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Screenrights Reports 2004-05


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screenrights Annual Report 2004/05

The idea is a simple one. 8

Educators can copy from television and radio for teaching. Filmmakers are paid for this use of their work. Access & payment.

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I— The Hon Philip Ruddock

B H i Attorney-General

L „ Parliament House

8 P Canberra ACT 2600

Dear Attorney-General,

it is my pleasure, on behalf of the Directors, to present Screenrights'Annual Report and Audited Accounts

for the year ended 30 June 2005, in accordance with the requirements of sections 135R, 135ZZD, 135ZZV

and 183D, Copyright Act 1968.

This year the distributable amount payable to copyright owners under the PartVA Australian Educational

Service was $15.4 million, an increase of 8.9% on the same figure for last year. The PartVA ratio

o f administrative expenses to collections was 19.6% with the retransmission case expenses, and on a

comparable basis w ithout retransmission the administrative expenses to collections was 15.9%. For all

income generating services, including our voluntary services, total trust operations resulted in an overall

distributable amount of $17.4 million.The income generating services are the Australian Educational Service,

the New Zealand Educational Service and the International Collections Service. The Retransmission Service

and the Government Copying Service do not currently generate income. The ratio of administrative expenses

to total collections was 21.9% due to the substantial expense incurred in valuing the retransmission right

under Part VC o f the Copyright Act. On a comparative basis, the ratio would have been 16.1%.

In the year under review membership increased by 14%. There are now 2,258 members in 51 countries.

We would like to express our appreciation for the assistance provided by you and your Department

throughout the year. Screenrights is pleased to be working w ith the Government to ensure access

to an im portant educational resource while providing payment to the copyright owners whose work

our educators use.

Yours sincerely,

I

Simon Lake

Chief Executive

Screenrights is the trading name of The Audio-Visual Copyright Society Limited j ACN 003 912 310 j ABN 76 003 912 310 ADDRESS: Level 3, 156 M ilitary Road, Neutral Bay NSW Australia EMAIL: info@screen.org WEBSITE: www.screen.org POSTAL: Box 1248, Neutral Bay NSW 2089 Ausralia TELEPHONE: +61 2 9904 0133 FACSIMILE: +61 2 9904 0498 NEW ZEALAND - FREEPHONE: 0800 44 2348 FREEFAX: 0800 44 7006

Rodger Cummins, Fairfax Photos

Television can be a wonderful teaching resource - it's timely, relevant and can provide a fresh approach to a subject.

The Screenrights licence makes it possible for us to provide teachers with copies of broadcast programs to support teaching and learning throughout the college.

Jenny Williams, Teacher Librarian, Barker College, Hornsby NSW

____ ___

Educators can copy from television and radio for teaching T E L E V IS O N

C O P Y IN G

ACCESS

Copying TV for teaching

tore than 10,000 Australian schools, TAFEs and universities have a Screenrights licence to copy from television,

eachers across Australia can tape the latest documentaries, news, current affairs, movies and other TV programs whenever

ney want. There's no need to obtain individual copyright clearances or negotiate one-off fees. It's as simple as pushing

he record button.

Our coverage icreenrights licenses · 9,364 schools (97.4% o f schools in Australia) · 62 TAFEs (100% coverage)

• 39 universities (100% coverage)

Delivering real benefits Pver half a million copies from TV or radio are made every year by Australian teachers under their Screenrights licence.

NT: 43,245

y f Tas: 93,515

\cross the nation 1,922,394 Australian school and university students (lu lltim e andequivalent)

enefit from television and radio under a Screenrights licence*

; These figures exclude students from the Australian Catholic University and from TAFEs. heACUand TAFEs are licensed by Screenrights but data on FTE numbers is not available 1 a state-by-state basis.

'The Oyster Farmer". Becker Entertainment. Anthony Buckley, producer.

Screenrights royalties are an important source of revenue for the Australian production industry.This money helps independent producers to keep making films and television programs for both the Australian and the world market.

Anthony Buckley, producer

Filmmakers are paid for this use of their wor

Collecting royalties for filmmakers

Screenrights members come from across the globe and include producers, distributors, writers and artists, as well

as music and other copyright owners in film and television.

Our collections continue to increase •Total collections (including interest) reached $21.42 million

This is an increase o f 9.11% on total collections for 2003/04

•Total amount declared for distribution to members reached $17.41 million

This is an increase of 7.47% on the am ount for 2003/04

Our membership continues to grow

Screenrights now has 2,258 members from 51 countries around the world

$19.6 I 521.42 {

million million '

2004 2005

517.41 ; million s

2004 2005

Membership 2003 ' - - ■ : :

Membership 2004

Membership 2005

0 100 0 2000 2500

Member Services Officer Leigh Tran with Chad Corley, Membership and Distribution Manager Viscopy

(the visual artists collecting society).

Screenrights' Member Services team prides itself on distributing royalties to members efficiently and quickly. In 2004/05, we exceeded each of our distribution targets - making this our most efficient distribution year yet.

W e monitor copying and distribute payment efficiently and quickly

iScreenrights monitors copying across the education sector using surveys and record keeping. Once we have

identified the programs that have been copied, Member Services officers commence researching the relevant

copyright owners who should be paid royalties for that title. With more than 15 years'experience and extensive

data, the distribution process is both fast and efficient.

*$16.20 million was distributed to members during 2004/05

Distributions to members 2003/04

Distributions to members 2004/05

mm

$14.53 million

$16.20 million

'83.13% of the 2004 Australian educational royalties were distributed by 30 June 2005. This exceeded

the distribution target o f 70%.

enhance TV. co,

Vicky Greer with enhanceTV editor Megan Wood.

The enhanceTV service is really useful - the resources are well w ritten and interesting for a range of students.

The newsletter makes finding relevant programs really easy. In fact, we integrate links to the enhanceTV site

in our AV resource collection.

Vicki Greer, Head o f History, St Andrew's Cathedral School, Sydney NSW

j | J L ■

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■ h F 1 F a · ^ I f

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Enhanced benefits for everyone

C O P Y IN G

PAYMENT

ACCESS

Linking stakeholders in creative partnerships

Screenrights brings filmmakers and educators together, enabling each sector to benefit the other.

With www.enhancetv.com.au, we provide teachers with information about upcoming programs and free

resources to help them teach with television. Filmmakers also use the site to promote their content to this

important market for free. It's a smart and effective way of linking creators w ith the people w ho use their work.

• During 2004/05, subscribers to enhanceTV more than doubled, w ith 4,000 educators now

receiving the weekly educational television guide.

•Teachers can access more than 350 study guides and over 60 features to help them

use television in teaching.

• With 20 separate home pages, the site gives educators access to resources

that are relevant to them.

..δ

Once again we have had excellent results ... with improved returns to our members and im portant new developments in licensing the use of film and television.

Bridget Godwin, September 2005

CHAIRMAN'S NOTE TO MEMBERS — I

Screenrights'two key aims are simple: to facilitate access to audio-visual material

and to provide payment to the copyright owners who created this work. Once again,

we have had excellent results in both these areas, with improved returns to our

members and im portant new developments in licensing the use of film and television.

Improved returns

Our total collections (including interest) have increased by 9.11 % to $21.42 million and

from this pool we have declared $17.41 million for distribution to our members.

This is an increase o f 7.47% on the $16.2 million declared for distribution in the 2003/04

financial year.

Our Australian Educational Service accounts for the bulk of this amount, w ith total

licensing revenue from this service reaching $ 19.04 million during this 12 month period.

This is an increase of 10.1% on the total for 2003/04.

Developments in enhanceTV

The importance of the Australian Educational Service to both our members and the

educators w ho use their work was recognised by Screenrights w ith the establishment

of www.enhancetv.com.au. EnhanceTV provides free resources to teachers who want

to use television in the classroom, helping them to get the most out of their Screenrights

licence. It also gives our members the opportunity to promote their programs to

educators w ithout charge.

The success o f enhanceTV has continued to grow. The enhanceTV team surveyed

subscribers to its online television guide during 2004/05, with the results confirming

the popularity o f the site. In last 12 months, subscribers have more than doubled

to reach 4,000.

Respondents made it very clear to us that teachers are more likely to use television in

the classroom if they have access to resources for teaching. This is a message that we

are constantly promoting to our members, encouraging them to take advantage of

the site to improve their reach into this valuable market.

0

The Hon Dr Brendan Nelson MP, Minister for Education, Science and Training, with students a t the total news (“ttn“)

guide launch. Ross Shultz, Newspix.

