ABC Learning Centres had a record year with significant growth. Revenue increased 149.9% to $631.5 million and operating profit after tax grew 86.4% to $81.1 million. ABC expanded globally through acquisitions, becoming the largest listed childcare provider in the world with over 900 centres across Australia, New Zealand, and the United States after acquiring Learning Care Group and Children's Courtyard. ABC also grew its presence in Australia through the acquisitions of Kids Campus and Hutchison's Child Care Services.

1. A.B.C. Learning Centres Limited
Annual Report 2006
A.B.C. Learning Centres Limited ABN 93 079 736 664 Annual Report 2006

2. Contents
1 2006 Highlights
2 Chairman’s Report
4 CEO’s Report
6 ABC’s four Building Blocks
8 Review of Operations
– Australia, New Zealand
and United States
– Education
14 Board of Directors
17 Financial Report
Corporate Directory

3. Another record year has
seen ABC grow its business
exponentially and provide an
increased return to shareholders.
Revenue $631.5m
+149.9%
Operating profit after tax $81.1m
+86.4%
Earnings per share 27.7c
+20.4%
Business Highlights Growth in Childcare Places 112,179
2004–2006
January 2006
Acquisition of
Learning Care
Group, Inc. in
the United States 46,164
June 2006 22,969
Acquisition of Kids
Campus Limited
2004 2005 2006
Financial Highlights 2006 2005 % Change
(AIFRS) (AIFRS) 2005/2006
Revenue $631.5m $252.7m 149.9
Operating profit after tax $81.1m $43.5m 86.4
Earnings per share – basic 27.7 cents 23.0 cents 20.4
Final dividend – fully franked 8.0 cents 6.0 cents 33.3
Full year dividend – fully franked 15.0 cents 11.0 cents 36.4
1

4. Chairman’s Report
The past 12 months have been a landmark year,
a transforming year for the Company.
With the acquisition of the US based Learning Care Group, Working closely with the existing Learning Care Group
ABC became the world’s largest listed childcare provider. As and Children’s Courtyard senior management, ABC
we stood on the threshold of this new stage of development can repeat its successful Australian and New Zealand
this year, we took time to do what we have always done – formula of achieving high occupancy by lifting the standard
pursue a program of well planned and well managed growth, of care and providing a world-class curriculum, quality staff
underpinned by the highest quality of early childhood and a comprehensive program of renewal and renovation.
education and care.
Within Australia, the acquisition of Kids Campus in
It was ABC’s foray into the US that gave us the most June 2006 further consolidated our position. ABC had
exciting business headlines of the year. In November 2005, demonstrated its ability to integrate new centres with
we announced our intention to acquire Learning Care, at a successful merger with the Peppercorn Management
that time the third largest for-profit childcare provider in Group in 2004, and this continued with Kids Campus.
North America. More recently, in August 2006, we agreed In July, we announced the acquisition of Hutchison’s
to purchase Dallas-based Children’s Courtyard, the ninth Child Care Services.
largest childcare provider in North America.
Another exciting development this year was our expansion
These acquisitions came out of our strong belief that the into corporate childcare, meaning parents have access to
US provides exceptional opportunities for ABC. The US has centres either actually in or near their workplaces. I have
a similar childcare market to Australia, with more mothers in visited two Westpac-ABC centres, a 75-place centre in
the workforce and a greater demand for the highest quality Brisbane and a 50-place centre in Westpac’s new building
education and care, but is served by a fragmented industry in Sydney, which have transformed those lucky families’
where no company holds more than three per cent of the lives. Arrangements with the Commonwealth Bank are also
market. This has meant that the US industry has not yet underway, as part of the bank’s new staff wellbeing program.
had the benefit of the capital injection we have achieved here.
Corporate childcare has emerged as an important service
We have always been aware that a move by an Australian that fits well into ABC’s strategy of managed growth.
company into the US can be viewed as risky. But the Board
and management have absolute confidence in our proven
track record of good management and sound planning
in a market that is similar to ours but 15 times larger.
2

5. Right from the beginning, we
have understood the importance
not only of our families but also
of our communities.
An important aspect of this strategy is our continual review Revenue this year was $631 million, an increase of 150 per cent
and revision of our educational and developmental programs on last year, and our operating profit after tax was $81 million,
to ensure they capture the latest research and are in line with an increase of 86 per cent.
our approach to lifelong learning. You can read about these
The increase in revenue is being passed on to shareholders
important programs later in this report.
as a final dividend of 8 cents per share, fully franked, making
Right from the beginning, we have understood the importance a full year dividend of 15 cents per ordinary share fully franked
not only of our families but also of our communities. We have for the year.
always been involved with the communities, large and small,
In conclusion, it has been a year of progress on all fronts.
that have been home to our centres. And we have relished
It is the progress ABC has consistently shown since it
the opportunity to champion a number of causes, particularly
started its first centre less than 20 years ago and listed five
those with an emphasis on children, families and education.
years ago on the Australian Stock Exchange. There have
So this year ABC introduced SIDS and Kids Safe Sleeping
been many people on that journey and many people who
kits into our centres right across Australia and New Zealand
continue to make it successful. I would like to congratulate
and helped our children fundraise on Red Nose Day. Our
and thank them all.
support has been as varied as the Australian Children’s
Music Foundation and the establishment of a Chair in Your Directors feel enormous confidence in the road ahead,
Midwifery to be established by the Mater Mother’s Hospital and we thank you for joining us.
and the Australian Catholic University.
For you, our shareholders, the benefits of being part of a
dynamic, responsible company are equalled by our solid
financial results.
Sallyanne Atkinson AO
Chairman
3

6. CEO’s Report
ABC is now an international childcare provider with
an increasingly strong financial and shareholder focus.
During the year, we have repaid debt and funded
acquisitions and further growth opportunities.
Consolidation and International Expansion ABC has consolidated its position in the giant US market
In the last 12 months, ABC has evolved into a substantially with the recent acquisition of Children’s Courtyard in Texas,
different company. We are a significantly larger company giving us a total of 417 owned centres and 108 franchised
and now also an international organisation. centres in the US.
During the year, we commenced our expansion into the US, Our expansion into the US has been measured, with a
gaining a substantial part of the largest childcare market in deliberate focus on strategic integration into our existing
the world. business, enabling us to deliver shareholder value through
an immediate return on invested capital.
We cemented our position as the leading childcare provider
in the Australian market through our acquisitions of Kids We see greater potential in the US market for further
Campus and Hutchison’s Child Care Services and are acquisitions in addition to building new centres and
now Australia’s leading provider of childcare services. acquiring franchised businesses.
Our financial position has been strengthened with an Australian Acquisitions
additional capital raising underpinning our acquisitions We have continued to build our leadership position in the
and funding our future growth opportunities. Australian market through further acquisitions. Building
on our merger with the Peppercorn Group, we acquired
These initiatives have positioned ABC at the forefront of
Kids Campus Limited and announced the acquisition of
the childcare industry, enabling us to continue to provide
Hutchison’s Child Care Services Limited.
the highest quality of care for children and families in our
centres and strategically positioning us to capitalise on These acquisitions give us benefits of scale and importantly
these investments over the longer term. provide ABC with the opportunity to provide an enhanced
choice of centres for our corporate partners.
Expansion into the US
One of the major initiatives we have undertaken in the past With the Peppercorn merger, ABC has demonstrated its
year has been our expansion into the US. Our acquisition ability to manage and integrate acquisitions to enhance
of the Learning Care Group, Inc. in January, with 460 owned shareholder value without compromising quality of care
and franchised centres, gave ABC a significant position in or education.
the US market.
The successful integration of operational and administrative
The US expansion was a logical progression for the functions also enables centre staff to spend more time on
company. Our previous merger with Peppercorn Group what they do best – providing an exciting and challenging
meant we were of sufficient scale to warrant international early learning environment for the children in their care.
expansion and the Learning Care Group was a natural,
Realising the benefits of these acquisitions is not an easy
strategic fit for the Company.
undertaking and we are fortunate to have dedicated staff
We were able to bring the benefit of our management who are committed to ensuring the success of this program.
experience to an existing provider with two respected The amalgamation of the various offices into one corporate
operating subsidiaries, Tutor Time and Childtime, subsequently office has been a significant achievement and I would like to
expanding our operations further, with Tutor Time acquiring extend my appreciation to our staff for making this happen.
an additional 17 centres in southern California.
4

7. Our expansion into the US has been
measured, with a deliberate focus
on strategic integration into our
existing business, enabling us to
deliver shareholder value through an
immediate return on invested capital.
Following the acquisition of the Hutchison centres, This has been the hallmark of our business success
ABC will have over 1000 centres in Australia and and continues to be the primary focus of management.
New Zealand, or approximately 20 per cent of long day
In the next financial year, as part of our commitment to
care centres nationally.
raising standards across our industry, ABC will make
In addition to growth by acquisition, we will continue to significant investments in centre staff training programs.
selectively build new centres in the coming year. In addition, we will continue our corporate partnership
program to develop childcare centres for entities such
Capital Management
as the major banks.
During the year, ABC has raised sufficient capital to repay
debt and fund acquisitions and further growth opportunities. In the past year, ABC has been transformed as we have
Our net debt position at the end of June was $29.3 million. significantly expanded the scope and size of our business,
We can now feel comfortable in increasing the debt position while remaining true to our commitment to quality in all
of the Company as we continue to grow. our centres.
The breadth and scale of our operations now means that we The outlook for our business remains positive and we will
have also moved into the ASX Top 100 list of companies. The continue to selectively acquire and construct centres where
Company and its operations are now attracting the attention they meet a community need and add to our business.
of a new set of institutional shareholders and one of our
We thank our dedicated staff for their help in building ABC
priorities is to engage with this market to build understanding
into a prosperous international company.
of our development strategy.
Commitment to Training and Quality
In the past year the Company has experienced a significant
transformation in the size and composition of our business
while remaining firmly focused on the provision of quality
early childhood care and education.
Edmund S Groves
CEO Operations (Global)
5

8. ABC’s four Building Blocks
The best foundation for a child’s future
ABC Learning Centres is committed to ensuring each child
is loved, nurtured, educated and given the best possible
chance in life. That is why we have specifically created the
‘Four Building Blocks’. Each one of these building blocks is a
pathway to a child’s overall wellbeing and future development.
We recognise that in order for young children
to reach their full potential in a learning
environment, they must each be viewed
as an individual.
At ABC, we recognise that each child is uniquely
different. Our tailored learning curriculum
focuses on each child’s unique style of learning
that allows them to gain the most from these
experiences. Literacy, numeracy, and computer
skills are key elements of this building block.
We offer specialised and fun programs to nurture
a child’s nutritional and physical development.
Our aim is to ensure children begin and continue
to make healthy choices, as well as developing
and enhancing their gross and fine motor skills.
The programs and the activities offered in this
building block are based on the individual child.
Each child is able to develop skills according to
their own unique abilities and special interests.
6

9. ABC prides itself on the special learning
environments it creates. Centre facilities are
constantly upgraded, ensuring a safe and secure
environment for all children.
That’s why we have re-invested close to
$100 million into our early learning centres
over the last four years. Our extensive play and
educational facilities are specifically designed
with child safety and child development as the
main priority. We are also the only company
continuing to build centres in all areas where
need exists across the country.
ABC centre staff are early childhood
professionals, dedicated to the development
of every individual child.
All our staff training and assessment services
are not only relevant to the real world but also
incorporate holistic practices in child development.
They undertake continuing levels of study to
achieve their qualifications developed specifically
for the care and education of children under six
years of age. In Australia, centre staff qualifications
range from Certificate level through to Diplomas,
Advanced Diplomas and Bachelor of Education
(Early Childhood). ABC centre staff are employed
according to the Child Care Regulations and
Acts specific to each State/Territory.
Real Mums. Real Stories.
“My son attends an ABC childcare how to use a cup and baby eating
centre one day a week, and has utensils and settling problems.
done since 12 weeks of age. ABC staff and directors assisted
It is on these days that we find me with post-natal depression, this
he is most settled, he is happy assistance is given freely and is not
when I arrive to pick him up. part of the school fees. This kind of
He spends his days finger painting, care and attention to a little person,
experiencing a myriad of toys that his growth and development
no parent would be able to provide and his family’s overall wellbeing
in such a variety or quantity. The is nothing short of a fantastic
staff there assist parents in learning community service to all.”
how best to cope with difficult
moments, how to introduce solids, Mrs K Barry, ABC Grays Point
7

10. Review of Operations
Australia, New Zealand and United States
It was a year of unprecedented expansion, with ABC
achieving a growth rate of 41 per cent in its number of
childcare centres, moving into the US and New Zealand
and significantly expanding the corporate care division.
Summary Another significant acquisition was the six childcare centres
Operations grew significantly through the year. The total managed by the Universal group in metropolitan Sydney.
number of centres increased from 660 to 933 (905 in This acquisition comprised 421 existing places with a further
Australia, 28 in New Zealand), a growth of 41 per cent. 960 places to be developed. More than half of the places are
to be for children under three years of age.
The Company continued to acquire high quality groups
and excellent sites and centres in outstanding locations. A further 192 centres were acquired through the year in small
A strengthening of our operational structure has enabled groups or individually.
us to focus on and measure our quantitative and qualitative
Delivery of Services
performance indicators more effectively. Systems have
The main focus of the delivery of services to our
continued to improve and have reduced the administrative
children and families continued to be on our high quality
burden for our centre staff, enabling them to spend
educational curriculum.
additional time with the children. Our Corporate Care
division has progressed markedly, securing further major Staff training continued as a key focal point with
organisations. Marketing has been enhanced this year, with curriculum training and our Rewards Success Program
a number of major campaigns boosting occupancies. featuring strongly.
Acquisitions
The acquisition of Kids Campus Limited (KDS) for
$127.9 million was the most significant new initiative during
the financial year. KDS has added 75 centres and an existing
pipeline of 21 centres to the group, with 8,000 places in
strategic locations. The transaction also included a further
4,000 places to be provided over three years.
Real Parents. Real Stories.
“Our daughter who is now or updated, and the systems and
26 months old has been going procedures have improved.
to a local (privately-run) day care Our daughter (who originally attended
centre for just on two years. In July one day and now attends three
last year it was turned into an ABC full days per week) has grown and
Centre, a move which my husband flourished and turned into a happy
and I, being small business owners, healthy toddler under their care.
were originally ambivalent about. ABC is the best thing that could
However, what we have noticed have happened to our centre.”
since the changeover is that,
parents are now better informed, Lana and Craig White,
every toy and piece of equipment ABC Jerraboombah
in the centre has been replaced
8

11. Northern Territory Queensland
15 335
Western Australia
78 Australian
Capital
Territory
New South Wales
210
South Australia
8 Victoria
56 281
Tasmania New Zealand
11 28
Our operational structure was strengthened by the addition Refurbishments were carried out at 212 centres through
of more than 40 area managers to the management team. the year and over 30,000 maintenance responses
These managers were mostly senior Centre Directors were undertaken.
promoted into the position but still retaining a strong
Staff computers were provided to over 200 centres
connection to the centres.
and there were over 6,000 IT&T responses in the year.
Operations Central, a centralised support service staffed
Systems
by senior early childhood personnel, was launched through
Improved access by Centre Directors to centre relief staff
the year. Operations Central has provided centre staff and
was achieved through our labour management system,
families with much improved support and the Company
Kronos. This system was also extended to our New Zealand
with essential feedback data on its operations.
centres. We also commenced automated child attendance
Performance times in our New Zealand centres, improving our security
Under the Commonwealth Quality Improvement and and management processes.
Accreditation System, 213 of our centres were accredited
A new rostering system was developed in our childcare
this year, 98 per cent achieving the highest level.
centre systems as well as automatic direct debiting of fees
And under our internal Quality Assurance Program, each and improved banking systems. These developments have
of our centres was visited once per quarter, resulting been instrumental in reducing office time for Centre Directors.
in 1,856 centre visits and the issuing of 4,937 quality
Substantial work was undertaken on our intranet
assurance certificates in the areas of Industry Compliance,
throughout the year. All centre policies and procedures and
Early Childhood Learning Environment, Centre Presentation
other essential centre information is now at the fingertips of
and Administration.
the Centre Director. Online ordering of toys and equipment
Centre staff turnover continued at the low rate of 8.3 per cent. as well as purchasing of supplies for the centres has been
Much of the turnover was for family or travel reasons. further developed.
9

12. Review of Operations
Australia, New Zealand and United States
Corporate Care Other campaigns through the year included the 2 Weeks
The Corporate Care division commenced the management Free and “Guess Who” campaigns. New signage
of the existing 19 Department of Defence childcare centres. turnaround times for acquired centres was also greatly
A number of existing ABC centres were converted to reduced, enabling the centres to be identified with the
Defence corporate care centres, increasing the total number ABC marketing campaigns.
to 35 centres.
Regional marketing information was amended to include the
Other corporate partners who joined through the year local centre telephone number as well as the toll-free number
included the Commonwealth Bank of Australia, Optus, (1800 222 543 in Australia, 0508 222 543 in New Zealand).
Chisholm TAFE, Chandler Macleod and the Queensland
Learning Care Group
Institute of Medical Research.
Joining the ABC Group has brought exciting opportunities
Marketing for growth and development of the Learning Care Group
It has always been ABC’s experience that word of mouth is in the US. Since the acquisition by ABC in January 2006,
our best form of marketing. This year has been no different the Learning Care Group has made a strategic shift in
in this regard and the constant stream of support letters its business strategy, which previously focused on growth
that we receive from our excited families suggests that through the franchise market.
the neighbourhood grapevine is hard at work. It is also
a constant reminder that the Company must continually
find improved ways to support and inspire those families.
We bolstered our marketing efforts this year with a major
re-enrolment campaign over the summer holiday period.
The campaign included an extensive flyer distribution
and TV advertisements which continued through the
Commonwealth Games and local radio advertisements.
Additional call centre staff were engaged and trained
to respond to the huge influx of enquiries.
Real Parents. Real Stories.
“When I was pregnant with Miranda, for Miranda and not to worry about
I struggled to find her an place in things, just enjoy the remainder
childcare as all the places were of the pregnancy and impending
full. My husband I and kept getting parenthood. This was very reassuring.
knocked back. Originally, we The staff are all thrilled when we
had avoided the larger corporate carry her in the door, and are
centres such as ABC for fear of our genuinely concerned for her welfare.
baby being treated as just another We are very thankful for the love
customer. But we then phoned and care that our daughter has
ABC and were surprised with the received, and would recommend
response we got. We were invited ABC centres to any other parents.”
to visit the centre and see how the
kids enjoy their time there. We were Brad and Janelle McKenzie,
told that a place would be found ABC Newtown
10

13. East
Midwest
91 128
West
125 South
138
Today, the company is driving growth by: As a result of these acquisitions, the Learning Care Group
(a) acquiring other regional early education providers operates in nearly 500 locations in the United States
who are known for their exceptional quality; of America.
(b) purchasing franchised Tutor Time centres; and We are currently undergoing an extensive remodelling program
(c) developing new centres to increase concentration and have budgeted approximately US$40 million to undertake
in select key markets. these refurbishments at more than 180 of the Childtime
centres across the country. These enhancements include an
In the eight months since the ABC acquisition, the Learning updated classroom environment that supports our new The
Care Group has been highly successful in executing Empowered Child™ curriculum. Early indications of recently
this shift in business strategy by acquiring 23 previously completed remodels show an improvement in enrolment,
franchised Tutor Time centres and contracting to purchase which is anticipated for all the centres involved throughout
Children’s Courtyard, which operates 46 schools (comprised this process.
of 74 centres) in Texas.
The Children’s Courtyard acquisition was an ideal fit under
Learning Care Group’s umbrella of brands, as they have
a strong commitment to high quality early education and
care. The synergies among both companies will allow
for continued growth in the marketplace and will position
Learning Care Group as a leading early education provider
in Texas.
11

14. Review of Operations
Education
Education is what we do. ABC’s National Institute of
Early Childhood Education had steady growth through
the year. Educational initiatives such as the ABC LifeSmart
Curriculum have enhanced our programs for older children
in our centres.
College – Australia The ABC LifeSmart Curriculum provides children with
The National Institute of Early Childhood Education (NIECE), the foundation learning skills they require to become
has experienced steady yet significant growth over the confident lifelong learners. The curriculum gives children
previous 12 months. the opportunities to explore and extend upon these skills
through their participation in a wide range of experiences
NIECE provides specialised training in Children’s Services
in their early learning environment.
qualifications to an average of 2,300 students at any
given time, on a national basis. Over 1,000 students The experiences offered by the early learning environment, the
have successfully graduated with Children’s Services daily routine and the interactions with educators all contribute
qualifications in the previous year. to create a supportive, stimulating and challenging program.
Trainers/assessors are based in nine locations around Within the environment a range of activities are offered
Australia, delivering courses to full-time and external that actively engage children to enhance all areas of their
students. NIECE’s unique delivery model allows external development, promote confidence and independence
students to access regular workshops in metropolitan and and assist them in transitioning to their first year of
regional locations as well as receive one-on-one mentoring. compulsory schooling.
NIECE has been awarded DET-funded User Choice contracts The ABC LifeSmart Curriculum has a significant focus
to deliver training services to trainees and apprentices in on literacy, numeracy and computer skills development.
Queensland, New South Wales, Victoria, Tasmania, South It also includes:
Australia, Western Australia and the Northern Territory.
– Letterland – a phonemic awareness program to
Trainees and apprentices equate to almost one-third of
promote early literacy skills;
enrolled students, the remainder being self-funded students
who select NIECE as their provider of choice. – Broadlearn – a specialised program for children to
develop computer skills using a digital library of over
NIECE is firmly established as a nationally Recognised
300 learning activities;
Training Organisation and is the largest private provider
delivering the Certificate lll, Diploma and Advanced Diploma – Behavioural Learning – a special program for children
in Children’s Services. to facilitate positive peer interactions and to assist
children with self-regulation and behaviour management;
ABC LifeSmart Curriculum – Australia/New Zealand
This year, while experiencing exceptional growth both in the – Read for 10 – a reading program for families which has
quantity and the types of early learning services we have been developed by the ABC Education Department in
acquired, we have focused specific attention on improving conjunction with the Dymocks Literacy Foundation and
our exciting and innovative programs and educational services. the National Institute of Early Childhood Education; and
The introduction of the ABC LifeSmart Curriculum has been – Hold on Tight, Stay in Sight – a program developed by
an educational initiative developed to further enhance the the ABC Education Department to encourage all children
educational programs currently offered in the oldest age group and families to be conscious of car safety in driveways.
classrooms at ABC Learning Centres. The curriculum meets
and extends on the varying legislative requirements of each
state and territory of Australia and the Te Whariki guidelines
established by the New Zealand Ministry of Education.
12

15. To help support each of these exciting new initiatives, the – Biometric access systems – fingerprint identity
ABC Education Department has launched its own site verification to provide our families with an added sense
on the ABC Learning Centre’s intranet. This site provides of security;
additional support for centre personnel with each of these
– Next Generation Application data solution – which
new programs and offers additional advice for program
gives both parents and centre staff the ability to
planning and implementation.
seamlessly interact over the internet;
Each and every one of these projects is very special.
– PeopleSoft – designed to improve internal support
Each project has been specifically developed to extend
systems and provide up-to-date human resources
the educational opportunities for children and to increase
functions, as well as serving as a portal for company-
their learning outcomes.
wide information; and
ABC has been developing and providing early childhood
– Galileo educational software – helping teaching staff
programs for the past 18 years. The launch of our new ABC
tailor their educational program to the unique needs of
LifeSmart Curriculum is a further example of our dedication
the classroom and individual students.
to the ongoing development of educational programs for the
children in our care. The proprietary curriculum at Learning Care Group is
one of our key differentiators and strengths. The Tutor
Education and Curriculum – United States
Time LifeSmart™ and Childtime The Empowered Child™
Learning Care Group is committed to providing our families
educational offerings help inspire a lifelong love of learning.
with the best care, staff and centres. To ensure we have
We are currently in the process of providing all our teaching
achieved all of these goals, we are taking steps that will
staff with additional training on this curriculum, making
help our schools through the accreditation process, either
this the first time that Learning Care Group has made the
on a national or local level. These certifications may come
financial commitment to bring teachers together from an
from the National Association for the Education of Young
entire area and train them using a professional resource.
Children (NAEYC), the National Early Childhood Program
Accreditation (NECPA) or other state governing agencies. Recently, we completed a pilot of the online lesson planning
portion of our new Curriculum Embedded Assessment
The government relations department at Learning Care
System. The teachers were very receptive, reporting that
Group has been very involved with the Early Care and
lesson planning was more enjoyable and saved them time.
Education Consortium, with one of our staff members
Teachers will begin using this system company-wide in
serving as the committee’s president. Our team continues
December.
to strengthen its legislative relationships and raise awareness
on the issues affecting early education providers, ensuring Through extensive market research, Learning Care Group
Learning Care Group has a strong voice in the field. has seen more and more parents turn to online/web-based
resources when considering an early education provider
To be a leader in the early education field, it is imperative
for their child. We will continue to explore e-marketing
to utilise state-of-the-art technology and to streamline
opportunities to ensure that Learning Care Group and its
processes. We are currently in the process of testing and
brands are providing our target web-based audience with
installing a variety of technology enhancements, including:
the information they need in a user-friendly format.
13

