Full Year Financial Accounts

Page

Chairman's report

2

CEO's report

3

Directors' report

4

Auditor's independence declaration

19

Corporate governance statement

20

Independent audit report

28

Directors' declaration

30

Consolidated statement of profit or loss and other comprehensive income

31

Consolidated statement of financial position

32

Consolidated statement of changes in equity

33

Consolidated statement of cash flows

34

Notes to the financial statements

35

Additional securities exchange information

82

The directors of eServGlobal Limited submit herewith the financial report for the financial year ended 31 October 2014.

The names and particulars of the directors of the company during or since the end of the financial year are shown below. The directors held office during the whole of the financial year except as noted:

Name

Particulars

Duncan Lewis

Chairman

Duncan Lewis has over 30 years' of wide-ranging experience in the Technology Media & Telecommunications industry, having held senior management positions at BT and Managing Director and Chief Executive level positions at Cable and Wireless, Granada and Equant, both in the UK and internationally.

Mr Lewis is a highly experienced private equity and venture capital advisor. He has also served as a Senior Advisor to the Carlyle Group where he assisted in developing strategy and identifying investments in the telecommunications and media sectors worldwide.

He also serves as Chairman of NextiraOne nv, Chairman of niu Solutions Holdings Limited, Chairman of Goldacre Ventures, Chairman of Workshare Limited and Chairman of Mobbu Limited. Duncan is an independent director of Spirent Communications plc, of euNetworks Group Limited and JQW plc. Duncan was previously Chairman of Apsmart Limited until it was sold to Thomson-Reuters and its successor company, MPme Ltd and Chief Executive of Vislink plc from October 2008 to March 2011.

He holds an MA from Cambridge University.

Mr Lewis was appointed to the Board of Directors on 30 June 2014.

Paolo Montessori

Managing Director and Chief Executive Officer

Paolo Montessori has worked in the telecommunications industry for more than 20 years and is a well recognised figure in the global mobile VAS market with a particular focus on mobile money solutions. He has been closely involved in both commercial and solution design in the field of mobile money and payments, having led projects for numerous industry leaders.

His experience extends to the telecom and financial services industries in Australia, the Middle East, South Asia, Asia Pacific, Europe and Latin America, encompassing both emerging and developed markets where mobile money is experiencing rapid growth.

He holds a Batchelor of Arts from the University of British Columbia and a Postgraduate Diploma (Hons) in International Management from the Ecole les Roches in Switzerland.

Paolo was appointed Managing Director and Chief Executive Officer of eServGlobal on 30 April 2013.

Stephen Blundell

Chief Operating Officer and Executive Director

Stephen Blundell has nearly 20 years of experience in finance and operations. He took over the role of eServGlobal's Chief Financial Officer in 2009 and was appointed to the role of Finance Director in 2013. In December 2014 he was appointed to the role of Chief Operating Officer to support the Company's growth strategy.

Stephen has held various senior roles with leading multi-national software companies, including EMEA Director of Finance at Adobe Systems and EMEA Vice President Commercial Operations at Siemens PLM, where he drove eight quarters of unprecedented revenue growth, exceeding competitors' success and the company's own financial plans.

He holds a BA (Hons) in Accounting and Finance and is an associate member of the Institute of Chartered Accountants of England and Wales.

Stephen was appointed to the Board of Directors on 30 April 2013.

François Barrault

Non-executive Director and Chairman of the Remuneration and Nomination Committee.

François is the founder and chairman of FDB Partners, an investment and consulting firm that specializes in technology and publishing. He has previously served as CEO of BT Global services, President of BT International, and as a member of the board and the operating committee of BT Group PLC. He is also Chairman of Idate/DigiWorld Institute, the leading European think tank in TMT. He is also a Non-Executive Director of Alpha Networks, Numergy, Les Editions du Priviège, Fondation Mimi and sits on various advisory boards around the world.

His extensive experience includes key roles within Lucent Technologies such as President, Mobility International and President and CEO for the EMEA region. Prior to Lucent, he worked at Ascend Communications, where he held the position of Senior Vice President, International. He has also held executive positions within IBM, Computervision/Prime and Stratus and was co-founder and Chairman of the Board of Astria, an e-commerce software supplier.

He holds a Master of Science (D.E.A) in Robotics/AI and an E.D.P in Engineering from the Ecole Centrale de Nantes.

François has been a member of the Board since March 2003 and is Chairman of the Remuneration and Nomination Committee.

Stephen Baldwin

Non-executive Director and Chairman of the Audit Committee

Stephen is a chartered accountant with 30 years of business experience. He commenced his career with Price Waterhouse and had a decade with the firm in three different countries. He was subsequently employed in the funds management industry for many years, initially with Hambro-Grantham and then with Colonial First State, where he was that group's Head of Private Equity. He has extensive Board experience across multiple industries. Other current roles include advising one of Australia's larger superannuation funds on their global private equity program.

Stephen holds a Bachelor of Commerce (Honours) from the University of Cape Town and is a member of the Institute of Chartered Accountants of Australia.