Teachers are more likely to use television in the classroom if they have access to resources for teaching This is a message that we are constantly promoting to our m em bers...

Bridget Godwin, September 2005

New services

Although the Australian Educational Service clearly makes up the bulk of our revenue, Screenrights

also understands the importance of growing the business in other areas. We will soon be in a

position to remunerate members under tw o new licences: the Government Copying Service and the

Retransmission Service. The Government Copying Service will pay members for the copying of their

work in State and Federal Government departments.The Retransmission Service provides payment to

members for the retransmission of free-to-air broadcasts of their work by pay television operators.

The rate to be paid is currently being determined by the CopyrightTribunal after hearing an application

from Screenrights in October 2004 and April 2005. Screenrights'legal team and licensing division

worked hard in preparing this application and I would like to congratulate them on their efforts.

Networks that benefit stakeholders

Screenrights has always worked closely w ith stakeholders to lobby for changes to relevant laws

that affect their interests. In the past 12 months, we have made submissions to the Government

on directors' copyright, unauthorised use o f subscription broadcasts and the need for a levy to

compensate copyright owners for the private copying of their works.

We have had good news for our members in relation to tax on Screenrights royalties. Screenrights

joined forces w ith the print copyright collecting society, Copyright Agency Limited, to argue for

changes to tax laws which meant that rightsholders could be taxed twice on income held for them

in trust by collecting societies. Legislation was passed ensuring that this income is only taxed in the

hands o f rightsholders. We would like to thank the Government for negotiating the passage o f these

amendments.

Our networks are not just based in Australia and New Zealand. Screenrights has agreements in place

with collecting societies in Canada, Europe and the United States, enabling us to collect royalties

held by these societies on behalf o f members w ho appoint us to do this for them. We are also a board

member o f AGICOA (the peak body representing retransmission collecting societies) and an associate

member o f EUROCOPYA, which represents private copying societies in Europe. Maintaining this

international network means we are not only at the forefront o f developments in copyright collections,

we are also able to act for our members at a global level.

The future I am proud o f Screenrights'continued excellence in copyright collections, and I would like to thank

our Chief Executive, Simon Lake, and all of the Screenrights staff for their hard work and dedication

throughout the year. I would also like to thank my fellow Directors for all they have done in the last

12 months. They are enthusiastic and com m itted to the success o f the organisation.

The sustained growth in our key areas of business and the im m inent introduction of new services to

benefit our members augur well for the years to come. With these results, Screenrights is assured of a

strong and vital future in providing access to a wealth of audio-visual resources and payment to the

people w ho make this work.

Bridget Godwin

September 2005

The royalties we pay to our members are now an im portant source of revenue for people who make the creative content we enjoy, and our licences provide a simple and effective way for our educators

to access this work.

Simon Lake, September2005

CHIEF EXECUTIVE'S REPORT

m m m m

mami mmmm Screenrights has had another very successful year in all key areas of its business.

Revenue has increased, our established licences continue to perform well, and there

have been im portant developments in providing new services for access to audio-visual

material and remuneration to copyright owners.

However, members may note that the result for the last two years indicates losses in 2005

of $543,807 and in 2004 of $742,344. These are a result of the legal expenses incurred in

seeking to establish a rate for retransmission in the Copyright Tribunal. The expenditure

of $1.2 million on the retransmission case this year has been incurred on behalf of

members in Screenrights' role as the declared society for Part VC of the Copyright Act.

These expenses were budgeted for and have been fully funded.

The loss arises as a result of the accounting treatment o f the retransmission case costs

and the mechanism for funding them. Importantly, Screenrights continues to generate

significant positive cash flows and the Directors believe that Screenrights remains in a

position to pay all debts as they fall due and payable.

Payment to members: Growth in revenue, efficiency in distribution Revenue, expenditure and membership figures are expanded upon below, but, briefly,

total collections (including interest) reached $21.42 million. This is an increase of 9.11%

on the $19.6 million collected in the previous financial year. Our expenses have increased,

with the expenses to collections ratio for 2004/05 reaching 21.9%. However, this increase

can largely be attributed to the substantial costs associated with making an application

to the Copyright Tribunal for a retransmission royalty rate. With the retransmission costs,

Part VA expenses would be 19.6%. W ithout these costs, I am pleased to report that overall

expenses to collections for 2004/05 has remained largely steady at 16.1%, compared

to 15.8% for the 2003/04 period. For Part VA, expenses to collections (taking out

retransmission costs) was 15.9%.

Our Member Services team has continued to work exceptionally well in getting the

money we collect out the door and into our members' hands. We distributed $16.2 million

in the last 12 months, and we are consistently achieving excellent results in distributing

the pools from previous years within the six year statutory distribution period. More than

98.7% of the 1999 educational royalties were paid to members before the 30 June 2005

expiration date, leaving only 1.3% of this money to roll over into the next year's distribution

pool. This is a fantastic result and represents a trend of greater efficiency in distribution.

Emma Rogers - one o f Screen rights' Member Services officers

Access to audio-visual material: Developments in licensing The retransmission application will ultimately result in an important new source of revenue for our

members. We have also made progress with the development of a licence for government copying.

Screenrights has an in principal agreement with the Commonwealth Government for the surveying of

copying in government departments and for the remuneration of this copying. In addition to this, we

have an agreement in place w ith the State Governments for an interim survey o f copying over the next

12 months.

Our core business continues to be our Australian Educational Service and I am pleased to report that

we have entered into a new deal with the Australian Vice-Chancellors' Committee (AVCC). This agreement

provides that the 38 AVCC universities can continue to copy from radio and television and communicate

these copies, ensuring members'income from this sector for the next five years. The deal demonstrates

the strength o f the working relationship developed between Screenrights and the universities, a

relationship that benefits both our members and the academics wanting access to their work.

Commitment to good governance In meeting its tw o key aims of providing access to audio-visual material and payment to members,

Screenrights recognises that it is imperative to ensure that our operations are fair and transparent to

all stakeholders. In the past 12 months, we have consulted with all interested parties in establishing a

distribution policy for retransmission royalties once the rate is determined. In addition to this, Screenrights

is in regular communication with members, the education sector and other key stakeholders. We have a

m onthly electronic newsletter for members and weekly educational television guides emailed to teachers

in Australia and New Zealand.

Our compliance w ith the voluntary Code of Conduct for copyright collecting societies has also been

assessed by the independent reviewer, former Federal Court Judge Mr JCS Burchett QC.This review

occurs on an annual basis and I am pleased to report that the 2004/05 review stated that Screenrights had

I © effectively fulfilled its obligations under the Code.

Supporting our stakeholders

Screenrights has always supported the interests of all our stakeholders and the last 12 months have

proved to be no exception. Our sponsorship program provides financial assistance to the Screen

Producers'Association o f Australia (SPAA) Conference, SPAA Fringe, the Screen Production and

Development Association Conference in New Zealand, the Australian Screen Directors' Association

Conference, the Australian Writers'Guild and the Australian International Documentary Conference.

We have a close relationship with Australian Teachers of Media (ATOM) and provide support for the

annual ATOM Awards, recognising excellence in audio-visual material in education.

Bringing stakeholders together for continued growth Screenrights'continued success can also be attributed to our com m itm ent to bringing our

stakeholders together. EnhanceTV is our key driver in achieving this aim. It has 350 free study guides

available for downloading and 20 separate home pages so that teachers can access material directly

relevant to them. The site now has more than 20,000 visits per month.

Filmmakers have found that promoting their work on the site increases their educational royalties,

and teachers use the site to get more out of-television in the classroom. This year's growth in subscriber

numbers and the positive feedback we received in our survey o f visitors to enhanceTV show that the

site has become a valuable resource to the film industry and to the education sector.

KEY REVENUE, EXPENDITURE AND MEMBERSHIP FIGURES: AN OVERVIEW

Following is an overview o f key revenue and expenditure figures for the past 12 months, as well as

licensing and membership statistics for this period. The royalties we pay to our members are now an

im portant source o f revenue for people w ho make the creative content we enjoy, and our licences

provide a simple and effective way for our educators to access this work.These figures demonstrate

Screenrights'strength in providing a valuable service to both these sectors, and to new sectors, in the

coming years.

Revenue from licences Screenrights'total collections (including interest) for the 2004/05 financial year was $21.42 million.

This is an increase o f 9.11% on the $19.6 million reported in the previous 12 months.