16. Board of Directors
Mrs Sallyanne Atkinson AO Mr Edmund Groves Dr Le Neve Groves Mr Martin Kemp
Chairman CEO Operations (Global) CEO Education Executive Director
CEO Operations
Sallyanne Atkinson is a Eddy Groves is co-founder Le Neve Groves is co-
(Australia and
former Lord Mayor of of ABC and was the founder of ABC, CEO of
New Zealand)
Brisbane, Australian Senior architect behind ABC’s Education and Principal
Trade Commissioner to listing on the ASX in 2001. of the National Institute of Martin Kemp has 16 years’
Paris and Chairman of He is renowned as one Early Childhood Education experience in childcare and
Queensland Tourism. of Australia’s business (formerly ABC Early has, in that time, co-founded
She is a director of several leaders and brings over Childhood Training College). a number of childcare groups
public companies and 18 years’ experience in the Le Neve holds several early including Premier Early
associations, including childcare industry. Eddy childhood qualifications, Learning Centres. He has
APN News & Media has primary responsibility including a Diploma of owned, managed, operated,
Limited and The Australian for financial and operational Teaching Primary/Preschool, acquired or developed
Ballet. She is chairman matters. He also provides Bachelor of Education, over 300 childcare centres
of the Federal Ministerial industry acknowledged Master of Education and throughout Australia and
Taskforce on Dementia skills in acquisition strategy, a PhD in Education. New Zealand.
and of the Crawford Fund centre location and design,
Le Neve assists in the Martin holds a Bachelor of
(Qld). Sallyanne is also a business development and
development of and Engineering (Hons) degree
Special Representative for corporate strategic planning.
oversees all early childhood and a Masters of Engineering
Queensland, South East He is among Australia’s
philosophies, policies and Science degree and is a
Asia in the Queensland leading public speakers and
practices in the ABC Group. member of the Institution
State Government. regularly addresses a range
Since the inception of ABC of Engineers Australia.
of business and childcare
Among Sallyanne’s many Developmental Learning He has extensive project
industry forums and events.
achievements, she has Centres, Le Neve has management experience in
received several awards supported the design and multi-million dollar projects
including Officer of the implementation of ABC’s around Australia.
Order of Australia and high quality programs for
Martin has been a member
recently was awarded which we have received 17
of the Commonwealth Child
an Honorary Doctorate industry awards. Le Neve
Care Advisory Council,
by the Australian Catholic is also the Chairman of
President of the Queensland
University. She is a Fellow ABC’s risk management
Professional Child Care
of the Australian Institute committee.
Centres Association,
of Management, Australian
Le Neve, a member of President of the Australian
Institute of Company
the Stronger Families and Confederation of Child Care,
Directors and Australian
Communities Partnership President of the Queensland
Institute of Planning.
established in 2004 by Private Child Care Centres
Sallyanne holds a Bachelor the Commonwealth Employers Organisation and
of Arts degree from the Government, is also a Foundation Board Member
University of Queensland. Queensland State Director of the Australian Childcare
for Young Media Australia. Centres Association (federal
employer organisation).
14

17. Mr William Bessemer Mr David Ryan AO The Hon. Lawrence Anthony
Non-Executive Director Non-Executive Director Non-Executive Director
Bill Bessemer is currently David Ryan is the Chairman Larry Anthony is currently a
Chairman of Austock Group of Tooth & Co and other board member of Learning
Limited and Australia Pacific Residual Assco Group Care Group, Inc, Macquarie
Exchange Limited and is a Limited group companies. Media Group, Indue Ltd
director of public company He is also a non-executive and the National Chairman
Timbercorp Limited. director of Transurban for the Duke of Edinburgh’s
Group and Lend Lease Awards Australia.
He has extensive experience
Corporation Limited, as
and practical corporate Larry has vast experience
well as a member of the
skills covering debt and in government sectors
Advisory Board of Virgin
equity raisings, financial and finance including roles
Management Asia-Pacific
structuring, mergers, with Merrill Lynch and
Pty Ltd and a member
acquisitions and business Potter Warburg. He is a
of the Advisory Board of
recoveries. former Federal Minister for
Caliburn Partnership.
Children and Youth Affairs,
Bill holds a Bachelor of
David has extensive Community Services and
Economics degree from the
business experience the Parliamentary Secretary
University of Queensland,
through his current and for Trade. He is also involved
a Master of Business
former roles which include with various charities
Administration degree from
holding senior executive across Australia.
the University of Melbourne
management positions in
and is a Certified Practising Larry holds a Bachelor
public companies and being
Accountant. of Commerce degree from
a member of a number of
the University of New South
public company boards.
Wales, a diploma from
David is well credentialed the Australian Institute
to provide support to of Company Directors, a
the ABC board as a diploma of Applied Finance
Non-Executive Director. and Investment and is a
Member of the Banking
and Securities Institute
of Australia and Australian
Institute of Company
Directors.
15

18. 16

19. A.B.C. Learning Centres Limited
Annual Financial Report for the year ended 30 June 2006
18 Corporate Governance Statement
23 Directors’ Report
36 Auditors’ Independence Declaration
37 Independent Audit Report
39 Directors’ Declaration
40 Income Statements
41 Balance Sheets
42 Statement of Changes in Equity
44 Cash Flow Statements
45 Notes to the Financial Statements
98 Additional Stock Exchange Information
17

20. Corporate Governance Statement
Corporate Governance 3. within the last three years has not been employed in an
The Company is committed to implementing the highest executive capacity by the Company or another group
standards of corporate governance. In determining what those member, or been a Director after ceasing to hold any such
high standards should involve the Company has turned to the employment;
ASX Corporate Governance Council’s Principles of Good
4. within the last three years has not been a principal of a
Corporate Governance and Best Practice Recommendations.
material professional adviser or a material consultant to the
The Company is pleased to advise that the Company’s policies
Company or another group member, or an employee
are consistent with those ASX guidelines.
materially associated with the service provided;
Where the Company’s corporate governance practices do not
5. is not a material supplier or customer of the Company
correlate with the practices recommended by the Council, the
or another group member, or an officer of or otherwise
Company is working towards compliance.
associated directly or indirectly with a material supplier
1. Board of Directors or customer;
1.1 Role of the Board
6. has no material contractual relationship with the Company
The Board’s role is to govern the Company rather than to
or other group member other than as a Director of the
manage it. In governing the Company, the Directors must act in
Company;
the best interests of the Company as a whole. It is the role of
senior management to manage the Company in accordance 7. has not served on the Board for a period which could, or
with the direction and delegations of the Board and the could reasonably be perceived to, materially interfere with
responsibility of the Board to oversee the activities of the Director’s ability to act in the best interests of the
management in carrying out these delegated duties. Company; and
In carrying out its governance role, the main task of the Board is 8. is free from any interest and any business or other
to drive the performance of the Company. The Board must also relationship which could, or could reasonably be perceived
ensure that the Company complies with all of its contractual, to, materially interfere with the Director’s ability to act in the
statutory and any other legal obligations, including the best interests of the Company.
requirements of any regulatory body. The Board has the final A majority of the Board is not made up of independent
responsibility for the successful operations of the Company. Directors. The Board currently has three independent Directors
To assist the Board carry out its functions, it has a Code of and four non-independent Directors.
Conduct to guide the Directors, the Chief Executive Officers, Mr William Bessemer is a Non-Executive Director of the
the Chief Financial Officer and other key executives in the Company and is also the Chairman and shareholder of the
performance of their roles. Austock Group Limited which owns the Company’s corporate
1.2 Composition of the Board advisors and as such does not meet the Company’s criteria for
To add value to the Company the Board has been formed so independence. However, as one of the founding Directors of the
that it has effective composition, size and commitment to Company, his experience and knowledge of the Company
adequately discharge its responsibilities and duties. The names makes his contribution to the Board such that it is appropriate
of the Directors and their qualifications and experience are for him to remain on the Board.
stated on pages 25 to 27 along with the term of office held by As the Company is now a global operation, the Board needs to
each of the Directors. Directors are appointed based on the carefully consider an appropriate and relevant Board structure
specific governance skills required by the Company and on the for the future before it appoints further Directors.
independence of their decision-making and judgement.
1.3 Responsibilities of the Board
The Company recognises the importance of Non-Executive In general, the Board is responsible for, and has the authority
Directors and the external perspective and advice that to determine, all matters relating to the policies, practices,
Non-Executive Directors can offer. Mrs Sallyanne Atkinson management and operations of the Company. It is required to
(Chairman), Mr William Bessemer, Mr David Ryan and the do all things that may be necessary to be done in order to carry
Hon. Larry Anthony are all Non-Executive Directors. In addition out the objectives of the Company.
to being Non-Executive Directors, Mrs Sallyanne Atkinson,
Mr David Ryan and the Hon. Larry Anthony also meet the Without intending to limit this general role of the Board, the
following criteria for independence adopted by the Company. principal functions and responsibilities of the Board include the
following.
An Independent Director:
1. Leadership of the Organisation: overseeing the Company
1. is a Non-Executive Director; and establishing codes that reflect the values of the
2. is not a substantial shareholder of the Company or an Company and guide the conduct of the Board,
officer of, or otherwise associated directly with, a substantial management and employees.
shareholder of the Company;
18

21. 2. Strategy Formulation: working with senior management to 1.4.2 Commitments
set and review the overall strategy and goals for the Each member of the Board is committed to spending sufficient
Company and ensuring that there are policies in place to time to enable them to carry out their duties as a Director of
govern the operation of the Company. the Company.
3. Overseeing Planning Activities: overseeing the development 1.4.3 Confidentiality
of the Company’s strategic plan and approving that plan as In accordance with legal requirements and agreed ethical
well as the annual and long-term budgets. standards, Directors and key executives of the Company
have agreed to keep confidential, information received in the
4. Shareholder Liaison: promoting effective communications
course of the exercise of their duties and will not disclose
with shareholders through an appropriate communications
non-public information except where disclosure is authorised
policy and promoting participation at general meetings of
or legally mandated.
the Company.
1.4.4 Continuous Disclosure
5. Monitoring, Compliance and Risk Management: overseeing
The Board has designated the Company Secretary as the
the Company’s risk management, compliance, control and
person responsible for overseeing and coordinating disclosure
accountability systems and monitoring and directing the
of information to the ASX as well as communicating with the
financial and operational performance of the Company.
ASX. In accordance with the ASX Listing Rules the Company
6. Company Finances: approving expenses in excess of those immediately notifies the ASX of information:
approved in the annual budget and approving and monitoring
1. concerning the Company that a reasonable person would
acquisitions, divestitures and financial and other reporting.
expect to have a material effect on the price or value of the
7. Human Resources: appointing, and, where appropriate, Company’s securities; and
removing the Chief Executive Officers (CEOs) and
2. that would, or would be likely to, influence persons who
Chief Financial Officer (CFO) as well as reviewing the
commonly invest in securities in deciding whether to acquire
performance of the CEOs and monitoring the performance
or dispose of the Company’s securities.
of senior management in their implementation of the
Company’s strategy. 1.4.5 Education and Induction
New Directors undergo an induction process in which they are
8. Ensuring the Health, Safety and Well-Being of Employees:
given a full briefing on the Company. This includes meetings
in conjunction with the senior management team,
with key executives, tours of the premises, an induction
developing, overseeing and reviewing the effectiveness of
package and presentations. Information conveyed to new
the Company’s occupational health and safety systems to
Directors include:
promote the well-being of all employees.
– details of the roles and responsibilities of a Director with an
9. Delegation of Authority: delegating appropriate powers to
outline of the qualities required to be a successful Director;
the CEOs to ensure the effective day-to-day management
of the Company and establishing and determining the – formal policies on Director appointment as well as conduct
powers and functions of the Committees of the Board. and contribution expectations;
Full details of the Board’s role and responsibilities are contained – details of all relevant legal requirements;
in the Board Charter, a copy of which is available upon request. – a copy of the Board Charter;
1.4 Board Policies – guidelines on how the Board processes function;
1.4.1 Conflicts of Interest
Directors must: – details of past, recent and likely future developments relating
to the Board including anticipated regulatory changes;
– disclose to the Board actual or potential conflicts of interest
that may or might reasonably be thought to exist between – background information on and contact information for key
the interests of the Director and the interests of any other people in the organisation including an outline of their roles
parties in carrying out the activities of the Company; and and capabilities;
– if requested by the Board, within seven days or such further – an analysis of the Company;
period as may be permitted, take such necessary and – a synopsis of the current strategic direction of the Company
reasonable steps to remove any conflict of interest. including a copy of the current strategic plan and annual
If a Director cannot or is unwilling to remove a conflict of budget; and
interest then the Director must, in accordance with the – a copy of the Constitution of the Company.
Corporations Act, absent himself or herself from the room when
discussion and/or voting occurs on matters about which the
conflict relates.
19

22. Corporate Governance Statement
In order to achieve continuing improvement in Board In addition, consistent with the law, designated officers are
performance, all Directors are encouraged to undergo continual prohibited from trading in the Company’s securities while in the
professional development. Specifically, Directors are provided possession of unpublished price sensitive information concerning
with the resources and training to address skills gaps where the Company. Unpublished price sensitive information is
they are identified. information regarding the Company, of which the market is not
1.4.6 Independent Professional Advice aware, that a reasonable person would expect to have a material
The Board collectively and each Director has the right to seek effect on the price or value of the Company’s securities.
independent professional advice at the Company’s expense, up Notice of an intention to trade must be given prior to trading in
to specified limits, to assist them to carry out their the Company’s securities as well as a confirmation that the
responsibilities. person is not in possession of any unpublished price sensitive
1.4.7 Related Party Transactions information. The completion of any such trade by a Director
Related party transactions include any financial transaction must also be notified to the Company Secretary who in turn
between a Director and the Company and will be reported in advises the ASX.
writing to each Board meeting. Unless there is an exemption 1.4.10 Performance Review/Evaluation
under the Corporations Act from the requirement to obtain Generally, it is the policy of the Board to conduct an evaluation
shareholder approval for the related party transaction, the Board of its performance annually. The Board’s performance will be
cannot approve the transaction. measured against both qualitative and quantitative indicators.
1.4.8 Shareholder Communication The objective of this evaluation is to provide best practice
The Company respects the rights of its shareholders and to corporate governance to the Company.
facilitate the effective exercise of those rights the Company is The Board is currently undergoing an independent review of its
committed to: performance by external management consultants.
1. communicating effectively with shareholders through 1.4.11 Attestations by CEO and CFO
releases to the market via ASX, the Company’s website, In accordance with the Board’s policy, the CEO and the CFO
information mailed to shareholders and the general made the attestations recommended by the ASX Corporate
meetings of the Company; Governance Council as to the Company’s financial condition
2. giving shareholders ready access to balanced and prior to the Board signing this Annual Report.
understandable information about the Company and 2. Board Committees
corporate proposals; 2.1 Audit Committee
3. making it easy for shareholders to participate in general Below is a summary of the role, composition and responsibilities
meetings of the Company; and of the Audit Committee. Further details are contained in the
Audit Committee’s Charter.
4. requesting the external auditor to attend the annual general
meeting and be available to answer shareholder questions 2.1.1 Role
about the conduct of the audit and the preparation and The Audit Committee is responsible for reviewing the integrity of
content of the auditor’s report. the Company’s financial reporting and overseeing the
independence of the external auditors.
The Company also makes available a telephone number and
email address for shareholders to make enquiries of the 2.1.2 Composition
Company. During the 2006 financial year, the Audit Committee consisted
of three members. The Hon. Larry Anthony was appointed to the
1.4.9 Trading in Company Shares Audit Committee in August 2006. Members are appointed by
The Company has a Share Trading Policy under which the Board from amongst the Non-Executive Directors, a majority
Directors, members of senior management and other of whom are also independent. The current members of the
employees likely to be in possession of unpublished price Audit Committee are Mr David Ryan (Chairman), Mrs Sallyanne
sensitive information and their associates may not trade in the Atkinson, Mr William Bessemer and the Hon. Larry Anthony. All
Company’s securities during the following “blackout periods” members can read and understand financial statements and are
commencing: otherwise financially literate and Mr David Ryan, the Chairman,
– 30 days prior to the release by the Company of its is a qualified accountant with experience in financial and
half-yearly results to the ASX and concluding two days accounting matters. The details of the member’s qualifications
after such release; and may be found in their Director Profiles on pages 25 to 27.
– 30 days prior to the release by the Company of its The Audit Committee held two meetings throughout the year
annual results to the ASX and concluding two days after and details of attendance of the members of the Audit
such release. Committee are contained in the following table.
20

23. August 2005 February 2006 2.2.4 Criteria for selection of Directors
Mr David Ryan ✓ ✓ Directors are appointed based on the specific governance skills
Mrs Sallyanne Atkinson ✓ ✓ required by the Company. Given the size of the Company and
Mr William Bessemer ✓ ✓ the business it operates, the Company aims at all times to have
at least one Director with experience in the childcare industry.
2.1.3 Responsibilities In addition, Directors should have the relevant blend of personal
The Audit Committee reviews the audited annual and half-yearly experience in:
financial statements and any reports which accompany
– accounting and financial management;
published financial statements before submission to the Board
and recommends their approval. – legal skills; and
The Audit Committee also recommends to the Board the – CEO-level business experience.
appointment of the external auditor and each year, reviews the 2.2.5 Responsibilities in respect of Remuneration
appointment of the external auditor, their independence, the The responsibilities of the Committee include setting policies for
audit fee, and any questions of resignation or dismissal. senior officers’ remuneration, setting the terms and conditions
2.2 Nomination and Remuneration Committee of employment for the Chief Executive Officers, reviewing and
Below is a summary of the role, composition and responsibilities making recommendations to the Board on the Company’s
of the Nomination and Remuneration Committee. Further details incentive schemes and superannuation arrangements, reviewing
are contained in the Nomination and Remuneration Committee’s the remuneration of both Executive and Non-Executive
Charter. Directors and making recommendations to the Board on any
proposed changes and undertaking an annual review of the
2.2.1 Role
Chief Executive Officers’ performance, including, setting with
The role of the Nomination and Remuneration Committee is to
the Chief Executive Officers goals for the coming year and
help achieve a structured Board that adds value to the
reviewing progress in achieving these goals.
Company by ensuring an appropriate mix of skills are present in
Directors on the Board at all time and to assist the Board in 2.2.6 Remuneration Policy
fulfilling its responsibilities in respect of establishing appropriate Details of the Board’s policy on remuneration are set out on
remuneration levels and incentive policies for employees. pages 27 to 34 of the Directors’ Report which incorporates the
Company’s remuneration report.
2.2.2 Composition
Mrs Sallyanne Atkinson (Chairman), Mr Edmund Groves and 2.3 Risk Management Committee
Mr David Ryan are the current members of the Nomination and Below is a summary of the role, composition and responsibilities
Remuneration Committee the majority of whom are of the Risk Committee. Further details are contained in the Risk
independent Directors. Committee’s Charter.
The Nomination and Remuneration Committee held two 2.3.1 Role
meetings throughout the year and details of attendance of the The role of the Risk Management Committee is to ensure that
members of the Committee are contained in the following table. the Company is able to manage a diverse and complex range
of significant risks. The committee is also responsible for
September 2005 June 2006
establishing policies on risk oversight and management.
Mrs Sallyanne Atkinson ✓ ✓
Mr Edmund Groves ✓ ✓ 2.3.2 Composition
The members of the Risk Management Committee are:
Mr David Ryan ✓ ✓
– Dr Le Neve Groves (Chairman);
2.2.3 Responsibilities in respect of Nominations
The responsibilities for nominations include devising criteria for – Mr William Bessemer; and
Board membership, reviewing the need for various skills and – Mr Martin Kemp.
experience on the Board and where appropriate identifying
specific individuals for nomination as Directors for review by the The Risk Management Committee held five meeting during the
Board. The Committee also oversees management succession year and details of attendance of the members of the
plans, including the CEO’s and evaluates the Board’s Committee are contained in the following table.
performance and makes recommendations for the appointment
and removal of Directors.
21

24. Corporate Governance Statement
September 2005 November 2005 February 2006 April 2006 June 2006
Dr Le Neve Groves ✓ ✓ ✓ ✓ ✓
Mr William Bessemer ✓ ✓ ✓ ✓ ✓
Mr Martin Kemp ✓ ✓ ✓ ✓ ✓
2.3.3 Responsibilities for its part is committed to providing clients, customers and
The duties and responsibilities of the Risk Management consumers with fair value.
Committee include:
Employment Practices
(a) Assessing the internal processes for determining and The Company endeavours to provide a safe workplace in which
managing key risk areas, particularly: there is equal opportunity for all employees at all levels of the
(i) non-compliance with laws, regulations, standards and Company. The Company does not tolerate the offering or
best practice guidelines, including environmental and acceptance of bribes or the misuse of Company assets or
industrial relation laws; resources.
(ii) litigation and claims; and Obligations Relative to Fair Trading and Dealing
The Company aims to conduct its business fairly and to
(iii) relevant business risks other than those that are dealt compete ethically and in accordance with relevant competition
with by other specific Board committees. laws. The Company strives to deal fairly with the Company’s
(b) Ensuring that the ABC Group has an effective risk customers, suppliers, competitors and other employees and
management system and that major risks to the ABC Group encourages its employees to strive to do the same.
are reported at least annually to the Board. Responsibilities to the Community
(c) Receiving from management reports on all suspected and As part of the community the Company:
actual frauds, thefts and breaches of laws. – is committed to conducting its business in accordance
(d) Evaluating the process the ABC Group has in place for with applicable environmental laws and regulations and
assessing and continuously improving internal controls, encourages all employees to have regard for the
particularly those related to areas of significant risk. environment when carrying out their jobs;
(e) Assessing whether management has controls in place for – encourages all employees to engage in activities beneficial
unusual types of transactions and/or any potential to their local community; and
transactions that may carry more than an acceptable – supports community charities.
degree of risk.
Responsibility to the Individual
(f) Meeting periodically with key management, internal and The Company is committed to keeping private information from
external auditors and compliance staff to understand and employees, clients, customers, consumers and investors
discuss the ABC Group’s control environment. confidential and protected from uses other than those for which
3. Company Code of Conduct it was provided.
As part of its commitment to recognising the legitimate interests Conflicts of Interest
of stakeholders, the Company has a Code of Conduct to guide Employees and Directors must avoid conflicts as well as the
compliance with legal and other obligations to legitimate appearance of conflicts between personal interests and the
stakeholders. These stakeholders include shareholders, interests of the Company.
employees, clients, customers, government authorities, creditors
and the community as whole. The Code includes the following: How the Company Complies with Legislation Affecting
its Operations
Responsibilities to Shareholders and the Financial Within Australia, the Company strives to comply with the spirit
Community Generally and the letter of all legislation affecting its operations. Outside
The Company complies with the spirit as well as the letter of all Australia, the Company will abide by local laws in all countries in
laws and regulations that govern shareholders’ rights. The which it operates. Where those laws are not as stringent as the
Company has processes in place designed to ensure the Company’s operating policies, particularly in relation to the
truthful and factual presentation of the Company’s financial environment, workplace practices, intellectual property and the
position and prepares and maintains its accounts fairly and giving of “gifts”, Company policy will prevail.
accurately in accordance with the generally accepted
accounting and financial reporting standards. How the Company Monitors and Ensures Compliance with
its Code
Responsibilities to Clients, Customers and Consumers The Board, management and all employees of the Company
Each employee has an obligation to use their best efforts to are committed to implementing this Code of Conduct and each
deal in a fair and responsible manner with each of the individual is accountable for such compliance. Disciplinary
Company’s clients, customers and consumers. The Company measures may be imposed for violating the Code.
22

25. Directors’ Report
Your Directors present their Annual Report on the Company and its controlled entities (referred to hereafter as the Group) for the
financial year ended 30 June 2006.
Directors
The names of the Directors in office at any time during the year and to the date of this report are:
Mrs Sallyanne Atkinson AO
Mr Edmund S Groves
Dr Le Neve A Groves
Mr William E Bessemer
Mr Martin Vincent Kemp
Mr David John Ryan AO
Hon. Lawrence James Anthony
Directors have been in office since the start of the financial year until the date of this report unless otherwise stated.
Principal Activities
The principal activities of the Group during the financial year were the provision of childcare services and education.
Operating Results
The consolidated profit of the Group for the financial year after providing for income tax amounted to $81,110,000
(2005: $43,534,000 AIFRS).
Dividends Paid or Recommended
The Directors have declared a fully franked final dividend of 8 cents per share ($31,451,724). The dividends will be franked at a rate
of 30%. The final dividend will be paid on 29 September 2006.
Dividend Date paid Dividend per share Total dividend
Ordinary Shares – 29 September 2005 6 cents $15,036,962
Final dividend for the year ended 30 June 2005 franked to 100%
Preference Shares – 30 November 2005 16.9212 cents $2,030,543
Final dividend for the year ended 30 June 2005 franked to 100%
Ordinary Shares – 31 March 2006 7 cents $18,417,078
Interim dividend for the year ended 30 June 2006 franked to 100%
Preference Shares – 31 May 2006 16.8288 cents $2,019,457
Interim dividend for the year ended 30 June 2006 franked to 100%
Review of Operations
A Review of the Operations of the Group during the year ended 30 June 2006 and up to the date of this report appears in the
separate section “Review of Operations” on pages 8 –13.
Significant Changes in State of Affairs
The following significant changes in the state of affairs of the Group occurred during the year:
(i) On 13 September 2005, the Company issued 10,000,000 ordinary shares at $6.00 per share to raise capital to reduce debt and
to fund the Company’s ongoing acquisition program;
(ii) On 15 December 2005, the Company issued 37,200,000 ordinary shares at $7.00 to raise funds for the acquisition of the
Learning Care Group, Inc. and to fund the Company’s ongoing acquisition program;
(iii) On 11 January 2006, the Company acquired the Learning Care Group, Inc. for US$159,100,000;
(iv) On 9 May 2006, the Company issued 44,104,239 ordinary shares at an issue price of $7.30 each to a range of institutional and
professional investors to refinance the Company’s balance sheet to place the Company in a strong position to take advantage of
global acquisition opportunities;
(v) In May 2006, the Company acquired Kids Campus Limited for $127,897,000; and
(vi) On 14 June 2006, the Company issued 38,087,542 ordinary shares at an issue price of $7.30 each to a range of institutional
and professional investors to refinance ABC’s balance sheet to place the Company in a strong position to take advantage of
global acquisition opportunities.
23

