external auditor management framework, including policies been placed on the Navitas website and • Ted Evans risks contained in the risk register; and whether the independence of the for the oversight and management of Each business unit is responsible for is therefore accessible by all Navitas • Harvey Collins audit function has been maintained material business risks. the identification, assessment, control, staff. The Policy outlines Navitas’ • Management understanding and acceptance of its responsibility to having regard to the provision of non- The Navitas Board is ultimately responsible reporting and on-going monitoring of risks approach to managing risk including a James King BComm, FAICD has over audit services; implement appropriate systems of for risk management in Navitas and must within its own responsibility. Business description of responsibilities; 30 years of board and management internal control to effectively manage • effectiveness of the audit/client satisfy itself that significant risks faced units are responsible for implanting experience with major multi-national • The Audit and Risk Committee has potential risks; relationship; and the requirements of this policy and for companies in Australia and internationally. by the Navitas Group are being managed endorsed the risk management providing assurance to the Board of • Ongoing management oversight of He is the Chairman of the Audit and • fees/value. appropriately and that the system of risk methodology which includes an Directors that it has done so. The business integrated risk management, control strategic matters by management and Risk Committee. management within the Navitas Group is In tender situations the Audit and Risk robust enough to respond to changes in unit, where deemed appropriate, may self-assessment and internal audit of operational matters by business Ted Evans AC, BEcon has significant Committee will nominate an Audit Tender Navitas’ business environment. enhance its own organisational structure process managed by Group Internal unit management; provided that such enhancements further experience in the financial sector, having Evaluation Committee to undertake the Audit and Risk Management; • Various policies and procedures The Audit and Risk Committee has the joined the Australian Treasury in 1969. task of selecting a new auditor. The Audit assist the achievement of the objectives of covering areas such as Share Dealing, following responsibilities in regard to • The risk management system includes He was a director of the Reserve Bank Tender Evaluation Committee will be this policy. Human Resources, Information risk management: a Group-wide risk register of all key of Australia from 1993 to 2001 and the comprised of the Chairman of the Audit Management is responsible for identifying material inherent risks, an assessment Technology, Critical Incidents and • assessing the internal process for Commonwealth Bank of Australia from and Risk Committee, the Chief Executive and evaluating risks within their area of control effectiveness, comparison of Delegations of Authority, such policies determining and managing key 1993 to 1996. He was a former director Officer, the Chief Financial Officer and of responsibility, implementing agreed residual risks to target risks and a data are centrally located via an intranet; and Chairman of Westpac Banking risk areas; other representatives of the Audit and Risk actions to manage risk and for reporting base of actions to reduce any residual • Monthly reporting and review of Corporation. He is a member of the Audit Committee and management as deemed • confirming management’s risk appetite as well as monitoring any activity or risks to the desired level; financial and budgetary information; and Risk Committee. appropriate. Auditor selection will be and tolerance; circumstance that may give risk to new or based on the satisfactory demonstration changed risks. 50 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Corporate Governance Statement (continued)

• External auditors independently system of risk management and internal Ethical and Responsible evaluating Navitas’ compliance with control and that the system is operating Decision-Making the International Financial Reporting effectively in relation to financial reporting Navitas has established codes of conduct Standards on an annual basis; risks. The Board understands that as to the: these assurances regarding the internal • An internal audit function, which is • practices necessary to maintain control systems provide a reasonable designed to provide assurance to confidence in the Company’s integrity; the Audit and Risk Committee on the level of assurance only and do not imply effectiveness of the risk management a guarantee against adverse events, or • practices necessary to take into and internal control procedures and losses, or more volatile outcomes arising account its legal obligations and mechanisms in place to mitigate risks in the future and that the design and the reasonable expectations of its across the Navitas Group, that risks operation of the internal control systems stakeholders; and are being adequately and appropriately relating to financial reporting has been • responsibility and accountability identified and that the principles and assessed primarily through the use of of individuals for reporting requirements of managing risk are declarations by process owners who are and investigating reports of consistently adopted throughout the responsible for those systems. Internal unethical practices. Navitas Group. Internal audit also audit activity has also assisted with this recommends improvements to the assessment. Some follow up action items These codes of conduct, entitled “Code of system of risk management; and were noted and action plans have been Conduct for Directors and Key Officers” and “Code of Conduct — The Company’s • Independent and regular external developed for management consideration Obligations to Stakeholders” are publicly reviews by various industry that will address these and a summary of available on the Company’s website: accreditation bodies to ensure this has been provided to the Audit and navitas.com/investor_centre.html. compliance with relevant legislation, Risk Committee on 22 June 2012. regulation and state and national codes The Group Risk Management Policy is Communications with Shareholders of practice. publicly available on the Company’s The Company has designed a website: navitas.com/investor_centre.html. The Company has identified a series of communications policy: material business risks which the Company • for promoting effective communication believes to be inherent in the industry in Other Policies with Shareholders; and which the Company operates, and being the categories of risk reported on or Continuous Disclosure • encouraging Shareholder participation referred to in this financial report. In 2012, Navitas has established written policies at AGMs. these were: designed to ensure: The Company has a platform by which • ability to optimise performance from • compliance with ASX Listing Rule senior managers who are authorised to organic growth opportunities and disclosure; and speak to analysts (the CEO, the CFO and in recently acquired businesses; • accountability at a senior executive level some circumstances the General Manager • protecting the Navitas brand and for that compliance. Public Relations) are able to record relationships with key stakeholders; and details of the meeting including time and The relevant policy, entitled “Corporate place, attendees and file notes of what • ability to predict, influence or manage Governance Policy — Continuous was discussed. change (including political, regulatory Disclosure” is publicly available on the and technological change). Company’s website: The policy, entitled “Corporate Governance Policy - Communications Strategy”, is The Board has received a formal report navitas.com/investor_centre.html. publicly available on the Company’s from management under Recommendation website: navitas.com/investor_centre.html. 7.2 as to the effectiveness of Navitas’ Securities Trading Policies management of its material business The Company has established policies risks with respect to the reporting period. concerning trading in its securities by Summary Upon due consideration of Navitas’ risk Directors, senior executives and employees. In summary, Navitas concludes that it management and internal control system, These policies, entitled “Directors and substantially complied with all of the management formally reported that, with Senior Executives Dealing In Securities Recommendations other than as previously respect to the financial year ending 30 Policy” and “Employees Dealing In disclosed in this statement. June 2012, Navitas is, in its assessment, Securities Policy” are publicly available on effectively managing its material business the Company’s website: risks through its risk management and navitas.com/investor_centre.html. internal control system. A summary of the Company’s policy on In addition, the Board has received a prohibiting transactions in associated written assurance from the Chief Executive products which limit risk of participating Officer and the Chief Financial Officer in unvested entitlement under any equity that, to the best of their knowledge and based remuneration schemes is set out in belief, the declaration provided by them these securities trading policies. in accordance with section 295A of the Corporations Act is founded on a sound SUCCESS THROUGH DIVERSITY Navitas Li mited Annu al R eport 2012 53

DIVERSITY DELIVERS GROWTH AND OPPORTUNITY

Financial Statements CLICK TO VIEW 54 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 55

Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position For the year ended 30 June 2012 As at 30 June 2012

2012 2011 2012 2011 Note $000s $000s Note $000s $000s

Revenue 5 688,530 643,812 ASSETS Current Assets Marketing expenses (96,862) (89,922) Cash and cash equivalents 10 19,162 36,307 Trade and other receivables 11 81,719 72,592 Academic expenses (147,909) (122,042) Other 12 14,817 16,908 Administration expenses (331,655) (323,021) Finance costs 6 (7,987) (3,610) Total Current Assets 115,698 125,807

Profit before income tax expense 104,117 105,217 Non Current Assets Property, plant and equipment 13 66,062 61,368 Income tax expense 7 (30,497) (27,983) Deferred tax assets 7 16,856 17,876 Intangible assets 14 438,274 448,733 Profit for the year 73,620 77,234 Total Non Current Assets 521,192 527,977 Other comprehensive income Net currency translation differences 1,904 923 TOTAL ASSETS 636,890 653,784 Fair value movement in hedge instruments (1,864) 666 LIABILITIES Income tax relating to other comprehensive income 359 - Current Liabilities Trade and other payables 15 72,714 84,568 Other comprehensive income for the year 399 1,589 Deferred revenue 173,999 169,490 Current tax payable 7 4,119 5,641 Total comprehensive income for the year 74,019 78,823 Borrowings 16 2,839 3,308 Provisions 17 3,242 3,143 Profit attributable to: Owners of the parent 19 73,149 77,392 Total Current Liabilities 256,913 266,150 Non controlling interest 20 471 (158) Non Current Liabilities Trade and other payables 15 6,459 7,305 73,620 77,234 Borrowings 16 133,308 135,833 Total comprehensive income attributable to: Provisions 17 6,650 5,283 Owners of the parent 73,728 78,723 Non controlling interest 291 100 Total Non Current Liabilities 146,417 148,421

74,019 78,823 TOTAL LIABILITIES 403,330 414,571

NET ASSETS 233,560 239,213 Cents Cents Earnings per share 9 EQUITY Basic 19.5 21.7 Issued capital 18 195,175 194,851 Diluted 19.5 21.7 Reserves 19 1,299 720 Retained earnings 19 37,986 45,145

The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. Equity attributable to owners of the parent 234,460 240,716

Non controlling interests 20 (900) (1,503)

TOTAL EQUITY 233,560 239,213

The consolidated statement of financial position should be read in conjunction with the accompanying notes. 56 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 57

Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows For the year ended 30 June 2012 For the year ended 30 June 2012

Non- Issued Retained controlling Capital Reserves earnings interests Total equity 2012 2011 $000s $000s $000s $000s $000s Note $000s $000s

Balance at 1 July 2011 194,851 720 45,145 (1,503) 239,213 Cash flows from operating activities Receipts from customers 687,751 623,531 Profit for the year - - 73,149 471 73,620 Payments to suppliers and employees (575,519) (522,148) Fair value movement in hedge instruments (after tax) - (1,505) - - (1,505) Interest received 375 1,881 Net currency translation differences - 2,084 - (180) 1,904 Interest paid (7,987) (3,447) Income tax paid (30,761) (30,359) Total comprehensive income for the year - 579 73,149 291 74,019 Net cash flows from operating activities 10 73,859 69,458 Issue of share capital - - - - - Cost of issuing share capital (after tax) - - - - - Cash flows from investing activities Issue of share capital to non-controlling interest - - - - - Purchase of property, plant and equipment 13 (19,366) (11,013) Transfer to general reserve - - - - - Proceeds on disposal of plant and equipment 26 13 Employee share plan purchase 324 - - - 324 Proceeds on disposal of operations - 5,662 Acquisition of non-controlling interest share - - - 392 392 Net cash paid for controlled entities - (248,051) Dividends paid - - (80,308) (80) (80,388) Payment of acquisition related costs - (4,779)

Balance at 30 June 2012 195,175 1,299 37,986 (900) 233,560 Net cash flows used in investing activities (19,340) (258,168)

Total attributable to: Cash flows from financing activities Non controlling interests - - - (900) (900) Proceeds from issue of ordinary shares 18 - 102,250 Owners of the parent entity 195,175 1,299 37,986 - 234,460 Payment of share issue costs 18 - (2,032) Proceeds from borrowings 245,938 184,696 Repayment of borrowings (236,431) (49,697) Balance at 1 July 2010 69,504 (832) 36,741 (1,967) 103,446 Payment of debt establishment costs - (1,286) Payments to non controlling interests (420) (5) Profit for the year - - 77,392 (158) 77,234 Payment of dividends 8 (80,308) (68,767) Fair value movement in hedge instruments (after tax) - 666 - - 666 Payment of dividends to non controlling interests (80) (115) Net currency translation differences - 665 - 258 923 Net cash flows from/(used) in financing activities (71,301) 165,044 Total comprehensive income for the year - 1,331 77,392 100 78,823 Net decrease in cash and cash equivalents (16,782) (23,666) Issue of share capital 126,382 - - - 126,382 Net foreign exchange differences (363) (1,754) Cost of issuing share capital (after tax) (1,422) - - - (1,422) Cash and cash equivalents at beginning of the financial year 36,307 61,727 Issue of share capital to non-controlling interest - - - 152 152 Transfer to general reserve - 221 (221) - - Cash and cash equivalents at the end of the financial year 10 19,162 36,307 Employee share plan purchase 387 - - - 387 Acquisition of non-controlling interest share - - - 327 327 The consolidated statement of cash flows should be read in conjunction with the accompanying notes. Dividends paid - - (68,767) (115) (68,882)

Balance at 30 June 2011 194,851 720 45,145 (1,503) 239,213

Total attributable to: Non controlling interests - - - (1,503) (1,503) Owners of the parent entity 194,851 720 45,145 - 240,716

The consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 58 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 59

NotesNotes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

1 Corporate information 2 Summary of significant accounting policies (continued)

The financial report of Navitas Limited (the “Company”) for the year ended 30 June 2012 was authorised for issue in accordance (b) Statement of compliance (continued) with a resolution of directors dated 31 July 2012. (ii) Accounting Standards and Interpretations issued but not yet effective (continued) Navitas Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian A project team has been formed to assess the impact of these new standards and interpretations. A final assessment has Securities Exchange. not been made on the expected impact of these standards and interpretations, however, it is expected that there will be no The nature of the operations and principal activities of the Group are described in note 4. significant changes in the Group’s accounting policies.

(c) Basis of consolidation 2 Summary of significant accounting policies The consolidated financial statements comprise the financial statements of Navitas Limited and its subsidiaries (as outlined in note 26) as at and for the period ended 30 June each year (the Group). Interests in associates are equity accounted and are not part of (a) Basis of preparation the consolidated Group (see note 2(i) below).