This revenue came from our three income generating licences, the Australian Educational Service

(AES), the New Zealand Educational Service (NZES) and the International Collections Service (ICS).

Figure 7 shows the territories in which Screenrights collects royalties for members

Figure 2 shows the changes to Screenrights' licensing revenue (excluding interest) over the last three years.

$ million

Figure 3 shows the breakdown o f to ta l licensing revenue (including interest) from each o f the three income generating licences.

$19.04 million -

- $0.91 million

$1.47 million

Australian Educational Service

NZ Educational Service

International Collections Service

Figure 4 compares the total licensing revenue (including interest) from each o f Screenrights' income generating licences over

the last three years.

$ million Australian Educational Service

■ I S NZ Educational Service

International Collections Service

The past 12 months have seen a marked increase in revenue from the AES (10.1%) and the NZES (13.08%),

with a drop in revenue from the ICS (12.63%), reflecting the tougher international conditions for Australian

program makers.

-Employee related $2,033,539

1 Legal $785,251

/~ (ird u d e s retransmission costs

o f $712.200)

Licensing $326,587

Operating expenses

Entity $562,906 (includes retransmission costs

o f$536,148)

Travel $122,902 ' | Y ^ N Z $267,333

Member Services $70,677

Promotion and Marketing $62,151— 1 L Information Systems $9,218

Figure 5 shows the breakdown o f expenditure fo r 2004/05

Expenditure Screenrights' expenditure for the 2004/05

financial year was $4.70 million, an

increase of 21.4% on the previous year.

This increase can largely be attributed

to the substantial expenses associated

with the application to the Copyright

Tribunal to determine a retransmission

royalty rate. The total costs incurred

in 2004/05 for the retransmission case

was $ 1,248,348. Once the application

is determined, the service will bring in

a new source of remuneration for our

members. Expenses in relation to the

retransmission application under 'Entity'

and 'Legal'expenses in Figure 5.

Expenditure in relation to collections

Screenrights' expenditure was 21.9% o f total collections for the 2004/05 financial year. This is an increase on the

previous year's expenses to collections ratio o f 19.7%. W ithout Screenrights' application to the Copyright Tribunal

for a retransmission royalty rate, our expenses to collections would have been 16.1%. This figure can be compared

to the expenses to collections ratio for 2001/02, the last year before Screenrights made its application to the

Copyright Tribunal. In that year, the ratio was 16.1%.

It Is also interesting to look at the expenses to collections ratio for each o f the income generating licences.

The Australian Educational Service (AES) had an expenses to collections ratio with the substantial retransmission

case expenses of 19.6%, and w ithout retransmission on a comparative basis was 15.9%. The New Zealand

Educational Service (NZES) expenses to collection ratio was 18.82% and the International Collections Service (ICS)

ratio was 13.4%.

The expenses to collections ratio for the ICS is determined each financial year from the actual expenses to

collections ratio for the previous 12 months. This allows Screenrights to distribute royalties to members as they

are received, w ithout having to w ait until the end of the financial year.

Figure 6 shows Screenrights' net income (total income and interest less to ta l expenses) over the last three years.

$ million

20

$15.77 $16.55 $17.27

02/03 03/04 04/05

Figure 7 shows expenditure in relation to collections over the lost three years

%

50

40

30

20

10

0

* On a com parative basis, w ithou t the $1.2 m retransmission case costs, the 2004/05 ratio w ould be 16.1%

Figure 8 shows the expenses to collections ra tio fo r each o f the incom e generating licences over the last three years.

Australian Educational Service

■ 8 NZ Educational Service

International Collections Service

This is on a com parative basis, less the substantial retransmission case costs. If this is included, the figure w ould be 19.6%.

Distributions to members The total distributable amount for the 2004/05 financial year was $17.41 million, an increase o f 7.47%

on the $16.2 million declared for distribution the previous year.

Figure 9 shows the total distributable am ount for the last 12 years.

$ million

94 95 96 97 98 99 00 01 02 03 04 05

Figure 7 0 shows the total distributable am ount declared under each o f the income generating licences in 2004/05.

Australian Educational Service

NZ Educational Service

International Collections Service

Figure 7 7 shows the total distributable am ount declared undereach o f the income generating licences over the last three years.

Australian Educational Service

NZ Educational Service

International Collections Service

The total amount actually distributed to members during 2004/05 was $16.20 million.

Who does the money go to? Our membership Screenrights'membership grew by 14% in the 2004/05 financial year, to reach a total o f 2,258 members.

These members come from 51 countries around the world and represent all genres o f filmmaking.

Figure 72 shows the growth in our membership over the last 12 years.

No of members

I

Figure 13 shows the countries from which our members come.

Figure 14 shows the breakdown in allocation between Australian and overseas rightsholders for the to ta l am ount

distributed in 2004/05.

$8.61 million _ .„*saeS S B »s $6.10 million

Γ Overseas members

$8.61 million _ . $6.11

Other Australian members Ovt

1

$1.53 million

Australian rnllprtinn snriptips— I Australian collecting societies-

Figure 15 shows the breakdown in the types o f audio-visual m aterial copied by educational institutions in 2004/05.

Dedicated educational: 31.09%-

Current affairs: 6.90%

Infotainment/light entertainment/variety: 6.77%

Drama (includes telefeatures, miniseries and series): 5.97%

News: 5.50%

Unknown: 0.09%

Music program/video clips: 0.16%

Sport: 0.42% -

Radio: 3.61%

Film (feature and short): 3.37%

Animation/childrens: 1.05%

Advertisements: 0.55%

WORKING TOGETHER FOR A SUCCESSFUL FUTURE

In conclusion, I would like to pay tribute to our staff and Board. We have worked hard to fulfil our mission of

access to audio-visual material and payment to members, and we look forward to continuing to expand our

range o f services.

September 2005

Jamie LeHuray - enhanceTV Project Manager

Screenrights' continued success can also be attributed to our com m itm ent to bringing our stakeholders together. EnhanceTV is our key driver in achieving this aim ... the site has become a valuable resource to the film industry and to the education sector.

Simon Lake, September 2005

MISSION STATEMENT

Screenrights aims to facilitate the use o f audio-visual material and to optimise returns to copyright

owners through the collective management o f their rights.

Description of Screenrights' core activities Screenrights is a non-profit copyright collecting society for producers, distributors, script writers,

music copyright owners, rights owners in artistic works and sound recordings, and other rights owners

in film. Screenrights does not replace individual licensing of rights in traditional markets; rather, it

administers rights through a number o f collective licensing services. These services give users ready

access to audio-visual material while ensuring that copyright owners are paid for the use o f their work.

Screenrights'core business is administering institutional use of broadcast programming. Screenrights

has administered the educational copying licence in the Australian Copyright Act since its inception in

1990. Rights owners can appoint Screenrights as their non-exclusive agent to register their titles with

other collecting societies. Rights owners can also appoint Screenrights as their non-exclusive agent to

license the copying o f their work from television by New Zealand educational institutions. The Society

may collectively administer copyright in any field where audio-visual material is used.

CORPORATE OBJECTIVES

The corporate objectives o f Screenrights reflect current operational needs, core activities and initiatives

to position the Society to meet the future requirements o f its members.

1. To maximise the level of returns to copyright owners from the utilisation of their

works in the education sector.

2. To ensure efficient and tim ely distribution of funds.

3. To raise the profile o f Screenrights as a global copyright organisation through

the development of strategic alliances.

4. To increase the level of licensing revenue for members' works through the provision

of new and innovative licensing services.

5. To improve the level o f service to members and licensees through the provision

of online information systems.

6. To raise the profile of Screenrights through marketing and promotion.

7. To achieve comprehensive repertoire coverage to support new and innovative

copyright licensing services.

8. To maximise operational efficiency with the aim o f having a collections to expenses

ratio o f 15-16%.

The Screenrights Board o f Directors

CORPORATE GOVERNANCE STATEMENT

Audio-Visual Copyright Society Ltd (trading as Screenrights) is dedicated to maximising the incentive

provided by the copyright system for the production of audio-visual works. Specifically Screenrights aims

to maximise returns to audio-visual creators and investors through collective management of rights.

In furtherance of this goal, Screenrights seeks to maintain and foster principles o f corporate governance

that accord with best practice and are appropriate for a declared collecting society, requiring the highest

standards of behaviour and accountability. The Board of Directors has adopted a Corporate Governance

Policy, of which this Statement is a brief extract. Copies of the full policy are available on request.

The aim of the Screenrights Board of Directors is stewardship that is effective, accountable and fair.