Stephen was appointed a director and a member of the Audit and Remuneration and Nomination Committees on 25 November 2011. He was appointed as Chairman of the Audit Committee with effect from 1 May 2013.

John Conoley

Non-executive Director

John's extensive experience spans the software, hardware, IT services, telecommunications and energy markets. He began his career in the IT industry with IBM in 1983, and worked on a range of industries in technical, sales, and marketing roles. Since then, Mr. Conoley has held general management and director-level roles in small and medium-sized private and public companies. His most recent roles include: Non-executive director with IT security company Vistorm, Head of the £1.6bn B2B Energy Division at Eon, Chief Executive Officer of mobile device company Psion PLC, an international company listed in the UK. He is also currently CEO of a Private Equity backed software company based in the UK.

John holds a Bachelor of Arts (Hons) from Southampton University.

John was appointed as a Director and a member of the Audit Committee on 1 May 2013.

Tom Rowe

Company Secretary & Non-executive Director

Tom Rowe has served as Company Secretary of eServGlobal since 6 April 2011. He is a Corporate and Commercial Lawyer practicing as Special Counsel with Simpsons Solicitors principally in the areas of mergers and acquisitions, capital raising and corporate governance. Tom holds a BA LLB (Hons) from the University of Adelaide and is an Associate of the Governance Institute of Australia.

Tom was appointed to the Board on 3 March 2014.

Richard Mathews

Non-executive Chairman (resigned 3 March 2014)

Richard Mathews was the Non-executive Chairman of eServGlobal until he resigned from this role on 3 March 2014. He has over 20 years' management experience in telecommunications, software and investment. He is a founding partner of MHB Holdings. Previously, he was CEO of Mincom, Australia's largest enterprise software company, increasing the share price from $2.50 to $8.77 in a two-year period. He has also held the role of Senior Vice President, International at J.D. Edwards.

He holds a Bachelor of Commerce and a Bachelor of Science and is an Associate Chartered Accountant.

Richard resigned as a Director on 3 March 2014.

Craig Halliday

Non-executive Director (resigned 30 December 2013)

Craig was the Chief Executive Officer and Managing Director of eServGlobal until his resignation from these roles on 30 April 2013.

Prior to eServGlobal, Craig served as Executive President of Field Operations (COO) at Mincom, where he achieved record-breaking growth in both revenues and profitability. He has worked in the high-tech industry as an executive and investor since 1996 and has held senior roles including President of PeopleSoft Japan and various management positions within J.D. Edwards.

Craig holds a Bachelor of Science from Edinburgh University and is a member of the Institute of Chartered Accountants in England and Wales.

Following his resignation as Chief Executive Officer on 30 April 2013, Craig continued as an executive director and was the Chairman of the HomeSend Committee which was concluded in December 2013.

Craig resigned as a Director on 30 December 2013.

Name

Company

Period of Directorship

Duncan Lewis

Spirent PLC

2007 - Ongoing

EuNetworks Limited

2011 - Ongoing

JQW Limited

2013 - Ongoing

John Conoley

Psion PLC

28 April 2008 - 01 October 2012

Company Secretary

Principal activities

eServGlobal (LSE: ESG, ASX: ESV) offers mobile money solutions which put feature-rich mobile financial services at the fingertips of users worldwide, covering the full spectrum of mobile wallet, mobile commerce, recharge and agent management features. eServGlobal invests heavily in product development, using carrier-grade, next-generation technology and aligning with the requirements of 65 customers in 50 countries. eServGlobal is partnering with MasterCard and BICS to build the HomeSend business, the market leading international remittance service based on eServGlobal technology and enabling mobile money transfer in over 50 markets. eServGlobal has been a source of innovative solutions for mobile and financial service providers for 30 years.

Review of operations

This report is to be read in conjunction with the Chairman's review and CEO's report on pages 2 and 3.

The consolidated entity achieved sales revenue for the year of $31.3 million (2013: $31.0 million).

Earnings before interest, tax, depreciation and amortisation ("EBITDA") were $28.6 million after foreign exchange losses of $0.4 million, share based payments of $0.4 million, gain on disposal of Homesend business of $31.7 million and share of loss of associate of $2.3 million (2013: EBITDA was $7.3 million after foreign exchange gains of $8.0 million and share based payments of $0.5 million). The net result of the consolidated entity for the year to 31 October 2014 was a profit after tax and minority interest for the year of $14.1 million (2013: $10.3 million. Included in this result was an income tax expense of $13.5 million (2013: income tax credit of $5.9 million). Earnings per share were 5.6 cents (2013: 4.3 cents).

The operating cash flow for the year was a net outflow of $4.1 million. Total cash flow for the year was a net outflow of $1.3 million. Cash at 31 October 2014 was $3.7 million.

Changes in state of affairs

On 19 December 2013 the Group announced the sale of its international mobile money transfer business, HomeSend to a newly formed entity, HomeSend SRCL, which is a business venture between eServGlobal, MasterCard and BICS.

The transaction was subject to certain conditions precedent and was subsequently completed on 3 April 2014.

