Eureka Group Holdings Limited Annual Report 2017

Plain-text annual report

Delivering affordable, caring and inclusive communities EUREKA GROUP HOLDINGS ABN 15 097 241 159 2016-2017 ANNUAL REPORT For personal use only2016-2017 HIGHLIGHTS Strong profitability with EBITDA of $9.4m and Statutory Profit after tax of $6.5m. Marked improvement of occupancy levels at EGH‑owned villages following a company‑wide strategy, implemented in February 2017 that led to occupancies lifting to 89.6% from a base of 83‑84% in first half of FY16‑17. Significant progress in determining pathway to realise value over the next 1 to 2 years through complementary value creation opportunities at Couran Cove and Terranora. Continued growth of portfolios: acquired 4 growing to 27 and 9 additional villages EGH‑owned villages managed villages • Significant structural changes Recruitment of additional senior executives and the separation of board and executive functions, to allow each to fulfill its responsibilities. • Blue Care Alliance Strengthening the alliance between Eureka Group Holdings and Blue Care to improve the quality of services to Eureka residents, increased occupancies through extended resident stays and Blue Care referrals, while capitalising on a pipeline of potential future village acquisitions. • The fundamentals for the sector in which Eureka operates remain very strong and continue to improve. There remains opportunity for the ongoing growth and expansion of the company’s portfolio. 2 2016-2017 ANNUAL REPORTFor personal use only3 EUREKA GROUP HOLDINGSFor personal use onlyAbove left: Couran Cove Eco Village Above right: Terranora interior Bottom left: Couran Cove Eco Village interior Bottom right: Terranora exterior 4 2016-2017 ANNUAL REPORTFor personal use onlyIndustry Award In September 2016, Rockhampton Village managers, Kevin and Mika Humphreys were awarded Queensland Manager of the Year by the Property Council of Queensland. Kevin and Mika have built strong relationships with a range of community care providers and work with them to help any residents who need additional support. Living on site, Kevin and Mika play an active role in engaging all residents in activities and social interactions, including sourcing entertainers, hosting craft classes, organising religious congregations and trips to the local zoo. Kevin and Mika have continually showed an unsurpassed enthusiasm for our residents’ care, complemented by an incredible drive to make their village stand out and Eureka is proud to have such an energetic and caring team at the helm of Eureka Care village Rockhampton. Pictured L to R: Mika Humphreys (QLD Winner), Kevin Humphreys (QLD Winner) and Andrew Heyer (Eureka) 5 EUREKA GROUP HOLDINGSFor personal use onlyContents FINANCIAL HIGHLIGHTS Chairman’s Report CEO’s Report Acquisitions in 2016-17 Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Auditor’s Independence Declaration Corporate Governance Statement Corporate Directory Security Holder Information 2 8 10 16 20 31 32 33 34 35 69 70 75 76 77 78 All images within this Annual Report show residents at Eureka villages. 6 2016-2017 ANNUAL REPORTFor personal use onlyEUREKA GROUP HOLDINGS 7 For personal use onlyChairman’s Report I am pleased to report to shareholders a year of continued expansion with four new property acquisitions, together with a significant structural change to Eureka Group Holdings Ltd (EGH) corporate organisational environment. Given the rapid growth of Eureka over recent years, your Board decided it was essential to create a platform that would underpin its future growth by streamlining EGHs corporate structure, while also strengthening and improving resources and internal systems. It was decided to fully separate the Board from the Executive to allow each to fulfill its responsibilities. To that end, Executive Directors, Mr Greg Rekers and Mr Kerry Potter retired from Eureka Group in early February 2017 after many years of outstanding input during a strong growth phase of the business. I would like to formally record the Board’s appreciation for Mr Rekers and Mr Potter’s long-term service and commitment. As part of this structural change, the Board conducted an open and competitive recruitment process to identify a new Chief Executive Officer to steer the business into the future. After evaluating approximately 120 candidates, Eureka appointed Jeff Weigh CEO, who commenced in early February 2017. The Board is confident that Mr Weigh has the specific skills, vision and enthusiasm to lead Eureka Group’s next phase of growth. Specifically, Mr Weigh brings over 15 years of experience in heading regionally-based property operations and has a strong track record of building and growing profitable enterprises. For four years he was CEO of South Bank Corporation (Brisbane based corporation owning and managing over $700 million of assets adjacent to the Brisbane CBD) where he more than doubled profit to $26 million per annum. He also reduced the Corporation’s debt from $35 million to zero during his four-year tenure. Prior to that, Mr Weigh also spent 10 years as Managing Director of Fortland Hotels, a 3.5 star hotel management company, which he built over that time before selling the portfolio to Accor Asia Pacific. Jeff also sits on the Board of Directors at Port of Brisbane Pty Ltd, a position he has held for the past two-and-a-half years. 8 The priorities set for Mr Weigh from the outset were: a) Reshaping the corporate structure to separate the Board and Executive duties; b) Focusing the responsibility of the day-to-day management of all aspects of the business over to the CEO and senior management; c) Improving the operating systems of the business; d) Lifting the depth and experience of the Executive Team; and e) Building a solid platform of systems, people and resources to prepare for robust growth into the future. The transition to the new structure at EGH has been achieved seamlessly with the implementation of this new structure and systems now working very effectively. Bookending FY 2017 was the appointment in June of Mr Paul Cochrane as Chief Financial Officer, who brings to the company significant expertise as a senior commercial executive with extensive public company, retirement living and property experience. The Board is extremely pleased with the strengthening of the executive team, which is progressing very well. BLUE CARE ALLIANCE I am delighted to report that the relationship with Uniting Church Blue Care has flourished during the year. Strong and functional working relationships have been developed between both organisations and the partnership is now delivering results for both organisations. The relationship between EGH and Blue Care is an important and valued alliance that is set for continued and sustained growth well into the future as Blue Care continues to roll out its in home care services to Eureka’s Queensland Villages adding a material improvement to our residents’ quality of life. INDUSTRY OUTLOOK Australia’s ageing population continues unabated and provides a strong platform for continued growth and commercial opportunity. Recent national research into Australia’s retirement village sector and demographic profiles that are underpinning the sector, was undertaken by Ibisworld in August 2016. This industry-wide research confirms the confidence we share in the future of the Eureka business and our business model of providing quality and affordable rental accommodation for seniors and disability pensioners in safe, caring and well managed environments. The Ibisiworld report states: “Industry revenue is forecast to grow at a compound annual rate of 10.1% over the five years through 2021-22, to reach $6.3 billion. Australia’s ageing population is projected to underpin this growth, as more and more retirees will require accommodation.” 2016-2017 ANNUAL REPORTFor personal use onlyChart 1 Chart 2 Population aged 70 and older Real household disposable income Major market segmentation (2016) 0 0 0 ‘ e l p o e P 3500 3000 2500 2000 1500 e g n a h c % 6 5 4 3 2 1 0 08 10 12 14 16 18 20 22 Year 10 12 14 16 18 20 22 Year 9.5% Self-funded 18.1% Department of Veterans’ Affairs pension Total $3.9bn 72.4% Centrelink Source:www.ibisworld.com.au Source:www.ibisworld.com.au In addition, as retirees’ life expectancies continue to increase and medical developments seek to reduce the burden on Australia’s healthcare system, residents are expected to live in the industry’s independent and low-level care retirement villages for longer, before transitioning into higher care nursing homes if required. This trend will greatly benefit industry operators as they will be able to maintain occupancy rates for longer periods of time and potentially reduce the costs associated with resident turnover. Greater occupancy rates and cost reductions would subsequently contribute to growth in the industry’s profit margins. Source: Ibisworld (August 2016) Driving commercial performance and growth within our affordable rental portfolio and continuing to expand through acquisitions and infill developments, remain the core of the Eureka strategy and we are well positioned to take advantage of the opportunities in this ever-increasing market. I would like to thank my fellow directors and Board for their ongoing commitment, hard work and governance of Eureka. The management team, village managers and staff have all worked very hard and professionally to deliver outstanding results in a year of considerable change. As illustrated in Chart 2 above, there is a significant majority of retirement village customers who fund their accommodation through Centrelink (72%) and Department of Veterans Affairs (18%). I also sincerely thank our loyal shareholders for their enduring confidence in Eureka. The achievements of this financial year provide a solid platform as we head into the future and strive to deliver long-term value accretion to our shareholders. These two market segments continue to account for some 90% of the burgeoning retirement village market. These customers most often pay through the Centrepay system and are very satisfied with the quality and affordability of the Eureka product. The strength of this sector in such a growing market segment bodes well for the future growth of Eureka. The continued strong growth in the number of Australians reaching retirement with few or no assets, together with the baby boomer segment moving into retirement in significant numbers augers very well for the EGH business model. According to Steven Wood of UBS: “this is actually a space that cannot be outsourced, and cannot be disrupted.” Source : Steven Wood, UBS, 2017. Robin Levison Chairman 9 EUREKA GROUP HOLDINGSFor personal use only CEO’s Report The 2017 year has been one of fundamental change in the structure, operations and governance of the company. The Eureka Board decided to move to a more conventional corporate structure with full separation between the Board and the Executive. The Executive Chairman moved to non‑executive Chairman upon the appointment of a CEO in February 2017. The immediate focus of the CEO was to implement a range of commercial initiatives: a) Lifting village occupancy across EGH-owned villages from 83% to 89% by the end of June; CHIEF FINANCIAL OFFICER APPOINTMENT In June 2017, Eureka appointed Mr Paul Cochrane as Chief Financial Officer following the resignation of Mr Ryan Maddock. Mr Cochrane is a highly experienced financial and commercial executive with demonstrated experience in the aged care sector, ASX-listed companies (including Company secretarial) and property development and management. The appointment of Mr Cochrane was a key opportunity to add value to and complement the skills and capabilities of the Executive. VILLAGE ACQUISITIONS During FY2017, Eureka Group acquired 4 additional villages to a value of $11.3 million. ACQUISITIONS FY2017 September 2016 Orange 55 units $5.115m December 2016 Broken Hill 42 units March 2017 June 2017* Mackay Gympie 38 units 42 units $1.05m $1.16m $4.0m TOTAL 4 Villages 177 units $11.325m b) Improving the financial performance of three properties in * settled July 2017 South Australia; c) Building the acquisition pipeline to sustain the growth path of the business; d) Introducing a range of cost saving initiatives across the business: by reducing two regional management positions and achieving better economies of scale through procurement savings in utilities, waste services, pest control, fire maintenance and communications; While this is a lower rate of acquisition than the previous financial year, it reflected a number of potential villages that failed to meet Eureka’s selection criteria – other than the financial return – and under the new corporate structure that is focusing on robust and long-term growth by securing assets that bolster the EGH business model and deliver financial returns to our shareholders. e) Defining a role for Eureka in the Couran Cove (Gold BLUE CARE ALLIANCE GAINING MOMENTUM Coast) project; f) Gaining more traction with the Blue Care Alliance; and g) Bringing together the operations, finance and property management teams into one cohesive support office in Southport and introducing defined channels of communication and reporting between operating teams. The alliance between Eureka and Blue Care has completed its first year of operation. The alliance ensures that Eureka residents enjoy a range of in home services, offering professional and tailored programs for each individual, that are enabled through government funding available to residents. The program instils confidence among Eureka residents through the provision of improved health and home services outcomes. Eureka residents also have peace of mind in knowing they can live independently for extended periods while enjoying a healthier and more active retirement. The Blue Care alliance is fully consistent with Eureka’s philosophy of delivering quality, independent living communities within safe, caring and well- managed environments. Four trial sites were established to test how the program would be delivered. Each of the trial sites at Ipswich, Cairns, Wynnum (Brisbane) and Rockhampton were successful and allowed the service delivery and interaction between Eureka and Blue Care to be honed and streamlined. 