26. Directors’ Report
Significant Events After Balance Date
On 7 July 2006 the Company announced an off-market takeover bid of Hutchison’s Child Care Services Ltd for $1.50 per ordinary
share. On 25 September 2006 the Company declared the takeover bid unconditional and commenced compulsory acquisition of
the remaining shares.
On 6 September 2006 the Company acquired 100% of The Children’s Courtyard LLP, the ninth largest childcare provider in the US for
US$66 million.
No other matter or circumstance has arisen since 30 June 2006 that has significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Group’s state of affairs in future financial years.
Future Developments
The likely developments in the operations of the Group and the expected results of those operations in future financial year is
the proposed acquisition of a number of childcare centres in locations throughout Australia, New Zealand and the United States
of America.
The Board expects that the above developments will provide a wider market penetration and enable the Group’s activities to
be expanded.
Environmental Issues
The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State
or Territory.
Options
Sign-on options were granted over ordinary shares during the financial year by the Company to the Learning Care Group, Inc.
executives in accordance with their employment agreements.
The options granted under the employment agreements were:
1. 1,083,000 sign-on options granted to William Davis at an option premium of $0.00 per option and an exercise price of
$7.35 per option;
2. 375,145 sign-on options granted to Frank Jerneycic at an option premium of $0.00 per option and an exercise price of
$7.35 per option;
3. 334,807 sign-on options granted to Kathy Myers at an option premium of $0.00 per option and an exercise price of
$7.35 per option; and
4. 119,239 sign-on options granted to Scott Smith at an option premium of $0.00 per option and an exercise price of
$7.35 per option.
The options granted will vest at a rate of 20% per annum on each anniversary or at the end of the executives’ compensation period
(if the employment agreement is not renewed through to 2011).
Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body
corporate or in the interest of any other registered scheme.
During and since the end of the financial year no options have been exercised.
24

27. Information on Directors
Mrs Sallyanne Atkinson AO Chairman – Non-Executive.
Appointed 3 October 2000.
Qualifications Bachelor of Arts (University of Queensland),
Fellow, Australian Institute of Management,
Fellow, Australian Institute of Company Directors,
Fellow, Australian Institute of Planning,
Fellow, Australian Marketing Institute,
Doctor of the University (Hon) Australian Catholic University.
Experience Appointed Chairman in November 2000. Former Lord Mayor of Brisbane, Australian Senior
Trade Commissioner to Paris and Chairman of Queensland Tourism. Director of several public
companies and associations, including APN News & Media Limited and The Australian Ballet.
She is chairman of Federal Ministerial Taskforce on Dementia and of the Crawford Fund (Qld).
Currently, Special Representative for Queensland, South East Asia in the Queensland
Government. Represented Australia on the International Olympic Committee, at major trade
and business forums such as the OECD and the International Chamber of Commerce and
has spoken at conferences in Europe, Asia and the United States.
Interest in shares and options 695,000 ordinary shares.
Special Responsibilities Member of the Audit Committee and Chairman of the Nomination and Remuneration
Committee.
Mr Edmund S Groves Chief Executive Officer – Operations (Global).
Appointed 15 August 1997.
Qualifications Member, Australian Institute of Company Directors.
Experience Co-founder of ABC Developmental Learning Centres Pty Limited in 1988. Controls one of
the largest milk distribution operations in Queensland.
Interest in shares and options 16,797,500 ordinary shares.
Special Responsibilities Primary responsibility for all financial and operational matters and liaising with government
and regulatory bodies. Member of the Nomination and Remuneration Committee.
Dr Le Neve A Groves Chief Executive Officer – Education.
Appointed 15 August 1997.
Qualifications Diploma of Teaching Primary/Preschool,
Bachelor of Education (University of South Australia),
Master of Education (University of South Australia),
Doctor of Education (University of South Australia),
Member, Australian Institute of Company Directors.
Experience Co-founder of ABC Developmental Learning Centres Pty Limited in 1988. Principal of the
National Institute of Early Childhood Education (formerly ABC Early Childhood Training
College) since its inception in 1996. She is currently a member of the Stronger Families and
Communities Partnership established in 2004 by the Commonwealth Government.
Interest in shares and options 16,810,500 ordinary shares.
Special Responsibilities Develops and oversees all early childhood philosophies, policies and practices of the Group.
Designs and implements high quality educational programs for ABC’s Learning Centres.
Chairman of the Risk Management Committee.
25

28. Directors’ Report
Mr William E Bessemer Non-Executive Director.
Appointed 15 August 1997.
Qualifications Bachelor of Economics (University of Queensland),
Master of Business Administration (University of Melbourne),
Certified Practising Accountant.
Experience Currently Chairman of Austock Group Limited and Australia Pacific Exchange Limited. He is
also a Director of Timbercorp Limited. He has extensive experience covering debt and equity
raisings, financial structuring, mergers acquisitions and business recoveries.
Interest in shares and options 105,000 ordinary shares.
Special Responsibilities Member of the Audit Committee and Risk Management Committee.
Mr Martin V Kemp Chief Executive Officer – Operations (Australia and New Zealand).
Appointed 28 November 2001.
Qualifications Bachelor of Engineering (Hons) (University of Queensland),
Master of Engineering Science (University of Sydney),
Member of Institution of Engineers, Australia.
Experience Owner, operator, manager and developer of childcare centres for 16 years. Project manager
for numerous multi-million dollar projects around Australia. He has been a member of the
Commonwealth Child Care Advisory Council, President of the Queensland Professional Child
Care Centres Association, President of the Australian Confederation of Child Care, President of
the Queensland Private Child Care Centres Employers Organisation and a Foundation Board
Member of the Australian Childcare Centres Association (federal employer organisation).
Interest in shares and options 10,462,259 ordinary shares.
50,000 redeemable converting preference shares.
Special Responsibilities Primary responsibility for all development and acquisitions by the Group. Member of the Risk
Management Committee.
Mr David J Ryan AO Non-Executive Director.
Appointed 26 June 2003.
Qualifications Bachelor of Business Studies (NSW University of Technology),
Fellow, Australian Institute of Company Directors,
Fellow, Certified Practising Accountant.
Experience Chairman of Tooth & Co and other Residual Assco Group Ltd group companies,
Non-Executive Director of Transurban Group and Lend Lease Corporation Limited, member
of the Advisory Board of Virgin Management Asia-Pacific Pty Ltd and member of the
Advisory Board of Caliburn Partnership. Extensive financial and operational experience
through current and former roles including senior executive management positions in public
companies and being a member of a number of public company boards.
Interest in shares and options 239,595 ordinary shares.
Special Responsibilities Chairman of the Audit Committee and a member of the Nomination and Remuneration
Committee.
26

29. The Hon. Lawrence J Anthony Non-Executive Director.
Appointed 16 March 2005
Qualifications Bachelor of Commerce (University of New South Wales),
Diploma of Applied Finance and Investment,
Fellow, Australian Institute of Company Directors,
Member, Banking and Securities Institute of Australia,
Experience He is currently a Board Member of Learning Care Group, Inc., Macquarie Media Group,
Indue Ltd, National Chairman for the Duke of Edinburgh’s Awards Australia and National
Chairman of National Credit Union Assn Inc. He has vast experience in government sectors
and finance including roles with Merrill Lynch and Potter Warburg. He is a former Federal
Government Minister for Children and Youth Affairs, Community Services and Parliamentary
Secretary for Trade. He is also involved with various charities across Australia.
Interest in shares and options 106,622 ordinary shares.
Special responsibilities Member of the Audit Committee.
Information on Company Secretary
Ms Jillian G Bannan Company Secretary.
Appointed 8 March 2004
Qualifications Bachelors of Law and Commerce from James Cook University, Queensland,
Member of the Queensland Law Society,
Affiliate of Chartered Secretaries Australia.
Experience She commenced with the Group in February 2003. Prior to joining ABC, she worked as a
solicitor in private practice principally in the commercial and corporate law fields.
Remuneration Report
The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act
for the Company and the consolidated entities for the year ended 30 June 2006.
The Company’s remuneration strategy is designed to attract, retain and motivate appropriately qualified and experienced directors
and senior executives. Details of the Company’s remuneration strategy for the 2006 financial year are set out in this Remuneration
Report. This Remuneration Report forms part of the Directors’ Report.
Non-Executive Directors
The fees paid to Non-Executive Directors are set at levels which reflect both the responsibilities of, and the time commitments
required from, each Non-Executive Director to discharge their duties. Fee levels are set having regard to independent professional
advice and the fees paid by comparable companies. The fees paid to Non-Executive Directors are not linked to the performance of
the Company.
Executive Directors and Senior Executives
In the 2005/2006 year, executive remuneration was comprised of a fixed cash component for Executive Directors and a
combination of a fixed cash component and fixed share component for senior executives.
In June 2006, shareholders approved a new remuneration structure for Executive Directors at an extraordinary general meeting.
Executive Director remuneration under the new structure comprises both a fixed component and an at-risk component which is
intended to remunerate executives for increasing shareholder value and for achieving financial targets and business strategies. It is
also designed to attract and retain high calibre executives.
An overview of the elements of the 2005/2006 remuneration structure and the new remuneration structure are set out in Tables 1A
and 1B.
A more detailed discussion of each element is contained in this Remuneration Report.
27

30. Directors’ Report
Table 1A – Overview of Elements of 2005/2006 Remuneration Structure
2005/2006
Australia Discussion in
Directors Directors Senior US Senior Remuneration
Elements of remuneration Non-Executive Executive Executives Executives Report
Fixed remuneration Fees ✓ ✗ ✗ ✗ Pg 28
Salary ✗ ✓ ✓ ✓ Pg 31
Superannuation ✓ ✓ ✓ ✓ Pg 31
Other benefits ✓ ✓ ✓ ✓ Pg 31
At-risk remuneration Short-term incentive ✗ ✗ ✗ ✓ Pg 31
Long-term incentive ✗ ✗ ✗ ✓ Pg 31
Post-employment Notice periods and
termination payments ✗ ✓ ✓ ✓ Pg 33
Table 1B – Overview of Elements of New Remuneration Structure
2006/2007 – New Remuneration Structure – Executive Directors
Discussion in
Directors Remuneration
Elements of remuneration Executive Report
Fixed remuneration Fees ✗ Pg 31
Salary ✓ Pg 31
Superannuation ✓ Pg 31
Other benefits ✓ Pg 31
At-risk remuneration Short-term incentive ✓ Pg 31
Long-term incentive ✓ Pg 31
Post-employment Notice periods and termination payments ✓ Pg 33
Section 1 – Non-Executive Directors’ Remuneration
A. Board Policy on Remuneration – Attracting and retaining high calibre directors
Non-Executive Directors’ fees, including committee fees, are set by the Board within the maximum aggregate amount of $400,000
approved by shareholders. This amount was approved in 2003.
In order to maintain Non-Executive Directors’ independence and impartiality, their remuneration is not linked to the performance
of the Company. In setting fee levels, the Nomination and Remuneration Committee, which makes recommendations to the Board,
takes into account:
– the Company’s existing remuneration policies;
– fees paid by comparable companies;
– the general time commitment required from Directors and the risks associated with discharging the duties attaching to
the role of Director; and
– the level of remuneration necessary to attract and retain Directors of a suitable calibre.
Details of the membership of the Nomination and Remuneration Committee and its responsibilities are set out on page 21 of
the Corporate Governance Statement.
Fees
For the 2005/2006 year, Non-Executive Directors received a fee of $40,000 per annum in relation to their services as Directors.
The Chairman, taking into account the greater time commitment required, received a fee of $80,000. The Company does not pay
additional fees for membership of the Board’s committees.
In accordance with rule 7.3(f) of the Company’s Constitution, Directors are also permitted to be paid additional fees for special duties.
Such fees are not included in the aggregate remuneration cap approved by shareholders. No such fees were paid during the year.
Directors are also entitled to be reimbursed for all business related expenses, including travel on Company business, as may be
incurred in the discharge of their duties.
28

31. Superannuation contributions are also made on behalf of the Non-Executive Directors in accordance with the Company’s statutory
superannuation obligations.
The Board will continue to review its approach to Non-Executive Director remuneration to ensure it remains in line with general
industry practice and best practice principles of corporate governance.
Retirement Benefits
In the past, the Company has not paid retirement benefits to Non-Executive Directors. It is not the intention of the Board to initiate
payment of retirement benefits.
B. Details of Remuneration
Details of Non-Executive Directors’ remuneration for the year ended 30 June 2006 are set out in the following table. All values are in
Australian dollars unless otherwise stated.
Table 2 – Non-Executive Director Remuneration
Superannuation
Directors’ Fees Contributions1 Other2 Total
$ $ $ $
S Atkinson (Chairman) 79,999 7,200 – 87,199
L J Anthony 39,998 3,600 – 43,598
W E Bessemer – – 40,000 40,000
D J Ryan 39,998 3,600 – 43,598
Total 159,995 14,400 40,000 214,395
1 Superannuation contributions made on behalf of Non-Executive Directors to satisfy the Company’s obligations under applicable Superannuation
Guarantee legislation.
2 Includes the cost of motor vehicles provided by the Company (inclusive of applicable fringe benefits tax).
Section 2 – Executive Director and Senior Executive Remuneration
The disclosures in this section relate to the executives listed below, being the Executive Directors and the senior executives with
authority and responsibility for planning, directing and controlling the activities of the Company and the Group during the financial
year. This group of executives are the key management personnel as defined in AASB 124 “Related Party Disclosures” and includes
the five most highly remunerated Company and Group executives during the financial year.
Table 3 – Executive Directors and Senior Executives
Australia
Executive Director/Senior Executive Position
E S Groves Chief Executive Officer – Operations (Global)
L A Groves Chief Executive Officer – Education
M V Kemp Chief Executive Officer – Operations (Australia and New Zealand)
J M Reynolds Chief Operating Officer
M P Loveday Chief Financial Officer
J G Bannan Company Secretary and General Counsel
United States of America
Executive Director/Senior Executive Position
W Davis President and Chief Executive Officer
F Jerneycic Chief Financial Officer and Treasurer
K Myers Chief Operating Officer
S Smith Human Resources Vice President
Board Policy on Remuneration – Rewarding individual and Company performance
The remuneration of the Executive Directors and senior executives is designed to reward executives for increasing shareholder value
and for achieving financial targets and business strategies. It is also set to attract, retain and motivate appropriately qualified and
experienced executives. Accordingly, the Board considers it desirable for remuneration packages of Executive Directors and senior
executives to include both a fixed component and an at-risk or performance related component (comprising both short-term and
long-term incentives). The Board views the at-risk component as an essential driver of the Company’s high performance culture.
Where the Company’s remuneration practices do not correlate with this policy, the Company is working towards compliance.
29

32. Directors’ Report
The Nomination and Remuneration Committee has recommended, and the Board has adopted, a policy that remuneration will:
(a) reinforce the short, medium and long-term financial targets and business strategies of the Company as set out in the strategic
business plans endorsed by the Board;
(b) provide a common interest between executives and shareholders; and
(c) be competitive in the markets in which the Company operates in order to attract, motivate and retain high calibre executives.
Company Performance
The benefits to the Company and its shareholders of the Board’s policy on Executive Director and senior executive remuneration are
demonstrated by the Company’s growth and development over the last five years.
Earnings
The Company’s earnings for the five years to 30 June 2006 are summarised in Table 4.
Table 4 – Earnings
Year ended Year ended Year ended Year ended Year ended
30 June 06* 30 June 05 30 June 04 30 June 03 30 June 02
$’000 $’000 $’000 $’000 $’000
Revenue 631,450 292,700 96,421 40,911 23,838
EBITDA 157,900 68,127 27,727 17,088 9,800
NPAT 81,110 52,337 21,368 12,072 6,858
* 2006 stated under AIFRS. Previous years stated under AGAAP.
Shareholder Wealth
Table 5 shows the Company’s Total Shareholder Return, basic earnings per share, dividends per share and the share price from
2002 to 2006, all of which are measures of the consequences of Company performance on shareholder wealth.
Table 5 – Shareholder Wealth
Year ended Year ended Year ended Year ended Year ended
30 June 06 30 June 05 30 June 04 30 June 03 30 June 02*
Share price** $6.40 $5.58 $3.70 $3.10 $2.64
Total dividends paid 15 cents 11 cents 10 cents 7 cents 5.6 cents
Franked dividends 100% 100% 100% 100% 100%
EPS 27.7 cents*** 25.7 cents 17.5 cents 14.0 cents 9.8 cents
Total Shareholder Return 17.4% 53.8% 22.6% 20.1% 426.6%
* Measures calculated to take into account 5:1 share split which occurred in November 2002.
** The amount disclosed is the closing price of the Company’s shares on the ASX on 30 June of the relevant year.
*** 2006 EPS calculated under AIFRS. Previous years calculated under AGAAP.
As can be seen from the results provided, the Company has experienced consistent growth in earnings per share of approximately
282% over the last five years, resulting in:
– an increase in the Company’s share price; and
– EPS average annual increase of 38%.
Components of Remuneration
Executive Directors
As indicated above, the Executive Directors were paid a fixed cash remuneration package for the 2005/2006 year (refer to Table 1A).
Each Executive Director currently maintains a shareholding in the Company which is not part of their remuneration package. For two
out of the three Executive Directors, this shareholding amounts to over 4% of the issued capital of the Company. This indicates that
the Executive Directors have an interest in the long-term outcome for the Company.
As the Company has rapidly grown, the Board determined that it was prudent to put in place a more relevant and suitable
remuneration structure. This new structure was approved by shareholders at an extraordinary general meeting held on 7 June 2006.
30

33. The new remuneration structure for Executive Directors has the following components (refer to Table 1B):
1. Fixed remuneration; and
2. Performance-based at-risk remuneration, comprising:
– Short-Term Incentive (STI) – based on annual performance at an individual, business unit and Company level; and
– Long-Term Incentive (LTI) – based on sustained creation of shareholder value over a three year period.
The Board aims to achieve a balance between fixed and performance-related components of remuneration that reflect market
conditions at each job and seniority level.
The relative proportion of Executive Directors’ total remuneration packages that is performance-based is set out in Table 6 below:
Table 6 – Proportion of Fixed and At-Risk Remuneration
% of Total Target Remuneration (Annualised)
Performance-based
Fixed Remuneration Remuneration
STI* LTI**
Executive Directors 50 25 25
* The STIs are based on target.
** The LTIs are based on target.
The proportion of Total Target Remuneration is based on the various Executive Directors meeting their targeted rewards. Should the
stretch rewards be met, the proportion of remuneration which is performance-based will be higher than stated above, in accordance
with the plan rules.
Senior Executives (Australia)
Remuneration for senior executives in the Australian operations has the following components:
1. Fixed remuneration; and
2. Fixed number of ordinary shares.
This remuneration structure was introduced in 2003 and senior executives entered into five year service agreements on this basis.
This structure includes an issue of shares that is not dependent upon the satisfaction of any performance conditions. The rationale
behind this was to encourage the alignment of personal and shareholder interests. The Company believes this policy to have been
effective in increasing shareholder wealth over the past three years. It is the intention of the Company to introduce a remuneration
structure similar to the new structure in place for Executive Directors which includes short-term and long-term incentives on expiry
of the service agreements.
Senior Executives (United States of America)
Remuneration for senior executives in the US operations has the following components:
1. Fixed remuneration; and
2. Performance-based at-risk remuneration, comprising:
(a) cash bonus – based on annual performance at a Company level;
The level of cash bonus payable to the senior executives will be based on a percentage of their salary for achieving percentages
of the EBITDA budget goal (and prorated for levels in between) set by the Company at the beginning of the financial year.
% of EBITDA Goal Achieved % of Salary
80% or less 0%
90% 25%
100% 50%
110% 75%
120% or more 100%
This cash bonus was structured to focus the senior executives’ remuneration on achieving the financial results set by the Company.
In assessing whether the senior executives have achieved these goals, the Company will calculate the percentage of EBITDA
goal achieved from the Company’s audited financial report.
31

34. Directors’ Report
(b) performance share bonus – based on annual performance at a Company level;
The performance share bonus is equal to at least 50% of the senior executives’ current fixed remuneration taken as ordinary
shares. The price payable for the shares is the market share price on 1 July of the financial year to which the bonus accrues.
The performance share bonus is based on the achievement of a percentage of EBITDA budget goal achieved (and prorated for
levels in between):
% of EBITDA Goal Achieved % of Award Vested
80% or less 0%
90% 50%
100% 100%
The rationale behind the performance share bonus was to encourage the alignment of personal and shareholder interests.
In assessing whether the senior executives have achieved these goals, the Company will calculate the percentage of EBITDA
goal achieved from the Company’s audited financial report.
The Board aims to achieve a balance between fixed and performance-related components of remuneration that reflect market
conditions at each job and seniority level.
The relative proportion of US senior executives’ total remuneration packages that is performance-based is set out in the table below:
% of Total Target Remuneration (Annualised)
Performance-based
Fixed Remuneration Remuneration
STI* LTI
US Senior Executives 50 50 0
* The STIs are based on target performance.
The proportion of total target remuneration is based on the various senior executives meeting their targeted rewards. Should the
stretch rewards be met, the proportion of remuneration which is performance-based will be higher than stated above, in accordance
with the executives’ employment agreements.
Fixed Remuneration – All Executive Directors and Senior Executives
The terms of employment for all Executive Directors and senior executives contain a fixed remuneration component. This is
expressed as a dollar amount that the executive may take in a form agreed with the Company. Fixed remuneration is made up of
base salary, exclusive of superannuation contributions and benefits, including fringe benefits tax. This amount of remuneration is not
dependent upon performance and is set by reference to appropriate benchmark information for an individual’s responsibilities,
performance, qualifications, experience and location.
Service Agreements
The remuneration and other terms of employment for Executive Directors and the senior executive team are formalised in their
service agreements.
Duration of Contract
Under the terms of the service agreements:
(a) the Executive Directors continue to be employed until their employment is terminated;
(b) the senior executives (Australia) have a five year employment term; and
(c) the senior executives (United States of America) have a three year employment term.
32

35. Notice Periods and Payments on Termination
The service agreements provide for termination payments to be made in certain circumstances. In particular, the Company may
terminate the employment of:
(a) the Executive Directors on six months’ notice; and
(b) the Australian and US senior executives on three months’ notice.
The Company may make a payment in lieu of notice.
In general, a senior executive must give the Company at least 90 days’ notice of resignation. In certain circumstances, such as a
substantial diminution of responsibility, the Company may be deemed to have terminated the employment of the senior executive
and will be liable to make compensation payments.
Termination payments payable to the senior executives if the Company terminates their contract of employment will not, in general,
exceed 18 months’ fixed salary (except in relation to the US senior executives who, if terminated without cause are entitled to the
balance of their unpaid employment agreement). The Company makes provision for employee entitlements in accordance with
applicable Accounting Standards.
Sign-on Incentives
As part of the acquisition of the Learning Care Group, Inc, an issue of options valued at $5,403,302 (at date of issue) was made
to key US executives as part of their consideration for agreeing to hold office. Such payments were made by the Company to
compensate those US executives for bonuses they forfeited from their previous employer on agreeing to take up employment with
the Company.
These options will vest at the rate of 20% per year on each anniversary, or upon earlier cessation of employment (the executives’
service agreements have a three year employment term). Shares issued upon exercise of options will rank equally in all respects with
existing fully paid ordinary shares.
Remuneration Paid
Details of the remuneration paid to Executive Directors and each of the named senior executives are set out in the following table.
Post-
Employment
Short-Term Employment Benefits Benefits Share-based Payments
Primary Incentive Non-Monetary Superannuation Equity (a), Sign-on
Fixed Salary Payments Benefits Benefits (b) Share/Units Options Total
$ $ $ $ $ $ $
Australia (AU$)
E S Groves 350,011 – 10,168 31,501 – – 391,680
L A Groves 350,011 – 34,350 31,501 – – 415,862
M V Kemp 299,988 – – 26,999 – – 326,987
J M Reynolds 194,999 – 26,614 17,550 283,800 – 522,963
M P Loveday 109,652 – – 9,869 258,000 – 377,521
J G Bannan 153,404 – 25,599 9,306 154,800 – 343,109
USA (US$)
W Davis 186,954 98,000 4,292 3,656 – – 292,902*
F Jerneycic 106,354 55,750 – 3,656 – – 165,760*
K Myers 106,354 55,750 – – – – 162,104*
S Smith 80,096 42,250 – 3,090 – – 125,436*
USA (AU$)
W Davis – – – – – 3,060,246 3,060,246
F Jerneycic – – – – – 1,060,052 1,060,052
K Myers – – – – – 946,068 946,068
S Smith – – – – – 336,935 336,935
* Remuneration accrued since 11 January 2006.
33

36. Directors’ Report
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity
compensation granted or outstanding during the year. The notional value of equity instruments which do not vest during the
reporting period is determined as at the grant date and is progressively allocated over the vesting period. The amount included as
remuneration is not related to or indicative of the benefit (if any) that individual executives may ultimately realise should the equity
instruments vest. The notional value of options as at the date of their grant has been determined in accordance with AASB 2
applying the Black Scholes valuation method and is based on the following assumptions:
Grant Date 27 January 2006
Expiry Date 27 January 2011
Price at grant date $7.61
Exercise Price $7.35
Number of options 1,912,191
Dividend Yield 1.84%
Volatility 28.992%
Risk Free Rate 5.31%
Vesting Date 20% on 27 January 2007
20% on 27 January 2008
60% on 27 January 2009
It is the Company’s belief that all US executives will remain in employment with Learning Care Group Inc. for the duration of their
contract, and as such, all options will vest according to the conditions of the options granted.
Meetings of Directors
During the financial year, 19 meetings of directors (including committees) were held. Attendances were:
Committee Meetings
Nomination and Risk Management
Directors’ Meetings Audit Committee Remuneration Committee Committee
Number Number Number Number
eligible to Number eligible to Number eligible to Number eligible to Number
attend attended attend attended attend attended attend attended
Sallyanne Atkinson 10 10 2 2 2 2 – –
Edmund S Groves 10 10 – – 2 2 – –
Le Neve A Groves 10 10 – – – – 5 5
William E Bessemer 10 10 2 2 – – 5 5
Martin V Kemp 10 10 – – – – 5 5
David J Ryan 10 9 2 2 2 2 – –
Lawrence J Anthony 10 9 – – – – – –
Indemnifying Officers or Auditor
During or since the end of the financial year the Company has paid or agreed to pay insurance premiums as follows:
The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in
defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company, other than
conduct involving a wilful breach of duty in relation to the Company. The policy prohibits the disclosure of the premium paid.
The Company has entered into agreements to indemnify officers of the Company against any damages in relation to any act or
omission of the officer in fulfilling his/her duties as an officeholder. The agreements provide for the Company to pay all damages and
costs which may be awarded against the officer. The indemnity does not apply to the extent that any damages result from any wilful
neglect, wilful default or dishonesty by the officer or to any claim by the Company against the officer.
Proceedings on Behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Auditor’s Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 36.
34