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are Standards Board. The financial report has also been prepared on a historical cost basis, except for available-for-sale and held-for- considered when assessing whether a group controls another entity. trading financial assets which have been revalued at fair value. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent The financial statements comprise the consolidated financial statements of the Group. accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000s) unless expenses and profit and losses resulting from intragroup transactions have been eliminated in full. otherwise stated. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. (b) Statement of compliance The financial report complies with Australian Accounting Standards, and International Financial Reporting Standards (‘IFRS’) as Investments in subsidiaries held by Navitas Limited are accounted for at cost in the separate financial statements of the parent issued by the International Accounting Standards Board. entity less any impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues in profit or loss of the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from (i) Adoption of new and revised Accounting Standards subsidiaries, the parent will assess whether any indicators of impairment of the carrying value of the investment in the subsidiary The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards exist. Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an Board (the AASB) that are relevant to their operations and effective for the current reporting period. The adoption of these impairment loss is recognised. amendments has not resulted in any changes to the Group’s accounting policies and has no affect on the amounts reported for The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting the current or prior periods. involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their (ii) Accounting Standards and Interpretations issued but not yet effective acquisition date fair values (see note 2(d)). Accounting Standards and Interpretations, including those issued by the IASB/IFRIC where an Australian equivalent has not yet been made by the AASB, that have recently been issued or amended but are not yet effective that have not been adopted for The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing the annual reporting period ended 30 June 2012, but would be relevant to its operations, are: investment in the acquiree) is goodwill or a discount on acquisition. A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction. Application date (reporting period Application date Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are Affected Standards and Interpretations commences on or after) for Group presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent. AASB 9 ‘Financial Instruments’, AASB 2009- 11 ‘Amendments to 1 January 2013 30 June 2014 Losses are attributed to the non-controlling interest even if that results in a deficit balance. Australian Accounting Standards arising from AASB 9’ and AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 If the Group loses control over a subsidiary, it (December 2010)’* • Derecognises the assets (including goodwill) and liabilities of the subsidiary; AASB 10 ‘Consolidated Financial Statements’ 1 January 2013 30 June 2014 • Derecognises the carrying amount of any non-controlling interest; AASB 127 ‘Separate Financial Statements’ (2011) 1 January 2013 30 June 2014 AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments 1 January 2013 30 June 2014 • Recognises the fair value of the consideration received; to Australian Accounting Standards arising from AASB 13’ • Recognises the fair value of any investment retained; AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 “Amendments 1 January 2013 30 June 2014 to Australian Accounting Standards arising from AASB 119 (2011)’ • Recognises any surplus or deficit in profit or loss; and AASB 2010-8 ‘Amendments to Australian Accounting Standards — 1 January 2012 30 June 2013 • Reclassifies to profit or loss or transfers directly to retained earnings, as appropriate, the parent’s share of components Deferred tax: Recovery of Underlying Assets’ previously recognised in other comprehensive income. AASB 2011-4 Amendments to Australian Accounting Standards to Remove 1 July 2013 30 June 2014 Individual Key Management Personnel Disclosure Requirements AASB 2011-9 ‘Amendments to Australian Accounting Standards —­ 1 July 2012 30 June 2013 Presentation of Items of Other Comprehensive Income’

* The IASB have recently deferred the application date of the IFRS equivalent to this standard until 1 January 2015. 60 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 61

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 2 Summary of significant accounting policies (continued)

(d) Business combinations (f) Foreign currency translation

Business combinations are accounted for using the acquisition method. Transaction costs directly attributable to the acquisition (i) Functional and presentation currency are expensed under the acquisition method. The consideration transferred in a business combination shall be measured at Both the functional and presentation currency of Navitas Limited and its Australian subsidiaries is Australian dollars ($). fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the Each entity in the Group determines its own functional currency and items included in the financial statements of each entity liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, less the amount of any are measured using that functional currency. 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 The functional currency of the non Australian Group companies is the national currency of the country of operation. expensed as incurred. (ii) Transactions & balances 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 Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the acquiree. the balance sheet date. Foreign currency differences arising on retranslation are recognised in the profit or loss.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate the acquiree is remeasured at fair value as at the acquisition date through profit or loss. 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. 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 (iii) Translation of Group companies’ functional currency to presentation currency with AASB 139 in profit or loss. If the contingent consideration is classified as equity, it shall not be remeasured. As at the reporting date the assets and liabilities of these foreign subsidiaries are translated into the presentation currency of Navitas Limited at the rate of exchange ruling at the reporting date and the statements of comprehensive income are translated (e) Segment reporting at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur separate component of equity. 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 Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity. the segment and assess its performance and for which discrete financial information is available. This includes start up operations On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the is reclassified to profit or loss. existence of a line manager and the level of segment information presented to the board of directors. (g) Cash and cash equivalents Operating segments have been identified based on the information provided to the chief operating decision maker — being the Chief Executive Officer. 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 The group may aggregate two or more operating segments when they have similar economic characteristics, and the segments are insignificant risk of changes in value. similar in each of the following respects: For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, • Nature of the products and services; net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current liabilities on • Nature of the production processes; the statement of financial position.

• Type or class of customer for the products and services; (h) Trade and other receivables

• Methods used to distribute the products or provide the services; and if applicable Trade receivables, which generally have 30 to 60 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for any uncollectible amounts. • Nature of the regulatory environment. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating identified. An allowance for doubtful debts is raised when there is objective evidence that the Group will not be able to collect segment that does not meet the quantitative criteria is still reported separately where information about the segment would be the debt. 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”. 62 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 63

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 2 Summary of significant accounting policies (continued)

(i) Investments and other financial assets (i) Investments and other financial assets (continued)

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial (iv) Available-for-sale financial assets assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value classified as any of the three preceding categories. After initial recognition available-for-sale assets are measured at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets at initial with gains or losses being recognised as a separate component of equity until the asset is derecognised or until the investment recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit All regular way purchases and sales of financial assets are recognised on the trade date (i.e. the date that the Group commits to or loss. purchase the asset). Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery The fair values of assets that are actively traded in organised financial markets are determined by reference to quoted market of the assets within the period established generally by regulation or convention in the market place. bid prices at the close of business on the balance sheet date. For investments with no active market, fair values are determined Subsequent to initial recognition, investments in subsidiaries and associates are measured at cost in the company using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current financial statements. market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum. (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 (v) Impairment of financial assets loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred instruments. Gains or losses on investments held for trading are recognised in profit or loss. after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount (ii) Held-to-maturity investments and the present value of estimated future cash flows, discounted at the original effective interest rate. Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are measured at amortised cost less impairment. This amortised cost is computed as the amount initially recognised minus credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between or loss. the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the are derecognised or impaired, as well as through the amortisation process. previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not (iii) Loans and receivables been recognised. Loans and receivables including loan notes and loans to key management personnel are non-derivative financial assets with In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the directly in equity. effective interest method less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 64 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 65

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 2 Summary of significant accounting policies (continued)

(j) Plant and equipment (l) Impairment of non-financial assets other than goodwill Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value. The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If such an indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an • Plant and equipment — over 2 to 10 years individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value less costs to sell. In such cases the asset • Leasehold improvements — the shorter of the lease term or the estimated useful life is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash- The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its year end. recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that (i) Derecognition and disposal reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between net disposal proceeds and asset is carried at fair value (in which case the impairment loss is treated as a revaluation decrease). the carrying amount of the asset) is included in the profit and loss in the year the asset is derecognised. An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment (k) Leases losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its conveys a right to use the asset. recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss (i) Group as a lessee immediately, unless the relevant asset is carried at fair value, in which case the reversal is treated as a revaluation increase. After Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the residual value on a systematic basis over its remaining useful life. minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability (m) Goodwill and intangible assets so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. (i) Goodwill Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is Goodwill acquired in a business combination is initially measured as the excess of the sum of the consideration transferred, the no reasonable certainty that the Group will obtain ownership by the end of the lease term. amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events or changes in Lease incentives circumstances indicate that the carrying value may be impaired. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight line basis, except where For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies consumed. of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. (ii) Group as a lessor Each unit or group of units to which the goodwill is so allocated: Leases where the Group retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. 1. represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and However, contingent rentals arising under operating leases are recognised as income in a manner consistent with the basis on 2. is not larger than an operating segment determined in accordance with AASB8 Operating Segments. which they are determined. 66 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 67

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 2 Summary of significant accounting policies (continued)

(m) Goodwill and intangible assets (continued) (n) Trade and other payables

(i) Goodwill (continued) 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 Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to respect of the purchase of these goods and services. which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised immediately in profit or loss. When goodwill forms part of a cash- Liabilities for trade payables and other payables generally have 30–60 day terms. generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of (o) Interest-bearing loans and borrowings the operation. Goodwill disposed of in this manner is measured on the basis of the relative values of the operation disposed of All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable and the portion of the cash-generating unit retained. transaction costs.

Impairment losses recognised for goodwill are not subsequently reversed. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. (ii) Intangible assets Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset least 12 months after the balance date. acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible (p) Provisions and employee leave benefits assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. (i) Provisions

The useful lives of these intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at estimate can be made of the amount of the obligation. least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in any provision is presented in the profit or loss net of any reimbursement. the expense category consistent with the function of the intangible asset. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are determined unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful money and, where appropriate, the risks specific to the liability. The increase in the provision due to the passage of time is life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a recognised as a finance cost. prospective basis. (ii) Employee leave benefits A summary of the policies applied to the Group’s intangible assets is as follows: Wages, salaries, annual leave and sick leave

Licences Brand Names Copyrights Liabilities for wages and salaries, including non monetary benefits, and annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to Useful lives Finite Indefinite Finite the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non Method used Contract life Not applicable 25 years — straight line accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (no longer than 10 years) Long service leave Internally generated/acquired Acquired Acquired Acquired The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of Recoverable amount testing Where an indicator Annually and where Where an indicator expected future payments to be made in respect of services provided by the employees up to the reporting date. Consideration of impairment exists. an indicator of of impairment exists. Amortisation method impairment exists. Amortisation method is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future reviewed at each reviewed at each payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and financial year end. financial year end. currencies that match, as closely as possible, the estimated future cash outflows.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised. 68 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 69

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 2 Summary of significant accounting policies (continued)

(q) Share-based payment transactions (t) Income tax and other taxes

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby (i) Income tax employees render services in exchange for shares or rights over shares (equity settled transactions). The Group does not provide Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered cash settled share based payments. from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or The cost of equity settled transactions with employees are measured by reference to the fair value of the equity instruments at substantively enacted by the balance sheet date. the date at which they are granted. The fair value is determined by reference to the market price of the company’s shares on the Deferred income tax is generally provided on all temporary differences at the balance sheet date between the tax bases of Australian Stock Exchange. assets and liabilities and their carrying amounts for financial reporting purposes. The cost of equity settled transactions are recognised, together with a corresponding increase in equity, over the period in which Deferred income tax liabilities are recognised for all taxable temporary differences except: the service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). • when the deferred income tax liability arises from the initial recognition of goodwill or 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 The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects the extent to or loss; or which the vesting period has expired, and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised for the period. • 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 differences can be controlled and it is probable that the temporary No cumulative expense is recognised for awards that ultimately do not vest (in respect of non-market vesting conditions). differences will not reverse in the foreseeable future.

(r) Issued Capital Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and Ordinary shares are classified as equity, and are recognised at the fair value of the consideration received by the company. 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 credits and unused tax losses can be utilised except: Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an (s) Revenue recognition asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be accounting profit nor taxable profit or loss; or reliably measured at the fair value of the consideration. The following specific recognition criteria must also be met before revenue • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in is recognised: joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary (i) Rendering of education services difference will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. Where the contract outcome can be reliably measured, the Group has control of the right to be compensated for the education services and the stage of completion can be reliably measured. Stage of completion is measured by reference to the number of The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that contact days held as a percentage of the total number of contact days in the course. 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. (ii) Interest Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts has become probable that future taxable profit will allow the deferred tax asset to be recovered. estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). 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 tax rates (and tax laws) that have been enacted or substantively enacted at the (iii) Dividends balance sheet date.

Revenue is recognised when the shareholders’ right to receive the payment is established. Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit or loss.

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. 70 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 71

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

2 Summary of significant accounting policies (continued) 3 Significant accounting judgements, estimates and assumptions

(t) Income tax and other taxes (continued) In applying the Group’s accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, (ii) Other taxes estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to Revenues, expenses and assets are recognised net of the amount of GST except: management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below: • where 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 as part of the expense item as applicable; and (a) Significant accounting judgements • receivables and payables are stated with the amount of GST included. In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amount recognised in the financial statements: 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. (i) Investment in controlled entities Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from Where the Group has a 50% or less effective shareholding in a company, it assesses on a case by case basis whether control investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating exists and accounts for the investment as appropriate under AASB 127 Consolidated and Separate Financial Statements. cash flows. (ii) Recovery of deferred tax assets Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that (u) Earnings per share future taxable profits will be available to utilise those temporary differences. Basic earnings per share is calculated as net profit attributable to members of the parent divided by the weighted average number of (b) Significant accounting estimates and assumptions ordinary shares, adjusted for any bonus element. The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and (i) Impairment of goodwill and intangibles with indefinite useful lives • other non discretionary changes in revenues or expenses during the period that would result from the dilution of potential The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. ordinary shares; This requires an estimation of the recoverable amount of the intangibles and the cash generating units to which the goodwill is allocated. The assumptions used in this estimation of recoverable amount of goodwill and intangibles with indefinite useful lives divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. are discussed in note 16.

(ii) Long service leave provision As discussed in note 2, the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of the liability, estimated attrition rates and pay increases through promotion and inflation have been taken into account. 72 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 73

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

4 Segment information 4 Segment information (continued)

(a) Reportable segments (a) Reportable segments (continued) University Programs: The University Programs business delivers education programmes, via pathway colleges and managed campuses, to students requiring a university education. 2011 University Student $000s Programs SAE English Workforce Recruitment Corporate Total SAE: The SAE business delivers education programmes in the area of creative media including courses in audio, film and media. Revenue English: The English business delivers English language tuition. Sales to external customers 372,947 65,020 129,783 52,689 17,660 3,727 641,826 Workforce: The Workforce business delivers vocational and job skills training.

Student Recruitment: The Student Recruitment business delivers student recruitment services to students seeking Total segment revenue 372,947 65,020 129,783 52,689 17,660 3,727 641,826 international education experience.

Corporate: Corporate is the aggregation of the Group’s corporate functions. Interest (Other Corporations) 1,986 The following tables present revenue and profit information by reportable segment for the years ended 30 June 2012 and 2011. Total consolidated revenue 643,812 2012 University Student $000s Programs SAE English Workforce Recruitment Corporate Total Result

Revenue EBITDA* 110,616 17,173 6,834 4,948 1,284 (19,711) 121,144 Sales to external customers 366,674 113,864 123,254 65,052 15,805 3,497 688,146 Depreciation (3,400) (2,785) (511) (976) (222) (2,087) (9,981) Amortisation - - (669) (309) - - (978)

Total segment revenue 366,674 113,864 123,254 65,052 15,805 3,497 688,146 Impairment of Goodwill - - (2,079) (1,265) - - (3,344)

Profit before tax and net Interest (Other Corporations) 384 107,216 14,388 3,575 2,398 1,062 (21,798) 106,841 finance income

Total consolidated revenue 688,530 Net finance expense (1,624)

Result Profit before income tax 105,217 EBITDA* 104,905 26,419 5,216 6,079 568 (16,370) 126,817

Depreciation (3,470) (5,527) (1,452) (1,064) (282) (2,325) (14,120) Income tax expense (27,983) Amortisation - - (668) (309) - - (977)

Impairment of Goodwill ------Profit for the year 77,234

Profit before tax and net * EBITDA = earnings before net interest, taxes, depreciation, amortisation and impairment 101,435 20,892 3,096 4,706 286 (18,695) 111,720 finance income

Net finance expense (7,603)

Profit before income tax 104,117

Income tax expense (30,497)

Profit for the year 73,620

* EBITDA = earnings before net interest, taxes, depreciation, amortisation and impairment 74 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 75

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

4 Segment information (continued) 6 Expenses

2012 2011 (b) Geographical areas Note $000s $000s The Group operates in the following Geographical areas.

(a) Finance costs External revenue Non Current assets 2012 $000s $000s Bank loans and overdrafts 7,987 3,610

(b) Depreciation and amortisation Australia 502,400 324,955 Depreciation 13 14,120 9,981 United Kingdom 39,625 12,129 Amortisation Europe 46,670 139,733 Licences 372 373 Canada 32,695 25 Copyrights 605 605 Asia 43,004 19,602 United States 18,487 6,367 Total amortisation 14 977 978 Rest of World 5,265 1,525 15,097 10,959

Total 688,146 504,336 (c) Lease payments Minimum lease payments — operating lease 41,352 34,840 2011

(d) Employee benefits expense Australia 503,644 330,293 Employee benefits 226,535 198,548 United Kingdom 39,807 5,357 Post Employment benefits 17,053 13,385 Europe 22,985 143,036 Canada 25,265 47 243,588 211,933 Asia 34,971 24,883 United States 7,736 4,925 (e) Losses and gains Net loss on disposal of property, plant and equipment 120 243 Rest of World 7,418 1,560 Foreign exchange (gain)/loss (1,502) 2,561 Gain on disposal of operations 24 - (4,816) Total 641,826 510,101 Impairment of goodwill 14 - 3,344

(c) Segment accounting policies (1,382) 1,332 The Group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Revenues are attributed to geographic areas based on the location of the customers providing the revenues. Segment accounting policies are the same as the Group’s policies described in Note 2. During the financial period, there were no 7 Income tax changes in segment accounting policies that had a material effect on the segment information. 2012 2011 (d) Major Customers $000s $000s The Group delivers services to a range of diverse individual customers, no individual customer is considered material. (a) Income tax expense The major components of income tax expense are: 5 Revenue

2012 2011 Income tax recognised in profit or loss $000s $000s Current income Tax Current income tax charge (27,059) (29,892) Tuition services 636,106 586,634 Adjustments in respect of current income tax of previous years (2,180) 1,814 Other services 52,040 55,192 Deferred income tax Interest — Other corporations 384 1,986 Relating to the origination and reversal of temporary differences (1,258) 95

688,530 643,812 Income Tax reported in the statement of comprehensive income (30,497) (27,983) 76 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 77

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

7 Income tax (continued) 7 Income tax (continued)

2012 2011 (d) Tax consolidation $000s $000s (i) Members of the tax consolidated group and the tax sharing arrangement (b) Numerical reconciliation between aggregate tax expenses recognised in the Effective 5 November 2004, for the purposes of income taxation, Navitas Limited and its 100% owned Australian subsidiaries statement of comprehensive income and tax expense calculated per the statutory formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax rate income tax expense to the wholly owned subsidiaries on a pro rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, Accounting profit before tax 104,117 105,217 the possibility of default is remote. The head entity of the tax consolidated group is Navitas Limited. (ii) Tax effect accounting by members of the tax consolidated group At the Group’s statutory income tax rate of 30% (31,235) (31,565) Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their “tax effected” accounting profit Adjustments in respect of current income tax of previous years (2,180) 1,814 for the period. Allocations under the tax funding agreement are recognised on a monthly basis. Sundry items 2,918 1,768 The allocation of taxes under the tax funding agreement is recognised as a change in the subsidiaries’ intercompany accounts with the tax consolidated group head entity, Navitas Limited. The group has applied the separate taxpayer within group Income Tax reported in the statement of comprehensive income (30,497) (27,983) approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group.