Following the transaction, MasterCard owns 55% of HomeSend SRCL, eServGlobal owns 35% and BICS owns 10%. Based on the initial shareholdings, MasterCard has appointed three directors to the Board of HomeSend SRCL, eServGlobal has appointed two directors and BICS has appointed one director.

MasterCard contributed cash for its interest in HomeSend SRCL with eServGlobal receiving $13.3 million in cash, which includes $5.1 million held in escrow, net of a pro rata of HomeSend SRCL estimated working capital requirements for the medium term. In addition, MasterCard has entered into a commercial agreement with HomeSend which will have an initial duration of three years and automatic yearly renewal thereafter. The commercial agreement requires MasterCard to use its best endeavours to promote the HomeSend service utilising MasterCard's sales channels.

As a result of the transfer of its Homesend business to the HomeSend SRCL, eServGlobal recognised a gain on disposal of $31.7m in 2014 based on total consideration of $44.4m less business net assets classified as held for sale and associated selling expenses. The fair value of the retained investment in Homesend SRCL is shown as an Associate investment which is subject to equity accounting.

Subsequent Events

On 23 December 2014 eServGlobal announced that it had entered into subscription agreements with existing and new Australian institutional investors for the Company to issue a total of 10,000,000 new ordinary shares ("New Shares") at A$0.55 (28.69 pence) per New Share, raising gross proceeds of AUD$5.5 million (£2.87 million) before costs (the "Placing").

The 10,000,000 fully paid ordinary shares were issued on 31 December 2014. Following the issue, the Company's total issued share capital is 264,974,052 fully paid ordinary shares of no par value.

Future developments

Details of future developments in the Group are contained in the Chairman's review and CEO's report on pages 2 and 3. To the extent that the disclosure of information regarding likely developments in the operations of the Group in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Group, this information has not been disclosed in this report.

Environmental regulations

The Group operates primarily within the technology and telecommunication sector and conducts its business activities with respect for the environment while continuing to meet the expectations of shareholders, customers, employees and suppliers.

During the year under review, the Directors are not aware of any particular or significant environmental issues which have been raised in relation to the consolidated entity's operations.

Dividends

No dividends were declared or paid during the financial year (2013: nil).

Share options

eServGlobal Employee Share Option Plan

The company has an ownership-based remuneration scheme for directors, key management personnel and employees. In accordance with the provisions of the scheme, directors and employees may be granted options to acquire ordinary shares in the company. The Board believes that the options scheme has a significant role to play in motivating employees to help ensure the continued performance of the company. The exercise of any share options is not dependent on any performance criteria, however, is dependent on a period of service relative to the vesting dates.

Share options granted to directors and senior management

During the financial year and up to the date of this report the company granted nil options to the directors and senior management of the entity (2013: 2,400,000). Further details of the executive and employee share option plan are disclosed in Note 6 to the financial statements.

Issuing Entity

Number of shares under option

Class of shares

Exercise price of option

Expiry date of options

eServGlobal Limited

4,531,945

Ordinary

$0.36

14 May 2017

eServGlobal Limited

1,500,000

Ordinary

$0.36

21 Dec 2017

eServGlobal Limited

740,000

Ordinary

$0.36

10 Jun 2018

Indemnification of officers and auditors

During the financial year, the company paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary, and all key management personnel officers of the company and of any related body corporate against any liability incurred as a director, secretary or key management personnel officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability cover and the amount of the premium.

The company has agreed to indemnify the directors of the company for any liability incurred as a director or officer, to the extent permitted by the Corporations Act 2001.

The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate, against any liability incurred by such an officer or auditor.

Board of Directors

Special Purpose Committees

Audit Committee

Remuneration and Nomination Committee

Directors

Held *

Attended

Held#

Attended

Held*

Attended

Held*

Attended

Duncan Lewis

3

3

-

-

-

-

-

-

François Barrault

11

11

-

-

-

-

7

7

Richard Mathews

3

3

1

1

-

-

-

-

Stephen Baldwin

11

11

2

2

5

5

7

7

Craig Halliday

2

1

-

-

-

-

-

-

John Conoley

11

10

-

-

5

4

-

-

Paolo Montessori

11

11

-

-

-

-

-

-

Stephen Blundell

11

11

-

-

-

-

-

-

Tom Rowe

8

8

1

1

-

-

-

-

Rounding off of amounts

The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order, amounts in the directors' report and the financial report are rounded off to the nearest thousand dollars unless otherwise indicated.

Remuneration Report

Determining remuneration policy for directors and key management personnel, and its relationship to eServGlobal's performance

The Company is listed on both the Australian Securities Exchange and the London Stock Exchange (AIM). It is an international group which is faced with all of the market pressures that flow in such circumstances. It must compete successfully with other international organisations that are substantially larger and which have the ability to draw on enormous resources. Our employees are based in diverse parts of the globe and regularly must travel to work in remote locations. The remuneration policies must be appropriate to these circumstances.