Governance for whom?

The Board comprises individuals elected by the members of the Society. It has collective legal

responsibility for directing the affairs of the Society for the benefit o f the members (present and

future), recognising the interests o f other stakeholders, notably the public (directly and through the

Office of the Attorney-General), the statutory and voluntary licensees, employees and other parties

with whom Screenrights interacts.

Screenrights'Directors recognise a direct responsibility to copyright owners but also a partnership with

copyright users and w ith the Government.

Board responsibilities and functions The Board is responsible for providing leadership and direction to management.The Board

encourages open administration. The principal functions o f the Board are:

(a) To establish corporate objectives and, with management, to set the strategic

direction and the policies required to effect those objectives;

(b) To ensure control systems are in place to monitor:

(i) compliance with law and ethical standards; (ii) financial performance, including compliance with Accounting Standards; (iii) accountability to members, the Government and other interested persons;

(c) Specifically, to adopt, up-date and amend major policy documents, including the Strategic Plan, the Annual Business Plan, the Annual Budget and the Distribution Policy;

(d) To appoint the Chief Executive, including determining remuneration and performance criteria and considering succession planning;

(e) To delegate the running of the Society to management and to ensure systems of accountability and adequate reporting; and

(f) To report to members.

Board composition

The Screenrights Board comprises 12 Directors. To promote independent views and to ensure a range of

experience and skills, all Directors are non-executive directors.

The Audit Committee

The principal functions of the Audit Committee are to ensure that accounting records are maintained

in accordance w ith statutory requirements, to ensure that financial controls are sufficient, and to review

the financial statements and consult w ith the external auditors.

The members o f the Audit Committee for the year to 30 June 2005 were Nick Hampton (Chairman),

Nick Collis-George, Philip Nelson and Allison Rowe.

General expectations of Directors' performance Directors recognise that they are expected:

• to exercise independence and act in the interests of the general body of members, rather

than any sectional interest;

• to act with discretion and maintain confidentiality;

• to have a genuine interest in Screenrights and a desire for it to succeed and, where

appropriate, to promote Screenrights to others;

• to devote tim e to attendance at meetings, reading and analysing Board papers and

considering strategic issues;

• to make a positive contribution to decision making; and

• to periodically review their performance as Directors and as a Board.

Independent advice

Directors may seek independent professional advice, at the expense of Screenrights, after first securing

the consent o f the Chairman or the Chief Executive, such consent not to be unreasonably withheld.

The role of management

The role of management is to develop, implement and evaluate systems to meet Screenrights'objectives.

Management is responsible for the efficient allocation of Screenrights'resources.

Role of members and voting

The Board respects the importance of the membership in the exercise of its delegated authority. At the

Annual General Meeting members may participate in debate on policy matters that affect their Society,

and members may call extraordinary general meetings.The Board of Directors seeks to ensure that

members are informed of major developments and strategic directions adopted by their Society.

Privacy, confidentiality and accountability

Screenrights respects the privacy o f individuals and respects the confidentiality o f the commercial

information owned by its members. Screenrights equally adheres to the principles of open and

accountable administration in its own affairs.

Extracted and summarised from the Corporate Governance Policy. The full policy also addresses other legal and ethical duties and incorporates the charters o f the Board committees.

Audio-Visual Copyright Society Limited ABN 76 003 912 310

DIRECTORS'REPORT

The Directors present their report together with the financial report of Audio-Visual Copyright Society

Limited ("the Company") for the year ended 30 June 2005 and the independent audit report thereon.

Directors The Directors o f the Company at any time during or since the financial year are:

Nicholas Hampton, FCA (UK) Consultant to music, communications

and charitable industries.

Director, Nordoff-Robbins

Music Therapy Australia Limited.

Director, Across the Divide Pty Ltd.

Treasurer, Golden Stave Foundation.

Director since 1990.

Jill Bryant Marketing Director, Asia-Pacific,

BBC W orldwide Ltd.

Director since 2003.

David Baldock General Manager, NinoxTelevision.

Documentary, factual and reality

programmes producer.

Chairperson o f Screenrights'

NZ Advisory Committee.

Director since 2001. Nicholas Ham pton, Jill Bryant, D a vid Baldock.

John Ford, BA, LLB Managing Director, Sony Pictures

Television Pty Limited.

Director, Premium Movie

Partnership, TV1.

Chairman, Sydney Children's

Hospital Foundation.

Director since 1997.

Bridget Godwin, BA, LLB Manager, Regulatory & Business

Affairs, Seven Network.

Director since 1995.

Elected Chairman in 1999.

Philip Nelson, BA Managing Director, L.I.C. Australia.

Director since 1994.

John Ford, Bridget Godwin, Philip Nelson.

m

II

Allison Rowe, FAICD Copyright Consultant.

Formerly Head, Copyright Section,

Australian Broadcasting Corporation.

Director since 1990.

Nicholas Collis-George Manager, Australian Institute

o f Architects NSW.

Director since 1993.

Will Davies, BA Independent docum entary producer.

Executive Producer,

Look Film Productions Pty Ltd.

Director since 1996.

Allison Rowe, Nicholas Collis-George, W ill Davies.

Alison Weston, DipT, BA(Hons) Manager, Education Programming,

Education Television, Australian

Broadcasting Corporation.

Director since 1995.

Elected Vice Chairman in 2000.

Martin Armiger Composer and writer.

Head o f Screen Composition, A FTPS.

Director since 1999.

Tania Chambers, BA(Hons), LLB, FAICD Chief Executive, ScreenWest, Inc.

Independent film and television producer.

Director since 1996.

Com pany Secretary

Alison Weston, M a rtin Armiger, Tania Chambers.

Brian Lomas, FCPA, MAICD Financial Controller and Company Secretary.

Director, Hume C om m unity Housing Association.

Appointed Company Secretary January 2003.

f t

Directors'meetings The number of Directors'meetings (including meetings o f committees of Directors) and number of

meetings attended by each of the Directors o f the Company during the financial year are:

Director Directors' meetings Audit Committee meetings A B A B

M Armiger 5 6 - -

D Baldock 5 6 - -

J Bryant 6 6 - -

T Chambers 6 6 - -

N Collis-George 4 6 1 2

W Davies 5 6 - -

J Ford 4 6 - -

B Godwin 6 6 - -

N Hampton 5 6 2 2

P Nelson 4 6 2 2

A Rowe 6 6 2 2

A Weston 5 6 - -

A Number of meetings attended B Number of meetings held during the time the Director held office during the year

Lead Auditor's Independence Declaration A copy of the Lead Auditor's Independence Declaration as required under Section 307C o f the

Corporations Act 2001 is included at page 30.

Principal activities The principal activity o f the Company during the course o f the financial year was utilisation of its

right as a declared collecting society under PartVA and, insofar as it relates to audio-visual items,

PartVB of the Copyright Act, to collect monies from educational institutions for distribution to

relevant copyright owners.

Review and results of operations The operating loss, after accounting for Entity income tax refunds of $6,503 relating to 2003 and

$3,901 relating to 2004, amounted to $543,807 (2004: loss of $792,344).The loss arises principally

as a result o f the accounting treatment o f the expenditure incurred for the ongoing valuation of

the retransmission right under Part VC o f the Australian Copyright Act 1968.

The amount of $17,412,056 (2004: $16,156,399) was determined to form the Distributable

Amount available for distribution to relevant copyright owners from monies collected for the

accounting year ended 30 June 2005.

As a result of the Company's exemption from income tax backdated to 1 July 2002, the following

amounts have been added to prior year distribution pools and will be paid to relevant copyright

owners by way of top-up payments:

2003 Australia $483,660 and New Zealand $16,761

2004 Australia $544,005 and New Zealand $24,607

State of affairs

In the opinion o f the Directors the only significant changes in the state o f affairs of the Company that

occurred during the financial year under review was the amendment to the Income Tax Assessment

Act 1997,Tax Laws Amendment (2004 Measures No 6) Act 2005, which received Royal Assent on

21 March 2005. Under this amendment, which is backdated to 1 July 2002, the Society will not be

taxed on any copyright income (defined as ordinary or statutory royalties/licence fees and interest

received or derived by the Society) it collects and holds on behalf of members, pending allocation to

them. Additionally the Society will not be taxed on non-copyright income to the extent that this

non-copyright income does not exceed the lesser of:

• 5% o fth e total amount o f copyright income and non-copyright income o f the Society

for the income year; and

• $5 million or such other amount as is prescribed by regulation.