(c) Recognised tax assets and liabilities 8 Dividends paid and proposed

Current Income tax 2012 2011 Opening Balance 5,641 7,355 $000s $000s Acquisitions - 567 Charged to income 29,239 28,078 (a) Recognised amounts Payments (30,761) (30,359) Declared and paid during the year Dividends on ordinary shares: Closing Balance 4,119 5,641 Final franked dividends for 2011: 12.0 cents (2010: 10.7 cents) 45,028 36,633 Interim franked dividend for 2012: 9.4 cents (2011: 8.7 cents) 35,280 32,134 Deferred Income Tax Opening balance 17,876 14,406 80,308 68,767 Acquisitions - 2,837 Charged to income (1,258) 95 (b) Unrecognised amounts Charged to equity 238 538 Dividends proposed and not recognised as a liability Dividends on ordinary shares: Closing balance 16,856 17,876 Final franked dividends for 2012: 10.1 cents (2011: 12.0 cents) 37,907 45,028

Deferred income tax relates to the following: (c) Franking credit balance The amount of franking credits available for the subsequent financial year are: Deferred tax assets - franking account balance as at the end of the financial year at 30% 15,016 26,708 Employee provisions 5,972 3,694 - franking credits that will arise from the payment of income tax payable as at the Other provisions 1,077 630 end of the financial year 3,528 4,161 - impact on the franking account of dividends proposed before the financial report Lease incentives 1,907 3,054 was authorised for issue but not recognised as a distribution to equity holders Equity raising costs 417 538 during the period. (16,280) (19,298) Interest Rate Swaps 359 -

Carry forward tax losses 6,478 6,107 2,264 11,571 Other temporary differences 853 4,172

(d) Tax rates 17,063 18,195 The tax rate at which dividends have been franked is 30%. Dividends proposed will be 100% franked at the rate of 30%. Deferred tax liabilities Intangible assets acquired (207) (319)

16,856 17,876 78 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 79

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

9 Earnings per share 10 Cash and cash equivalents

The following reflects the income and share data used in the basic and diluted earnings per share computations: 2012 2011 $000s $000s

2012 2011 Cash at bank and in hand 19,162 36,307 $000s $000s Cash at bank earns interest at floating rates based on daily bank deposit rates.

(a) Earnings used in calculating earnings per share (a) Reconciliation to statement of cash flows Basic earnings per share For the purposes of the statement of cash flows, cash and cash equivalents comprise Net profit attributable to equity holders of the parent 73,149 77,392 the following at 30 June: There are no adjustments to net profit for calculating diluted earnings per share. Cash and cash equivalents 19,162 36,307 Number of shares 2012 2011 (b) Reconciliation of profit for the period to net cash flows from operating activities Net profit for the period 73,620 77,234

(b) Weighted average number of shares Non cash items Weighted average number of ordinary shares for basic earnings per share. 375,298,743 356,873,719 Depreciation 14,120 9,981 There are no adjustments to the weighted average number of ordinary shares for calculating diluted earnings per share. Amortisation 977 978 Impairment of goodwill - 3,344 (c) Other transactions Lease incentives 855 (1,205) There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the Net loss on disposal of property, plant and equipment 120 243 date of completion of these financial statements. Net exchange loss/(gains) 50 2,561 Profit on disposal of operations - (4,816) Other non cash items 67 446

Payment of acquisition related costs - 4,779

Decrease/(increase) in assets Trade and other receivables (9,024) 3,923 Prepayments and other assets 1,668 (2,803) Deferred tax assets (1,024) 123

Increase/(decrease) in liabilities Trade and other payables (15,060) (4,148) Deferred revenues 6,148 (20,544) Current tax liabilities 539 (2,281) Provisions 803 1,643

Net cash flows from operating activities 73,859 69,458 80 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 81

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

10 Cash and cash equivalents (continued) 11 Trade and other receivables (continued)

(c) Financing activities (a) Allowance for doubtful debts At reporting date, the following financing facilities had been negotiated and were available. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. An additional expense of $0.042m (2011: $0.523m) has been recognised for the current year for specific debtors for which such evidence exists. The 2012 2011 amount of the allowance has been measured as the difference between the carrying amount of the trade receivables and the Note $000s $000s present value of the estimated future cash flows expected to be recovered from the relevant debtors. Movements in the allowance for doubtful debts were as follows: Total facilities Credit facility 16 225,000 225,000 2012 2011 $000s $000s Facilities utilised at balance date Opening balance 2,926 1,484 Credit facility 16 133,308 135,833 Balance acquired - 919 Exchange differences (45) -

Facilities unutilised at balance date Charge for the year 42 523 Credit facility 91,692 89,167 Closing balance 2,923 2,926

(d) Non cash financing and investing activities As at 30 June, the ageing of trade receivables is as follows: Refer to notes 18 and 24 for disclosures of non cash financing and investing activities (including business acquisitions). Consolidated Total 0-30 days 31-60 days +60 days PDNI* +60 days CI* 11 Trade and other receivables 2012 64,015 49,373 2,758 9,370 2,514 2011 55,207 29,352 11,761 11,804 2,290

2012 2011 *Past due not impaired (PDNI) $000s $000s Considered impaired (CI) Receivables past due but not considered impaired are disclosed above. Each business unit has been in contact with the relevant Trade receivables 64,015 55,207 debtor and is satisfied that payment will be received in full. Receivables considered impaired are disclosed above. Each business Allowance for doubtful debts (2,923) (2,926) unit has provided for these receivables whilst actively managing their recovery. Other balances within trade and other receivables (except as disclosed below) do not contain impaired assets and are not past due. 61,092 52,281 It is expected that these other balances will be received when due.

(b) Related party receivables Accrued Income 13,342 9,506 Refer to note 26 for terms and conditions of related party receivables. Other receivables 7,285 10,805 In the prior year an allowance for impairment of $0.335m had been made for loans receivable from a related party. These loans have been written off in the period as Navitas is no longer actively involved with this associate. Related party receivables Associate - 335 (c) Fair value and credit risk Allowance for impairment - (335) Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

The maximum exposure to credit risk is the net carrying amount of receivables. No collateral is held as security. 81,719 72,592 Refer to note 23 for further disclosures on credit risk.

(d) Foreign exchange and interest rate risk Refer to note 23 for disclosures on foreign exchange and interest rate risk.

12 Other assets

2012 2011 $000s $000s Current Prepayments 12,025 14,085 Other 2,792 2,823

14,817 16,908 82 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 83

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

13 Property, plant and equipment 14 Intangible assets

(a) Reconciliation of carrying amounts at the beginning and end of period (a) Reconciliation of carrying amounts at the beginning and end of period

Plant and Leasehold $000s Goodwill Brand Names Copyrights Licences Total $000s equipment Improvements Total

Gross carrying amount Gross carrying amount Balance at 1 July 2010 168,555 - 15,113 2,581 186,249 Balance at 1 July 2010 17,695 40,762 58,457 Acquisition of subsidiaries 136,718 136,000 - - 272,718 Additions 10,997 16 11,013 Disposals (2,276) - - - (2,276) Disposals (165) (873) (1,038) Impact of foreign Transfers 68 (68) - currency conversion 756 - - - 756 Acquisition of a subsidiary 20,891 - 20,891 Exchange differences (401) (1,028) (1,429) Balance at 30 June 2011 303,753 136,000 15,113 2,581 457,447 Impact of foreign currency conversion (9,482) - - - (9,482) Balance at 1 July 2011 49,085 38,809 87,894 Additions 16,607 2,759 19,366 Balance at 30 June 2012 294,271 136,000 15,113 2,581 447,965 Disposals (670) - (670) Transfers 10,287 (10,287) - Accumulated amortisation Exchange differences (431) (49) (480) and impairment losses Balance at 1 July 2010 (389) - (2,857) (1,146) (4,392) Closing balance at 30 June 2012 74,878 31,232 106,110 Impairment expense (3,344) - - - (3,344) Amortisation expense - - (605) (373) (978) Accumulated depreciation

Balance at 1 July 2010 (6,902) (11,090) (17,992) Balance at 30 June 2011 (3,733) - (3,462) (1,519) (8,714) Depreciation expense (6,392) (3,589) (9,981) Impairment expense - - - - - Disposals 53 761 814 Amortisation expense - - (605) (372) (977) Transfers - - -

Exchange differences 448 185 633 Balance at 30 June 2012 (3,733) - (4,067) (1,891) (9,691)

Balance at 1 July 2011 (12,793) (13,733) (26,526) Net book value Depreciation expense (12,290) (1,830) (14,120) At 1 July 2010 168,166 - 12,256 1,435 181,857 Disposals 563 - 563

Transfers (4,130) 4,130 - At 1 July 2011 300,020 136,000 11,651 1,062 448,733 Exchange differences 56 (21) 35

At 30 June 2012 290,538 136,000 11,046 690 438,274 Closing balance at 30 June 2012 (28,594) (11,454) (40,048)

(b) Valuations of identifiable intangibles Net book value During the 2011 financial year the Group acquired Brand intangibles as part of the SAE acquisition (note 24). Brand intangibles were At 1 July 2010 10,793 29,672 40,465 included in the 2011 financial statements using provisional valuations. A formal valuation of $136.0m was finalised during 2012. There was no difference between the provisional and the final valuation. At 1 July 2011 36,292 25,076 61,368 (c) Description of the Group’s intangible assets

At 30 June 2012 46,284 19,778 66,062 (i) Brand Names Brand names include intangible assets acquired through business combination. This intangible asset has been assessed as having indefinite lives on the basis of strong brand resilience, ongoing expected profitability and the expectation of minimal (b) Plant and equipment under lease ongoing expenditure. The Group has no assets under finance lease. (ii) Copyrights (c) Impairment losses Copyrights include intangible assets acquired through business combinations. This intangible asset has been assessed as No impairment loss was recognised in relation to property, plant and equipment assets during 2012 and 2011. having a finite life and is amortised using the straight line method over a period of 25 years. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that recoverable amount is lower than the carrying amount. 84 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 85

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

14 Intangible assets (continued) 14 Intangible assets (continued)

(c) Description of the Group’s intangible assets (continued) (e) Impairment testing of goodwill and indefinite life intangible assets (continued)

(iii) Licences (iii) Indefinite life intangible assets Licences include intangible assets acquired through business combinations. These intangible assets have been assessed as The recoverable value of the SAE Brand Name has been assessed using the same methods and assumptions as the having a finite life and are amortised using the straight line method over a period of 5 to 10 years. If an impairment indication related goodwill. arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that recoverable amount is lower than the carrying amount. 15 Trade and other payables (iv) Goodwill 2012 2011 Goodwill is not amortised but is subject to annual impairment testing (see note 14(f)). $000s $000s Some goodwill balances are denominated in currencies other than Australian Dollars. In particular a substantial portion of goodwill associated with the purchase of the SAE Group is denominated in Euros. These non-Australian Dollars balances are Current translated into Australian Dollars and fluctuate in line with foreign exchange movements. In the 2012 financial year Goodwill Trade payables 13,671 15,209 decreased by $9.5m due to translation of foreign currency denominated goodwill. Other payables 57,094 67,585 (d) Impairment losses recognised Lease incentives 1,949 1,774 No impairment losses were recorded during the year. During the 2011 financial year impairment losses of $3.4m were recognised in relation to intangible assets. The English Division was charged $2.1m following the loss of the South Australian AMEP contract, and 72,714 84,568 the Workforce Division was charged $1.2m following a review of Navitas College of Public Safety operations.

(e) Impairment testing of goodwill and indefinite life intangible assets Non Current Lease incentives 6,459 7,305 (i) Carrying amount of goodwill allocated to each of the cash generating units The carrying amounts of acquired goodwill have been allocated to the following individual cash generating units that have significant amounts of intangibles for impairment testing as follows: (a) Fair value

Cash generating unit (or group of units) Due to the short term nature of these payables (excluding lease incentives), their carrying value is assumed to approximate their fair value. Carrying amount of Goodwill (b) Interest rate, foreign exchange and liquidity risk $000s 2012 2011 Refer to note 23 for disclosures on interest rate, foreign exchange and liquidity risk.

SAE Group 128,799 136,382 Navitas English 45,633 38,277 16 Borrowings Sydney Institute of Business & Technology Pty Ltd 32,332 32,332 2012 2011 Melbourne Institute of Business & Technology Pty Ltd 11,738 11,738 $000s $000s Colleges of Business & Technology (WA) Pty Ltd 13,089 13,089 Australian College of Applied Psychology Pty Ltd 10,804 10,804 At amortised cost Multiple units without significant intangibles 48,143 57,398 Current Loans from other related parties 2,839 3,308 290,538 300,020 Non Current The recoverable amount of these cash-generating units has been determined based on a value in use calculation using cash Bank facility 133,308 135,833 flow projections covering a five year period, based on financial budgets approved by senior management.

The discount rate applied to cash flow projections is 14.6% (2011: 14%) and cash flows beyond the five year period are estimated (a) Fair value using a terminal value calculated under standard valuation principles incorporating a growth rate of 3.5% (2011: 3%). Due to the nature of these borrowings, the carrying amount of the Group’s borrowings approximate their fair value.

(ii) Key assumptions used in value in use calculations for 30 June 2012 and 30 June 2011 (b) Interest rate, foreign exchange and liquidity risk The following describes each key assumption on which management has based its cash flow projections when determining the Refer to note 23 for disclosures on interest rate, foreign exchange and liquidity risk. value in use of the listed cash generating units. (c) Assets pledged as security Budgeted gross margins — the basis used to determine the value assigned to the budgeted gross margins is the average gross Bank credit facilities are unsecured. Refer to note 10 for further information. margins achieved in the year immediately before the budgeted year, increased for expected volume/efficiency improvements based on historical trends. Thus values assigned to gross margins reflect past experience.

Wage inflation — the basis used to determine the value assigned to wages inflation is the forecast inflation index during the budget year for Australia. Values assigned to the key assumption are consistent with external sources of information.

SAE cash flow projections have been based on assumptions developed during the acquisition of SAE. These assumptions are similar to those used by Navitas historically, adjusted for factors unique to SAE or the region that SAE operates in. 86 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 87

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

16 Borrowings (continued) 18 Issued Capital

2012 2011 (d) Summary of borrowing arrangements $000s $000s The Group has bank borrowing facilities of $225m at 30 June 2012 (2011: $225m). The total utilised at 30 June was $133.308m (2011: $135.833m) drawn as Euro and Australian Dollars. Ordinary shares 195,175 194,851 The facilities are unsecured. The weighted average effective interest rate on the facilities was 4.43% (2011: 4.32%). Further details are provided in note 23. (a) Terms and conditions of ordinary shares (e) Loans from other related parties Ordinary shares have no par value and have the right to receive dividends as declared and, in the event of winding up the company, Refer to note 26 for terms and conditions of loans from other related parties. to participate in the proceeds from the sale of all surplus assets in proportion to the number and amounts of paid shares held. The company does not have a limited amount of authorised capital. (f) Defaults and breaches During the current and prior years, there were no defaults or breaches of any loans. Ordinary shares entitle their holders to one vote, in person or by proxy, at a meeting of the company.

