Annual Report 2007 For personal use only - ASXNet proﬁt after tax grew 9% to $18.8 million. Recurring revenue levels continue to be high reinforcing the strength of the underlying

Annual Report 2007

Look at us in a different light

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Look at us in a different

MYOB is committed to reducing our environmental footprint and ensuring that the growth of our business is sustainable in every sense.

As you will see, this year we present to you a shorter printed Annual Report on mixed source paper using world’s best practice ISO 4001 Environmental Management Systems, together with the full financial report on CD (inserted inside back cover).

This year, you, our shareholders, also have the option of downloading the full MYOB Annual Report, directly from our website, www.myob.com/investors . We are continually striving to improve our communications with you and hope you will support our drive towards sustainable growth.

Enjoy!

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Contents

Introduction 1

Look at us in a different light 2

Broader 2

Deeper 4

Stronger 6

Longer 8

Joint Report from the Chairman and CEO 10

Operating Review 12

Financial Summary 14

Board of Directors 16

Financial Statements 18

Shareholder Information 23

Notes to Shareholders 24

Company Directory 25

Since 1991 MYOB has transformed the way owner operated businesses work.

We continue to challenge ourselves to find better ways to liberate and empower business owners.

In this quest MYOB itself continues to change and evolve.

MYOB has become broader, deeper, stronger and longer.

We invite you to look at us in a different light.

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2 MYOB Annual Report 2007

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MYOB started at the core of every business – their financial management. We’ve changed

how business owners view their finances by making them accessible to every business owner (not just those who know accounting jargon).

We’ve increased visibility of their business results by providing instant financial insights – business owners are no longer ‘in the dark’ until ‘month end’.

We’ve broadened our reach across a business’ operations to connect more internal processes and more effectively connect businesses with their customers and suppliers.

For example, integrating a retailer’s ‘front office’ -an MYOB point-of-sale system - with their ‘back office’, an MYOB financial management system.

Or accelerating the receipt of customer payments or making outgoing payments by connecting MYOB M-Powered services with an MYOB financial management system.

MYOB Annual Report 2007 3

McGree Earthmoving now has its payments really moving. They’ve cut back on processing time and improved cashflow management by connecting M-Powered Payments with their MYOB financial system.

“ The solution has been quite liberating as it has enabled me and the office staff to quickly group, plan and send all payments on a specified

date even when I’m out on site at a project.”– Kevin McGree, Business Owner, McGree Earthmoving. McGree Earthmoving has more than 40 years experience. They employ up to 20 people, including contractors, and work on projects of between $50,000 and $2M.

MYOB is delivering a growing range of ways to truly help liberate and empower business owners

BroaderF

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MYOB seeks to really understand our clients intimately, to understand

their needs. Then we go deeper to discover and address their underlying business challenges.

For instance, MYOB is a leading supplier of solutions to accounting practices. MYOB offers firm-wide operations systems incorporating client management, document and workflow management and tax and compliance processing systems.

In delivering these solutions MYOB people work so closely with clients that they virtually become part of their team, contributing ideas to drive productivity and gaining insights into a firm’s underlying challenges.

Through this client intimacy MYOB has discovered the significant effect of the skills shortage in the accounting profession. Many firms are swamped with lower-value compliance work and don’t have capacity to grow their higher value business advisory services.

These client insights led directly to the creation of MYOB Accountants Resourcing, an outsourced compliance processing service.

Using accredited professionals in our Malaysian offices we’re lifting the compliance burden off many accounting practices in Australia, New Zealand and the United Kingdom, liberating them to perform more valuable client work.

DeeperWe’re developing deeper relationships and solving underlying business challenges

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relationships

“ We use MYOB Accountants Resourcing to outsource the accounts preparation and taxation work and then focus on the client’s specific business issues – business planning, property acquisition and so on – ourselves.”

“But it’s the time that’s freed up in the practice that really makes the difference. Never underestimate the power of getting in front of clients – you always get more work when you meet face-to-face.”– Manish Sundarjee, partner at Kidmans Partners, an Australia wide accounting practice, which employs 27 people.

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High performance operations in established markets plus good positions in fast developing Asian markets ensure MYOB is building a stronger growth business

The combination of strong market position, a high portion of recurring revenue and excellent cash flow

are indicators of the strength of MYOB’s established operations.

This high performance is exemplified by MYOB operations in Australia and New Zealand in which MYOB is a clear market leader for businesses and accountants and enjoys a high portion of revenue from recurring sources. This is principally from business essentials such as payroll and tax preparation systems.

These largely non-discretionary and recurring spends provide financial strength in both booming and weak economic times.

MYOB is also well positioned for growth in the fast developing Asian markets, including Singapore, Malaysia and Hong Kong, with a particular focus on China. Its burgeoning economy is generating a wave of new entrepreneurs. They’re young, computer savvy and keen to emulate the best business practices of developed nations.

MYOB has built a strong operational base in China and is investing in growing brand awareness and distribution channels. It’s an exciting time showing much of the hallmarks of MYOB’s early days in Australia coupled with a faster rate of market growth and ultimately a market that will be many times larger.

Stronger6 MYOB Annual Report 2007

performanceperformance

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“ MYOB Premier helps us identify our most valuable clients and most productive employees which are the keys to our growth. Importantly it allows us to spend less time managing the financial side of things. Which means we can put our focus into the creative work for our clients. We’re also free to pursue our passion - growing our business into something really special.”– Maurice Chan, Managing Director of MK2. One of Hong Kong’s most progressive advertising agencies. MK2 is now expanding into mainland China. Founded in 1992, MK2 employs 20 people and creates multilingual advertising for clients in Hong Kong and mainland China.F

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A values driven business that respects its team, clients, community and the environment is a business that performs stronger for longer

Our strong recurring revenue and ongoing client growth are driven by relationships and reputation.

Beyond products and services, it has been how MYOB has conducted its business that continues to enhance those relationships and our reputation, now and for the longer-term.

MYOB runs its business with respect for the present and the future.

For our people that means helping them produce their best work today and providing them with career and personal growth opportunities.

For our clients it’s ensuring we always add much more value to their business than we take. We avoid today’s ‘quick sale’ if it comes at the cost of the long-term relationship.

In our communities we encourage and support entrepreneurs, helping owner operated businesses survive and thrive, and through them driving the local economy and employment.

We’ve always respected our environment and have run a ‘green’ business well before it was fashionable. If you have a long-term outlook,respecting the environment has always made business sense.

By operating with respect and living our values, MYOB has become a business that will perform stronger for longer.

Longer MYOB Annual Report 2007 9

MYOB ValuesThese were created in an interactive process with our team in 1998 and have remained unchanged.

Vision

We are creative, innovative and resourceful. We continually strive to be the best.

Integrity

We act with integrity and honesty in everything we do.

Communication

We communicate openly by exchanging information and actively listening to all stakeholders.

Team Spirit

We value and recognise the contributions of our colleagues, both locally and globally. We enjoy working together to achieve outstanding results and total job satisfaction.

Excellence

We act professionally and pursue excellence in all areas of our business.

Corporate Responsibility

We act responsibly within our community and care for the environment.

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Very strong financial performance

Revenue of $205.6 million for the year ended 31 December 2007 represented growth of 13% compared with 2006.

The strong growth combined with a continued focus on costs and margin improvement resulted in EBITDA of $77.7 million for the full year to 31 December 2007.

Net profit after tax grew 9% to $18.8 million.

Recurring revenue levels continue to be high reinforcing the strength of the underlying business and your company continues to generate very strong cash flows. This is particularly crucial in turbulent economic times, where these defensive attributes of our business put us in a good position to remain strong.

Ongoing strength of established business

Our commitment to lifting the burden from business owners in all our markets remains as strong today as it has always been.

MYOB’s core markets continue to be critical to our success. In 2007, there was strong revenue growth in both the Accountants Division and the Business Division.

The company’s strong results for the year were driven by a very robust year of growth from the Australian business in 2007, with EBITDA growth in Australia of 21%.

Reflecting the continued performance of our established business, underlying EBITDA margin (that is, operating EBITDA margin before investing in our ‘start-up’ portfolio of investments in China and MYOB Accountants Resourcing) exceeded 40%.

Investing for future growth

Crucial to your company’s future success is the ongoing program of investments in a range of initiatives as we continue to broaden our capabilities beyond compliance to deliver further value for our clients. Today our company is focused on a number of regions presenting strong opportunities and our business around the world continues to grow and expand.

In 2007 we further expanded our reach into the mid-market – firms with 20-200 employees – and embedded the acquisitions of Comacc and Exonet in Australia and New Zealand with the ‘Enterprise’ suite of offerings.

Our investment in Asia, including China, continued to move forward and show good levels of growth in revenue, as we expanded our product range.

We deepened the relationship we have with clients through services like MYOB Accountants Resourcing, providing a pool of trained and qualified accountants to complete routine compliance work on behalf of our clients’ clients. This service shows a lot of promise and is now available in Australia, New Zealand and being piloted in the UK.

Much work was undertaken in 2007 on potential acquisitions, and the pipeline remains healthy across a number of regions and scale of potential businesses. We have maintained, and will continue, our disciplined approach to ensuring any

Remaining true to the vision of liberating and empowering businesses to help them achieve success has been central to the continued growth of MYOB in 2007. Ensuring the company’s future success through ongoing and sustainable investments in new initiatives has also been critical this year.

Joint Report from the Chairman and Chief Executive Officer

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acquisition meets our strategic fit and pricing criteria.

Capital distribution

The Directors have provided for a fully franked dividend of 3.25 cents per share for the 2007 year. The dividend will be paid on 18 April 2008 to all shareholders on the register at the book’s closing date of 7 April 2008.

Continued improvements in profitability and a strong cash flow position underpinned by excellent recurring revenue indicate that your company’s debt capacity continues to increase. Following a detailed review of the company’s capital position and prospects, the Directors have resolved to lift the future dividend payout ratio to a target of 80% of reported earnings (up from 50%), reflecting increased confidence in the long term cash flow of the business along with an increasing level of franking credits.

Further, the Directors have resolved to undertake a distribution (comprising a return of capital and a special dividend) of $80 million, or 20.8 cents per share, subject to your approval at our forthcoming AGM, on 24 April 2008.

A healthy outlook

The outlook for 2008 is for ongoing robust growth in the more established businesses, supplemented by the portfolio of new growth initiatives.

We will continue to broaden our capabilities beyond ‘software in a box’ to deliver new value for our clients in an online global world.

Meanwhile, we continue to explore new ways to ensure our growth is sustainable – for you, our shareholders, for our clients, employees and the physical environment, and the communities in which we operate.

Importantly for you, our shareholders, we expect to see continued good improvement in revenue and profits for some years to come, and therefore continued shareholder returns.

We are pleased to present to you the 2007 Annual Report and invite you to join us at the Annual General Meeting on Thursday 24 April 2008.

SIMON MCKEONChairman

CRAIG WINKLERChief Executive Officer

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Australia

Throughout 2007, MYOB’s Australian business worked hard to continue to have a positive impact on the operations of many small and increasingly medium sized businesses, as well as accountants in public practice.

We continued to expand and diversify the ways in which we reach out to new businesses, and in 2007 this included:

• Continued growth in the number of professional partners that resell our products and provide related services to our clients

• Expanded market share through traditional retail sales channels, reaching 68%, according to GfK market statistics

• ‘Prepare for the best’: our successful brand advertising campaign, which aimed to appeal to the aspirational elements of owning and running a business

• A new focus on our mid-market business partners

• Continued improvement in our direct sales teams

• A doubling of sales through our website

We also expanded our product range. Of particular note was the launch of MYOB Enterprise Payroll, which complements MYOB Exonet in our mid-market suite, and provides a solution for growing small businesses that need a richer, deeper, more sophisticated payroll application.

This was an important milestone in our mid-market strategy which is to leverage our brand and scale to offer superior business management applications and a higher level of service at a more competitive price than mid-market businesses (20 – 200 employees) have ever seen.

Our relationship with accountants in public practice also strengthened throughout 2007. We now serve a record number of accountants in public practice and provide an even wider range of products and services to meet their evolving needs. Of note is the success we have had in MYOB Accountants Resourcing, more than doubling in 2007 to become the leading provider of outsourced compliance services in the Australian market.

We also hit some important internal milestones, with the rollout of a new client management platform. Throughout 2008, this will allow us to continue to improve our client service levels with a particular emphasis on developing online service capabilities.

We close 2007 proud of our achievements: robust growth in new client numbers, continued double digit revenue growth with strong margin improvement; and optimistic about our outlook.

New Zealand

For MYOB’s New Zealand operations, 2007 was a year of change, consolidation of recently acquired operations, and revenue growth of 13%.

Our focus on better servicing client needs was rewarded, with continued improvements in our client satisfaction survey results.

The Enterprise Division within New Zealand was formed through the amalgamation of the MYOB Comacc Payroll and MYOB Exonet operations in mid year. Both operations produced increased growth over the year.

We launched MYOB Accountants Resourcing to the New Zealand market in 2007 with considerable success. The tight labour market is forecast to continue for some time, particularly for skilled labour. This provides us with a great opportunity to leverage our brand and provide scalable solutions to accountants in public practice, providing additional production capacity to their practice at a competitive rate with high quality output.

Our established accountants business continues to grow with our major clients committing to MYOB’s range of accountant products after a tender review process.

The Business Division introduced direct selling via our website in 2007. This has increased each month and will continue to grow as the market responds with increased online usage.

Operating Review

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Market share in retail continued to be strong throughout the year and our position in this channel remains very good with GfK statistics recording an average share of retail sales in the mid 80% range.

Key milestones during 2007 included:

• Successful initial launch of the global CRM system

• Consolidation of Auckland operations into a single facility from three separate sites and a remote training centre

• Strong client acquisition and sales in the established business, as well as in the newer mid market segment

• New additions to the management team with new Managing Director and GM Business Division

The New Zealand business is well placed to continue strong revenue growth and continue delivering substantial new value for clients in the year ahead.

Asia

In 2007 there was a continued focus on investment and building of the MYOB brand and business model.

In China, localisation of products and alignment to the regulations and workflow practices for SMEs was a high priority, and 12 products were successfully released throughout the year. The MYOB small business accounting product range is now available in a localised, Chinese language format.Due to the size and diversity of China we

have focused our energy on the major and fastest growing economic regions of Beijing, Shanghai and Guangzhou along with our operational headquarters of Chengdu. Towards the end of the year, by combining these with our successful operation in Hong Kong, we created the ‘Greater China Region’. This approach enables the company to more fully leverage our knowledge, skills and experience of the Hong Kong team in China.

In Hong Kong, 2007 was a very good year, seeing revenue growth of 13%, and importantly, achieving the significant milestone of operating profitability. Likewise, Malaysia and Singapore also showed excellent growth compared with 2006, with new client registrations up 24% and 60% respectively. Brand recognition is continuing to grow in all countries and MYOB is the market leader in both Hong Kong and Singapore.

The Accountants Division in Asia continued with a very positive performance. We have increased the team’s size and experience and started to supply solutions into a broader range of accounting practices. Our practice management solutions continue to be well received by the larger accounting practices and we have had a net increase in our client base during 2007.

In summary, the company’s operations in Asia are well poised for continued strong growth in both Divisions and the outlook for 2008 is positive.

Europe

The European business had a healthy 2007, with regional revenue growth of 16%.

The Business Division experienced revenue growth of 50%, with slower growth in the second half compared with the first half, due to the seasonal skew to the first half. Continued investment in brand and channel/partner development in the second half of 2007 saw EBITDA for the Business Division down by £0.6 million.

The loss of the Lloyds TSB contract was a particular disappointment for the business. As a result of this, the company realised a writedown on the intangibles associated with the Dosh acquisition in 2006 of $1.0 million.

The Accountants Division maintained its strong market position, with revenue growth of 13%. Within this, the Irish operations achieved stellar growth on 2006. The history of excellent client retention rates and cross-sell within the existing base continued. As a result, EBITDA grew 15% benefitting particularly from the enhanced product set, improved client management and service processes, and a focused marketing effort.

The Accountants Division finished the year well, signing a number of large contracts and delivering an excellent 30% growth in orders for the year. The healthy sales pipeline and order backlog at the end of the year bode well for 2008.


Australia Strong growth in new initiatives – Accountants Resourcing and mid-market

New Zealand Revenue growth of 13% and better servicing client needs

Asia Now market leader in Singapore and Hong Kong

Europe Stellar growth in Ireland and healthy overall revenue growth of 16%

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Financial Summary

Total Operating Revenue ($ million)

0 30 60 90 120 150 180 210

1997 24.0

1998 35.8

1999 45.0

2000 115.0

2001 63.4

2002 75.7

2003 88.2

2004 122.1

2005 166.0

2006 182.3

2007 205.6

Operating EBITDA (pre-specific costs) ($ million)

0 10 20 30 40 50 60 70 80

1997 7.7

1998 11.8

1999 15.0

2000 40.7

2001 15.4

2002 26.1

2003 31.9

2004 42.9

2005 60.4

2006 64.1

2007 77.7

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12 Months to 31 December ($ million) 2005 2006 2007

Operating revenue (from continuing operations) 161.2 182.3 205.6

Operating EBITDA 60.4 64.1 77.7

Operating EBIT 27.7 22.8 29.4

Profit before tax 25.5 25.7 28.8

Taxation expense (8.0) (8.4) (10)

Profit after tax from continuing operations 17.5 17.3 18.8

Earnings per share 4.20 4.49 4.93

Fully franked dividends (declared) per share (cents) 4.00* 3.00 3.25

Adjusted EBIT ($ million)

0 5 10 15 20 25 30 35 40

2001 6.05

2002 8.07

2003 13.19

2004 10.73

2005 19.02

2006 22.04

2007 34.81

Operating Cashflow ($ million)

-10 0 10 20 30 40 50

2001

2002 13

2003 15

2004 11

2005 29

2006 31

2007 41

(5)

*includes special dividend of 1.25 cents per share

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Board of Directors

Simon McKeonBCom, LLB, FAICDIndependent Non-Executive Chairman

Simon joined the MYOB Board at the end of 2005 and has been Chairman since April 2006. He is Executive Chairman of Macquarie Group Limited’s Melbourne office. Simon practised as a solicitor with Blake Dawson Waldron in Sydney prior to joining Macquarie Bank, and is a Fellow of the Australian Institute of Company Directors. Simon is President of the Federal Government’s Australian Takeovers Panel and also Chairman of MS Research Australia, the Association of Independent Schools in Victoria, Melbourne Cares and the Federal Government’s Point Nepean Community Trust.

Simon is the Chairman of the Remuneration and Nomination Committees and a member of the Audit Committee.