37. Non-Audit Services
The Board of Directors in accordance with advice from the Audit Committee is satisfied that the provision of the non-audit services
during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The
Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence.
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor as outlined in
note 5 to the financial statements.
Rounding of Amounts
The Company is an entity to which ASIC Class Order 98/100 applies. Accordingly, amounts in the financial statements and
Directors’ Report have been rounded to the nearest thousand dollars.
Signed in accordance with a resolution of the Board of Directors.
Sallyanne Atkinson AO
Chairman
Edmund S Groves
Director
Signed at Brisbane on the 28th day of September 2006
35

38. Independence Declaration
to the Directors of A.B.C. Learning Centres Limited
AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF A.B.C. LEARNING CENTRES LIMITED
As lead engagement partner for the audit of A.B.C. Learning Centres Limited and its controlled entities for the year ended
30 June 2006, I declare that, to the best of my knowledge and belief in relation to the audit, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
(b) no contraventions of any applicable code of professional conduct.
Pitcher Partners
S A Green
Partner
Brisbane, 28 September 2006
36

39. Independent Audit Report
to the Members of A.B.C. Learning Centres Limited
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF A.B.C. LEARNING CENTRES LIMITED
Scope
The financial report, remuneration disclosures and directors’ responsibility
The financial report comprises the income statements, balance sheets, statements of changes in equity, cash flow statements
and the directors’ declaration for both A.B.C. Learning Centres Limited (“the company”) and A.B.C. Learning Centres Limited
and its controlled entities (“the group”) for the year ended 30 June 2006. The group comprises both the company and the entities
it controlled during that year.
The company has disclosed information about the remuneration of key management personnel (“remuneration disclosures”),
as required by Accounting Standard AASB 124 Related Party Disclosures under the heading “Remuneration Report” on
pages 27–34 of the directors’ report, as permitted by the Corporations Regulations 2001.
The directors of 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 maintenance of 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. The directors are also responsible for the remuneration disclosures contained in the directors’ 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 reasonable assurance as to whether the financial report is free of
material misstatement and the remuneration disclosures comply with Accounting Standard AASB 124 and the Corporations
Regulations 2001. The nature of an audit is influenced by factors such as the use of 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 present fairly, in accordance with the
Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in
Australia, a view which is consistent with our understanding of the company’s and the group’s financial position, and of their
performance as represented by the results of their operations and cash flows and whether the remuneration disclosures comply with
Accounting Standard AASB 124 and the Corporations Regulations 2001.
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
remuneration disclosures; and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting
estimates made by the directors.
While we consider the effectiveness of managements’ 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.
37

40. Independent Audit Report
to the Members of A.B.C. Learning Centres Limited
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF A.B.C. LEARNING CENTRES LIMITED (continued)
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements
and the Corporations Act 2001.
Audit opinion
In our opinion;
(1) the financial report of the company and the group is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and the group’s financial position as at 30 June 2006 and of their performance
for the 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; and
(2) the remuneration disclosures that are contained on pages 27–34 of the directors’ report comply with Accounting Standard
AASB 124 and the Corporations Regulations 2001.
Pitcher Partners S A Green
Brisbane, 28 September 2006 Partner
38

41. Directors’ Declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 40 to 97 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2006 and of its performance, as
represented by the results of their operations, changes in equity and their cash flows, for the financial year ended on that
date; 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;
(c) the audited remuneration disclosures set out on pages 27 to 34 of the Directors’ Report comply with Accounting Standards
AASB 124 “Related Party Disclosures” and the Corporations Regulations 2001.
The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of
the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the Directors
Sallyanne Atkinson AO
Chairman
Edmund S Groves
Director
Brisbane
28 September 2006
39

42. Income Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
Revenue 2(a) 592,176 230,621 – –
Other income 2(b) 39,274 22,056 67,528 36,212
2 631,450 252,677 67,528 36,212
Changes in inventories of finished goods (14,731) (1,622) – –
Employee benefits (240,586) (80,928) (7,631) (4,630)
Depreciation and amortisation (15,073) (5,282) (48) (48)
Impairment (11,346) (1,603) (1,000) –
Finance costs (22,401) (10,022) (19,078) (8,206)
Rental and other property expenses (114,631) (59,948) – –
Children catering and consumables (27,016) (8,357) – –
Advertising and promotions (8,754) (1,350) – –
Insurances (6,126) (2,918) (259) (74)
Communication (4,893) (2,451) – –
Travel (6,867) (2,175) (6) (4)
Other (38,608) (15,718) (1,219) (513)
Profit before income tax expense 120,418 60,303 38,287 22,737
Income tax expense 3(a) (39,308) (16,769) (4,323) (2,316)
Profit from continuing operations 81,110 43,534 33,964 20,421
Profit attributable to members of
the parent entity 81,110 43,534 33,964 20,421
Earnings per share:
Basic (cents per share) 21 27.7 23.0
Diluted (cents per share) 21 27.7 22.9
Notes to the financial statements are included on pages 45 to 97.
40

43. Balance Sheets
As at 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
Current assets
Cash and cash equivalents 32 132,470 45,560 57,641 34,189
Trade and other receivables 6 114,814 31,139 36,675 7,846
Other financial assets 7 252 3,649 – 500
Inventories 8 5,453 4,226 – –
Other 9 26,160 17,304 1,179 491
Total current assets 279,149 101,878 95,495 43,026
Non-current assets
Trade and other receivables 6 558 414 55,754 51,544
Other financial assets 7 78,367 31,093 1,765,887 807,367
Property, plant and equipment 10 241,962 82,714 654 702
Deferred tax assets 3 34,579 8,782 14,230 8,744
Childcare licences 11 1,343,423 772,697 – –
Goodwill 12 313,717 175,187 – –
Other intangible assets 13 31,531 664 – –
Total non-current assets 2,044,137 1,071,551 1,836,525 868,357
Total assets 2,323,286 1,173,429 1,932,020 911,383
Current liabilities
Trade and other payables 14 121,601 52,214 11,444 129
Short-term borrowings 15 8,067 4,456 – –
Current tax payables 3 14,123 3,061 13,380 2,964
Provisions 16 9,540 5,891 – –
Other 17 999 – – –
Total current liabilities 154,330 65,622 24,824 3,093
Non-current liabilities
Long-term borrowings 15 234,888 246,272 209,107 211,007
Deferred tax liabilities 3 77,857 59,649 57,494 56,598
Provisions 16 1,999 911 – –
Other 17 16,480 5,723 – –
Total non-current liabilities 331,224 312,555 266,601 267,605
Total liabilities 485,554 378,177 291,425 270,698
Net assets 1,837,732 795,252 1,640,595 640,685
Equity
Issued capital 18 1,635,028 636,145 1,635,028 636,145
Reserves 19 109,977 114,033 597 79
Retained earnings 20 92,727 45,074 4,970 4,461
Total equity 1,837,732 795,252 1,640,595 640,685
Notes to the financial statements are included on pages 45 to 97.
41

44. Statement of Changes in Equity
For the financial year ended 30 June 2006
Foreign Employee Available- Total
Asset currency equity-settled for-sale attributable to
Ordinary revaluation translation benefit revaluation Retained equity holders
shares reserve reserve reserve reserve earnings of the entity
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2005 636,145 114,002 31 – – 45,074 795,252
Gain/(loss) on revaluation
of licences – (4,139) – – – – (4,139)
Related income tax on
revaluations – 100 – – 266 – 366
Gain/(loss) on available-for-sale
investments – – – – (887) – (887)
Translation of asset
revaluation reserve – (1,008) – – – – (1,008)
Exchange differences
arising on translation of
foreign operations – – 473 – – – 473
Net income recognised
directly in equity – (5,047) 473 – (621) – (5,195)
Net profit for the year – – – – – 81,110 81,110
Total recognised income
and expense for the year – (5,047) 473 – (621) 81,110 75,915
Transactions with equity
holders in their capacity
as equity holders
Recognition of
share-based payments 6,492 – – – – – 6,492
Issue of shares –
share placement 994,704 – – – – – 994,704
Issue of shares –
dividend reinvestment 11,415 – – – – – 11,415
Transfer from employee
equity-settled reserve – – – 1,139 – – 1,139
Share issue costs (19,560) – – – – – (19,560)
Related income tax 5,832 – – – – – 5,832
Dividends – – – – – (33,457) (33,457)
Total issue of shares 998,883 – – 1,139 – (33,457) 966,565
Balance at
30 June 2006 1,635,028 108,955 504 1,139 (621) 92,727 1,837,732
Notes to the financial statements are included on pages 45 to 97.
42

45. Statement of Changes in Equity
For the financial year ended 30 June 2005
Foreign Employee Available- Total
Asset currency equity-settled for-sale attributable to
Ordinary revaluation translation benefit revaluation Retained equity holders
shares reserve reserve reserve reserve earnings of the entity
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2004 124,879 3,834 37 – – 20,447 149,197
Gain/(loss) on revaluation
of licences – 165,852 – – – – 165,852
Related income tax on
revaluations – (55,684) – – – (55,684)
Exchange differences
arising on translation of
foreign operations – – (6) – – – (6)
Net income recognised
directly in equity – 110,168 (6) – – – 110,162
Net profit for the year – – – – – 43,534 43,534
Total recognised income
and expense for the year – 110,168 (6) – – 43,534 153,696
Transactions with equity
holders in their capacity
as equity holders
Issue of shares –
share placement 400,033 – – – – – 400,033
Issue of shares –
dividend reinvestment 1,154 – – – – – 1,154
Issue of shares – on
scheme of arrangement 108,120 – – – – – 108,120
Issue of shares –
exercise options 8,211 – – – – – 8,211
Issue of shares –
other (staff) 500 – – – – – 500
Transfer from employee
equity-settled reserve – – – – – – –
Recognition of
share-based payments 4,038 – – – – – 4,038
Share issue costs (15,090) – – – – – (15,090)
Related income tax 4,300 – – – – – 4,300
Dividends – – – – – (18,907) (18,907)
Total issue of shares 511,266 – – – – (18,907) 492,359
Balance at
30 June 2005 636,145 114,002 31 – – 45,074 795,252
Notes to the financial statements are included on pages 45 to 97.
43

46. Cash Flow Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
Cash flow from operating activities
Receipts from customers 632,352 236,933 1,015 (162)
Payment to suppliers and employees (500,598) (165,061) (1,966) (683)
Interest received 4,961 2,354 4,394 1,910
Interest and other costs of finance paid (22,237) (10,022) (18,910) (8,206)
Income tax paid (25,412) (21,030) (24,831) (6,152)
Net cash provided by/(used in) operating
activities 32(e) 89,066 43,174 (40,298) (13,293)
Cash flows from investing activities
Payment for investment securities (23,832) (3,020) (21,239) (2,737)
Proceeds on sale of investment securities 9,601 44,485 – 862
Proceeds from repayment/(amounts
advanced to) related party loans 8 9 (502,371) –
Proceeds from repayment/(amounts
advanced to) related parties 343 (13) – (155,810)
Amounts advanced to other parties (24,470) (6,183) (23,987) (3,183)
Payment for property, plant and equipment (133,967) (66,034) (937) –
Proceeds from sale of property, plant
and equipment 27,869 13,546 – –
Payment for childcare licences (354,618) (193,066) (3,808) –
Proceeds from sale of childcare licences 8,050 – – –
Proceeds from/(payments for) other items (1,854) 199 – –
Payment for businesses 28 (358,289) (243,888) (340,593) (247,994)
Net cash used in investing activities (851,159) (453,965) (892,935) (408,862)
Cash flows from financing activities
Proceeds from issues of equity securities 994,697 408,742 994,702 408,742
Payment for share issue costs (19,560) (15,091) (19,560) (15,091)
Proceeds from borrowings 5,545 114,490 5,483 79,900
Repayment of borrowings (108,532) (33,873) (1,900) –
Dividends paid:
members of the parent entity (22,041) (17,752) (22,040) (17,752)
Net cash provided by financing activities 850,109 456,516 956,685 455,799
Net increase in cash and cash equivalents 88,016 45,725 23,452 33,644
Cash and cash equivalents at the beginning
of the financial year 44,131 (1,588) 34,189 545
Effects of exchange rate changes on the
balance of cash held in foreign currencies (430) (6) – –
Cash and cash equivalents at the end
of the financial year 32(a) 131,717 44,131 57,641 34,189
Notes to the financial statements are included on pages 45 to 97.
44

47. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note Contents Page
1 Summary of Accounting Policies 46
2 Profit from Operations 53
3 Income Taxes 54
4 Key Management Personnel 58
5 Remuneration of Auditors 62
6 Trade and Other Receivables 62
7 Other Financial Assets 63
8 Inventories 63
9 Other Current Assets 63
10 Property, Plant and Equipment 64
11 Childcare Licences 66
12 Goodwill 67
13 Other Intangible Assets 68
14 Trade and Other Payables 68
15 Borrowings 69
16 Provisions 70
17 Other Liabilities 70
18 Issued Capital 71
19 Reserves 72
20 Retained Earnings 73
21 Earnings per Share 73
22 Dividends 75
23 Commitments for Expenditure 76
24 Contingent Liabilities and Contingent Assets 76
25 Leases 77
26 Economic Dependency 77
27 Subsidiaries 78
28 Acquisition of Businesses 79
29 Segment Information 82
30 Related Party Disclosures 83
31 Subsequent Events 85
32 Notes to the Cash Flow Statement 85
33 Financial Instruments 86
34 Impacts of the adoption of Australian equivalents
to International Financial Reporting Standards 89
35 Share-based Payments 96
36 Additional Company Information 97
45

48. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 1. Summary of Accounting Policies Reporting Standards”, with 1 July 2004 as the date of transition.
Statement of compliance Reconciliations and descriptions of the effect of transition from
The financial report is a general purpose financial report which previous AGAAP to AIFRS on the Group’s equity and its net
has been prepared in accordance with the Corporations Act income are given in note 34.
2001, Accounting Standards and Urgent Issues Group
Historical cost convention
Interpretations, and complies with other requirements of the
These financial statements have been prepared under the
law. Accounting Standards include Australian equivalents to
historical cost convention, as modified by the revaluation of
International Financial Reporting Standards (“AIFRS”).
available-for-sale financial assets, financial assets and liabilities
Compliance with the AIFRS ensures that the consolidated
(including derivative instruments) at fair value through profit or
financial statements and notes of the consolidated entity
loss, certain classes of property, plant and equipment and
comply with International Financial Reporting Standards
investment property. Cost is based on the fair values of the
(“IFRS”). The parent entity financial statements and notes also
consideration given in exchange for assets.
comply with IFRS except for the disclosure requirements in
IAS 32 “Financial Instruments: Disclosure and Presentation” (b) Principles of consolidation
as the Australian equivalent Accounting Standard, AASB 132 A controlled entity is any entity controlled by A.B.C. Learning
“Financial Instruments: Disclosure and Presentation” does not Centres Limited. Control exists where A.B.C. Learning Centres
require such disclosures to be presented by the parent entity Limited has the capacity to dominate the decision-making in
where its separate financial statements are presented together relation to the financial and operating policies of another entity
with the consolidated financial statements of the consolidated so that the other entity operates to achieve the objectives of
entity. A.B.C. Learning Centres Limited.
(a) Basis of accounting The financial statements of the subsidiaries are prepared for the
The principal accounting policies adopted in the preparation of same reporting period as the parent Company, using consistent
the financial report are set out below. These policies have been accounting policies.
consistently applied to all the periods presented, unless All inter-Company balances and transactions between entities in
otherwise stated. the Group, including any unrealised profit or losses, have been
In the application of AIFRS management is required to make eliminated on consolidation. Where controlled entities have
judgements, estimates and assumptions about carrying values entered or left the Group during the year, their operating results
of assets and liabilities that are not readily apparent from other have been included from the date control was obtained or until
sources. The estimates and associated assumptions are based the date control ceased.
on historical experience and various other factors that are (c) Foreign currency translation
believed to be reasonable under the circumstance, the results (i) Functional and presentation currencies
of which form the basis of making the judgements. Actual Items included in the financial statements of each of the Group’s
results may differ from these estimates. The estimates and entities are measured using the currency of the primary
underlying assumptions are reviewed on an ongoing basis. economic environment in which the entity operates (“the
Revisions to accounting estimates are recognised in the period functional currency”). The consolidated financial statements are
in which the estimate is revised if the revision affects only that presented in Australian dollars, which is A.B.C. Learning
period, or in the period of the revision and future periods if the Centres Limited functional and presentation currency.
revision affects both current and future periods.
(ii) Transactions and balances
Judgements made by management in the application of AIFRS Foreign currency transactions are translated into the functional
that have significant effects on the financial statements and currency using the exchange rates prevailing at the dates of the
estimates with a significant risk of material adjustments in the transactions. Foreign exchange gains and losses resulting from
next year are disclosed, where applicable, in the relevant notes the settlement of such transactions and from the translation at
to the financial statements. year-end exchange rates of monetary assets and liabilities
Accounting policies are selected and applied in a manner denominated in foreign currencies are recognised in the income
which ensures that the resulting financial information satisfies statement, except when deferred in equity as qualifying cash
the concepts of relevance and reliability, thereby ensuring that flow hedges and qualifying net investment hedges.
the substance of the underlying transactions or other events Translation differences on non-monetary items, such as equities
is reported. held at fair value through profit or loss, are reported as part
The Group changed its accounting policies on 1 July 2005 to of the fair value gain or loss. Translation differences on
comply with AIFRS. The transition to AIFRS is accounted for in non-monetary items, such as equities classified as
accordance with Accounting Standard AASB 1 “First-time available-for-sale financial assets, are included in the fair value
Adoption of Australian Equivalents to International Financial reserve in equity.
46

49. (iii) Group companies Where an impairment loss subsequently reverses, the carrying
The results and financial position of all the Group entities (none amount of the asset (cash-generating unit) is increased to the
of which has the currency of a hyperinflationary economy) that revised estimate of its recoverable amount, but only to the
have a functional currency different from the presentation extent that the increased carrying amount does not exceed the
currency are translated into the presentation currency as follows: carrying amount that would have been determined had no
– assets and liabilities for each balance sheet presented are impairment loss been recognised for the asset (cash-generating
translated at the closing rate at the date of that balance sheet; unit) in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the relevant
– income and expenses for each income statement are asset is carried at fair value, in which case the reversal of the
translated at average exchange rates (unless this is not a impairment loss is treated as a revaluation increase to the
reasonable approximation of the cumulative effect of the extent of previous revaluation increments relating to that specific
rates prevailing on the transaction dates, in which case asset. Impairment losses recognised for goodwill are not
income and expenses are translated at the dates of the subsequently reversed.
transactions); and
(f) Provisions
– all resulting exchange differences are recognised as a Provisions are recognised when the group has a present
separate component of equity. obligation (legal or constructive) as a result of a past event, it is
On consolidation, exchange differences arising from the more likely than not that an outflow of resources embodying
translation of any net investment in foreign entities, and of economic benefits will be required to settle the obligation and a
borrowings and other currency instruments are taken to reliable estimate can be made of the amount of obligation.
shareholders’ equity. When a foreign operation is sold or The amount recognised as a provision is the best-estimate of
borrowings repaid, a proportionate share of such exchange the consideration required to settle the present obligation at
differences are recognised in the income statement as part of reporting date, taking into account the risks and uncertainties
the gain or loss on sale. surrounding the obligation. Where a provision is measured using
Goodwill and fair value adjustments arising on the acquisition of the cash flows estimated to settle the present obligation, its
a foreign entity are treated as assets and liabilities of the foreign carrying amount is the present value of those cash flows.
entity and translated at the closing rate. When some or all of the economic benefits required to settle a
(d) Borrowing costs provision are expected to be recovered from a third party, the
Borrowing costs incurred for the construction of any qualifying receivable is recognised as an asset if it is virtually certain that
asset are capitalised during the period of time that is required to recovery will be received and the amount of the receivable can
complete and prepare the asset for its intended use or sale. be measured reliably.
Other borrowing costs are expensed. Onerous lease contracts
(e) Impairment of assets An onerous contract is considered to exist where the Group has
Goodwill, childcare licences and other intangible assets that a contract under which the unavoidable cost of meeting the
have an indefinite useful life are not subject to amortisation and contractual obligations exceed the economic benefits estimated
are tested annually for impairment, or more frequently if events to be received. Present obligations arising under onerous
or changes in circumstances indicate that they might be contracts are recognised as a provision to the extent that the
impaired. Other assets are reviewed for impairment whenever present obligation exceeds the economic benefits estimated to
events or changes in circumstances indicate that the carrying be received.
amount may not be recoverable. Impairment losses are Restructuring
recognised for the amount by which the asset’s carrying amount A provision for restructuring is recognised when the Group has
exceeds its recoverable amount. The recoverable amount is the developed a detailed formal plan for the restructuring and has
higher of an asset’s fair value less costs to sell and value in use. raised a valid expectation in those affected. It will carry out the
For the purposes of assessing impairment, assets are grouped restructuring by:
at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows – starting to implement the plan; or
from other assets or groups of assets (cash-generating units). – announcing its main features to those affected by it.
If the recoverable amount of an asset (or cash-generating unit) (g) Segment reporting
is estimated to be less than its carrying amount, the carrying A business segment is a group of assets and operations
amount of the asset (cash-generating unit) is reduced to its engaged in providing services that are subject to risks and
recoverable amount. An impairment loss is recognised in profit returns that are different to those of other business segments.
or loss immediately, unless the relevant asset is carried at fair A geographical segment is engaged in providing services within
value, in which case the impairment loss is treated as a a particular economic environment and is subject to risks and
revaluation decrease to the extent of previous revaluation returns that are different from those of segments operating in
increments relating to that specific asset. other economic environments.
47

50. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 1. Summary of Accounting Policies continued when collection of the full nominal amount is no longer
(h) Income tax probable. Receivables are normally on 7 to 30 day terms.
The income tax expense or revenue for the period is the tax
(j) Property, plant and equipment
payable on the current period’s taxable income based on the
Land and buildings are measured at cost less accumulated
national income tax rate for each jurisdiction adjusted by
depreciation. Property improvements are depreciated over the
changes in deferred tax assets and liabilities attributable to
period of the lease or estimated useful life, whichever is the
temporary differences between the tax bases of assets and
shorter, using the straight-line method. Plant and equipment is
liabilities and their carrying amounts in the financial statements,
stated at cost less accumulated depreciation. Cost includes
and to unused tax losses.
expenditure that is directly attributable to the acquisition of
Deferred tax assets and liabilities are recognised for temporary the items.
differences at the tax rates expected to apply when the assets
Subsequent costs are included in the asset’s carrying amount
are recovered or liabilities are settled, based on those tax rates
or recognised as a separate asset, as appropriate, only when it
which are enacted or substantively enacted for each jurisdiction.
is probable that future economic benefits associated with the
The relevant tax rates are applied to the cumulative amounts of
item will flow to the Group and the cost of the item can be
deductible and taxable temporary differences to measure the
measured reliably. All other repairs and maintenance are
deferred tax asset or liability. Exception is made for certain
charged to the income statement during the financial period in
temporary differences arising from the initial recognition of an
which they are incurred.
asset or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a Land is not depreciated. Depreciation on other assets is
transaction, other than a business combination, that at the time calculated using the straight-line method to allocate their
of the transaction did not affect either accounting profit or cost, net of their residual values, over their estimated useful
taxable profit or loss. lives as follows:
Deferred tax assets are recognised for deductible temporary Buildings – over 20 years;
differences and unused tax losses only if it is probable that Plant and equipment – over 2 to 15 years;
future taxable amounts will be available to utilise those Property improvements – over 20 years; and
temporary differences and losses. Motor vehicles under finance lease – over 10 years.
Deferred tax liabilities and assets are not recognised for The assets’ residual values and useful lives are reviewed, and
temporary differences between the carrying amount and tax adjusted if appropriate, at each balance sheet date.
bases of investments in controlled entities where the parent An asset’s carrying amount is written down immediately to its
entity is able to control the timing of the reversal of the recoverable amount if the asset’s carrying amount is greater
temporary differences and it is probable that the differences than its estimated recoverable amount (note 1(e)).
will not reverse in the foreseeable future.
Gains and losses on disposals are determined by comparing
Current and deferred tax balances attributable to amounts proceeds with carrying amount. These are included in the
recognised in equity, consequently require the tax effect to also income statement.
be recognised in equity.
An item of property, plant and equipment is derecognised upon
A.B.C. Learning Centres Limited is the head Company of a disposal or when no future economic benefits are expected to
tax consolidated group under the Tax Consolidation Regime. arise from the continued use of the asset.
All Australian wholly owned companies in the Group are part of
the tax consolidated group and are therefore taxed as a single Revaluations
entity. Consequently, A.B.C. Learning Centres Limited is Following initial recognition at cost, land and buildings are
responsible for recognising the current and deferred tax assets carried at a revalued amount which is fair value at the date of
and liabilities for the tax consolidated group. the revaluation less any subsequent accumulated depreciation
on buildings and accumulated impairment losses.
The Group has notified the Australian Tax Office that it has
formed an income tax consolidated group to apply from Fair value is determined by reference to market-based
30 June 2004. The tax consolidated group has entered a tax evidence, which is the amount for which the assets could be
sharing agreement whereby each Company in the group exchanged between a knowledgeable willing buyer and a
contributes to the income tax payable in proportion to their knowledgeable willing seller in an arm’s length transaction as at
contribution to the net profit before tax of the tax consolidated the valuation date.
group. Such amounts are reflected in amounts receivable from Any revaluation surplus is credited to the asset revaluation
or payable to other entities in the tax consolidated group. reserve included in the equity section of the balance sheet
(i) Receivables unless it reverses a revaluation decrease of the same asset
Receivables are carried at nominal amounts less any provision previously recognised in the income statement.
for doubtful debts. A provision for doubtful debts is recognised
48