(b) Movements in shares on issue 17 Provisions 2012 2011 2012 2011 Note Shares Number $000s Shares Number $000s $000s $000s Current Movements in shares on issue Make Good provision 233 198 At 1 July 375,230,115 194,851 342,361,526 69,504 Long service leave 3,009 2,945 Issue of share capital - - 26,907,997 102,250 Cost of issuing share capital (net of tax) - - - (1,422) 3,242 3,143 Acquisition of subsidiary 24 - - 5,871,551 24,132 Non Current Employee share schemes (i) 88,513 324 89,041 387 Make good provision 2,269 2,084 Long service leave 4,381 3,199 At 30 June 375,318,628 195,175 375,230,115 194,851

6,650 5,283 (i) Employee share schemes During the year the Company issued 37,735 (2011: 35,451) shares to executive employees (under the terms of the executive (a) Nature and timing of provisions share plan) to a value of $0.138m (2011: $0.154m) in settlement of obligations arising from the Company’s ValueShare incentive (i) Long service leave scheme. These obligations were previously recognised in the Company’s results for the 30 June 2011 financial year. In addition, Refer to notes 2 and 3 for the relevant accounting policy and a discussion of the significant estimates and assumptions applied the Company issued 50,778 (2011: 53,590) shares valued at $0.186m (2011: $0.233m) to eligible employees in lieu of salaries in the measurement of this provision. and wages as part of the Company’s Employee Share Ownership Plan.

(ii) Make good provisions (c) Capital management Under the terms of its lease agreements the Group must restore certain leased premises to their condition as at the Refer to note 22 for further disclosures in relation to the Group’s capital management activity. commencement of the lease.

(b) Movements in provisions (other than employee benefits)

2012 2011 $000s $000s

Make good provision At 1 July 2,282 1,833 Acquisitions - 147 Additions 220 517 Utilised - (215)

At 30 June 2,502 2,282

Current 233 198

Non current 2,269 2,084 88 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 89

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

19 Reserves and retained earnings 19 Reserves and retained earnings (continued)

2012 2011 (b) Nature and purpose of reserves (continued) $000s $000s (ii) Cash flow hedge reserve Foreign currency translation reserve 1,917 (167) This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an Cash flow hedge reserve (839) 666 effective hedge. General reserve 221 221 (iii) General reserve The general reserve is used to record amounts retained in equity as required by local laws relevant to subsidiary operations. 1,299 720

Retained earnings 37,986 45,145 20 Non controlling interest 2012 2011 (a) Movements in reserves and retained earnings $000s $000s A reconciliation of the carrying amounts of reserves and retained earnings at the beginning and end of the financial year. Non controlling interest (900) (1,503) 2012 2011 Note $000s $000s (a) Movements in non controlling interest A reconciliation of the non controlling interest at the beginning and end of the financial year. Foreign currency translation reserve At 1 July (167) (832) 2012 2011 $000s $000s Currency translation differences 2,084 665

Non controlling interest At 30 June 1,917 (167) At 1 July (1,503) (1,967) Purchase of non controlling interest 392 327 Cash flow hedge reserve Net profit/(loss) for the year 471 (158) At 1 July 666 - Dividends paid (80) (115) Changes in fair value of interest rate swap (1,864) 666 Movements in reserves (180) 258 Tax effect of changes in fair value of interest rate swap 359 - Issue of Equity - 152

At 30 June (900) (1,503) At 30 June (839) 666

Comprising: General reserve Ordinary share capital 1,349 1,349 At 1 July 221 - Reserves 143 323 Transfer from retained earnings - 221 Accumulated losses (2,392) (3,175)

At 30 June 221 221 (900) (1,503)

Retained earnings At 1 July 45,145 36,741 21 Derivative financial instruments Transfer to general reserve - (221) 2012 2011 Profit attributable to members of the parent entity 73,149 77,392 $000s $000s Dividends 8 (80,308) (68,767) Current Assets — receivables At 30 June 37,986 45,145 Forward currency contracts — held for trading 976 939 Interest rate swap contracts — cash flow hedges - 666

(b) Nature and purpose of reserves 976 1,605 (i) Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial Current Liabilities — payables statements of foreign subsidiaries. Forward currency contracts — held for trading 668 848 It is also used to record gains and losses on hedges of the net investments in foreign operations. Interest rate swap contracts — cash flow hedges 1,198 -

1,866 848 90 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 91

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

21 Derivative financial instruments (continued) 21 Derivative financial instruments (continued)

(a) Instruments used by the Group (a) Instruments used by the Group (continued)

Derivative financial instruments are used by the Group in the normal course of business in order to manage exposure to fluctuations (i) Forward currency contracts — held for trading (continued) in foreign exchange rates and interest rates. 2012 2011 (i) Forward currency contracts — held for trading $000s $000s The Group has entered into forward exchange contracts which are economic hedges but do not satisfy the requirements for hedge accounting. Maturity 12–24 months (continued) Sell EUR — Buy AUD 2012 2011 $000s $000s Notional Amounts 2,022 2,179 Average exchange rate 0.7418 0.6885 Maturity 0–12 months Buy CNY — Sell AUD Sell GBP — Buy AUD Notional Amounts (969) (1,377) Notional Amounts 3,016 2,365 Average exchange rate 6.1906 5.8117 Average exchange rate 0.5969 0.5918 Buy INR — Sell AUD Sell CAD — Buy AUD Notional Amounts (955) (2,332) Notional Amounts 2,446 2,263 Average exchange rate 54.9561 47.1603 Average exchange rate 1.0222 0.8838 Sell SGD — Buy AUD These contracts are fair valued by comparing the contracted rate to the market rates for contracts with the same length of maturity. All movements in fair value are recognised in profit or loss in the period they occur. The net fair value gain on foreign Notional Amounts 2,265 2,170 currency derivatives during the year was $0.381m (2011: loss $1.176m) for the Group. Average exchange rate 1.2141 1.1981 Sell CHF — Buy AUD ii) Interest rate swaps — cash flow hedges Notional Amounts - 435 The Groups debt facilities allow borrowings in multiple foreign currencies, accordingly, interest-bearing loans of the Group Average exchange rate - 0.9200 currently range from 1.8% to 6.9%. In order to protect against rising interest rates the Group has entered into interest rate swap contracts under which it has a right to receive interest at variable rates and to pay interest at fixed rates. Swaps in place cover Sell EUR — Buy AUD approximately 70% (2011: 75%) of the principal outstanding at reporting date and are timed to expire at the renewal dates of Notional Amounts 5,923 3,161 each loan. The fixed interest rates are 2.08% (2011: 2.08%). Average exchange rate 0.7344 0.7118 The interest rate swaps require settlement of net interest receivable or payable each month. The settlement dates coincide Sell USD — Buy AUD with the dates on which interest is payable on the underlying debt. All swaps are matched directly against the appropriate loans Notional Amounts 419 759 and interest expense and as such are considered highly effective. They are settled on a net basis. The swaps are measured at Average exchange rate 0.9549 1.0544 fair value and all gains and losses attributable to the hedged risk are taken directly to equity and re-classified into profit or loss Buy CNY — Sell AUD when the interest expense is recognised. Notional Amounts (2,095) (3,502) iii) Cross Currency Basis Swaps — fair value hedges Average exchange rate 5.9676 6.0683 For the floating portion of the Group’s EUR loan, representing 25% of the total EUR borrowing, the Group entered into a Cross Buy INR — Sell AUD Currency Basis Swap. A Cross Currency Basis Swap is essentially a funding instrument that can be used to achieve a lower Notional Amounts (1,731) (2,825) floating rate of fixed rate funding cost and it is not a trading instrument. The Cross Currency Basis Swap reduced the margin Average exchange rate 44.7829 43.5433 that the Group pays on their floating Euro exposure. Similarly to an interest rate swap, there is a net interest receivable or payable each month. The settlement dates coincide with Maturity 12–24 months the dates on which interest is payable on the underlying debt. This instrument does not satisfy the requirements for hedge Sell GBP — Buy AUD accounting. All movements in fair value are recognised in profit or loss in the period they occur.

Notional Amounts 1,465 2,057 (b) Interest rate risk Average exchange rate 0.6141 0.5835 Refer to note 23 for disclosures on interest rate risk. Sell CAD — Buy AUD Notional Amounts 1,525 - (c) Credit risk Average exchange rate 0.9838 - Credit risk arises from the potential failure of counterparties to meet their obligations at maturity of contracts. This arises on derivative financial instruments with unrealised gains. Management have established a policy that ensures that the Group only deals Sell SGD — Buy AUD with counterparties that have a published credit rating and that exposure to individual counterparties is weighted based on the level Notional Amounts 1,643 1,250 of rating achieved. Under this policy maximum exposure to an individual counterparty is 50% of the total portfolio. Average exchange rate 1.2174 1.2002 Sell CHF — Buy AUD Notional Amounts - 462 Average exchange rate - 0.8650 92 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 93

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

22 Capital risk management objectives and policies 23 Financial risk management objectives and policies (continued)

When managing capital it is management’s objective to maximize the returns to shareholders as measured by Economic Value The main risks that may arise from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and Added (EVA®), whilst also ensuring that the entity continues to operate as a going concern. liquidity risk.

EVA measures the profits earned by the business after charging for the funds invested by both lenders and shareholders. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring Accordingly management aims to maintain a capital structure that ensures the lowest cost of capital for the Group, and maximizes levels of potential exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and returns to shareholders from their capital investment. foreign exchange rates. Where material, ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts and maintenance of appropriate Management are regularly reviewing capital structure to ensure that the Group takes advantage of favourable costs of capital. As the credit facilities. market is constantly changing, management will: actively review the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares, and initiate on market share buy backs, and drawdown on/repay bank borrowings to ensure that The Audit and Risk Committee periodically reviews and approves the policies for managing each of these risks as summarised below. capital is managed appropriately. Risk exposures and responses The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 16, cash and cash equivalents, and equity attributable to equity holders of the parent (comprising issued capital, reserves and retained earnings as disclosed in (a) Interest rate risk note 18 and 19). The Group operates globally, primarily through subsidiary companies established in the markets in which the Group The Group’s exposure to market interest rates relates primarily to the Group’s long term borrowing obligations with a floating interest trades. None of the Group’s entities are subject to externally imposed capital requirements. rate. The level of debt is disclosed in note 16.

Operating cash flows are used to maintain and expand the Group’s operations as well as make routine outflows of tax, dividends and At reporting date the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk that are not repayment of maturing debt. designated in cash flow hedges: The group’s policy is to borrow centrally, using a variety of currencies, to meet anticipated funding requirements. 2012 2011 Management monitors capital through the combination of gearing ratio (net debt/total capital) and return on capital employed. The $000s $000s limit for the Group’s gearing ratio is no greater than 50%, based on current credit facilities. The Group’s gearing ratios at 30 June 2012 and 2011 were as follows: Financial Assets Cash and cash equivalents 19,162 36,307 2012 2011 $000s $000s Financial Liabilities Total borrowings 136,147 139,141 Bank borrowings (40,452) (33,958) Less cash and cash equivalents (19,162) (36,307) Net exposure (21,290) 2,349 Net (cash)/debt 116,985 102,834 Total equity 233,560 239,213 Interest rate swap contracts outlined in note 21 with a fair value loss of $1.198m (2011: gain $0.666m) are exposed to fair value movements if interest rates change. Under these contracts the group is committed to $2.1m (2011: $2.1m) interest expense within 12 months, $1.6m (2011: $2.1m) interest expense between one year and two years, and $nil (2011: $1.6m) interest expense between Total capital 350,545 342,047 two years and five years, on $92.9m (2011: $101.9m) of notional debt at 2.08%.

The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Group’s policy is: Gearing ratio 33.4% 30.0% Current borrowings: between 25% and 75% of borrowings at fixed rates of interest Management’s target for return on capital employed is a minimum return in excess of the Group’s weighted average cost of capital Non current borrowings (one to three years): between 25% and 75% of borrowings at fixed rates of interest (WACC). For 2012, the Group’s WACC was approximately 10% (2011: 10%), and returns achieved were 9.4% (2011: 50.6%) from Non current borrowings (three to five years): between 0% and 25% of borrowings at fixed rates of interest continuing operations. To manage this mix in a cost efficient manner the Group’s policy allows for both fixed rate and floating rate debt. In the absence of fixed rate debt the Group’s policy allows for the use of interest rate swaps, collars and caps. Where the Group enters into fixed rate debt it is understood that this creates a fair value exposure as a by-product of the Group’s attempt to manage its cash flow volatility 23 Financial risk management objectives and policies arising from interest rate changes.

The Group’s principal financial instruments comprise receivables, payables, bank loans, finance leases, cash and cash equivalents At the 30 June 2012 the Group had bank debt of $40.452m (2011: $33.958m) at floating rates, and $92.856m (2011: $101.875m) at and derivatives. fixed rates (via swap).

The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s At 30 June 2012 the face value of interest rate swaps, collars and caps held was $92.856m (2011: $101.875m). Treasury policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security.

The Group may enter into derivative transactions, principally interest rate swaps and forward currency contracts. The purpose is to manage the potential interest rate and currency risks arising from the Group’s operations and its sources of finance. Trading in derivatives may also be undertaken, specifically in forward currency contracts. These derivatives provide economic hedges, but do not qualify for hedge accounting and are based on limits approved by the Audit and Risk Committee.

EVA® Is a registered trademark of Stern Stewart & Co. 94 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 95

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

23 Financial risk management objectives and policies (continued) 23 Financial risk management objectives and policies (continued)

The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing (b) Foreign currency risk (continued) positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates. (ii) Sensitivity analysis (i) Sensitivity analysis The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date. The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date. At 30 June 2012, if exchange rates had moved, as illustrated in the table below, with all other variables held constant, post tax At 30 June 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows: profit and equity would have been affected as follows: 2012 2011 2012 2011 $000s $000s $000s $000s Judgments of reasonably possible movements Judgments of reasonably possible movements Post tax profit and equity higher/(lower) Post tax profit and equity (lower)/higher (149) 16 AUD/CNY +5% (218) (164) +1% (100 basis points) AUD/INR +5% (390) (128) AUD/EUR +5% 858 201 The movements in profit and equity are due to lower interest revenues from variable rate cash balances, and higher interest expenses from variable rate borrowings. The sensitivity is changed compared to 2011 because of a decrease in cash balances AUD/CNY -10% 118 376 and increase in net debt that has occurred due to acquisition activity. AUD/INR -10% (164) 306 AUD/EUR -10% (564) (402) Management believe the balance date risk exposures are representative of the risk exposure inherent in the financial instruments. The movements in profit and equity in 2012 are more sensitive than in 2011 due to continued offshore expansion and (b) Foreign currency risk correspondingly increased use of forward currency contracts.

(i) Transactional risk Management believe the balance date risk exposures are representative of the risk exposure inherent in the The Group also has transactional currency exposures. Such exposures arise from sales or purchases by an operating entity in financial instruments. currencies other than its functional currency. (c) Credit risk The Group’s policy is to use forward currency contracts to reduce currency exposures over a rolling 24 month horizon. Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, Contracts are taken out where exposures are in excess of $0.75m in any single rolling 12 month period. other financial assets and derivative instruments. The Group’s exposure to credit risk arises from potential default of the counter It is Group’s policy not to enter into forward contracts until the forecast transactional exposure is considered a committed party, with a maximum exposure equal to the carrying amount of these instruments. exposure, and will only enter into forward contracts within the following bands. Exposure at balance date is addressed in each applicable note. Current exposure (1-12 months): between 25% and 75% of forecast transactional exposure The Group is not exposed to significant credit risk due to the nature of revenue which is generally received in advance of the service Non current exposure (13-24 months): between 0% and 50% of forecast transactional exposure being provided. The Group and the Company has, as disclosed in note 21, forward currency contracts held for trading that are subject to fair In situations where revenues are not provided in advance of service, the Group trades only with recognised, creditworthy third value movements through profit and loss as foreign exchange rates move. parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the Board. These risk limits are regularly monitored.

