ABN 79 131 843 868 Annual Report for the year ended 30 June 2017 PEAKO LIMITED ABN 79 131 843 868 TABLE OF CONTENTS Corporate Directory ............................................................................................................................. 3 Chairman’s Letter ................................................................................................................................. 4 Operations Report ................................................................................................................................ 5 Corporate ............................................................................................................................................. 5 Minerals Interests ................................................................................................................................ 5 Oil & Gas Interests ............................................................................................................................... 6 Corporate Governance ......................................................................................................................... 7 Directors’ Report .................................................................................................................................. 7 Remuneration Report ........................................................................................................................ 10 Auditor’s Independence Declaration ................................................................................................. 14 Consolidated Statement of Profit or Loss and Other Comprehensive Income ................................. 15 Consolidated Statement of Financial Position ................................................................................... 16 Consolidated Statement of Changes in Equity................................................................................... 17 Consolidated Statement of Cash Flows ............................................................................................. 18 Notes to the Financial Statements ..................................................................................................... 19 Directors’ Declaration ........................................................................................................................ 38 Independent Auditor’s Report to the Members ................................................................................ 39 Additional Shareholder Information (unaudited) .............................................................................. 42 Forward–looking Statements This Financial Report includes certain forward-looking statements that have been based on current expectations about future acts, events and circumstances. These forward-looking statements are, however, subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in such forward-looking statements. These factors include, among other things, commercial and other risks associated with the meeting of objectives and their investment considerations, as well as other matters not yet known to the Company or not currently considered material by the Company. Risk Factors Exploration for and development of natural resources is speculative, expensive and subject to a wide range of risks. There can be no assurance that the activities of the Company will result in the discovery of petroleum or minerals, nor that any discovery or development will prove to be commercially viable. Individual investors should consider these matters in light of their personal circumstances (including financial and taxation affairs) and seek professional advice from their accountant, lawyer or other professional adviser as to the suitability of an investment in the company. 2 PEAKO LIMITED ABN 79 131 843 868 Corporate Directory Directors Geoffrey Albers Raewyn Clark Peter Armitage Company Secretary Robert Wright Non-Executive Chairman Executive Director Non-Executive Director Registered Office Level 21, 500 Collins Street Melbourne Vic 3000 Website: www.peako.com.au Email: info@peako.com.au Ph: (03) 8610 4702 Fax: (03) 8610 4799 Auditor Grant Thornton Audit Pty Ltd Level 30 525 Collins Street Melbourne, Victoria 3000 Australia Share Registry (From 2 October 2017) Automic Pty Ltd Level 3 50 Holt Street Surry Hills, NSW 2010, Australia Telephone: 1300 288 664 (within Australia) Telephone: +61 (2) 9698 5414 (outside Australia) Website: www.automic.com.au Securities Exchange Listing ASX Limited Level 4, North Tower, Rialto 525 Collins Street Melbourne Victoria 3000 Website: www.asx.com.au ASX Code: PKO Incorporated in Western Australia 25 June 2008 3 PEAKO LIMITED ABN 79 131 843 868 Chairman’s Letter Dear Shareholders Peako is a natural resources company, incorporated in Australia, with its securities listed on the ASX. Its focus is on energy in all its forms. 2016/17 was a year of further consolidation for the company. Exploration Licence E45/3278 at Sunday Creek, was granted following successful negotiations with Western Desert Lands Aboriginal Corporation which resulted in execution of a Land Access and Mineral Exploration Agreement. The Sunday Creek Prospect, in the Paterson Province of Western Australia, had been held under application by the company for a number of years since ASX listing. The Paterson region is well known for its gold, base metals and uranium potential and is an active area of exploration for base and other minerals. Following grant, the Company undertook desktop studies and obtained samples and data previously acquired by a third party. There have been no developments in relation to the Cadlao petroleum interests during the year. The arbitration commenced some years ago by Peako against Cadlao Development Company Limited (Cadco) and Blade Petroleum Limited (Blade), in relation to the Cadco Buy-back Right, was terminated by the Arbitrator at Peako’s request in December 2016. Cadco had failed to respond to any communication from Peako or the Arbitrator for more than two years and Peako learned that Blade Petroleum Limited was in liquidation. As such, the arbitration was considered to have little prospect of a meaningful outcome. The investment had been previously fully impaired. The proceeds sharing arrangement with Octanex Limited, whereby Peako agreed to share any proceeds derived in relation its Cadlao interests up to a limit of $1,603,683 will end on 26 November 2017. There is no expectation of their being any such proceeds. The Company will cease reporting on the Cadlao interests, unless further matters arise. Peako maintained extreme fiscal discipline during the year. Directors continue to forgo directors’ fees and all other forms of corporate expenditure have been limited or reduced. During the year the Company consolidated its share capital on a 1 for 20 basis in order to make the Company’s share structure a more attractive investment vehicle for capital raising purposes and attractive to potential project partners. In this vein, the Company anticipates that it will conduct a modest pro rata share capital raising during the last quarter of this year to provide working capital for its activities. Peako is now positioned to test the potential of its minerals exploration