In determining the appropriate remuneration policies for the Group, the Board believes that the salary packages must be sufficient, in the international marketplace in which the Group operates, to attract, retain and motivate high calibre, hard-working, dedicated employees, who have the knowledge and skills appropriate for the business. In this regard, a component of the salary package for employees is paid after the results of a financial year are completed, and the entitlement is based primarily on the results achieved by the Group. The Board's broad policy is implemented through its Remuneration and Nominations Committee.

Elements of remuneration which are dependent on company performance

The Board believes that it is critical that the above specified employees are driven by the financial performance of eServGlobal and, as detailed below, has structured key management personnel packages so that a substantial portion of the variable component of their packages is directly linked to financial outcomes of eServGlobal. The targets are established annually and are approved by the Board at the same time as approval of the Group's business plan. The two key measures of this are: annual revenue and earnings before interest, tax, depreciation and amortisation components. This component is confirmed in conjunction with the completion of the financial statements. The CEO, COO, CTO and CSO variable component is earned in full by reference to the financial result of the company. These targets are selected to ensure alignment of shareholders' interests with key management personnel remuneration.

31 October 2013$'000

31 October 2011$'000

30 June 2011$'000

31 October 2014

$'000

Revenue

31,261

31,003

28,070

7,017

42,808

EBITDA

28,623

7,279

(8,656)

(6,186)

52,173

Net profit/(loss) after tax

14,240

10,374

(15,589)

(9,258)

39,159

31 October 2014

31 October 2011

30 June 2011

31 October 2013

31 October 2012

Share price at start of year

$0.515

$0.200

$0.520

$0.730

$0.600

Share price at end of year

$0.660

$0.515

$0.200

$0.520

$0.730

Interim dividend

-

-

-

-

-

Final dividend

-

-

-

12.1 cps

-

Capital distribution

-

-

-

16.9 cps

-

Basic earnings/(loss) per share

5.6

4.3

(8.0)

(4.7)

19.8

Diluted earnings/(loss) per share

5.5

4.2

(8.0)

(4.7)

19.8

Short-term employee benefits

Post

Employment benefits

Share based payments

Termination Benefits

Total

2014

Salary & fees

Bonus (incl. variable pay component)

Non-monetary

Superannuation

Options

$

$

$

$

$

$

$

%

Non-executive Directors 

S Baldwin

98,727

-

-

-

-

-

98,727

-

F Barrault

146,776

-

-

-

-

-

146,776

-

D Lewis (vi)

45,488

-

-

-

-

-

45,488

-

J Conoley

89,416

-

-

-

-

-

89,416

-

C Halliday (i) (iv) (v)

11,971

252,224

4,350

-

-

-

268,545

94%

R Mathews (vii)

40,000

-

-

-

-

-

40,000

-

T Rowe (viii)

49,275

-

-

-

-

-

49,275

-

Group's other Key Management Personnel

R Arame (i) (ii)

292,491

194,952

47,682

40,451

37,162

-

612,738

32%

S Blundell (i) (iii)

310,736

599,031

1,468

16,176

51,316

-

978,727

19%

J Hume

234,172

59,799

1,021

-

96,440

-

391,432

15%

P Montessori (i) (ii)

462,379

587,214

-

-

92,196

-

1,141,789

15%

Total

1,781,431

1,693,220

54,521

56,627

277,114

-

3,862,913

-

Short-term employee benefits

Post

Employment benefits

Share based payments

Termination Benefits

Total

2013

Salary & fees

Bonus (incl. variable pay component)

Non-monetary

Superannuation

Options

$

$

$

$

$

$

$

%

Non-executive Directors 

R Mathews

130,000

-

-

6,300

-

-

136,300

-

S Baldwin

91,142

-

-

-

-

-

91,142

-

F Barrault

79,422

-

-

-

-

-

79,422

-

J Brooke (i) (viii)

-

-

-

-

-

-

-

-

J Conoley (vi)

37,392

-

-

-

-

-

37,392

-

D Smart (vii)

33,360

-

-

3,002

-

-

36,362

-

Group's other Key Management Personnel

C Halliday (v) (x)

282,602

208,159

24,060

-

(48,888)

278,333

744,266

28%

R Arame (ii) (iii)

268,875

239,015

43,474

36,881

61,923

-

650,168

37%

S Blundell (ii) (iv)

263,524

-

724

14,209

72,083

-

350,540

-

P Montessori (ii) (iii) (ix)

346,329

2,098

60,410

-

90,903

-

499,740

-

J Hume

185,740

-

-

-

66,927

-

252,667

-

Total

1,718,386

449,272

128,668

60,392

242,948

278,333

2,877,999

-

Directors' shareholdings

The following table sets out each director's relevant interest in shares of the company or a related body corporate as at the end of the financial year.

Balance at 1 November

Received on exercise of options

Net other change

Balance at 31 October

No.

No.

No.

No.