Craig WinklerMBAChief Executive Officer

Craig has been involved in software programming and business consultancy since 1984 and in 1991 co-founded the business now operated by MYOB Limited. Since that time Craig has been responsible for the technical development of products and expansion of markets. His experience includes product development for international markets, domestic and international business acquisitions and integration of these businesses.

Craig is a member of the Remuneration and Nomination Committees.

Colin HensonFCPA, Dip Law (BAB), FCIS, FCIM, FAICDIndependent Non-Executive Director

Colin joined the MYOB Board in August 2004 following the merger with Solution 6, on which Board he served previously. Colin has worked in a range of industries from brewing to electronics over 35 years, the last 15 of which have been in company reconstruction roles. Colin is currently Chairman of ERG Limited, Chairman of Permo-Drive Technologies Limited, Chairman of Hedley Leisure and Gaming Property Partners Limited and Chairman of BHA Holdings Pty Ltd.

Colin is a member of the Audit and Remuneration Committees.

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Title


John StewartBBus, FCA, FAICDIndependent Non-Executive Director

John was appointed to the Board of MYOB Limited in April 1999. He is a Chartered Accountant and a former Chairman of the New South Wales Branch of the Institute of Chartered Accountants in Australia. He is the Chief Executive Officer of an engineering consultancy firm as well as a Director of the Australian Committee for UNICEF Limited.

John is Chairman of the Audit Committee and a member of the Remuneration and Nomination Committees.

Christopher WilliamsFAleX, F.FinIndependent Non-Executive Director

Christopher joined the MYOB Board in June 2004, bringing expertise in strategic marketing, the SME market and customer value management process design. He retired as senior executive of the National Australia Bank Group in 2002 after more than a decade of senior strategic positions at a regional and global level. He then became Director and subsequently Chairman of Traffion Technologies. Christopher is a Fellow of the Financial Services Institute of Australia, Fellow of the Australian Institute of Export and a Member of the Australian Institute of Company Directors.

Christopher is member of the Remuneration Committee.

Christopher LeeBA, MBAExecutive Director

Christopher retired as an Executive Director of MYOB LTD on 27 April 2007 having held this position since 9 April 1999. In 1982 Chris co-founded Teleware Inc, a company specialising in the development of microcomputer software for online financial services. After spearheading the original development of the MYOB Accounting software, Chris became president of Teleware Inc in 1991. Following a series of ownership changes, Chris acquired equity in and became a Director of group entities in 1996.

Robert ResideCompany Secretary

Robert Reside was appointed Company Secretary in August 2001. He is a lawyer with a background in private and corporate practice. He has been MYOB Limited’s Group Counsel since 2000.

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Income Statement FOR THE YEAR ENDED 31 DECEMBER 2007

Note CONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

Revenue 5 207,136 183,943 35,720 34,053

Cost of sales 6 (a) (25,626) (23,950) - -

Gross profit 181,510 159,993 35,720 34,053

Gain / (Loss) on disposal of non-current assets (179) 4 (217) -

Marketing expenses (10,963) (11,011) (44) (63)

Staff related expenses (65,858) (57,520) (9,605) (8,215)

Telecommunications (3,611) (3,872) (1,402) (1,026)

Occupancy (5,905) (5,846) (158) (646)

Depreciation and amortisation expenses 6 (a) (48,241) (41,283) (501) (694)

Specific items 6 (b) (1,069) 3,223 (113) 738

Other expenses (15,887) (15,949) (1,569) (1,448)

Finance costs 6 (a) (199) (316) (106) -

Share of loss of associate 15 (825) (1,708) (825) (1,708)

Profit before income tax 28,773 25,715 21,180 20,991

Income tax (expense) / benefit 7 (9,962) (8,387) 555 732

Net profit for the period 18,811 17,328 21,735 21,723

Attributable to:

Minority interest (199) (117) - -

Members of MYOB Limited 19,010 17,445 21,735 21,723

Cents Cents

Earnings per share for profit attributable to theordinary equity holders of the company

8

Basic earnings per share 4.93 4.49Diluted earnings per share 4.80 4.44

The above income statement should be read in conjunction with the accompanying notes.


Financial Statements

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Balance Sheet AS AT 31 DECEMBER 2007

Note CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

ASSETSCurrent AssetsCash and cash equivalents 10 30,428 26,009 17,236 13,630 Trade and other receivables 11 17,320 14,672 61,289 32,038 Inventories 12 1,243 872 - - Other current assets 13 6,677 8,428 4,153 4,516 Total current assets 55,668 49,981 82,678 50,184

Non-current AssetsOther financial assets 14 - 607 - 607 Investment in associates accounted for using the equity method 15 7,420 6,303 7,420 6,303 Investment at cost 16 - - 328,256 327,955 Deferred income tax asset 7 16,601 13,485 2,263 2,616 Property, plant and equipment 17 15,421 16,129 43 543 Intangible assets 18 273,670 272,132 - - Total non-current assets 313,112 308,656 337,982 338,024 TOTAL ASSETS 368,780 358,637 420,660 388,208

LIABILITIESCurrent LiabilitiesTrade and other payables 19 19,458 18,982 73,487 49,080 Unearned revenue 20 36,661 33,990 - - Interest-bearing loans and borrowings 21 899 1,558 - - Income tax payable 3,092 3,796 2,673 3,013 Provisions 22 10,713 11,148 1,254 2,826 Total current liabilities 70,823 69,474 77,414 54,919

Non-current LiabilitiesInterest-bearing loans and borrowings 21 - 1,359 - - Deferred income tax liabilities 7 22,993 18,127 10 2 Provisions 22 2,127 2,862 229 526 Total non-current liabilities 25,120 22,348 239 528 TOTAL LIABILITIES 95,943 91,822 77,653 55,447 NET ASSETS 272,837 266,815 343,007 332,761

EQUITYEquity attributable to equity holders of the parentContributed equity 23 (a) 226,951 228,647 226,951 228,647 Retained earnings 24 (a) 39,047 31,609 10,290 127 Reserves 24 (b) 6,875 5,144 105,766 103,987 Parent interests 272,873 265,400 343,007 332,761 Minority interests 25 (36) 1,415 - - TOTAL EQUITY 272,837 266,815 343,007 332,761

The above balance sheet should be read in conjunction with accompanying notes.


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Financial Statements (Cont.)

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Stat

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or p

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nly


Title

Cash Flow Statement FOR THE YEAR ENDED 31 DECEMBER 2007

Notes CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

Cash flows from operating activitiesReceipts from customers 206,445 184,419 9,610 10,779 Payments to suppliers and employees (158,778) (149,670) (10,686) (9,657)Dividends received - - 25,500 20,780 Borrowing costs 6 (a) (199) (316) (106) - Income tax (paid) / received (8,205) (5,035) (5,862) 1,246 Interest received 5 1,498 1,685 874 1,181 Merger integration costs 6 (b) - (471) - (471)

Net cash flows from operating activities 40,761 30,612 19,330 23,858

Cash flows from investing activitiesProceeds from sale of property, plant and equipment 37 - - - Proceeds from equity return on investments - 5,876 - - Receipts from subsidiaries - - 45 1,053 Purchase of property, plant and equipment 17 (8,921) (6,625) - (228)Purchase of remaining minority interest (3,529) - - - Capitalised internal software costs 18 (6,471) (8,128) - - Purchase of intangible assets 18 (80) (135) - - Purchase of investments (1,942) (11,311) (2,501) (22,466)

Net cash flows used in investing activities (20,906) (20,323) (2,456) (21,641)

Cash flows from financing activitiesProceeds from issue of shares 23 (b) 2,100 992 2,100 992 Share buy back 23 (b) (3,690) (8,558) (3,690) (8,558)Payment of share buy back cost 23 (b) - (9) - (9)Payment of capital return advisory cost 23 (b) (106) - (106) - Proceeds from borrowings 8,000 - - - Repayment of borrowings (10,018) (6,496) - - Dividends paid by parent entity 9, 24 (11,572) (15,696) (11,572) (15,696)

Net cash flows from/(used in) financing activities (15,286) (29,767) (13,268) (23,271)

Net increase / (decrease) in cash and cash equivalents 4,569 (19,478) 3,606 (21,054)Net foreign exchange differences (150) (8) - - Cash and cash equivalents at beginning of period 26,009 45,495 13,630 34,684

Cash and cash equivalents at end of period 10 30,428 26,009 17,236 13,630

The above cash flow should be read in conjunction with the accompanying notes.



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Shareholder information

Key Dates

Ex-entitlement date for final dividend 1 April 2008Record date for final dividend 7 April 2008Final dividend paid 18 April 2008Annual General Meeting 24 April 2008Half year end 30 June 2008

Australian Securities Exchange listing

MYOB Limited ordinary shares are quoted on the Australian Securities Exchange (ASX). The stock code under which the shares trade is ‘MYO’. Trading results are published in most large Australian daily newspapers.

Communications

Enquiries or notifications by shareholders regarding their shareholdings or their dividends should be directed to MYOB Limited’s share registry:

Computershare Investor Services Pty LtdYarra Falls, 452 Johnston Street, Abbotsford, Victoria 3067

Telephone: (within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000Facsimile: +61 3 9473 2500

Mailing: GPO Box 2975 EE, Melbourne Victoria 3001 E-mail: [email protected]: www.computershare.com.au

Shareholders communicating with the share registry should advise them that the enquiry relates to MYOB Limited shares. When writing to the share registry, they should quote their Shareholder Reference Number as it appears on their share certificate(s) or the Holder Identification Number (HIN) as it appears on their Holding Statement, along with their current address.

Registered Office

12 Wesley Court, Burwood East,Victoria, 3151Tel: +61 3 9222 9797 Fax:+613 9222 9798 www.myob.com

Company Secretary

Robert Reside

Voting Rights

At meetings of shareholders (subject to the Constitution of MYOB Limited):i. Each shareholder entitled to vote may either vote in person, by proxy, by representative or by attorney;ii. On a show of hands, each shareholder present in person, by proxy, by representative or by attorney has one vote; andiii. On a poll, each shareholder present in person, by proxy, by representative or by attorney shall have one vote for every share held by

that shareholder. In the case of joint holdings, only one joint holder may vote and, if both joint holders attend the meeting, only the first named in the register of shareholders may vote.


Shareholder Information

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Note to Shareholders

Save your money by receiving shareholder updates and notices electronically

You will have seen that this year’s Annual Report has reduced the cost to you of paper – by printing only a concise Report, with the financials contained on CD-Rom, as well as helping our environment. We would like to remind you that you can register to receive notifications about Company announcements, annual and periodic reports, and other Company information from MYOB Limited by email. By registering for this service, you can be kept up-to-date with significant Company announcements as they happen. Sending you information electronically means we can further eliminate the cost of sending paper – good for shareholders (it saves money) and for the environment.

Register today by visiting the share registry at www.computershare.com and follow these easy steps:

1. Click on ‘Securityholders’.2. Click on ‘Register now’.3. Type ‘MYOB Limited’ into the ‘Company

Name’ box and enter your personal security information – Holder Identification Number (HIN) or Security Reference Number (SRN); postcode – and click ‘Submit’.

4. Follow the prompts to register, if you are already a registered member move on to Step 5.5. On left hand side navigation menu under ‘Manage’ select ‘Communication Options’.6. Select which publication type you wish to receive electronically, enter your email address in the box provided and click ‘Submit’.

You will be sent a confirmation email acknowledging your selections. When you receive it, just click ‘Reply’ to confirm your details, then ‘Send’. It’s as easy as that.

Register now to receive future MYOB Company information by email.

This service is run by our share registry, Computershare Investor Services Pty Limited. If you have any queries please contact the registry on 1300 850 505.

Conserve resources – consolidate your shareholding now

If you currently hold separate shareholdings in MYOB Limited, you may also wish to consider consolidating your shareholdings into one account. This way, we can avoid sending you multiple copies of documentation in the future.

To consolidate your shareholdings, you will simply need to visit our share registry at www.computershare.com and complete the following steps:

1. Click on ‘Download a form’.2. Click and download the ‘Request to Consolidate Holdings’ form found under ‘Holder Amendments’.3. Complete this form and return it to the share registry.

Please contact Computershare on 1300 850 505 if you have any queries about consolidating your shareholdings.

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Company Directory

Directors

Simon McKeonIndependent Non-Executive Chairman

Craig WinklerChief Executive Officer

John StewartIndependent Non-Executive Director

Colin HensonIndependent Non-Executive Director

Christopher WilliamsIndependent Non-Executive Director

Company Secretary

Robert Reside

Registered Office

12 Wesley Court Burwood East VIC Australia 3151

Website

www.myob.com

Auditors

Ernst & YoungErnst & Young Building8 Exhibition StreetMelbourne VIC Australia 3000

Share Registry

Computershare Investor Services Pty LimitedYarra Falls452 Johnston StreetAbbotsford VIC Australia 3067

Notice of Annual General Meeting

The Annual General Meeting of the Company will be held on Thursday 24 April 2008 at MYOB Head Office: 12 Wesley Court Burwood East VIC Australia 3151.

This document is printed on FSC certified paper using world’s best practice ISO14001 Environmental Management Systems.

Supporting the growth of responsible forest management worldwide.MK6451/0208

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Directors’Report

MYOB Limited

Year ended 31 December 2007

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Directors’ Report (Cont.)

The Directors of MYOB Limited submit their report for the year ended 31 December 2007.

Principal activitiesThe principal activities within the MYOB Group during the period were the development and publishing of software and the provision of services for small and medium enterprises, including accountants in public practice.

Consolidated result ($’000)

The consolidated profit for the period attributable to the members of MYOB Limited was: 19,010

EmployeesThe Group had 1,254 employees as at 31 December 2007 (2006: 1,131 employees).

DividendsDividends paid or declared for payment are as follows:

Fully franked dividend of 3.00 cents per share for the year ended 31 December 2006 as declared by the Directors on 13 February 2007 and paid 20 April 2007 11,572

Fully franked dividend of 3.25 cents per share for the year ended 31 December 2007as declared by the Directors on 11 February 2008 and payable on 18 April 2008 (Not recognised as a liability) 12,528

Review of operationsFor the 12 months ended 31 December 2007 the MYOB Group reported operating revenue from continuing operations of $205.6 million, up 12.8% compared with the year ended 31 December 2006. MYOB achieved an underlying EBITDA margin in 2007 of 37.8%. MYOB’s profit from continuing operations before income tax, specific items, share of loss of associate, depreciation and amortisation increased by 21% to $77.7million (up from $64.1 million in 2006).

Included in the result is amortisation of product development of $29.0 million and acquired intangibles of $9.8 million. During 2007 MYOB continued to invest in the business with expenditure on product development of $32.3 million and equipment of $15.4 million.

In addition, the Company made gains or incurred charges on a number of specific items in relation to recent investments. These included a $1.0 million loss on the impairment of Dosh intangibles and $0.8 million as the Company’s share of losses of 45% owned Net Return. Further, some outstanding legal matters were resolved that had been inherited as part of the Solution 6 acquisition.

The Directors have provided for a final dividend of 3.25 cents per share fully franked. The dividend will be paid on 18 April 2008 to all shareholders on the register at the books closing date of 7 April 2008.

As a result of the strong cash position and access to significant debt capacity to fund appropriate acquisitions, the Directors have proposed to undertake a distribution to shareholders in the amount of $80 million or 20.79 cents per ordinary share, comprised of:

a. a pro-rata capital reduction of $69.393 million (being 18.03 cents per share); and

b. a special dividend, fully franked, of $10.624 million (being 2.76 cents per share).

Payment of the entire distribution (i.e. both the special dividend and the pro-rata capital reduction) will be contingent upon shareholder approval for the pro-rata capital reduction being obtained.

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Significant changes in state of affairsSignificant changes in the state of affairs of the MYOB Group occurred during the period:

a. On 4 January 2007, MYOB New Zealand Ltd, a subsidiary of MYOB Limited acquired the remaining 25% stake in Exonet New Zealand. The acquisition of the remaining 25% is part of MYOB’s investment in expanding its share of the enterprise market; and

b. On 18 May 2007, MYOB Limited acquired the remaining 49% outside equity in the Accountants Resourcing group. The acquisition of the remaining 49% of Accountants Resourcing Holdings Pty Ltd provided greater scope for further expansion of this service to other markets. Subsequent to this MYOB has leveraged the Accountants Resourcing business by expanding operations into New Zealand and the United Kingdom.

In the opinion of the Directors there were no other significant changes in the state of affairs of the consolidated entity that occurred during the period under review not otherwise disclosed in this report or the consolidated financial statements.

Significant events after balance dateMYOB will undertake a distribution to shareholders in the amount of $80 million or 20.79 cents per ordinary share, comprised of:

a. a pro-rata capital reduction of $69.393 million (being 18.03 cents per share); and

b. a special dividend, fully franked, of $10.624 million (being 2.76 cents per share);

Shareholder approval for the distribution is to be sought at the Annual General Meeting (“AGM”) on 24 April 2008. Payment of the entire distribution (i.e. both the special dividend and the pro-rata capital reduction) will be contingent upon shareholder approval for the pro-rata capital reduction being obtained.

There are no other matters or circumstances that have arisen since the end of the period which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

Likely developments and future resultsIt is expected that MYOB will continue to grow revenues, improve operating EBITDA margins and hold product development spend relatively flat over the coming years. As a result, strong growth in EBIT (adjusted for product development spend) and cash flow from operations is expected.

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Directors’ interests in the shares and options of the company and related bodies corporateAt the date of this report the interests of the Directors in the shares and options of the Company and related bodies corporate were:

Name of Director

MYOB Limited

Ordinary Shares Held Director Options Exercisable at

Directly Indirectly $0.50 $0.66 $1.24

Mr Simon McKeon 102,236 269,307 - - -

Mr John Stewart - 302,913 - - -

Mr Christopher Williams 25,335 98,349 - - -

Mr Colin Henson - 98,349 - - -

Mr Craig Winkler 3,500,000 105,224,044 - - 1,800,000

Directors’ meetings The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the period were:

Name of Director Full Meetings of Directors

Meetings of Committees

Audit Remuneration Nomination

AttendedHeld/

Eligible AttendedHeld/



Eligible

Mr Simon McKeon 12 12 6 6 5 5 3 3

Mr John Stewart 12 12 6 6 5 5 3 3

Mr Christopher Williams 11 12 4 5 4 5 - -

Mr Colin Henson 12 12 6 6 4 4 - -

Mr Craig Winkler^ 8 12 - - 4 5 2 3

Mr Chris Lee 3 3 - - - - - -

^ Mr Winkler took long service leave from 1 May to 31 July 2007 and hence was not available for Board meetings during that period.

As at the date of this report, the Company had an Audit Committee, Remuneration Committee and a Nomination Committee.