interests, as well as to review other opportunities. EG Albers - Chairman Peako Limited 28 September 2017 4 PEAKO LIMITED ABN 79 131 843 868 Operations Report Corporate During the year the Company continued to maintain tight fiscal discipline. Minerals Interests Mineral Exploration Interests – Paterson Province Projects, Western Australia Paterson Figure 1 Paterson Province Projects Location Map Peako’s Paterson Province Projects; the Sunday Creek and Mount Sears initiatives, comprise a ~403km2 tenement package in the Rudall River area of the Paterson Province of Western Australia. The Paterson region is well known for its gold, base metals and uranium potential, hosting Australia’s fifth largest uranium deposit at Kintyre. Uranium occurrences are known in both the Sunday Creek and Mount Sears prospects. Both prospects are considered polymetallic. four Peako’s tenement package comprises tenements, one of which is the granted Exploration Licence E45/3278, and three at the applications stage. They were the cornerstone of Peako’s portfolio of mineral assets when it first listed on ASX as Raisama Limited in 2009. Exploration activities commenced with the the acquisition of past exploration data, assessment of which will inform and shape our exploration work program for the Sunday Creek project. Peako’s Paterson Province tenement package is shown below. Figure 1 Paterson Province Tenement Package 5 PEAKO LIMITED ABN 79 131 843 868 The Sunday Creek area was first explored by others between 1978 and 1981. The lack of high resolution data available at that time resulted in limited structural interpretation by previous explorers. as The Sunday Creek Prospect was initially a identified radiometric anomaly without GPS or high resolution airborne data, with subsequent rock chip samples copper, containing uranium and lead. Radiometric anomalies were also followed up with soil geochemical surveys, which produced low assay responses, mainly due to sand cover. Figure 2 Best Uranium Hits in E45/3278 - Location of Occidental 1980 Drill Holes A four-hole reconnaissance drilling program was done at spacing of 4km and a prospective contact of 20km strike length is considered to remain largely untested. The Mount Sears Prospect is located 25 kilometres east of the Sunday Creek Prospect covering an area of 150km2. A known uranium occurrence in the Mount Sears Range was discovered by Occidental Minerals Corporation in 1978 and has an associated airborne radiometric uranium anomaly. An overview of the Mount Sears project geology and historic data indicates that the project area is prospective for copper and uranium. In June 2017, following the March 2017 change of government of Western Australia to the Mark McGowan led Labor Party, the McGowan government implemented a ban on uranium mining on all future granted mining leases in Western Australia. Peako is reviewing its exploration work program as a consequence of this ban. Oil & Gas Interests SC6 (Cadlao) - Cadlao Oilfield Re-development Project, the Philippines Since the last Annual Report there have been no developments and no activity in relation to the Cadlao interests. The investment has been previously fully impaired. The Company will cease reporting on this interest. 6 PEAKO LIMITED ABN 79 131 843 868 Corporate Governance The Board is responsible for the strategic direction of the Company, the identification and implementation of corporate policies and goals, and the monitoring of the business and affairs of the Company on behalf of its shareholders. The Board is currently comprised of three Directors. In accordance with the Company’s Constitution and the ASX Listing Rules, the Directors (other than the Chief Executive Officer) are subject to re- election by shareholders every three years. The Board meets regularly throughout the year. A corporate governance statement reporting on Peako’s governance framework, principles and practices is provided on the Peak website www.peako.com.au Directors’ Report Your directors present their annual financial report on the consolidated entity (referred to hereafter as the “Group”) consisting of Peako Limited (the “Company” or “parent entity”) and the entities it controlled at the end of, or during, the financial year ended 30 June 2017. In order to comply with the Corporations Act 2001, the directors report is as follows: Directors The following persons were directors of the Company during the financial year and up to the date of this report: Geoffrey Albers Raewyn Clark Peter Armitage Non-Executive Chairman Executive Director Non-Executive Director Information on Directors E. Geoffrey Albers LLB, FAICD Mr Albers was appointed to the board of Peako Limited on 4 February 2013. Mr Albers has over 35 years’ experience as a director and administrator in corporate law, resource exploration and resource sector investment. Mr Albers has interests in a number of companies active in the petroleum industry in Australia and Malaysia. His companies are also active resource sector investors. Mr Albers is also a director of the ASX listed companies Octanex Limited and Enegex Limited. Raewyn Clark, B.Bus(dist), CA, MAICD, AGIA, ACIS Mrs Clark has more than twenty years experience focussed primarily on the upstream oil and gas sector. Her experience includes business development, financial modelling and analysis, capital raising and mergers and acquisitions, as well as managing joint venture partners, government, regulator and investor relations. Mrs Clark was appointed to the Board on 4 December 2014. Mrs Clark is also a Director of the ASX listed companies Octanex Limited and Enegex Limited. Mrs Clark resigned as Company Secretary of Peako on 2 May 2017. 7 PEAKO LIMITED ABN 79 131 843 868 Peter Armitage FCA FAICD Mr Armitage was appointed to the board of Peako Limited on 18 August 2015. Mr Armitage began his professional career with an international accounting firm. After qualification he was invited into partnership of a national firm. Since the early 1980s he has been a director of a number of listed exploration companies in both Australia and New Zealand. He is currently a Non-Executive director of ASX listed Strategic Energy Resources Limited and Enegex Limited. Information on Company Secretary Robert Wright B Bus, CPA Mr Wright was appointed as Company Secretary of Peako on 2 May 2017. Mr Wright is a senior financial professional with over 25 years commercial experience in the resource, energy and manufacturing industries gained at various companies and locations, including 14 years at BHP. As well as carrying out his secretarial duties for Peako, he is the company’s Chief Financial Officer and the Company Secretary and CFO of the ASX listed companies Octanex Limited and Enegex Limited. Mr Wright is a member of CPA Australia. Ordinary shares During the year the share capital of the Company was consolidated on a one for twenty basis, making the company’s share capital more workable and a more attractive investment vehicle. The number of shares on issue reduced from 1,020,380,247 to 51,019,137. Options As at 30 June 2017 and to the date of this report there were 5,000,000 options on issue (30 June 2016: 20,000,000). 5,000,000 options exercisable at $0.04 (4 cents) each, expiring 24 November 2019 were granted to directors at the general meeting on 24 November 2016. 