The exemption outlined above is granted on the basis that any copyright and non-copyright income

collected or derived by the Society that is exempt from income tax is included in the assessable

income o f members on distribution.

Environmental regulation The Company's operations are not subject to any significant environmental regulations under either

Commonwealth or State legislation. However, the Board believes that the Company has adequate

systems in place for the management o f its environmental requirements and is not aware o f any

breach o f those environmental requirements as they apply to the Company.

Events subsequent to balance date There has not arisen in the interval between the end o fthe financial year and the date o f this report

any item, transaction or event of a material and unusual nature likely, in the opinion o fth e Directors

o fth e Company, to affect significantly the operations o fth e Company, the results of those operations,

or the state o f affairs o fth e Company in future financial years.

Likely developments The Company will continue its current activities. Potential new revenue streams in development

include:

(a) Copying by State and Commonwealth Government departments; and

(b) Retransmission from free to air to cable.

Indemnification and insurance of officers

During the year the Company has paid a premium of $14,927 in respect o f a contract o f insurance

indemnifying those persons who are or have been officers o fth e Company against liabilities that

may arise from their position as officers, except where the liability arises out of conduct involving a

lack o f good faith.That insurance policy does not contain details o fth e premiums paid in respect of

individual officers o fth e Company.

Dated at Neutral Bay this 14th day o f September 2005.

Signed in accordance w ith a resolution o fth e Directors:

Bridget Godwin

Chairman

LEAD AUDITOR'S INDEPENDENCE DECLARATION

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the Directors of Audio-Visual Copyright Society Limited

I declare that, to the best of my knowledge and belief, in relation to the audit

for the financial year ended 30 June 2005 there have been:

(i) no contraventions of the auditor independence requirements as set out in the

Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to

the audit.

K P H U

KPMG

Cameron Slapp

Partner

Sydney, 14 September 2005

m

INDEPENDENT AUDIT REPORT TO MEMBERS

SCOPE

The financial report and Directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance,

statement o f cash flows, accompanying notes to the financial statements, and the Directors'declaration

for Audio-Visual Copyright Society Limited (the"Company"), for the year ended 30 June 2005.

The Directors o f the Company are responsible for the preparation and true and fair presentation of the

financial report in accordance with the Corporations Act 2001. This includes responsibility for the main

tenance o f adequate accounting records and internal controls that are designed to prevent and detect

fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approach

We conducted an independent audit in order to express an opinion to the members of the Company.

Our audit was conducted in accordance with Australian Auditing Standards in order to provide reason

able assurance as to whether the financial report is free of material misstatement. The nature o f an audit is

influenced by factors such as the use o f professional judgement, selective testing, the inherent limitations

of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit

cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly,

in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial

reporting requirements in Australia, a view which is consistent with our understanding of the Company's

financial position, and of its performance as represented by the results o f its operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and

disclosures in the financial report, and

• assessing the appropriateness o f the accounting policies and disclosures used and the

reasonableness of significant accounting estimates made by the Directors.

While we considered the effectiveness of management's internal controls over financial reporting when

determining the nature and extent of our procedures, our audit was not designed to provide assurance

on internal controls.

Audit opinion In our opinion, the financial report of Audio-Visual Copyright Society Limited is in accordance with:

a) the Corporations Act 2001, including:

i. giving a true and fair view of the Company's financial position as at 30 June 2004 and

of its performance for the financial year ended on that date; and

ii. complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

b) other mandatory financial reporting requirements in Australia.

k p h c , KPMG

Cameron Slapp

Partner

Sydney, 14 September 2005

DIRECTORS'DECLARATION

(a)The financial statements and notes, set out on pages 33 to 50, are in accordance with

the Corporations Act 2001, including:

In the opinion of the Directors of Audio-Visual Copyright Society Limited:

(i) giving a true and fair view of the financial position of the Company as at 30 June 2005 and

of its performance, as represented by the results o f its operations and its cash flows, for the

financial year ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001;

and

(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and

when they become due and payable.

Signed in accordance with a resolution of the Directors:

Dated at Neutral Bay this 14th day of September 2005.

Bridget Godwin

Chairman

s

Audio-Visual Copyright Society Limited

STATEMENT OF FINANCIAL PERFORMANCE for the year ended 30 June 2005

Note 2005

$

2004 $

Trust Revenue from rendering o f services: - Statutory Royalty Receipts (Part VA) 3(a) 17,473,969 15,903,669

- International Collections Service 3(a) 780,235 926,380

- NZ Educational Service 3(a) 1,361,554 1,217,827

Other revenues from ordinary activities 3(a) 1,795,183 1,560,434

Total revenue 21,410,941 19,608,310

Employee expenses (2,033,539) (1,828,855)

Depreciation expense 4(a) (64,177) (71,506)

Operating expense (367,317) (345,260)

Licensing expense (326,587) (297,190)

Travel expense (122,902) (113,335)

Marketing expense (62,151) (76,750)

Legal expense (785,251) (76,576)

Other expenses from ordinary activities (375,096) (252,489)

Net royalties collected and interest received thereon before income tax 17,273,921 16,546,349

Income tax benefit/(expense) attributable to net royalties and interest 5(a) 1,069,033 (568,480)

Net royalties collected and interest received thereon after income tax 18,342,954 15,977,869

Add expired statutory trust funds 138,135 178,530

Total net royalties collected and interest received thereon after income tax before transfer to Distribution Pools 18,481,089 16,156,399

Less amount transferred to statutory Distribution Pool 2003 (483,660) -

Less amount transferred to statutory Distribution Pool 2004 (544,005) -

Less amount transferred to statutory Distribution Pool 2005 13 (15,428,081) (14,168,681)

Less am ount transferred to New Zealand Distribution Pool 2003 (16,761)

Less amount transferred to New Zealand Distribution Pool 2004 (24,607) -

Less amount transferred to New Zealand Distribution Pool 2005 (1,199,842) (1,074,932)

Less amount transferred to International Collections Service (784,133) (912,786)

- -

Non Trust Other revenues from ordinary activities 3(b) 8,694 24,571

Depreciation expense 4(b) (26,758) (25,022)

Legal expenses (536,148) (782,130)

Other expenses from ordinary activities - (5,862)

Operating profit/loss from ordinary activities before related income tax expense (554,212) (788,443)

Income tax benefit/(expense) relating to ordinary activities 5(a) 10,405 (3,901)

Net loss (543,807) (792,344)

The statement of financial performance is to be read in conjunction with the notes to the financial statements set out on pages 36 to 49..

e

Audio-Visual Copyright Society Limited

STATEMENT OF FINANCIAL POSITION for the year ended 30 June 2005

Note 2005 2004

$ $

Current assets Cash assets 6 4,261,497 4,649,837

Receivables 7 941,828 1,862,338

Investments 8 23,184,618 22,207,486

Current tax asset 1,259,612 -

Other 9 25,687 16,179

Total current assets 29,673,242 28,735,840

Non-current assets Property, plant and equipment 10 1,166,658 1,150,531

Total non-current assets 1,166,658 1,150,531

Total assets 30,839,900 29,886,371

Current liabilities Payables 11 1,183,154 2,166,577

Provisions 12 190,738 114,709

Current tax liabilities - 193,101

Other 13 28,464,548 26,359,796

Total current liabilities 29,838,440 28,834,183

Non-current liabilities Provisions 12 170,718 153,139

Total non-current liabilities 170,718 153,139

Total liabilities 30,009,158 28,987,322

Net assets 830,742 899,049

Equity Retained profits 14 810,742 842,972

Reserves 15 20,000 56,077

Total equity 830,742 899,049

s

The statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 36 to 49.

Audio-Visual Copyright Society Limited

STATEMENT OF CASH FLOWS for the year ended 30 June 2005

Note 2005

$

2004 $

Cash flows from operating activities

Cash receipts in the course of operations Cash payments in the course of operations Income taxes paid

20,148,127 (20,855,007) (373,275)

20,429,475 (19,623,896) (502,799)

Net cash provided by/(used in) operating activities 20(b) (1,080,155) 302,780

Cash flows from investing activities

Interest received Payments for property, plant and equipm ent Proceeds from sale o f non-current assets

1,775,926 (134,930) 27,951

1,580,073 (63,377)

Net cash provided by investing activities 1,668,947 1,516,696

Net increase in cash held 588,792 1,819,476

Cash at the beginning o f the financial year 26,857,323 25,037,847

Cash at the end o f the financial year 20(a) 27,446,115 26,857,323

The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 36 to 49.

k

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

1. Statement of significant accounting policies The significant policies which have been adopted in the preparation of this financial report are:

(a) Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements o f the Australian Accounting Standards Board and the Corporations Act 2001.