Committee membershipMembers acting on the committees of the Board during the year were:

Audit Remuneration Nomination

Mr Simon McKeon Mr Simon McKeon^ Mr Simon McKeon^

Mr John Stewart^ Mr John Stewart Mr John Stewart

Mr Christopher Williams# Mr Christopher Williams Mr Craig Winkler

Mr Colin Henson Mr Colin Henson*

Mr Craig Winkler

# Appointed 13 February 2007* Appointed 13 February 2007^ Chairman

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Remuneration ReportThis report outlines the remuneration arrangements in place for Directors and executives of MYOB Limited and its controlled entities (the Group), and provides the disclosures which meet the remuneration reporting requirements of the Corporations Act 2001. This report also provides the disclosures required by accounting standard AASB 124 Related Party Disclosures.

Remuneration Philosophy

The performance of the Group depends upon the quality of its Directors and executives. To create value the Group must attract, motivate and retain highly skilled Directors and executives.

To this end, the Group embodies the following principles in its framework:

• provide competitive rewards to attract high calibre executives;• link executive rewards to shareholder value;• allocation of a significant portion of executive remuneration ‘at risk’, dependent upon meeting pre-determined performance

benchmarks;• establish appropriate, demanding performance hurdles in relation to variable executive remuneration; and• encourage Directors to take a high portion of their fees in shares.

Remuneration Committee

The Board is responsible for determining and reviewing compensation arrangements for the Directors, the Chief Executive Officer and the executive team. The Board has established a Remuneration Committee comprising four non-executive Directors and the Chief Executive Officer. A non-executive Director chairs all meetings.

The Remuneration Committee reviews and makes recommendations to the Board regarding the:

• appointment and compensation arrangements for the Directors, executive Directors and senior management of the Group (including, without limitation, incentive, share option and other benefit plans and service contracts);

• general remuneration policies and practices for the Group; • recruitment and termination policies within the Group; and • Group’s superannuation requirements.

Remuneration Structure

In accordance with best practice corporate governance, the structure of non-executive Directors’ and executives’ remuneration is separate and distinct.

Non-Executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive Directors shall be determined from time to time by a general meeting. The latest determination was at the 2005 Annual General Meeting when shareholders approved an aggregate remuneration of $350,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed and approved every three years. The Board considers advice from external consultants and national benchmarking data when undertaking the review process.

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The current annual base fees for non-executive Directors are as follows:

• Chairman - $75,000• Directors - $40,000

All non-executive Directors who chair a Board committee receive an additional yearly fee of $7,500 per chairmanship. Members of the committees receive an additional yearly fee of $5,000 per committee.

Compulsory superannuation contributions of 9% of fees are paid on behalf of each director in addition to the fees. There is no cap on the superannuation contributions by MYOB Limited. Non-executive Directors are encouraged to hold shares in the Company and can elect to sacrifice fees for shares in the MYOB Deferred Share Plan. Under ASX Listing Rules, any issue of shares to Directors is required to be approved by shareholders.

Remuneration of Non-Executive Directors for the Year Ended 31 December 2007

The remuneration of non-executive Directors for the year ending 31 December 2007 is detailed below:

Name of Non-Executive Director

Short-term Employee Benefits Post Employment Total

Cash Salary Sacrifice Superannuation

Mr Simon McKeon 2007 9,500 85,500 8,550 103,550

2006 39,579 42,750 7,410 89,739

Mr John Stewart 2007 5,750 51,750 5,175 62,675

2006 5,750 51,750 5,175 62,675

Mr Christopher Williams 2007 8,886 40,500 4,445 53,831

2006 4,500 40,500 4,050 49,050

Mr Colin Henson 2007 8,886 40,500 4,445 53,831

2006 4,500 40,500 4,050 49,050

Mr Graeme Pearson 2007 - - - -

2006 3,675 28,500 2,850 35,025

Total Remuneration 2007 33,022 218,250 22,615 273,887

2006 58,004 204,000 23,535 285,539

Executive and Executive Director Remuneration

Objective

The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group and so as to:

• reward executives and employees for company, business unit and individual performance against targets set by reference to appropriate benchmarks;

• align the interests of executives and employees with those of shareholders;• link reward with the strategic goals and performance of the Company; and• ensure total remuneration is competitive by market standards.

Structure

The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the Chief Executive Officer and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such executives on a periodic basis by reference to relevant employment market conditions and external consultants, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality executive team.

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Remuneration consists of the following key elements:

• fixed remuneration;• variable remuneration;

- variable pay and short term incentives; - equity plans and long term incentives; and

• post employment benefits.

The arrangements for fixed and variable remuneration are established for each executive and executive Director by the Remuneration Committee. The Committee also review the overall remuneration strategy for the Group and its application by executives to all employees.

Fixed Remuneration

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

Fixed remuneration for executives and executive Directors is reviewed annually by the Remuneration Committee and the process consists of a review of the Group, business unit and individual performance, relevant comparative remuneration in the market and internal and, where appropriate, external advice on policies and practices. The Committee has access to external advice independent of management.

All employees, including executives and executive Directors are given the opportunity to receive their fixed (primary) remuneration in a variety of forms, including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue administration cost for the Company.

Superannuation/pension contributions on behalf of staff are made at the local statutory rate.

Variable Pay and Short Term Incentives (STI)

The objectives of the Group’s variable pay programs are to link the achievement of the Group’s operational targets and profitability with the remuneration received by all staff.

Profit Share Plan

All employees, including executives, are eligible to participate in the Profit Share Plan. Under the plan, an amount of up to 10% of Group earnings before tax and interest is set aside for payment to employees.

The profit share amount is divided by the total remuneration of the Group to arrive at a profit share amount as a percentage. Each employee automatically receives 50% of the profit share percentage multiplied by their remuneration for the period (known as the team portion). To be eligible for the other 50% of profit share (known as the excellence portion), the employee’s business unit must have achieved its key performance indicators and the individual employee must have received a performance rating of at least “achieves objectives” for the period. The amount of profit share paid increases the higher the individual’s performance rating. Individuals with a rating of “developing” or who are still in their first three months of employment are eligible to half the 50% payment assuming business unit indicators have been met.

Subject to the Board’s discretion, profit share is paid every six months following the release of the half or full year results. Employees and executives who are entitled to receive any other form of short term incentive payments are only eligible to receive the team portion of the payment.

The profit share percentage for 2007 was 4.0%.

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Short term incentives

In addition to the Profit Share Plan, the Group offers a short term incentive (STI) component to selected employees, managers and executives. The STI program is to link the achievement of the Group’s operational targets with the remuneration received by the executives and employees charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the employee to achieve the operational targets and such that the cost to the Group is reasonable in light of market practice and total remuneration.

Actual STI payments granted to an employee depend on the extent to which specific operating targets set at the beginning of the period are met. The operational targets consist of a number of key performance indicators covering both financial and non-financial measures of performance. Typically included are measures such as revenue, EBITDA (earnings before interest, tax, depreciation and amortisation), client satisfaction, client numbers, employee turnover and product delivery. The Group has predetermined benchmarks which must be met in order to trigger payments under the STI scheme.

Equity Plans and Long Term Incentives

The objective of the equity plans and long term incentives (LTI) is to create opportunities for employees to participate as equity owners in the Company based on company performance and other relevant factors, and to reward key staff and executives in a manner which aligns this element of remuneration with the creation of shareholder wealth.

Consideration is given on an annual basis (and at other times as the Remuneration Committee deems appropriate) to LTI grants, using the employee share and option plans.

All employees are entitled to participate in share offers when the Board determines such offers should be made. The form of the share offer depends on local regulations and tax laws. In Australia, eligible employees are able to be offered shares with a restriction on trading of these shares for three years. Past offers have been made on the basis of a number of free shares offered to employees, with a matching offer from the Company for further share subscriptions by staff. No general offer of shares was made in 2007.

Option grants are only made to executives and selected employees who are able to significantly influence the generation of shareholder wealth and thus have a direct impact on the Group’s performance. Individual participation in such grants is determined based on the:

• strategic significance of the role and outcomes achieved;• impact on strategic outcomes in terms of special achievements or requirements;• future potential and succession planning requirements; and• performance and personal effectiveness in achieving outstanding results.

During 2007, MYOB Limited issued the following options:

Grant Date Vesting Date Expiry Date Exercise Price No. of Options

No. of Grantees

3 May 2007 3 May 2010 3 May 2011 - 1,066,772* 26

3 May 2007 3 May 2010 3 May 2011 - 1,851,063 178

3 May 2007 3 May 2010 3 May 2011 - 5,698,377* 36

* 6,765,149 options issued during the year were subject to performance hurdles. Details of the performance hurdles are contained further in this report.

The Company introduced “zero exercise price options” or “ZEPOs” in 2006. These became the standard long term incentive mechanism. Performance hurdles were applied to the ZEPOs granted to key executives.

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Remuneration of Executives for the Year Ended 31 December 2007

During the year the following persons were the executives with the greatest authority for the strategic direction and management of the Group and comprise the key management personnel for the purposes of disclosure under AASB 124 Related Party Disclosures and Class Order CO 06/50.

Name of Executive Current Title Period of Responsibility

Current Executives

Mr Craig Winkler Chief Executive Officer & Executive Director Full year

Mr Matthew Critchley Chief Operating Officer - Asia Full year

Mr Simon Martin Chief Financial Officerand Corporate Strategy Executive

Full year

Mr Tim Reed Managing Director, Australiaand Global Product Strategy Executive

Full year

Mr Matt Lynch Managing Director, New Zealand From 16 April

Mr John Moss General Manager, Product Management and Corporate Development

From 15 January

Mr Jason Noorman Group Manager, Product Development Full Year

Mr Robert Reside Company Secretary and Group Counsel Full year

Previously specified Executives

Mr Richard Allen Managing Director, Europe From 1 January to 26 October

Mr David Lowe General Manager, Product Management From 1 January to 31 August

Mr Chris Lee Executive Director From 1 January to 27 April

In addition to the above, the following executive, whilst not key management personnel in accordance with AASB 124 Related Party Disclosures, should be included in the executive remuneration report due to the fact that he is among the five highest remunerated executives during the year (in accordance with Class Order CO 06/50):

• Mr Simon Crompton – General Manager, Accountants Division Europe

He held this position for the whole year.

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Employment Agreements

All service agreements for executives are unlimited in term but may be terminated by written notice from either party or by the employing entity within the Group making a payment in lieu of notice. The service agreements outline the components of the remuneration paid to executives and require the remuneration of executives to be reviewed annually. The service agreements do not require the Group to increase base salary, pay a short term incentive (excluding profit share), make termination payments or offer a long term incentive in any given year.

In the event of retrenchment, the executives listed in the table below are entitled to the written notice or payment in lieu of notice as provided in their service agreement. The employment of the executives may be terminated without notice or payment in lieu of notice in some circumstances. Generally, this could occur where the executive:

• is charged with a criminal offence that is capable of bringing the organisation into disrepute;• is declared bankrupt;• breaches a provision of their employment agreement;• is guilty of serious and wilful misconduct; or• unreasonably fails to comply with any material and lawful direction given by the company.

All executives are required to agree to a restraint of trade clause post employment to ensure that valuable knowledge and experience is not accessed by competitors through poaching of staff. Most executives are entitled to STI payments based on performance against key performance indicators.

The table below sets out the key employment terms for key management personnel:

Name of Executive Notice Period Restraint Period Incentives as a % of Base Salary

Company Employee ShortTerm

Long Term Incentive

SpecialLTI

Executive Director

Mr Craig Winkler 6 months 3 months 6 months post employment N/A Option grants N/A

Current Executives

Mr Matthew Critchley 3 months 3 months 6 months post employment 25% 25% 100%

Mr Simon Martin 6 months 3 months 6 months post employment 25% 25% 100%

Mr Tim Reed 3 months 3 months 6 months post employment 25% 25% 100%

Mr Robert Reside 6 months 3 months 12 months post employment N/A 20% 100%

Mr Jason Noorman 3 months 3 months 6 months post employment 20% 20% 100%

Mr Matt Lynch 3 months 3 months 6 months post employment 25% 25% 100%

Mr John Moss 3 months 3 months 6 months post employment 20% 20% 100%

Mr Simon Crompton 3 months 3 months 6 months post employment 20% 20% 100%

Long Term Incentives are satisfied by the issue of options. The value is set as a percentage of base salary and the amount granted is calculated by reference to the five day VWAP of the MYOB share price prior to issue less the exercise price of options, normally zero.

Short Term Incentive Payments for the year ended 31 December 2007

The amount of short term incentive is set in a range based on performance against key operational indicators which are set as part of the planning process in the year prior. Each indicator is given a weighting and a range in determining payments at the end of the year.

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The table following sets out the key performance targets set by the Remuneration Committee for 2007 for executives eligible for STI.

Performance Condition Reasons for Use Method Used to Assess

Revenue Absolute revenue targets are set for each business to emphasise the importance of achieving budget and ensure each business is stretching for growth.

Revenue achieved versus plan.

Earnings Before Interest, Taxation, Depreciation and Amortisation margin before intra group transfers

MYOB seeks to maintain a high level of profitability on revenue, with a close focus on costs. All executives are charged with the close management of expenses and finding new ways to become efficient in the delivery of services and products to our clients. A target EBITDA margin is set for each business each year, balancing a focus on efficiency with investment in the business to drive growth.

EBITDA margin versus planned margin or achievement of an absolute EBITDA amount.

Group Earnings Before Interest and Taxation

This measure links performance to the overall Group operational result.

Group EBIT achieved versus plan.

New revenue This allows the measure of innovation in particular in sourcing new revenue streams.

New revenue from sources not in the income statement in 2006.

Client Survey Results The views of our clients are extremely important to us.

Satisfaction rating percentage versus planned.

Staff Retention Employees are crucial to our success and account for around 70% of our costs. Strong staff retention maintains business efficiency, impacting revenue and costs.

Staff retention over the year versus planned retention.

Staff Satisfaction Survey Staff are surveyed twice annually to assess factors contributing to their engagement.

Satisfaction rating percentage versus planned.

In addition to the above, each of the executives may have specific, role-based objectives for delivery during the course of the year. These are also a factor of STI achievement, however they are considered commercially sensitive.

Long Term Incentives (including Special issues) for the year ended 31 December 2007

Long term incentives are satisfied by the grant of options. Options are granted at the discretion of the Board based on recommendations by the Remuneration Committee. Options are issued by MYOB Limited and each option entitles the holder to subscribe for one fully paid ordinary share in the entity under the terms and conditions specified.

The table on the next page sets out the option grants made to each executive during the year. There were no options granted as equity compensation to non-executive Directors during the year. For some executives, their service agreements set out a target LTI value of up to 100% of base salary (eg: special LTI’s). The target value is based on the face value of the instrument used, that is, in the case of options, the difference between the share price at the date of grant and the option exercise price.

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The Company introduced “zero exercise price options” or “ZEPOs” in 2006. These became the standard long term incentive mechanism. Performance hurdles were applied to the ZEPOs granted to key executives.

Standard LTI options will only vest on completion of a continuous three year service period with MYOB (or one of its subsidiaries) from the time of grant of the options AND if the following performance hurdles have been met:

1. Outperformance of the S&P200 accumulation index for a period of 10 consecutive business days in the six months either side of the vesting date. This is an all or nothing hurdle, and

2. Growth in adjusted EBIT (EBIT after adding back amortisation of intangibles and PD/PM and China loss, less PD/PM spend) of minimum 25% and scaling to 100% on achievement of 30% CAGR.

During 2007, the company launched a major initiative, Accelerate Innovation, targeted at transforming the business over the following three years. In recognition of the major imperative, the board resolved to make a special once off issue of ZEPO’s to team members charged with delivering this program over that period. This special LTI option grant will only vest on completion of a continuous three year service period with MYOB (or one of its subsidiaries) from the time of grant of the options AND if the following performance hurdles have been met:

1. Grow the number of clients by 25% across the Group,

2. Grow revenue per client employee by 25%,

3. Achieve a cash EBIT* of 3.75 x 2006 cash EBIT, and

4. By generating a return on capital employed (ROACE)** of over 15%.

* Cash EBIT is the sum of the previous 12 months EBITDA, adding back share based payments expense and then deducting cash spend on product management, product development, IT development, client management platform and capital expenditure on plant and equipment.** ROACE is the full year Cash EBIT divided by the average closing total Assets after deducting Cash.

The above will form the basis of the hurdles for the LTI - effectively in 4 tranches, subject to achievement of a minimum cash EBIT of A$50m in 2009.

The fair value of each option was estimated on the date of the grant using the Binomial Approximation, Black Scholes/Merton and Monte-Carlo Simulation option pricing models.

The assumptions used at each relevant valuation date were as follows:

Grant Date 03 May 07

Dividend Yield 2.59%

Expected Volatility 26.83%

Historical Volatility 26.83%

Risk-free interest rate 6.03%

Expected life of option (days)

Tranche 1 1,096

Tranche 2 1,096

Tranche 3 1,096

The dividend yield reflects the assumption that future dividend yields will reflect the current dividend yield at the grant date. The expected volatility reflects the assumption that the historical volatility is indicative of future volatility at the grant date. The risk-free interest rate was determined as the Commonwealth Bond rate for the expected life of the option at the grant date. The expected life of the options is the period from the grant date to the exercise date and does not reflect anticipated exercise patterns. Where a performance condition applies to the options exercise an independent assessment of the condition was applied as a discount.

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Rem

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For

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Rem

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sona

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Notes relating to the tables of Remuneration Details for the Year Ended 31 December 2006 and 2007:

1. Salary represents amounts paid in cash during the financial year.

2. Non-monetary benefits are valued in accordance with the cost to the Group for the provision of motor vehicles, insurance, parking and related fringe benefits tax where items are on a salary sacrifice basis.

3. Short term incentives to be settled in cash for the current performance period accrual and prior performance periods over or under accruals. Short term incentive performance conditions are detailed above.

4. Superannuation includes the employer’s contributions which are recognised on a deemed basis.

5. Executives may elect to receive some of their short term incentive or base salary in the form of MYOB shares rather than cash through participation in the MYOB Deferred Employee Share Scheme. Such shares vest immediately and are valued in accordance with the market value of MYOB Limited shares at the grant/purchase date.

6. Options have been issued based on the criteria contained above in this report. The fair value of each option was estimated on the date of the grant using the Binomial Approximation, Black Scholes/Merton and Monte-Carlo Simulation option pricing models depending on whether the option has market hurdles. The assumptions used at each relevant valuation date are contained in Note 29.

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Indemnification and insurance of directors and officersDuring the period the Company paid an insurance premium indemnifying each of the Directors and officers of the economic entity against all liabilities to another person that may arise from the position as directors or officers of the Group, except where the liability arises out of criminal or dishonest conduct or behaviour involving a lack of good faith. The agreement stipulates that the Group will meet the full amount of such liabilities, including costs and expenses. The total amount of insurance contract premiums paid was $82,457 (2006: $44,103).