20,000,000 options exercisable at $0.28 (28 cents) expired on 25 November 2016. Dividends No dividend has been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. Principal activities The principal activities of the Group during the financial year continue to be direct and indirect equity investments made with the objective of advancing the exploration for and development of natural resources. Review of operations A detailed review of the Group's activities and operations is set out on pages 5-6 of this Report. Significant changes in the state of affairs There have been no significant changes in the state of affairs of the Group to the date of this Report, other than those changes detailed in the review of activities and operations, and elsewhere in this Report. Matters subsequent to balance date There are no significant after balance date events up to the signing of this report. 8 PEAKO LIMITED ABN 79 131 843 868 Likely developments and expected results The Group will continue to pursue projects which seek to provide sound opportunities for future development during the next financial year. Likely developments and expected results of the operations of the Group in subsequent years are not discussed further in this report. In the opinion of the directors, further information on those matters could prejudice the interests of the Company. Environmental legislation The Group is subject to significant environmental legal regulations in respect to its exploration and evaluation activities in Australia. There have been no known breaches of these regulations and principles. Indemnification of directors and officers During the financial year and to the date of this report, the company did not pay premiums in respect of contracts insuring officers or auditors of the company against liabilities arising from their position of officers or auditor of the company. Meetings of directors During the financial year there were two formal directors’ meetings. All other matters that required formal Board resolutions were dealt with via written circular resolutions. In addition, the directors met on an informal basis at regular intervals during the financial year to discuss the Group’s affairs. The number of formal meetings of the Company’s board of directors and relevant committees attended by each director were: Geoffrey Albers Raewyn Clark Peter Armitage Directors’ Meetings Audit Committee Meetings Held Attended Held Attended 2 2 2 2 2 2 2 2 2 2 2 2 Proceedings on behalf of Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. 9 PEAKO LIMITED ABN 79 131 843 868 Remuneration Report This report is audited. Directors / Executives Position Held Geffrey Albers Raewyn Clark Peter Armitage Non-Executive Chairman Executive Director Non-Executive Director During the year there were no employees or consultants to the company that meet the definition of key management personnel, other than the directors. Remuneration levels for company officers are competitively set to attract and retain experienced directors. The remuneration structure explained below is designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The remuneration structure takes into account: • • the capability and experience of the directors; and the ability of directors to control the entity’s performance. Remuneration levels are reviewed annually through a process that considers the performance of individual directors and the overall performance of the entity. Director Remuneration During the year under review, directors were remunerated a total of $33,744 (2016: $Nil) which $Nil). This included shareholder-approved non-executive remuneration of $6,949 (2016: remuneration is made up entirely of share based payments in the form of options granted. There is no performance related remuneration for directors. The directors do not receive employee benefits, including annual leave and long service leave, but remuneration may include the grant of options (share based payments) over shares of the company to align directors’ interests with that of the shareholders. The company aims to reward directors with a level and mix of remuneration commensurate with their position and responsibilities within the company. There is no direct relationship between remuneration of directors and the company’s performance for the last five years. 10 PEAKO LIMITED ABN 79 131 843 868 REMUNERATION REPORT (Continued) Components of directors’ compensation are disclosed below. Primary benefits paid / payable Equity Settled Salary Directors’ fees Super- annuation Equity option issued TOTAL Year ended 30 June 2017 Directors Geoffrey Albers Raewyn Clark Peter Armitage $ - - - - $ - - - - $ - - - - $ $ - 26,995 6,949 33,744 - 26,995 6,949 33,744 Primary benefits paid / payable Equity Settled Salary and/or consulting fees Directors’ fees Super- annuation Equity option issues TOTAL Year ended 30 June 2016 Directors Geoffrey Albers Raewyn Clark Peter Armitage $ - - - - $ - - - $ - - - $ - - - $ - - - - Loans to key management personnel No loans were made key management personnel during the current or previous financial year. Other transactions with key management personnel In the year ended 30 June 2017, the Company incurred consulting fees of $25,211 (2016: $7,290) with Samika Pty Ltd, a director-related entity of Raewyn Clark. The fees were provided under normal commercial terms and conditions with $nil remaining unpaid at 30 June 2017(2016 $2,420). 11 PEAKO LIMITED ABN 79 131 843 868 REMUNERATION REPORT (Continued) Key management personnel interest in equity holdings Fully paid ordinary shares 30 June 2017 Directors Geoffrey Albers* Raewyn Clark Peter Armitage Balance at beginning of year Number 22,962,089* - - 22,962,089 Granted as compensation Number Net change other Number Balance at end of year Number - - - - - - - - 22,962,089 - - 22,962,089 • Adjusted for 1 for 20 share consolidation completed 1 December 2016 Unlisted options 30 June 2017 Directors Geoffrey Albers Raewyn Clark Peter Armitage Balance at the beginning of the year Number Granted during the year Number Expired during the year Number Other / Transfers Number - - - - - 4,000,000 1,000,000 5,000,000 - - - - - - - - Balance at the end of the year Number - 4,000,000 1,000,000 5,000,000 Vested and exercisable at the end of year Number - 4,000,000 1,000,000 5,000,000 5,000,000 options exercisable at $0.04 (4 cents) each, expiring 24 November 2019 were granted to directors at general meeting on 24 November 2016. There are no performance conditions attached to these options as the directors do not receive employee benefits, including annual leave and long service leave and the grant of options (share based payments) over shares of the company will align directors’ interests with that of the shareholders. End of remuneration report 12 PEAKO LIMITED ABN 79 131 843 868 Auditor independence Section 307C of the Corporations Act 2001 requires our auditors, Grant Thornton Audit Pty Ltd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 14 and forms part of this directors’ report for the year ended 30 June 2017. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. The Company has considered the position and is satisfied that the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The auditor has not provided any non-audit services and as such auditor independence was not compromised. This report is made in accordance with a resolution of the directors. RL Clark Director 28 September 2017 13 The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF PEAKO LIMITED In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Peako Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants A R J Nathanielsz Partner - Audit & Assurance Melbourne, 28 September 2017 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. PEAKO LIMITED ABN 79 131 843 868 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2017 Financial income Other income Expenses Audit fees Professional and consultancy fees Depreciation charges Financial expense Insurance costs Office costs Other costs Share based payment Stock exchange and share registry costs (Loss) / profit before income tax expense Income tax expense Net (loss) / profit for the year Other comprehensive income Items that may be reclassified to profit or loss Foreign exchange (loss) / gain on translation of subsidiary financial statements Other comprehensive income net of tax Total comprehensive income for the year Basic (loss) / profit per share Diluted (loss) /profit per share Note 2 20 11 3 4 4 2017 $ 3,767 - 3,767 (25,126) (26,318) - - - (33,929) (38,915) (33,743) (23,781) (181,812) (178,045) - (178,045) 2016 $ 305 1,285,601 1,285,906 (37,500) (21,791) (3,578) (10,497) (17,127) (25,143) (42,296) - (21,017) (178,949) 1,106,957 - (178,045) 1,106,957 (207) 462 (207) (178,252) Cents (0.35) (0.35) 462 1,107,419 Cents 3.03 3.03 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 15 PEAKO LIMITED ABN 79 131 843 868 Consolidated Statement of Financial Position as at 30 June 2017 Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Trade and other receivables Mineral exploration costs Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Note 5 5 7 8 9 10 2017 $ 112,685 1,788 114,473 5,777 8,322 14,099 2016 $ 271,158 6,356 277,514 5,984 - 5,984 128,572 283,498 30,924 30,924 41,342 41,342 30,924 41,342 97,648 242,156 36,808,483 33,999 (36,744,834) 36,808,483 1,895,589 (38,461,916) 97,648 242,156 The above statement of financial position should be read in conjunction with the accompanying notes. 16 PEAKO LIMITED ABN 79 131 843 868 Consolidated Statement of Changes in Equity for the year ended 30 June 2017 Issued capital $ Share compensation reserve $ Foreign currency translation reserve $ Accumulated losses $ Total equity/ (deficiency) $ Balance at 1 July 2015 36,528,192 1,895,127 Profit for the year Other comprehensive income Total comprehensive profit for the year - - - - - - Issue of shares Share issue costs Balance at 30 June 2016 343,068 (62,777) 36,808,483 - - 1,895,127 - - 462 462 - - 462 (39,568,873) (1,145,554) 1,106,957 1,106,957 - 462 1,106,957 1,107,419 - - (38,461,916) 343,068 (62,777) 242,156 Balance at 1 July 2016 36,808,483 1,895,127 462 (38,461,916) 242,156 Loss for the year Other comprehensive loss Total comprehensive loss for the year - - - - - - - (207) (178,045) - (178,045) (207) (207) (178,045) (178,252) Expiry of options Issue of options Balance at 30 June 2017 - - 36,808,483 (1,895,127) 33,744 33,744 - - 255 1,895,127 - (36,744,834) - 33,744 97,648 The above statement of changes in equity should be read in conjunction with the accompanying notes. 17 PEAKO LIMITED ABN 79 131 843 868 Consolidated Statement of Cash Flows for the year ended 30 June 2017 Cash flows from operating activities Payments to suppliers and employees Financial income Net cash outflows from operating activities Cash flows from investing activities Payments to suppliers - exploration Proceeds from sale of permit interest Net cash (outflow) / inflow from investing activities Cash flows from financing activities Proceeds from the issue of shares Share issue costs Net cash inflows from financing activities Net (decrease) / increase in cash held Cash at the beginning of reporting period Effect of exchange rate fluctuations on cash held Cash at the end of the reporting period Note 18 2017 $ (153,988) 3,860 (150,128) 2016 $ (162,539) 167 (162,372) (8,322) - (8,322) - 100,000 100,000 - - - (158,450) 271,158 (23) 112,685 343,068 (62,777) 280,291 217,919 52,985 254 271,158 The above statement of cash flows should be read in conjunction with the accompanying notes. 18 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies (a) 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, Accounting Standards and Interpretations and other requirements of the law. The financial report has also been prepared on a historical cost basis. The Parent Entity is registered and domiciled in Australia. The financial statements comprise the consolidated financial statements for the Group. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity. The financial statements are presented in Australian dollars, unless otherwise stated. Going concern For the year ended 30 June 2017 the Group incurred a net cash outflow from operating and investing activities of $158,450 and a net loss after tax of $178,045. As at 30 June 2017, the Group has working capital of $83,549. The Board considers that the Group is a going concern and recognises that additional funding may be required to ensure that it can continue to fund its operations and further develop exploration assets during the twelve month period from the date of this financial report. Such additional funding is likely to be derived from a rights issue made to all shareholders. Directors are confident that the Group will be able to successfully raise sufficient funding to enable it to continue as a going concern for at least 12 months from the signing of the annual financial report. If the Group is unable to raise sufficient capital for these purposes, there is a material uncertainty that may cast doubt on the Group’s ability to continue as a going concern and, therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. (b) Adoption of new and revised standards Changes in accounting policies on initial application of Accounting Standards In the year ended 30 June 2017, the directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group’s operations and effective for the current annual reporting period. It has been determined by the directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies. The directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2017. As a result of this review the directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies. 19 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (c) Statement of compliance The financial report was authorised by the board of directors for issue on 26 September 2017. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). (d) Basis of consolidation The consolidated financial statements consolidate those of the parent company and all of its subsidiaries as of 30 June 2017 (“Group”). The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non- controlling interests based on their respective ownership interests. (e) Exploration and evaluation expenditure Exploration and evaluation assets, including the costs of acquiring permits or licences, are capitalised as exploration and evaluation assets on an area of interest basis. Exploration and evaluation assets are only recognised if the rights to tenure of the area of interest are current and either: (i) (ii) the expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale or partial sale: or activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. 