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

There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst a number of financial institutions to minimise the risk of default of counterparties.

Credit risk exposure from financial guarantees is set out in note 25. 96 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 97

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

23 Financial risk management objectives and policies (continued) 23 Financial risk management objectives and policies (continued)

(d) Liquidity risk (d) Liquidity risk (continued) The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of operating cash The Group has entered into financial guarantee contracts as disclosed in note 25c. In the event of default these are at call. Default is flows and committed available credit facilities. considered remote and the Group expect that no payment will be required in the foreseeable future.

During the 2011 financial year the group renegotiated it facilities as follows: The tables above reflect all contractually fixed settlement, repayments, receivables and interest resulting from recognised financial liabilities and assets, including derivative financial instruments, as of 30 June 2012. For derivative financial instruments the gross • Two facilities ending June 2012 were extended until February 2014 and the facility limits were each increased by $75m to cash settlement is presented where gross settlement occurs and the net cash settlement is presented where net settlement occurs. $100m ($200m in total) For the other obligations the respective undiscounted cash flows for the respective upcoming fiscal years are presented. Cash flows • One facility, for $25m, ending June 2011 was extended until June 2012. for financial liabilities are based on the earliest possible date for on which the Group can be required to pay. Cash flows for financial assets are based on the terms and conditions existing at the balance sheet date. During the 2012 year the $25m facility ending 30 June 2012 was extended to 30 June 2013. No other facilities were changed. Management manages this liquidity risk by the maintenance of appropriate unutilised credit facilities and continued operation At 30 June 2012 $133.308m of the facility had been utilised (2011: $135.833m). Cash flows from operations for 2012 were $73.9m of the business as a going concern generating operating cash flows. Whilst operating as a going concern, the material business (2011: $69.5m). units of the Group receive operating cash flows prior to the provision of the service. At 30 June 2012, the Group had recognised The Group’s policy is that no more than 50% of credit facilities should mature within the following 12 months. At 30 June 2012, 11% deferred revenue of $173.999m (2011: $169.490m), representing cash receipted by the Group for which tuition services had yet (2011: 11%) of the Group’s credit facilities will mature within the following 12 months. to be provided. Management have utilised these cash receipts to reduce debt, return capital to shareholders, and to purchase investments. At 30 June 2012, the Group had $133.308m bank debt (2011: $135.833m) and had unutilised credit facilities of (i) Contractual maturities $91.692m available (2011: $89.167m). Management is confident this is sufficient to cover any liquidity risk exposure at 30 June.

3 months (e) Fair value <3 months to a year 1–5 years Total 2012 $000s $000s $000s $000s The methods for estimating fair value are outlined in the relevant notes to the financial statements. Subsequent to initial recognition at fair value financial instruments are grouped into Levels 1 to 3 based on the degree to which the Financial assets fair value is observable. Levels are defined as follows: Cash and cash equivalents 19,162 - - 19,162 Trade and other receivables 78,445 3,274 - 81,719 • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets of liabilities. Foreign exchange derivatives 314 509 153 976 • Level 2 fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are 97,921 3,783 153 101,857 observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Financial liabilities • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are Trade and other payables 13,671 57,094 - 70,765 not based on observable market data (unobservable inputs). Borrowings - 2,839 133,308 136,147 Derivative financial assets and liabilities disclosed in note 21 are classified as level 2 fair value measurements. The Group has no Interest rate derivatives 530 1,589 1,589 3,708 significant financial assets and liabilities grouped as level 3 fair value measurements. There were no transfers between level 1 and 2 Foreign exchange derivatives 167 430 71 668 in the current or prior period.

14,368 61,952 134,968 211,288

Net maturity 83,553 (58,169) (134,815) (109,431)

2011

Financial assets Cash and cash equivalents 36,307 - - 36,307 Trade and other receivables 58,952 13,640 - 72,592 Foreign exchange derivatives 184 516 239 939

95,443 14,156 239 109,838

Financial liabilities Trade and other payables 15,209 65,338 - 80,547 Borrowings - - 139,141 139,141 Interest rate derivatives 530 1,589 3,708 5,827 Foreign exchange derivatives 145 476 227 848

15,884 67,403 143,076 226,363

Net maturity 79,559 (53,247) (142,837) (116,525) 98 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 99

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

24 Business combinations 24 Business combinations (continued)

During the 2012 financial year there were no significant acquisitions. The 2011 statement of comprehensive income includes revenue of $65.0m, and profit after tax of $12.3m, as a result of the acquisition. Had the acquisition of SAE occurred at the beginning of the 2011 financial year the statement of comprehensive income The following significant acquisitions occurred during the 2011 financial year. would have included revenue of $122.0m, and profit for the year of $22.7m. Acquisition of SAE Navitas Limited paid a premium for the acquisition, and recognised goodwill of $136.382m, because it believes the long run growth Effective 1 January 2011, Navitas limited acquired the SAE group of companies (“SAE”). SAE was a privately held group of companies opportunities and potential for synergies are significant. that specialised in the provision of education services in the area of Creative Media, specifically audio, film and media. Other transactions The total consideration transferred was $294.294m and included a combination of cash and equity instruments. Total cash transferred was $270.162m and 5,871,551 ordinary shares were issued to the vendor, with a fair market value of $4.11 each (totaling Navitas had no other material acquisitions during the 2011 financial year, however, Navitas was awarded the tender to manage the $24.132m) based on the quoted price of the shares of Navitas Limited on the date of issue. operations of La Trobe International College, Melbourne.

As at 30 June 2011, the Group had provisionally recognised the fair values of the identifiable assets and liabilities of SAE based Navitas transferred no consideration for this, but acquired the following identifiable assets and liabilities. upon the best information available at the reporting date. Some balances were provisional because in some cases accounting estimates were still subject to finalisation by independent valuers. All valuations were finalised during the 2012 financial year Fair value at with no differences arising between the provisional and final valuations and related acquisition accounting. Provisional Business acquisition date Carrying Value combination accounting was as follows: Note $000s $000s

Fair value at Cash and cash equivalents 3,868 3,868 acquisition date Carrying Value Note $000s $000s Unearned Income 3,868 3,868 Cash and cash equivalents 22,005 22,005 Trade receivables 9,805 10,213 Provisional fair value of identifiable net assets - - Plant and equipment 20,891 20,891 Goodwill arising on acquisition 14 - Deferred tax assets 2,837 2,837 Total consideration transferred - Identifiable Intangible Assets 14 136,000 - Prepayments 3,273 3,273 This resulted in a net cash inflow to the Group of $3.868m. No acquisition costs were paid. Other assets 705 2,998 Disposals 195,516 62,217 During the 2011 financial year Navitas disposed of SAE operations in the United Arab Emirates for $7.133m. Navitas recognised a gain of $3.816m on this disposal. Trade payables 2,214 2,214 Other payables 4,496 4,496 Unearned Income 27,982 27,982 Tax liabilities 567 567 Borrowings 2,255 2,255 Provisions 90 90

37,604 37,604

Fair value of identifiable net assets 157,912 24,613 Goodwill arising on acquisition 14 136,382

Total consideration transferred 294,294

Acquisition date fair value consideration transferred comprised: Cash paid 270,162 Shares issued, at fair value 24,132

294,294

Direct costs related to the acquisition (expensed in 2011) 4,874

The cash outflow on acquisition is as follows: Net cash acquired with the subsidiary 22,005 Cash paid (270,162)

Net cash outflow (248,157) 100 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 101

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

25 Commitments and contingencies 26 Related party disclosures

(a) Leasing (a) Equity interests in related parties

(i) Operating leases — Group as lessee The consolidated financial statements include the financial statements of Navitas Limited and the controlled entities listed in the following table. The Group has entered into commercial leases on certain premises. These leases have an average life of between three and ten years with options to renew in some cases. There are no restrictions placed upon the lessee by entering into these leases. Beneficial Investment Country of incorporation Interest (%) ($000s) 2012 2011 Name 2012 2011 2012 2011 $000s $000s

Australia Future minimum rentals payable ACL Pty Ltd* 100 100 - - Within one year 36,678 32,969 Australian Campus Network Pty Limited* 100 100 - - After one year but not more than five years 106,073 101,162 Australian College of Applied Psychology Pty. Limited* 100 100 13,581 13,581 More than five years 46,170 48,782 Australian College of English Pty Ltd* 100 100 - - Cadre Design Pty. Limited 100 - 100 - 188,921 182,913 Colleges of Business & Technology (NSW) Pty Ltd* 100 100 - - Colleges of Business and Technology (WA) Pty Ltd* 100 100 12,914 12,914 Cytech Intersearch Pty Limited* 100 100 1,620 1,620 In respect of non-cancellable operating leases the following liabilities have been recognised: Educational Enterprises Australia Pty. Ltd.* 100 100 1,689 1,689 Educational Services Pty Ltd* 100 100 - - 2012 2011 $000s $000s EduGlobal Australia Pty Ltd 55 55 - - EduGlobal Pty Ltd* 100 100 - - Lease incentives Hawthorn Learning Pty Limited* 100 100 5,290 5,290 Health Skills Australia Pty Ltd* 100 100 3,500 3,500 Current 1,949 1,774 IBT (Canada) Pty Limited* 100 100 - - Non Current 6,459 7,305 IBT (Sydney) Pty Limited* 100 100 - - IBT Education Pty Ltd* 100 100 - - 8,408 9,079 IBT Finance Pty Limited* 100 100 - - Institutes of Business and Technology (UK) Pty Ltd* 100 100 - - (b) Property, plant and equipment Learning Information Systems Pty Limited 85 85 - - The Group has no capital commitments. LM Training Specialists Pty. Ltd.* 100 100 3,089 3,089 Melbourne Institute of Business and Technology Pty Ltd* 100 100 11,875 11,875 (c) Guarantees Navitas America Pty Ltd* 100 100 - - The Group has entered into lease rental guarantees with a face value of $27.667m (2011: $27.260m) and performance guarantees Navitas Bundoora Pty Ltd* 100 100 - - with a face value of $36.894m (2011: $14.060m). The fair value of the guarantees has been assessed as $nil based on underlying Navitas College of Health Pty Ltd* 100 100 - - performance of the entities subject to the guarantees. Navitas College of Public Safety Pty Ltd 100 75 2,021 2,021 Navitas English Pty Limited* 100 100 55,821 55,821 Navitas English Services Pty Limited* 100 100 - - Navitas Professional Pty Ltd* 100 100 - - Navitas Professional Training Pty Ltd* 100 100 3,720 3,720 Navitas SAE Holdings Pty Ltd* 100 100 - - Navitas USA Pty Ltd* 100 100 - - Newcastle International College Pty Ltd* 100 100 - - Perth Institute of Business and Technology Pty Ltd* 100 100 2,201 2,201 Queensland Institute of Business & Technology Pty Ltd* 100 100 10,339 10,339 SAE Institute Pty Limited 100 100 - - South Australian Institute of Business and Technology Pty Ltd* 100 100 465 465 Sydney Institute of Business and Technology Pty Ltd* 100 100 32,603 32,603 The Australian Centre for Languages Pty Ltd* 100 100 - - The Learning Space Pty Ltd 100 - - -

Canada Fraser International College Limited 100 100 - - Navitas Canada Holdings Limited 100 100 - - 102 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 103

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

26. Related party disclosures (continued) 26. Related party disclosures (continued)

(a) Equity interests in related parties (continued) (a) Equity interests in related parties (continued) Beneficial Investment Beneficial Investment Country of incorporation Interest (%) ($000s) Country of incorporation Interest (%) ($000s) Name 2012 2011 2012 2011 Name 2012 2011 2012 2011 Rest of World Germany Ausedken Limited (Kenya) 100 100 859 859 SAE Alumni GmbH 100 - - - Australian College of Business and Technology (Private) Limited (Sri Lanka) 75 75 7,070 7,070 SAE Institute GmbH 100 100 64,000 64,000 EduGlobal China Limited (Hong Kong) 55 55 5,090 5,090 SAE Germany Holdings GmbH 100 100 - - Navitas SAE FZ-LLC (UAE) 100 - - - PT SAE Kreatif Media (Indonesia) 100 - - - India SAE Egitim Enstitüsü Limited Sirketi (Turkey) 100 100 - - Study Overseas Global Private Limited 100 100 - - SAE Gesellschaft für Ausbildung von Tontechnikern Gesellschaft m.b.H. (Austria) 100 100 - - Study Overseas India Private Limited 100 100 - - SAE Hellados Sole Partner Ltd —­ Laboratory of Liberal Studies (Greece) 100 100 - - SAE Institute Belgium SPRL (Belgium) 100 100 - - Netherlands SAE Institute Izobraževanje Na Podrocju Audio, Video In Filmske Tehnike, D.O.O., SAE Coöperatief U.A. 100 100 - - 100 100 - - Ljubljana (Slovenia) SAE Netherlands B.V. 100 100 - - SAE Institute South Africa Pty Ltd (South Africa) 100 100 - - SAE Technology Group Holdings B.V. 100 100 85,744 85,744 SAE Italia Srl. (Italy) 100 100 - - SAE School of Audio Engineering AG (Switzerland) 100 100 - - Singapore SAE Technology Group, S.L. (Spain) 100 100 - - Curtin Education Centre Pte. Ltd. 100 100 - - School of Audio Engineering (N.Z.) Limited (New Zealand) 100 100 - - Navitas Asia Holdings Pte. Ltd. 100 100 1,373 - School of Audio Engineering France SARL (France) 100 100 - - Navitas Education Centre Pte. Ltd. 100 100 - - School of Audio Engineering Sweden Aktiebolag (Sweden) 100 100 - - SAE Institute Pte. Ltd. 100 100 - - Study Overseas (Mauritius) Holdings Ltd (Mauritius) 100 100 - -

United Kingdom * indicates member of the closed group Cambridge Ruskin International College Limited 100 100 - - Edinburgh International College Ltd 100 100 - - (i) Entities subject to class order relief Employment Overseas Ltd. 100 100 - - Pursuant to ASIC Class Order 98/1418, relief has been granted to certain of the entities which are indicated above as members HIBT Limited 100 100 1,666 1,666 of the closed group (“closed group entities”) from the Corporations Act 2001 requirements for preparation, audit and International College Portsmouth Ltd. 100 100 - - lodgement of their financial reports. International College Wales Limited 100 100 - - As a condition of the Class Order, Navitas Limited and the closed group entities entered into a Deed of Cross Guarantee on 15 London IBT Limited 100 100 24 24 June 2006, as varied by assumption deeds dated 8 November 2006, 20 May 2009, 25 May 2010 and 6 August 2010, and a deed Navitas UK Holdings Limited 100 100 - - of variation dated 19 May 2009. The effect of the deed is that Navitas Limited has guaranteed to pay any deficiency in the event Plymouth Devon International College Ltd 100 100 - - of winding up of any closed group entity. The closed group entities have also given a similar guarantee in the event that Navitas SAE Education Limited 100 100 - - Limited is wound up. Study Overseas Ltd. 100 100 9,790 9,790 During the period, no entity has been: The International College at Robert Gordon University Ltd 100 100 - - • removed by a revocation deed contemplated by the Deed of Cross Guarantee; or

United States • the subject of a notice of disposal contemplated by the Deed of Cross Guarantee. Navitas Boston LLC 100 100 - - During the period, no entity obtained relief under the Class Order or a previous order at the end of the immediately preceding Navitas Bowling Green LLC 100 100 - - financial year but which was ineligible for relief in respect of the relevant financial period. Navitas Dartmouth LLC 100 100 - - Navitas Lowell LLC 100 100 - - Navitas USA General Partnership 100 100 - - Navitas USA Holdings LLC 100 100 - - SAE Institute Group, Inc. 100 100 7,000 7,000 SAE Institute of Technology (Atlanta) Corp. 100 100 - - SAE Institute of Technology (Chicago) Corp. 100 - - - SAE Institute of Technology (Los Angeles) Corp. 100 100 - - SAE Institute of Technology (Miami) Corp. 100 100 - - SAE Institute of Technology (Nashville) Corp. 100 100 - - SAE Institute of Technology (New York) Corp. 100 100 - - SAE Institute of Technology (San Francisco) Corp. 100 100 - - 104 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 105