10 2016-2017 ANNUAL REPORTFor personal use onlyBy way of example, Blue Care Chaplains provide counselling to help minimise the trauma around stressful events such as the passing of a resident, which leads to improved resident sentiment towards village life and Eureka in general. As well as the improved level of care provided by Blue Care, the program will be positive in reducing resident turnover and ultimately, will lead to improved occupancy rates across the Eureka portfolio over the medium term. The integrated delivery of in home care also has positive reputational benefits to Eureka. Blue Care Liaison Officers are guiding residents or their family members, through the ‘My Aged Care’ portal to confirm their eligibility for services and to help take the stress and anxiety out of the process. Blue Care services are highly complementary to Eureka’s “independent living” ethos, which in turn, is driving, increased enquiries from new clients and their families. Since trialling the Blue Care Alliance at the four locations listed earlier, the Alliance has now been rolled out to all Eureka villages in Queensland and the benefits are beginning to flow to both partners (EGH and Blue Care). There are now jointly branded marketing collateral materials available to existing and prospective residents at all Eureka villages in Queensland. Furthermore, regional Blue Care Managers and Liaison Officers have all received inductions into Eureka’s Queensland villages. What is also pleasing since the initial trial and subsequent roll out of the Alliance to all EGH villages is Queensland is that take-up of Blue Care services has been relatively strong and referrals to Eureka villages from Blue Care regional and central staff are steadily increasing. The Blue Care and Eureka Alliance is an important platform for both organisations going forward. SUPPORTED RESIDENTIAL FACILITIES Over the past two years, Eureka acquired three Supported Residential Facilities (SRFs) in South Australia. There are two in Adelaide and one in Mount Gambier. At the time of acquisition, these properties were showing strong EBITDA performance. However, their subsequent performance was below budget due to shortfalls in revenue and materially higher operating costs. A targeted improvement plan was put in place in March 2017 that lifted their collective performance. Consequently, EGH is undertaking a detailed assessment of these businesses to evaluate alternate options for their future operations. This report is expected to be completed in the second quarter of the 2017-18 financial year. Top left: Albert Street Gardens, Orange Top right: Residents at Eureka Care Communities, Gladstone Bottom right: Residents and staff at Eureka Madross Gardens, Albury 11 EUREKA GROUP HOLDINGSFor personal use onlyTERRANORA VILLAGE, NORTHERN NEW SOUTH WALES Terranora Village and associated property was acquired in December 2015 for $7 million. Originally built as the Royal Terranora Resort to service an 18-hole golf course and associated licensed premises, the apartments were generally larger than typical Eureka units, being up to 100 square metres internally. The village had a strong rental income despite not having been renovated for many years and has over 5 hectares of adjoining hilltop land 20 minutes from Gold Coast Airport, with views spanning the Tweed Valley, Gold Coast and Pacific Ocean. With the larger apartments, excess land and strength in the Gold Coast property market, it was determined to strata title the existing apartments and sell them on a retail basis. Town planners were engaged and a three-lot subdivision, comprising the existing apartments plus two other development lots were designed and an application was lodged with the Tweed Shire Council. Top left: Eureka Murray River Gardens Mildura managers, Ian and Collette Hazeldene Bottom left: Eureka Cascade Gardens Mackay Top right: Avenell Village on Vasey, Bundaberg Bottom right: A resident at Eureka Care Communities Gladstone 12 2016-2017 ANNUAL REPORTFor personal use onlyDuring the process, council requested various changes to the plan, including readvertising the development. At all times it has been a positive consultative process with council working towards a long term solution for a property being reclassified from a resort to residential. The process has been meticulous, that needed to take into account future development on the site, which is significant together with upgrading the existing apartments to current council requirements. All work has been completed in upgrading the existing property to current standards and the future development potential for Stage 1 vacant land is for up to 240 townhouses, or indeed, a higher number of Eureka type product if that path is chosen in the future. Once this initial stage is complete, Eureka will be in a position to focus on Stage 2 through the completion of a full feasibility assessment of a 125-unit Eureka Village development or sale of the undeveloped land. While the approval process has taken longer than originally expected, we anticipate receipt of the approval in the near future. Terranora is a very exciting and productive asset for Eureka. COURAN COVE, GOLD COAST Eureka assets at Couran Cove include: » 29 eco cabins — four of which are currently being refurbished or upgraded with the balance (25) rented. » Option over 60 development sites with power, water and sewer services connected to the boundary. These sites are suitable to be developed into an independent low cost rental village for 120 duplex accommodation units. Eureka is currently evaluating the strategic fit of these assets within the portfolio. Meanwhile, the owner of Couran Cove’s central visitor, hospitality and marine facilities has completed extensive refurbishment works to refresh and upgrade the entire Couran Cove experience, which also creates an enhanced environment and backdrop for the Eureka assets. Terranora 13 EUREKA GROUP HOLDINGSFor personal use onlyPORTFOLIO OCCUPANCY IMPLEMENTING CULTURAL CHANGE — FY2017 HIGHLIGHTS: The occupancy performance of our owned village portfolio was averaging around 83%-84% for the first half of this financial year. A company-wide strategy was introduced to improve occupancy in the period from February 2017 onwards, resulting in a lift to 89.6% by the end of June 17. This strategic initiative has laid a solid base and set the benchmark for improved performance in the new financial year. STRUCTURAL CHANGE As outlined earlier, this financial year has been one of significant change in the structure, operations and governance of the company. The Eureka Board elected to move to a more conventional corporate structure with full separation between the Board and the Executive and the Executive Chairman moved to non-executive Chairman following the appointment of a CEO in February 2017. » Merging the Robina and Southport offices into one new office at Southport; » Rebranding the Southport office to “Support Office” rather than Head Office in recognition that our villages are the central core of the Eureka business; » Carrying out an extensive team building campaign across all business units within the company to focus on village occupancy; and » Streamlining the company structure and removing some middle management roles. I would like to thank the entire Eureka team for a stellar performance and dedication throughout the year and for embracing the transition to the new structure. I must also sincerely thank the Board for their unwavering support and commitment to the future success of Eureka Group Holdings. Jeff Weigh Chief Executive Officer Owned Owned Villages Occupancy Trend 95 90 85 80 % y c n a p u c c O 14 1 Jan 2017 1 Feb 2017 1 Mar 2017 1 Apr 2017 1 May 2017 1 Jun 2017 1 Jul 2017 1 Aug 2017 Week Ending 2016-2017 ANNUAL REPORTFor personal use only Terranora poolside 15 EUREKA GROUP HOLDINGSFor personal use onlyFY2017 Acquisitions Eureka Group aims to provide the highest level of low cost rental accommodation and associated care to independent retirees who are either completely or primarily reliant on the Australian Government pension and rent assistance. In Australia, 77 percent of people over the age of 65 rely on pensions as their primary source of income. During FY2017, Eureka Group acquired 4 additional villages to a value of $11.3 million. While this is a lower rate of acquisition than the previous financial year, it reflected a number of potential villages that failed to meet Eureka’s selection criteria – other than the financial return. Under the new corporate structure, Eureka is focusing on robust and long-term growth by securing assets that bolster the EGH business model and deliver financial returns to our shareholders. 16 FRESHWATER VILLAS GYMPIE, QLD The 42-unit Freshwater Villas retirement village in Gympie is located close to the hospital, medical facilities and broad mix of retail shops. The property has undeveloped land sufficient for an additional 8 units to be added as required. Freshwater already trades at high occupancy levels and is expected to be a positive addition to Eureka on the $4 million purchase price with room for occupancy improvements. UNITS: 42 Purchase price: $4 million EUREKA MACKAY VILLAGE MACKAY, QLD Eureka Group purchased the 38-unit village in Mackay in March 2017 for $1.16 million, which includes a dining and communal area and large commercial kitchen. This is the second property for EGH in Mackay and complements the company’s other villages throughout North Queensland including facilities located at Condon, Smithfield, Wulguru, Townville and Bowen. UNITS: 38 Purchase price: $1.16 million SHORTY O’NEIL VILLAGE BROKEN HILL, NSW Eureka acquired the 42-unit Shorty O’Neil Village for $1.05 million in December 2016. The village includes a community centre, a separate office building and large commercial kitchen facilities. Purchased as ‘Vacant Possession’ the village is now trading at 100 percent occupancy with a waiting list of potential residents following a highly successful marketing campaign. UNITS: 42 Purchase price: $1.05 million ALBERT STREET GARDENS ORANGE, NSW This 55-unit retirement village in western New South Wales was purchased in September 2016 for $5.115 million. Known as Albert Street Gardens, the village has a long-term historic occupancy rate of 92% that is underpinned by the demographic profile of Orange, which has a population of around 40,000 with 20 percent of people aged 65 years and over. UNITS: 55 Purchase price: $5.115 million 2016-2017 ANNUAL REPORTFor personal use only FRESHWATER VILLAS GYMPIE, QLD The 42-unit Freshwater Villas retirement village in Gympie is located close to the hospital, medical facilities and broad mix of retail shops. The property has undeveloped land sufficient for an additional 8 units to be added as required. Freshwater already trades at high occupancy levels and is expected to be a positive addition to Eureka on the $4 million purchase price with room for occupancy improvements. UNITS: 42 Purchase price: $4 million EUREKA MACKAY VILLAGE MACKAY, QLD Eureka Group purchased the 38-unit village in Mackay in March 2017 for $1.16 million, which includes a dining and communal area and large commercial kitchen. This is the second property for EGH in Mackay and complements the company’s other villages throughout North Queensland including facilities located at Condon, Smithfield, Wulguru, Townville and Bowen. UNITS: 38 Purchase price: $1.16 million SHORTY O’NEIL VILLAGE BROKEN HILL, NSW Eureka acquired the 42-unit Shorty O’Neil Village for $1.05 million in December 2016. The village includes a community centre, a separate office building and large commercial kitchen facilities. Purchased as ‘Vacant Possession’ the village is now trading at 100 percent occupancy with a waiting list of potential residents following a highly successful marketing campaign. UNITS: 42 Purchase price: $1.05 million ALBERT STREET GARDENS ORANGE, NSW This 55-unit retirement village in western New South Wales was purchased in September 2016 for $5.115 million. Known as Albert Street Gardens, the village has a long-term historic occupancy rate of 92% that is underpinned by the demographic profile of Orange, which has a population of around 40,000 with 20 percent of people aged 65 years and over. UNITS: 55 Purchase price: $5.115 million 17 EUREKA GROUP HOLDINGSFor personal use only 18 2016-2017 ANNUAL REPORTFor personal use onlyFinancials Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Auditor’s Independence Declaration Corporate Governance Statement Corporate Directory Security Holder Information 20 31 32 33 34 35 69 70 75 76 77 78 EUREKA GROUP HOLDINGS 19 For personal use onlyEureka Group Holdings Limited and controlled entities Directors’ Report The Directors present their report on Eureka Group Holdings Limited (the “Company”, “EGH” or “Eureka”) and its controlled entities (the “Group”, or the “Consolidated Entity”) for the year ended 30 June 2017. PRINCIPAL ACTIVITIES The principal activities of EGH include:    Providing specialist property asset management through property ownership and caretaking and infrastructure management; Providing accommodation and tailored services to a broad market of aged residents with discretionary and non- discretionary spend characteristics; and Project management. REVIEW OF OPERATIONS AND RESULTS The performance of the Group as represented by the results of operations for the year, were as follows: Performance Measure Net profit Add back: Interest expense Tax Depreciation Amortisation Earnings before interest, tax, depreciation and amortisation (EBITDA) Consolidated 30 June 2017 $’000 30 June 2016 $’000 6,538 2,606 - 129 142 9,415 10,467 1,733 - 113 155 12,468 EBITDA is a non-IFRS measure, however the directors believe that it is a readily calculated measure that has broad acceptance and is used by regular users of published financial statements as proxy for overall operating performance. EBITDA presented has been calculated from amounts disclosed in the financial statements. The decrease in EBITDA to $9.4 million was largely reflective of lower net fair value gain of $1.1 million compared to $4.0 million in the previous year and additional payments to two directors of $0.5 million. Financing costs increased during the 30 June 2017 year as a result of increased borrowings to fund the village acquisitions. Financial Position Total Assets Net assets Working capital (current assets less current liabilities) Consolidated 30 June 2017 $’000 30 June 2016 $’000 128,534 74,867 11,872 111,323 64,934 8,505 The Group continues to strengthen its financial position. During the year, the Group acquired investment properties for total consideration including transactions costs of $13.1 million. These acquisitions were partly funded through bank debt, which resulted in bank debt increasing from $42.7 million to $50.5 million. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the 30 June 2017 financial year the Group acquired 3 seniors’ rental villages and a number of units within other senior rental villages where Eureka is the manager. This is consistent with Eureka’s growth strategy to acquire high performing villages and associated management rights. The villages acquired include:  Albert Street Gardens Village Orange for $5.11 million in September 2016  Shorty O’Neil Village Broken Hill for $1.05 million in December 2016  Eureka Mackay Village for $0.55 million in March 2017 The purchase prices above are exclusive of applicable acquisition costs. During the period the Group also spent $4.29 million on enhancing properties held through capital additions. During the 30 June 2017 financial year, the Group divested its manager’s unit at Slacks Creek for $0.17 million. 20 EGH ANNUAL REPORT 2017 20 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report DIVIDENDS No dividends have been paid during the year (2016: $nil). No dividends are recommended for the financial year ended 2017. SHARE CAPITAL AND SHARE OPTIONS The number of ordinary shares on issue at 30 June 2017 was 229,671,923 (2016: 225,784,473 ). On 8 July 2016, the Company’s Share Purchase Plan (‘SPP’) was finalised. 5,263,400 shares at $0.75 were allotted on 14 July 2016. 1,375,950 ordinary shares were cancelled from the Share Buy Back during the financial year (2016: Nil). There were no options issued during the year (2016: Nil). LIKELY DEVELOPMENTS AND EXPECTED RESULTS In the 2018 Financial Year there will be a continued commitment to Eureka’s “Buy and Build” strategy which has seen the company move away from its historical ownership of management rights only, over low cost rental retirement villages to a dominant and holistic bricks and mortar village ownership and management model which has generated far superior returns to shareholders. Eureka will continue to acquire existing assets which meet its EBITDA return hurdle rate and will continue to improve the performance of recently acquired assets which to date have consistently added to the value of each village. Each year the company also reviews its management rights portfolio and there may be further divestments from that portfolio should it be seen as opportune. The transformation of the Terranora property acquired for $7 million in December 2015 is well advanced. Negotiations with the Tweed Shire Council have been conducted professionally and thoroughly. Eureka holds 25 sales subject to a D.A. from the Tweed Shire and issue of individual titles. The marketing for the Terranora excess vacant land not required by Eureka will also start within the next 6-12 months. Lastly, Eureka will continue to build on the Blue Care partnership announced in June 2016 and expects the Blue Care “in home care” model to be a valuable alliance for both parties. Further information is included in the Chairman’s Review. SUBSEQUENT EVENTS The Group has completed the acquisition of the 42 unit village in Gympie QLD on 19 July 2017, otherwise known as ‘Freshwater Villas’ for $3.8 million. Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2017 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 subsequent financial years. ENVIRONMENTAL REGULATION The Group’s operations are not subject to any particular or significant environmental regulation under a law of the Commonwealth or of a State or Territory. INDEMNIFICATION AND INSURANCE OF OFFICERS OR AUDITORS During or since the end of the financial year, the Group has not given any indemnity or entered into any agreement to indemnify any person who is or has been an officer of the Company. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. During the financial year the Group has paid a premium of $74,643 for Directors’ and Officers’ liability for current and former Directors and Officers. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purposes of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. EUREKA GROUP HOLDINGS EGH ANNUAL REPORT 2017 21 21 Directors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report ROUNDING OF AMOUNTS The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191’Class issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that legislation to the nearest thousand dollars, or in certain cases, the nearest dollar. DIRECTORS AND MEETINGS ATTENDED The names of all Directors who held office since the beginning of the year together with the numbers of meetings the Company’s Directors held during the year, and the numbers of meetings held and attended by each Director are: Name Robin Levison Lachlan McIntosh Greg Rekers Kerry Potter Nirmal Hansra Director's Meetings Audit & Risk Committee Meetings Held 7 7 2 2 7 Attended 7 7 1 2 7 Held 3* 3 - - 3 Attended 3* 3 - - 3 Nomination & Remuneration Committee Meetings Attended 3* 3 - - 3 Held 3* 3 - - 3 *Attended by invitation INFORMATION ON DIRECTORS The details of each Director’s qualifications, experience and special responsibilities for those in office during the year are: Robin Levison – Executive Chairman, CEO 1 July 2016 to 7 February 2017, Non-Executive Chairman 7 Feb 2017 onwards Robin Levison holds a Masters of Business Administration from the University of Queensland and is a Member of Chartered Accountants Australia and New Zealand. Robin has 15 years of Public Company Management experience. During this time he served as Managing Director at Industrea Limited and Spectrum Resources and has held senior roles at KPMG, Barclays Bank and Merrill Lynch. Robin is also Chair of the University of Queensland Business, Economics and Law Alumni Ambassador Council, and is a Graduate and Fellow of Australian Institute of Company Directors. Other listed company directorships in the last 3 years: PPK Group Limited. Special responsibilities: Chair of the Board. Lachlan McIntosh – Non-Executive Director Lachlan McIntosh has a Bachelor of Commerce degree and is a Member of Chartered Accountants Australia and New Zealand. He specialises in corporate finance and mergers and acquisitions. He has had substantial experience in the real estate and retirement accommodation industry along with significant experience in the franchising industries and mining services industries. Other listed company directorships in the last 3 years: New Guinea Gold Corporation (April 2013 to April 2014) and Onterran Limited (from 11 October 2014). Special responsibilities: Member of Audit & Risk Committee, Member of Nomination & Remuneration Committee. Greg Rekers – Executive Director and Head of Real Estate (Resigned on 8 February 2017) Greg led the Company’s real estate activities during his employment. Greg is also a director of Navigator Property Group (NPG), a consultancy group specialising in the areas of property development and project marketing. Greg worked for PRD Gold Coast, a national and international property marketing company where he was a leading project salesman. Upon departing PRD, Greg continued to be highly successful in providing project marketing services to numerous property developers, which then led to the creation of NPG. Other listed company directorships in the last 3 years: nil Special responsibilities: nil 22 EGH ANNUAL REPORT 2017 22 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Kerry Potter – Executive Director and Chief Operating Officer (Resigned on 8 February 2017) Kerry was the Company’s Chief Operating Officer during his employment. Kerry is also a director of Navigator Property Group, a consultancy specialising in the areas of property development and project marketing. Kerry holds a Bachelor of Commerce degree and worked with the Commonwealth public service until 1987 where he had been a director of the Government’s real estate arm. Kerry then became the Director of Project Marketing for PRD Gold Coast, a successful national and international organisation. After leaving PRD, Kerry became CEO of Raine and Horne Queensland and Chesterton International. Kerry then became the principal and hands-on director of numerous development residential and commercial projects for various consortia in the period 2000 to 2007. Other listed company directorships in the last 3 years: nil Special responsibilities: nil Nirmal Hansra – Non-Executive Director Nirmal holds a Master of Commerce (Business Management) degree from University of NSW and is a Fellow of the Australian Institute of Company Directors, Fellow of Chartered Accountants Australia and New Zealand and Fellow of Australian Society of Certified Practicing Accountants. He has over 35 years of senior executive management experience and 11 years of board and corporate advisory experience. During this time Nirmal had roles as CFO / Finance Director of listed companies such as Industrea Limited, ISoft Group Limited, Australian Pharmaceutical Industries Limited and Ruralco Holdings Limited. Nirmal is Chair of Campbell Page Limited, non-executive director and chair of the finance, audit and risk committee of Kuringai Financial Services Limited, Council of the Ageing (COTA) in New South Wales and Children’s Tumour Foundation Limited. He is also a non-executive director of Have A Voice Pty Ltd. Other listed company directorships in the last 3 years: nil Special responsibilities: Chair of Audit & Risk Committee, Chair of Nomination & Remuneration Committee COMPANY SECRETARY Oliver Schweizer – Company Secretary Oliver has a Bachelor of Economics degree and is a Chartered Financial Analyst. Oliver has over 15 years’ experience in commercial accounting, finance, investments and listed entities. KEY MANAGEMENT PERSONNEL The details of each key management personnel’s qualifications, experience and special responsibilities for those in office during the year (excluding Head of Real Estate and Chief Operating Officer noted above) are: Jeff Weigh – Chief Executive Officer (Appointed on 7 February 2017) Jeff Weigh holds a Master of Economic Studies from the University of Queensland and completed the Executive Hotel Management course from Cornell University, USA. He is a highly experienced executive whose immediate previous role was CEO of South Bank Corporation for 4 years until September 2016. Jeff was Queensland Manager of I-Med, a member company of DCA Group Ltd that became an ASX top 200 public company specialised in medical imaging and aged care. He also co-founded Fortland Hotels & Resorts in 1990 and was Managing Director. Paul Cochrane – Chief Financial Officer (Appointed on 28 June 2017) Paul Cochrane holds a Bachelor of Commerce from University of Queensland, is a Member of Chartered Accountants Australia and New Zealand and holds an REIQ Real Estate License. He spent three years as CFO and Company Secretary at Ariadne Australia Ltd, followed by 7 years in a variety of senior roles at Lend Lease Ltd, including 3 years as Project Director of Springfield Lakes. Paul was also General Manager – Finance at Aveo Ltd, a full service property group with a principal focus on retirement living. He was also CFO for Devine Ltd for 5 years, ultimately assuming the role of Company Secretary as well. He began his career with Price Waterhouse serving in the audit Division in Brisbane, followed by tenure in Hong Kong and London. EGH ANNUAL REPORT 2017 23 23 EUREKA GROUP HOLDINGSDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Ryan Maddock – Chief Financial Officer (Ceased role on 30 June 2017) Ryan Maddock is a Chartered Accountant and has a Bachelor of Business with a Major in Accounting from Griffith University. He has over 12 years of accounting experience working in both Australia and North America and most recently held the role of Senior Financial Accountant at a Perth-based TSX-listed company. Prior to that he held the roles of Audit Manager at KPMG and Accountant at PKF. INTEREST IN SHARES AND OPTIONS HELD AT THE DATE OF THIS REPORT Directors Robin Levison Lachlan McIntosh Nirmal Hansra Directors Total Executives Jeff Weigh Paul Cochrane Executives Total OPTIONS Ordinary shares 12,905,000 11,916,166 839,834 25,661,000 400,000 - 400,000 There were no options outstanding during the financial year and up to the date of the Directors’ report. REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for Eureka Group Holdings Limited’s non-executive directors’, executive directors and other key management personnel (“KMP”) of Eureka Group Holdings Limited for the year ended 30 June 2017. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. This remuneration report has been set out under the following headings: a) Principles of compensation of key management personnel b) Details of remuneration c) Non-executive director remuneration policy d) Service agreements e) Relationship between remuneration and Company performance f) Remuneration consultants g) Equity Instruments held by Key Management Personnel h) Loans to/from Key Management Personnel i) Other transactions with Key Management Personnel (a) PRINCIPLES OF COMPENSATION OF KEY MANAGEMENT PERSONNEL Compensation of key management personnel comprise remuneration determined having regard to industry practice and the need to obtain appropriately qualified independent persons. Compensation aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to the market best practice for delivery of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices:     competitiveness and reasonableness; acceptability to shareholders; performance linkage/alignment of executive compensation, and transparency. The Nomination & Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. Consideration is given to normal commercial rates of remuneration for similar levels of responsibility and the Company’s financial performance. 