20 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (e) Exploration and evaluation expenditure continued Exploration and evaluation assets are assessed for impairment if the facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. One or more of the following facts and circumstances indicate that an entity should test exploration and evaluation assets for impairment (the list is not exhaustive): (i) (ii) (iii) (iv) the exploration and evaluation tenure right has expired or are expected to expire in the near future, and is not expected to be renewed. substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale Proceeds from the sale of exploration permits or recoupment of exploration costs from farming arrangements are credited against exploration costs previously capitalised. Any excess of the proceeds overs costs recouped are accounted for as a gain on disposal. (f) Revenue recognition 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: (i) Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (g) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Temporary bank overdrafts are included in cash at bank and in hand. Permanent bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 21 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continues (h) Income tax Current tax assets and liabilities 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 balance date. Deferred income tax is provided on all temporary differences at the balance 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: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in controlled entities, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference 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 credits and unused tax losses can be utilised, except: • when 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; or • when the deductible temporary difference is associated with investments in controlled entities, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance 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. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the financial period 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 balance date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. 22 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continues (i) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows 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. (j) Impairment of assets The carrying amounts of the company’s assets are reviewed at each statement of financial position date to determine whether there are indicators of impairment. At each reporting date the company assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset's carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of 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. Due to the uncertainty surrounding each of the interests that Group holds in relation to the Cadlao development project, The directors have, as a matter of caution, decided to continue to impair all of the interests associated with Cadlao. As a result, no value is attributed to those interests, with the assets therefore not included on the Statement of Financial Position. (k) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. 23 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (l) (m) (n) (o) Provisions Where applicable, 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. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss and other comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Share-based payment transactions Equity settled transactions The fair value of options granted are recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the grantee become unconditionally entitled to the options. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares. (p) Foreign currency translation Both the functional and presentation currency of Peako Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency by applying 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 balance date. 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 profit or loss. 24 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (p) Foreign currency translation (continued) Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. 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. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currencies of the foreign operations are not nominated in Australian Dollars. As at the balance date the assets and liabilities of these subsidiaries are translated into the presentation currency of Peako Limited at the rate of exchange ruling at the balance date and their income statements are translated at the weighted average exchange rate for the year. The exchange differences arising on the translations are taken directly to a separate component of recognised in the foreign currency translation reserve in equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss. (q) Trade and other receivables Trade receivables are initially valued at fair value and then subsequently measured at amortised cost. Trade receivables on oil and gas sales are due for settlement within 30 days from the date of the sale. Collectability of trade debtors is reviewed on an on-going basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. (r) Segment Reporting Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker, which has been identified as the Board of Directors of Peako Limited. (s) Parent entity financial information The financial information for the parent entity, Peako Limited, disclosed in Note 15 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the parent entity’s financial statements. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. 25 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (t) Critical accounting estimates and judgements Management determine the development, selection and disclosure of the company’s critical accounting policies and estimates and the application of these policies and estimates. There are no estimates and judgements that are considered to have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods Management exercise judgement as to the recoverability of exploration expenditure. Any judgement may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploitation, then the relevant capitalised amount will be written off through profit or loss and other comprehensive income. Recovery of deferred tax assets Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits. Currently the Group has not recognised any deferred tax assets in the Statement of Financial Position. (u) Financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 26 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 1: Statement of significant accounting policies continued (v) Derecognition of financial assets and financial liabilities Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is derecognised when: • • • the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass- through’ arrangement; or the Group has transferred its rights to receive cash flows from the asset