RoundingThe amounts contained in this report and in the financial statements have been rounded off under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the Class Order applies.

Tax consolidationMYOB Limited and its 100% owned Australian subsidiaries are a tax consolidated group.

Tax effect accounting by members of the tax consolidated groupMembers of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their taxable profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes.

The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries' inter-company account with the tax consolidated group head company, MYOB Limited. The group has applied the ‘stand alone' approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group.

Corporate governanceIn recognition of the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of corporate governance. The Company’s corporate governance statement is contained in the annual report.

Auditor independence and non-audit servicesThe Directors received the following declaration from the auditor of the Company:

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Liability limited by a scheme approved underProfessional Standards Legislation.

Auditor’s Independence Declaration to the Directors of MYOB Limited

In relation to our audit of the financial report of MYOB Limited for the financial year ended 31December 2007, to the best of my knowledge and belief, there have been no contraventions of theauditor independence requirements of the Corporations Act 2001 or any applicable code ofprofessional conduct.

Ernst & Young

David PetersenPartnerMelbourne11 February 2008

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

Ernst & Young received or are due to receive $70,413 for the provision of tax and other services to Group entities during the year.

Signed in accordance with a resolution of the Board of Directors:

SIMON MCKEON CRAIG WINKLER Chairman Chief Executive Officer MYOB Limited MYOB Limited

Dated at Melbourne this 11th day of February 2008

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CorporateGovernance

MYOB Limited


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Corporate Governance (Cont.)

The Company is firmly committed to ethical business practices, a safe workplace and compliance with the law. We pursue the highest standard of ethical conduct in the interests of our shareholders and all other stakeholders and implement all appropriate corporate governance principles and practices. More information concerning the matters disclosed in this report may be obtained from the Company’s website at www.myob.com.au/investor

Compliance with the ASX Corporate Governance Council Best Practice RecommendationsThe ASX Listing Rules require companies to disclose certain information concerning corporate governance in their annual report and to provide a statement outlining the extent to which they have followed the 10 ASX Best Practice Recommendations (‘Recommendations’) in the reporting period. At the date of this report, MYOB considers that it complies with all of the Recommendations as is disclosed in this statement. A cross-reference to each of the required items of disclosure is included at the conclusion of this section.

Composition of the BoardThe composition of the Board is determined in accordance with the following principles and guidelines:

• the Board should comprise at least five Directors, the majority of whom shall be Non-Executive Directors;• the Chairperson must be a Non-Executive Director;• the Board should comprise Directors with an appropriate range of qualifications and expertise; and• the Board shall meet at least once every second month and follow meeting guidelines set down to ensure all Directors are made

aware of, and have available, all necessary information to participate in an informed discussion of all agenda items.

Board Member Selection CriteriaThe recommendation and nomination of potential new Directors is done through the Nomination Committee.

The Board as a whole then considers and decides on the selection and appointment of new members. Directors consider the appropriate skills and characteristics required by the Board to maximise its effectiveness and assess the blend of skills, knowledge and experience necessary for the present and future needs of the Company. When a vacancy exists, the full Board may use the assistance of external advisers in seeking nominations and deciding on the most suitable candidates. New Directors are supplied with a letter of appointment detailing their obligations and terms of engagement.

MYOB’s Constitution provides for new Directors appointed by the Board to stand for election by the shareholders at the following Annual General Meeting and for all Directors, other than the Chief Executive Officer, to stand for re-election on a rotation basis not exceeding three years.

The Chairman is selected by the Board from the Non-Executive Directors and is responsible for efficient conduct of Board business.

Board ResponsibilitiesThe Board acts on behalf of, and is accountable to, the shareholders. It seeks, however, to identify not only the expectations of the shareholders, but also the expectations of the community, the regulatory bodies and any other ethical expectations and obligations considered relevant to the operation of the business.

The specific responsibilities of the Board include:

• approving the strategic direction, policies and budgets of the Company and ensuring that these are followed;• approving major investments and monitoring the return of those investments;• monitoring financial performance, including approval of the annual and half year financial statements and reports;• appointing the Chief Executive Officer and monitoring the performance of the Chief Executive Officer and senior management;• overseeing the remuneration, development and succession planning for the Chief Executive Officer and senior management, and

ensuring that appropriate human resource management systems are in place;• ensuring appropriate risk management systems are established and reports on performance are regularly reviewed;

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• reviewing and approving the Company’s compliance systems and corporate governance principles;• ensuring that the Company provides continuous disclosure of information to the investment community, and that shareholders

have available all information they reasonably require to make informed assessments of the Company’s prospects;• overseeing the Company’s commitment to its values, sustainable development, the environment and the health and safety of

employees, contractors, clients and the community; and• enhancing and protecting the reputation of the Company.

The responsibility for the operation and administration of the consolidated entity is delegated by the Board to the Chief Executive Officer and the Executive Team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess their performance.

The details of the matters reserved for the Board is available on the website.

Board IndependenceThe Company’s policy requires that the majority of the membership of the Board should comprise Non-Executive and Independent Directors. A Director’s independence is assessed in accordance with the guidelines set out in the Recommendations. Simon McKeon, John Stewart, Colin Henson and Christopher Williams are Independent Directors.

Avoidance of Conflicts of InterestsDirectors are required to declare any interests they or their related entities may have in matters to be discussed by the Board. Any Director with a material personal interest in a matter must absent themselves during its discussion and not vote on the relevant resolution.

Resources Available to the BoardDirectors have the right of access to Company employees, advisors and records. In relation to their duties and responsibilities, Directors have access to the advice and counsel of the Chairman and the Company Secretary and have, following consultation with the Chairman, the right to seek independent professional advice at the Company’s expense.

Review of Board PerformanceThe Board conducts annual performance reviews. The process of evaluating the performance of the Board is the responsibility of all Directors and is undertaken at the direction of the Chairman. Each member of the Board completes a performance evaluation questionnaire each year. The Chairman will collate and present the findings to the Board and facilitate a review of these findings. The Board reviews progress made over the year and agrees on development and action as required. The process aims to ensure that individual Directors continue to contribute effectively to the Board’s performance.

Board Committee StructureThe Board has three committees to assist in the carrying out of its responsibilities and duties. These committees permit the more efficient conduct of business.

Remuneration CommitteeThe Board is responsible for determining and reviewing compensation arrangements for the Directors, the Chief Executive Officer and the Executive Team. The Board has established a Remuneration Committee, comprising of four Non-Executive Directors and the Chief Executive Officer. A Non-Executive Director chairs all meetings.

The Remuneration Committee reviews and makes recommendations to the Board regarding the:

• compensation arrangements for the Directors, Executive Directors and senior management of the Company (including, without limitation, incentive, share option and other benefit plans) and service contracts;

• general remuneration policies and practices for the Company;• recruitment and termination policies within the Company; and• Company’s superannuation requirements.

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The level of Non-Executive Directors’ fees are to be reviewed by the Board following a review by the Chairman and the Chief Executive Officer, taking into consideration any additional time required for involvement in various committees. The Committee will make recommendations to the Chairman and Chief Executive Officer for the purposes of their review.

The Committee’s recommendations in relation to these policies must take into account the Company’s performance over the relevant period.

Members of the Remuneration Committee for the year were Simon McKeon (Chairman), John Stewart, Craig Winkler, Colin Henson and Christopher Williams.

The Remuneration Committee Charter is available on the website.

Audit CommitteeThe Audit Committee assists the Board in the effective discharge of the Company’s responsibilities concerning compliance with financial reporting, internal controls, risk management, audit and insurance.

The Audit Committee is responsible for the selection and nomination to the Board of an external auditor and acts as the focal point of communication between the Board, management and the external auditor in relation to any audit issues and to identify any cooperation problems between the external auditor and management. It liaises with the external auditor to identify areas of particular concern arising from the audits and reports to the Board on performance and effectiveness of the external auditor.

The Audit Committee must satisfy itself as to the adequacy of the scope and quality of external audits and review the effectiveness of external audits and recommend improvements to the Board. It is also responsible for monitoring internal controls and information management systems, recommending improvements to internal control systems to the Board, reviewing external audit reports and ensuring prompt remedial action is taken for any identifiable breakdowns in controls and monitoring accounting, compliance with the Corporations Act, accounting policies and ASX Listing Rules. The Audit Committee reviews financial statements (including interim reports) and discusses any concerns with relevant parties, monitors the reporting of significant transactions and related party arrangements and reviews accounting procedures adopted and any changes in reporting made or adopted since the last financial statements.

The Audit Committee is responsible for monitoring compliance with the laws, licenses, industry practice standards and internal organisational standards and culture, reporting any departures from the compliance arrangements to the Board, reporting any breach of the laws or license conditions to regulatory bodies and/or appropriate parties (if the Committee is of the opinion that the Company is not dealing with such breaches) and nominating an independent auditor to review the adequacy of the scope and quality of the compliance arrangements within the Company.

The Audit Committee reviews and makes recommendations to the Board in relation to areas of significant financial risk and significant transactions which are not a normal part of the Company’s business. In performing its risk management functions, the Committee must ensure that the Company has identified the principal strategic, operational and financial risks to which it is exposed and that systems are in place which facilitate the effective monitoring and management of risk and determine that the Company has instituted adequate reporting systems and internal controls together with appropriate monitoring of compliance activities. The Committee must also satisfy itself that the systems for managing risk are working properly, must monitor policies directed to ensuring that the Company complies with the law and conforms with the highest standards of financial and ethical behaviour.

Members of the Audit Committee throughout the year were John Stewart (Chairman), Simon McKeon, Christopher Williams and Colin Henson.

The Audit Committee Charter is available on the website.

Nomination CommitteeThe Nomination Committee assists the Board by providing advice and recommendations such as to ensure that any prospective appointments to the Board are individuals who are best able to discharge the responsibilities of Directors. In assessing the suitability of a candidate, the Nomination Committee considers the skills required by the Board and the extent to which the required skills are represented on the Board.

Members of the Nomination Committee throughout the year were Simon McKeon (Chairman), Craig Winkler and John Stewart.

The Nomination Committee Charter is available on the website.

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Risk ManagementThe Board, through the Audit Committee, is responsible for identifying areas of significant business risk and in ensuring arrangements are in place to adequately manage those risks. The strategic plan encompasses the entity’s vision, mission and strategy statements designed to meet stakeholders’ needs and to manage business risk. Ongoing risk reporting is in place across the group with the Risk Manager reporting to the Audit Committee. Any significant business risk is identified and monitored by the Board.

When presenting the financial statement for approval by the Board, the Chief Executive Officer and the Chief Financial Officer provide a written statement to the Board that:

• The Group’s financial statements present a true and fair view in all material aspects of MYOB’s financial condition and operational results and are in accordance with the relevant accounting standards;

• The Group’s financial statements are founded on a sound system of risk management and internal compliance and control which implements policies adopted by the Board; and

• The risk management and internal control systems are sound and operating effectively in all material respects.

The Company’s Risk Management Policy is available on the website.

External AuditThe Company’s External Audit Policy provides for the rotation of the lead audit partner every five years. The Company is mindful to ensure that the independence of the auditor is maintained. Any proposal for the performance of permitted non-audit work by the auditor requires the prior approval of the Chief Financial Officer. The auditor or his nominee attends the Annual General Meeting and is available to answer shareholder questions as required.

The Company’s External Audit Policy is available on the website.

Corporate ConductCompliance with legislative requirements and acting with a high level of integrity is expected of all Directors and employees. The Company’s Code of Conduct sets out the requirements of Directors, Executives and employees. The Company also operates programs dealing with occupational health and safety, the environment, trade practices, dealing in Company securities, equal opportunity, related party transactions and various internal control matters.

The Company respects and protects the privacy of its employees and clients, and meets its obligations under the privacy legislation. The Company has developed a set of values and commitment to these values is required of all employees and is part of the Company’s performance management system.

The Company’s Code of Conduct and Privacy Policy are available on the website.

Remuneration of Non-Executive DirectorsNon-Executive Directors are separately remunerated from the Company’s employees. The payment of Non-Executive Directors is consistent with market norms and has been approved by the shareholders at an Annual General Meeting. All payments to Non-Executive Directors are disclosed in the Directors’ Report. The only superannuation payments made to Non-Executive Directors are those required by legislation.

Indemnification and Insurance of Directors and OfficersDuring the period the Company paid an insurance premium indemnifying each of the Directors and Officers of the consolidated entity against all liabilities to another person that may arise from their position as Director or Officer of the Company and its controlled entities, except where the liability arises out of criminal or dishonest behaviour involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of such liabilities, including costs and expenses. The total amount of insurance contract premiums paid was $82,457 (2006:$44,103)

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Securities Trading and Trading WindowsThe MYOB Share Trading Policy provides that those persons associated with the Company must not engage in ‘insider trading’, nor the disclosing of inside information to third parties and that Directors and Officers, and their associates, may only trade MYOB shares in the period of 6 weeks following release of MYOB’s annual and half-yearly financial results, the period of 6 weeks following MYOB’s Annual General Meeting or such other specified period as notified by the Chairman or Chief Executive Officer.

The Company’s Share Trading Policy is available on the website.

Continuous DisclosureThe Continuous Disclosure Manager is responsible to the Board for ensuring MYOB’s compliance with its continuous disclosure requirements. This includes overseeing and coordinating disclosure of information to ASX, analysts, brokers, shareholders, the media and the public and overseeing and maintaining accurate records of all disclosures of information by MYOB.

The MYOB Continuous Disclosure Policy provides that neither MYOB nor any Director or Executive of MYOB may release any information that is required to be disclosed to ASX under the continuous disclosure rules to any person before the information has been given to the Continuous Disclosure Manager, the information has been given to the ASX and an acknowledgment of the receipt of that information has been received from the ASX.

The Company’s Disclosure Policy is available on the website.

Communication to ShareholdersThe Board ensures that the shareholders are informed of all information necessary to assess the performance of the Company. In addition to complying with the continuous disclosure rules of the ASX, information is communicated to the shareholders through the:

• Annual Report which is distributed to all shareholders;• Updates distributed to all shareholders;• Annual General Meeting and other meetings so called to obtain approval for Board action as appropriate;• Periodic mailing of newsletters and other communications to shareholders during the year; and• Maintenance of the ‘investor’ section of the Company’s website at www.myob.com/investors

Cross reference to ASX Disclosure Requirements Page No.

The skills, experience and expertise relevant to the position of Director held by each Director in office at the date of the Annual Report

16 – 17

The names of the Directors considered by the Board to constitute independent Directors and the Company’s materiality thresholds.

16 – 17, 47

A statement as to whether there is a procedure agreed by the Board for Directors to take independent professional advice at the expense of the Company.

47

The term of office held by each Director in office at the date of the Annual Report. 16 – 17

The names of members of the Nomination Committee and their attendance at meetings of the Committee. 28, 48

Details of the names and qualifications of those appointed to the Audit Committee, or, where an Audit Committee has not been formed, those who fulfil the functions of an Audit Committee.

16 – 17, 28

The number of meetings of the Audit Committee and the names of the attendees. 28

Whether a performance evaluation for the Board and its members has taken place in the reporting period and how it was conducted.

47

Disclosure of the Company’s remuneration policies including the costs and benefits of the policy and the link between performance and remuneration.

29 – 41

The names of the members of the Remuneration Committee and their attendance at meetings of the Committee. 28

The existence and terms of any schemes for retirement benefits, other than statutory superannuation, for Non-Executive Directors.

29 – 30

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FinancialStatements

MYOB Limited


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Income Statement FOR THE YEAR ENDED 31 DECEMBER 2007

Note CONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

Revenue 5 207,136 183,943 35,720 34,053

Cost of sales 6 (a) (25,626) (23,950) - -

Gross profit 181,510 159,993 35,720 34,053

Gain / (Loss) on disposal of non-current assets (179) 4 (217) -

Marketing expenses (10,963) (11,011) (44) (63)

Staff related expenses (65,858) (57,520) (9,605) (8,215)

Telecommunications (3,611) (3,872) (1,402) (1,026)

Occupancy (5,905) (5,846) (158) (646)

Depreciation and amortisation expenses 6 (a) (48,241) (41,283) (501) (694)

Specific items 6 (b) (1,069) 3,223 (113) 738

Other expenses (15,887) (15,949) (1,569) (1,448)

Finance costs 6 (a) (199) (316) (106) -

Share of loss of associate 15 (825) (1,708) (825) (1,708)

Profit before income tax 28,773 25,715 21,180 20,991

Income tax (expense) / benefit 7 (9,962) (8,387) 555 732


Attributable to:

Minority interest (199) (117) - -

Members of MYOB Limited 19,010 17,445 21,735 21,723

Cents Cents

Earnings per share for profit attributable to theordinary equity holders of the company

8

Basic earnings per share 4.93 4.49Diluted earnings per share 4.80 4.44

The above income statement should be read in conjunction with the accompanying notes.

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Balance Sheet AS AT 31 DECEMBER 2007

Note CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

ASSETSCurrent AssetsCash and cash equivalents 10 30,428 26,009 17,236 13,630 Trade and other receivables 11 17,320 14,672 61,289 32,038 Inventories 12 1,243 872 - - Other current assets 13 6,677 8,428 4,153 4,516 Total current assets 55,668 49,981 82,678 50,184

Non-current AssetsOther financial assets 14 - 607 - 607 Investment in associates accounted for using the equity method 15 7,420 6,303 7,420 6,303 Investment at cost 16 - - 328,256 327,955 Deferred income tax asset 7 16,601 13,485 2,263 2,616 Property, plant and equipment 17 15,421 16,129 43 543 Intangible assets 18 273,670 272,132 - - Total non-current assets 313,112 308,656 337,982 338,024 TOTAL ASSETS 368,780 358,637 420,660 388,208

LIABILITIESCurrent LiabilitiesTrade and other payables 19 19,458 18,982 73,487 49,080 Unearned revenue 20 36,661 33,990 - - Interest-bearing loans and borrowings 21 899 1,558 - - Income tax payable 3,092 3,796 2,673 3,013 Provisions 22 10,713 11,148 1,254 2,826 Total current liabilities 70,823 69,474 77,414 54,919

Non-current LiabilitiesInterest-bearing loans and borrowings 21 - 1,359 - - Deferred income tax liabilities 7 22,993 18,127 10 2 Provisions 22 2,127 2,862 229 526 Total non-current liabilities 25,120 22,348 239 528 TOTAL LIABILITIES 95,943 91,822 77,653 55,447 NET ASSETS 272,837 266,815 343,007 332,761

EQUITYEquity attributable to equity holders of the parentContributed equity 23 (a) 226,951 228,647 226,951 228,647 Retained earnings 24 (a) 39,047 31,609 10,290 127 Reserves 24 (b) 6,875 5,144 105,766 103,987 Parent interests 272,873 265,400 343,007 332,761 Minority interests 25 (36) 1,415 - - TOTAL EQUITY 272,837 266,815 343,007 332,761

The above balance sheet should be read in conjunction with accompanying notes.