24 EGH ANNUAL REPORT 2017 24 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Eureka Group Holdings Limited and controlled entities Directors’ Report Ryan Maddock – Chief Financial Officer (Ceased role on 30 June 2017) Remuneration comprises the following: Ryan Maddock is a Chartered Accountant and has a Bachelor of Business with a Major in Accounting from Griffith University. He has over 12 years of accounting experience working in both Australia and North America and most recently held the role of Senior Financial Accountant at a Perth-based TSX-listed company. Prior to that he held the roles of Audit Manager at KPMG and Accountant at PKF. INTEREST IN SHARES AND OPTIONS HELD AT THE DATE OF THIS REPORT Directors Robin Levison Lachlan McIntosh Nirmal Hansra Directors Total Executives Jeff Weigh Paul Cochrane Executives Total OPTIONS Ordinary shares 12,905,000 11,916,166 839,834 25,661,000 400,000 - 400,000 There were no options outstanding during the financial year and up to the date of the Directors’ report. REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for Eureka Group Holdings Limited’s non-executive directors’, executive directors and other key management personnel (“KMP”) of Eureka Group Holdings Limited for the year ended 30 June 2017. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. This remuneration report has been set out under the following headings: a) Principles of compensation of key management personnel b) Details of remuneration c) Non-executive director remuneration policy d) Service agreements e) Relationship between remuneration and Company performance f) Remuneration consultants g) Equity Instruments held by Key Management Personnel h) Loans to/from Key Management Personnel i) Other transactions with Key Management Personnel (a) PRINCIPLES OF COMPENSATION OF KEY MANAGEMENT PERSONNEL Compensation of key management personnel comprise remuneration determined having regard to industry practice and the need to obtain appropriately qualified independent persons. Compensation aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to the market best practice for delivery of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices:     competitiveness and reasonableness; acceptability to shareholders; performance linkage/alignment of executive compensation, and transparency. The Nomination & Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. Consideration is given to normal commercial rates of remuneration for similar levels of responsibility and the Company’s financial performance. EGH ANNUAL REPORT 2017 24    base pay (salaries/fees) and benefits, including superannuation; short-term incentives (bonuses); and long-term incentives such as options or rights or shares. The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. All executives have detailed job descriptions with identified key performance indicators against which annual reviews are compared in relationship between the benefits contained in the employment agreements and the Company’s performance in the 2017 financial year. Remuneration details for certain individuals are described at (d). While bonus payments are generally at the discretion of the Board, management is assessed on items including:  Occupancy targets  Profitability  Property capital appreciation  Operational cost management Bonus payments can be dependent on key criteria, refer to the table in section (e) Relationship Between Remuneration and Company Performance for further details. The performance conditions described above were chosen because they were considered appropriate for senior management given the operations. They are measured by comparing what has been achieved vs set budgets/targets. The Nomination & Remuneration Committee is of the opinion that continued improved results can be achieved in part by the adoption of performance based compensation. Accordingly, the Board intends to institute a Long Term Incentive Plan (LTI) and is satisfied that this scheme will assist in generating increased shareholder returns if maintained over the coming years. (b) DETAILS OF REMUNERATION The names of persons who were key management personnel of Eureka Group Holdings Limited at any time during the financial year are shown in the following table. Key management personnel are defined as those who have a direct impact on the strategic direction of the Company. At the date of this report and during the year, the key management personnel of the Group are: Name Role Robin Levison Non-Executive Director/Chair Lachlan McIntosh Non-Executive Director Nirmal Hansra Non-Executive Director Period in role 24/12/2013 – ongoing 20/07/2009 – ongoing 24/04/2012 – ongoing Greg Rekers Executive Director/Head of Real Estate 24/04/2012 – Resigned 08/02/2017 Kerry Potter Executive Director/Chief Operating Officer 24/04/2012 – Resigned 08/02/2017 Jeff Weigh Chief Executive Officer Paul Cochrane Chief Financial Officer 07/02/2017 – ongoing 28/06/2017 – ongoing Ryan Maddock Chief Financial Officer 16/06/2014 – Ceased role on 30/06/2017 EGH ANNUAL REPORT 2017 25 25 EUREKA GROUP HOLDINGSDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Key management personnel remuneration for the year ended 30 June 2017 and 30 June 2016: Short term Salary/ fees $ Bonus $ Post employm ent Super- annuatio n $ Share based payme nts $ Other long term benefits $ 30 June 2017 Directors Robin Levison Lachlan McIntosh Nirmal Hansra Greg Rekers 1 Kerry Potter 1 120,000 50,000 50,000 - - - 159,389 65,000 159,389 65,000 Directors Total 538,778 130,000 - - - - - - Executives Jeff Weigh 2 Ryan Maddock 3 Paul Cochrane 4 134,097 - 9,335 193,151 17,908 19,053 - - - Executives Total 327,248 17,908 28,388 Total 866,026 147,908 28,388 30 June 2016 Directors Robin Levison Lachlan McIntosh Nirmal Hansra Greg Rekers Kerry Potter 105,000 39,000 37,998 - - - 229,241 100,000 229,241 100,000 Directors Total 640,480 200,000 Executives - - - - - - Ryan Maddock 141,294 40,539 17,697 Executives Total 141,294 40,539 17,697 Total 781,774 240,539 17,697 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Perform -ance related % % of bonus that was paid - - - - - - 29% 29% 100% 100% Total $ 120,000 50,000 50,000 224,389 224,389 668,778 143,432 230,112 - - 8% 100% - - - 373,544 1,042,322 105,000 39,000 37,998 329,241 329,241 840,480 - - - - - - 30% 30% 100% 100% 199,530 20% 100% 199,530 1,040,010 1 Greg Rekers and Kerry Potter ceased as key management personnel on 8 February 2017. Bonus was paid for the July 2016 to December 2016 period. Additional payments were made as disclosed in section (d) of the Remuneration Policy. 2 Jeff Weigh commenced as key management personnel on 7 February 2017. 3 Ryan Maddock ceased as key management personnel on 30 June 2017. 4 Paul Cochrane commenced as key management personnel on 28 June 2017. (c) NON-EXECUTIVE DIRECTOR REMUNERATION POLICY Fees and payments to non-executive directors reflect the demands that are made on, and the responsibilities of, the directors. The Nomination & Remuneration Committee reviews non-executive directors’ fees and payments annually. Non-executive directors do not receive share options or other incentives. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $250,000 in aggregate plus statutory superannuation. With the growth planned for the Group and the associated need to increase the number of directors on the board, the Board is proposing that at the next shareholders’ meeting in November 2017, shareholders approve an increase to the directors’ fee pool to $500,000 plus statutory superannuation. 26 EGH ANNUAL REPORT 2017 26 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Eureka Group Holdings Limited and controlled entities Directors’ Report Key management personnel remuneration for the year ended 30 June 2017 and 30 June 2016: The following fees have applied during the year: Post employm ent Super- annuatio Short term Salary/ fees $ Bonus $ n $ Share based payme nts $ Other long term benefits $ Total $ Perform -ance related % % of bonus that was paid 120,000 50,000 50,000 159,389 65,000 159,389 65,000 - - - - - Directors Total 538,778 130,000 134,097 9,335 193,151 17,908 19,053 - Executives Total 327,248 17,908 28,388 Total 866,026 147,908 28,388 30 June 2017 Directors Robin Levison Lachlan McIntosh Nirmal Hansra Greg Rekers 1 Kerry Potter 1 Executives Jeff Weigh 2 Ryan Maddock 3 Paul Cochrane 4 30 June 2016 Directors Robin Levison Lachlan McIntosh Nirmal Hansra Greg Rekers Kerry Potter Executives 105,000 39,000 37,998 - - - 229,241 100,000 229,241 100,000 Directors Total 640,480 200,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29% 29% 100% 100% 8% 100% - - - - - - - - - - - - - - - - 30% 30% 100% 100% - - - - - - - - - - - - - - - - - - - - 120,000 50,000 50,000 224,389 224,389 668,778 143,432 230,112 - 373,544 1,042,322 105,000 39,000 37,998 329,241 329,241 840,480 199,530 1,040,010 Ryan Maddock 141,294 40,539 17,697 199,530 20% 100% Executives Total 141,294 40,539 17,697 Total 781,774 240,539 17,697 2 Jeff Weigh commenced as key management personnel on 7 February 2017. 3 Ryan Maddock ceased as key management personnel on 30 June 2017. 4 Paul Cochrane commenced as key management personnel on 28 June 2017. (c) NON-EXECUTIVE DIRECTOR REMUNERATION POLICY Fees and payments to non-executive directors reflect the demands that are made on, and the responsibilities of, the directors. The Nomination & Remuneration Committee reviews non-executive directors’ fees and payments annually. Non-executive directors do not receive share options or other incentives. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $250,000 in aggregate plus statutory superannuation. With the growth planned for the Group and the associated need to increase the number of directors on the board, the Board is proposing that at the next shareholders’ meeting in November 2017, shareholders approve an increase to the directors’ fee pool to $500,000 plus statutory superannuation. Base fees Robin Levison – Non-Executive Chairman Lachlan McIntosh – Non-Executive Director Nirmal Hansra – Non-Executive Director $ 120,000 60,000 60,000 No superannuation has been paid to non-executive directors. Non-executive directors fees were increased to $60,000 on 1 January 2017. (d) SERVICE AGREEMENTS On appointment to the board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the board policies and terms, including remuneration, relevant to the office of director. Remuneration and other terms of employment for the chief executive officer, chief financial officer and the other key management personnel are also formalised in service agreements. The details of these agreements for executive key management personnel are as follows: Jeff Weigh (Chief Executive Officer) Agreement Commenced 7 February 2017 Term of the Agreement: The agreement may be terminated by either the Company or Mr Weigh with 6 months’ notice or by the Company in the event of a material breach of misconduct by Mr Weigh. Details: Mr Weigh’s remuneration comprises a base salary of $350,000 plus 9.5% superannuation and certain benefits such as car parking, mobile phone expenses and use of laptop. His remuneration also comprises additional short-term incentives equal to 50% of his base salary and a long-term incentive to be approved by the shareholders at the next Annual General Meeting in November 2017. Mr Weigh is responsible for the overall management of the Group and reports to the Chair of the Board. Greg Rekers (Executive Director & Head of Real Estate) Agreement Commenced 24 April 2012 (Resigned 8 February 2017) Term of the Agreement: The Agreement may be terminated by the Company after the first anniversary of the contract, provided that the Company pays Mr Rekers a lump sum equal to the value of the salary package for one year. The agreement may be terminated by Mr Rekers with 3 months’ notice. The agreement may also be terminated by the Company in the event of grave misconduct. Details: Mr Rekers remuneration comprises a consulting fee of $200,000 plus 30% of all sales commissions (consulting fee is half of the total payment to Navigator Property Group) and a travel allowance of $24,000. His remuneration also comprises additional short-term incentives equal to 50% of his base fee, for reaching agreed upon budgets, adhering to all relevant legislative requirements and reporting financials in a timely manner. Mr Rekers is responsible for the departments of real estate, property development and project marketing for the Company. The directors believe that the remuneration is appropriate for the duties allocated to Mr Rekers. Upon termination subject to adherence of contractual clauses, Mr Rekers is entitled to a lump sum equal to the value of the salary package for 1 year. Mr Rekers will receive no entitlements if terminated for grave misconduct. 