and either: o has transferred substantially all the risks and rewards of the asset, or o has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay. When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Note 2: Other Income Discharge of Octanex Limited loan Other income Consolidated 2017 2016 $ $ - 1,284,774 - 827 - 1,285,601 27 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 3: Income tax Consolidated 2017 $ 2016 $ Income tax expense recognised in statement of comprehensive income Current income tax Current income tax payable Deferred income tax Relating to origination and reversal of temporary differences Income tax expense Reconciliation to income tax expense on accounting profit / (loss) - - Accounting (loss) / profit before tax (178,045) 1,106,957 Tax (benefit) expense at the statutory income tax rate of 30% (53,414) 332,087 Non-deductible expenses Non-assessable income Unrealised tax losses not recognised Temporary differences not recognised Income tax expense Unrecognised deferred tax balances Deferred tax assets Tax revenue losses (Australian) Tax revenue losses (Foreign) Unamortised business related costs Accruals & provisions Deferred tax liabilities: Exploration expenses Accrued income 13,844 (32) 65,676 (26,074) - 5,168 243 (283,766) (53,732) - 14,442,926 14,224,008 169,763 64,268 14,300 (8,332) (45) 169,763 140,103 17,000 - - Net unrecognised deferred tax assets 14,682,880 14,550,874 Potential tax benefit @ 30% (2016: 30%) 4,404,864 4,365,262 The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits thereof. 28 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 4: Earnings per share Consolidated 2017 $ 2016 $ The profit/(loss) and weighted average number of ordinary shares used in the calculation of basic and dilutive loss per share is as follows: Net (loss) / profit for the year The weighted average number of ordinary shares (178,045) 51,019,137 1,106,957 36,518,184 Total basic and dilutive (loss) / profit per share (cents) (0.35) 3.03 Note 5: Trade and other receivables Current GST Other receivables Non-current Security deposit 1,742 46 1,788 5,777 5,777 6,218 138 6,356 5,984 5,984 Note 6: Segment information Segment information is presented using a 'management approach', i.e. segment information is provided on the same basis as information used for internal reporting purposes by the directors. At regular intervals, the board is provided management information at a group level for the company’s cash position, and a company cash forecast for the next twelve months of operation. On this basis, no segment information is included in these financial statements. Note 7: Mineral exploration costs Areas of interest in the exploration and evaluation phase Balance at the beginning of the year Costs for the year Balance at the end of the year - 8,322 8,322 - - - Peako was granted Exploration Licence E45/3278 by the Western Australian Department of Mines and Petroleum (DMP) on 30 September 2016. The recoupment of exploration project acquisition costs carried forward is dependent upon the recoupment of costs through successful development and commercial exploitation, or alternatively by sale of the respective areas. 29 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 8: Trade and other payables Current Trade and other payables* Director-related entities – other payables (Note 14) Other Consolidated 2017 $ 15,952 14,972 - 30,924 2016 $ 23,431 17,911 - 41,342 * Trade payables are non-interest bearing and are normally paid on 30 day terms. Note 9: Issued Capital As at 30 June 2017 there were 51,019,137 fully paid ordinary shares on issue (2016: 1,020,380,247). During the year the share capital of the Company was consolidated on a one for twenty basis, making the company’s share capital more workable and a more attractive investment vehicle. The number of shares on issue reduced from 1,020,380,247 to 51,019,137 Movement in ordinary share capital Consolidated 2017 $ 2016 $ 2017 # 2016 # At the beginning of the year Shares issued during the year Costs associated with share issue Consolidation 36,808,483 - 36,528,192 343,068 (62,777) - 1,020,380,247 - - (969,361,110) 680,253,247 340,127,000 - - At reporting date 36,808,483 36,808,483 51,019,137 1,020,380,247 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares. On a show of hands every shareholder of ordinary shares present at a meeting in person or by proxy is entitled to one vote and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Movement in share options As at 30 June 2017 5,000,000 options on issue (30 June 2016: 20,000,000). 5,000,000 options exercisable at $0.04 (4 cents) each, expiring 24 November 2019 were granted to directors at general meeting on 24 November 2016 (refer to Note 11). 20,000,000 options exercisable at $0.28 (28 cents) expired on 25 November 2016. 30 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 10: Reserves Foreign currency translation reserve (a) Share compensation reserve (b) Consolidated 2016 2017 $ $ 462 255 1,895,127 33,744 33,999 1,895,589 (a) (b) Foreign currency translation reserve The foreign currency translation reserve represents foreign exchange movements on the translation of financial statements for controlled entities from the functional currency into the presentation currency of Australian dollars. Share compensation reserve The share compensation reserve is used to record the value of equity benefits provided to employees, consultants and directors as part of their remuneration. Note 11: Share based payments Share options to directors 5,000,000 options exercisable at $0.04 (4 cents) each, expiring 24 November 2019 were granted to directors at general meeting on 24 November 2016. The 5,000,000 options granted to directors were valued using the Binomial Option Valuation model. The following inputs were used: Exercise price: Share price at grant date: Maximum option life Expected volatility Risk free interest rate 4.0 cents 2.0 cents 3.0 years 81% 1.55% Expected volatility was based on the average volatility of a peer group of eleven companies within the oil and gas exploration industry. The implied volatility of the eleven companies was in the range of 66% to 95%. The fair value of this share based payment at grant date was $33,744. The options were fully vested at grant date so a share based payment expense with a corresponding increase in equity of $33,744 has been recognised for the year ended 30 June 2017. Note 12: Financial instruments (a) Capital risk management Prudent capital risk management implies maintaining sufficient cash and marketable securities to ensure continuity of tenure to exploration assets and to be able to conduct the Group’s business in an orderly and professional manner. The Board monitors its future capital requirements on a regular basis and will when appropriate consider the need for raising additional equity capital, debt funding or to farm-out exploration projects as a means of preserving capital. 31 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 12: Financial instruments (continued) (b) Categories of financial instruments The Group’s principal financial instruments comprise of cash and short-term deposits and short term borrowings. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. (c) Financial risk management objectives The Group is exposed to market risk (including, interest rate risk and equity price risk), credit risk and liquidity risk. The main risks arising from the Group’s financial instruments are interest rate risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. (d) Market risk There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period. Interest rate risk management All cash balances attract a floating rate of interest. Excess funds that are not required in the short term are placed on deposit for a period of no more than 6 months. The Group’s exposure to interest rate risk and the effective interest rate by maturity periods is set out below. Interest rate sensitivity analysis At 30 June 2017, if interest rates had changed on cash and cash equivalent by 100 basis points (1%) and all other variables were held constant, the Group’s after tax profit would have been $1,126 (2016: $2,000) lower/higher as a result of higher/lower interest income on cash and cash equivalents. (e) Credit risk management Credit risk relates to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from any defaults. (f) Liquidity risk management Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. Liquidity risk is monitored to ensure sufficient monies are available to meet contractual obligations as and when they fall due. The following are the contractual maturities of the financial liabilities, including interest payments. Contractual amounts have not been discounted. 32 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 12: Financial instruments (continued) (f) Liquidity risk management (continued) Carrying Amount Contractual cash flows $ $ 0-12 month s $ 1-2 years 2-10 years $ $ 30,924 - 30,924 41,342 - 41,342 30,924 30,924 - 30,924 30,924 - 41,342 41,342 - 41,342 41,342 - - - - - - - - - - - - - 30 June 2017 Consolidated: Non-derivative Financial Liabilities Trade and other payables Non current payables 30 June 2016 Consolidated: Non-derivative Financial Liabilities Trade and other payables Borrowings Non current payables (g) Foreign currency risk The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currency. The functional currency of the group is denominated is Australian dollars. The Group’s policy is to maintain and hold the sufficient foreign currency to meet its liabilities when due. Surplus financial assets are transferred and held within Australian dollar currency based financial products. Unhedged amounts in respect of cash, receivable and payable in foreign currency Cash Receivables - current Receivables – non-current Payables Consolidated 2016 $ 2017 $ - - 5,777 - 5,777 - - 5,984 - 5,984 The only foreign currency the Group is currently exposed to is the US dollar. At 30 June 2017 if AUD:USD rates had changed by +/- 10% and all other variables were held constant, the Group’s after tax loss would have been $577 (2016: $(598)) higher/ (lower) as a result of lower/higher foreign exchange translations on cash, receivables and payables. 33 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 13: Commitments for expenditure Not longer than 1 year Longer than 1 year and not longer than 5 years Consolidated 2016 $ 2017 $ 20,000 60,000 80,000 - - - Expenditure commitments (minerals) The Group’s interests in minerals tenements are limited to E45 /3278 which has a current year commitment of $20,000. The permit year ends 29 September each year and currently expires 29 September 2021. Note 14: Related party disclosure The ultimate parent entity in the wholly-owned group and the ultimate Australian parent entity is Peako Limited. The consolidated financial statements include the financial statements of Peako Limited and the controlled entities listed in the following table: Name of entity Country of incorporation Class of shares Equity holding % 2016 2017 Australia Peak Oil & Gas (Australia) Pty Ltd Peak Oil & Gas (Singapore) Pte Singapore Ltd Peak Royalties Ltd British Virgin Islands Peak Oil & Gas Philippines Ltd British Virgin Islands British Virgin Islands Energy Best Limited Australia SA Drilling Pty Ltd Australia Samarai Pty Ltd Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 The transactions between Peako Limited and its controlled entities during this financial year consisted of loans between Peako Limited and its controlled entities. Related Parties The following table provides details of advances to related parties and outstanding balances at balance date. Parent entity 2017 $ 2016 $ Peak Oil & Gas (Australia) Pty Ltd SA Drilling Pty Ltd Samarai Pty Ltd Impairment of loans to controlled entities 10,420,932 206,356 255,884 (10,883,172) - 10,874,872 206,356 255,884 (11,337,112) - 34 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 14: Related party disclosure (continued) Transactions with Related Parties Director-related entities Companies in which a Peako director controls or significantly influences, that provide services to the company or to a joint operation in which the company has an interest. (i) During the year services were provided under normal commercial terms and conditions by: Samika Pty Ltd (Samika), a director-related entity of RL Clark Exoil Pty Ltd (Exoil), a director-related entity of EG Albers Natural Resources Group (NRG), a director-related entity of EG Albers Octanex Limited (Octanex), a director-related entity of EG Albers The following table provides details of services provided by director- related entities Samika - consulting Exoil – office services Octanex – accounting and administration support NRG – underwriting services The following table provides details of amounts payable to director- related entities at balance date. Samika Exoil Octanex 2017 $ 25,211 33,929 14,590 - 73,730 2016 $ 7,290 25,143 7,110 25,510 65,053 - 7,800 7,172 14,972 2,430 7,660 7,821 17,911 35 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Note 15: Parent Entity Disclosures Parent Entity Financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net Assets Issued capital Accumulated losses Options reserve Total Equity Financial performance (Loss) profit for the year Other comprehensive income Total comprehensive loss 2017 $ 114,472 8,322 122,794 30,922 - 30,922 91,872 2016 $ 277,513 - 277,513 41,340 - 41,340 236,173 58,725,355 (58,667,227) 33,744 91,872 58,725,355 (60,680,608) 2,191,426 236,173 (178,045) - (178,045) 1,654,185 - 1,654,185 Note 16: Matters Subsequent to Balance Date Since the end of the financial year the directors are not aware of any other matter or circumstance not otherwise dealt with in this report or financial statements that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Note 17: Contingent Liabilities Contingent liability of US$2,800,000 (A$3,6,40,146) (2016: A$3,770,536) payable on first two liftings from Cadlao oil project, provided that the project proceeds, which is uncertain, and provided that Peak Oil & Gas (Singapore) Pte Ltd retains its economic interest in the Cadlao Project via VenturOil unless it has lost that interest by virtue of gross negligence . In lieu of the balance of monies of $1,284,774 owing on the Octanex Limited (“Octanex”) loan, Octanex has agreed to accept a proceeds sharing arrangement with Peako whereby Octanex will share proportionately in any proceeds (any economic benefit or entitlement) received by Peako in relation to any of its Cadlao interests in the period to 26 November 2017 up to a limit of $1,603,683. Peako does not expect to receive any as such proceeds from the Cadlao project. 