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

26 Related party disclosures (continued) 26 Related party disclosures (continued)

(b) Closed Group Disclosures (b) Closed Group Disclosures (continued)

The consolidated statement of comprehensive income and statement of financial position of the entities which are members of the (ii) Consolidated statement of financial position “closed group” are as follows: Closed Group (i) Consolidated statement of comprehensive income 2012 2011 $000s $000s Closed Group 2012 2011 $000s $000s Current Assets Cash 2,504 - Revenue 484,947 481,846 Trade and other receivables 71,171 87,278 Other 10,973 8,768 Marketing expenses (62,859) (61,711) Academic expenses (112,763) (96,911) Total Current Assets 84,648 96,046 Administration expenses (195,532) (233,212) Finance costs (8,441) (3,610) Non Current Assets Plant & equipment 38,638 29,858 Profit before income tax expense 105,352 86,402 Deferred tax assets 10,669 11,762 Intangible assets 365,912 284,938 Income tax expense (29,380) (24,804) Other financial assets 181,134 170,860

Profit for the year 75,972 61,598 Total Non Current Assets 596,353 497,418

Other comprehensive income Total Assets 681,001 593,464 Fair value movements in hedge reserves (1,864) 666 Income tax relating to currency translation difference 359 - Current Liabilities Trade and other payables 55,924 62,917 Other comprehensive income for the year (1,505) 666 Deferred revenue 113,439 112,137 Current tax payables 9,599 5,141 Total comprehensive income for the year 74,467 62,264 Borrowings 130,344 34,813 Provisions 3,192 3,144

Total Current Liabilities 312,498 218,152

Total Non Current Liabilities Trade and other payables 6,273 6,819 Borrowings 133,308 135,833 Provisions 6,452 4,673

Total Non Current Liabilities 146,033 147,325

Total Liabilities 458,531 365,477

Net Assets 222,470 227,987

Equity Issued capital 195,175 194,851 Reserves (839) 666 Retained earnings 28,134 32,470

Total Equity 222,470 227,987 106 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 107

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

26 Related party disclosures (continued) 27 Key management personnel

(b) Closed Group Disclosures (continued) (a) Details of key management personnel

(iii) Consolidated Retained Earnings The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period: Closed Group (i) Directors 2012 2011 $000s $000s Harvey Collins Non-Executive Chairman Rod Jones Chief Executive Officer and Managing Director At 1 July 32,470 39,639 Peter Campbell Non-Executive Director Profit attributable to members of the closed group 75,972 61,598 Ted Evans Non-Executive Director Dividends (80,308) (68,767) Tracey Horton Non-Executive Director (appointed 13 June 2012) James King Non-Executive Director At 30 June 28,134 32,470 Peter Larsen Non-Executive Director

(c) Transactions with other related parties (ii) Executives

(i) Transactions between the Group and its related parties Tony Cullen Group General Manager — Marketing and Sales During the financial year, the following transactions occurred between the Group and its other related parties: Lyndell Fraser Executive General Manager — Workforce • Minority shareholders have loaned $55,330 (2011: $228,129) to controlled entities, and minority shareholders were repaid Hugh Hangchi Company Secretary and Group General Counsel $475,481 (2011: $304,586). Neil Hitchcock Group General Manager — IT and Facilities The following balances arising from transactions between the Group and its other related parties are outstanding at Bryce Houghton Chief Financial Officer reporting date: Scott Jones Executive General Manager — Student Recruitment, Manager — SAE Integration and Liaison (appointed 1 July 2011) • Current loans totaling $2,838,944 (2011: $2,831,605) are repayable to Mr David Shi and his related entities. Mr Shi is the Managing Director of EduGlobal China Ltd (EGC) and owns the minority shareholding of EGC not owned by Navitas Limited. Jenny Michel Group General Manager — Human Resources Interest on the loan is charged at nil% (2011: nil). No repayments were made during the period. John Wood Executive General Manager — University Programs • At 30 June 2011 interest free non current loans totaling $475,481 were repayable to Solinet Investments Pte Ltd. Solinet Helen Zimmerman Executive General Manager — English Investments owns 10% of Navitas Singapore Pte Ltd. During the 2012 financial year period $475,481 was repaid and the loan was reduced to nil. During the 2011 financial year $152,393 of the loan was converted to equity and $304,586 was repaid.

• No receivables (2011: $335,000) are due from Australian Institute of Business & Technology Limited. An amount of $335,000 was written off in the year. During the prior year a provision of $335,000 was recorded against this receivable.

All amounts advanced to or repayable to related parties are unsecured and are subordinate to other liabilities. The amounts outstanding will be settled in cash. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

Guarantees provided or received for any related party receivables or payables have been disclosed in note 25.

Transactions and balances between the company and its associates were eliminated in the preparation of consolidated financial statements of the Group to the extent of the Group’s share in profits and losses of the associate resulting from these transactions.

(d) Ultimate Parent Navitas Limited is the ultimate Australian parent company and ultimate parent of the Group. 108 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 109

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

27 Key management personnel 27 Key management personnel (continued)

(b) Key management personnel compensation (c) Shareholdings of key management personnel (continued)

The aggregate compensation made to key management personnel of the company and the Group is set out below: (ii) Executives

2012 2011 Balance at Balance at $ $ 2012 beginning of year Acquisitions Disposals end of year

Short term benefits 4,456,775 5,890,375 Tony Cullen 199,411 - (103,500) 95,911 Post employment benefits 447,754 503,256 Lyndell Fraser 36,251 11,832 - 48,083 Other long term benefits (87,576) 268,112 Hugh Hangchi 75,962 10,000 - 85,962 Neil Hitchcock 144,475 - - 144,475 4,816,953 6,661,743 Bryce Houghton 107,553 20,000 - 127,553 Scott Jones 2,650,136 20,000 (60,160) 2,609,976 (c) Shareholdings of key management personnel Jenny Michel 33,573 7,151 - 40,724 The movement during the reporting period in the number of ordinary shares in Navitas Limited held, directly, indirectly or John Wood 112,642 273 - 112,915 beneficially, by each key management person, including their related parties, is as follows: Helen Zimmerman 86,305 - (55,547) 30,758

(i) Directors 3,446,308 69,256 (219,207) 3,296,357 Balance at Balance at 2012 beginning of year Acquisitions Disposals end of year 2011

Harvey Collins 43,948 - - 43,948 Tony Cullen 199,411 - - 199,411 Rod Jones 53,517,995 65,000 - 53,582,995 Lyndell Fraser 22,589 13,662 - 36,251 Peter Campbell 19,053,512 - - 19,053,512 Hugh Hangchi 75,962 - - 75,962 Ted Evans 60,000 - - 60,000 Neil Hitchcock 107,175 37,300 - 144,475 Tracey Horton* - - - - Bryce Houghton 107,278 275 - 107,553 James King 50,000 - - 50,000 Scott Jones 2,650,136 - - 2,650,136 Peter Larsen 28,727,357 - - 28,727,357 Jenny Michel 24,807 8,766 - 33,573 John Wood 112,642 - - 112,642 101,452,812 65,000 - 101,517,812 Helen Zimmerman 76,244 10,061 - 86,305

2011 3,376,244 70,064 - 3,446,308

Harvey Collins 40,000 3,948 - 43,948 (d) Loans to key management personnel Rod Jones 53,517,995 - - 53,517,995 There were no loans provided to any key management personnel. Peter Campbell 19,053,512 - - 19,053,512 Ted Evans 60,000 - - 60,000 (e) Other transactions with key management personnel James King 50,000 - - 50,000 There have been no other transactions with key management personnel. Peter Larsen 28,727,357 - - 28,727,357

101,448,864 3,948 - 101,452,812

* Appointed 13 June 2012 110 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 111

Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2012 For the year ended 30 June 2012

28 Events after balance sheet date 30 Parent Entity Disclosures

Subsequent to balance sheet date, the directors of the Company declared a final dividend on ordinary shares in respect of the 2012 a) Financial Information financial year. The total amount of dividend is $37.907m, which represents a fully franked dividend of 10.1 cents per share. The dividend has not been provided for in the 30 June 2012 financial statements. 2012 2011 Parent $000 $000

29 Auditor’s remuneration Profit for the year 77,035 32,739 The auditor of Navitas Limited is Deloitte Touche Tohmatsu. Total comprehensive income 77,035 32,739 2012 2011 $ $ Current Assets 15,231 17,528

Audit services Total Assets 483,390 389,945 Auditor of the Company Deloitte Touche Tohmatsu (Australia) Current Liabilities 139,176 28,614 Audit and review of financial reports 324,605 261,266 Other regulatory audit services 7,150 6,500 Total Liabilities 277,729 179,165 Acquisition related completion audits - 193,693 Overseas Deloitte Touche Tohmatsu firms Share holders Equity Audit and review of financial reports 293,364 275,060 Issued capital 195,175 194,851 Acquisition related completion audits - 106,307 Reserves (839) 666 Retained earnings 11,325 15,263 625,119 842,826

Total Equity 205,661 210,780 Other Auditor Audit and review of financial reports 127,500 - b) Guarantees Cross guarantees have been provided by Navitas Limited and its controlled entities as listed in note 26. The fair value of the cross Other services guarantee has been assessed as $nil based on the underlying performance of the entities in the closed group. Auditor of the Company Deloitte Touche Tohmatsu (Australia) c) Other Commitments and Contingencies Other — consulting services - - Navitas Limited has no commitments to acquire property, plant and equipment, and has no contingent liabilities.

752,619 842,826 SUCCESS THROUGH DIVERSITY Navitas Li mited Annu al R eport 2012 113

DIVERSITY DELIVERS COLLECTIVE ACHIEVEMENT

Directors’ Report 114 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 115

Directors’ Report

Your Directors submit their report for the Committee Membership a) any liability which does not arise out of year ended 30 June 2012. As at the date of this report, the Company conduct involving: had an Audit and Risk Committee and a (i) a wilful breach of duty in relation Directors Nomination and Remuneration Committee. to the Company; and The names and details of the Company’s Members acting on the committees of the (ii) a contravention of section 182 or Directors in office during the financial board during the year were: section 183 of the Corporations year and until the date of this report are Act 2001, as permitted by section 199B of the Corporations Act set out on pages 8 and 9. Directors were Nomination and 2001; and in office for this entire period unless Audit and Risk Remuneration otherwise stated. b) any liability for costs and expenses incurred by the Director in defending James King Ted Evans Interests in the Shares and Options (Chairman) (Chairman) proceedings, whether civil or of the Company and Related criminal, whatever their outcome, and Harvey Collins Peter Campbell Bodies Corporate without the qualifications set out in Ted Evans Harvey Collins As at the date of this report, the interests clause (a) above. of the Directors in the shares and options The total amount of insurance contract of Navitas Limited were: Indemnification and Insurance premiums paid is $71,309. This amount is included as part of the Directors Ordinary of Directors and Officers remuneration on page 122. Directors shares held The Company has made an agreement Corporate Information Significant Changes in the Rounding to indemnify all the Directors against any Company Secretary Harvey Collins 43,948 liability incurred by that Director in his Corporate Structure State of Affairs The amounts contained in this report and capacity as a director of the Company Hugh Hangchi, LLB, BComm, GAICD in the financial report have been rounded Rod Jones 53,582,995 Navitas Limited is a company limited by There has been no significant change in the or a subsidiary of the Company. The Appointed 27 April 2005 to the nearest $1,000 (where rounding shares that is registered and domiciled in state of affairs of the Company. Peter Campbell 19,053,512 agreement provides for the Company to is applicable) under the option available Mr Hangchi is a practising lawyer and Australia. Navitas Limited has prepared a Ted Evans 60,000 pay an amount to indemnify directors only to the Company under ASIC Class Order has experience in providing advice to consolidated financial report incorporating Significant Events after the Tracey Horton - to the extent: 98/0100. The Company is an entity to directors of listed and unlisted public the entities that it controlled during the Balance Sheet Date which the Class Order applies. James King 50,000 a) the Company is not precluded by law companies in relation to directors’ duties, financial year as listed in note 26 of the Peter Larsen 28,727,357 from indemnifying the Directors; and the Corporations Act, the Listing Rules and financial statements. Subsequent to balance sheet date, the corporate governance. directors of the Company declared a final Non Audit Services b) for the amount that the Director is not dividend on ordinary shares in respect of otherwise entitled to be indemnified Nature of Operations and Details of the amounts paid to the Prior to joining the company, Mr Hangchi the 2012 financial year. The total amount Directors’ Meetings and is not actually indemnified by Principal Activities auditor of the Company, Deloitte Touche was a senior associate at a national of dividend is $37.907m, which represents another person (including a related Tohmatsu, and its related practices for The number of meetings of Directors law firm where he specialised in capital The principal activities during the financial a fully franked dividend of 10.1 cents per body corporate or an insurer). audit and non audit services provided (including meetings of committees of raisings, mergers and acquisitions and year of the Group were of the provision Share. The dividend has not been provided regulated takeovers. He has also worked of educational services to domestic and during the year are set out in note 29. Directors) held during the year and the During or since the financial year, the for in the 30 June 2012 financial statements. as a solicitor with the Australian Securities overseas students. There have been no number of meetings attended by each Company has paid premiums in respect and Investments Commission. significant changes in the nature of those Director were as shown in the table below. of a contract insuring all the directors of Auditor’s Independence activities during the year. Future Developments Navitas Limited against any of the following Declaration All Directors were eligible to attend all Likely developments in, and expected meetings held. liabilities incurred by the Director as a The auditor’s independence declaration director, namely: Operating and Financial Review results of the operations of the Group in subsequent years are referred to is set on page 126 and forms part of the A review of the consolidated entities’ elsewhere in this report, particularly on directors’ report for the financial year Meetings of Committees operations and financial performance has pages 14 to 39. In the opinion of the ended 30 June 2012. been provided for on pages 14 to 39. Directors’ meetings Audit and Risk Nomination and Remuneration Directors, further information on those Number of Number of matters could prejudice the interests of the Remuneration Report meetings meetings Dividends Company and the Group and has therefore This report outlines the remuneration Number of Number of held while a Number of held while a Number of not been included in this report. arrangements in place for the key meetings held meetings committee meetings committee meetings Cents $000s while a director attended member attended member attended management personnel (Directors Environmental Regulation and executives) of Navitas Limited Final dividends and Performance (the Company). Harvey Collins 8 8 5 5 3 3 recommended The Group’s operations are not subject to The following were key management Rod Jones 8 8 - - - - — on ordinary shares 10.1 37,907 any significant environmental regulations personnel at any time during the reporting Peter Campbell 8 8 - - 3 3 Interim dividends paid under the government legislation of the period and unless otherwise indicated during the year Ted Evans 8 8 5 5 3 3 countries it operates in. The Board believes were key management personnel for the Tracey Horton* 1 1 - - - - — on ordinary shares 9.4 35,280 that the consolidated entity has adequate entire period. James King 8 8 5 5 - - Final for 2011 shown as systems in place for the monitoring of recommended in the Peter Larsen 8 8 - - - - environmental regulations and is not aware 2011 report of any such regulations that apply to the — on ordinary shares 12.0 45,028 * It is noted that Ms Horton was appointed on 13 June 2012. consolidated entity. 116 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 117

Directors’ Report (continued)