It has been prepared on the basis o f historical costs and, except where stated, does not take into account changing money values or current valuations o f non-current assets.

These accounting policies have been consistently applied and, except where there is a change in accounting policy, are consistent with those of the previous year.

Current liabilities exceed current assets by $165,198 (2004: $98,343). The Directors believe it is appropriate to prepare the accounts on a going concern basis as distributable amounts payable are disclosed as current liabilities as these amounts are payable at call. In practice, however, a portion of this balance, which the Directors expect will exceed the deficiency above, will not be paid in the next 12 months.

(b) Revenue recognition

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority. Exchanges of goods or services of the same nature and value w ithout any cash consideration are not recognised as revenues.

Revenue from rendering services

Royalty receipts are based partly on information provided by copyright users. Where receipts are determined under sampling systems estimating copying levels, the samples are conducted by an independent statistical and research organisation, AC Nielsen, who use a variety o f methods to ensure that the estimation is reliable within accepted tolerances.

Interest revenue

Interest is generally recognised as it accrues, taking into account the effective yield on the financial asset.

Sale of non-current assets

The gross proceeds o f non-current asset sales are included as revenue o f the Company. The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the tim e o f disposal and the net proceeds on disposal. The gain or loss is brought to account at the date an unconditiona contract o f sale is signed.

(c) Taxation

The Income Tax Assessment Act 1997 was amended during the year ended 30 June 2005. Tax Laws Amendment (2004 Measures No 6) Act 2005 received Royal Assent on 21 March 2005.

The amendments in so far as they relate to collecting societies provide:

• Collecting societies will not be taxed on any copyright income that they collect and hold on behalf of members, pending allocation to them;

• Non-copyright income derived by collecting societies will no longer be taxed (provided that the amoun of non-copyright income derived is within certain limits); and

• Any copyright and non-copyright income collected or derived by the collecting society that is exempt from income tax is included in the assessable income of the members upon distribution.

e

.

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

7. S tatem e nt o f s ig n ific a n t accounting policies (cont'd)

(c) T axation (cont'd)

The amending Act contains definitions of:

(a) Declared Collecting Society; (b) Collecting Society; (c) Copyright income, which includes licence fees and interest received or derived from the copyright income.

Non-copyright income is subject to a de-minimus rule. Non-copyright income of collecting societies will be exempt from income tax to the extent that this non-copyright income does not exceed the lesser of:

• 5% per cent o f the total am ount o f copyright income and non-copyright income o f the collecting societies for the income year; and • $5 million or such other am ount as is prescribed by the regulations.

The Society will not be taxed on any copyright income (defined as ordinary or statutory royalties/licence fees and interest received or derived by the Society) it collects and holds on behalf of members, pending allocation to them. Additionally the Society will not be taxed on non-copyright income to the extent that this non-copyright income does not exceed the above specified limitations.

Trust As a result o f the above legislative change the income o f the trust for 2004/05 is not subject to income tax (2004:48.5%).

Non-trust income The income received in the non-trust is an apportionment of interest covering non-trust funds held at bank. As a result o f the legislative changes outlined above the non-trust income for 2004/05 is not subject to income tax (2004:30%).

(d) Recoverable amount of non-current assets valued on cost basis

The carrying amounts o f non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount o f a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is recognised as an expense in the reporting period in which it occurs.

Current valuations for land and buildings valued on the cost basis are carried out at least once every three years.

In assessing recoverable amounts o f non-current assets, the relevant cash flows have not been discounted to their present value, except where specifically stated.

(e) Cash/investments

Cash and short term deposits are carried at face value o f the amounts deposited. The carrying amounts of cash and short term deposits approximate net fair value. Interest revenue is accrued at the market or contracted rates.

(f) Receivables

Trade debtors, representing equitable remuneration from the Company's licensees to be settled within 60 days, are carried at amounts due. The collectability o f debts is assessed at balance date and specific provision is made for any doubtful accounts. The carrying am ount o f trade debtors approximates net fair value.

(g) Acquisition of assets

All assets acquired, including property, plant and equipment, are initially recorded at their cost o f acquisition at the date o f acquisition, being the fair value o f the consideration provided plus incidental costs directly attributable to the acquisition.

8

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

I

7. S tatem ent o f s ig n ifica n t accounting policies (cont'd)

(h) Depreciation

Items of property, plant and equipment, including buildings and leasehold property but excluding freehold land, are depreciated using the straight line method over their estimated useful lives. Motor vehicles are depreciated using the diminishing value method.

Assets are depreciated from the date o f acquisition and depreciation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only.

The depreciation rates used for each class of asset are as follows:

Liabilities are recognised for amounts to be paid in the future for goods or services received. Trade accounts payable are normally settled within 60 days. The carrying amount o f accounts payable approximates net fair value.

(j) Employee benefits

Wages, salaries and annual leave

Liabilities for employee entitlements to wages, salaries and annual leave represent the amounts which the Company has a present obligation to pay resulting from employees' services provided up to the balance date. The provisions have been based on contractual entitlements and have been calculated at undiscounted amounts based on remuneration wage and salary rates that the Company expects to pay as at reporting date, including related on-costs.

Long service leave

The provision for employee benefits to long service leave represents the present value o f the estimated future cash outflows to be made resulting from employees' services provided to reporting date.

Superannuation plan

The Company contributes to a defined contribution employee superannuation plan. Contributions are charged against income as they are made.

Number of employees

The number o f employees at year end was 21.2 full time equivalents (2004:20.4)

(k) Distributions

The Company holds the net distributable amount for each year in trust for rightsholders o f the copyright in film and television programs. These rightsholders are eligible to receive the royalties held on their behalf upon completing necessary documentation, including a membership agreement and warranty.

With respect to the Statutory Service (Part VA and Part VB, Copyright Act 1968), the distributable pool is allocated to all copied programs and actual distributions are made as and when the required documentation is completed. Until this stage is reached for a given title, all funds are held in trust for the rightsholders of the

copied program up to a period of four years. The Board o f Directors may decide that special circumstances exist and continue to hold the pool in trust for a maximum of two further years. The Board has exercised this discretion for all relevant distribution periods to date. After that period, the remaining allocations that have · not been distributed are forfeited and placed into general revenue for inclusion in the current distribution

period in accordance with Guidelines issued by the Attorney-General.

2004/2005 2003/2004

• Buildings • Plant & equipment

2.5% 10-35%

2.5% 10-35%

(i) Payables

lAudio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS forthe year ended 30 June 2005

7. Statement of significant accounting policies (cont'd)

(k) Distributions (cont'd)

In administering the Statutory Service, the Company collects and distributes remuneration payable by educational institutions. The Distributable Amount is the total amount received from record-keeping and sampling institutions for the distribution period (financial year) together with bank interest after deduction of operating expenses, providing for taxation and allocating the relevant portion to the Reserve Fund.

Results o f record-keeping and sampling procedures are collated so that the total number o f minutes for each program title and episode is ascertained. Allocations are made to each program according to the number of minutes copied and the type o f program.

Once an allocation per program by title has been established, a further allocation is made to the various forms of copyright subsisting in the programs (for example, cinematograph film, literary/dramatic works, artistic works, sound recordings). Claimants warrant that they own or control the relevant copyright in one or more of these components and at the close o f the distribution period are paid accordingly.

This same process has been instituted for the allocation and distribution o f royalties for the copying of programs by educational institutions in New Zealand. This is so even though the mechanism of conducting the service is different, w ith rightsholders appointing Audio-Visual Copyright Society Limited trading as Screenrights as their agent to license this recording right in New Zealand.

With respect to the international registration and collection process, Screenrights simply distributes the royalties it receives from other audio-visual societies for titles it has registered on behalf o f the rightsholders. Screenrights follows the allocations set by the relevant society and only makes an adjustment for interest and the expenses incurred in providing the service for its members.

(l ) Goods and services tax

Revenues, expenses and assets are recognised net of the amount o f goods and services tax (GST), except where the am ount o f GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances, the GST is recognised as part of the cost o f acquisition of the asset or as part o f the expense.

Receivables and payables are stated with the amount o f GST included.

The net amount o f GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement o f Financial Position.