36 PEAKO LIMITED ABN 79 131 843 868 Notes to the Financial Statements for the Year Ended 30 June 2017 Consolidated 2017 $ 2016 $ Note 18: Reconciliation of (loss) / profit after income tax to net cash outflow from operating activities Reconciliation of loss from ordinary activities after income tax to net cash outflow from operating activities Net (loss) / profit for the year (178,045) 1,106,957 Depreciation charges Discharge of loan Foreign exchange gain Grant of options Decrease in trade and other receivables Decrease in trade and other payables Net cash outflow from operating activities Note 19: Auditor’s remuneration The auditors of the Group are Grant Thornton Audit Pty Ltd. Ltd. Assurance services Grant Thornton Audit Pty Ltd HLB Mann Judd Non-Audit services Grant Thornton Audit Pty Ltd Total auditors’ remuneration - - 23 33,744 4,568 (10,418) (150,128) 3,578 (1,284,774) 847 - 20,680 (9,660) (162,372) 25,126 - 32,000 5,500 - - 25,126 37,500 37 PEAKO LIMITED ABN 79 131 843 868 Directors’ Declaration The directors of the company declare that: The financial statements, comprising the statement of profit or loss and other comprehensive 1. income, statement of financial position, statement of cash flows, statement of changes in equity, and accompanying notes, are in accordance with the Corporations Act 2001 and: (a) (b) (c) comply with Accounting Standards and the Corporations Regulations 2001; give a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1(a). In the directors’ opinion, there are reasonable grounds to believe that the company will be able 2. to pay its debts as and when they become due and payable. 3. The remuneration disclosures included in pages 10 to 12 of the directors’ report, (as part of audited Remuneration Report), for the year ended 30 June 2017, comply with section 300A of the Corporations Act 2001. The directors have been given the declarations by the chief executive officer and chief financial 4. officer required by section 295A. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by: RL Clark Director 28 September 2017 38 The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report to the Members of Peako Limited Report on the audit of the financial report Opinion We have audited the financial report of Peako Limited (the “Company”) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and b Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 1(a) in the financial statements, which indicates that the Group incurred a net loss of $178,045 during the year ended 30 June 2017, had net cash outflows for the year of $158,450 and as of that date, the Group’s remaining cash balance was $112,685 with current liabilities of $30,924 and net assets of $97,648. As stated in Note 1(a), these events or conditions, along with other matters as set forth in Note 1(a), indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Exploration and Evaluation Assets – valuation Note 7 At 30 June 2017 the carrying value of Exploration and Evaluation Assets was $8,322. In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, the company is required to assess at each reporting date if there are any triggers for impairment which may suggest the carrying value is in excess of the recoverable value. The process undertaken by management to assess whether there are any impairment triggers in each area of interest involves an element of management judgement. This area is a key audit matter due to the valuation of exploration and evaluation assets being a significant risk. Our procedures included, amongst others: Obtaining the management prepared reconciliation of capitalised exploration and evaluation expenditure and agreeing to the general ledger; Reviewing management’s area of interest considerations against AASB 6; Conducting a detailed review of management’s assessment of trigger events prepared in accordance with AASB 6 including; - Tracing projects to statutory registers and exploration licenses to determine whether a right of tenure existed; Enquiry of management regarding their intentions to carry out exploration and evaluation activity in the relevant exploration area, including review of managements’ budgeted expenditure; - - Understanding whether any data exists to suggest that the carrying value of these exploration and evaluation assets are unlikely to be recovered through development or sale; Reviewing the appropriateness of the related disclosures within the financial statements. Information Other than the Financial Report and Auditor’s Report Thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard Responsibilities of the Directors’ for the Financial Report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 10 to 12 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Peako Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. GRANT THORNTON AUDIT PTY LTD Chartered Accountants A R J Nathanielsz Partner - Audit & Assurance Melbourne, 28 September 2017 PEAKO LIMITED ABN 79 131 843 868 Additional Shareholder Information (unaudited) The shareholder information set out below was applicable as at 25 September 2017. A. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total Ordinary shares 237 223 71 155 39 725 There were 647 holders of less than a marketable parcel of ordinary shares. B. Equity security holders Twenty largest quoted equity security holders – ordinary shares Name Octanex Limited Hawkestone Resources Pty Ltd Southern Energy Pty Ltd Sacrosanct Pty td 500 Custodians Pty Ltd Sagepark Holdings Pty Ltd Albers Ernest Geoffrey Pontia Pty Ltd Hebei Mining Aust Holding ty Ltdl Albers Cust Co Pty Ltd Seaspin Pty Ltd Auralandia Pty Ltd Australis Finance Pty Ltd Trayburn Pty Ltd Great Missenden Holdings Pty Ltd Bull Equities Pty Ltd Pathik Rohitendra Smedvig Peter Veblen Grp Pty Ltd Parfitt Julia Grace Ordinary Shares No. held % of issued shares 7,122,435 5,689,074 4,783,028 3,900,000 2,800,000 2,141,141 2,100,000 1,886,637 1,387,298 1,100,000 973,976 914,113 914,113 900,000 761,761 750,000 735,804 681,819 632,228 500,000 40,673,427 13.96% 11.15% 9.37% 7.64% 5.49% 4.20% 4.12% 3.70% 2.72% 2.16% 1.91% 1.79% 1.79% 1.76% 1.49% 1.47% 1.44% 1.34% 1.24% 0.98% 79.72% 42 PEAKO LIMITED ABN 79 131 843 868 C. Substantial holders Substantial shareholders as disclosed in substantial shareholding notices given to the Company are as follows: Octanex Group Number Held 30,084,521 Percentage 58.97% D. Voting rights The voting rights attaching to each class of equity securities are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. E. Interests in tenements Tenement Granted E45/3278 Location Sunday Creek, WA Peako Limited Registered Entity Name Registered Interest % 100.00 Peako Entity Peako Limited Beneficial Interest % 100.00 Tenement Application Location Registered Entity Name Registered Interest % Peako Entity Beneficial Interest % E45/3477 E45/3292 E45/3345 Peako Limited Broadhurst, WA Mt Seers, WA Peako Limited Sunday Creek, WA Peako Limited 100.00 100.00 100.00 Peako Limited Peako Limited Peako Limited 100.00 100.00 100.00 43
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