Directors Structure Structure Harvey Collins Non-Executive Chairman The Constitution and the ASX Listing Rules In determining the level and make up of Rod Jones Chief Executive Officer and Managing Director specify that the aggregate remuneration executive remuneration, the Nomination of non-executive Directors should be and Remuneration Committee considers Peter Campbell Non-Executive Director determined from time to time by a general the market levels of remuneration paid to Non-Executive Director Ted Evans meeting. The latest determination was executives of comparable companies. Tracey Horton Non-Executive Director (appointed 13 June 2012) made at the company’s annual general Remuneration consists of the following James King Non-Executive Director meeting on 23 November 2010 where key elements: Dr Peter Larsen Non-Executive Director shareholders approved an aggregate remuneration of $900,000. An amount not • Fixed Remuneration exceeding the amount determined is then • Variable Remuneration (ValueShare Executives divided between the Directors as agreed. Incentive Scheme) Tony Cullen Group General Manager — Marketing and Sales The Board considers advice from The proportion of fixed remuneration and Lyndell Fraser Executive General Manager — Workforce external consultants as well as fees variable remuneration is established for Company Secretary & Group General Counsel Hugh Hangchi paid to non-executive Directors of each senior manager by the Nomination Neil Hitchcock Group General Manager — IT and Facilities comparable companies when determining and Remuneration Committee or the Chief Bryce Houghton Chief Financial Officer the remuneration. The amount of Executive Officer (as the case may be). aggregate remuneration and the manner Scott Jones Executive General Manager — Student Recruitment, The fixed and variable components of the of apportionment will be reviewed Manager — SAE Integration and Liaison (appointed 1 July 2011) remuneration of the key management periodically, and the quantum will be personnel are detailed on page 122. Jenny Michel Group General Manager — Human Resources subject to approval by Shareholders. John Wood Executive General Manager — University Programs Each Director receives a fee for being a Fixed Remuneration Helen Zimmerman Executive General Manager — English director of the Company. An additional fee is also paid for each board committee Objective Remuneration Philosophy Nomination and on which a Director sits. The payment The level of fixed remuneration will be of additional fees for serving on a reviewed annually accordingly to ensure The performance of the Company depends Remuneration Committee committee recognises the additional time it is commensurate with Company upon the quality of its directors and The Nomination and Remuneration commitment required by Directors which and individual performance, as well executives. To prosper, the Company must Committee of the Board of Directors is serve on one or more committees. as consistent with market rates for attract, motivate and retain highly skilled responsible for determining and reviewing comparable executive roles. success enjoyed by the Group and in so Structure directors and executives. The remuneration of key management compensation arrangements for the doing, align their interests with those of The diagram below illustrates the structure directors, the Chief Executive Officer (CEO) personnel, including non-executive To this end, the Company embodies Structure shareholders. It also allows one of the of the ValueShare Incentive Scheme. and the senior management team. Directors, for the year ending 30 June 2012 largest costs — staff remuneration — to the following principles in its Fixed remuneration can be received in Further detail is provided in the text is detailed on page 122. rise and fall with the performance of remuneration framework: The Nomination and Remuneration a variety of forms, including cash and that follows. the business. Committee assesses the appropriateness • Provide competitive rewards to attract Senior Manager and Executive fringe benefits such as motor vehicles and high calibre executives; of the nature and amount of remuneration expense payment plans. It is intended that An important part of the Company’s Captures all at-risk pay of directors and senior managers on a Director Remuneration the manner of payment chosen will be ongoing success is its ability to attract Each participant in the ValueShare • Link executive rewards to periodic basis by reference to relevant optimal for the recipient without creating and retain the best talent in the education Incentive Scheme is assigned a level of Shareholder value; Objective employment market conditions with the undue cost for the Company. industry and in the seven years since target variable pay (TVP) which is based on • Have a significant portion of executive overall objective of ensuring maximum The Company aims to reward executives its inception, the ValueShare Incentive a percentage of their fixed remuneration. with a level and mix of remuneration remuneration ‘at risk’, dependent stakeholder benefit from the retention of a Variable Remuneration Scheme is helping Navitas achieve that The Group’s TVP percentages range upon meeting pre-determined high quality board and executive team. commensurate with their position and goal. For many of our staff, the opportunity from 10% to 75% of fixed remuneration, performance benchmarks; responsibilities within the Company and Summary of Outcomes for 2012 to share in the financial success enjoyed depending on the level of responsibility so as to: • Mandatory requirement for senior Remuneration Structure While final incentive payments are subject by the business makes working at Navitas held by the participant. executives of the Company to take at • Reward executives for Company, attractively different from other positions In accordance with best practice corporate to Board determination in September least 50% of all incentive payments business unit and individual in the education sector. governance, the structure of non-executive each year, at a Group level, performance in the form of ordinary shares in the performance against targets set by during 2012 was below target and as a Director and senior manager remuneration reference to appropriate benchmarks; Company (until such executives hold consequence, no incentive is expected to Target is separate and distinct. EVA EVA incentive Individual Final a beneficial interest in shares in the • Align the interests of executives with Variable Pay be paid to Corporate staff in relation to the x performance = declared +/– performance = payment Company equal to the value of their those of Shareholders; 2012 year, including the Managing Director (TVP) fixed remuneration); and Non-executive • Link reward with the strategic goals and and CEO. TVP ranges Corporate For participants Individual For participants • Establish appropriate, demanding Director Remuneration from 10%–75% staff are tied with TVP of performance with TVP of 20% performance of the Company; and Many business units within the Group fared performance hurdles in relation to of fixed pay to the Group 20% or more, is determined or more, if the better and incentive plan participants at depending on EVA result, declarations are by the business payment is in variable executive remuneration. Objective • Ensure remuneration is competitive by market standards. this level are likely to receive some level responsibility. business unit uncapped on unit managing excess of their The Board seeks to set aggregate staff are tied the upside and director, Chief TVP, two thirds remuneration at a level which provides of reward. to the business the downside. Executive of the amount the Company with the ability to attract unit and Group For others, Officer or above their EVA result. Board (as the TVP is deferred and retain directors of the highest calibre, Objective declarations are limited case may be). at risk for whilst incurring a cost that is acceptable The ValueShare Incentive Scheme aims to 0%–200% two years. to shareholders. to share with participants the financial of TVP. 118 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Directors’ Report (continued)

It is important to note that the ValueShare For participants with a TVP of 20% or executive key management personnel and Incentive Scheme comprises the entire more, declarations are uncapped on both shareholders in the medium to long term. at-risk opportunity offered to staff; Navitas the upside and the downside. For these For those executives, at least 50% of the does not offer any form of equity based participants, if rewards are in excess of incentive payment is used to pay for ordinary remuneration in addition to the ValueShare 100% of TVP, two-thirds of that amount is shares in the Company (at an issue price Scheme, for example. deferred and paid out over the following calculated as a volume weighted average two years. Further detail of the deferral of market price for the five trading days Based on shareholder value rewards is discussed below. immediately before the date of issue) until The ValueShare Incentive Scheme is based such executives hold a beneficial interest Allows for individual recognition on sustained improvements in the financial in shares in the Company equal to the value performance of the Group and its business 30% of each participant’s incentive of their fixed remuneration. This ensures all units, as measured by Economic Value declaration is then placed in a pool and executive key management personnel have a Added (EVA®). reallocated amongst business unit meaningful exposure to the performance of colleagues based on individual performance, EVA measures the profit the business Navitas shares, funded out of the proceeds at the discretion of the business unit makes above and beyond what investors of their incentive payments. managing director, Chief Executive Officer could expect to earn, had their funds been or Board (as the case may be). invested elsewhere at similar risk. As such, Not a short-term incentive scheme it is the value created by the business While payments under the ValueShare For senior staff, above TVP payments for shareholders. Incentive Scheme are made in cash and are deferred and can be forfeited if classified under the accounting standards EVA is more demanding than other profit not sustained as ‘short-term benefits’ (due to the fact measures such as EPS or EBITDA as it For participants with a TVP less than that they will be paid within 12 months of requires a reasonable return on equity to 20% of fixed remuneration, payment is year end), there are a number of elements be achieved before it becomes positive. then made. in the Scheme that ensure rewards reflect Research by independent consultancy sustained, multi-year performance. Juno Partners shows that only about 50% For participants with a TVP of 20% or more, These include: of the top 300 Australian listed businesses payment is also made, but where rewards generate positive EVA in any one year. are in excess of 100% of TVP, two-thirds of • payments reflect performance against a the amount above TVP is deferred and paid set of three year targets; The Board sets the required return out over the following two years. Deferred • two-thirds of payments for above target for investors used to calculate EVA amounts can be lost if the employee’s performance are deferred; annually and may, at its discretion, make participation in the scheme ends for • deferred payments are subject to loss if amendments to the statutory profit to whatever reason, or if future EVA growth performance deteriorates significantly or calculate EVA. falls substantially below target. the employee ceases to be a participant Varies with each business’ Any deferred amounts do not vest in in the plan for whatever reason; financial performance the employee and are not paid on the • for executive key management termination of their employment. Every three years, the Board sets growth personnel, at least 50% of any payment targets for the Group and each business must be used to purchase shares until For senior staff, incentive declarations unit. For the 2012–2014 period, the the executive has established a holding can be negative Group’s growth target, if achieved, would in Navitas equal to the value of their represent top 30% performance compared If EVA growth falls substantially below fixed remuneration. to the actual EVA growth achieved by the target, participants with a TVP of 20% top 300 Australian listed companies over or more can suffer a negative incentive Incentive Outcomes in 2012 2005–2011*. The three year target is then declaration. In this instance, prior year While Navitas enjoyed a rise in EBITDA broken down into annual growth targets. deferred amounts can be reduced during the year, this was principally due or lost altogether. No payment is to the full year impact of SAE Group’s At the end of each year, after consideration made in future years until all negative earnings. As a result of the capital of the EVA growth achieved by an individual declarations are earned out with positive employed in the business growing business unit and the Group against their incentive declarations. substantially following the acquisition targets, an incentive declaration for each EVA® Is a registered trademark of Stern Stewart & Co. of the SAE Group, and other declines in participant is determined. divisional earnings, the growth in EVA at For participants with a TVP less than 20% Additional requirements for the Group level fell substantially short of of fixed remuneration declarations can Executive Key Management Personnel the target set by the Board. range between 0% and 200% of TVP. The aggregate of annual ValueShare Final incentive outcomes are subject to * as determined by Juno Partners, an independent Incentive Scheme payments to executive review and confirmation by the Board in consultancy appointed by the Board. key management personnel is subject to September of this year, but for staff working the approval of the Board. in a corporate position with TVP of less than An additional step is taken with the aim 20% this will likely mean no incentive will be of further strengthening the alignment of paid for the year ended 30 June 2012. For corporate staff with TVP of 20% or more, 120 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 121

Directors’ Report (continued)

Employment Contracts A summary of the key employment contract terms for the executive key management personnel is provided below. None of the non-executive Directors have an employment contract with the Company.

Executive Tony Cullen*, Lyndell Fraser, Hugh Hangchi, Neil Hitchcock*, Scott Jones, John Wood* Term No term is specified Notice Period Either party may terminate by providing three months’ written notice. The employee may terminate by giving two months’ written notice if there is a material diminution in the employee’s responsibilities, or the employee is required to relocate outside their home state (“Material Change”). The Company may terminate within six months of a Material Change occurring. The Company may terminate without notice if the employee is guilty of any criminal or indictable offence, breaches any law in relation to the performance of the employee’s duties, commits any serious breach of faith, or act of serious neglect or gross misconduct. The Company may also terminate without notice if the employee is unable to perform duties due to illness, injury a negative incentive will likely be declared 2012 or incapacity. which would mean no incentive would be Economic Value Added (EVA) calculation $000s * For these executives, a Material Change also includes where a third party acquires a controlling interest in the Company. paid for the year ended 30 June 2012 and the loss of some or all of their deferred Termination If the employee or the Company terminates due to a Material Change, a final termination payment equivalent to EBITDA 126,817 incentive balances. Under the terms of Provisions three months’ remuneration is payable. the Scheme, no incentive will be paid to - Depreciation (14,120) If the Company terminates for illness, injury or incapacity, the employee is entitled to any amounts owing as compensation under the employment agreement to the extent earned on a pro-rata basis together with these participants in future years until any = Net Operating Profit Before Tax 112,697 negative incentive is earned out in full. compensation (without loading, bonuses or profit share) that would otherwise have been paid to the end of the then current term of employment, plus reimbursement for any properly incurred (and fully documented) costs. Some business units within the Group - Taxes at 30% (33,809) achieved or exceeded their EVA growth Executive Jenny Michel and Helen Zimmerman = Net Operating Profit After Tax (A) 78,888 targets during the year and, as a result, Term No term specified. participants working within these Notice Period Either party may terminate by providing one month’s written notice in the case of Ms Michel and six months’ written business units are likely to enjoy rewards Capital Employed* 407,639 notice in the case of Ms Zimmerman. significantly different from that of x Cost of Capital 10% The company may terminate without notice if the employee commits misconduct, is convicted of any criminal corporate staff. offence which brings the company into disrepute or is continually or significantly neglectful of the employee’s duties. = Capital charge (B) 40,764 Termination Cash bonuses for these participants None have been provided for in the financial Provisions statements for 30 June 2012, but as A-B Economic Value Added (EVA) 38,124 noted above, are subject to review and Executive Bryce Houghton confirmation by the Board in September Term Three years, from 1 January 2012 prior to payment in October. Opening EVA 57,882 Notice Period Either party may terminate by providing one month’s notice in writing. The Company may terminate without notice if the employee is guilty of any criminal or indictable offence, breaches Relationship of Rewards EVA (decrease)/increase (19,758) any law in relation to the performance of the employee’s duties, commits any serious breach of faith, or act of to Performance serious neglect or gross misconduct. * based on the average of month end net debt and equity balances throughout the year, after adjustments In the opinion of the Directors the The Company may also terminate without notice if the employee is unable to perform duties due to illness, injury Company’s remuneration policies have or incapacity. contributed to the Company’s success in Termination If the Company terminates by giving one month’s notice in writing, the employee is entitled to a final termination creating shareholder value since listing, as Provisions payment equivalent to the remuneration for the balance of the contract. demonstrated by the following table which If the Company terminates for illness, injury or incapacity, the employee is entitled to any amounts owing has key measures of the Group’s earnings as compensation under the employment agreement to the extent earned on a pro-rata basis together with and shareholder returns. compensation (without loading, bonuses or profit share) that would otherwise have been paid to the end of the then current term of employment, plus reimbursement for any properly incurred (and fully documented) costs.