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Stat

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of

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-

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9

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-

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924

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(1

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t 31

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100

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10,

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343

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Cash Flow Statement FOR THE YEAR ENDED 31 DECEMBER 2007

Notes CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

Cash flows from operating activitiesReceipts from customers 206,445 184,419 9,610 10,779 Payments to suppliers and employees (158,778) (149,670) (10,686) (9,657)Dividends received - - 25,500 20,780 Borrowing costs 6 (a) (199) (316) (106) - Income tax (paid) / received (8,205) (5,035) (5,862) 1,246 Interest received 5 1,498 1,685 874 1,181 Merger integration costs 6 (b) - (471) - (471)

Net cash flows from operating activities 40,761 30,612 19,330 23,858

Cash flows from investing activitiesProceeds from sale of property, plant and equipment 37 - - - Proceeds from equity return on investments - 5,876 - - Receipts from subsidiaries - - 45 1,053 Purchase of property, plant and equipment 17 (8,921) (6,625) - (228)Purchase of remaining minority interest (3,529) - - - Capitalised internal software costs 18 (6,471) (8,128) - - Purchase of intangible assets 18 (80) (135) - - Purchase of investments (1,942) (11,311) (2,501) (22,466)

Net cash flows used in investing activities (20,906) (20,323) (2,456) (21,641)

Cash flows from financing activitiesProceeds from issue of shares 23 (b) 2,100 992 2,100 992 Share buy back 23 (b) (3,690) (8,558) (3,690) (8,558)Payment of share buy back cost 23 (b) - (9) - (9)Payment of capital return advisory cost 23 (b) (106) - (106) - Proceeds from borrowings 8,000 - - - Repayment of borrowings (10,018) (6,496) - - Dividends paid by parent entity 9, 24 (11,572) (15,696) (11,572) (15,696)

Net cash flows from/(used in) financing activities (15,286) (29,767) (13,268) (23,271)

Net increase / (decrease) in cash and cash equivalents 4,569 (19,478) 3,606 (21,054)Net foreign exchange differences (150) (8) - - Cash and cash equivalents at beginning of period 26,009 45,495 13,630 34,684

Cash and cash equivalents at end of period 10 30,428 26,009 17,236 13,630

The above cash flow should be read in conjunction with the accompanying notes.

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Notes to FinancialStatements

MYOB Limited


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Notes to the Financial Statements (Cont.)

1 Corporate information

The financial report of MYOB Limited for the year ended 31 December 2007 was authorised for issue in accordance with a resolution of the directors on 11 February 2008.

MYOB Limited (the parent) is a company limited by shares and incorporated in Australia. MYOB Limited’s shares are publicly traded on the Australian Securities Exchange.

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

Registered Office: 12 Wesley Court Burwood East Vic Australia 3151

2 Summary of significant accounting policies

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

The financial report has also been prepared on a historical cost basis. The accounting policies have been consistently applied during the year, unless otherwise stated.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.

(a) Statement of compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).

(b) New accounting standards and interpretations

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ending 31 December 2007. These are outlined in the table below.

Reference Title Summary Applicationdate of

standard*

Impact on Group financial report

Application date for Group*

AASB 2007-1 Amendmentsto Australian AccountingStandards arising from AASB Interpretation 11 [AASB 2]

Amendingstandard issued as a consequence of AASB Interpretation 11 AASB 2 – Group and Treasury Share Transactions.

1-Mar-07 This is consistent with the Group’s existing accounting policies for share-based payments, so the amendments are not expected to have any impact on the Group’s financial report.

1-Jan-08

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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) New accounting standards and interpretations (continued)


standard*


Applicationdate for Group*

AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments [AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128, 129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038]

Amendments arising as a result of the AASB decision that, in principle, all options that currently exist under IFRS should be included in the Australian equivalents to IFRS and additional Australian disclosures should be eliminated, other than those now considered particularly relevant in the Australian reporting environment.

1-Jul-07 These amendments are expected to reduce the extent of some disclosures in the Group’s financial report.

1-Jan-08

AASB 8 Operating Segments New standard replacing AASB 114 Segment Reporting, which adopts a management approach to segment reporting.

1-Jan-09 AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group’s financial statements. However the amendments may have an impact on the Group’s segment disclosure.

1-Jan-09

AASB 101 (revised)

Presentation of Financial Statements

Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.

1-Jan-09 The amendments are expected to only affect the presentation of the Group’s financial report and will not have a direct impact on the measurement and recognition of amounts under the current AASB 101. The Group has not determined at this stage whether to present the new statement of comprehensive income as a single or double statements.

1-Jan-09

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(b) New accounting standards and interpretations (continued)


standard*


Applicationdate for Group*

AASBInterpretation 11

AASB 2 – Group and Treasury Share Transactions

Addresses whether certain types of share-based payment transactions with employees (or other suppliers of goods and services) should be accounted for as equity-settled or as cash-settled transactions under AASB 2. It also specifies the accounting treatment in a subsidiary’s financial statements for share-based payment arrangements involving equity instruments of the parent.

1-Mar-07 Refer to AASB 2007-1 above.

1-Jan-08

*designates the beginning of the applicable annual reporting period

Adoption of new accounting standard

The Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on the income statement or balance sheet of the entity.

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(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of MYOB Group and its subsidiaries as at 31 December each year. Interests in associates are equity accounted and are not part of the consolidated Group.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the Group had control.

The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition.

Minority interests not held by the Group are allocated their share of net profit after tax in the income statement and are presented within equity in the consolidated balance sheet, separately from parent shareholders’ equity.

(d) Business combinations

The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the costs of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(e) Foreign currency translation

Both the functional and presentation currency of MYOB Limited and its Australian subsidiaries is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

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All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the profit or loss.

The functional currencies of the foreign operations are as follows:

United KingdomNew ZealandUnited States of AmericaMalaysiaChinaIrelandSingaporeHong Kong

Great Britain poundNew Zealand dollarUnited States dollarMalaysia ringgitChina RMBEuroSingapore dollarHong Kong dollar

The assets and liabilities of these overseas subsidiaries are translated into the presentation currency of MYOB Limited at the rate of exchange ruling at the reporting date and the income statements are translated at the weighted average exchange rates for the period.

The exchange differences arising on the retranslation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

(f) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and on hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(g) Trade and other receivables

Trade receivables which generally have 30 day terms are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off to the income statement when identified.

(h) Inventories

Inventories are valued at the lower of cost or net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

- Raw materials – purchase cost on an average cost basis, and

- Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

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(i) Investment in associate

The Group’s investment in its associate is accounted for under the equity method of accounting in the consolidated financial statements. This is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

The financial statements of the associate are used by the Group to apply the equity method. The reporting dates of the associate and the Group are not identical. However, the associate prepared management accounts as at 31 December 2007 to enable application of the equity method and the Group and the associate both use consistent accounting policies.

The investment in the associate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in value. The consolidated income statement reflects the Group’s share of the results of operations of the associate.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated statement of changes in equity.

(j) Investments

All investments are initially recognised at fair value plus, in the case of investments not measured at fair value through the profit and loss, transaction costs that are directly attributable to the acquisition of the investment. After initial recognition, investments which are classified as available-for-sale are measured at fair value.

Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

(k) Property, plant and equipment

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

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

Class of Fixed Asset Depreciation Period

Leasehold improvements 3-8 years

Plant and equipment 3-5 years

Leased plant and equipment 4-5 years

Leased fit-outs 7 years

ImpairmentThe impairment testing for property, plant and equipment is done in accordance with the Accounting policy in Note 2(m).

(l) Goodwill

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is not amortised, instead it is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the synergies arising from the combination.

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Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill has been allocated.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or losson disposal of the operation.

Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

(m) Intangible assets

Acquired both separately and from a business combination

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Intangible assets with indefinite useful lives (other than goodwill) are tested for impairment annually, either individually or at the cash-generating unit level. Such intangibles are not amortised.

Where amortisation is charged on assets with finite lives, this expense is taken to the income statement.

Research and development costs

Research costs are expensed as incurred.

Development expenditure incurred on an individual project is capitalised when its future recoverability can reasonably be regarded as assured.

Following the initial recognition of the development expenditure, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses.

Any expenditure carried forward is amortised over three years per the table below.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.

A summary of the policies applied to the Group’s intangible assets is as follows:

Patents,Trademarks and

Licences

Product Development

Costs

IntellectualProperty

Software

Useful Lives Finite

Method used 1 to 10 years- straight line

3 years-straight line 3 to 8 years- straight line

5 years- straight line

Internally generated/Acquired Acquired Internally generated

Acquired Internally generated

Impairment test/Recoverable amount testing

Carrying value and amortisation method reviewed annually if there is an indication of impairment.

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Gains or losses arising from sales of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is sold.

Recoverable amount of the assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets. The recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Change in disclosure

In 2007 management elected to reclassify internally capitalised software from PP&E to intangibles for disclosure requirements. This resulted in a $12.8 million restatement of the 2006 net carrying amounts for comparative purposes.

(n) Trade and other payables

Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

(o) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the amortisation process.

(p) Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(q) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

(r) Employee entitlements

Provision is made for the Group‘s liability for employee entitlements arising from services rendered by employees to the reporting date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries and annual leave which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements.

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Contributions are made by the group to employee superannuation funds and are charged as expenses when incurred. All employees are entitled to varying levels of benefits on retirement, disability or death. The superannuation plans or equivalent provide accumulated benefits. Contributions are made by the Group in accordance with the statutory requirements of each jurisdiction.

Share-based payment transactions

The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”).

MYOB Limited has adopted the following employee and director incentive plans:

- The MYOB Exempt Employee Share Plan;- The MYOB Deferred Share Plan; and- The MYOB Executive Option Plan.

Each of these plans has been approved by the Remuneration Committee.

Under the Employee Share Plan rules the Board may offer shares to any full time or part time employee. Shares issued under the Plan will be fully paid and will have the same entitlements as other ordinary shares in MYOB Limited. However, Australian employees will not generally be permitted to deal in the shares for three years or until they cease to be employees of the Group, whichever occurs first.

Option plan

The cost of equity-settled transactions under the Executive Option plan with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the Binomial Approximation, Black Scholes/Merton and Monte-Carlo Simulation option pricing models.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of MYOB Limited (“market conditions”).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at the reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation. Any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (Note 8).

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Employee Profit Share Scheme

Employees can be paid a share of any profit made by the Group each financial year on a bi-annual basis. The Board of Directors have reviewed and formalised the profit share policy. Under the scheme, a total of 10% of MYOB Limited consolidated profit before interest and tax will be available to employees and is paid biannually. The liability relating to the six months ended 31 December 2007 has been recognised in the financial statements. Profit Share is discretionary and must be approved by the Board.

(s) Leases

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(t) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Sale of goods

Revenue is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer. In the case of product, the physical stock must have been shipped to the customer.

Maintenance/support

Unearned income is recognised upon receipt of payment for maintenance/support contracts. Revenue is brought to account over time as it is earned.

However, to the extent that MYOB has fulfilled all its obligations under the contract, the income is recognised as being earned at the time when all MYOB’s obligations under the contract have been fulfilled.

Services

Services revenue such as seminar fees is recognised when the service is provided.

However, where customers are no longer able to obtain a refund or credit note on cancellation before the service is conducted, the revenue is recognised on the last day where refund or credit note would not be available.

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

Royalties

Royalties are derived from sale of copyrighted forms and product sales under licence. Revenue is recognised on an accruals basis.

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Dividends

Dividend revenue is recognised when the right to receive a dividend has been established.

Change in estimates

Management revised its estimate of unearned revenue in relation to shipped but unregistered products. The old method estimated that any product unregistered would be registered in the course of time. The new approach recognises that the majority of shipped but unregistered products greater than twelve months since date of shipment are unlikely to be registered. A “one off” adjustment to recognise this change in estimate was booked in 2007 resulting in $925K of additional revenue.

(u) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

- except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry–forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

- except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

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

Change in policy

The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ inter-company account with the tax consolidated group head company, MYOB Limited. The Group has applied the ‘stand alone’ approach in 2007 in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. In previous years, the Group applied the ‘separate taxpayer within group’ approach.

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(v) Other taxes

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

- where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item applicable;

- receivables and payables which are stated with the amount of GST included, and- the net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables

in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

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

(w) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

- costs of servicing equity (other than dividends);- the after tax effects of dividends and interests associated with dilutive potential ordinary shares that have been recognised as

expenses; and- other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential

ordinary shares;divided by the weighted average number of ordinary shares and dilutive potential ordinary shares.

(x) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of goodwill

The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives are disclosed in note 32.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using Binomial Approximation, Black Scholes/Merton and Monte-Carlo Simulation option pricing models, using the assumptions detailed in note 29. F

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3 Financial risk and management objectives and policies

The Group’s principal financial instruments comprise receivables, payables, finance leases, cash and short term deposits.

The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, liquidity risk and credit risk. Senior management, in conjunction with the Board, reviews and agrees policies for managing each of these risks.

Risk Exposures and Responses

Foreign currency risk

As a result of operations in Europe, New Zealand, Asia and the USA the Group’s balance sheet is impacted by movements in exchange rates. However, given the level of net assets held in local currencies, the level of exposure is limited.

The Group also has minor transactional currency exposures. Such exposure arises from sales or purchases by an operating unit in a currency other than the unit’s functional currency.

Approximately 34% of the Group’s sales are denominated in currencies other than the reporting currency of the Group. These revenues are partially hedged by local denominated expenses as well as product development costs in each jurisdiction that are paid in local currency.

At 31 December 2007, the group had the following exposure to various foreign currencies:

Consolidated Parent

2007 2006 2007 2006$’000 $’000 $’000 $’000

Financial AssetsCash and cash equivalents 6,084 7,789 - -

Trade and other receivables 7,315 6,280 12,878 6,657 13,399 14,069 12,878 6,657

Financial liabilitiesTrade and other payables 7,327 8,786 - -

Related party loans 9,432 11,015 7,573 2,470 16,759 19,801 7,573 2,470

Net exposure (3,360) (5,732) 5,305 4,187

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3 FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (continued)

Foreign currency risk (continued)

The following sensitivity is based on the foreign currency risk exposures in existence at the balance sheet date. As at 31 December 2007, had the Australian Dollar moved, with all other variables held constant, post tax profit and equity would have been affected as illustrated in the table below.

Management have assessed the closing net position of each entities assets in the table below for movements in currency to highlight the potential impact on the net asset position. There were no material impacts identified based on the parameters used.

Post Tax Profit EquityHigher/(Lower) Higher/(Lower)

Judgements of reasonablypossible movements:

2007 2006 2007 2006$000 $000 $000 $000

ConsolidatedAUD/GBP + 10% - - (109) (4)AUD/GBP - 5% - - 63 2 AUD/EUR + 10% - - (99) (55)AUD/EUR - 5% - - 58 32 AUD/NZD + 10% - - (249) 77 AUD/NZD - 5% - - 144 (45)AUD/USD + 10% - - (19) 1 AUD/USD - 5% - - 11 (1)AUD/HKD + 10% - - 177 187 AUD/HKD - 5% - - (103) (109)AUD/SGD + 10% - - 157 122 AUD/SGD - 5% - - (91) (71)AUD/MYR + 10% - - 292 218 AUD/MYR - 5% - - (169) (126)AUD/RMB + 10% - - 64 (182)AUD/RMB - 5% - - (37) 105

ParentAUD/GBP + 10% 15 (11) - - AUD/GBP - 5% (9) 6 - - AUD/EUR + 10% 39 (6) - - AUD/EUR - 5% (22) 4 - - AUD/NZD + 10% 179 (129) - - AUD/NZD - 5% (104) 75 - - AUD/USD + 10% 11 1 - - AUD/USD - 5% (6) - - - AUD/HKD + 10% (153) (158) - - AUD/HKD - 5% 88 92 - - AUD/SGD + 10% (107) (6) - - AUD/SGD - 5% 62 4 - - AUD/MYR + 10% (228) (113) - - AUD/MYR - 5% 132 65 - - AUD/RMB + 10% (97) 156 - - AUD/RMB - 5% 56 (90) - -

Note: Overseas entities do not hold any assets / liabilities in any currency other than their local currency.

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

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Interest rate risk

The Group has limited debt and therefore minimal exposure to interest rate risk in terms of liabilities. The level of debt is disclosed in note 21.

At balance date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk:

Consolidated Parent

2007 2006 2007 2006$’000 $’000 $’000 $’000

Financial AssetsCash and cash equivalents 30,428 26,009 17,236 13,630 Receivable from wholly owned subsidiaries - - 61,217 31,933

30,428 26,009 78,453 45,563

Financial LiabilitiesPayable to wholly owned subsidiaries - - 71,689 47,769 Unsecured lease liability 899 2,917 - -

899 2,917 71,689 47,769 Net exposure 29,529 23,092 6,764 (2,206)

The Group manages its interest rate risk by the use of fixed rate instruments (e.g. finance leases) and by spreading the tenure of any debt to optimise the balance between costs of funds and liquidity.

Similarly, in terms of interest rate risk on cash and deposits the Group seeks to maximise the interest earned on these funds balanced against the length of investment and impact on liquidity.

The following sensitivity analysis is based on the interest rate risk exposures in existence as at the balance sheet date.

At 31 December 2007, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Post Tax Profit

Higher/(Lower)Judgements of reasonably 2007 2006possible movements: $000 $000

Consolidated+0.5% (50 basis points) 103 81 -0.5% (50 basis points) (103) (81)

Parent+0.5% (50 basis points) 24 (8)-0.5% (50 basis points) (24) 8

The movements in profit are due to movements in interest costs from variable rate debt and cash movements.

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Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities, bank loans and finance leases.

The Group minimises liquidity risk by maintaining a significant level of cash and equivalents as well as ensuring the Group has access to the use of credit facilities as required.

Maturity analysis of financial assets and liabilities

The risks implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in ongoing operations such as property plant and equipment and investments in working capital.