51. Any revaluation deficit is recognised in the income statement (ii) Loans and receivables
unless it directly offsets a previous surplus of the same asset in Loans and receivables are non-derivative financial assets with
the asset revaluation reserve. fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or
In addition, any accumulated depreciation as at revaluation date
services directly to a debtor with no intention of selling the
is eliminated against the gross carrying amount of the asset and
receivable and are normally on seven- to 30-day terms.
the net amount is restated to the revalued amount of the asset.
They are included in current assets, except for those with
Upon disposal, any revaluation reserve relating to the particular
maturities greater than 12 months after the balance sheet date
asset being sold is transferred to retained earnings.
which are classified as non-current assets. Loans and
Independent valuations are performed with sufficient regularity receivables are included in receivables in the balance sheet.
to ensure that the carrying amount does not differ materially
(iii) Held-to-maturity investments
from the asset’s fair value at the balance sheet date.
Non-derivative financial assets with fixed or determinable
(k) Leases payments and fixed maturity are classified as held-to-maturity
Leases of property, plant and equipment, where the Group has when the Group has the positive intention and ability to hold to
substantially all the risks and rewards of ownership are classified maturity. Investments intended to be held for an undefined
as finance leases. Finance leases are capitalised at the lease’s period are not included in this classification.
inception at the lower of the fair value of the leased property
(iv) Available-for-sale financial assets
and the present value of the minimum lease payments. The
Available-for-sale financial assets, comprising principally
corresponding rental obligations, net of finance charges, are
marketable equity securities, are non-derivatives that are either
included in current and non-current borrowings as appropriate.
designated in this category or not classified in any of the other
Each lease payment is allocated between the liability and
categories. They are included in non-current assets unless
finance charges so as to achieve a constant rate on the finance
management intends to dispose of the investment within
balance outstanding. The interest element of the finance cost is
12 months of the balance sheet date.
charged to the income statement over the lease period so as to
produce a constant periodic rate of interest on the remaining Purchases and sale of financial assets that require delivery of
balance of the liability for each period. The property, plant and assets within the time frame generally established by regulation
equipment acquired under finance leases is depreciated over or convention in the market place are recognised on the trade
the shorter of the asset’s useful life and the lease term. date (i.e. the date that the Group commits to purchase the
asset). Investments are initially recognised at fair value plus
Leases in which a significant portion of the risks and rewards of
transaction costs for all financial assets not carried at fair value
ownership are retained by the lessor are classified as operating
through profit or loss. Financial assets are derecognised when
leases. Payments made under operating leases are charged to
the rights to receive cash flows from the financial assets have
the income statement on a straight-line basis over the period of
expired or have been transferred and the Group has transferred
the lease. Amounts accrued in respect of rental increases
substantially all the risks and rewards of ownership.
payable under operating lease commitments in future periods
are classified as other liabilities. Available-for-sale financial assets and financial assets at fair
value through profit and loss are subsequently carried at fair
(l) Investments and other financial assets
value. Loans and receivables and held-to-maturity investments
The Group classifies its investments in the following categories;
are carried at amortised cost using the effective interest
financial assets at fair value through profit or loss, loans and
method. Realised and unrealised gains and losses arising from
receivables, held-to-maturity investments and available-for-sale
changes in the fair value of the “financial assets at fair value
financial assets. The classification depends on the purpose for
through profit or loss” category are included in the income
which the investments were acquired. Management determines
statement in the period in which they arise. Unrealised gains
the classification of its investments at initial recognition and
and losses arising from changes in the fair value of
re-evaluates this designation at each reporting date.
non-monetary securities classified as available-for-sale are
(i) Financial assets at fair value through profit or loss recognised in equity in the available-for-sale investments
This category has two sub-categories: financial assets held for revaluation reserve. When securities classified as
trading, and those designated at fair value through profit or loss available-for-sale are sold or impaired, the accumulated fair
on initial recognition. A financial asset is classified in this value adjustments are included in the income statement as
category if acquired principally for the purpose of selling in the gains and losses from investment securities.
short term or if so designated by management. The policy of
For investments that are actively traded in organised financial
management is to designate a financial asset if there exists the
markets, fair value is determined by reference to Stock
possibility it will be sold in the short term and the asset is
Exchange quoted market bid prices at the close of business on
subject to frequent changes in fair value. Assets in this category
the balance sheet date.
are classified as current assets if they are either held for trading
or are expected to be realised within 12 months of the balance
sheet date.
49

52. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 1. Summary of Accounting Policies continued – the Employee Share Plan, which provides benefits to
(m) Borrowings Australian head office employees; and
Borrowings are initially recognised at fair value. Borrowings are
– the Employee Share Option Plan, which provides benefits to
subsequently measured at amortised cost. Any difference
the Executives of the US operations.
between the proceeds and the redemption amount is
recognised in the income statement over the period of the The cost of the equity-settled transactions outlined above are
borrowings using the effective interest method. measured by reference to the fair value of the equity instrument
at the date at which they are granted. The fair value of share
Redeemable converting preference shares are classified as
options granted is measured by use of the Black Scholes
liabilities. The dividends on these preference shares are
model. The expected life used in the model has been adjusted,
recognised in the income statement as interest expense.
based on management’s best estimate, for the effects of
Borrowings are classified as current liabilities unless the Group non-transferability, exercise restrictions and behavioural
has an unconditional right to defer settlement of the liability for considerations. The fair value of shares granted is measured
at least 12 months after the balance sheet date. using the market price at the date of grant.
(n) Trade and other payables The cost of equity-settled transactions is recognised, together
Liabilities are recognised for amounts to be paid in the future for with a corresponding increase in equity, over the period in which
goods and services received, whether or not billed to the the performance and/or services conditions are fulfilled, ending
Group. These liabilities are normally settled on 30 day terms. on the date on which the relevant employee/carer becomes fully
(o) Inventories entitled to the award (vesting period).
Inventories are measured at the lower of cost and net The dilutive effect, if any, of outstanding options is reflected as
realisable value. additional share dilution in the computation of earnings per
(p) Employee benefits share (see note 21).
(i) Wages and salaries, annual leave and sick leave (q) Cash and cash equivalents
Liabilities for wages and salaries, including non-monetary Cash and cash equivalents includes cash on hand, deposits
benefits, annual leave and vesting sick leave expected to be held at call with financial institutions, other short-term, highly
settled within 12 months of the reporting date are recognised liquid investments with original maturities of three months or
in other payables and provisions in respect of employees’ less that are readily convertible to known amounts of cash and
services up to the reporting date are measured at the amounts which are subject to an insignificant risk of changes in value,
expected to be paid when the liabilities are settled. Liabilities for and bank overdrafts. Bank overdrafts are shown within
non-vesting sick leave are recognised when the leave is taken borrowings in current liabilities on the balance sheet.
and measured at the rates paid or payable.
(r) Revenue recognition
(ii) Long service leave Revenue from the rendering of a service is recognised upon
The liability for long service leave is recognised in the provision delivery of the service to the customers.
for employee benefits and measured as the present value of
Interest revenue is recognised on a proportional basis taking
expected future payments to be made in respect of services
into account the interest rates applicable to the financial assets.
provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience Dividend revenue is recognised when the right to receive a
of employee departures and periods of service. Expected future dividend has been established.
payments are discounted using market yields at the reporting Lease income from operating leases is recognised in income on
date on national government bonds with terms to maturity and a straight-line basis over the term of the lease.
currency that match, as closely as possible, the estimated
future cash outflows. Royalty revenue is recognised when the right to receive the
royalty has been established.
(iii) Share-based payments
The Group makes equity-settled share-based payments only. All revenue is stated net of the amount of goods and services
The Group provides benefits to employees and carers in the tax (GST).
form of share-based payments, whereby employees and carers (s) Goods and services tax (“GST”)
render services in exchange for shares or rights over shares Revenues, expenses and assets are recognised net of the
(equity-settled transactions). amount of GST, except where the amount of GST incurred
There are currently three types of share-based payments is not recoverable from the taxation authority. In these
provided by the Group; circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
– the Carers Share Plan, which provides benefits to the Receivables and payables in the statement of financial position
employees of regional management companies; are shown inclusive of GST.
50

53. Cash flows are presented on a gross basis. The GST Goodwill
components of cash flows arising from investing or financing Goodwill represents the excess of the cost of an acquisition
activities which are recoverable from, or payable to the taxation over the fair value of the Group’s share of the net identifiable
authority, are presented as operating cash flow. assets of the acquired subsidiary at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included as an
(t) Rounding of amounts
intangible asset. Goodwill acquired in business combinations is
The parent entity has applied the relief available to it under ASIC
not amortised and instead is tested for impairment annually, or
Class Order 98/0100 and accordingly, amounts in the financial
more frequently if events or changes in circumstances indicate
report and Directors’ Report have been rounded off to the
that it might be impaired, and is carried at cost less
nearest $1,000.
accumulated impairment losses.
(u) Acquisitions of assets
For the purpose of impairment testing, goodwill acquired in a
The purchase method of accounting is used for all acquisitions
business combination is, from the acquisition date, allocated
of assets (including business combinations) regardless of
to each of the Group’s cash-generating units, or groups of
whether equity instruments or other assets are acquired. Cost is
cash-generating units, that are expected to benefit from the
measured as the fair value of the assets given, shares issued or
synergies of the combination, irrespective of whether other
liabilities incurred or assumed at the date of exchange plus
assets or liabilities of the Group are assigned to those units
costs directly attributable to the acquisition. Where equity
or group of units.
instruments are issued in an acquisition, the value of the
instruments is their market price as at the date of exchange, Each unit or group of units to which goodwill is allocated:
unless in rare circumstances, it can be demonstrated that the – represents the lowest level within the Group at which
published market price as at the date of exchange is an goodwill is monitored for internal management purposes;
unreliable indicator of fair value and that other evidence and and
valuation methods provide a more reliable measure of fair value.
Transaction costs arising on the issue of equity instruments are – is not larger than a segment based on either the Group’s
recognised directly in equity. primary or the Group’s secondary reporting format
determined in accordance with AASB 114 “Segment
Where settlement of any part of cash consideration is deferred, Reporting”.
the amounts payable in the future are discounted to their
present value as at the date of the acquisition. The discount Other
rate used is the entity’s incremental borrowing rate, being the Other intangible assets include financial, childcare, education,
rate at which a similar borrowing could be obtained from an curriculum, trademarks and franchise agreements and are
independent financier under comparable terms and conditions. recorded at cost less amortisation and impairment. Amortisation
of other intangible assets is calculated using the straight-line
Identifiable assets acquired and liabilities and contingent method to allocate their cost over their estimated useful lives
liabilities assumed in a business combination are measured as follows:
initially at their fair values at the acquisition date, irrespective of
the extent of any minority interest. The excess of the cost of – curriculum – over 15 years
acquisition over the fair value of the Group’s share of the – trademarks – over 20 years
identifiable net assets acquired is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets of – franchise agreements – over 15 years
the subsidiary acquired, the difference is recognised directly in – financial systems – over 2.5 years
the income statement, but only after a reassessment of the
(w) Earnings per share
identification and measurement of the net assets acquired.
Basic earnings per share
(v) Intangible assets and expenditure carried forward Basic earnings per share is determined by dividing net profit
Childcare licences after income tax attributable to members of the Company,
Childcare licences are recorded at fair value less any excluding any costs of servicing equity other than ordinary
subsequent accumulated impairment losses. shares, by weighted average number of ordinary shares
Childcare licences are intangible assets and are initially recorded outstanding during the half-year, adjusted for bonus elements in
at cost. Childcare licences are acquired and therefore are not ordinary shares issued during the year.
internally generated. Subsequent to initial recognition licences are Diluted earnings per share
recorded at their fair value with reference to an active market. Diluted earnings per share adjusts the figures used in the
Childcare licences are also regarded as having an indefinite useful determination of basic earnings per share to take into account
life as there is no foreseeable limit to the period over which the the finance costs with dilutive potential ordinary shares and the
asset is expected to generate net cash inflows for the Group. weighted average number of shares assumed to have been
Intangible assets with an indefinite useful life are not amortised issued for no consideration in relation to dilutive potential
but are tested for impairment in accordance with note 1(e). ordinary shares.
51

54. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 1. Summary of Accounting Policies continued costs to sell. A gain is recognised for any subsequent increases
(x) Contributed equity in fair value less costs to sell of an asset (or disposal group), but
Ordinary shares are classified as equity. Preference shares are not in excess of any cumulative impairment loss previously
classified as liabilities. recognised. A gain or loss not previously recognised by the date
Incremental costs directly attributable to the issue of new shares of the sale of the non-current asset (or disposal group) is
or options are shown in equity as a deduction, net of tax, from recognised at the date of derecognition.
the proceeds. Incremental costs directly attributable to the issue Non-current assets (including those that are part of a disposal
of new shares or options, or for the acquisition of a business, group) are not depreciated or amortised while they are classified
are included in the cost of the acquisition as part of the as held for sale. Interest and other expenses attributable to the
purchase consideration. liabilities of a disposal group classified as held for sale continue
(y) Assets (or disposal groups) held for sale to be recognised.
Assets (or disposal groups) are classified as held for sale and Non-current assets classified as held for sale and the assets of a
stated at the lower of their carrying amount and fair value less disposal group classified as held for sale are presented separately
costs to sell if their carrying amount will be recovered principally from the other assets in the balance sheet. The liabilities of a
through a sale transaction rather than through continuing use. disposal group classified as held for sale are presented separately
Impairment losses are recognised for any initial or subsequent from the other liabilities in the balance sheet.
write down of the asset (or disposal group) to fair value less
52

55. Consolidated Company
2006 2005 2006 2005
Note 2. Profit from Operations $’000 $’000 $’000 $’000
(a) Revenue
Revenue from continuing operations consisted
of the following items:
Revenue from the rendering of services 592,176 230,621 – –
592,176 230,621 – –
(b) Other income
Rental revenue:
Operating lease rental revenue 525 431 45 45
Interest revenue:
Bank deposits 4,510 2,354 3,942 1,910
Interest-bearing loans 812 – 812 –
Controlled entities – – 27,243 11,256
5,322 2,354 31,997 13,166
Royalties 5,706 – – –
Dividends:
Subsidiaries – – 35,486 22,958
Other entities 4,325 4 – –
4,325 4 35,486 22,958
Other 1,364 – – 2
Attributable to:
Continuing operations 17,242 2,789 67,528 36,171
Gain/(loss) on disposal of property, plant,
and childcare licences 22,175 4,726 – 41
Gain/(loss) on disposal of investments (143) 14,541 – –
Gains attributable to continuing operations 22,032 19,267 – 41
Total other income from continuing operations 39,274 22,056 67,528 36,212
Total revenue and other income from continuing operations 631,450 252,677 67,528 36,212
(c) Profit before income tax
Profit/(loss) before income tax has been arrived at after
charging the following expenses.
Finance costs:
Interest on loans 17,111 5,558 14,696 4,156
Dividends on instruments classified as financial liabilities 4,050 4,050 4,050 4,050
Other finance costs 1,240 414 332 –
Total finance costs 22,401 10,022 19,078 8,206
Net bad and doubtful debts arising from:
Other entities 1,062 59 – –
Impairment of investments 1,000 1,603 1,000 –
Impairment of property, plant and equipment 1,922 – – –
Impairment of childcare licences 8,424 – – –
Total impairment 11,346 1,603 1,000 –
53

56. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note 2. Profit from Operations continued $’000 $’000 $’000 $’000
Depreciation of non-current assets 14,233 5,282 48 48
Amortisation of non-current assets 926 – – –
Amortisation of onerous contracts (86) – – –
15,073 5,282 48 48
Operating lease rental expenses 93,813 51,439 – –
93,813 51,439 – –
Employee benefit expense:
Share-based payments:
Equity-settled share-based payments 6,492 4,038 6,492 4,038
Executive option plan 1,139 – 1,139 –
7,631 4,038 7,631 4,038
Termination benefits 277 – – –
Other employee benefits 232,678 76,890 – 592
Total employee benefits 240,586 80,928 7,631 4,630
Consolidated Company
2006 2005 2006 2005
Note 3. Income Taxes $’000 $’000 $’000 $’000
(a) Income tax recognised in profit
Tax expense/(income) comprises:
Current tax expense/(income) 39,370 15,836 5,282 2,306
Adjustments recognised in the current year in relation
to the current tax of prior years (284) – (144) –
Deferred tax expense/(income) relating to the origination
and reversal of temporary differences 222 933 (815) 10
Total tax expense/(income) 39,308 16,769 4,323 2,316
Attributable to:
Continuing operations 39,308 16,769 4,323 2,316
The prima facie income tax expense on pre-tax accounting
profit from operations reconciles to the income tax expense
in the financial statements as follows:
Profit from continuing operations 120,418 60,303 38,287 22,737
Profit from operations 120,418 60,303 38,287 22,737
Income tax expense calculated at 30% 36,126 18,091 11,486 6,821
Equity-based payment expenses 2,290 1,211 2,289 1,135
Interest on redeemable converting preference shares 1,215 1,136 1,215 1,136
Dividends from related entities – – (10,646) (6,887)
Non-assessable capital gains – (4,952) – –
Other non-assessable/non-deductible items (520) 1,252 123 111
Effect on varying rates of tax on overseas income 481 31 – –
39,592 16,769 4,467 2,316
(Over)/under provision of income tax in previous year (284) – (144) –
39,308 16,769 4,323 2,316
54

57. The tax rates used in the reconciliations are the corporate tax rates of 30%, 33% and 36.64% payable by Australian, New Zealand
and United States of America corporate entities, respectively, on taxable profits under tax laws in each jurisdiction. There has been
no change in Australian and New Zealand corporate tax when compared with previous reporting period.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
(b) Income tax recognised directly in equity
The following current and deferred amounts were charged
directly to equity during the period:
Current tax:
Share – issue expenses (2,322) (1,155) (2,322) (1,155)
Deferred tax:
Childcare licence revaluations (100) 55,684 – –
Revaluations of available-for-sale securities (266) – (266) –
Share issue expenses deductible over five years (3,510) (3,145) (3,510) (3,145)
(6,198) 51,384 (6,098) (4,300)
(c) Current tax assets and liabilities
Current tax assets:
Tax refund receivable – – – –
– – – –
Current tax payables:
Income tax payable attributable to:
Parent entity 2,960 1,112 2,960 1,111
Entities in the tax consolidated group 10,420 1,849 10,420 1,853
Other 743 100 – –
14,123 3,061 13,380 2,964
(d) Deferred tax balances
Deferred tax assets comprise:
Tax losses – revenue 4,174 – – –
Tax losses – capital – – – –
Temporary differences 30,405 8,782 14,230 8,744
34,579 8,782 14,230 8,744
Deferred tax liabilities comprise:
Temporary differences 77,857 59,649 57,494 56,598
77,857 59,649 57,494 56,598
55

58. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 3. Income Taxes continued
Taxable and deductible temporary differences arise from the following:
Consolidated
Opening Charged Charged Acquisitions/ Closing
balance to income to equity disposals Other balance
2006 $’000 $’000 $’000 $’000 $’000 $’000
Gross deferred tax liabilities:
Licences (57,119) – 100 – – (57,019)
Property, plant and equipment (2,110) (1,409) – (16,707) – (20,226)
Other items (420) 283 – (475) – (612)
(59,649) (1,126) 100 (17,182) – (77,857)
Gross deferred tax assets:
Share issue expenses 4,216 – 3,510 – – 7,726
Lease accrual 1,717 1,790 – 2,102 – 5,609
Employee provisions 1,919 (264) – 3,585 – 5,240
Property, plant and equipment (USA) – (31) – 7,519 – 7,488
Tax losses (USA) – (832) – 5,006 – 4,174
Other items 930 241 266 2,905 – 4,342
8,782 904 3,776 21,117 – 34,579
(50,867) (222) 3,876 3,935 – (43,278)
Attributable to:
Continuing operations (43,278)
(43,278)
Company
Opening Charged Charged Acquisitions/ Closing
balance to income to equity disposals Other balance
2006 $’000 $’000 $’000 $’000 $’000 $’000
Gross deferred tax liabilities:
Licences – – – – – –
Property, plant and equipment – – – – – –
Other items – – – – – –
– – – – – –
Gross deferred tax assets:
Share issue expenses 4,216 – 3,510 – – 7,726
Lease accrual – – – – – –
Employee provisions – – – – – –
Other items 5 815 266 – – 1,086
4,221 815 3,776 – – 8,812
4,221 815 3,776 – – 8,812
Add: Balances recognised in relation to
entities in the tax consolidated group:
Gross deferred tax assets 5,418
Gross deferred tax liabilities (57,494)
(43,264)
56

59. Taxable and deductible temporary differences arise from the following:
Consolidated
Opening Charged Charged Acquisitions/ Closing
balance to income to equity disposals Other balance
2005 $’000 $’000 $’000 $’000 $’000 $’000
Gross deferred tax liabilities:
Licences (1,435) – (55,684) – – (57,119)
Property, plant and equipment (1,292) (818) – – – (2,110)
Other items (229) 992 – (1,183) – (420)
(2,956) 174 (55,684) (1,183) – (59,649)
Gross deferred tax assets:
Share issue expenses 1,071 – 3,145 – – 4,216
Lease accrual 647 1,070 – – – 1,717
Employee provisions 95 521 – 1,303 – 1,919
Property, plant and equipment (USA) – – – – – –
Tax losses (USA) – – – – – –
Other items 18 (2,698) – 3,610 – 930
1,831 (1,107) 3,145 4,913 – 8,782
(1,125) (933) (52,539) 3,730 – (50,867)
Attributable to:
Continuing operations (50,867)
(50,867)
Company
Opening Charged Charged Acquisitions/ Closing
balance to income to equity disposals Other balance
2005 $’000 $’000 $’000 $’000 $’000 $’000
Gross deferred tax liabilities:
Licences – – – – – –
Property, plant and equipment – – – – – –
Other items – – – – – –
– – – – – –
Gross deferred tax assets:
Share issue expenses 1,071 – 3,145 – – 4,216
Lease accrual – – – – – –
Employee provisions – – – – – –
Other items 15 (10) – – – 5
1,086 (10) 3,145 – – 4,221
1,086 (10) 3,145 – – 4,221
Add: Balances recognised in relation to
entities in the tax consolidated group:
Gross deferred tax assets 4,523
Gross deferred tax liabilities (56,598)
(47,855)
57

60. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 4. Key Management Personnel
Details of Key Management Personnel
The Key Management Personnel of A.B.C. Learning Centres Limited during the year were:
– Mrs S Atkinson AO (Chairman – Non-Executive)
– Mr E S Groves (Chief Executive Officer – Operations (Global))
– Dr L A Groves (Chief Executive Officer – Education)
– Mr W E Bessemer (Non-Executive Director)
– Mr M V Kemp (Chief Executive Officer – Operations (Australia and New Zealand))
– Mr D J Ryan (Non-Executive Director)
– Hon. L J Anthony (Non-Executive Director)
– Ms J M Reynolds (Chief Operating Officer)
– Mr M P Loveday (Chief Financial Officer)
– Ms J G Bannan (Company Secretary and General Counsel)
– Mr W Davis (President and Chief Executive Officer – Learning Care Group Inc.)
– Mr F Jerneycic (Chief Financial Officer and Treasurer – Learning Care Group Inc.)
– Mrs K Myers (Chief Operating Officer – Learning Care Group Inc.)
– Mr S Smith (Human Resources Vice President – Learning Care Group Inc.)
(a) Key Management Personnel compensation
The aggregate compensation of the Key Management Personnel of the Group and the Company is set out below:
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Australia
Short-term employee benefits 1,755 1,692 200 166
Post-employment benefits 141 148 14 15
Share-based payment 697 946 697 946
2,593 2,786 911 1,127
United States of America (AUD)
Short-term employee benefits 999 – – –
Post-employment benefits 14 – – –
Share-based payment 5,403 – 5,403 –
6,416 – 5,403 –
The Company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed Key
Management Personnel remuneration disclosures to the Directors’ Report. The relevant information can be found in remuneration
report on pages 27 to 34.
(b) Executive share options of A.B.C. Learning Centres Limited
Balance
Balance at Granted as Net other Balance at Vested at
1 July 2005 remuneration Exercised change 30 June 2006 30 June 2006
2006 No. No. No. No. No. No.
W Davis – 1,083,000 – – 1,083,000 –
F Jerneycic – 375,145 – – 375,145 –
K Myers – 334,807 – – 334,807 –
S Smith – 119,239 – – 119,239 –
– 1,912,191 – – 1,912,191 –
58