Year to 31 October 2014

Richard Mathews(i)

13,286,972

-

(13,286,972)

-

Stephen Blundell

-

618,055

(618,055)

-

Craig Halliday(ii)

20,415,021

-

(20,415,021)

-

Francois Barrault

500,000

-

-

500,000

Stephen Baldwin

932,600

-

-

932,600

John Conoley

Duncan Lewis

Tom Rowe

-

-

-

-

-

-

-

-

-

-

-

-

Year to 31 October 2013

Richard Mathews(i)

16,317,275

-

(3,030,303)

13,286,972

Craig Halliday(ii)

23,445,324

-

(3,030,303)

20,415,021

Francois Barrault

500,000

-

-

500,000

James Brooke(iii)

35,153,419

-

(35,153,419)

-

Stephen Baldwin

932,600

-

-

932,600

John Conoley

-

-

-

-

Share-based payments granted as compensation

Options series

Grant date

Expiry date

Exercise price

Grant date fair value

Issued 14 May 2012 (i)

14-May-12

2017

$0.36000

$0.11

Issued 11 Feb 2013 (ii)

11-Feb-13

2017

$0.36000

$0.26

Issued 01 Jul 2013 (iii)

01-Jul-13

2018

$0.36000

$0.24

Balance at 1 November

Granted as compen-sation

Exercised

Net other change

Balance at

31 October

Balance vested at 31 October

Vested but not exercisable

Vested and exercisable at report date

Vested during the year

Vested since the end of the year

No.

No.

No.

No.

No.

No.

No.

No.

No.

No.

Year to 31 October 2014

Craig Halliday

-

-

-

-

-

-

-

-

-

-

James Hume

1,000,000

-

-

-

1,000,000

550,000

-

800,000

550,000

250,000

R Arame

1,150,000

-

-

-

1,150,000

1,000,000

-

1,150,000

1,000,000

150,000

S Blundell

1,250,000

-

618,055

-

631,945

381,945

-

631,945

1,000,000

250,000

P Montessori

1,250,000

-

-

-

1,250,000

750,000

-

1,250,000

750,000

500,000

Balance at 1 November

Granted as compen-sation

Exercised

Net other change

Balance at

31 October

Balance vested at 31 October

Vested but not exercisable

Vested and exercisable at report date

Vested during the year

No.

No.

No.

No.

No.

No.

No.

No.

No.

Year to 31 October 2013

Craig Halliday

1,500,000

-

-

(1,500,000)

-

-

-

-

-

James Hume

350,000

650,000

-

-

1,000,000

R Arame

1,000,000

150,000

-

-

1,150,000

-

-

-

-

S Blundell

1,000,000

250,000

-

-

1,250,000

-

-

-

-

P Montessori

750,000

500,000

-

-

1,250,000

-

-

-

-

Name

Number of options granted

Value of options granted

$

Number of options exercised

Value of options exercised

$

R Arame

-

-

-

-

S Blundell

-

-

618,055

126,639

P Montessori

-

-

-

-

J Hume

-

-

-

-

C Halliday

-

-

-

-

√* indicates partial compliance. Refer to further details below.

Corporate governance statement

Principle 1. Lay solid foundations for management and oversight

1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

The primary responsibilities of eServGlobal's board include:

· the establishment of long term goals of the company and strategic plans to achieve those goals;

· the review and adoption of the annual business plan and budgets for the financial performance of the company and monitoring the results on a monthly basis;

· the appointment of the Chief Executive Officer;

· ensuring that the company has implemented adequate systems of internal control together with appropriate monitoring of compliance activities; and

· the approval of the annual and half-yearly financial statements and reports.

The board meets on a regular basis, on average at least once monthly, to review the performance of the company against its goals, both financial and non-financial. In normal circumstances, prior to the scheduled monthly board meetings, each board member is provided with a formal board package containing appropriate management and financial reports.

The responsibilities of senior management including the Chief Executive Officer are contained in letters of appointment and job descriptions given to each executive on appointment and updated annually or as required.

The primary responsibilities of senior management are to:

(i) Achieve the annual business plan and budget

(ii) Ensure the highest standards of quality and service are delivered to customers

(iii) Ensure that employees are supported, developed and rewarded to the appropriate professional standards

(iv) Ensure that the company continues to produce innovative technology and leading products

Decision making in respect of the functions reserved for the board and those delegated to management is in accordance with a delegation of authority policy and procedures adopted by the board.

1.2 Companies should disclose the process for evaluating the performance of senior executives.

The performance of all senior executives is reviewed at least once a year by the Chief Executive Officer, in conjunction with the full board. They are assessed against personal and company key performance indicators established at the start of each calendar year for each individual. For more detail, refer to the Remuneration Report.

1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.

A performance evaluation for each senior executive has taken place in the reporting period in line with the process disclosed. A statement covering the primary responsibilities of the board is set out in 1.1 above. A statement covering the primary responsibilities of the senior management is set out in 1.1 above. A copy of the board charter is not publicly available.

Corporate governance statement

Principle 2. Structure the board to add value

2.1 A majority of the board should be independent directors.

The eServGlobal board consists of five non-executive directors and two executive directors. Duncan Lewis, John Conoley, Stephen Baldwin and Francois Barrault are considered to be independent directors. Tom Rowe is a non-executive director but is not considered independent due to his material association to the provider of Australian legal and company secretarial services to the company and its Australian subsidiaries.