Year end 31 December 2007 <6 months 6-12 months 1-5 years TOTAL

2007 ConsolidatedFinancial assetsCash and cash equivalents 29,674 754 - 30,428 Trade and other receivables 17,146 174 - 17,320

46,820 928 - 47,748

Financial liabilitiesTrade and other payables 19,257 201 - 19,458 Interest bearing loans and borrowings 899 - - 899

20,156 201 - 20,357 Net maturity 26,664 727 - 27,391

2006 ConsolidatedFinancial assetsCash and cash equivalents 25,098 911 - 26,009 Trade and other receivables 14,569 103 - 14,672

39,667 1,014 - 40,681

Financial liabilitiesTrade and other payables 18,788 194 - 18,982 Interest bearing loans and borrowings 779 779 1,359 2,917

19,567 973 1,359 21,899 Net maturity 20,100 41 (1,359) 18,782

2007 ParentFinancial assetsCash and cash equivalents 17,236 - - 17,236 Trade and other receivables 72 61,217 - 61,289

17,308 61,217 - 78,525

Financial liabilitiesTrade and other payables 1,798 71,689 73,487 Net maturity 15,510 (10,472) - 5,038

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Liquidity risk (continued) <6 months 6-12 months 1-5 years TOTAL

2006 ParentFinancial assetsCash and cash equivalents 13,630 - - 13,630 Trade and other receivables 105 31,933 - 32,038

13,735 31,933 - 45,668

Financial liabilitiesTrade and other payables 1,311 47,769 49,080 Net maturity 12,424 (15,836) - (3,412)

At balance date, the Group has available approximately $15 million of unused credit facilities available for its immediate use.

Credit risk

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 limited.

There are no significant concentrations of credit risk within the Group. The Company minimises concentrations of credit risks in relation to trade accounts receivable by undertaking transactions with a large number of customers. However, the majority of customers are concentrated in Australia.

Fair value

All assets and liabilities recognised in the balance sheet, whether they are carried at cost or at fair value are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated in applicable notes.

4 Segment information

The Group’s primary reporting format is geographical segments and its secondary format is business segments.

MYOB Limited’s operating divisions are organised and managed separately according to the nature of the customers they service, with each segment offering different products and serving different markets.

Geographically, the group operates in three predominant segments, being Australia, the United Kingdom and New Zealand. The head office and investment activities of the Group are based in Melbourne, Australia.

The Business segment provides business management software and services to small and medium enterprises. The Accountants segment provides business software and services to accounting professionals in practice.

Transactions between segments are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

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5 RevenueCONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

RevenueRevenue from sale of goods 63,727 53,073 - - Revenue from services 141,267 128,434 8,970 11,987 Royalties 644 751 - - Finance (interest) revenue 1,498 1,685 1,250 * 1,286 Dividends received - - 25,500 20,780 Total revenue from operating activities 207,136 183,943 35,720 34,053 * $376K is from intercompany capital loans (2006: $105K)

6 Expenses(a) Expenses

Cost of salesIncluded in cost of sales: salaries and related costs for provision of consulting services 8,963 8,278 - - cost of inventories recognised as expense 16,663 15,672 - -

25,626 23,950 - -

Borrowing costsFinance lease charges 199 316 106 - Total borrowing costs 199 316 106 -

Employee expensesSuperannuation 5,506 5,114 537 489 Share based payments 1,779 924 1,779 924 Total employee expenses 7,285 6,038 2,316 1,413

Depreciation of non-current assetsPlant and equipment 7,076 8,821 493 686 Leasehold improvements 1,153 703 8 8 Capitalised leased assets 914 923 - - Total Depreciation of non-current assets 9,143 10,447 501 694

Amortisation of non-current assetsInternally generated software 668 420 - - Product development 29,049 21,585 - - Intellectual property 8,575 8,896 - - Patents and trademarks 1,250 593 - - Total amortisation of non-current assets 39,542 31,494 - -

Gross depreciation and amortisation expense 48,685 41,941 501 694 Less: capitalised depreciation (444) (658) - - Net depreciation and amortisation expenses to Income Statement 48,241 41,283 501 694

Operating lease rentalMinimum lease payments - operating lease 7,191 8,250 1,908 1,908 Total operating lease rentals 7,191 8,250 1,908 1,908

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6 EXPENSES (continued) CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

(b) Specific items

Legal & property provisions relating to Solution 6 legacy matters 113 (1,209) 113 (1,209)Dosh asset Impairment (Note 18) 956 - - - Solution 6 merger integration costs - 471 - 471 Gain on sale of investment in UBS - (2,485) - -

1,069 (3,223) 113 (738)

7 Income Tax

Major components of income tax expense for the years ended 31 December 2007 and 2006 are:

Income Statement

Current income taxCurrent income tax charge 8,986 5,095 (927) (6,120)Adjustments in respect of current income tax of previous years (192) (452) 12 572 Realisation of deferred tax assets not previously brought to account (580) - - -

Deferred income taxRelating to origination and reversal of temporary differences 1,748 3,744 360 4,816

Income tax expense reported in income statement 9,962 8,387 (555) (732)

A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Group’s effective income tax rate for the years ended 31 December 2007 and 2006 is as follows:

Accounting profit before income tax 28,773 25,715 21,180 20,991

At domestic statutory income tax rate of 30% (2006: 30%) 8,631 7,715 6,354 6,297 Effect of higher tax rate in New Zealand 243 61 - - Adjustments in respect of current income tax of previous years (192) (452) 46 572 Unrecognised tax losses 1,881 1,807 - - Expenditure not allowable for income tax purposes 121 161 623 (15)Realisation of deferred tax assets not previously brought to account (580) - - - Other 1,078 (75) 72 (119)Research & Development concession (1,220) (830) - - Intercompany transactions - - (7,650) (7,467)

At effective income tax rate of 34.6% (Parent: (2.6%)) (2006: 32.6%, Parent: (3.5%)) 9,962 8,387 (555) (732)

Income tax expense reported in income statement 9,962 8,387 (555) (732)

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7 INCOME TAX (continued) Balance sheet Income statement2007 2006 2007 2006

Deferred income tax $’000 $’000 $’000 $’000

Deferred income tax at 31 December relates to the following:

CONSOLIDATED

Deferred income tax liabilities

Accelerated tax depreciation/deductions (22,952) (18,125) 4,828 10,939

Interest receivable (41) (2) 38 (35)

Intangible assets not deductible for tax purposes - - - (2,219)

Gross deferred income tax liabilities (22,993) (18,127)

Deferred income tax assets

Accelerated accounting deductions 10,256 5,991 (4,265) (1,150)

Losses available for offset against future taxable income 68 - (68) 202

Unrealised foreign exchange losses 150 216 66 (176)

Provisions 3,671 3,550 (121) (591)

Accruals 813 661 (152) (392)

Other 1,643 3,067 1,423 (2,833)

Gross deferred income tax assets 16,601 13,485

Deferred income tax charge 1,749 3,745

PARENT

Deferred income tax liabilities

Interest receivable (10) (2) 7 (34)

Gross deferred income tax liabilities (10) (2)

Deferred income tax assets

Accelerated accounting deductions 429 97 (332) 803

Unrealised foreign exchange losses 144 195 51 (155)

Loss available for offset against future taxable income - - - -

Provisions 419 921 503 (109)

Accruals 196 148 (49) (59)

Other 1,075 1,255 181 4,370

Gross deferred income tax assets 2,263 2,616

Deferred income tax charge 361 4,816

Unrecognised temporary differences

At 31 December 2007 there are no unrecognised temporary differences associated with MYOB Limited’s investment in subsidiaries as there is no expected liability for additional taxation should unremitted earnings be remitted (2006: $nil).

Tax consolidation

(i) Members of the tax consolidated group and the tax sharing arrangementMYOB Limited and its 100% owned subsidiaries are a tax consolidated group. MYOB Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have beenrecognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

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7 INCOME TAX (continued)

(ii) Tax Effect Accounting by Members of the Tax Consolidated GroupMembers of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their taxable profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 “Income Taxes”.

The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ inter-company account with the tax consolidated group head company, MYOB Limited. The Group has applied the ‘stand alone’ approach in 2007 in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. In previous years, the Group applied the ‘separate taxpayer within group’ approach.

8 Earnings per share

The following reflects the income and share data used in the Group’s basic and diluted earnings per share computations:

a) Earnings used in calculating earnings per share

CONSOLIDATED

For basic and diluted earnings per share 2007 2006

$’000 $’000

Net profit after tax attributable to ordinary equity holders of the parent 19,010 17,445

b) Weighted average number of shares

Weighted average number of ordinary shares for basic earnings per share 385,541,055 388,107,612

Effect of dilution:

Share options 10,279,832 4,648,650

Weighted average number of ordinary shares adjusted to the effect of dilution 395,820,887 392,756,262

There are no instruments excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share in the future because they are antidilutive for either of the periods presented.

There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

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9 Dividends paid and proposed CONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

a) Recognised amounts

Dividends declared and paid during the year:

Dividends on ordinary shares:

Final franked dividend for 2006 ($0.030 per share) 11,572 - 11,572 -

Final franked dividend for 2005 ($0.0275 per share) - 10,791 - 10,791

Special dividend for 2006: NIL (2005: $0.0125 per share) - 4,905 - 4,905

b) Unrecognised amounts

Dividends on ordinary shares:Final franked dividend for 2007: ($0.0325 per share) (2006: $0.0300 per share) 12,528 11,572 12,528 11,572

After the Balance Sheet date, the above dividends were declared by the Board of MYOB. These amounts have not been recognised as a liability in 2007 but will be brought to account in 2008.

MYOB LIMITED

2007 2006

$’000 $’000

Franking credit balance

The amount of franking credits available for the subsequent financial year are:

– franking account balance as at the end of the financial year at 30% (2006: 30%) (743) 1,513

– franking credits that will arise from the payment of income tax payable as at the end of the financial year 8,457 2,698

7,714 4,211

The amount of franking credits available for future reporting periods:– impact on the franking account of dividends proposed or declared before the financial

report was authorised for issue but not recognised as a distribution to equity holders during the period (5,369) (4,954)

2,345 (743)

Note: Tax instalments payable for the tax years ended 31 December 2007 and 31 December 2008 will ensure sufficient franking credits availability to fully frank the proposed dividends.

The tax rate at which paid dividends have been franked is 30% (2006: 30%).

Dividends proposed will be franked at the rate of 30% (2006: 30%).

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10 Cash and cash equivalents CONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

Cash at bank and on hand 14,428 24,978 1,236 12,613

Short-term deposits 16,000 1,031 16,000 1,017

30,428 26,009 17,236 13,630

Cash at bank and on hand earns interest at floating rates based on daily bank deposit rates. The carrying amounts of cash and cash equivalents represent fair value.

Short-term deposits have an average maturity of 31 days and earn interest at the respective short-term deposit rates. The deposits are convertible to cash within two working days.

$2.3m of cash at bank (2006 - $1.9m) is funds held on behalf of customers of M-Powered services.

11 Trade and other receivables

Current

Trade receivables 15,908 14,012 - -

Allowance for impairment (a) (720) (576) - -

15,188 13,436 - -

Other receivables 2,132 1,236 72 105

Related party receivables:

Wholly owned subsidiaries - - 61,217 31,933

17,320 14,672 61,289 32,038

(a) Allowance for impairmentTrade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss of $242K (2006: $186K) has been recognised by the Group in the current year. These amounts have been included in the other expense item.

Movements in the provision for impairment loss:

At 1 January 576 602 - -

Charge for the year (included in other expenses) 242 186 - -

Foreign exchange translation (7) (14) - -

Amounts written off (91) (198) - -

At 31 December 2007 720 576 - -

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11 TRADE AND OTHER RECEIVABLES (continued)

At 31 December, the ageing analysis of trade receivables is as follows:

0-30 31-60 61-90 +91 +91 Total days days days days days

PDNI* PDNI* PDNI* CI* 2007 Consolidated 15,908 12,429 1,359 339 1,061 720

Parent - - - - - -

2006 Consolidated 14,011 11,710 627 258 840 576 Parent - - - - - -

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

Other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of the receivables.

Details regarding foreign exchange and interest rate risk exposure is disclosed in note 3.

12 Inventories CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

Raw materials and stores (at cost) 393 252 - - Finished goods (at cost) 904 708 - - Provision for obsolescence (54) (88) - -

1,243 872 - -

13 Other current assets

Prepayments 3,393 2,996 1,154 1,020 Withholding tax 2,924 4,843 2,887 3,169 Other assets 360 589 112 327

6,677 8,428 4,153 4,516

14 Other financial assets (non-current)

Other receivables - 607 - 607

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15 Investment in associates CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

Investment in Net Return Pty Ltd 7,420 6,303 7,420 6,303

MYOB Limited has a 44.54% (2006: 32.4%) interest in Net Return Pty Ltd, which is the distributor of the Net Suite range of integrated on-demand mid-market ERP, CRM and eCommerce solutions in Australia and New Zealand.

Net Return Pty Ltd is a small proprietary company incorporated in Australia that is not listed on any public exchange and therefore there is no published quotation price for the fair value of this investment.

The reporting date of Net Return Pty Ltd is 30 June.

MYOB’s investment in the above mentioned associate was not impaired during the year. (2006: $Nil)

Movements in the carrying amount of the Group’s investment in associates

CONSOLIDATED2007 2006$’000 $’000

Balance as at 1 January 6,303 6,048 Investment 1,942 1,963 Share in loss after income tax (825) (1,708)Balance as at 31 December 7,420 6,303

Summarised financial informationThe following table illustrates summarised information of the investment in Net Return Pty Ltd:

Share of associate’s balance sheet:Current assets 1,545 973 Non-current assets 6,568 6,249 Current liabilities (693) (919)

Non-current liabilities - - Net assets 7,420 6,303

Share of associates’ revenue and profit:Revenue 2,572 2,428

Loss before income tax (825) (1,708)Income tax - - Loss after income tax (825) (1,708)

Contingent liabilities relating to the associateShare of contingent liabilities incurred jointly with other investors 82 60

16 Investments at cost CONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

Investment in subsidiaries (refer note 27) - - 328,256 327,955

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18 Intangible assets CONSOLIDATED MYOB

LIMITED

Product development

costs

Internally generatedSoftware

Patents,trademarks

andlicences Goodwill

Intellectualproperty Total Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000


At 1 January 2007, net of accumulated amortisation 53,278 12,793 3,691 173,334 29,036 272,132 -

Additions 32,373 6,471 80 - - 38,924 -

Acquisition of minorities - - - 3,081 - 3,081 -

Impairment - - (220) (677) (59) (956) -

Amortisation (29,049) (668) (1,250) - (8,575) (39,542) -

Net foreign currency movements arising from foreign operations 131 - (37) (40) (23) 31 -

At 31 December 2007, net of accumulated amortisation 56,733 18,596 2,264 175,698 20,379 273,670 -

At 1 January 2007

Cost (gross carrying amount) 141,469 13,213 5,295 176,730 81,451 418,158 -

Accumulated amortisation and impairment (88,191) (420) (1,604) (3,396) (52,415) (146,026) -

Net carrying amount 53,278 12,793 3,691 173,334 29,036 272,132 -

At 31 December 2007


Accumulated amortisation and impairment (116,741) (1,088) (2,207) (3,347) (60,889) (184,272) -


In 2007 management elected to reclassify internally capitalised software from PP&E to intangibles for disclosure requirements. Refer Summary of significant accounting policies - 2(m).

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18 INTANGIBLE ASSETS (continued)

CONSOLIDATEDMYOB

LIMITED

Product development

costs

Internally generatedSoftware

Patents,trademarks

andlicences Goodwill

Intellectualproperty Total Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000


At 1 January 2006, net of accumulated amortisation 39,660 5,084 626 166,993 35,998 248,361 -

Additions 35,211 8,129 135 - - 43,475 -

Acquisition of minorities - - 3,444 6,204 1,832 11,480 -

Impairment - - - (74) - (74) -

Amortisation (21,585) - (593) - (8,896) (31,074) -

Depreciation - (420) - - - (420) -

Net foreign currency movements arising from foreign operations (8) - 79 211 102 384 -

At 31 December 2006, net of accumulated amortisation 53,278 12,793 3,691 173,334 29,036 272,132 -

At 1 January 2006


Accumulated amortisation and impairment (66,627) - (995) (3,448) (43,521) (114,591) -

Net carrying amount 39,660 5,084 626 166,993 35,998 248,361 -

At 31 December 2006 -


Accumulated amortisation and impairment (88,191) (420) (1,604) (3,396) (52,415) (146,026) -


Impairment losses recognised

An impairment loss of $956K on Intangibles was recognised in the 2007 financial year. The impaired Intangibles related to the purchase of Dosh Pty Ltd in 2006 (Part of Europe for segment reporting). The impairment loss was due to Lloyds TSB Bank plc not renewing the existing distribution agreement and has been recognised in the income statement as part of specific items. For impairment test of Intangible assets with indefinite useful lives, refer to Note 32.

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19 Trade and other payablesCONSOLIDATED MYOB LIMITED2007 2006 2007 2006$’000 $’000 $’000 $’000

CurrentTrade creditors 2,974 3,031 219 52

Sundry creditors 4,395 5,387 33 403

Accrued expenses 12,089 10,564 1,546 856

Wholly owned subsidiaries - - 71,689 47,769

19,458 18,982 73,487 49,080

Trade liabilities are non interest bearing and normally settled on 30 day terms.

Accrued expenses includes a $2.3m liability for funds held on behalf of customers of M-Powered services. This liability is offset by the cash held (refer note 10).

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

20 Unearned revenue

Current

Unearned revenue 36,661 33,990 - -

Revenue from customer support and maintenance is recognised over the twelve month life of the support and maintenance contract. Revenue not recognised in the income statement under this policy is classified as unearned revenue in the balance sheet. The carrying amount is the reasonable approximation of the fair value.

21 Interest-bearing loans and borrowings

Effective CONSOLIDATED MYOB LIMITEDinterest

rate2007 2006 2007 2006

% Maturity $’000 $’000 $’000 $’000

CurrentUnsecured lease liability 6.8 2008 899 1,558 - -

Non-current

Unsecured lease liability 6.8 2008 - 1,359 - -

Performance under the lease liability is guaranteed by MYOB Limited. No deficiency of net assets exists in the controlled entity.

Fair values

The carrying amount of the Group’s current and non-current borrowings approximate their fair value.

Interest rate and liquidity risks

Details regarding interest rate, foreign exchange and liquidity risks is disclosed in note 3.