2012 2011 2010 2009 2008 2007 2006 Executive Rod Jones Term No term specified. Economic Value Added (EVA) ($million) $38.12 $57.88 $54.53 $40.64 $27.29 $20.59 $18.34 Notice Period The Company may terminate at any time by giving the employee six months’ written notice. Dividends per share — paid and The employee may terminate his employment at any time by giving the company six months’ written notice. proposed (cents) 19.5 20.7 18.8 14.3 10.9 9.3 9.5 The Company may terminate the employee’s employment immediately without notice, and without payment in lieu Dividends paid ($million) $80.3 $68.7 $57.8 $40.1 $33.7 $31.5 $39.5 of notice, if the employee is guilty of, charged with, or under investigation for, any criminal or indictable offence, is Closing share price (at 30 June) $4.34 $4.03 $4.66 $2.73 $2.09 $1.89 $1.88 disqualified from holding office under the Corporations Act, has breached any law in relation to the performance of the Earnings per share before amortisation employee’s duties, commits any serious breach of faith, or act of serious neglect or default, or performs any act, or is and impairment (cents) 19.8 22.9 19.4 14.6 12.2 10.6 10.2 guilty of any omission, the likely result of which is that the company or the business will be brought into disrepute. Net profit after tax attributable to The Company may also terminate immediately without notice and without payment in lieu of notice if the employee is members of the Company ($million) $73.15 $77.30 $64.20 $49.20 $37.43 $32.25 $31.49 unable to perform duties due to illness, injury or incapacity. Return on capital employed 9% 50% 59% 47% 34% 27% 40% Termination If the Company terminates by giving six months written notice, the employee has no claim against the company for Provisions compensation or damage in respect of the termination other than payment of six months of his remuneration. 122 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 123

Directors’ Report (continued)

Remuneration of Directors and Other Key Management Personnel The compensation of each member of key management personnel of the Group is set out on the following page:

(a) Directors’ and Executives’ Remuneration (a) Directors’ and Executives’ Remuneration (continued)

Short term benefits Post-employment Short term benefits Post-employment Non Other Non Other Salary monetary Super- long term Performance Incentive Salary monetary Super- long term Performance Incentive 2012 $ & Fees Cash bonus* benefits annuation benefit+ Total related % Reserve^ 2011 $ & Fees Cash bonus* benefits annuation benefit+ Total related % Reserve^

Non-executive Non-executive Directors Directors Harvey Collins 209,101 - 11,722 18,819 - 239,642 - - Harvey Collins 201,835 - 2,262 18,165 - 222,262 - - Peter Campbell 97,422 - 11,722 8,768 - 117,912 - - Peter Campbell 60,412 - 2,262 42,088 - 104,762 - - Ted Evans 119,140 - 11,722 - - 130,862 - - Ted Evans 115,000 - 2,262 - - 117,262 - - Tracey Horton1 - - 977 - - 977 - - James King 110,092 - 2,262 9,908 - 122,262 - - James King 114,055 - 11,722 10,265 - 136,042 - - Peter Larsen 43,808 - 2,262 51,192 - 97,262 - - Peter Larsen 45,894 - 11,722 52,526 - 110,142 - - 531,147 - 11,310 121,353 - 663,810 - - 585,612 - 59,587 90,378 - 735,577 - - Executive Director Executive Director Rod Jones# 708,243 611,886 4,197 50,000 144,328 1,518,654 40 641,401 Rod Jones # 2 721,026 71,595 13,702 53,401 (42,769) 816,955 9 239,524 Other Key Other Key Management Management Personnel Personnel Tony Cullen# 238,217 114,692 35,822 39,216 27,084 455,031 25 134,142 Tony Cullen# 2 226,705 15,144 33,903 50,192 (27,300) 298,644 5 49,097 Lyndell Fraser# 275,228 152,146 - 39,377 233 466,984 33 49,453 Lyndell Fraser# 294,493 97,491 - 41,083 2,939 436,006 22 35,600 Hugh Hangchi# 248,065 101,600 1,935 40,268 12,641 404,509 25 113,788 Hugh Hangchi# 2 276,666 3,160 1,980 26,281 11,140 319,227 1 33,337 Neil Hitchcock# 264,120 110,245 1,935 41,094 28,738 446,132 25 128,223 Neil Hitchcock# 2 273,653 14,632 1,980 24,807 (31,629) 283,443 5 46,020 Bryce Houghton# 353,889 240,355 55,534 25,578 20,952 696,308 35 244,622 Bryce Houghton# 2 372,978 27,456 51,712 25,969 9,728 487,843 6 90,470 Scott Jones# 214,890 156,705 1,775 40,011 13,549 426,930 37 130,209 Scott Jones# 261,465 24,872 1,980 26,612 (19,579) 295,350 8 86,807 Jenny Michel# 206,422 82,085 - 31,365 4,794 324,666 25 94,964 Jenny Michel# 2 212,563 2,519 - 27,943 3,051 246,076 1 31,209 John Wood# 370,790 483,563 1,935 47,272 8,210 911,770 53 240,633 John Wood# 384,163 126,231 1,980 38,614 799 551,787 23 171,714 Helen Zimmerman# 311,64 4 - - 27,722 7,583 346,949 - (122,767) Helen Zimmerman# 297,527 - - 42,474 6,044 346,045 - (54,743) 3,191,508 2,053,277 103,133 381,903 268,112 5,997,933 34 1,654,668 3,321,239 383,100 107,237 357,376 (87,576) 4,081,376 9 729,035 Total 3,722,655 2,053,277 114,4 43 503,256 268,112 6,661,743 31 1,654,688 Total 3,906,851 383,100 166,824 447,754 (87,576) 4,816,953 8 729,035 Directors and Executives have been provided with no other post employment benefits and no share based payments.

Directors and Executives have been provided with no other post employment benefits and no share based payments. For notes +,*, # and ^ refer to page 122.

(1) Appointed 13 June 2012.

(2) For these executives no cash bonus has been accrued for 2012. Balances are the difference between amounts provided for in 2011 and amounts paid during the year ended Independent Audit and Remuneration Report 30 June 2012. The required disclosures as included on pages 117 to 132 of this remuneration report have been audited by Deloitte Touche Tohmatsu. + Other long term benefits include movements in Long Service Leave. Benefits have been reduced for some executives due to a change in assumed payout values. The directors’ report, including the remuneration report, is signed in accordance with a resolution of the Directors. * Cash bonus comprises the annual incentive (ValueShare Incentive Plan) payments payable in September of each financial year after review and confirmation by the Board. Under the terms of the plan payments will only be made if the participant is an employee at the date of payment. The cash bonus includes the amount provided as payable in relation to the 2012 financial year, adjusted for the difference between the amount provided for the in the 2011 financial year and the actual amount paid in September 2011. No bonus in relation to the 2012 financial year is expected for executives marked with a (2) and accordingly no bonus has been provided for in the 2012 financial statements. The disclosed value relates wholly to adjustments to the 2011 provision.

# For these executives, at least 50% of the incentive payment will be used to pay for ordinary shares in the Company (at an issue price calculated as a volume weighted average market price for the 5 trading days immediately before the date of issue) until such executives hold a beneficial interest in shares in the Company equal to the value of their fixed remuneration. This requirement will be determined based on share and option holdings in the Company as disclosed by these executives in August of each financial year. It is therefore not currently possible to quantify the component of the cash bonus that will be used to buy ordinary shares in the Company.

^ As noted on page 118 of the Directors’ Report, the Incentive Reserve is the balance of unpaid incentive payments under the ValueShare Incentive Scheme. The Incentive Reserve R Jones does not vest with the executive unless the Group has achieved its performance objectives and the executive is an employee at the date of declaration of the incentive payment. The executive is not entitled to any balance of the incentive reserve upon termination. For the purposes of the remuneration report the incentive reserve does not form part of Chief Executive Officer and Managing Director compensation for the year. Perth, Western Australia, 31 July 2012 SUCCESS THROUGH DIVERSITY Navitas Li mited Annu al R eport 2012 125

DIVERSITY DELIVERS A BETTER FUTURE

Declarations SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 127

Directors’ Declaration

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

1. In the opinion of the Directors:

(a) the financial statements and notes are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position as at 30 June 2012 and the performance for the year ended on that date of the consolidated entity; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; (b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2 to the financial statements; and

(c) there are reasonable grounds to believe that the Company will be able to pays its debts as and when they become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ended 30 June 2012.

3. In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 26 will, as a group, be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.

On behalf of the Board

R Jones Chief Executive Officer and Managing Director Perth, Western Australia, 31 July 2012

130 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 131

Additional Information

Additional information Substantial Shareholders Twenty Largest Shareholders required by ASX and not The number of Shares held by the substantial Shareholders, as disclosed in substantial The twenty largest holders of Navitas fully paid ordinary shares on the Company’s register as at 5 September 2012 were: holding notices given to the Company, were: shown elsewhere in this annual report is as follows. Rank Name Number of Shares % of Issued Capital Shareholder Fully Paid Ordinary Shares 1 National Nominees Limited 48,579,456 12.94 The information is current Rodney Malcolm Jones 53,517,995 2 J P Morgan Nominees Australia Limited 41,670,808 11.10 as at 5 September 2012. Hyperion Asset Management Limited 32,975,448 3 HSBC Custody Nominees (Australia) Limited 35,399,825 9.43 Peter Devon Larsen 28,727,357 4 Remjay Investments Pty Ltd 34,711,843 9.25 Coolah Holdings Pty Ltd 27,602,617 5 Landmark Holdings (WA) Pty Ltd 28,433,610 7.58 JCP Investment Partners Ltd 27,068,481 6 Wonder Holdings Pty Ltd 24,751,890 6.59 Northcape Capital Pty Ltd 22,795,239 7 Cambo Investments Pty Ltd 18,034,971 4.81 Peter John Campbell 20,109,495 8 Hoperidge Enterprises Pty Ltd 17,986,690 4.79 9 Coolah Holdings Pty Ltd 13,996,895 3.73 Voting Rights 10 Citicorp Nominees Pty Limited 9,953,973 2.65 The voting rights attached to the class of Navitas fully paid ordinary shares as set out in 11 Mr Max Schroder 8,933,391 2.38 rule 111 of Navitas’ constitution are the right to attend and vote at meetings of Navitas and 12 Ms Julianne Hannaford 8,433,563 2.25 on a show of hands to one vote and on a poll to one vote for each Share held. 13 Lily Investments Pty Ltd 5,527,968 1.47 Distribution of Shareholders and their holdings 14 BNP Paribas Noms Pty Ltd 4,757,549 1.27 15 Mr Luniarty Kartosudiro 4,384,312 1.17

Size of Holdings Number of Shareholders 16 Pictorial Holdings Pty Ltd 4,220,638 1.12 HSBC Custody Nominees (Australia) Limited 1–1,000 1,137 17 4,131,283 1.10 1,001–5,000 1,165 18 Argo Investments Limited 3,123,160 0.83 5,001–10,000 341 19 Dasam Nominees Pty Ltd 2,910,904 0.78 10,001–100,000 288 20 Citicorp Nominees Pty Limited 2,830,196 0.75 100,001–and over 82 Total 322,772,925 86.00 Total 3,013

The number of holders of the class of Navitas fully paid ordinary shares was 3,013. None of the ordinary shares are subject to voluntary escrow and there are no restricted securities on issue.

The number of holders holding less than a marketable parcel of Navitas’ fully paid ordinary The Company does not have a current on-market buy-back for its Shares. shares, based on the market price at 5 September 2012, was 117 holders holding a total of There are no issues of securities approved for the purpose of item 7 of section 611 of the Corporations Act which have not yet 2,707 Shares. been completed. 132 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 133

Investor Information Glossary

Annual General Meeting Lost Holding Statements ACAP Australian College of Applied Psychology Pty Limited The Annual General Meeting of Navitas Shareholders should notify the Share will be held at: registry immediately, in writing, so that a ACBT Australian College of Business and Technology Pvt Ltd replacement statement can be arranged. Navitas Limited AMEP Adult Migrant English Program The Jarrah Room Level 2, Kirin Centre Change of Name AQTF Australian Quality Training Framework 15 Ogilvie Road Shareholders who change their name Mount Pleasant should notify the Share registry, in writing, ASIC Australian Securities and Investments Commission Western Australia 6153 and attach a certified copy of a relevant ASX Australian Securities Exchange on Thursday 15 November 2012 marriage certificate or deed poll. at 11am (Perth time). ASX Listing Rules The official listing rules of the ASX Tax File Numbers (TFN) Full details of the meeting are contained in the notice of annual general meeting Although it is not compulsory for each ATTC Australian TESOL Training Centre sent with this annual report for those Shareholder to provide a TFN or exemption AUQA Australian Universities Quality Agency Shareholders who elected to receive a hard details, for those Shareholders who do copy annual report. not provide the necessary details, the British Accreditation Council Company will be obliged to deduct tax from BAC any unfranked portion of their dividends Shareholder Enquiries BCUIC Birmingham City International College Ltd trading as BCUIC at the top marginal rate. TFN application All enquiries should be directed to forms can be obtained from the Share Board The Board of Directors of Navitas the Company’s Share registry at: registry, any Australia Post Office or the Australian Taxation Office. Computershare Investor CELUSA Centre for English Language at the University of South Australia Services Pty Limited Level 2, 45 St Georges Terrace Navitas Publications CIR Contingent Incentive Reserve Perth WA 6000 The Company’s annual report is the Constitution The constitution of the Company T 1300 55 70 10 main source of information for investors. F +61 8 9323 2033 Shareholders who do not wish to receive Corporations Act Corporations Act 2001 (Cth) All written enquiries should include your the annual report should advise the Share Holder Identification Number as it appears registry. Navitas’ financial reports are CRIC Cambridge Ruskin International College Limited in your holding statement along with your also available on the Navitas website current address. (see below). CRICOS Commonwealth Register of Institutions and Courses for Overseas Students

Curtin College or CC Colleges of Business and Technology Pty Ltd trading as Curtin College Change of Address Navitas Website Curtin Singapore or Information about Navitas and the Group is Curtin University of Technology Singapore Campus It is important that you notify the Share Curtin Singapore Campus registry immediately in writing if there is available on the internet at navitas.com. any change to your registered address. Curtin Sydney or CUS Curtin University of Technology Sydney Campus

Cytech Cytech Intersearch Pty Limited

DEC Navitas English Darwin English Centre

DEEWR Department of Education, Employment and Workplace Relations

DIAC Department of Immigration and Citizenship

Directors Directors of Navitas

DIISRTE Department of Industry, Innovation, Science, Research and Tertiary Education

EBITDA Earnings before interest, taxation, depreciation and amortisation

EduGlobal EduGlobal China Limited

EIC Edinburgh International College

ELICOS English Language Intensive Courses for Overseas Students 134 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012 135

Glossary (continued)

EOL Employment Overseas Limited NPAT Net profit after tax

EPS Earnings per Share NQF National Qualifications Framework

ESOS Act Education Services for Overseas Students Act 2000 (Cth) NWS Navitas Workforce Solutions Pty Ltd

ETP ELICOS and TESOL programs pcp prior comparative period

EVA® Economic Value Added® PUIC Plymouth Devon International College Limited trading as PUIC

Eynesbury Educational Enterprises Australia Pty Ltd trading as Eynesbury International PIBT Perth Institute of Business and Technology Pty Ltd A government loan scheme to help eligible non-Commonwealth supported (fee paying) students pay FEE-HELP PIBT IEC PIBT International English Centre their tuition fees

FIC Fraser International College PY Professional Year

Group or Navitas Group Navitas and its subsidiary companies QAA Quality Assurance Agency for higher education

GMAT Graduate Management Admission Test QIBT Queensland Institute of Business & Technology Pty Ltd

GRE Graduate Record Examination RTO Registered Training Organisation

Hawthorn-Melbourne Hawthorn Learning Pty Ltd trading as Hawthorn-Melbourne SAE SAE Institute

HIC HIBT Limited trading as Hertfordshire International College SEC Navitas English Sydney English Centre

HSA Health Skills Australia Pty Ltd Shareholder A holder of a Share

HSS Humanitarian Settlement Services Shares Fully paid ordinary shares in the capital of the Company

HTS Highly Trusted Sponsor SIBT Sydney Institute of Business and Technology Pty Ltd

ICM International College of Manitoba SOL Study Overseas Limited

ICP International College Portsmouth Limited SPP Special Preparatory Program

ICRGU International College Robert Gordon University StudyLink Learning Information Systems Pty Ltd trading as StudyLink

ICWS International College Wales Limited TEQSA Tertiary Education Quality and Standards Agency

KPI Key Performance Indicator TESOL Teachers of English to Speakers of Other Languages

LIBT London IBT Limited TVP Target Variable Pay

LLNP Language, Literacy and Numeracy Program UMass Boston Navitas at University of Massachusetts Boston

LTM La Trobe Melbourne UMass Dartmouth Navitas at University of Massachusetts Dartmouth

MIBT Melbourne Institute of Business and Technology Pty Ltd UMass Lowell Navitas at University of Massachusetts Lowell

MQC Macquarie City Campus UPD University Programs Division

NARI Navitas Applied Research Institute UKBA UK Border Agency

Navitas or Company Navitas Limited ABN 69 109 613 309 VET Vocational education and training

NCPS Navitas College of Public Safety Pty Ltd WACC Weighted average cost of capital

NIC Newcastle International College Pty Ltd trading as NIC WKU Navitas at Western Kentucky University 136 SUCCESS THROUGH DIVERSITY Na vitas Li mited Annu al R eport 2012

Corporate Information

Directors Executive Directors

Mr Rod Jones

Non-Executive Directors

Mr Harvey Collins

Mr Peter Campbell

Mr Ted Evans

Ms Tracey Horton

Mr James King

Dr Peter Larsen

Company Secretary Mr Hugh Hangchi

Registered Office Navitas Limited

Level 2, Kirin Centre

15 Ogilvie Road

Mt Pleasant WA 6153

Share Registrar Computershare Investor Services Pty Limited

Level 2, 45 St Georges Terrace

Perth WA 6000

Auditor Deloitte Touche Tohmatsu

240 St Georges Terrace

Perth WA 6000

Internet Address www.navitas.com Navitas Limited Level 2, Kirin Centre 15 Ogilvie Road Mt Pleasant WA 6153 Australia T +61 (8) 9314 9600 F +61 (8) 9314 9699 E [email protected] ABN 69 109 613 309 navitas.com