61. Executive share options of A.B.C. Learning Centres Limited
Balance
Balance at Granted as Net other Balance at vested at
1 July 2004 remuneration Exercised change 30 June 2005 30 June 2005
2005 No. No. No. No. No. No.
Nil – – – – – –
– – – – – –
– – – – – –
An initial incentive award of options valued at $5,403,302 were provided to the senior executives of the Learning Care Group, Inc. in
return for the execution of their employment agreements.
These options will vest at the rate of 20% per year on each anniversary, or upon earlier cessation of employment. Shares issued
upon exercise of options will rank equally in all respects with existing fully paid ordinary shares.
Further details on options provided as remuneration and shares issued on the exercise of such options, together with the terms and
conditions of the options can be found in the remuneration report on pages 27 to 34 of the Directors’ Report.
The following share-based payment arrangements were in existence during the period:
Options series Number Grant date Expiry date Exercise price
$
1 1,912,191 27-Jan-06 27-Jan-11 7.35
In accordance with the terms of the share-based payment arrangement, options issued on 27 January 2006 vest as detailed below:
– 382,438 options vest on 27 January 2007
– 382,438 options vest on 27 January 2008
– 1,147,315 options vest on 27 January 2009
For further detail on the policy for options granted refer to the remuneration report on pages 27 to 34 of the Directors’ Report.
The weighted average fair value of the share options granted during the financial year is $5,403,302 (2005: nil). Options were priced
using a Black Scholes Option Valuation Formula. Where relevant, the expected life used in the model has been adjusted based on
the details as follows:
The model inputs for options granted during the year ended 30 June 2006 included:
(a) Grant date share price: $7.61
(b) Exercise price: $7.35
(c) Expected volatility: 28.992%
(d) Option life: 5.00274 years
(e) Dividend yield: 1.84%
(f) Risk-free interest rate: 5.31%
The following reconciles the outstanding share options granted under the ABC Executive option plan at the beginning and end of
the financial year:
2006 2005
Number of Weighted average Number of Weighted average
options exercise price options exercise price
No. $ No. $
Balance at beginning of the financial year –
Granted during the financial year 1,912,191 7.35 2,550,000 3.22
Forfeited during the financial year – – –
Exercised during the financial year (i) – – (2,550,000) –
Expired during the financial year – – – –
Balance at end of the financial year 1,912,191 –
Exercisable at end of the financial year 1,912,191 – – –
59

62. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 4. Key Management Personnel continued
(b) Executive share options of A.B.C. Learning Centres Limited continued
(i) Exercised during the financial year
The following share options granted under the ABC Directors option plan were exercised during the financial year:
2006 Number exercised Exercise date Share price at exercise date
Options series $
Nil – – –
2005 Number exercised Exercise date Share price at exercise date
Options series $
S Atkinson 210,000 7-Jun-05 4.92
E S Groves 745,000 9-Mar-05 5.61
L A Groves 745,000 9-Mar-05 5.61
W E Bessemer 105,000 7-Jun-05 4.92
M V Kemp 640,000 9-Mar-05 5.61
D J Ryan 105,000 7-Jun-05 4.92
2,550,000
(c) Fully paid ordinary shares of A.B.C. Learning Centres Limited
Balance at Granted as Received on Balance at
1 July 2005 remuneration exercise of options Net other change 30 June 2006
2006 No. No. No. No. No.
Directors of A.B.C. Learning Centres
Limited
Ordinary shares
S Atkinson 695,000 – – – 695,000
E S Groves 18,595,000 – – (1,797,500) 16,797,500
L A Groves 18,608,000 – – (1,797,500) 16,810,500
W E Bessemer 105,000 – – – 105,000
M V Kemp 9,099,545 – – 1,362,714 10,462,259
D J Ryan 235,000 – – 4,595 239,595
L J Anthony 25,000 – – 81,622 106,622
Other Key Management Personnel of
the Group
Ordinary shares
J M Reynolds 112,035 55,000 – (66,200) 100,835
M P Loveday 50,000 50,000 – (100,000) –
J G Bannan 30,000 30,000 – (33,000) 27,000
W Davis – – – 229,000 229,000
F Jerneycic – – – 20,000 20,000
K Myers – – – 20,000 20,000
S Smith – – – 15,000 15,000
60

63. Balance at Granted as Received on Balance at
1 July 2004 remuneration exercise of options Net other change 30 June 2005
2005 No. No. No. No. No.
Directors of A.B.C. Learning Centres
Limited
Ordinary shares
S Atkinson 500,000 – 210,000 (15,000) 695,000
E S Groves 16,033,755 – 745,000 1,816,245 18,595,000
L A Groves 17,861,715 – 745,000 1,285 18,608,000
W E Bessemer 375,000 – 105,000 (375,000) 105,000
M V Kemp 5,459,545 – 640,000 3,000,000 9,099,545
D J Ryan 30,000 – 105,000 100,000 235,000
L J Anthony – – – 25,000 25,000
Other Key Management Personnel of
the Group
Ordinary shares
J M Reynolds 56,000 55,000 – 1,035 112,035
M P Loveday – 50,000 – – 50,000
J G Bannan – 30,000 – – 30,000
(d) Redeemable converting preference shares of A.B.C. Learning Centres Limited
Balance at Granted as Received on Balance at
1 July 2005 remuneration exercise of options Net other change 30 June 2006
2006 No. No. No. No. No.
M V Kemp 50,000 – – – 50,000
50,000 – – – 50,000
Balance at Granted as Received on Balance at
1 July 2004 remuneration exercise of options Net other change 30 June 2005
2005 No. No. No. No. No.
M V Kemp 50,000 – – – 50,000
D J Ryan 40,000 – – (40,000) –
90,000 – – (40,000) 50,000
(e) Loans to Key Management Personnel
There are no loans made or outstanding with Directors and other Key Management Personnel of the Group, including any related
parties at 30 June 2006 (2005: nil).
(f) Other transactions with Key Management Personnel
During the year no loans were advanced by the Group to Key Management Personnel (2005: nil).
61

64. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note 5. Remuneration of Auditors Note $’000 $’000 $’000 $’000
Auditor of the parent entity (i)
Audit or review of the financial report 449 229 74 26
Taxation services – 5 – 5
Other assurance services 8 32 – 4
Due diligence – 63 – 63
457 329 74 98
Other auditors (ii)
Auditing the financial report 164 – – –
621 329 74 98
(i) The auditor of A.B.C. Learning Centres Limited and Australian subsidiaries is Pitcher Partners, an independent member of Baker Tilly International.
(ii) The auditor of Learning Care Group, Inc. is Rehmann Robson, an independent member of Baker Tilly International.
Consolidated Company
2006 2005 2006 2005
Note 6. Trade and Other Receivables Note $’000 $’000 $’000 $’000
Current
Trade receivables 77,582 14,368 4 –
Allowance for doubtful debts (1,463) (188) – –
76,119 14,180 4 –
Property settlements receivable 20,892 7,410 – –
Deposits (cash under restrictions) (i) 2,069 432 – –
Tax related receivable (ii) – – 35,860 7,804
Goods and services tax (GST) recoverable 620 2,313 451 (138)
Other receivables 15,114 6,804 360 180
114,814 31,139 36,675 7,846
Non-current
Trade receivables 105 – – –
105 – – –
Rental bonds 453 414 – –
Tax related receivable (ii) – – 55,754 51,544
558 414 55,754 51,544
(i) Security deposits held are classified as a receivable and represent cash held under restrictions.
(ii) Tax related receivables relate to subsidiaries.
62

65. Consolidated Company
2006 2005 2006 2005
Note 7. Other Financial Assets Note $’000 $’000 $’000 $’000
Current
Non-interest-bearing loans at call advanced to:
Other entities 252 3,649 – 500
Non-current
Shares in controlled entities – – 726,568 386,547
At fair value
Available-for-sale:
Shares – Listed entities (i) 2,520 3,037 2,520 2,737
Centre development costs 18,663 24,082 3,974 –
Other investments (i) 27,847 1,212 25,534 –
46,510 25,294 29,508 –
Interest-bearing loans advanced to:
Other entities 21,211 – 20,971 –
Non-interest-bearing loans advanced to:
Subsidiaries – – 980,115 415,398
Other entities 8,126 2,762 6,205 2,685
29,337 2,762 1,007,291 418,083
78,367 31,093 1,765,887 807,367
(i) The Group holds shares in listed and non-listed entities. At 30 June 2006 and 30 June 2005, it does not consider any of the investments as investments in
associates due to the Group not exerting significant influence over the entities and the share holdings being less than 20% of the voting or potential voting
power of the investee.
Consolidated Company
2006 2005 2006 2005
Note 8. Inventories $’000 $’000 $’000 $’000
Finished goods:
At cost 5,453 4,226 – –
5,453 4,226 – –
Consolidated Company
2006 2005 2006 2005
Note 9. Other Current Assets $’000 $’000 $’000 $’000
Prepayments 16,667 10,944 242 491
Land and buildings held for on sale 9,493 6,360 937 –
26,160 17,304 1,179 491
63

66. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 10. Property, Plant and Equipment
Consolidated
Property Plant and Motor vehicles
Freehold Buildings improvements equipment under finance
land at cost at cost at cost at cost lease at cost Total
$’000 $’000 $’000 $’000 $’000 $’000
Gross carrying amount
Balance at 1 July 2004 93 1,238 19,603 19,378 54 40,366
Additions 3 6 36,105 11,492 – 47,606
Disposals – – (1,989) (835) (54) (2,878)
Acquisitions through business
combinations – – 1,073 8,093 – 9,166
Transfers – (66) 66 – – –
Balance at 1 July 2005 96 1,178 54,858 38,128 – 94,260
Additions – 201 75,780 30,495 – 106,476
Disposals (453) (9,180) (3,014) (2,737) – (15,384)
Acquisitions through business
combinations 15,385 41,892 14,258 12,678 – 84,213
Classified as held for sale (96) (213) – – – (309)
Transfers – – 1,220 (1,220) – –
Net foreign currency exchange differences 254 558 (121) (13) – 678
Balance at 30 June 2006 15,186 34,436 142,981 77,331 – 269,934
Accumulated depreciation/
amortisation and impairment
Balance at 1 July 2004 – 223 1,142 3,207 32 4,604
Disposals – (5) (141) – (32) (178)
Acquisitions through business
combinations – – 117 1,721 – 1,838
Depreciation expense – 52 2,315 2,915 – 5,282
Balance at 1 July 2005 – 270 3,433 7,843 – 11,546
Disposals – (6) (2,169) (1,035) – (3,210)
Acquisitions through business
combinations – 2,073 362 1,046 – 3,481
Classified as held for sale – (8) – – – (8)
Impairment losses charged to profit (i) – – 1,890 32 – 1,922
Depreciation expense – 496 5,703 8,034 – 14,233
Net foreign currency exchange differences – 38 – (30) – 8
Balance at 30 June 2006 – 2,863 9,219 15,890 – 27,972
Net book value
As at 30 June 2005 96 908 51,425 30,285 – 82,714
As at 30 June 2006 15,186 31,573 133,762 61,441 – 241,962
64

67. Company
Property Plant and Motor vehicles
Freehold Buildings improvements equipment under finance
land at cost at cost at cost at cost lease at cost Total
$’000 $’000 $’000 $’000 $’000 $’000
Gross carrying amount
Balance at 1 July 2004 – 965 – – – 965
Balance at 1 July 2005 – 965 – – – 965
Additions – – – – – –
Disposals – – – – – –
Balance at 30 June 2006 – 965 – – – 965
Accumulated depreciation/
amortisation and impairment
Balance at 1 July 2004 – 214 – – – 214
Depreciation expense – 49 – – – 49
Balance at 1 July 2005 – 263 – – – 263
Depreciation expense – 48 – – – 48
Balance at 30 June 2006 – 311 – – – 311
Net book value
As at 30 June 2005 – 702 – – – 702
As at 30 June 2006 – 654 – – – 654
(i) Impairment losses are included in the line item impairment in the income statement. The impairment losses recognised during the period (2005: nil) relate to
write downs of various items of property, plant or equipment that were held by childcare centres that were closed.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Aggregate depreciation allocated, whether recognised
as an expense or capitalised as part of the carrying
amount of other assets during the year:
Buildings 496 52 48 49
Property improvements 5,703 2,315 – –
Plant and equipment 8,034 2,915 – –
14,233 5,282 48 49
On transition to the Australian equivalents to International Financial Reporting Standards (AIFRS) the Group has elected to measure
buildings previously recorded at valuation at the date of transition to AIFRS at its fair value and use that fair value as its deemed cost
at that date.
65

68. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2006
Note 11. Childcare Licences $’000 $’000
Gross carrying amount
Balance at 1 July 2004 235,746 –
Additions 108,396 –
Acquisitions through business combinations 267,223 –
Disposals or classified as held for sale (4,519) –
Net revaluation increments/(decrements) 165,851 –
Balance at 1 July 2005 772,697 –
Additions 359,708 –
Acquisitions through business combinations 169,633 –
Disposals or classified as held for sale (7,327) –
Reclassified from goodwill 62,806 –
Balance at 30 June 2006 1,357,517 –
Impairment
Net adjustment from revaluation increments/(decrements) 5,670 –
Impairment losses charged to profit and loss 8,424 –
Balance at 30 June 2006 14,094 –
Net book value
As at 30 June 2005 772,697 –
As at 30 June 2006 1,343,423 –
(a) Impairment charge
The impairment charge relates to childcare centres that were closed during the financial year.
(b) Allocation of childcare licences to cash-generating units
The Group has identified an individual childcare licence as a cash-generating unit.
The recoverable amount of the childcare licence cash-generating unit’s have been determined based on a value in use calculation
using cash flow projections from financial budgets approved by management covering a five year period.
The discount rate applied to the cash flow projections is 9.5% which reflects with the Group’s weighted average cost of capital
(WACC). Applicable growth rates have been applied to the budgeted inflows and outflows for years one to five based on historical
information and industry norms. As the life of a childcare licence is indefinite a terminal value has been included based upon the
forecasted cash flows at year five.
Whilst that each childcare licence is a CGU the note above has been disclosed on an aggregate basis.
66

69. Consolidated Company
2006 2005 2006 2005
Note 12. Goodwill $’000 $’000 $’000 $’000
Gross carrying amount
Balance at beginning of financial year 175,187 – – –
Additional amounts recognised from business
combinations occurring during the period 194,052 175,187 – –
Effects of foreign currency exchange differences 2,659 – – –
Reclassified to childcare licences (62,806) – – –
Other 4,625 – – –
Balance at end of financial year 313,717 175,187 – –
Accumulated impairment losses
Balance at beginning of financial year – – – –
Impairment losses for the year – – – –
Eliminated on disposal of a subsidiary – – – –
Effect of foreign currency exchange differences – – – –
Balance at end of financial year – – – –
Net book value 313,717 175,187 – –
Allocation of goodwill to cash-generating units
The Group has identified the following Cash-Generating Units (CGU) to which goodwill has been allocated:
– An individual childcare licence
– Training college (see note 13)
– Wholesaling of education toys
– US Childcare Operation
– Rights to further acquisitions
– Trademark (see note 13)
All goodwill is allocated to a cash-generating units on the following basis:
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
Training college (a) 1,836 – – –
Wholesale and education toys (b) 3,259 – – –
US Childcare Operations (c) 173,468 – – –
Rights to further acquisitions (d) 109,892 175,187 – –
Unallocated (e) 25,262 – – –
Total 313,717 175,187 – –
(a) The recoverable amount of the training college cash-generating unit has been determined based on a value in use calculation using cash flow projections
from financial budgets approved by management covering a five year period. For a conservative valuation no growth rate was applied during the five years.
The discount rate applied to the cash flow projections was 9.5%.
(b) The recoverable amount of the wholesale and education toys cash-generating unit has been determined based on a value in use calculation using cash flow
projections from financial budgets approved by management covering a five year period. For a conservative valuation no growth rate was applied during the
five years. The discount rate applied to the cash flow projections was 9.5%.
(c) The recoverable amount of the US Childcare Operations cash-generating unit has been determined based on a value in use calculation using cash flow
projections from financial budgets approved by management covering five years. The discount rate applied to the cash flow projections is 12%. Applicable
growth rates have been applied to the budgeted inflows and outflows for years one to five based on historical data and industry norms.
(d) The recoverable amount of the rights to further acquisitions cash-generating unit has been determined based on the number of places expected to be
acquired over the next three years as a result of the business combination. A profit per place is then applied based on historical data and averages. The
discount rate applied in the discounted cash flow calculation was 10.5% which reflects the risk associated with this cash-generating unit.
(e) As Kids Campus Limited was acquired on 29 May 2006 a formal allocation of goodwill was not finalised prior to reporting date.
67

70. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2006
Note 13. Other Intangible Assets Note $’000 $’000
Gross carrying amount
Balance at 1 July 2004 1,078 –
Additions (i) 38 –
Acquisitions through business combinations – –
Disposals or classified as held for sale – –
Net revaluation increments/(decrements) – –
Net foreign currency exchange differences – –
Other (445) –
Balance at 1 July 2005 671 –
Additions (i) 2,464
Acquisitions through business combinations (ii) 29,726 –
Disposals or classified as held for sale – –
Net revaluation increments/(decrements) – –
Net foreign currency exchange differences 274 –
Reclassified to goodwill (671) –
Balance at 30 June 2006 32,464 –
Accumulated amortisation and impairment
Balance at 1 July 2004 (7) –
Amortisation expense – –
Impairment losses charged to profit – –
Reversals of impairment losses charged to profit – –
Net foreign currency exchange differences – –
Balance at 1 July 2005 (7) –
Amortisation expense (926) –
Impairment losses charged to profit – –
Reversals of impairment losses charged to profit – –
Net foreign currency exchange differences – –
Balance at 30 June 2006 (933) –
Net book value
As at 30 June 2005 664 –
As at 30 June 2006 31,531 –
(i) Additional intangibles relate to financial, childcare and education systems.
(ii) Intangibles acquired through business combination include curriculum, trademarks and franchise agreements.
Consolidated Company
2006 2005 2006 2005
Note 14. Trade and Other Payables $’000 $’000 $’000 $’000
Trade payables 13,324 5,431 19 27
Sundry creditors and accrued expenses 108,277 46,783 11,425 102
121,601 52,214 11,444 129
68

71. Consolidated Company
2006 2005 2006 2005
Note 15. Borrowings Note $’000 $’000 $’000 $’000
Current
Secured (i)
At amortised cost (2005: cost):
Bank overdrafts 753 1,429 – –
Bank loans 87 1,000 – –
Other loans (Hire purchase loans) 7,227 2,027 – –
8,067 4,456 – –
Non-current
Unsecured
At amortised cost (2005: cost):
Redeemable converting preference shares (ii) 58,107 58,107 58,107 58,107
Bank loans (i) 161,786 – 151,000 –
219,893 58,107 209,107 58,107
Secured (i)
At amortised cost (2005: cost):
Bank loans – 184,020 – 152,900
Finance lease liabilities 14,981 – – –
Hire purchase loans 14 4,145 – –
14,995 188,165 – 152,900
234,888 246,272 209,107 211,007
(i) In accordance with the security arrangements of liabilities, the carrying amounts of non-current assets pledged as security are as follows:
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
First mortgage
Freehold land and buildings – 1,004 – 702
Floating charge over assets – 1,058,360 – 860,514
– 1,059,364 – 861,216
The Company’s bankers have provided the Company’s financing facility on an unsecured basis. The Company holds releases for all securities previously held
by the banks. These releases have being lodged with the relevant authorities.
In the 2005 financial year, the bank borrowings were secured by registered mortgages over the parent entity and each of its controlled entities, and
interlocking debt and interest guarantees between the parent entity and each of its controlled subsidiaries, and a registered first mortgage over certain
freehold property of a controlled entity.
Finance leases and hire purchases are secured by the assets under lease or under hire purchase respectively.
(ii) During 2004 $60 million of redeemable converting preference shares were issued, with $7.5 million being initially classified as debt. Transaction costs of
$1.893 million were also incurred and offset against the value of the equity portion of the preference shares. Upon transition to AIFRS the equity balance of
the redeemable converting preference shares were reclassified from equity to debt and included above.
69

72. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note 16. Provisions Note $’000 $’000 $’000 $’000
Current
Employee benefits 9,071 4,907 – –
Restructuring and termination costs (i) 277 984 – –
Onerous lease contracts 25 192 – – –
9,540 5,891 – –
Non-current
Employee benefits 881 911 – –
Onerous lease contracts 25 1,118 – – –
1,999 911 – –
Consolidated Company
Restructuring Restructuring
and termination Onerous lease and termination Onerous lease
costs(i) contracts costs(i) contracts
$’000 $’000 $’000 $’000
Balance at 1 July 2005 984 – – –
Additional provision through acquisition
of business combinations 277 1,396 – –
Reductions arising from payments/other
sacrifices of future economic benefits (984) (86) – –
Balance at 30 June 2006 277 1,310 – –
Current 277 192 – –
Non-current – 1,118 –
277 1,310 – –
(i) The provision for restructuring and termination costs represents the present value of the directors’ best estimate of the costs directly and necessarily caused by
the restructuring that are not associated with the ongoing activities of the entity, including termination benefits, and were an existing liability at date of acquisition.
Consolidated Company
2006 2005 2006 2005
Note 17. Other Liabilities $’000 $’000 $’000 $’000
Current
Operating lease liability 999 – – –
999 – – –
Non-current
Operating lease liability 16,480 5,723 – –
16,480 5,723 – –
70

73. Consolidated Company
2006 2005 2006 2005
Note 18. Issued Capital $’000 $’000 $’000 $’000
393,146,555 fully paid ordinary shares (2005: 250,344,916) 1,635,028 636,145 1,635,028 636,145
1,635,028 636,145 1,635,028 636,145
2006 2005
No. No.
’000 $’000 ’000 $’000
Fully paid ordinary shares
Balance at beginning of financial year 250,345 636,145 116,428 124,879
Issue of shares – Share placement 140,151 994,704 100,008 400,033
Issue of shares – Scheme of arrangement – – 30,033 108,120
Issue of shares – Dividend reinvestment 1,694 11,415 271 1,154
Issue of shares – Carers incentive 625 4,716 406 2,038
Issue of shares – Other (staff) 332 1,776 417 2,000
Issue of shares – on settlement with vendors – – 231 500
Issue of shares – exercise of options – – 2,550 8,211
Transaction costs on share issue – (19,560) – (15,090)
Tax effect on transaction costs – 5,832 – 4,300
Balance at end of financial year 393,147 1,635,028 250,344 636,145
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Share options
As at 30 June 2006 there are 1,912,191 unvested options which were granted to the executives of Learning Care Group Inc. in
accordance with their employment agreements.
During the year ended 30 June 2005 the Directors exercised their remuneration options, converting 2,550,000 ordinary shares at
$3.22 per share.
71

74. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note 19. Reserves $’000 $’000 $’000 $’000
Asset revaluation 108,955 114,002 79 79
Foreign currency translation 504 31 – –
Employee equity-settled benefits 1,139 – 1,139 –
Available-for-sale revaluation (621) – (621) –
109,977 114,033 597 79
Asset revaluation reserve
Balance at beginning of financial year 114,002 3,834 79 79
Revaluation increments/(decrements) on
childcare licences (4,139) 165,852 – –
Foreign exchange translation (1,008) – – –
Deferred tax liability arising on revaluation 100 (55,684) – –
Balance at end of financial year 108,955 114,002 79 79
The asset revaluation reserve is used to record increases in the fair value of childcare licences and buildings and decreases to the
extent that such decreases relate to an increase on the same asset previously recognised in equity.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Foreign currency translation reserve
Balance at beginning of financial year 31 37 – –
Translation of foreign operations 473 (6) – –
Balance at end of financial year 504 31 – –
The foreign currency translation resulted from differences relating to the translation from US dollars and NZ dollars, being the
functional currency of the Group’s foreign controlled entities in the United States of America and New Zealand, into Australian dollars
that are brought to account by entries made directly to the foreign currency translation reserve.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Employee equity-settled benefits reserve
Balance at beginning of financial year – – – –
Share-based payment 1,139 – 1,139 –
Transfer to share capital – – – –
Balance at end of financial year 1,139 – 1,139 –
The employee equity-settled benefits reserve arises on the grant of share options to the executives under the executive share option
plan. Amounts are transferred out of the reserve and into the issued capital when the options are exercised.
72

75. Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Available-for-sale revaluation reserve
Balance at beginning of financial year – – – –
Restated balance at beginning of financial year – – – –
Valuation gain/(loss) recognised (887) – (887) –
Cumulative (gain)/loss transferred to the income statement
on sale of financial assets – – – –
Cumulative (gain)/loss transferred to the income statement
on impairment of financial assets – – – –
Deferred tax arising on revaluation 266 – 266 –
Balance at end of financial year (621) – (621) –
Changes in the fair value of investments, such as equities, classified as available-for-sale financial assets, are taken to the
available-for-sale investments revaluation reserve, as described in note 1(m). Amounts are recognised in profit and loss when the
associated assets are sold or impaired.
Consolidated Company
2006 2005 2006 2005
Note 20. Retained Earnings Note $’000 $’000 $’000 $’000
Balance at beginning of financial year 45,074 20,446 4,461 2,946
Net profit attributable to members of
the parent entity 81,110 43,534 33,964 20,421
Dividends paid 22 (33,457) (18,906) (33,455) (18,906)
Balance at end of financial year 92,727 45,074 4,970 4,461
Consolidated
2006 2005
Note 21. Earnings per Share Cents per share Cents per share
Basic earnings per share:
From continuing operations 27.7 23.0
Total basic earnings per share 27.7 23.0
Diluted earnings per share:
From continuing operations 27.7 22.9
Total diluted earnings per share 27.7 22.9
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
2006 2005
$’000 $’000
Earnings from continuing operations (a) 81,110 43,534
Total earnings (a) 81,110 43,534
2006 2005
No. ’000 No. ’000
Weighted average number of ordinary shares for the purposes of basic earnings per share 292,937 189,436
73

76. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 21. Earnings per Share continued
(a) Earnings used in the calculation of basic earnings per share and total basic earnings per share from continuing operations reconciles to net profit in the
income statement as follows:
Consolidated
2006 2005
$’000 $’000
Net profit 81,110 43,534
Redeemable converting preference share dividend – –
Earnings used in the calculation of basic EPS from continuing operations 81,110 43,534
Total earnings used in the calculation of basic EPS 81,110 43,534
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
2006 2005
$’000 $’000
Earnings from continuing operations (a) 81,110 43,534
Total earnings (a) 81,110 43,534
2006 2005
No.’000 No.’000
Weighted average number of ordinary shares for the purposes of diluted earnings
per share (b), (c), (d) 292,937 190,461
(a) Earnings used in the calculation of diluted earnings per share and total diluted earnings per share from continuing operations reconciles to net profit in the
income statement as follows:
2006 2005
$’000 $’000
Net profit 81,110 43,534
Redeemable converting preference share dividend – –
Earnings used in the calculation of diluted EPS from continuing operations 81,110 43,534
Total Earnings used in the calculation of diluted EPS 81,110 43,534
(b) The weighted average number of ordinary shares for basic earnings per share reconciles to the weighted average number of ordinary shares for the purposes
of diluted earnings per share as follows:
2006 2005
No. ’000 No. ’000
Weighted average number of ordinary shares used in the calculation of basic EPS 292,937 189,436
Weighted average number of shares deemed to be issued for no consideration in respect of:
Employee options – 1,025
Weighted average number of ordinary shares used in the calculation of diluted EPS 292,937 190,461
(c) The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of
diluted earnings per share:
2006 2005
No. ’000 No. ’000
Redeemable converting preference shares 12,000 12,000
Executive share option plan 1,912 –
13,912 12,000
(d) Weighted average number of converted, lapsed, or cancelled potential ordinary shares included in the calculation of diluted earnings per share:
2006 2005
No. ’000 No. ’000
Options to purchase ordinary shares pursuant to the executive share option plan – 1,025
74

77. Consolidated Company
2006 2005 2006 2005
Note 22. Dividends $’000 $’000 $’000 $’000
Recognised amounts
Fully paid ordinary shares
2005 Final dividend:
Fully franked to 30% (Prior Year fully franked to 30%) 15,037 6,427 15,037 6,427
2006 Interim dividend:
Fully franked to 30% (Prior Year fully franked to 30%) 18,419 12,479 18,418 12,479
33,456 18,906 33,455 18,906
Unrecognised amounts
Fully paid ordinary shares
2006 Final dividend:
Fully franked to 30% (Prior Year fully franked to 30%) 31,452 15,037 31,452 15,037
Company
2006 2005
$’000 $’000
Adjusted franking account balance 33,095 10,453
Impact on franking account balance of dividends not recognised 13,479 6,444
Income tax consequences of unrecognised dividends – –
75

78. Notes for the Financial Statements
For the financial year ended 30 June 2006
Consolidated Company
2006 2005 2006 2005
Note 23. Commitments for Expenditure $’000 $’000 $’000 $’000
(a) Capital expenditure commitments
Plant and equipment
Not longer than one year 3,822 – – –
Longer than one year and not longer than five years – – – –
Longer than five years – – – –
3,822 – – –
Intangible assets
Not longer than one year 39,475 – – –
Longer than one year and not longer than five years – – – –
Longer than five years – – – –
39,475 – – –
(b) Lease commitments
Finance lease liabilities and non-cancellable operating lease commitments are disclosed in note 25 to the financial statements.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Hire purchase commitments
Not longer than one year 7,373 2,027 – –
Longer than one year and not longer than five years 14 4,145 – –
Longer than five years – – – –
7,287 6,172 – –
(c) Centre Development Costs
Centre development costs of $206,462,000 have received Board approval but are subject to final contractual arrangements.
Note 24. Contingent Liabilities and Contingent Assets
The parent entity and Group had contingent liabilities at 30 June 2006 in respect of:
(i) Guarantees
Bank guarantees in Australia for specific commitments of the Group total $5.9 million.
(ii) Guarantees in respect of franchisee lease commitments
A subsidiary of the Company is primarily or contingently liable for many of the leases of Tutor Time’s franchisees. In an effort to build
its franchisee network, Tutor Time either leased the prospective site for a franchisee, with a subsequent sublease of the site to the
franchisee, or provided a lease guarantee to the landlord for the benefit of the franchisee in exchange for a monthly lease guarantee
fee payable by the franchisee that is based upon the monthly rent expense of the guaranteed lease. The payments the Company
could be required to pay related to leases and guarantees aggregates US$58.3 million and US$10.0 million, respectively, in case of
default by the franchisee. Should the Company be required to make payments under these leases, it may assume obligations for
operating the centre. Should the centre not be economically viable, the Company will make provision for the lease termination at
that time.
These guarantees may give rise to liabilities in the parent entity if the subsidiaries do not meet their obligations under the terms of
the overdrafts, loans, leases or other liabilities subject to the guarantees. No material losses are anticipated in respect of any of the
above contingent liabilities.
(iii) Letter of Credit issued to JP Morgan Chase
A letter of credit has been issued by the Company’s bankers for US$17 million to secure the Learning Care Group, Inc. bank facility
with JP Morgan Chase.
76

79. Note 25. Leases
Disclosures for lessees
Finance leases
Leasing arrangements
Finance leases relate to sale and leaseback transactions relating to some childcare centres in the United States of America.
Finance lease liabilities
Minimum future lease payments
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
No later than one year 1,519 – – –
Later than one year and not later than five years 6,440 – – –
Later than five years 24,745 – – –
Minimum lease payments (i) 32,704 – – –
Less future finance charges 17,723 –
Present value of minimum lease payments 15 14,981 – – –
(i) Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.
Operating leases
Leasing arrangements
The economic entity has non-cancellable property leases with varying terms of up to 23 years. All leases provide for additional
option periods. Contingent rental provisions within the lease agreements provide for increases within the rental structure in line with
consumer price index and market value, subject to review with the landlord. Equipment rental agreements provide for a maximum
rental period of three years.
Consolidated Company
2006 2005 2006 2005
Note $’000 $’000 $’000 $’000
Non-cancellable operating lease payments
Not longer than one year 110,891 58,891 – –
Longer than one year and not longer than
five years 327,143 197,895 – –
Longer than five years 770,919 159,125 – –
1,208,953 415,911 – –
In respect of non-cancellable operating leases
the following liabilities have been recognised:
Current:
Onerous lease contracts 16 192 – – –
Non-current
Onerous lease contracts 16 1,118 – – –
1,310 – – –
Note 26. Economic Dependency
The operation of childcare centres and training colleges benefit from the continued support by statutory authorities of the Federal
Governments as well as the Federal Government’s policies on the provision of subsidies to the childcare industry and benefits
provided to parents of children attending childcare centres.
77

80. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 27. Subsidiaries
Ownership interest
Name of entity Country of incorporation 2006 2005
% %
Parent entity
A.B.C. Learning Centres Limited Australia
Subsidiaries
A.B.C. Developmental Learning Centres Pty Ltd Australia 100 100
A.B.C. Early Childhood Training College Pty Ltd Australia 100 100
A.B.C. Corporate Care Pty Ltd Australia 100 100
Premier Early Learning Centres Pty Ltd Australia 100 100
A.C.N. 097 028 923 Pty Ltd Australia 100 100
ABC Developmental Learning Centres (NZ) Limited New Zealand 100 100
A.B.C. Education Services Pty Ltd Australia 100 100
A.B.C. Land Holdings Pty Ltd Australia 100 100
A.B.C. New Ideas Pty Ltd Australia 100 100
ABC Land Holdings (NZ) Limited New Zealand 100 100
DPPA Pty Ltd Australia 100 100
FutureOne Pty Ltd Australia 100 100
A.C.N. 089 836 180 Pty Ltd Australia 100 100
Brighter Future Family Services Pty Ltd (in administration) Australia 100 100
Interlink Education Systems Pty Ltd Australia 100 100
A.C.N. 084 147 446 Pty Ltd Australia 100 100
A.C.N. 084 147 393 Pty Ltd Australia 100 100
Child Care Centres Australia Ltd Australia 100 100
Highland Park Child Care Centre Pty Ltd Australia 100 100
Kiddies Place Childcare Pty Ltd Australia 100 100
Australian Montessori Education Pty Ltd Australia 100 100
Peppercorn Management Group Ltd Australia 100 100
PMG Corporate Pty Ltd Australia 100 100
Peppercorn Holdings No. 1 Pty Ltd Australia 100 100
Peppercorn Holdings No. 2 Pty Ltd Australia 100 100
Peppercorn Holdings No. 3 Pty Ltd Australia 100 100
Peppercorn Holdings No. 4 Pty Ltd Australia 100 100
Peppercorn Holdings No. 5 Pty Ltd Australia 100 100
Peppercorn Holdings No. 6 Pty Ltd Australia 100 100
Peppercorn Holdings No. 7 Pty Ltd Australia 100 100
Peppercorn Holdings No. 8 Pty Ltd Australia 100 100
Peppercorn Management Group (NZ) Limited New Zealand 100 100
Judius Pty Ltd Australia 100 100
Chosen Products Pty Ltd Australia 100 100
Judius (NZ) Limited New Zealand 100 100
Childcare Development Solutions Pty Ltd (note 28) Australia 100 –
Childcare Development Solutions Unit Trust Australia 100 –
78

81. Ownership interest
Name of entity Country of incorporation 2006 2005
% %
Learning Care Group, Inc. (note 28) United States 100 –
Childtime Childcare, Inc. United States 100 –
Tutor Time Learning Centers LLC United States 100 –
Tutor Time Franchise LLC United States 100 –
Tutor Time Learning Centers International, Inc. United States 100 –
Kids Campus Limited (note 28) Australia 100 –
Kids Campus Australia Pty Ltd Australia 100 –
Kids Campus Holdings Pty Ltd Australia 100 –
Kids Campus (W.A.) Pty Ltd Australia 100 –
Note 28. Acquisition of Businesses
Date of Proportion Cost of
Names of businesses acquired Principal activity acquisition acquired (%) acquisition
$’000
Childcare Development Solutions Unit Trust Provision of childcare 29 July 2005 100 12,530
services
Childcare Development Solutions Pty Ltd Trustee for the Childcare 29 July 2005 100 –
Development Solutions
Unit Trust
Learning Care Group, Inc. Provision of childcare and 11 January 2006 100 213,885
franchising services
Kids Campus Limited Provision of childcare 29 May 2006 100 127,897
services
Balance at 30 June 2006 354,312
79

82. Notes for the Financial Statements
For the financial year ended 30 June 2006
Childcare Development Solutions
Note 28. Acquisition of Businesses continued Pty Limited and Trust
Fair value Fair value on
Book value adjustment acquisition
Net assets acquired $’000 $’000 $’000
Current assets:
Cash and cash equivalents 36 – 36
Other debtors – – –
Receivables (52) – (52)
Inventories – – –
Other – – –
Non-current assets:
Receivables – – –
Other financial assets – – –
Childcare licences 3,447 14,575 18,022
Property, plant and equipment 9,711 – 9,711
Intangible assets – – –
Goodwill – – –
Deferred tax assets – – –
Current liabilities:
Payables (247) – (247)
Short-term borrowings (15,377) – (15,377)
Current tax liabilities – – –
Provisions (35) – (35)
Non-current liabilities:
Long-term borrowings – – –
Deferred tax liabilities – – –
Provisions – – –
(2,517) 14,575 12,058
Goodwill on consolidation 472
Cash consideration 12,530
Goodwill on consolidation
Goodwill from acquisitions
Goodwill from business combinations
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Cash consideration 12,530 – – –
Less:
Cash acquired (36) – – –
Outflow of cash 12,494 – – –
From the date of acquisition Childcare Development Solutions Pty Ltd and Trust have contributed $2,923,000 to the profit after tax
position of the Group.
From the date of acquisition the Learning Care Group, Inc. have contributed $4,267,000 to the profit after tax position of the Group.
From the date of acquisition Kids Campus Limited has contributed a loss of $43,000 to the profit after tax position of the Group.
If the acquisition of Childcare Development Solutions Pty Ltd and Trust had taken place at the beginning of the year, the profit after
tax for the ABC Group would have been $80,748,000 and revenue from continuing operations would have been $592,479,000.
80

83. Learning Care Group Inc. Kids Campus Limited
Fair value Fair value on Fair value Fair value on Total fair value
Book value adjustment acquisition Book value adjustment acquisition on acquisition
$’000 $’000 $’000 $’000 $’000 $’000 $’000
1,654 – 1,654 (5,667) – (5,667) (3,977)
3,197 – 3,197 3,690 – 3,690 6,887
13,568 – 13,568 584 – 584 14,100
– – – – – – –
6,251 – 6,251 1,243 – 1,243 7,494
307 – 307 – – – 307
4,017 – 4,017 (726) – (726) 3,291
(464) – (464) 69,825 82,250 152,075 169,633
66,506 – 66,506 4,514 – 4,514 80,731
29,726 – 29,726 – – – 29,726
156,183 – 156,183 1,434 – 1,434 157,617
20,830 – 20,830 1,392 – 1,392 22,222
(47,434) – (47,434) (6,421) – (6,421) (54,102)
(157) – (157) (649) – (649) (16,183)
368 – 368 (1,024) – (1,024) (656)
(4,520) – (4,520) (2,325) – (2,325) (6,880)
(24,923) – (24,923) (44,051) – (44,051) (68,974)
(17,705) – (17,705) – – – (17,705)
(5,653) – (5,653) – – – (5,653)
201,751 – 201,751 21,819 82,250 104,069 317,878
12,134 23,828 36,434
213,885 127,897 354,312
36,434
157,617
194,051
Consolidated Company Consolidated Company
2006 2005 2006 2005 2006 2005 2006 2005
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
213,885 – 212,782 – 127,897 – 127,811 –
(1,654) – – – 5,667 – – –
212,231 – 212,782 – 133,564 – 127,811 –
If the acquisition of the Learning Care Group, Inc. had taken place at the beginning of the year, the profit after tax for the ABC Group
would have been $77,909,000 and revenue from continuing operations would have been $708,570,000.
If the acquisition of Kids Campus Limited had taken place at the beginning of the year, the profit after tax for the ABC Group would
have been $71,835,000 and revenue from continuing operations would have been $643,642,000.
Goodwill on consolidation on the acquisition of Kids Campus Limited of $25,262,000 has not been allocated to a cash-generating
unit as it was acquired on 29 May 2006 (note 12).
81

84. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 29. Segment Information
The Group is managed on a global basis and operates in one industry segment in three geographical areas.
Australia
The home country of the Group and the origin of the listed parent Company. The areas of operation include the provision of
childcare services.
United States of America
As a result of the acquisition of the Learning Care Group, Inc. in January 2006, a new geographic segment has arisen.
New Zealand
The geographical segment of New Zealand forms part of the Group through the provision of childcare services.
Segment revenues
External sales Inter-segment (i) Other Total
2006 2005 2006 2005 2006 2005 2006 2005
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Australia 425,703 221,420 – – 33,370 22,052 459,073 243,472
United States of America 150,579 – – – 5,816 – 156,395 –
New Zealand 15,894 9,225 – – 88 (20) 15,982 9,205
Total of all segments 631,450 252,677
Consolidated 631,450 252,677
Segment result
2006 2005
$’000 $’000
Continuing operations:
Australia 111,585 58,990
United States of America 6,451 –
New Zealand 2,382 1,313
Profit before income tax expense 120,418 60,303
Income tax expense (39,308) (16,769)
Profit for the period from continuing operations 81,110 43,534
Segment assets and liabilities
Assets Liabilities
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Australia 2,233,744 1,162,869 422,198 385,300
United States of America 307,358 – 101,051 –
New Zealand 37,404 20,700 3,729 3,017
Total of all segments 2,578,506 1,183,569 526,978 388,317
Eliminations (255,220) (10,140) (41,424) (10,140)
Consolidated 2,323,286 1,173,429 485,554 378,177
82

85. Other segment information
Australia United States of America New Zealand Total
2006 2005 2006 2005 2006 2005 2006 2005
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Acquisition of segment assets 98,751 418,725 5,087 – 2,638 6,933 106,476 425,658
Impairment losses 11,346 1,603 – – – – 11,346 1,603
Depreciation and amortisation
of segment assets 11,112 5,144 3,647 – 314 138 15,073 5,282
Straight-line lease 5,510 3,315 249 – 46 – 5,805 3,315
Share-based payment expense 6,492 4,038 – – – – 6,492 4,038
Rent 75,505 55,498 31,582 – 1,739 1,135 108,826 56,633
Interest expense 21,403 9,992 950 – 48 30 22,401 10,022
Employee benefits 141,652 72,752 85,569 – 6,873 4,138 234,094 76,890
Gain/(Loss) on sale of
Non-Current Assets 22,126 19,267 (94) – – – 22,032 19,267
Note 30. Related Party Disclosures
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 27 to the financial statements.
(b) Key Management Personnel remuneration
Details of Key Management Personnel remuneration are disclosed in note 4 to the financial statements.
(c) Loans to Key Management Personnel
Details of loans made to Key Management Personnel remuneration are disclosed in note 4 to the financial statements.
(d) Key Management Personnel equity holdings
Refer to Key Management Personnel Compensation note 4 for full disclosure.
(e) Other transactions with Key Management Personnel (and their related parties) of A.B.C. Learning Centres Limited
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated.
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Transactions with other related parties:
(i) Mr W E Bessemer is a director of Austock Group Ltd
(“Austock”). Transactions with Austock during the year were:
– Acquisition & merger work for Peppercorn Group – 1,632 – 1,632
– Payment and commission on capital raising 24,533 13,453 24,533 13,453
– Management fees 13 39 13 39
– Underwriting fee 1,905 875 1,905 875
– Property rental 789 – – –
(ii) Mr E S Groves holds a 4% (2005: 4.08%) shareholding
in Austock at 30 June 2006. For details of transactions
with Austock made during the current period refer above.
(iii) Relatives of directors, E S & L A Groves, operate
Queensland Maintenance Services (“QMS”), a company
which provides maintenance and capital development
services to the economic entity.
– Maintenance services 5,783 1,631 – –
– Capital development services 68,919 13,828 – –
83

86. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 30. Related Party Disclosures continued
(e) Other transactions with Key Management Personnel (and their related parties) of A.B.C. Learning Centres Limited continued
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
(iv) Mr E S Groves operates the Brisbane Bullets basketball
franchise. Transactions with the Brisbane Bullets involved
the prepayment of advertising and other sponsorship costs.
– Annual sponsorship 352 255 – –
(v) Mr M V Kemp is also a director of Sheramere Pty Ltd
(“Sheramere”), a company which entered into an agreement
with the Group to sell certain childcare businesses and a
childcare management business to the economic entity.
Transactions with Sheramere during the year were:
– Centre operating costs recoverable from Sheramere under
this agreement – 164 – –
(vi) Mr M V Kemp is also a director of Ezi Debit Australia Pty Ltd
(“Ezi Debit”). Mr M & Mrs M Kemp and Mr E S & Dr L A Groves
own indirectly 11.5% each (2005: 12.5%) of Ezi Debit.
Ezi Debit has entered into an agreement with the Group to
provide parent payment solutions. Transactions with
Ezi Debit during the year were: 156 9 – –
(f) Transactions with Key Management Personnel of A.B.C. Learning Centres Limited
Refer to Key Management Personnel Compensation note 4 for full disclosure.
(g) Transactions with other related parties
No amounts were provided for doubtful debts relating to debts due from other related parties (2005: nil).
Amounts receivable from and payable to these other related parties are disclosed in notes 7 and 15 to the financial statements.
Any loans advanced to and payable to other related parties are unsecured and subordinate to other liabilities.
Transactions involving the parent entity
During the financial year, A.B.C. Learning Centres Limited recognised a net payable of $10.42 million (2005: $1.849 million) from
its wholly-owned subsidiaries for their tax payable for the current period. Details of tax balances are disclosed in note 3 to the
financial statements.
During the financial year, A.B.C. Learning Centres Limited received dividends of $35.486 million (2005: $22.958 million) from its
subsidiaries. Details of dividends received from related parties are disclosed in note 2 to the financial statements.
(h) Parent entities
The parent entity in the Group, the ultimate Australia parent entity and the ultimate parent entity is A.B.C. Learning Centres Limited.
84

87. Note 31. Subsequent Events
On 7 July 2006 the Company announced an off-market takeover of Hutchison’s Child Care Services Ltd. The financial effect of
the transaction can not be ascertained at the date of signing the Annual Report. On 25 September 2006, the Company declared
the takeover bid unconditional and commenced compulsory acquisition of the remaining shares. The offer at the date of signing
of the Directors’ Report is as follows:
(a) Cash offer made at $1.50 per Hutchison’s Child Care Services Ltd ordinary share for all outstanding equity of 65.9 million
shares on a fully diluted basis.
(b) The off-market takeover which was unanimously recommended by the Hutchison’s Child Care Services Ltd board values
Hutchison’s Child Care Services Ltd at $96.2 million.
(c) ABC has agreed to divest seven long day care services as part of the acquisition in order to address Australian Competition
and Consumer Commission competition concerns.
On 25 September 2006 the Company declared the takeover bid unconditional.
On 6 September 2006 the Company acquired 100% of The Children’s Courtyard LLP, the ninth largest childcare provider in
the United States of America for US$66 million. Due to the acquisition date of Children’s Courtyard being so close to the date
of the financial report, detailed disclosure has not been provided.
No other matter or circumstance has arisen since 30 June 2006 that has significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Group’s state of affairs in future financial years.
Note 32. Notes to the Cash Flow Statements
(a) Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand, cash at bank and outstanding bank
overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the
related items in the balance sheet as follows:
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Cash and cash equivalents 132,470 45,560 57,641 34,189
Bank overdrafts (753) (1,429) – –
131,717 44,131 57,641 34,189
(b) Non-cash financing and investing activities
During the year the Group did not acquire subsidiaries by way of equity issue (2005: $108.12 million). During the year the Company
offered a dividend reinvestment plan. The value of the shares issued as a result of participation in the plan for the year was
$11.415 million (2005: $1.154 million).
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
(c) Financing facilities
Unsecured multi-option facility, reviewed annually and
payable at call:
– amount used 181,699 – 181,140 –
– amount unused 144,551 – 138,860 –
326,250 – 320,000 –
Secured bank loan facilities
– amount used – 197,361 – 152,975
– amount unused – 32,134 – 25
– 229,495 – 153,000
85

88. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 32. Notes to the Cash Flow Statements continued
(d) Cash balances not available for use
Refer note 6 for security deposits held.
(e) Reconciliation of net profit for the period to net cash flows from operating activities
Consolidated Company
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Profit for the period 81,110 43,534 33,964 20,421
(Gain)/loss on sale or disposal of non-current assets (22,032) (19,268) – (41)
Depreciation and amortisation of non-current assets 15,073 5,282 48 48
Straight-line amortisation 5,808 3,315 – –
Equity-settled share-based payment 7,631 4,038 7,631 4,038
Interest income received and receivable – – (27,243) (11,256)
Dividends received and receivable – – (35,486) (22,958)
Rent received from subsidiaries – – (45) (45)
Impairment of non-current assets 11,346 1,603 1,000 –
Increase/(decrease) in current tax liability 10,493 (425) (21,850) 1,321
Increase/(decrease) in deferred tax balances 3,455 (3,836) 1,342 (5,157)
Changes in net assets and liabilities, net of effects from
acquisition and disposal of businesses:
(Increase)/decrease in assets:
Current receivables (35,395) 5,882 (773) (164)
Current inventories (1,227) – – –
Other current assets 1,882 (2,376) 249 312
Increase/(decrease) in liabilities:
Current payables 11,821 9,922 865 188
Current provisions (899) (4,497) – –
Net cash from operating activities 89,066 43,174 (40,298) (13,293)
Note 33. Financial Instruments
(a) Financial risk management objectives
The Group’s principal financial instruments comprise bank loans and overdraft, redeemable converting preference shares, finance
leases and hire purchase contracts, and cash and short-term deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial
assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Group also enters
into derivative transactions, being forward currency contracts. The purpose is to manage the interest rate and currency risks arising
from the Group’s operations and its sources of finance. It is, and has been throughout the period under review, the Group’s policy
that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are cash
flow interest rate risk, liquidity risk, foreign currency risk and credit risk.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 1 to the financial statements.
(c) Foreign currency risk management
The consolidated group is exposed to foreign currency translation risk through its controlled operations in the United States of
America and New Zealand. Foreign currency gains or losses arising from the translation of net assets of these operations are shown
as a movement in the foreign currency translation reserve (note 19).
86

89. Maturity profile of financial instruments
The following table details the Group’s exposure to interest rate risk as at 30 June 2006:
Fixed maturity dates
Weighted
average Variable Less Non-
effective interest than 1-2 2-3 3-4 4-5 5+ interest
interest rate rate one year years years years years years bearing Total
2006 % $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets:
Cash and cash equivalents 5.4% 132,470 – – – – – – – 132,470
Trade receivables – – – – – – – – 115,372 115,372
Investments – – – – – – – – 45,056 45,056
Loans 8% – 25,185 – – – – – 8,378 33,563
132,470 25,185 – – – – – 168,806 326,461
Financial liabilities:
Trade payables – – – – – – – – 121,601 121,601
Bank overdraft 9.3% 753 – – – – – – – 753
Bank loans 6.5% 161,786 – – – – – – 87 161,873
Other loans (HP loans) 9% – 7,373 14 – – – – 7,387
Finance lease liabilities 9.6% – 696 698 723 763 766 11,335 – 14,981
Redeemable cumulative
preference shares – – – – – – – 58,107 – 58,107
162,539 8,069 712 723 763 766 69,442 121,688 364,702
The following table details the Group’s exposure to interest rate risk as at 30 June 2005:
Maturity dates
Weighted
average effective Variable Less than More than Non-interest
interest rate interest rate one year 1-5 years five years bearing Total
2005 % $’000 $’000 $’000 $’000 $’000 $’000
Financial assets:
Cash and cash equivalents – – – – – 45,560 45,560
Trade and other receivables – – – – – 31,741 31,741
Other receivables – – – – – 13,768 13,768
– – – – 91,069 91,069
Financial liabilities:
Trade payables – – – – – 52,214 52,214
Bank overdraft 9.08% 1,429 – – – – 1,429
Bank loans 5.72% – 1,000 184,020 – – 185,020
Other loans 7.60% – 2,026 4,145 – – 6,171
RCPS – – – 58,107 – – 58,107
1,429 3,026 246,272 – 52,214 302,941
87

90. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 33. Financial Instruments continued
(d) Credit risk management
The Group trades only with recognised, creditworthy third parties.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
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.
For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit
terms without specific approval.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents,
available-for-sale financial assets and certain derivative instruments, the Group’s exposure to credit risk arises from default of the
counter party, with a maximum exposure equal to the carrying amount of these instruments.
Since the Group trades only with recognised third parties, there is no requirement for collateral.
(e) Fair value of financial instruments
Except as detailed in the following table, the Directors consider that the carrying amount of financial assets and financial liabilities
recorded in the financial statements approximates their fair values (2005: net fair value).
The fair values and net fair values of financial assets and financial liabilities are determined as follows:
– The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets
are determined with reference to quoted market prices; and
– The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing
models based on discounted cash flow analysis.
Transaction costs are included in the determination of net fair value.
The following tables detail the fair value (2005: net fair value) of financial assets and financial liabilities:
Carrying amount Fair value
2006 $’000 $’000
Financial assets
– –
Financial liabilities
Redeemable converting preference shares 58,107 79,200
58,107 79,200
Carrying amount Fair value
2005 $’000 $’000
Financial liabilities
Redeemable converting preference shares 58,107 75,840
58,107 75,840
The financial statements include share holdings in unlisted companies (note 7). Fair value is estimated using a discounted cash flow
model, which includes some assumptions that are not supportable by observable market prices or rates. Changes in these
assumptions do not significantly change the fair value recognised.
(f) Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
88

91. Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards
The Group changed its accounting policies on 1 July 2005 to comply with Australian equivalents to International Financial Reporting
Standards (“AIFRS”). The transition to AIFRS is accounted for in accordance with Accounting Standard AASB 1 “First-time Adoption
of Australian equivalents to International Financial Reporting Standards”, with 1 July 2004 as the date of transition.
An explanation of how the transition from AGAAP policies to AIFRS has affected the Company and Group’s balance sheet, income
statement and cash flows is set out in the following tables and the notes that accompany the tables.
(a) At the date of transition to AIFRS – 1 July 2004 (Consolidated)
Consolidated
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Current assets
Cash and cash equivalents 2,313 – 2,313
Trade and other receivables 13,555 – 13,555
Other financial assets 983 – 983
Inventories – – –
Other (i) 22,572 (1,025) 21,547
Total current assets 39,423 (1,025) 38,398
Non-current assets
Trade and other receivables 267 – 267
Other financial assets 1,670 – 1,670
Property, plant and equipment 35,762 – 35,762
Childcare licences 235,746 – 235,746
Deferred tax assets (vi) 113 1,718 1,831
Goodwill – – –
Other intangible assets 1,072 – 1,072
Total non-current assets 274,630 1,718 276,348
Total assets 314,053 693 314,746
Current liabilities
Trade and other payables 4,605 – 4,605
Short-term borrowings 19,671 – 19,671
Current tax payables 1,954 – 1,954
Provisions 246 – 246
Other – – –
Total current liabilities 26,476 – 26,476
Non-current liabilities
Long-term borrowings (iv) 83,353 50,607 133,960
Deferred tax liabilities (vi) 1,664 1,292 2,956
Provisions 1 – 1
Other (vii) – 2,156 2,156
Total non-current liabilities 85,018 54,055 139,073
Total liabilities 111,494 54,055 165,549
Net assets 202,559 (53,362) 149,197
Equity
Issued capital (iv), (vi) 174,009 (49,130) 124,879
Reserves 3,871 – 3,871
Retained earnings (i), (vi), (vii) 24,679 (4,232) 20,447
Total equity 202,559 (53,362) 149,197
89

92. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards continued
(b) At the end of the last annual reporting period under AGAAP – 30 June 2005 (Consolidated)
Consolidated
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Current assets
Cash and cash equivalents 45,560 – 45,560
Trade and other receivables 31,139 – 31,139
Other financial assets 3,649 – 3,649
Inventories 4,226 – 4,226
Other (i) 18,484 (1,180) 17,304
Total current assets 103,058 (1,180) 101,878
Non-current assets
Trade and other receivables 414 – 414
Other financial assets (v) 32,696 (1,603) 31,093
Property, plant and equipment 82,714 – 82,714
Childcare licences 772,697 – 772,697
Deferred tax assets (vi), (vii) 2,849 5,933 8,782
Goodwill (iii), (vii) 170,193 4,994 175,187
Other intangible assets (iii) 650 14 664
Total non-current assets 1,062,213 9,338 1,071,551
Total assets 1,165,271 8,158 1,173,429
Current liabilities
Trade and other payables 52,214 – 52,214
Short-term borrowings 4,456 – 4,456
Current tax payables 3,061 – 3,061
Provisions 5,891 – 5,891
Other – – –
Total current liabilities 65,622 – 65,622
Non-current liabilities
Long-term borrowings (iv) 195,665 50,607 246,272
Deferred tax liabilities (vi) 57,539 2,110 59,649
Provisions 911 – 911
Other (vii) – 5,723 5,723
Total non-current liabilities 254,115 58,440 312,555
Total liabilities 319,737 58,440 378,177
Net assets 845,534 (50,282) 795,252
Equity
Issued capital (ii), (iv), (vi) 676,935 (40,790) 636,145
Reserves 114,033 – 114,033
Retained earnings (i), (ii), (iii), (iv), (v), (vi), (vii) 54,566 (9,492) 45,074
Total equity 845,534 (50,282) 795,252
90

93. Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards continued
(c) Reconciliation of profit for the year ended 30 June 2005 (Consolidated)
Consolidated
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Revenue 230,621 – 230,621
Other income (viii) 62,079 (40,023) 22,056
Changes in inventories of finished goods (1,622) – (1,622)
Employee benefits (ii) (76,890) (4,038) (80,928)
Depreciation and amortisation (iii) (10,114) 4,832 (5,282)
Impairment (v) – (1,603) (1,603)
Finance costs (iv) (6,478) (3,544) (10,022)
Rental and other property expenses (vii) (56,633) (3,315) (59,948)
Children catering and consumables (8,357) – (8,357)
Advertising and promotions (1,350) – (1,350)
Insurances (2,918) – (2,918)
Communication (2,451) – (2,451)
Travel (2,175) – (2,175)
Cost of sales (viii) (40,023) 40,023 –
Other (15,562) (156) (15,718)
Profit before income tax expense 68,127 (7,824) 60,303
Income tax expense (vi) (15,790) (979) (16,769)
Profit from continuing operations 52,337 (8,803) 43,534
Profit attributable to members of the parent entity 52,337 (8,803) 43,534
No material impacts are expected to the net cash flows presented under AGAAP on adoption of AIFRS.
91

94. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards continued
(d) At the date of transition to AIFRS – 1 July 2004 (Company)
Company
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Current assets
Cash and cash equivalents 696 – 696
Trade and other receivables 2,506 – 2,506
Other financial assets – – –
Inventories – – –
Other 803 – 803
Total current assets 4,005 – 4,005
Non-current assets
Trade and other receivables – – –
Other financial assets 256,583 – 256,583
Property, plant and equipment 751 – 751
Childcare licences – – –
Deferred tax assets (vi) 95 1,071 1,166
Goodwill – – –
Other intangible assets – – –
Total non-current assets 257,429 1,071 258,500
Total assets 261,434 1,071 262,505
Current liabilities
Trade and other payables 35 – 35
Short-term borrowings 151 – 151
Current tax payables 1,642 – 1,642
Provisions – – –
Other – – –
Total current liabilities 1,828 – 1,828
Non-current liabilities
Long-term borrowings (iv) 80,500 50,607 131,107
Deferred tax liabilities 1,664 – 1,664
Provisions – – –
Other – – –
Total non-current liabilities 82,164 50,607 132,771
Total liabilities 83,992 50,607 134,599
Net assets 177,442 (49,536) 127,906
Equity
Issued capital (iv), (vi) 174,009 (49,130) 124,879
Reserves 79 – 79
Retained earnings (vi) 3,354 (406) 2,948
Total equity 177,442 (49,536) 127,906
92

95. (e) At the end of the last annual reporting period under AGAAP – 30 June 2005 (Company)
Company
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Current assets
Cash and cash equivalents 34,189 – 34,189
Trade and other receivables (vi) 7,454 392 7,846
Other financial assets 500 – 500
Inventories – – –
Other 491 – 491
Total current assets 42,634 392 43,026
Non-current assets
Trade and other receivables 51,544 – 51,544
Other financial assets (v) 808,970 (1,603) 807,367
Property, plant and equipment 702 – 702
Childcare licences – – –
Deferred tax assets (vi) 2,811 5,933 8,744
Goodwill – – –
Other intangible assets – – –
Total non-current assets 864,027 4,330 868,357
Total assets 906,661 4,722 911,383
Current liabilities
Trade and other payables 129 – 129
Short-term borrowings – – –
Current tax payables 2,964 – 2,964
Provisions – – –
Other – – –
Total current liabilities 3,093 – 3,093
Non-current liabilities
Long-term borrowings (iv) 160,400 50,607 211,007
Deferred tax liabilities (vi) 54,489 2,109 56,598
Provisions – – –
Other – – –
Total non-current liabilities 214,889 52,716 267,605
Total liabilities 217,982 52,716 270,698
Net assets 688,679 (47,994) 640,685
Equity
Issued capital (ii), (iv), (vi) 676,935 (40,790) 636,145
Reserves (v) 1,682 (1,603) 79
Retained earnings (ii), (iv), (vi) 10,062 (5,601) 4,461
Total equity 688,679 (47,994) 640,685
93

96. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards continued
(f) Reconciliation of profit for the year ended 30 June 2005 (Company)
Company
AGAAP Adjustment AIFRS
Note $’000 $’000 $’000
Revenue – – –
Other income (viii) 37,121 (909) 36,212
Changes in inventories of finished goods – – –
Employee benefits (ii) (592) (4,038) (4,630)
Depreciation and amortisation (48) – (48)
Impairment – – –
Finance costs (iv) (4,662) (3,544) (8,206)
Rental and other property expenses – – –
Children catering and consumables – – –
Advertising and promotions – – –
Insurances (74) – (74)
Communication – – –
Travel (4) – (4)
Cost of sales (viii) (909) 909 –
Other (513) – (513)
Profit before income tax expense 30,319 (7,582) 22,737
Income tax expense (vi) (1,161) (1,155) (2,316)
Profit from continuing operations 29,158 (8,737) 20,421
Profit attributable to members of the parent entity 29,158 (8,737) 20,421
(i) The Group has impaired formation costs that have been carried as a current asset in the consolidated group’s balance sheet
under AGAAP. The effect is as follows:
At 1 July 2004: For the Group there has been a decrease in retained earnings of $1,024,967 and a decrease to other current
assets of $1,024,967.
At 30 June 2005: For the Group there has been a decrease in retained earnings of $1,180,305 and a decrease to other current
assets of $1,180,305.
(ii) Share-based payments are provided to selected employees, licensees and suppliers for nil consideration. The market value of
the shares are expensed to the income statement when the shares are issued. A corresponding entry is made to increase
issued capital. The effect is as follows:
Group
At 30 June 2005: For the Group there has been a decrease in retained earnings of $4,037,931 and an increase in issued capital
of $4,037,931.
Company
At 30 June 2005: For the Company there has been a decrease in retained earnings of $4,037,931 and an increase in issued
capital of $4,037,931.
(iii) Under AASB 3 “Business Combinations” purchased goodwill is not permitted to be amortised but instead is subject to
impairment testing on an annual basis or upon the occurrence of triggers which may indicate a potential impairment. As the
goodwill has not been impaired, amortisation has been reversed. The effect is as follows:
Group
At 30 June 2005: For the Group, there has been an increase in retained earnings of $4,832,150 and an increase in goodwill and
other intangible assets of $4,832,150.
94

97. (iv) The Company’s redeemable converting preference shares have been classified as debt. The effect is as follows:
Group
At 1 July 2004 and 30 June 2005: For the Group there has been an increase of long-term borrowings of $50,607,020 and a
decrease to issued capital of $50,607,020.
Company
At 1 July 2004 and 30 June 2005: For the Company there has been an increase of long-term borrowings of $50,607,020 and a
decrease to issued capital of $50,607,020.
Group
At 30 June 2005: For the Group there has been a decrease to retained earnings of $3,543,750 representing interest expense
resulting from the reclassification of redeemable converting preference shares from equity to debt. A corresponding increase to
retained earnings of $3,543,750 has also been processed which is a reversal of the dividend paid on these shares.
Company
At 30 June 2005: For the Company there has been a decrease to retained earnings of $3,543,750 representing interest expense
resulting from the reclassification of redeemable converting preference shares from equity to debt. A corresponding increase to
retained earnings of $3,543,750 has also been processed which is a reversal of the dividends paid on these shares.
Group
(v) Listed shares held by the Group at 30 June 2005 were revalued under AGAAP. The revaluation has been reversed under AIFRS
and the impairment has resulted in a decrease to net profits at 30 June 2005 of $1,602,766 with a corresponding increase to
reserves of $1,602,766.
Listed shares held by the Group at 30 June 2005 were revalued under AGAAP. The revaluation has been reversed under
AIFRS resulting in decrease to other financial assets of $1,603,125 and a decrease to reserves by $1,603,125 to reflect no
revaluation amount.
The net reduction to the reserves was $359.
Company
Listed shares held by the Company at 30 June 2005 were revalued under AGAAP. The revaluation has been reversed under
AIFRS resulting in decrease to other financial assets of $1,603,125 and decrease to reserves by $1,603,125.
(vi) Under AGAAP income tax expense was calculated by reference to accounting profit after allowing for permanent differences.
Deferred tax asset was not recognised in relation to amounts recognised directly in equity such as costs associated with
capital raising.
A deferred tax liability is recognised for the difference between tax and accounting written-down value in respect of
depreciating assets.
Group
At 1 July 2004: For the Group there has been an increase in deferred tax liability of $1,292,014 and a decrease to retained
earnings of $1,292,014.
At 30 June 2005: For the Group there has been an increase in deferred tax liability of $2,109,359 and a decrease to retained
earnings of $2,109,359.
Company
At 30 June 2005: For the Company there has been an increase in deferred tax liability of $2,109,359 and an increase in
receivables of $2,109,359 to subsidiary under tax sharing agreement.
95

98. Notes for the Financial Statements
For the financial year ended 30 June 2006
Note 34. Impacts of the adoption of Australian equivalents to International Financial Reporting Standards continued
(f) Reconciliation of profit for the year ended 30 June 2005 (Company) continued
Group
A deferred tax asset arises in relation to capital raising costs recorded in equity that are deductible for taxation purposes over
five years.
At 1 July 2004: For the Group there has been an increase in deferred tax asset of $1,070,780 and an increase to equity of
$1,477,101 and decrease to retained earnings of $406,321.
At 30 June 2005: For the Group there has been an increase in deferred tax asset of $4,216,270 and an increase to equity of
$5,778,237 and decrease to retained earnings of $1,561,967.
In addition, a deferred tax asset arises where operating leases are recorded for accounting purposes on a straight-line basis,
however for tax purposes are deductible when incurred.
At 1 July 2004: For the Group there has been an increase in deferred tax asset of $646,882 and an increase to retained
earnings of $646,882.
At 30 June 2005: For the Group there has been an increase in deferred tax asset of $1,641,257 and an increase to retained
earnings of $1,641,257.
Company
At 1 July 2004: For the Company there has been an increase in deferred tax asset of $1,070,780 and an increase in equity of
$1,477,101 and decrease to retained earnings of $406,321.
At 30 June 2005: For the Company, there has been an increase in deferred tax asset of $5,933,267 and increase in equity of
$5,778,237, decrease to receivables of $1,716,997 and decrease to retained earnings of $1,561,967.
(vii) The Company’s operating leases are required to be expensed on a straight-line basis. The effect is as follows:
Group
At 1 July 2004: For the Group there has been a decrease in retained earnings of $2,156,275 and an increase in other non-current
liabilities of $2,156,275.
At 30 June 2005: For the Group there has been a decrease in retained earnings of $5,470,854 and an increase in other
non-current liabilities of $5,470,854. The Group purchased Child Care Centres Australia/Peppercorn Management Group
Limited in December 2004. The net assets did not reflect straight-line lease liability. This resulted in an increase in goodwill of
$176,729 and an increase of $75,741 in deferred tax asset and increase in other non-current liabilities of $252,470.
(viii) Under AIFRS the Group and Company are required to show gains from the sale of assets on a net basis. This change does not
affect the retained profits of the Company but requires a reclassification of $40,022,363 from expenses to revenue for the Group
and $908,552 for the Company.
Note 35. Share-based Payments
(i) Employee Share Plan
A scheme is in place where shares may be issued by the Company to employees for no cash consideration. All Australian resident
permanent employees (excluding Executive Directors) who have been continuously employed by the Group for a period of at least
one year are eligible to participate in the scheme. Employees may elect not to participate in the scheme.
Under the scheme, eligible employees may be offered fully-paid ordinary shares in A.B.C. Learning Centres Limited annually for no
cash consideration. The market value of shares issued under the scheme, measured as the average market price on the day of
issue of the shares, is recognised in the Balance Sheet as share capital and as part of employee benefit costs in the period the
shares are granted.
96

99. Consolidated Company
2006 2005 2006 2005
No. ’000 No. ’000 No. ’000 No. ’000
Number of shares issued under the plan to participating
employees during the financial year: 332 417 332 417
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Total expense arising from share-based payment transactions: 1,776 2,000 1,776 2,000
(ii) Carers Share Plan
A scheme is in place where shares may be issued by the Company to carers for no cash consideration.
Under the scheme, eligible carers may be offered fully-paid ordinary shares in A.B.C. Learning Centres Limited annually for no cash
consideration. The market value of shares issued under the scheme, measured as the average market price on the day of issue of the
shares, is recognised in the Balance Sheet as share capital and as part of employee benefit costs in the period the shares are granted.
Consolidated Company
2006 2005 2006 2005
No. ’000 No. ’000 No. ’000 No. ’000
Number of shares issued under the plan to participating
carers during the financial year: 625 406 625 406
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Total expense arising from share-based payment transactions: 4,716 2,038 4,716 2,038
(iii) Options
Options have been issued to the Key Management Personnel in the Learning Care Group, Inc. No other options have been granted.
Details of these options are outlined in note 4.
2006 2005 2006 2005
$’000 $’000 $’000 $’000
Total expense arising from share-based payment transactions: 1,139 – 1,139 –
Note 36. Additional Company Information
A.B.C. Learning Centres Limited is a listed public company, incorporated in Australia. The Company operates in Australia,
New Zealand and the United States of America.
Registered office Principal place of business
43 Metroplex Avenue 43 Metroplex Avenue
Murarrie Murarrie
Queensland, Australia 4172 Queensland, Australia 4172
97

100. Additional Stock Exchange Information
As at 15 September 2006
(a) Distribution of Holders of Equity Securities
(i) Ordinary shares
Number of holders Total ordinary shares
Size of holding in each category in each category
1 – 1,000 10,303 5,909,970
1,001 – 5,000 13,861 33,601,402
5,001 – 10,000 2,184 15,731,106
10,001 – 100,000 1,139 27,105,933
100,001 and over 165 311,118,144
27,652 393,466,555
The number of security investors holding less than a marketable parcel of 81 securities ($6.18 on 15/09/2006) is 432 and they hold
18,245 securities.
(ii) Redeemable converting preference shares
Number of holders Total RCPS shares
Size of holding in each category in each category
1 – 1,000 301 218,153
1,001 – 5,000 730 2,045,343
5,001 – 10,000 195 1,438,450
10,001 – 100,000 64 1,450,606
100,001 and over 11 6,847,448
1,301 12,000,000
The number of security investors holding less than a marketable parcel of 78 securities ($6.47 on 15/09/2006) is 5 and they hold
194 securities.
(b) The Names of the Substantial Shareholders who Have Notified the Company in Accordance with section 671B of the
Corporations Act 2001 as at 15 September 2006 Are:
Fully Paid
Ordinary shareholders Number
National Australia Bank Limited Group 28,712,230
Ausbil Dexia Limited 21,598,180
Commonwealth Bank of Australia 21,432,147
Newton Investment Management Limited 19,887,583
91,630,140
(c) Voting Rights
The voting rights attached to each class of equity securities are set out below:
(i) Ordinary Shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
98

101. (ii) Redeemable Converting Preference Shares
A preference share does not entitle its holder to vote at any general meeting of the Company except in the following
circumstances:
(a) on a proposal:
– to reduce the share capital of the Company;
– that affects the rights attached to the preference share;
– to wind up the Company; or
– for the disposal of the whole of the property, business and undertaking of the Company;
(b) on a resolution to approve the terms of a buy-back agreement;
(c) during a period in which a dividend or part of dividend of a preference share is in arrears as set out in terms of issue;
(d) during the winding up of the Company; or
(e) in any other circumstances in which the Listing Rules required holders of preference shares to be entitled to vote.
(iii) Options
There are no voting rights attached to this class of equity.
(d) Twenty Largest Holders of Quoted Equity Securities
(i) Ordinary Shares
Fully Paid
Number Percentage
1 National Nominees Limited 49,542,225 12.59
2 Westpac Custodian Nominees Limited 40,340,795 10.25
3 Citicorp Nominees Pty Limited 29,576,222 7.52
4 JP Morgan Nominees Australia Limited 21,393,583 5.44
5 ANZ Nominees Limited 18,295,474 4.65
6 Dr Le Neve Groves 16,810,500 4.27
7 Mr Edmund Groves 16,797,500 4.27
8 Cogent Nominees Pty Limited 13,656,418 3.47
9 RBC Dexia Investor Services Australia Nominees Pty Limited 6,995,820 1.78
10 Warbont Nominees Pty Ltd 6,821,283 1.73
11 Fleet Nominees Pty Limited 5,932,136 1.51
12 Abned Nominees Pty Limited 4,590,057 1.17
13 Woodross Nominees Pty Ltd 3,831,807 0.97
14 ANZ Nominees Limited 3,800,188 0.97
15 UBS Nominees Pty Ltd 3,573,166 0.91
16 Suncorp Custodian Services Pty Limited 3,396,963 0.86
17 Citicorp Nominees Pty Limited 3,234,825 0.82
18 Jimm Pty Ltd 2,962,000 0.75
19 Queensland Investment Corporation 2,544,657 0.65
20 MLEQ Nominees Pty Limited 2,335,260 0.59
256,430,879 65.17
Unquoted equity securities
Number on issue Number of holders
1,912,191* 4
Options issued as an initial incentive award to senior executives of the Learning Care Group, Inc. to take up ordinary shares.
* Number of unissued ordinary shares under the options.
99

102. Additional Stock Exchange Information
As at 15 September 2006
(ii) Redeemable Converting Preference Shares
Fully Paid
Number Percentage
1 JP Morgan Nominees Australia Pty Limited 2,306,412 19.22
2 Brispot Nominees Pty Ltd 1,166,201 9.72
3 ANZ Nominees Limited 911,734 7.60
4 Irrewarra Investments Pty Ltd 889,000 7.41
5 Fortis Clearing Nominees Pty Limited 390,654 3.26
6 Sandhurst Trustees Ltd 303,718 2.53
7 Westpac Custodian Nominees Limited 270,274 2.25
8 National Nominees Limited 219,300 1.83
9 Trim Investments Pty Ltd 155,000 1.29
10 Medical Research Foundation for Women and Babies 120,000 1.00
11 Citicorp Nominees Pty Limited 115,155 0.96
12 RBC Dexia Investor Services Australia Nominees Pty Limited 72,387 0.60
13 Caergwrle Investments Pty Ltd 70,000 0.58
14 Mutual Trust Pty Ltd 50,000 0.42
15 Volbane Pty Ltd 50,000 0.42
16 UBS Nominees Pty Ltd 47,200 0.39
17 Bond Street Custodians Limited 45,000 0.38
18 Yarranilgie Pty Ltd 42,310 0.35
19 Asset Custodian Nominees (Aust) Pty Ltd 40,000 0.33
20 Contemplator Pty Ltd 40,000 0.33
7,304,345 60.87
Company Secretary
Ms J G Bannan
Registered Office
43 Metroplex Avenue
Murarrie
Queensland, Australia 4172
Share Registry
Link Market Services Limited
Level 12
300 Queen Street
Brisbane QLD 4000
100

103. Corporate Directory
Directors Share Registry
Chairman Link Market Services Limited
Mrs Sallyanne Atkinson AO (Non-Executive) Level 12
Executive Directors 300 Queen Street
Mr Edmund S Groves Brisbane QLD 4000
Chief Executive Officer – Global Operations Telephone: +61 2 8280 7454
Dr Le Neve A Groves Facsimile: +61 2 9287 0309
Chief Executive Officer – Education Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Mr Martin V Kemp
Chief Executive Officer – Operations Financial and Accounting Advisors
(Australia and New Zealand) Harris Black Chartered Accountants
Level 2
Non-Executive Directors 262 Adelaide Street
Mr William E Bessemer Brisbane QLD 4000
Mr David J Ryan AO
The Hon. Lawrence J Anthony Telephone: +61 7 3032 0200
Facsimile: +61 7 3032 0201
Registered Office Email: info@harrisblack.com.au
43 Metroplex Avenue Website: www.harrisblack.com.au
Murarrie QLD 4172
Legal Advisors
Telephone: +61 7 3906 2000 Freehills Lawyers
Facsimile: +61 7 3908 2577 Level 42
Email: info@childcare.com.au 101 Collins Street
Website: www.childcare.com.au Melbourne VIC 3000
Corporate Advisor Telephone: +61 3 9288 1234
Austock Corporate Finance Limited Facsimile: +61 3 9288 1567
Level 1 Email: business_enquiries@freehills.com
350 Collins Street Website: www.freehills.com
Melbourne VIC 3000
Auditors
Telephone: +61 3 8601 2000 Pitcher Partners Accountants, Auditors and Advisors
Facsimile: +61 3 9670 1057 Level 21
Email: corporate@austock.com.au 300 Queen Street
Website: www.austock.com.au Brisbane QLD 4000
Telephone: +61 7 3228 4000
Facsimile: +61 7 3221 6420
Email: partners@pitcherqld.com.au
Website: www.pitcher.com.au
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