Cash flows are included in the statement o f cash flows on a gross basis. The GST components o f cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(m) Revisions of accounting estimates

Revisions to accounting estimates are recognised prospectively in current and future periods only.

(n) Foreign currency

Foreign currency transactions are translated to Australian currency at the rates o f exchange ruling at the dates o f the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rates o f exchange ruling on that date.

Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the Statement of Financial Performance in the financial year in which the exchange rates change.

m

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

7. S tatem ent o f s ig n ifica n t accounting policies (cont'd)

(o) Derivatives

The Company is exposed to changes in interest rates and foreign exchange balances. The Company does not use derivative financial instruments to hedge these risks.

(p) Provisions

A provision is recognised when there is a legal, equitable or constructive obligation as a result o f a past event and it is probable that a future sacrifice o f economic benefits will be required to settle the obligation, the tim ing or amount o f which is uncertain.

2. International Financial Reporting Standards (IFRS)

The Company will be required to prepare financial statements using Australian equivalents to International Financial Reporting Standards (AIFRS) for the first tim e for the year ended 30 June 2006. The Company is in the process of transitioning its accounting policies and financial reporting from current Australian Accounting Standards (AGAAR) to AIFRS. The Company has allocated internal resources and sought external advice to conduct impact assessments to identify key areas that would be impacted by the transition to AIFRS. Priority has been given to the preparation of an opening balance sheet in accordance w ith AIFRS as at the Company's date of transition to AIFRS, 1 July 2004. This will form the basis of accounting for AIFRS in the future, and is required when the Company prepares its first fully AIFRS compliant financial report for the year ended 30 June 2006.

No potential significant implications o f the conversion to AIFRS have been identified to date; however the process of transitioning to AIFRS is ongoing.

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

3. Revenue from ordinary activities

$ $

(a) Trust income

(i) Statutory royalty receipts (Part VA) Revenue from ordinary activities

Rendering o f services revenue from operating activities: Copyright royalties 17,473,969 15,903,669

Other revenues From operating activities: Interest - other parties 1,537,964 1,383,799

From outside operating activities: Gross proceeds from the sale of plant and equipment Miscellaneous

27,951

4,932

Total other revenues 1,565,915 1,388,731

Total revenues from ordinary activities 19,039,884 17,292,400

(ii) Non-statutory royalty receipts Revenue from ordinary activities

Rendering o f services revenue from operating activities: Copyright royalties - International Collections Service - NZ Educational Service

780,235 1,361,554

926,380 1,217,827

Other revenues From operating activities: Interest - other parties: - Bank interest for the International Collections Service

- Bank interest for the NZ Educational Service

2,141,789

125,231 104,037

2,144,207

93,492 78,211

Total other revenues 229,268 171,703

Total revenue from ordinary activities 2,371,057 2,315,910

(b) Non trust income Other revenues Interest: Other parties 8,694 24,571

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

Note 2005 2004

$ $

4. Operating profit

(a) Trust income

Expenses

Depreciation of: Plant and equipment 64,177 71,506

Net expense from movements in employee entitlements 93,608 26,414

(Profit)/loss on sale of plant and equipment (83) -

Foreign exchange (gain)/loss 8,468 28,416

Auditor's remuneration: Audit services 22,500 18,163

Other services - workers compensation review - 800

22,500 18,963

(b) Non trust income

Expenses

Depreciation of: Buildings 23,875 23,875

Plant and equipment 2,883 1,147

26,758 25,022

Auditor's remuneration: Audit services 3,337

Φ

.1

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

Note

5. Taxation

(a) Income tax expense

(i) Trust income

Prima facie income tax expense calculated at 0% (2004:48.5%) on net royalties and interest thereon

Net income deemed corpus of a trust

Tax refund due on change to tax exempt status

Income tax (benefit)Zexpense attributable to net royalties and interest thereon

(ii) Non trust income

Prima facie income tax expense calculated at 0% (2004: 30%) on the operating profit

Increase in income tax expense due to: Non-allowable depreciation Non-deductible legal expenses

Decrease in income tax expense due to: Sundry items

Tax refund due on change to tax exempt status

Income tax (benefit)/expense attributable to operating profit

2005 2004

$ $

- 8,024,979

- :: (7,456,499)

(1,069,033) -

(1,069,033) 568,480

(236,533)

_

7,507

234,639

- (1,712)

(10,405) -

(10,405) 3,901

Audio-Visual Copyright Society Limited was granted tax exempt status effective 1 July 2002 during the current year. As a result, the Company is entitled to a tax refund for income taxes paid to the Australian Taxation Office from 1 July 2002 to 30 June 2005.

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

Note 2005 2004

$ $

6. Cash assets

Cash at bank 4,261,197 4,649,537

Cash on hand 300 300

4,261,497 4,649,837

The interest rate at 30 June 2005 on cash accounts is 5.0% (2004:4.75%), which is the prevailing interest rate on cash at bank.

7. Receivables

Trade debtors 937,390 1,859,457

Sundry receivables 4,438 2,881

941,828 1,862,338

8. Investments

Short term deposits 23,184,618 22,207,486

The interest rate at 30 June 2005 on short term deposits maturing within 30 days is 5.58% (2004:5.37%).

9. Other

25,687 16,179

Current Prepayments

■Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

Note

10. Property, plant & equipment

2005 $

2004 $

Strata title commercial offices - at cost less: accumulated depreciation

1,277,996 (246,320)

1,277,996 (222,445)

1,031,676 1,055,551

Plant and equipm ent - at cost less: accumulated depreciation

873,164 (738,182)

790,544 (695,564)

134,982 94,980

1,166,658 1,150,531

Reconciliations Reconciliations o f the carrying amounts o f each class o f property, plant and equipment are set out below:

Strata title commercial offices Carrying am ount at beginning of year Depreciation

1,055,551 (23,875)

1,079,426 (23,875)

Carrying amount at end of year 1,031,676 1,055,551

Plant and equipment Carrying amount at beginning of year Additions Disposals

Depreciation

94,980 134,930 (27,868) (67,060)

104,256 63,377

(72,653)

Carrying amount at end of year 134,982 94,980

Valuations An independent valuation o f the commercial offices as at 30 June 2003 was undertaken on the basis of the market value of the property in its existing use and resulted in a valuation o f $2,050,000. This valuation accords with the Company's policy o f obtaining an independent valuation every three years. As the commercial offices are recorded at cost, the valuation has not been brought into account.

a

Audio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

11. Payables

Current

Trade creditors and accruals Royalties in advance

12. Provisions

Current

Provision for employee entitlements

Non-current

Provision for employee entitlements

13. Other

Current

Trust - Artistic Works and IBNR Fund

Trust-Statutory 1999 Distributable amount payable to copyright owners 2000 Distributable amount payable to copyright owners 2001 Distributable amount payable to copyright owners 2002 Distributable amount payable to copyright owners 2003 Distributable amount payable to copyright owners 2004 Distributable amount payable to copyright owners 2005 Distributable amount payable to copyright owners Sound recordings distributable amount

Trust - Non-statutory NZ Educational Service: 1999 Distributable amount payable to copyright owners 2000 Distributable amount payable to copyright owners 2001 Distributable amount payable to copyright owners 2002 Distributable amount payable to copyright owners 2003 Distributable amount payable to copyright owners 2004 Distributable amount payable to copyright owners 2005 Distributable amount payable to copyright owners International Collections Service

2005 2004

$ $

5,623 260,655 '

1,177,531 1,905,922 I

1,183,154 2,166,577 I

190,738 114,709

170,718 153,139 1

1,170,663 1,069,7111

787,547

438,801 803,207

614,938 904,569

1,800,695 2,125,026 1,698,019 2,646,619 2,870,162 14,168,681 15,428,081 -

74,019 69,247

22,924,715 21,504,896

31,662

14,746 26,335

15,242 31,741

49,862 77,503

180,302 318,003

380,206 1,074,932

1,199,842 -

2,528,970 2,225,013

4,369,170 3,785,189

28,464,548 26,359,796

e

ludio-Visua Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS ijorthe year ended 30 June 2005

Note 2005 2004

$ $

I

14. Retained profits

Opening balance 842,972 904,205

Profit/(loss) for the year (543,807) (792,344)

Transfer to reserves (24,571) (51,018)

Transfer from reserves 536,148 782,129

810,742 842,972

15. Reserves

Indemnity Fund Reserve Society Reserve Fund 20,000 56,077

20,000 56,077

Movement in reserves

Indemnity Fund Reserve Balance at beginning o f the year - 537,188

Transfer from retained profits - 31,018

Transfer to retained profits (568,206)

Society Reserve Fund Balance at beginning of the year 56,077 -

Transfer from retained profits 24,571 20,000

Transfer from 2003 distribution pool payable - 250,000

Transfer from 2004 distribution pool payable 475,500 -

Transfer to retained profits (536,148) (213,923)

20,000 56,077

Nature and purpose of reserves

Indemnity Fund Reserve

The reserve was created by the transfer o f the balance o f the former Indemnity Fund that was no longer required for that purpose as the indem nity period had expired. These funds have been held as part o f the Society's retained earnings and, although available to be used for the benefit of members, were not available for distribution to members.