Of the directors who resigned during the year, Richard Mathews was an independent director. Craig Halliday was not considered independent as he was the former Chief Executive Officer of the company.

.As such, during the financial year a majority of the board were independent directors.

The board is currently composed of four independent and three non-independent directors.

2.2 The chair should be an independent director.

Richard Mathews held the position of Chairman until 3 March 2014 at which time Stephen Baldwin was appointed as Acting Chairman. The current Chairman, Duncan Lewis was appointed on 30 June 2014.

At all times during the financial year and to the date of this report the Chairman has been an independent director

2.3 The roles of chair and chief executive officer should not be exercised by the same individual.

Paolo Montessori is the Chief Executive Officer and has held the position since April 2013.

2.4 A nomination committee should be established.

The Company has established a Remuneration and Nomination Committee. The members of this Committee are Francois Barrault and Stephen Baldwin. Many of the functions of the Remuneration and Nomination Committee were also carried out in conjunction with the full board.

2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.

The Chairman undertakes an annual informal evaluation process in reviewing the performance of directors and the board.

2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2

A description of the skills and experience of each director is contained in the Directors' Report.

The names of the directors considered to be independent are specified in 2.1 above.

Directors are able to take independent professional advice at the expense of the company, with the prior agreement of the chairman.

The period of office held by each director is specified in the Directors' Report.

An evaluation of the board of directors did take place during the reporting period as described at 2.5 above.

New directors are selected by and voted on by the board. The board does not have a formal policy for the nomination and appointment of directors but considers the position on merit on a case-by-case basis. Any director appointed by the board must retire at the next Annual General Meeting of the company but may submit himself/herself for re-election. Further, each year, a third of directors retire by rotation and are subject to re-election by shareholders at the Annual General Meeting.

A copy of the Remuneration and Nomination Committee charter is not publicly available.

Corporate governance statement

Principle 3. Promote ethical and responsible decision-making

3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:

· the practices necessary to maintain confidence in the company's integrity;

· the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and

· the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

eServGlobal Limited's policies contain a formal code of ethics that applies to all directors and employees, who are expected to maintain a high standard of conduct and work performance, and observe standards of equity and fairness in dealing with others. The detailed policies and procedures encapsulate the company's ethical standards.

The code of ethics is available on the company's website www.eservglobal.com.

3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and the progress in achieving them.

The company has not established a policy concerning diversity.

3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.

The company has not established measurable objectives for achieving gender diversity

3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.

The proportion of women within the organisation is: 25%

Women within whole organisation: 46

Women in senior executive positions: 29%

Women on the board: none

3.5 Companies should provide the information indicated in the Guide to reporting on Principle 3.

The company's business operations are conducted worldwide, and its Code of Ethics has been designed to accommodate the business operations of all the countries in which the company operates. The Code of Ethics complies with Principle 3.1.

Principle 4. Safeguard integrity in financial reporting

4.1 The board should establish an audit committee.

The company has established an Audit Committee.

4.2 The audit committee should be structured so that it:

· consists only of non-executive directors.

· consists of a majority of independent directors.

· is chaired by an independent chair, who is not chair of the board.

· has at least three members.

The Audit Committee comprises John Conoley and Stephen Baldwin and accordingly all members of the Audit Committee are non-executive and independent directors. Despite not having at least three members, the board believes that the Audit Committee is of an appropriate size for the company.

4.3 The audit committee should have a formal charter.

The company has adopted an Audit Committee charter.

4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4

The names and qualifications of the audit committee members and the number of meetings of the audit committee are contained in the Directors' Report.

The Audit Committee charter is not publicly available on the company's website.

The Audit Committee meets with and receives regular reports from the external auditors concerning any matters that arise in connection with the performance of their role, including the adequacy of internal controls.

In conjunction with the auditors, the Audit Committee monitors the term of the external audit engagement partner and ensures that the regulatory limit for such term is not exceeded. At the completion of the term, or earlier in some circumstances, the auditor nominates a replacement engagement partner. The Audit Committee interviews the nominee to assess relevant prior experience, potential conflicts of interest and general suitability for the role. If the nominee is deemed suitable, the Audit Committee reports to the board on its recommendation.

Principle 5. Make timely and balanced disclosure

5.1 Companies should establish written policies designed to ensure compliance with ASX listing rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

The eServGlobal board, Company Secretary and senior management are aware of the ASX Listing Rules, AIM Rules and Corporations Act disclosure requirements, and take steps to actively monitor and ensure ongoing compliance. At each board meeting, there is a separate agenda item on this topic where directors review the disclosures made by the company over the past month and consider any existing issues that may give rise to further required disclosure.

The Chairman and Chief Executive Officer continually monitor developments in the company and its business and in conjunction with the Company Secretary report any developments immediately to the board for consideration. All announcements are reviewed by the Company Secretary and/or other external advisers before release to the ASX or AIM.

The company's continuous disclosure policy is described above.