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22 Provisions Employee

Entitlements Integration Property Profit share Others Total

$’000 $’000 $’000 $’000 $’000 $’000

CONSOLIDATED

At 1 January 2007 8,321 608 2,747 671 1,663 14,010

Arising during the year 2,391 - 1,000 2,898 307 6,596

Released - - - - (621) (621)

Utilised (1,614) (608) (1,727) (2,250) (946) (7,145)

At 31 December 2007 9,098 - 2,020 1,319 403 12,840

Current 2007 7,991 - 1,043 1,319 360 10,713

Non-current 2007 1,107 - 977 - 43 2,127

9,098 - 2,020 1,319 403 12,840

Current 2006 6,799 608 1,427 671 1,643 11,148

Non-current 2006 1,522 - 1,320 - 20 2,862

8,321 608 2,747 671 1,663 14,010

Employee Entitlements Integration Property Profit share Others Total

$’000 $’000 $’000 $’000 $’000 $’000

MYOB LIMITED

At 1 January 2007 950 606 298 50 1,448 3,352

Arising during the year 195 - - 727 284 1,206

Released - - - - (621) (621)

Utilised (88) (606) (298) (688) (774) (2,454)

At 31 December 2007 1,057 - - 89 337 1,483

Current 2007 828 - - 89 337 1,254

Non-current 2007 229 - - - - 229

1,057 - - 89 337 1,483

Current 2006 722 606 - 50 1,448 2,826

Non-current 2006 228 - 298 - - 526

950 606 298 50 1,448 3,352

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22 PROVISIONS (continued)

Employee entitlementsProvision is made for the Group’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries and annual leave which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements.

IntegrationProvision has previously been made for the Group’s liability for integration costs arising from the merger with Solution 6 Holdings Ltd in August of 2004. Final costs of integration occurred during 2007. Provision carried at Dec 2006 was sufficient to cover these costs.

PropertyProvision is made for the Group’s liability for rent and dilapidation costs on property leases acquired through the merger with Solution 6 Holdings Ltd. Vacant Property leases will reach completion in the UK by December 2009.

Profit ShareProvision is made for the Group’s liability for Profit Share payable to appropriately entitled employees. Profit Share is paid twice yearly.

OtherOther Provisions is predominantly legal and property provisions relating to Solution 6 legacy matters.

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23 Contributed equityCONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

(a) Issued and paid up capital

385,477,839 fully paid ordinary shares 226,951 228,647 226,951 228,647

(2006: 385,305,015)

21,863,059 Issued options - - - -

(2006: 20,131,559)

226,951 228,647 226,951 228,647

Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

2007 2006

Number of shares $’000 Number of shares $’000

(b) Movement in ordinary shares on issue

Beginning of the financial year 385,305,015 228,647 392,384,818 235,966

Issued during the year

- exercise of options 3,244,800 2,100 1,788,800 992

- MYOB share plan - - 169,307 171

- acquisition of Dosh Software Ltd - - 249,686 271

- Share transaction costs - (106) - (9)

Shares returned during the year (19,810) - - -

MYOB share plan forfeitures - - (249,107) (186)

MYOB share buy back (3,052,166) (3,690) (9,038,489) (8,558)

End of the financial year 385,477,839 226,951 385,305,015 228,647 For

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23 CONTRIBUTED EQUITY (continued)

(c) Capital management

When managing capital, the company aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

The company regularly reviews the capital structure and seeks to take advantage of available opportunities to improve outcomes for the company and its shareholders.

During 2007, the company paid dividends of $11.6 million (2006: $15.7 million including a special dividend of $5.0 million). The company’s policy for dividends is to achieve and maintain a payout ratio of 80% of NPAT from 2009, growing dividends year on year.

The company intends to undertake a capital return in the first half of 2008.

The company’s gearing ratio will increase in 2008 due to the company’s intention to borrow for the purposes of funding a portion of the capital return. The gearing ratio at 31 December 2007 and 2006 was as follows:

CONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

Total Borrowings* 20,357 21,899 73,487 49,080

Less cash and cash equivalents (30,428) (26,009) (17,236) (13,630)

Net debt (10,071) (4,110) 56,251 35,450

Total equity 272,837 266,815 343,007 332,761

Total capital 262,766 262,705 399,258 368,211

Gearing ratio (3.83%) (1.56%) 14.09% 9.63%

*Includes interest bearing loans and borrowings and trade and other payables

The Group is not subject to any externally imposed capital requirements other than specific covenants (Interest, leverage and equity) set out under existing finance facilities.

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24 Retained earnings and reservesCONSOLIDATED MYOB LIMITED

2007 2006 2007 2006$’000 $’000 $’000 $’000

(a) Movements in retained earnings were as follows:Balance 1 January 31,609 29,860 127 (6,595)Prior year tax adjustment - - - 695 Net Profit 19,010 17,445 21,735 21,723 Dividends (Note 9) (11,572) (15,696) (11,572) (15,696)Balance 31 December 39,047 31,609 10,290 127


Foreign currency

translation

Employeeequitybenefitreserve Total

CapitalProfits

Employeeequitybenefitreserve Total

$’000 $’000 $’000 $’000 $’000 $’000(b) Reserves

At 1 January 2006 1,542 3,063 4,605 100,000 3,063 103,063 Gain/(loss) on translation of overseas controlled entities (385) - (385) - - -Share based payment - 924 924 - 924 924 At 31 December 2006 1,157 3,987 5,144 100,000 3,987 103,987 Gain/(loss) on translation of overseas controlled entities (48) - (48) - - - Share based payment - 1,779 1,779 - 1,779 1,779 At 31 December 2007 1,109 5,766 6,875 100,000 5,766 105,766

Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations.

Employee equity benefits reserveThe employee equity benefits reserve is used to record the value of equity benefits provided to employees and directors as part of their compensation. (Further details of these plans - note 29).

Capital Profits ReserveDuring the 1999 company float an extraordinary gain was generated in MYOB Ltd due to reconstruction and transfer entries. This gain (held in the capital reserve) is eliminated on consolidation.

25 Minority interestsCONSOLIDATED MYOB LIMITED

2007 2006 2007 2006$’000 $’000 $’000 $’000

Contributed equity 240 1,492 - - Retained profits (276) (77) - - Balance 31 December (36) 1,415 - -

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26 Cash flow reconciliationCONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$’000 $’000 $’000 $’000

Reconciliation of Net Profit after Income Tax with Cash Flow from Operations:


Cash flows excluded from operating profit attributable to operating activities:

Non-cash flows in operating profit

- Loss on disposal of Property, Plant and Equipment 179 - - -

- Amortisation/depreciation 48,241 41,283 501 694

- Options expense 1,779 924 1,779 924

- Impairment of Dosh Assets 956 - - -

- Forex on Inter-company - - 675 -

- Charges to provisions (1,060) (906) (1,869) (1,207)

- Gains on liquidation - - 250 -

- Interest on inter-company loans - - (376) (105)

- Other non-cash charges from other entities - - 1,357 -

- Share of loss of associate 825 1,708 825 1,708

- Minority interest - current year (loss) (398) (117) - -

- Gain on sale of UBS - (2,488) - -

Changes in assets and liabilities, net of the effects of the purchase and disposal of subsidiaries:

- Movement in trade and term debtors (2,360) (803) 651 251

- Movement in prepayments / other assets 1,154 (2,265) 363 (1,036)

- Movement in future income tax benefit (3,116) (8,079) 353 (1,354)

- Movement in inventories (337) (22) - -

- Movement in trade creditors and accruals 60 4,229 (134) 392

- Movement in product development (32,066) (34,711) - -

- Movement in income taxes payable (107) 2,790 (6,778) 1,903

- Movement in deferred taxes payable 4,980 8,642 8 (35)

- Movement in unearned revenues 3,021 2,982 - -

Cash Flows from operations 40,761 30,612 19,340 23,858

Non cash financing and investing activities:

In 2006 the Group issued $0.961 million of shares in Macquarie Outsource Holdings Pty Ltd (MOHPL) as part consideration for the acquisition of Macquarie Outsource Pty Ltd (MOPL) and Macquarie Outsource Sdn Bhd (MOSB).

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27 Related party disclosure (a) The Consolidated Financial Statements at 31 December 2007 include the following controlled entities which

are material to the Consolidated Entity:

COUNTRY OF INCORPORATION

PERCENTAGE OWNED (%)

2007 2006

Parent Entity:

MYOB Limited Australia

Controlled entities of MYOB Limited:

MYOB Australia Pty Ltd Australia 100 100

MYOB NZ Limited New Zealand 100 100

MYOB Technology Pty Ltd Australia 100 100

MYOB UK Limited United Kingdom 100 100

MYOB US, Inc United States of America 100 100

MYOB Asia Sdn Bhd Malaysia 100 100

MYOB Singapore Pte Limited Singapore 100 100

MYOB Hong Kong Limited Hong Kong 100 100

Solution 6 Holdings Pty Ltd Australia 100 100

Solution 6 Pty Ltd Australia 100 100

MYOB Ireland Ltd Ireland 100 100

MYOB Software China Co., Ltd China 95 95

Resourcing Services Sdn Bhd Malaysia 100 51

(b) Subsidiaries acquired

Exonet New Zealand :The Group paid $2.97 million to acquire the remaining 25% interest in Exonet New Zealand (2006: Held 75%). Exonet New Zealand’s net assets were subsequently transferred to MYOB NZ Limited and the entity is to be liquidated.

Accountants Resourcing Holdings Pty Ltd:MYOB Ltd acquired the remaining 49% ownership of Accountants Resourcing Holdings Pty Ltd for a consideration of $1.81 million (2006: Held 51%). Accountants Resourcing Holdings Pty Ltd (ARHPL) subsequently transferred its investment in Resourcing Services Sdn Bhd to MYOB Ltd and ARHPL is to be liquidated.

(c) Associate

Net Return Pty Ltd:The Group has a 44.54% interest in Net Return Pty Ltd (2006: 32.4%).

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27 RELATED PARTY DISCLOSURE (continued)

(d) Ultimate ParentMYOB Ltd is the ultimate Australian parent entity and the ultimate parent entity of the Group.

(e) Entities subject to class order relief

Pursuant to Class Order 98/1418, relief has been granted to MYOB Australia Pty Ltd, MYOB Practice Systems Pty Ltd, MYOB Technology Pty Ltd and MYOB Technology 2 Pty Ltd from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.

As a condition of the Class Order, MYOB Limited, MYOB Australia Pty Ltd, MYOB Practice Systems Pty Ltd, MYOB Technology Pty Ltd and MYOB Technology 2 Pty Ltd (the “Closed Group”) entered into a Deed of Cross Guarantee on 21 October 2002. The effect of the deed is that MYOB Limited has guaranteed to pay any deficiency in the event of winding up of either controlled entity. The controlled entities have also given a similar guarantee in the event that MYOB Limited is wound up.

The consolidated income statement and balance sheet of the entities which are members of the “Closed Group” are as follows:

i) Consolidated income statement CLOSED GROUP

2007 2006

$’000 $’000

Profit from ordinary activities before income tax 36,071 31,949

Income tax expense relating to ordinary activities (9,787) (7,908)

Net Profit from ordinary activities after income tax expense 26,284 24,041

Retained profits at the beginning of the financial year 46,530 38,185

Net Profit from ordinary activities after income tax expense 26,284 24,041

Dividends provided for or paid (11,572) (15,696)

Retained profits at the end of the financial year 61,242 46,530

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27 RELATED PARTY DISCLOSURE (continued)

(e) Entities subject to class order relief (continued)CLOSED GROUP

ii) Consolidated balance sheet 2007 2006$’000 $’000

Current AssetsCash assets 6,845 4,420

Trade and other receivables 9,987 8,230

Inventories 599 461

Other financial assets 17,236 13,630

Other 5,483 6,100

Total current assets 40,150 32,841

Non-current assetsReceivables 27,870 37,147

Investments at cost 229,843 227,955

Investments in associates 7,420 6,303

Property, plant and equipment 30,807 24,842

Deferred Tax assets 13,536 12,299

Intangible assets 64,824 59,267

Total non-current assets 374,300 367,813

Total Assets 414,450 400,654

Current liabilitiesTrade and other payables 12,049 9,878

Unearned revenue 29,668 26,962

Interest-bearing liabilities 899 1,558

Tax liabilities 2,673 3,013

Provisions 9,392 10,010

Total current liabilities 54,681 51,421

Non-current liabilitiesPayables 41,853 48,870

Interest bearing liabilities 0 1,359

Deferred Tax liabilities 22,851 17,930

Provisions 1,107 1,908

Total non-current liabilities 65,811 70,067

Total Liabilities 120,492 121,488

Net Assets 293,958 279,166

EquityContributed equity 226,950 228,646

Reserves 5,766 3,990

Retained profits 61,242 46,530

Total Equity 293,958 279,166

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28 Key management personnela) Details of Key Management Personnel

(i) DirectorsMr Simon McKeon Independent ChairmanMr Craig Winkler Chief Executive OfficerMr John Stewart Director (non-executive)Mr Christopher Williams Director (non-executive)Mr Colin Henson Director (non-executive)

(ii) ExecutivesMr Matthew Critchley Chief Operating Officer - AsiaMr Simon Martin Chief Financial Officer and Corporate Strategy ExecutiveMr Tim Reed Managing Director, Australia and Global Product Strategy ExecutiveMr Matt Lynch Managing Director, New ZealandMr John Moss General Manager, Product Management and Corporate DevelopmentMr Jason Noorman Group Manager, Product DevelopmentMr Robert Reside Company Secretary and Group CounselMr Simon Crompton General Manager, Accountants Division Europe

b) Compensation of Key Management Personnel


2007 2006 2007 2006

$’000 $’000 $’000 $’000

Short-term employee benefits 2,743 3,279 2,278 1,713

Post-employment benefits 198 198 178 136

Other long-term benefits - - - -

Share-based payment 374 263 326 207

3,315 3,740 2,782 2,056

MYOB Limited has applied the option under Corporations Amendments Regulation 2006 to transfer key management personnel remuneration disclosures required by AASB 124 Related Party Disclosures paragraphs Aus 25.4 to Aus 25.7.2 to the Remuneration Report section of the Directors’ report. These transferred disclosures have been audited.

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28 KEY MANAGEMENT PERSONNEL (continued)

d) Share Holdings of Directors and Executives

The relevant interest of each Director and executive and their personally related entities in ordinary shares of MYOB Ltd are:

31-Dec-07Balance at 01 January 2007

Granted as Remuneration

On Exercise of Options

Bought/(Sold)During the

Period

Balance at 31 December

2007

(i) Directors

Mr Simon McKeon 371,543 - - - 371,543

Mr Craig Winkler 108,224,044 - 500,000 - 108,724,044

Mr John Stewart 302,913 - 120,000 (120,000) 302,913

Mr Christopher Williams 123,684 - - - 123,684

Mr Colin Henson 98,349 - - - 98,349

(ii) Executives -

Mr Matthew Critchley 107,590 - 90,000 (62,795) 134,795

Mr Simon Martin - - - - -

Mr Tim Reed 100,754 - - - 100,754

Mr Matt Lynch - - - - -

Mr John Moss - - - - -

Mr Jason Noorman - - - - -

Mr Robert Reside 175,551 - 70,000 - 245,551

Mr Simon Crompton 226,556 - - (88,000) 138,556

Total 109,730,984 - 780,000 (270,795) 110,240,189

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d) Share Holdings of Directors and Executives (continued)

31-Dec-06

Balance at 01 January

2006Granted as

RemunerationOn Exercise of Options

Bought/(Sold)During the

Period

Balance at 31 December

2006

(i) Directors

Mr Simon McKeon 202,236 - - 169,307 371,543

Mr Craig Winkler 78,045,003 - - 30,179,041 108,224,044

Mr John Stewart 302,913 - - - 302,913

Mr Christopher Williams 123,684 - - - 123,684

Mr Colin Henson 98,349 - - - 98,349

Mr Chris Lee 4,599,444 - 150,000 (4,031,480) 717,964

(ii) Executives

Mr Matthew Critchley 107,590 - - - 107,590

Mr Simon Martin - - - - -

Mr Tim Reed 100,754 - - - 100,754

Mr Richard Allen - - - - -

Mr David Lowe 1,264 - 50,000 (50,000) 1,264

Mr Robert Reside 168,551 - - 7,000 175,551

Mr Simon Crompton 226,556 - - - 226,556

Mr Anthony Stevenson 205,645 - 186,000 (203,960) 187,685

Ms Rebecca McGaw - - - - -

Mr Jason Noorman - - - - -

Total 84,181,989 - 386,000 26,069,908 110,637,897

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e) Related party transactions

The following related party transactions occurred during the year:

- MYOB Limited received dividends of $25.5 million from subsidiaries. - MYOB Limited received management fees of $9.0 million from subsidiaries.- MYOB Limited received interest on intercompany capital accounts of $376K from subsidiaries.- MYOB Technology Pty Ltd received royalties of $54.7 million from other entities within the Group.

All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

f) Transactions with director-related entities of MYOB Limited and the consolidated entity

Lease payments including interest amounting to $613,957 were paid to Bangarie Pty Ltd, an entity associated with Mr C Winkler for Sydney fit-out . The amount outstanding as at 31 Dec 2007 - $ NIL (Dec 2006 - $613,957). Note: lease terminated early.

Simon McKeon is an executive officer of Macquarie Group Ltd (MQG).

1) MYOB Australia Pty Ltd has a contract with MQG in respect of the MoneyController product,

2) During the year MYOB Ltd did not engage MQG in an advisory capacity. (2006 fees - $50,000 plus $50,000 of out of pocket expenses),

3) During the year MYOB Ltd engaged MQG in an advisory and executory capacity in regard to the on-market share buyback and capital management initiatives. Fees paid in relation to this advice were $50,000 (2006; $10,000) plus a brokerage fee of 0.15% totalling $20,000 for the period (2006; $13,000).

All transactions were entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

g) Transactions with other related parties

None during the year.

h) Equity instruments of directors

None during the year.

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29 Share-based payment plans

a) Recognised share-based payment expenses CONSOLIDATED MYOB LIMITEDThe expense recognised for employee services received during the year is shown in the table below: 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Expense arising from equity-settled share-based payment transactions 1,779 924 1,779 924

The rules of the MYOB Executive Option Plan provide that the Board may, at its discretion, and subject to such vesting hurdles as it deems appropriate, grant options to selected executives and other employees.

b) Details of options issued

The following table summarises information about options granted by MYOB Limited to employees during the year ended 31 December 2007.

Grant Date Vesting Date

ExpiryDate

Exercise Price

No. of Options

3-May-07 3-May-10 3-May-11 - 1,066,772 *3-May-07 3-May-10 3-May-11 - 1,851,0633-May-07 3-May-10 3-May-11 - 5,698,377 *

The following table summarises information about options granted by MYOB Limited to employees during the year ended 31 December 2006.

Grant Date Vesting Date

ExpiryDate

Exercise Price

No. of Options

2-May-06 2-May-09 2-May-10 - 908,617 *2-May-06 2-May-09 2-May-10 - 2,195,431

* these options were granted with performance hurdles (refer Directors remuneration report for details)

c) Fair values of options

The fair value of each option was estimated on the date of the grant using Binomial Approximation, Black Scholes/Merton and Monte-Carlo Simulation option pricing models. The assumptions used at each relevant valuation date were as follows:

Grant date

3-May-07 2-May-06

Share price $1.23 $0.94Exercise Price 0.00 0.00Dividend yield 2.59% 2.55%Expected volatility 26.83% 27.06%Historical volatility 26.83% 27.06%Risk-free interest rate 6.03% 5.69%Expected life of option (days)Tranche 1 1096 1096Tranche 2 1096 1096Tranche 3 1096 1096

Note: Expected volatility is predominantly based on historical volatility.