Screenrights' Board resolved that the Indemnity Fund Reserve be used in 2004 to fund the costs involved in determining the value o f the new retransmission right.

Society Reserve Fund

Screenrights' Board further resolved to establish a reserve to be titled the Society Resen/e Fund in accordance with 15.4(c) of the Articles of Association. The Board also resolved to transfer $20,000 from Retained Earnings to establish the fund and to allocate $475,500 from the 2004 distribution pool ($250,000 from the 2003

distribution pool) to meet ongoing costs in determining the value o f the new retransmission right when the Indemnity Fund Reserve was extinguished.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

2005 2004

16. Directors' remuneration

Directors' income No. No.

The number of Directors o f the Company whose income from the Company or any related party falls w ithin the following bands: $0-$ 10,000 3 4

$ 10,001- $ 20,000 8 8

$20,001-$30,000 1 _________ 1 _

12 13

Audio-Visual Copyright Society Limited

$ $

Total income paid or payable, or otherwise made available, to all Directors o f the Company from the Company or any related party 109,000 109,000

It should be noted that the following three Directors chose not to receive any Directors'fees: Jill Bryant, John Ford, Alison Weston (2004: Jill Bryant, John Ford, Alison Weston).

17. Related parties

Directors

The names of each person holding the position o f Director of Audio-Visual Copyright Society Limited during the financial year are M Armiger, D Baldock, J Bryant, T Chambers, N Collis-George, W Davies, J Ford, B Godwin, N Hampton, R Nelson, A Rowe and A Weston.

Details of Directors' remuneration are set out in Note 16.

Apart from the details disclosed in this note, no Director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving Directors' interests subsisting at year-end.

Related entities of David Baldock, Will Davies and John Ford, or entities in which they hold a management position, are entitled to distributions calculated in accordance with Note 1 (k).

Other related parties

The following member provides services of assistance in identification of copyright owners and is reimbursed as follows: 2005 2004

$ $

APRA 2,000 6,400

©

jjAudio-Visual Copyright Society Limited

NOTES TO THE FINANCIAL STATEMENTS Ifor the year ended 30 June 2005

I Η H k : : : .V 'S

18. Business segments

The Company operates in one business segment carrying out its principal activity o f utilising its right to administer the service in Part VA o f the Copyright Act 1968. It also operates in one geographical segment being Australasia.

I

19. Members' liability

The Company is a company limited by guarantee. The guarantee o f members in the event o f the winding up of the Company is $10.00 for each member. At 30 June 2005 membership o f the Company comprised 2,258 full members (2004:1,979)

20. Notes to the statement of cash flows

\

\

>

\

I

(a) Reconciliation of cash For the purposes o f the statement o f cash flows, cash includes cash on hand and at bank and shortterm deposits at call. Cash as at the end of the financial year as shown in the statement o f cash flows is reconciled to

the related items in the balance sheet as follows:

2005 2004

$ $

Cash 4,261,497 4,649,837

Shortterm deposits 23,184,618 22,207,486

27,446,115 26,857,323

(b) Reconciliation of operating loss after income tax to net cash provided by operating activities

Operating loss after income tax (543,807) (792,344)

AddZ(less) items classified as investing/financing activities: Interest received - trust (1,767,232) (1,555,502)

- non trust (8,694) (24,571)

Profit on sale o f non-current assets (83)

AddZ(less) non-cash items: Amounts set aside to provision for employee entitlements 93,608 26,414

Depreciation 90,935 96,528

IncreaseZ(decrease) in income taxes payable (1,452,713) 69,582

Net cash utilised by operating activities before change in assets and liabilities (3,587,986) (2,179,893)

Change in assets and liabilities:

(Increase)Zdecrease in receivables 920,510 580,718

(Increase)Zdecrease in prepayments (9,508) 1,219

IncreaseZ(decrease) in creditors (255,032) 82,025

IncreaseZ(decrease) in royalties in advance (728,391) 135,628

IncreaseZ(decrease) in distributable amounts 2,580,252 1,683,083

Net cash provided (used in)Zby operating activities (1,080,155) 302,780

m

Audio-Visual Copyright Society Limited

ANNOTATED STATEMENT OF FINANCIAL PERFORMANCE for the year ended 30 June 2005

Royalty collections for the

year from schools, TAPE

colleges, universities,

New Zealand educational

institutions and overseas.

Includes interest and the

proceeds from sale o f Fixed

Assets.

The cost of running

Screenrights, including

employee expenses, the

retransmission case expenses

o f $ 1.2m, depreciation and

other ordinary expenses.

The remainder of the Pt VA

Distributable Amount from

1999 is $136,552. From our

ninth distribution pool, 1.3% j

o f the funds could not be distributed. The remainder

o f the New Zealand

Distributable Amount from

1999 is $1,583 or 1.0% of

the funds. Screenrights can

hold allocations in trust for

a maximum of six years trying

to locate relevant copyright

owners. Under the Attorney- |

General's Guidelines, these

funds are "recycled" by

adding them to the ■

Distributable Amount in

the current year.

The balance becomes the

2005 Distributable Amount,

available for distribution

to members.

This represents the amount

transferred to the NZ

distributable pool and the

International Collections

Service Fund. Note in the

case of international

collections, some o f these

funds may have already been

distributed at balance date.

We know that not everyone wants to analyse financial statements, so below is our annual summary of the most important information in these accounts. The notes show the calculations which determine how much money is available to distribute to members from the royalties collected and interest received, and after the deduction of tax and expenses.

Note

Revenue from ordinary activities:

Gross royalties 3(a)

Other revenues 3(a) |

Expenses 4(a) |

Income tax expense attributable to net

royalties collected during the current year

and interest received thereon 5(a)

Am ount available for distribution

Add expired trust funds (1998)

Add expired trust funds (1999) 1

Total amount available for distribution

Am ount transferred to statutory

distributable pool

13 p

Amount transferred to non-statutory

distributable pools

Balance at end o f financial year

2005 $

19,615,758

1,795,183

4,137,020

17,273,921

17,273,921

138,135

17,412,056

(15,428,081)

(1,199,842)

(784,133)

2004 $

18,047,876

1,560,434

3,061,961

16,546,349

568,480

15,977,869

178,530

16,156,399

(14,168,681)

(1,074,932)

(912,786)

m

Photography

Staff and Board of Directors - Julieann Howard Photography

Page 6: Member Services Officer Leigh Tran with Chad Corley, Membership and Distribution Manager Viscopy (the visual artists collecting society).

Page 8: Vicky Greer with enhanceTV editor Megan Wood.

Page 10: Bridget Godwin Page 12: Emma Rogers-one of Screenrights'Member Services officers Page 14: Simon Lake Page 22: Jamie LeHuray - enhanceTV Project Manager Pages 24/26/27: The Screenrights Board of Directors

Other photography credits

Page 2: Rodger Cummins, Fairfax Photos Page 4: "The Oyster Farmer". Becker Entertainment. Anthony Buckley, producer.

Page 16: Ross Shultz, Newspix. The Hon Dr Brendan Nelson MP, Minister for Education, Science and Training, with students at the total news ("ttn") guide launch.

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This page is intentionally blank

Design and artwork - Susan Oliver Print Production Pty Ltd 02 9901 4536 Printed in Australia 2005

Level 3,156 Military Road

Neutral Bay NSW Australia

PO Box 1248

Neutral Bay NSW 2089

Australia

Telephone+61 2 9904 0133

Facsimile +61 2 9904 0498

New Zealand

freephone 0800 44 2348

freefax 0800 44 7006

info@screen.org

http://www.screen.org

Screenrights is the trading name of

Audio-Visual Copyright Society Limited

ABN 76 003 912 310

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

PARLIAMENTARY PAPER No. 396 of 2005 ORDERED TO BE PRINTED

ISSN 0727-42881

screenrights