Corporate governance statement

Principle 6. Respect the rights of shareholders

6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

eServGlobal provides information to its shareholders through the formal communications processes (eg ASX & AIM announcements, annual general meeting, annual report, and shareholder letters). This material is also available on the eServGlobal website (www.eservglobal.com) and on the ASX and AIM websites.

Shareholders are encouraged to participate in the AGMs and time is set aside for formal and informal questioning of the board and senior management.

The company requests that its external auditor attend the annual general meeting and be available to answer any shareholder questions about the conduct of the audit and the preparation and content of the audit report.

6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.

The company's communications policy is described in 6.1 above.

Principle 7. Recognise and manage risk

7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

The board monitors the risks and internal controls of eServGlobal in conjunction with the Audit Committee. The Audit Committee looks to the Chief Executive Officer and Chief Financial Officer to ensure that an adequate system is in place to identify and, where possible, appropriately manage and mitigate risks inherent in the business, and to implement appropriate internal controls.

Categories of risks managed cover all major aspects of a global technology company. The details are not disclosed as this may disadvantage the company in regard to its competitors.

7.2 The board should require management to design and implement the risk management and internal control system to manage the Company's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company's management of its material business risks.

The board has required management to design and implement the risk management and internal control system to manage the company's material business risks and report to it on whether those risks are being managed effectively. Management has reported to the board as to the effectiveness of the company's management of its material business risks.

7.3 The board should disclose whether it has received assurance from the CEO [or equivalent] and the Chief Financial Officer (CFO) [or equivalent] that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

The board has received assurance from the Chief Executive Officer and the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

7.4 Companies should provide the information indicated in the guide to reporting on Principle 7.

The board has received the report from management under recommendation 7.2; the board has received assurance from the Chief Executive Officer and the Chief Financial Officer under recommendation 7.3; the company's policies on risk oversight and management of material business risks are not publicly available for the reason specified above.

Corporate governance statement

Principle 8. Remunerate fairly and responsibly

8.1 The board should establish a remuneration committee.

The Company has established a Remuneration and Nomination Committee. The members of that Committee are Francois Barrault and Stephen Baldwin.

8.2 The remuneration committee should be structured so that it:

• Consists of a majority of independent directors

• Is chaired by an independent chair

• Has at least three members.

The committee consists of a majority of independent directors.

The committee is chaired by Francois Barrault and despite not having three members the board believes the size of the committee is appropriate to discharge its mandate.

8.3 Companies should clearly distinguish the structure of non-executive directors' remuneration from that of executive directors and senior executives.

Non-executive directors, other than Tom Rowe, are paid a fixed directors fee as set out in the Directors' Report. Tom Rowe does not receive a fixed director's fee, rather Simpsons Solicitors is entitled to charge for the time Tom Rowe spends performing his duties as a non-executive director at the same hourly rate as is charged for legal services.

During the financial year, a consulting fee was paid to a company controlled by Francois Barrault for services provided to the company in relation to managing the search assignment for the appointment of the current Chairman, involvement in the negotiation of the HomeSend JV and time spent representing the company at conferences. The Board approved the consulting fee as the services provided in were in excess of what was reasonably expected of a non-executive director.

Senior executives remuneration packages, which consist of base salary, fringe benefits, incentive schemes (including performance related bonuses), superannuation and pension payments and entitlements upon retirement or termination, are reviewed annually with due regard to performance.

8.4 Companies should provide the information indicated in the guide to reporting on Principle 8.

 The members of the Remuneration and Nomination Committee and its operation are described above.

There are no schemes for retirement benefits, other than superannuation, for non-executive directors. Non-executive directors do not receive options or bonus payments.

A copy of the Remuneration and Nomination committee charter is not publicly available.

Note

Year Ended

31 October 2014

$'000

Year Ended

31 October 2013

$'000

Revenue

2

31,261

31,003

Direct cost of sales

(13,359)

(11,789)

Gross profit

17,902

19,214

Other income

2

30

55

Gain recognised on disposal of HomeSend business

9

31,684

-

Foreign exchange (loss)/gain

3

(449)

8,024

Research and development expenses

(2,151)

(2,717)

Sales and marketing expenses

(5,218)

(4,683)

Administration expenses

(10,900)

(12,614)

27

(2,275)

-

28,623

7,279

Amortisation expense

3

-

(1,875)

Depreciation expense

3

(584)

(468)

28,039

4,936

Finance costs

3

(284)

(441)

Profit before tax

3

27,755

4,495

Income tax (expense)/benefit

4

(13,515)

5,879

Profit for the year

14,240

10,374

Other comprehensive income/(loss)

Items that may be reclassified subsequently to profit or loss:

Exchange differences arising on the translation of foreign operations (nil tax impact)

(471)

(4,475)

Total comprehensive income for the year

13,769

5,899

Profit attributable to:

Equity holders of the parent

14,102

10,248

Non-controlling interest

138

126

14,240

10,374

Total comprehensive income attributable to:

Equity holders of the parent

13,599

5,784

Non-controlling interest

170

115

13,769

5,899

Earnings per share:

Basic (cents per share)

23

5.6

4.3

Diluted (cents per share)