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29 SHARE-BASED PAYMENT PLANS (continued)

c) Fair values of options (continued)

The dividend yield reflects the assumption that future dividend yields would reflect the current dividend yield at the grant date. The expected volatility reflects the assumption that the historical volatility is indicative of future volatility at the grant date. The risk-free interest rate was determined as the Commonwealth Bond rate for the expected life of the option at the grant date. The expected life of the options is the period from the grant date to the exercise date and does not reflect anticipated exercise patterns.

d) Summary of options granted under MYOB Executive Share Option Plan

During the year ended 31 December 2007, 3,244,800 options were exercised over ordinary shares, with a total cash consideration received by MYOB Limited of $2,098,404.

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of share options issued under the MYOB Executive Share Option Plan.

2007 2007 2006 2006No. WAEP No. WAEP

Outstanding at the beginning of the year 20,131,559 1 21,333,300 1

Granted during the year 8,616,212 $0.00 3,104,048 $0.00

Exercised during the year (3,244,800) $0.65 (1,788,800) $0.55

Cancelled during the year (3,639,912) $1.04 (2,516,989) $1.37

Outstanding at the end of the year 21,863,059 1 $0.00-1.04 20,131,559 1 $0.00-1.37

Exercisable at the end of the year 6,924,400 $1.52 10,450,400 $1.34

1 Included within this balance are options over 3,057,900 shares (2006: 6,155,400 shares) that have not been recognised in accordance with AASB 2 as the options were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with AASB 2.

The weighted average contractual life for the share options outstanding as at 31 December 2007 is between one and five years (2006: one and five years).

e) Types of Share based payment plans

MYOB has two standard LTI option plans. Both plans will vest on completion of a continuous three year service period with MYOB (or one of its subsidiaries) from the time of grant of the options however one plan also requires the following performance hurdles to be met:

1. Outperformance of the S&P200 accumulation index for a period of 10 consecutive business days in the six months either side of the vesting date. This is an all or nothing hurdle, and

2. Growth in adjusted EBIT (EBIT after adding back amortisation of intangibles and PD/PM and China loss, less PD/PM spend) of minimum 25% and scaling to 100% on achievement of 30% CAGR.

During 2007, the company launched a major initiative, Accelerate Innovation, targeted at transforming the business over the following three years. In recognition of the major imperative, the board resolved to make a special once off issue of ZEPO’s to team members charged with delivering this program over that period. This special LTI option grant will only vest on completion of a continuous three year service period with MYOB (or one of its subsidiaries) from the time of grant of the options AND if the following performance hurdles have been met:

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29 SHARE-BASED PAYMENT PLANS (continued)

1. Grow the number of customers by 25% across the Group,2. Grow revenue per customer employee by 25%,3. Achieve a cash EBIT* of 3.75 x 2006 cash EBIT, and4. By generating a return on capital employed (ROACE)** of over 15%.

* Cash EBIT is the sum of the previous 12 months EBITDA, adding back share based payments expense and then deducting cash spend on product management, product development, IT development, customer management platform and capital expenditure on plant and equipment.** ROACE is the full year Cash EBIT divided by the average closing total Assets after deducting Cash.

The above will form the basis of the hurdles for the LTI - effectively in 4 tranches, subject to achievement of a minimum cash EBIT of A$50m in 2009.

Share options issued under the MYOB Executive Share Option Plan and outstanding at the end of the year are as follow:

f) Movements in options on issue

Issue Date Expiry Date Exercise

Price

Numberon issue

31 Dec 06

NumberIssued

this year

Number exercised this year

Numbercancelledthis year

Numberon issue

31 Dec 07

2-Jul-99 2-Jul-09 $0.50 62,700 - 62,700 - -2-Jul-99 2-Jul-09 $0.50 1,846,900 - 1,071,300 - 775,600

30-Oct-99 1-Nov-09 $1.73 949,200 - - 829,200 120,000 27-Apr-00 1-May-10 $3.62 40,000 - - - 40,000 28-Jun-00 1-Nov-09 $1.98 329,600 - - 81,500 248,100 26-Jul-00 26-Jul-10 $3.58 296,100 - - - 296,100

18-Oct-00 18-Oct-10 $3.49 552,000 - - 216,000 336,000 22-Dec-00 1-Feb-11 $1.73 16,500 - - - 16,500 22-Dec-00 1-Nov-10 $1.73 50,000 - - - 50,000 22-Dec-00 1-Feb-11 $1.98 16,500 - - - 16,500 22-Dec-00 1-Nov-10 $1.98 50,000 - - - 50,000 30-Jan-01 30-Jan-11 $2.98 80,000 - - - 80,000 30-Jan-01 7-Feb-11 $1.96 160,000 - - - 160,000 1-Jan-01 17-May-11 $3.47 425,000 - - - 425,000

17-Sep-01 17-Sep-11 $0.46 735,900 - 330,800 6,000 399,100 17-Jan-02 17-Jan-12 $0.75 30,000 - - - 30,000 9-Feb-02 9-Feb-12 $0.46 15,000 - - - 15,000

28-Jun-02 30-Jun-12 $0.66 500,000 - 500,000 - -2-May-03 2-May-08 $0.68 1,425,000 - 905,000 10,000 510,000

24-Mar-04 24-Mar-09 $1.20 1,971,500 - 325,000 360,000 1,286,500 30-Aug-04 1-Jul-09 $1.39 800,000 - - 200,000 600,000 15-Sep-04 1-Jul-09 $1.39 20,000 - - - 20,000 15-Sep-04 1-Jul-09 $1.39 200,000 - - - 200,000 15-Sep-04 1-Jul-09 $1.39 50,000 - - - 50,000 22-Mar-05 22-Mar-10 $1.08 4,351,500 - 50,000 669,500 3,632,000 24-May-05 24-May-10 $1.24 1,800,000 - - - 1,800,000 10-Jun-05 10-Jun-10 $1.06 400,000 - - - 400,000 2-May-06 2-May-10 $0.00 877,726 - - 247,020 630,706 2-May-06 2-May-10 $0.00 2,080,433 - - 278,437 1,801,996 3-May-07 3-May-11 $0.00 - 1,066,772 - 134,239 932,533 3-May-07 3-May-11 $0.00 - 1,851,063 - 49,568 1,801,495 3-May-07 3-May-11 $0.00 - 5,698,377 - 558,448 5,139,929

20,131,559 8,616,212 3,244,800 3,639,912 21,863,059

Options in MYOB Limited are not quoted on the ASX.

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30 Acquisitions of remaining stake in minority interests

a) Acquisition of the remaining 25% stake in Exonet New Zealand

On 4 January 2007, MYOB New Zealand Ltd, a subsidiary of MYOB Limited acquired the remaining 25% stake in Exonet New Zealand. Details of transactions follow:

$’000

Considerations for purchase of shareholdings:

Cash paid to former shareholders 2,970

Minority interest acquired (444)

Goodwill arising on acquisition 2,526

The acquisition of the remaining 25% is part of MYOB’s investment in expanding its share of the enterprise market. Exonet specialises in business software for medium and small business.

b) Acquisition of the remaining 49% stake in Accountants Resourcing Holdings Pty Ltd (formerly Macquarie Outsource Pty Ltd)

On 18 May 2007, MYOB Limited acquired the remaining 49% outside equity in the Accountants Resourcing group. Details of transactions follow:

$’000

Considerations for purchase of shareholdings:

Cash paid to former shareholders 559

Deferred considerations 622

Total consideration 1,181

Minority interest acquired (628)

Goodwill arising on acquisition 553

The acquisition of the remaining 49% of Accountants Resourcing Holdings Pty Ltd provided greater scope for further expansion of this service to other markets. Subsequent to this MYOB has leveraged the Accountants Resourcing business by expanding operations into New Zealand and the United Kingdom.

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31 Commitments and contingencies Operating lease commitments – Group as lessee

Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:


2007 2006 2007 2006

$’000 $’000 $’000 $’000

Within one year 7,385 6,929 1,908 1,852

After one year but not more than five years 16,624 16,452 8,266 7,409

More than five years 3,194 5,174 - 3,704

27,203 28,555 10,174 12,965

The consolidated entity has operating lease commitments in relation to commercial property leases with the majority including renewal options. There are no restrictions placed upon the lessee by entering into these leases.

Finance lease and hire purchase commitments

Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows:

2007 2006

Minimumpayments

Present value of

paymentsMinimumpayments

Present value of

payments

$’000 $’000 $’000 $’000

CONSOLIDATED

Within one year 960 899 1,671 1,558

After one year but not more than five years - - 1,406 1,359

Total minimum lease payments 960 899 3,077 2,917

Less amounts representing finance charges (61) - (160) -

Present value of minimum lease payments 899 899 2,917 2,917

As at balance date the consolidated entity has finance leases for property fit-outs and plant and equipment with an average lease term of two years. The average discount rate implicit in the leases is 6.8%.

Contingent Liabilities and Contingent Assets

There are no contingent liabilities or contingent assets as at 31 December 2007.For

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32 Impairment testing of intangible assets with indefinite livesThe only intangible asset with an indefinite life currently held by the Group is Goodwill.

Goodwill acquired through business combinations has been allocated to individual cash generating units for impairment testing. The cash generating units have been identified as each of the following operations:

• Australia• New Zealand• United Kingdom• Ireland• Malaysia• China• Hong Kong

The recoverable amount of each operation has been determined on a “value in use” basis. To calculate this, pre-tax cash flow forecasts are derived from financial projections covering a 13 year period to 2020. The terminal value is calculated at the end of the 13 year period using a 4% growth rate applied to net cash flows. Whilst the terminal growth rate is below long-term average growth rates for the software market sector, and MYOB in particular, it is considered to be a prudent approach.

MYOB management determined that the use of 13 years (as opposed to 5 years) was more reflective of MYOB’s expected growth rates and was a more accurate calculation of terminal values for each operation. This is based on MYOB’s significant proportion of recurring (sustainable) revenue which under pins future growth rates based on past trends and results.

The discount rate applied to cash flow projections is 15.3% pre tax (2006: 15.3%). Cash flows modelled in the valuation are reviewed each year to ensure they are congruent with the risk implied in the discount rate used.

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32Im

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33 Events after the balance sheet date The directors have resolved to undertake a distribution to shareholders in the amount of $80 million or 20.79 cents per ordinary share, comprising a special dividend and pro-rata capital reduction payment. Payment of the distribution will be contingent upon shareholder approval for the pro-rata capital reduction being obtained.

There are no other matters or circumstances that have arisen since the end of the period which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

34 Auditor’s remunerationCONSOLIDATED MYOB LIMITED

2007 2006 2007 2006

$ $ $ $

The auditor of MYOB Limited is Ernst & Young.

Amounts received or due and receivable by Ernst & Young (Australia) for:

• an audit or review of the financial report of the entity and any other entity in the consolidated entity 439,400 413,000 217,400 213,000

• other services in relation to the entity and any other entity in the consolidated entity

- tax compliance - - - -

- assurance related 37,255 54,335 32,255 54,335

- special audits required by regulators 25,000 25,000 - -

501,655 492,335 249,655 267,335

Amounts received or due and receivable by affiliates of Ernst & Young Australia for:

• an audit or review of the financial report of subsidiary entities 255,650 229,486 428 -

• tax compliance 70,413 53,549 19,324 -

• others - 28,362 - -

827,718 803,732 269,407 267,335

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Liability limited by a scheme approved under

Professional Standards Legislation.

Independent auditor’s report to the members of MYOB Ltd.

Scope

The financial report, remuneration disclosures and directors’ responsibilityThe financial report comprises the balance sheet, income statement, statement of changes in equity,

cash flow statement, accompanying notes to the financial statements, and the directors’ declaration

for the company and the consolidated entity, for the year ended 31 December 2007. The

consolidated entity comprises both the company and the entities it controlled during that year.

The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of

Accounting Standard 124 Related Party Disclosures (“remuneration disclosures”), under the

heading “Remuneration Report” on pages 29 to 41 of the directors’ report, as permitted by

Corporations Regulation 2M.6.04.

Directors’ Responsibility for the Financial ReportThe directors of the company are responsible for the preparation and fair presentation of the

financial report in accordance with the Australian Accounting Standards and the Corporations Act

2001. This responsibility includes establishing and maintaining internal controls relevant to the

preparation and fair presentation of the financial report that is free from material misstatement,

whether due to fraud or error; selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances. The directors are also responsible for

the remuneration disclosures contained in the directors’ report.

Auditor’s ResponsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted

our audit in accordance with Australian Auditing Standards. These Auditing Standards require that

we comply with relevant ethical requirements relating to audit engagements and plan and perform

the audit to obtain reasonable assurance whether the financial report is free from material

misstatement and that the remuneration disclosures comply with Accounting Standard AASB 124

Related Party Disclosures. 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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial report. The procedures selected depend on our judgment, including the assessment of

the risks of material misstatement of the financial report, whether due to fraud or error. In making

those risk assessments, we consider internal controls relevant to the entity’s preparation and fair

presentation of the financial report in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal controls. An audit also includes evaluating the appropriateness of accounting policies used

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and the reasonableness of accounting estimates made by the directors, as well as evaluating the

overall presentation of the financial report.

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

for our audit opinion.

IndependenceIn conducting our audit we have met the independence requirements of the Corporations Act 2001.

We have given to the directors of the company a written Auditor’s Independence Declaration, a

copy of which is included in the directors’ report.

Auditor’s OpinionIn our opinion:

1. the financial report of MYOB Ltd is in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the financial position of MYOB Ltd and the

consolidated entity at 31 December 2007 and of their performance for the year ended

on that date; and

(ii) complying with Australian Accounting Standards (including the Australian

Accounting Interpretations) and the Corporations Regulations 2001.

2. the remuneration disclosures that are contained on pages 29 to 41 of the directors’ report

comply with Accounting Standard AASB 124 Related Party Disclosures.

Ernst & Young

David Petersen

Partner

Melbourne

11 February 2008

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Director’s Declaration

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

1. In the opinion of the directors:

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

(i) giving a true and fair view of the Company's and consolidated entity's financial position as at 31 December 2007 and of their performance for the year ended on that date; and

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

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

2. This declaration has been made after receiving the declaration required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial period ending 31 December 2007.

3. In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 27 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.

On behalf of the Board

SIMON MCKEON CRAIG WINKLER Chairman Chief Executive Officer MYOB Limited MYOB Limited

Melbourne, 11 February 2008

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Shareholder Information

Key Dates

Ex-entitlement date for final dividend 1 April 2008Record date for final dividend 7 April 2008Final dividend paid 18 April 2008Annual General Meeting 24 April 2008Half year end 30 June 2008

Australian Stock Exchange listing

MYOB Limited ordinary shares are quoted on the Australian Stock Exchange (ASX). The stock code under which the shares trade is ‘MYO’. Trading results are published in most large Australian daily newspapers.

Communications

Enquiries or notifications by shareholders regarding their shareholdings or their dividends should be directed to MYOB Limited’s share registry:

Computershare Investor Services Pty LtdYarra Falls, 452 Johnston Street, Abbotsford 3067

Telephone: (within Australia) 1300 850 505Facsimile: +61 3 9473 2500 (outside Australia) +61 3 9415 4000

Mailing: GPO Box 2975, Melbourne Victoria 3001 E-mail: [email protected]: www.computershare.com.au

Shareholders communicating with the share registry should advise them that the enquiry relates to MYOB Limited shares. When writing to the share registry, they should quote their Shareholder Reference Number as it appears on their share certificate(s) or the Holder Identification Number (HIN) as it appears on their Holding Statement, along with their current address.

Registered Office

12 Wesley Court, Burwood East, Victoria, 3151Tel: +61 3 9222 9797 Fax:+613 9222 9798 www.myob.com.au

Company Secretary

Robert Reside

Voting Rights

At meetings of shareholders (subject to the Constitution of MYOB Limited):

i. Each shareholder entitled to vote may either vote in person, by proxy, by representative or by attorney;ii. On a show of hands, each shareholder present in person, by proxy, by representative or by attorney has one vote; andiii. On a poll, each shareholder present in person, by proxy, by representative or by attorney shall have one vote for every share held

by that shareholder. In the case of joint holdings, only one joint holder may vote and, if both joint holders attend the meeting, only the first named in the register of shareholders may vote.

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Additional Information

Substantial Shareholders

As at 18th February 2008

Shareholder Name Shares Held % Shares held

Craig Winker and his associated entities 108,792,008 27.71

Guinness Peat Group 52,648,604 13.63

Commonwealth Bank of Australia 50,046,100 12.96

Schroder Investment Management Group 37,898,298 9.82

AMP Limited 23,450,664 6.07

Distribution of Shareholders


Ranges Number of Ordinary Shares Number of Shareholders

1-1,000 2,231,572 3,478

1,001-5,000 13,578,999 5,621

5,001-10,000 7,987,718 1,102

10,001-100,000 18,740,650 760

1000,001-max 343,235,900 77

Top 20 Shareholders


Shareholder Number of Shares %

Solwood Lane Pty Ltd 73,740,993 19.12

Silvara Pty Limited 52,648,604 13.65

JP Morgan Nominees Australia 45,730,087 11.85

Bangarie Pty Ltd 30,179,041 7.82

National Nominees Limited 22,746,482 5.90

HSBC Custody Nominees (Australia) Limited 17,960,953 4.66

Citicorp Nominees Pty Limited 12,589,104 3.26



Queensland Investment Corporation 6,577,222 1.70


Cogent Nominees Pty Limited 5,569,405 1.44

Ravere Pty Ltd 5,000,000 1.30

Cogent Nominees Pty Limited 4,767,308 1.24

AMP Life Limited 4,738,239 1.23

HSBC Custody Nominees (Australia) Limited 4,335,402 1.12


Mr Craig Winkler 3,500,000 0.91

ANZ Nominees 2,628,500 0.68

ARGO Investments Limited 2,050,000 0.53

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Since 1991 MYOB has transformed the way owner operated businesses work.

We continue to challenge ourselves to find better ways to liberate and empower business owners.

In this quest MYOB itself continues to change and evolve.

MYOB has become broader, deeper, stronger and longer.

We invite you to look at us in a different light.

myob.com/investors

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Documents

Annual Report 2007 For personal use only - ASXNet proﬁt after tax grew 9% to $18.8 million. Recurring revenue levels continue to be high reinforcing the strength of the underlying