23

5.5

4.2

Note

31 October 2014

$'000

31 October 2013

$'000

Current Assets

Cash and cash equivalents

30(a)

3,679

4,909

Trade, other receivables and work in progress

10

27,604

21,846

Inventories

12

173

74

Current tax assets

4

98

4,272

31,554

31,101

Assets classified as held for sale

8

-

7,754

Total Current Assets

31,554

38,855

Non-Current Assets

Investment in associate

27

27,777

-

Property, plant and equipment

13

3

482

Deferred tax assets

4

1,701

10,325

Goodwill

14

3,568

3,523

Other intangible assets

15

5,443

-

Other receivables

9

4,939

-

Total Non-Current Assets

43,431

14,330

Total Assets

74,985

53,185

Current Liabilities

Trade and other payables

16

11,512

8,678

Borrowings

17

3,000

3,000

Current tax payables

4

2,023

150

Provisions

18

1,174

1,265

Deferred Revenue

19

1,117

1,989

Total Current Liabilities

18,826

15,082

Non-Current Liabilities

Provisions for employee benefits

18

865

749

Total Non-Current Liabilities

865

749

Total Liabilities

19,691

15,831

Net Assets

55,294

37,354

Equity

Issued capital

20

110,574

106,695

Reserves

21

(4,155)

(4,090)

Accumulated Losses

22

(51,349)

(65,451)

Parent entity interest

55,070

37,154

Non-controlling interest

224

200

Total Equity

55,294

37,354

Issued Capital $'000

Foreign Currency Translation Reserve

$'000

Employee equity-settled benefits Reserve

$'000

Retained Earnings (Accumu-lated Losses) $'000

Attributable to owners of the parent

$'000

Non-controlling Interest

$'000

Total $'000

Consolidated

Balance at 1 November 2013

106,695

(6,563)

2,473

(65,451)

37,154

200

37,354

Profit for the year

-

-

-

14,102

14,102

138

14,240

Other comprehensive income (loss) for the year, net of income tax

Exchange differences arising on translation of foreign operations

-

(503)

-

-

(503)

32

(471)

Total comprehensive income for the year

-

(503)

-

14,102

13,599

170

13,769

Issue of new shares (Note 20)

3,879

-

-

-

3,879

-

3,879

Payment of dividends

-

-

-

-

-

(146)

(146)

Equity settled payments

-

-

438

-

438

-

438

Balance at 31 October 2014

110,574

(7,066)

2,911

(51,349)

55,070

224

55,294

Balance at 1 November 2012

90,770

(2,099)

2,017

(75,699)

14,989

85

15,074

Profit/(Loss) for the year

-

-

-

10,248

10,248

126

10,374

Other comprehensive income (loss) for the year, net of income tax

Exchange differences arising on translation of foreign operations

-

(4,464)

-

-

(4,464)

(11)

(4,475)

Total comprehensive income (loss) for the year

-

(4,464)

-

10,248

5,784

115

5,899

Issue of new shares (Note 20)

15,925

-

-

-

15,925

-

15,925

Equity settled payments

-

-

456

-

456

-

456

Balance at 31 October 2013

106,695

(6,563)

2,473

(65,451)

37,154

200

37,354

Note

Year Ended

31 October 2014

$'000

Year Ended

31 October 2013

$'000

Cash Flows from Operating Activities

Receipts from customers

24,290

23,851

Payments to suppliers and employees

(30,100)

(31,058)

Refund of research & development tax credits

2,738

-

Interest and other finance cost paid

(282)

(591)

Net income tax paid

(720)

(1,088)

Net cash used in operating activities

30(c)

(4,074)

(8,886)

Cash Flows From Investing Activities

Proceeds from HomeSend business divestment, net of transaction costs

5,418

-

Interest received

11

11

Payment for property, plant and equipment

(76)

(111)

Software development costs

(6,327)

(1,839)

Net cash used in investing activities

(974)

(1,939)

Cash Flows From Financing Activities

Proceeds from issue of shares

20

3,889

16,802

Payment for share issue costs

20

(10)

(877)

Dividend paid by controlled entity to non-controlling interest

(146)

-

Proceeds from borrowings

-

3,000

Repayment of borrowings

-

(7,200)

Net cash provided by financing activities

3,733

11,725

Net (Decrease)/Increase In Cash and Cash Equivalents

(1,315)

900

Cash At The Beginning Of The Year

4,909

3,794

Effects of exchange rate changes on the balance of cash held in foreign currencies

85

215

Cash and Cash Equivalents At The End Of The Year

30(a)

3,679

4,909

1.

SUMMARY OF ACCOUNTING POLICIES

Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

The financial statements include the consolidated financial statements of the Group.

Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards ('IFRS').

The financial statements were authorised for issue by the directors on 29 January 2015.

The financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The company is a company of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

1.

SUMMARY OF ACCOUNTING POLICIES (continued)

1.

SUMMARY OF ACCOUNTING POLICIES (continued)

1.

SUMMARY OF ACCOUNTING POLICIES (continued)

1.

SUMMARY OF ACCOUNTING POLICIES (continued)