1 Greg Rekers and Kerry Potter ceased as key management personnel on 8 February 2017. Bonus was paid for the July 2016 to December 2016 period. Additional payments were made as disclosed in section (d) of the Remuneration Policy. Mr Rekers ceased his position on 8 February 2017. In accordance with the terms noted above, a payment of $260,000 was made. These amounts are recorded in Consultancy Expenses. Kerry Potter (Executive Director & Chief Operations Officer) Agreement Commenced 24 April 2012 (Resigned on 8 February 2017) Term of the Agreement: The Agreement may be terminated by the Company after the first anniversary of the contract, provided that the Company pays Mr Potter a lump sum equal to the value of the salary package for one year. The agreement may be terminated by Mr Potter with 3 months’ notice. The agreement may also be terminated by the Company in the event of grave misconduct. Details: Mr Potters’ remuneration comprises a consulting fee of $200,000 plus 30% of all sales commissions (consulting fee is half of the total payment to Navigator Property Group) and a travel allowance of $24,000. His Remuneration also comprises additional short-term incentives equal to 50% of his base fee, for reaching agreed upon budgets, adhering to all relevant legislative requirements and reporting financials in a timely manner. Mr Potter is responsible for the day to day management and operations of the Company. The directors believe that the remuneration is appropriate for the duties allocated to Mr Potter. EGH ANNUAL REPORT 2017 26 EGH ANNUAL REPORT 2017 27 27 EUREKA GROUP HOLDINGSDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Upon termination subject to adherence of contractual clauses, Mr Potter is entitled to a lump sum equal to the value of the salary package for 1 year. Mr Potter will receive no entitlements if terminated for grave misconduct. Mr Potter ceased his position on 8 February 2017. In accordance with the terms noted above, a payment of $260,000 was made. These amounts are recorded in Consultancy Expenses. Ryan Maddock (Chief Financial Officer) Agreement Commenced 16 June 2014 (Ceased role on 30 June 2017) Term of the Agreement: The agreement may be terminated by either the Company or Mr Maddock with six weeks’ notice or by the Company in the event of a material breach of misconduct by Mr Maddock. Details: Mr Maddock’s remuneration comprises of a salary of $182,648 plus superannuation. Mr Maddock’s remuneration is not linked to the company’s performance and he is entitled to a bonus at the Directors’ discretion. Mr Maddock was responsible for the finance division and the accounting and finance functions of the Company and its associated companies. The directors believe that the remuneration is appropriate for the duties allocated to Mr Maddock. There are no other pay-outs upon resignation or termination. Paul Cochrane (Chief Financial Officer) Agreement Commenced 28 June 2017 Term of the Agreement: The agreement may be terminated by either the Company or Mr Cochrane with 3 months’ notice or by the Company in the event of a material breach of misconduct by Mr Cochrane. Details: Mr Cochrane’s remuneration comprises a base salary of $275,000 plus 9.5% superannuation and certain benefits such as car parking, mobile phone expenses and use of laptop. His remuneration also comprises additional short-term incentives equal to 35% of his base salary and a long-term incentive to be approved by the shareholders at the next Annual General Meeting in November 2017. Mr Cochrane is responsible for the finance division and the accounting and finance functions of the Company and its associated companies. (e) RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE The following table shows the revenue, net profit before tax, earnings per share, share price and dividend per share for the past 5 years of the Company. Total Revenue and Income $’000 Net Profit before tax $’000 EBITDA $’000 Earnings per share (cents per share) Share price at year end Dividend per share (f) REMUNERATION CONSULTANTS 2017 26,473 6,538 9,415 2.84 0.37 0.00 2016 24,155 10,467 12,468 5.19 0.79 0.00 2015 12,213 3,105 4,129 2.24 0.51 0.00 2014 10,662 661 1,512 0.80 0.12 0.00 2013 10,874 75 865 0.10 0.065 0.00 The Group did not engage any remuneration consultants during the 2017 financial year. 28 EGH ANNUAL REPORT 2017 28 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Mr Potter ceased his position on 8 February 2017. In accordance with the terms noted above, a payment of $260,000 was made. These amounts are recorded in Consultancy Expenses. Ryan Maddock (Chief Financial Officer) Agreement Commenced 16 June 2014 (Ceased role on 30 June 2017) Term of the Agreement: The agreement may be terminated by either the Company or Mr Maddock with six weeks’ notice or by the Company in the event of a material breach of misconduct by Mr Maddock. Mr Maddock’s remuneration comprises of a salary of $182,648 plus superannuation. Mr Maddock’s remuneration is not linked to the company’s performance and he is entitled to a bonus at the Directors’ discretion. Mr Maddock was responsible for the finance division and the accounting and finance functions of the Company and its associated companies. The directors believe that the remuneration is appropriate for the duties allocated to Mr Maddock. There are no other pay-outs upon resignation or Details: termination. Details: Paul Cochrane (Chief Financial Officer) Agreement Commenced 28 June 2017 Term of the Agreement: Total Revenue and Income $’000 Net Profit before tax $’000 EBITDA $’000 Earnings per share (cents per share) Share price at year end Dividend per share (f) REMUNERATION CONSULTANTS 2017 26,473 6,538 9,415 2.84 0.37 0.00 2016 24,155 10,467 12,468 5.19 0.79 0.00 2015 12,213 3,105 4,129 2.24 0.51 0.00 2014 10,662 661 1,512 0.80 0.12 0.00 2013 10,874 75 865 0.10 0.065 0.00 The Group did not engage any remuneration consultants during the 2017 financial year. Eureka Group Holdings Limited and controlled entities Directors’ Report Eureka Group Holdings Limited and controlled entities Directors’ Report Upon termination subject to adherence of contractual clauses, Mr Potter is entitled to a lump sum equal to the value of the (g) EQUITY INSTRUMENTS HELD BY KEY MANAGEMENT PERSONNEL salary package for 1 year. Mr Potter will receive no entitlements if terminated for grave misconduct. Shares held The numbers of securities held during the financial year by each director and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. Balance 1 July 2016 Received as remuneration Shares acquired Ceased employment Balance 30 June 2017 The agreement may be terminated by either the Company or Mr Cochrane with 3 months’ notice or by the Company in the Total 30,104,608 event of a material breach of misconduct by Mr Cochrane. Directors Robin Levison 12,549,608 Lachlan McIntosh 11,896,166 Nirmal Hansra Greg Rekers 1 Kerry Potter 1 Executives Jeff Weigh 2 Ryan Maddock 3 Paul Cochrane 4 583,334 2,120,608 2,866,442 - 88,450 - - - - - - - - - - 355,392 20,000 256,500 - - - 12,905,000 11,916,166 839,834 20,000 (2,140,608) 40,000 (2,906,442) - - 400,000 - 400,000 - - (88,450) - - - 1,091,892 (5,135,500) 26,061,000 Mr Cochrane’s remuneration comprises a base salary of $275,000 plus 9.5% superannuation and certain benefits such as car parking, mobile phone expenses and use of laptop. His remuneration also comprises additional short-term incentives equal to 35% of his base salary and a long-term incentive to be approved by the shareholders at the next Annual General Meeting in November 2017. Mr Cochrane is responsible for the finance division and the accounting and finance functions of the Company and its associated companies. (e) RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE 1 Ceased to be key management personnel on 8 February 2017 2 Commenced to be key management personnel on 7 February 2017 3 Ceased to be key management personnel on 30 June 2017 4 Commenced to be key management personnel on 28 June 2017 Options held There were no options over ordinary securities held during the financial year by any of the directors of the Group or other key management personnel of the Group, including their personally related parties. The following table shows the revenue, net profit before tax, earnings per share, share price and dividend per share for the past 5 years of the Company. (h) LOANS TO/FROM KEY MANAGEMENT PERSONNEL As at 30 June 2017, total loans outstanding to Kathlac Pty Ltd, an entity associated with Lachlan McIntosh, from Eureka Group Holdings Limited, was $nil (2016: $nil). Balance at beginning of year Increase in loan amount Loan repayments made Interest charged Conversion of debt to convertible notes/shares Amount included in current financial liabilities – Shareholder Loans Consolidated 30 June 2017 $ 30 June 2016 $ - - - - - - - 410,000 (411,105) 1,105 - - There were no loans to any director or key management personnel at any time during the year and prior year. (i) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Dotted Line Pty Ltd The Company traded from a premises owned by Dotted Line Pty Ltd, an entity associated with Greg Rekers. The premises was rented on commercial terms. Rent totalling $34,573 was paid during the year (2016: $39,600). As at 30 June 2017 the amount outstanding to Rekers Family Trust was $nil (2016: $nil). Greg Rekers and Associates Greg Rekers and Associates, a business associated with Greg Rekers, was paid fees of $nil (2016: $22,000) for providing due diligence research and advice during the year. EGH ANNUAL REPORT 2017 29 29 EGH ANNUAL REPORT 2017 28 EUREKA GROUP HOLDINGSDirectors’ ReportFor personal use only Eureka Group Holdings Limited and controlled entities Directors’ Report Griffith Scenic Village Pty Ltd Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $8,203 on commercial terms (2016: $8,414). As at 30 June 2017 the amount outstanding from Griffith Scenic Village Pty Ltd Pty Ltd was $nil (2016: $25,480). Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $22,178 for Manager’s unit rental fees on commercial terms (2016: $22,178). As at 30 June 2017 the amount outstanding to Griffith Scenic Village Pty Ltd was $nil (2016: $nil). Gladstone Scenic Village Pty Ltd Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $10,320 on commercial terms (2016: $8,044). As at 30 June 2017 the amount outstanding from Gladstone Scenic Village Pty Ltd was $nil (2016: $nil). Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $29,229 for Manager’s unit rental fees on commercial terms (2016: $29,229). As at 30 June 2017 the amount outstanding to Gladstone Scenic Village Pty Ltd was $nil (2016: $nil). 22 Capital Pty Ltd During the year, 22 Capital Pty Ltd, an entity associated with Lachlan McIntosh, was paid $206,250 in consulting fees (2016: $375,815). At 30 June 2017, the amount outstanding to 22 Capital Pty Ltd was $nil (2016: $66,000). Ignition Equity Partners Pty Ltd During the year, Ignition Equity Partners Pty Ltd, an entity associated with Robin Levison, received investor relations and capital raising fees of $nil (2016: $346,740). At 30 June 2017, the amount outstanding to Ignition Equity Partners Pty Ltd was $nil (2016: $206,250). This concludes the remuneration report, which has been audited. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services during the financial year by the auditor are outlined in note 28 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor, is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 28 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:   all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 75. This report is made in accordance with a resolution of the Directors. Robin Levison Executive Chairman Dated in Brisbane this 24th day of August, 2017. 30 EGH ANNUAL REPORT 2017 30 2016-2017 ANNUAL REPORTDirectors’ ReportFor personal use only Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $8,203 on commercial terms (2016: $8,414). As at 30 June 2017 the amount outstanding from Griffith Scenic Village Pty Ltd Pty Ltd was FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss and Other Comprehensive Income and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2017 Note Consolidated 30 June 2017 $’000 30 June 2016 $’000 Revenue Other income Expenses Village operating costs Impairment – trade receivables Employee benefits expenses Finance expense Marketing expenses Consultancy expenses Depreciation & amortisation expenses Lease expenses Other expenses Profit before income tax expense Income tax expense Profit after income tax expense Other comprehensive income Items that may be reclassified to profit or loss Items that will not be reclassified to profit or loss Other comprehensive income for the year, net of tax Total comprehensive income for the year 3 3 4 4 4 5 The directors are of the opinion that the services as disclosed in note 28 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: Basic and diluted earnings per share (cents per share) 23 24,053 2,420 (12,796) (126) (1,339) (2,606) (205) (653) (271) (201) (1,738) 6,538 - 6,538 - - - 6,538 2.84 19,350 4,805 (8,804) (37) (1,172) (1,733) (274) (151) (268) (255) (994) 10,467 - 10,467 - - - 10,467 5.19 Eureka Group Holdings Limited and controlled entities Directors’ Report Griffith Scenic Village Pty Ltd $nil (2016: $25,480). (2016: $nil). Gladstone Scenic Village Pty Ltd $nil (2016: $nil). $nil (2016: $nil). 22 Capital Pty Ltd Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $22,178 for Manager’s unit rental fees on commercial terms (2016: $22,178). As at 30 June 2017 the amount outstanding to Griffith Scenic Village Pty Ltd was $nil Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $10,320 on commercial terms (2016: $8,044). As at 30 June 2017 the amount outstanding from Gladstone Scenic Village Pty Ltd was Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $29,229 for Manager’s unit rental fees on commercial terms (2016: $29,229). As at 30 June 2017 the amount outstanding to Gladstone Scenic Village Pty Ltd was During the year, 22 Capital Pty Ltd, an entity associated with Lachlan McIntosh, was paid $206,250 in consulting fees (2016: $375,815). At 30 June 2017, the amount outstanding to 22 Capital Pty Ltd was $nil (2016: $66,000). During the year, Ignition Equity Partners Pty Ltd, an entity associated with Robin Levison, received investor relations and capital raising fees of $nil (2016: $346,740). At 30 June 2017, the amount outstanding to Ignition Equity Partners Pty Ltd was Ignition Equity Partners Pty Ltd $nil (2016: $206,250). This concludes the remuneration report, which has been audited. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services during the financial year by the auditor are outlined in note 28 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor, is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and   objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 75. This report is made in accordance with a resolution of the Directors. Robin Levison Executive Chairman Dated in Brisbane this 24th day of August, 2017. EGH ANNUAL REPORT 2017 30 The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. EGH ANNUAL REPORT 2017 31 31 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Consolidated Statement of Financial Position Consolidated Statement of Financial Position AS AT 30 JUNE 2017 AS AT 30 JUNE 2017 Current Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Loans receivable Total current assets Non-Current Assets Loans receivable Other assets Investment property Property, plant and equipment Intangible assets Total non-current assets Total Assets Current Liabilities Trade and other payables Other financial liabilities Provisions Total current liabilities Non-current liabilities Other financial liabilities Provisions Total non-current liabilities Total Liabilities Net Assets Equity Share capital Accumulated losses Total Equity Consolidated Note 30 June 2017 $’000 30 June 2016 $’000 19 6 7 8 10 10 8 12 13 14 15 17 16 17 16 18 4,395 2,632 7,649 1,623 76 6,841 3,407 6,300 846 66 16,375 17,460 501 3,000 100,666 1,665 6,327 112,159 539 - 86,472 1,232 5,620 93,863 128,534 111,323 2,660 1,554 289 4,503 49,019 145 49,164 3,688 5,123 144 8,955 37,393 41 37,434 53,667 46,389 74,867 64,934 94,255 (19,388) 74,867 90,860 (25,926) 64,934 The consolidated statement of financial position is to be read in conjunction with the accompanying notes 32 EGH ANNUAL REPORT 2017 32 2016-2017 ANNUAL REPORTFor personal use only Consolidated Statement of Financial Position AS AT 30 JUNE 2017 Consolidated 30 June 2017 30 June 2016 Note $’000 $’000 Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2017 AS AT 30 JUNE 2017 Current Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Loans receivable Total current assets Non-Current Assets Loans receivable Other assets Investment property Property, plant and equipment Intangible assets Total non-current assets Total Assets Current Liabilities Trade and other payables Other financial liabilities Provisions Total current liabilities Non-current liabilities Other financial liabilities Provisions Total non-current liabilities Total Liabilities Net Assets Equity Share capital Accumulated losses Total Equity Consolidated Note 30 June 2017 $’000 30 June 2016 $’000 Cash Flows from Operating Activities Receipts from customers (2) Payments to suppliers & employees (1) Interest received Interest paid 16,375 17,460 Net Cash provided by/(used) in Operating Activities (2) 19(b) Cash Flows from Investing Activities Payments for additions to investment properties (2) Payments for property, plant & equipment (3) Proceeds from the sale of intangible assets Payments made to sell intangible assets Payments for loans provided Repayments of loans provided (2) Repayment of residential obligation loans Payments for intangible assets Net Cash provided by/(used) in Investing Activities (2) Cash Flows from Financing Activities Proceeds from borrowings Repayment of borrowings Payments of transaction costs related to borrowings Proceeds from share issues Payments for share buy back Payments for share issue and buy back transaction costs Net Cash provided by/(used in) Financing Activities Net increase/(decrease) in cash and cash equivalents 18 18 Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 19(a) 24,277 (17,987) 49 (2,266) 4,073 (15,719) (302) 171 (10) (561) 67 (246) (849) (17,449) 9,848 (1,667) (440) 3,948 (523) (236) 10,930 (2,446) 6,841 4,395 17,030 (11,247) 44 (1,587) 4,240 (40,514) (111) 482 - (1,141) 178 - (803) (41,909) 18,637 (827) (250) 22,900 - (1,104) 39,356 1,687 5,154 6,841 (1) Included in cash payments made was an amount of $1.3 million for capital and other improvements to inventory held at Terranora to prepare the inventory for sale. (2) A significant non-cash investing activity took place during the year ended 30 June 2017 for $3 million. Refer to Note 8. Also Investment Property of $0.93 million was purchased on non-cash basis, refer to note 19. (3) Property, plant and equipment of $0.27 million was purchased on non-cash basis, refer to note 19. 19 6 7 8 10 10 8 12 13 14 15 17 16 17 16 18 4,395 2,632 7,649 1,623 76 501 3,000 100,666 1,665 6,327 112,159 2,660 1,554 289 4,503 49,019 145 49,164 6,841 3,407 6,300 846 66 539 - 86,472 1,232 5,620 93,863 3,688 5,123 144 8,955 37,393 41 37,434 128,534 111,323 53,667 46,389 74,867 64,934 94,255 (19,388) 74,867 90,860 (25,926) 64,934 The consolidated statement of financial position is to be read in conjunction with the accompanying notes The consolidated statement of cash flows is to be read in conjunction with the accompanying notes. EGH ANNUAL REPORT 2017 32 EGH ANNUAL REPORT 2017 33 33 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Share Capital $’000 Consolidated Accumulated Losses $’000 Total $’000 For the year ended 30 June 2017 Balance at 1 July 2016 90,860 (25,926) 64,934 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Share issued during the year Share buy back Capital raising costs Balance at 30 June 2017 - - - 3,948 (523) (30) 94,255 6,538 - 6,538 - - - (19,388) 6,538 - 6,538 3,948 (523) (30) 74,867 For the year ended 30 June 2016 Balance at 1 July 2015 68,248 (36,393) 31,855 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Shares issued during the year Capital raising costs Balance at 30 June 2016 - - - 23,920 (1,308) 90,860 10,467 - 10,467 - - (25,926) 10,467 - 10,467 23,920 (1,308) 64,934 The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. 34 EGH ANNUAL REPORT 2017 34 2016-2017 ANNUAL REPORTFor personal use only FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Eureka Group Holdings Limited and controlled entities Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2017 Balance at 1 July 2016 90,860 (25,926) 64,934 For the year ended 30 June 2017 Profit for the year Other comprehensive income Total comprehensive income for the year Share issued during the year Share buy back Capital raising costs Balance at 30 June 2017 For the year ended 30 June 2016 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Shares issued during the year Capital raising costs Balance at 30 June 2016 Consolidated Share Capital Accumulated Losses $’000 $’000 Total $’000 3,948 (523) (30) 94,255 - - - - - - 23,920 (1,308) 90,860 6,538 - 6,538 - - - (19,388) 10,467 - 10,467 - - (25,926) 6,538 - 6,538 3,948 (523) (30) 74,867 10,467 - 10,467 23,920 (1,308) 64,934 Balance at 1 July 2015 68,248 (36,393) 31,855 The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. EGH ANNUAL REPORT 2017 34 Transactions with owners in their capacity as owners: The registered office of the company is Suite 2D 7 Short St, Southport QLD 4215 1. INTRODUCTION Eureka Group Holdings Limited (covering the financial statements of Eureka Group Holdings Limited and all of its subsidiaries) (“EGH” or the “Group” or the “Consolidated Entity”) for the year ended 30 June 2017 is a company incorporated and domiciled in Australia. EGH is a for-profit entity for the purposes of preparing the financial statements. The Group’s operations and principal activities comprise ownership and property management of Independent Living Communities. The financial report is presented in Australian dollars. The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191’, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that legislation to the nearest thousand dollars, or in certain cases, the nearest dollar. The financial report was authorised for issue on 24 August 2017 by the Directors. 2. SUMMARY OF ACCOUNTING POLICIES BASIS OF PREPARATION The principal accounting policies adopted by the Group, comprising the parent entity Eureka Group Holdings Limited and its subsidiaries, are stated in order to assist in the general understanding of the financial report. These policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001. Compliance with IFRS The consolidated financial report of EGH complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). New, revised and amended Accounting Standards adopted by the Group The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Early adoption of standards The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2016. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties and derivative financial instruments. CONSOLIDATION This financial report covers the consolidated entity consisting of Eureka Group Holdings Limited and its controlled entities. Eureka Group Holdings Limited is the ultimate parent entity. The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Eureka Group Holdings Limited as at 30 June 2017 and the results of all controlled entities for the year then ended. The effects of all transactions between entities in the Group are eliminated in full. Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the financial report from the date that control commences until the date that control ceases. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the 'business combinations' accounting policy for further details. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. EGH ANNUAL REPORT 2017 35 35 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. BUSINESS COMBINATIONS The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquiree. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. REVENUE RECOGNITION Rent Revenue Rent revenue from investment properties is recognised on a straight-line basis over the lease term. Rent not received at balance date is reflected in the balance sheet as a receivable, or if paid in advance, as deferred revenue. Lease incentives granted are recognised over the lease term, on a straight-line basis, as a reduction of rent. Rental subsidy receipts from government bodies are recorded on an accruals basis as an entitlement to this income accrues on the provision of accommodation. Management, Property Maintenance, Catering and Service Fees The Group is entitled to receive a fee from unit owners for managing the units under management services agreements. The Group also receives a fee from the tenants of the units for the provision of property maintenance, catering and other services. The Group also provides property consulting services to third parties for agreed fees. Revenue is recognised when the services are provided. Interest Revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Certain transactions undertaken involve the exchange of assets. Where an exchange of assets is undertaken which has commercial substance and appropriate measurement can be made, acquired assets are measured at fair value and assets exchanged are derecognised at their carrying value. Any differences are recorded in the profit and loss. 36 EGH ANNUAL REPORT 2017 36 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. BUSINESS COMBINATIONS or other assets are acquired. The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquiree. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. REVENUE RECOGNITION Rent Revenue accommodation. are provided. Interest Revenue Other revenue Rent revenue from investment properties is recognised on a straight-line basis over the lease term. Rent not received at balance date is reflected in the balance sheet as a receivable, or if paid in advance, as deferred revenue. Lease incentives granted are recognised over the lease term, on a straight-line basis, as a reduction of rent. Rental subsidy receipts from government bodies are recorded on an accruals basis as an entitlement to this income accrues on the provision of Management, Property Maintenance, Catering and Service Fees The Group is entitled to receive a fee from unit owners for managing the units under management services agreements. The Group also receives a fee from the tenants of the units for the provision of property maintenance, catering and other services. The Group also provides property consulting services to third parties for agreed fees. Revenue is recognised when the services Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 INCOME TAX Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit and loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the differences relating to investments in subsidiaries to the extent that it is probable that it will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. TAX CONSOLIDATION The Company and its wholly-owned Australian resident entities have formed a tax-consolidation group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidation group is Eureka Group Holdings Limited. Current tax expense/income, deferred tax liabilities and deferred assets arising from temporary differences of the members of the tax-consolidation group are recognised in the separate financial statements of the members of the tax-consolidation group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax-consolidation group and are recognised by the Company as amounts payable/(receivable) to/(from) other entities in the tax-consolidation group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidation group to the extent that it is probable that future taxable profits of the tax-consolidation group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. Nature of Tax Funding Arrangements and Tax Sharing Arrangements The head entity in conjunction with other members of the tax-consolidation group has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidation group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity to the current tax liability/ (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable/ (payable) equal in amount to the tax liability/ (asset) assumed. The inter-entity receivables/ (payables) are at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant authorities. The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. CASH AND CASH EQUIVALENTS For the purpose of the statement of cash flows, cash includes cash at bank and on hand as well as highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. Other revenue is recognised when it is received or when the right to receive payment is established. Certain transactions undertaken involve the exchange of assets. Where an exchange of assets is undertaken which has commercial substance and appropriate measurement can be made, acquired assets are measured at fair value and assets exchanged are derecognised at their carrying value. Any differences are recorded in the profit and loss. TRADE AND OTHER RECEIVABLES Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. EGH ANNUAL REPORT 2017 36 EGH ANNUAL REPORT 2017 37 37 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. INVESTMENT PROPERTY Land and buildings have the function of investment and are regarded as composite assets. In accordance with applicable accounting standards, the buildings, including plant and equipment, are not depreciated. Transfers from investment property to inventory are determined by a change of use as evidenced by a start of development with a view to subsequent sale The fair value of the investment property at the date of transfer becomes the deemed cost of inventory. Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the period in which they arise. Transfers to and from investment properties to property, plant and equipment are determined by a change in use of owner- occupation. The fair value on the date of change of use from investment properties to property, plant and equipment are used as deemed cost for the subsequent accounting. The existing carrying amount of property, plant and equipment is used for the subsequent accounting cost of investment properties on date of change of use. Fair value is determined from market based evidence, by an appraisal undertaken by a professionally qualified valuer with experience in the location, category of the investment property, reputation, independence and whether professional standards are maintained. It is the Group’s policy to have all investment properties externally valued at intervals of not less than three years or a third of the properties each year. Internal valuations are undertaken with reference to current market conditions and available information for those investment properties not externally valued at each reporting date. It is the policy of the Group to review the fair value of each investment property at each reporting date and to cause investment properties to be revalued to fair values. Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. PROPERTY PLANT & EQUIPMENT Property plant and equipment is recognised at cost. Depreciation and amortisation is calculated on the straight line (SL) or diminishing value (DV) basis so as to write off the net cost of each item of property, plant and equipment over its expected useful life to the Group. Rates used for each class of asset are: Class Rate Method Plant and equipment 6-33% SL/DV Buildings 2.5% SL INTANGIBLE ASSETS Only intangible assets that have been purchased or paid for by the Group are recognised in the accounts. Internally generated intangibles such as management rights on Communities that the Group has constructed are not recognised in the accounts. Management rights and letting rights have a finite life and are carried at the lower of cost or recoverable amount. The management rights and letting rights are amortised using the straight line method over 40 years being the estimated useful life (for strata-titled villages), or over the period of the management right contract (for single-owner villages). Rent rolls have a finite life and are carried at the lower of cost or recoverable amount. Rent rolls are amortised using the straight line method over 15 years being the estimated useful life. Other intangible assets relate to sundry operational licences. These assets have an indefinite life as their renewal and maintenance is routine 38 EGH ANNUAL REPORT 2017 38 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. Intangible assets with indefinite useful lives are not amortised, but tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. Goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised, instead goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Impairment losses for goodwill are not subsequently reversed. INVESTMENT PROPERTY IMPAIRMENT OF ASSETS Financial Assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset previously recognised in equity is reclassified to profit or loss. Any impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in other comprehensive income. Non-Financial Assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives, recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. Except for goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Only intangible assets that have been purchased or paid for by the Group are recognised in the accounts. Internally generated intangibles such as management rights on Communities that the Group has constructed are not recognised in the accounts. FAIR VALUE MEASUREMENT When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Land and buildings have the function of investment and are regarded as composite assets. In accordance with applicable accounting standards, the buildings, including plant and equipment, are not depreciated. Transfers from investment property to inventory are determined by a change of use as evidenced by a start of development with a view to subsequent sale The fair value of the investment property at the date of transfer becomes the deemed cost of inventory. Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the period in which they arise. Transfers to and from investment properties to property, plant and equipment are determined by a change in use of owner- occupation. The fair value on the date of change of use from investment properties to property, plant and equipment are used as deemed cost for the subsequent accounting. The existing carrying amount of property, plant and equipment is used for the subsequent accounting cost of investment properties on date of change of use. Fair value is determined from market based evidence, by an appraisal undertaken by a professionally qualified valuer with experience in the location, category of the investment property, reputation, independence and whether professional standards are maintained. It is the Group’s policy to have all investment properties externally valued at intervals of not less than three years or a third of the properties each year. Internal valuations are undertaken with reference to current market conditions and available information for those investment properties not externally valued at each reporting date. It is the policy of the Group to review the fair value of each investment property at each reporting date and to cause investment properties to be revalued to fair values. Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. PROPERTY PLANT & EQUIPMENT Property plant and equipment is recognised at cost. Depreciation and amortisation is calculated on the straight line (SL) or diminishing value (DV) basis so as to write off the net cost of each item of property, plant and equipment over its expected useful life to the Group. Rates used for each class of asset are: Class Rate Method Plant and equipment 6-33% SL/DV Buildings 2.5% SL INTANGIBLE ASSETS Management rights and letting rights have a finite life and are carried at the lower of cost or recoverable amount. The management rights and letting rights are amortised using the straight line method over 40 years being the estimated useful life (for strata-titled villages), or over the period of the management right contract (for single-owner villages). Rent rolls have a finite life and are carried at the lower of cost or recoverable amount. Rent rolls are amortised using the straight line method over 15 years being the estimated useful life. Other intangible assets relate to sundry operational licences. These assets have an indefinite life as their renewal and maintenance is routine Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets including investment properties, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. EGH ANNUAL REPORT 2017 38 EGH ANNUAL REPORT 2017 39 39 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. FINANCIAL ASSETS AND LIABILITIES A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligation specified in the contract expire or are discharged or cancelled. An instrument is classified as at fair value through profit and loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes are recognised in profit or loss. Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories (at fair value through profit or loss, loans and receivables or held-to-maturity investments) are also included in the available-for-sale category. NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of the disposal group) are not depreciated or amortised while they are classified as held for sale. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position. TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid at that date. The amounts are unsecured and are generally settled within 30-60 days. BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which is relates. The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non- convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity 40 EGH ANNUAL REPORT 2017 40 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. FINANCIAL ASSETS AND LIABILITIES A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligation specified in the contract expire or are discharged or cancelled. in profit or loss. An instrument is classified as at fair value through profit and loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes are recognised Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories (at fair value through profit or loss, loans and receivables or held-to-maturity investments) are also included in the available-for-sale category. NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of the disposal group) are not depreciated or amortised while they are classified as held for sale. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position. TRADE AND OTHER PAYABLES BORROWINGS These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid at that date. The amounts are unsecured and are generally settled within 30-60 days. Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which is relates. The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non- convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity EGH ANNUAL REPORT 2017 40 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. EMPLOYEE BENEFITS Short-term Employee Benefits Liabilities for wages and salaries, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities, and are measured as the amounts expected to be paid when the liabilities are settled inclusive of on-costs. Sick leave is non-vesting and is expensed as paid. Long-term Employee Benefits The liabilities for annual leave and long service leave expected to not be settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given for expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields as at the reporting date on corporate bond rates with the terms to maturity that match, as closely as possible, the estimated future cash outflows. PROVISIONS Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. RETIREMENT VILLAGE RESIDENT LOANS These loans, which are repayable on the departure of the resident, are classified as financial liabilities at fair value through profit and loss with resulting fair value adjustments recognised in the income statement. The fair value of the obligation is measured as the ingoing contribution plus the resident’s share of capital appreciation to reporting date. Although the expected average residency term is between one to ten years, these obligations are classified as current liabilities, as required by Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting date. This liability is stated net of accrued deferred management fees at reporting date, because the Group’s contracts with residents require net settlement of those obligations. FINANCE COSTS Finance costs include interest on short-term and long-term borrowings, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs in connection with the arrangement of borrowings and finance lease charges. Finance costs incurred whilst qualifying assets are under construction are capitalised in the period in which they are incurred. Once each project is completed and ready for sale, subsequent finance costs are expensed when incurred. All other finance costs are expensed when incurred. GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense. EGH ANNUAL REPORT 2017 41 41 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Receivables and payables are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. LEASES Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in financial liabilities. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases. Operating lease payments are recognised as an expense on a straight line basis over the lease term. DIVIDENDS Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. CAPITAL MANAGEMENT The Group considers its share capital and accumulated losses as capital. When managing capital, the objective is to ensure the Group continues as a going concern, as well as to maintain optimum returns to shareholders and benefits for other stakeholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. The Group does not have any specific capital targets and nor is it subject to any external capital restrictions. The Board and Senior Management meet regularly and review in detail the current cash position and cash flow forecasts having regard to planned expansions and take the necessary action to ensure sufficient funds are available. CONTRIBUTED EQUITY 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. When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs is recognised as a deduction from equity. EARNINGS PER SHARE Basic Earnings Per Share Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted Earnings Per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. OPTIONS OVER PROPERTY Options over property are initially measured at cost. Subsequent to acquisition options continue to be recorded at cost, however are tested for impairment on an annual basis. Impairment is tested by reference to the assessed value of the underlying property assets or final cash settlement alternatives. Impairment losses are recorded as incurred. USE OF JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 42 EGH ANNUAL REPORT 2017 42 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 LEASES Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in financial liabilities. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases. Operating lease payments are recognised as an expense on a straight line basis over the Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. The Group considers its share capital and accumulated losses as capital. When managing capital, the objective is to ensure the Group continues as a going concern, as well as to maintain optimum returns to shareholders and benefits for other stakeholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. The Group does not have any specific capital targets and nor is it subject to any external capital restrictions. The Board and Senior Management meet regularly and review in detail the current cash position and cash flow forecasts having regard to planned expansions and take the necessary action to ensure sufficient funds are available. 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. When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs is recognised as a deduction from equity. lease term. DIVIDENDS CAPITAL MANAGEMENT CONTRIBUTED EQUITY EARNINGS PER SHARE Basic Earnings Per Share Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted Earnings Per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. OPTIONS OVER PROPERTY Options over property are initially measured at cost. Subsequent to acquisition options continue to be recorded at cost, however are tested for impairment on an annual basis. Impairment is tested by reference to the assessed value of the underlying property assets or final cash settlement alternatives. Impairment losses are recorded as incurred. USE OF JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Receivables and payables are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have most significant effect on the amount recognised in the financial statements are described as follows: Goodwill The Group tests annually, or more frequently, if events or changes in circumstances indicate impairment on whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in- use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 14 for further information. Amortisation of Management Rights Management rights are amortised over either 40 years (for strata-titled villages) or the period of the management right contract (for single-owner villages). For strata-titled villages where management rights are attached, the Group amortises its management rights over a period of 40 years (being the estimated useful life). The amortisation period used reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. In determining the useful life, the Group considered the expected usage of the assets, the legal rights over the asset and the renewal period of the management right agreements. The management rights are attached to each individual village’s property and include options or the ability to renew the contract. Taking these points into consideration, the Directors believe the amortisation period should be similar to the life of the property rather than agreement period. For Single-owner villages where management rights are attached, its management rights are amortised over the life of the contract. This is because Eureka has materially less control over future contract renewals than it does with the strata-titled villages. Eureka considers that it has materially less control over future contract renewals in single-owner villages primarily because: (a) it does not own or have any sort of tenure in respect of the managers unit; and (b) a single vote of the owner can elect to not renew Eureka’s management rights contract. Investment Property – Classification The Group classifies property as investment property when it meets the following key criteria: • • The property is held by the Group to generate long term investment growth and ongoing rental returns; and Ancillary services are insignificant to the arrangement as a whole. Associated with these properties are insignificant ancillary services – principally the provision of food services to residents. Judgement is required as to whether the ancillary services are significant. Management has determined that the ancillary services are not significant by comparing the fair value of the ancillary services to the total income generated from the property. In addition, qualitative factors have been considered as part of the assessment of ancillary services including both operational and legislative considerations. An assessment of the qualitative and economic factors associated with these services has been made and the ancillary services have been concluded not to be significant and hence property has been recorded as investment property. Properties that do not meet this criteria are classified as property, plant and equipment. Investment Property – Measurement The Group carries its investment property at fair value, with changes in fair value being recognised in profit or loss. The best evidence of fair value is current prices in an active market for similar investment properties. Where such information is not available, the Group determines a property’s value within a range of reasonable fair value estimates. In making its judgment, the Group considers information from a variety of sources including: a) Acquisition price paid for the property; b) Recent prices of similar properties with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and c) Capitalised income projections based upon a property’s estimated net market income, which is assumed to be a level annuity in perpetuity and capitalisation rate derived from analysis of market evidence. Fair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. EGH ANNUAL REPORT 2017 42 EGH ANNUAL REPORT 2017 43 43 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Recovery of Deferred Tax Assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary difference and tax losses. Recovery of Other Receivables At each reporting date the Group assesses the recoverability of other receivables and loans by reference to the expected future cash flows and credit worthiness of the borrower. Security provided is also considered. PARENT ENTITY In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 29. The accounting policies of the parent entity are consistent with those of the Group, as disclosed above, except for the following:   Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. Financial Guarantees Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment. COMPARATIVES Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods. Eureka Group Holdings Limited assessment of the impact of these new standards and interpretations is set out below. AASB 9 Financial Instruments AASB 9 Financial Instruments includes requirements for the classification, measurement and de-recognition of financial assets. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The standard is not applicable to the Group until 1 July 2018 but is available for early adoption. The Group is currently assessing the impact of the new guidance. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all existing revenue recognition accounting standards and interpretations. The standard introduces five step model and provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will conduct impact assessment during the 2018 financial year. The impact will be quantified when the assessment has been completed. As a result of the complete assessment, the result and impact on revenue if any, will invariably impact the transition method adopted. 44 EGH ANNUAL REPORT 2017 44 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Recovery of Deferred Tax Assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary difference and tax losses. Recovery of Other Receivables At each reporting date the Group assesses the recoverability of other receivables and loans by reference to the expected future cash flows and credit worthiness of the borrower. Security provided is also considered. In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 29. The accounting policies of the parent entity are consistent with those of the Group, as disclosed above, except for the following:   Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the PARENT ENTITY Financial Guarantees investment. COMPARATIVES Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods. Eureka Group Holdings Limited assessment of the impact of these new standards and interpretations is set out below. AASB 9 Financial Instruments AASB 9 Financial Instruments includes requirements for the classification, measurement and de-recognition of financial assets. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The standard is not applicable to the Group until 1 July 2018 but is available for early adoption. The Group is currently assessing the impact of the new guidance. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all existing revenue recognition accounting standards and interpretations. The standard introduces five step model and provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will conduct impact assessment during the 2018 financial year. The impact will be quantified when the assessment has been completed. As a result of the complete assessment, the result and impact on revenue if any, will invariably impact the transition method adopted. Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 AASB 16 Leases The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as AASB 16. The key features of AASB 16 are as follows: Lessee accounting  Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.  A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities.  Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.  AASB 16 contains disclosure requirements for lessees. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the Group. 3. REVENUE Revenue Catering – managed properties Catering – owned properties Service fees Property maintenance and consulting services Rental income Other revenue Other Income Interest revenue Net gain revaluation of investment property to fair value Gain on sale of management rights Insurance claim revenue Other income Consolidated 30 June 2017 $’000 30 June 2016 $’000 1,992 2,146 1,842 1,833 14,826 1,414 24,053 172 1,046 (10) 1,007 205 2,420 3,243 1,338 1,312 2,992 9,735 730 19,350 314 4,041 450 - - 4,805 EGH ANNUAL REPORT 2017 44 EGH ANNUAL REPORT 2017 45 45 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 4. ITEMS INCLUDED IN PROFIT/(LOSS) Consolidated 30 June 2017 $’000 30 June 2016 $’000 Profit/(loss) before income tax expense includes the following specific items: Flood damage expense 519 - Rental expense relating to operating leases - Minimum lease payments Finance cost - Interest and finance charges paid/payable for financial liabilities not at fair value through profit or loss Total finance cost Amortisation - Management rights - Rent rolls - Website Total amortisation Depreciation - Plant & equipment - Buildings - Motor vehicles Total depreciation Defined contribution superannuation expense 201 255 2,606 2,606 1,733 1,733 137 3 2 142 101 17 11 129 421 151 3 1 155 86 20 7 113 238 46 EGH ANNUAL REPORT 2017 46 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 5. INCOME TAX The major components of income tax expense for the years ended 30 June 2017 and 2016 are: Consolidated Statement of Profit or Loss Current income tax Deferred income tax Income tax expense reported in the Statement of Profit or Loss A reconciliation of tax expense and the accounting profit multiplied by the applicable tax rate of 30% presents as follows: Accounting profit before tax Income tax calculated at 30% Tax effect of permanent differences Recognition of deferred tax assets not previously recognised Income tax expense reported in the Statement of Profit or Loss 6. TRADE AND OTHER RECEIVABLES Trade debtors (i) Other debtors Financing extended (i) Provision for impairment Consolidated 30 June 2017 $’000 30 June 2016 $’000 - - - - - - 6,538 10,427 1,961 3,140 1 (1,962) - 1 (3,141) - 382 400 1,939 (89) 2,632 2,102 327 1,076 (98) 3,407 (i) Refer to Note 8 – amounts previously classified as trade debtors and financing extended were transferred to other non- current assets upon execution of the agreement disclosed in Note 8 between the Group and the parties to these amounts. The amount transferred was $3 million during year ended 30 June 2017. Trade receivables are non-interest bearing unless otherwise stated, and are generally on 30 day terms. The amounts advanced are secured over assets of the third party. 7. INVENTORIES Catering inventory – at cost Terranora units 7 7,642 7,649 29 6,271 6,300 The Terranora units transferred from investment property in 2016 were recognised at the date of transfer at fair value which, as inventory, is considered deemed cost. The costs of additional development are capitalised to the inventory as incurred. Inventory is recorded at the lower of cost and net realisable value. No valuation adjustments were required at 30 June 2017. The inventory is expected to be realised within 12 months via sales to third parties. EGH ANNUAL REPORT 2017 47 47 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 8. OTHER ASSETS Current Deposits Prepayments and other assets (iii) Capital replacement funds (ii) Non-current Other (i) Consolidated 30 June 2017 $’000 30 June 2016 $’000 204 1,419 - 1,623 3,000 3,000 4 221 621 846 - - (i) The Group has acquired by way of a call option an equitable interest in land at Couran Cove. The option has a 3 year life. The option is secured by registered mortgage over land assets at Couran Cove subject to the option and additional land assets. The land which is the subject of the option has a development approval for 60 lots/cabins and up to 120 tenancies. The land is adjacent to the 29 cabins already owned by the Group at Couran Cove. The option is exercisable individually for up to 60 lots during the option period. At the conclusion of the three year term, for any lots for which an option has not been exercised, the Group will receive a settlement in cash. Settlement will be based on the number of unexercised lots as a % of the 60 lots, applied to a $3.0 million value. The option was acquired on 31 December 2016 for $3.0 million and the nature of the asset is an Other non-current asset which is measured at cost. At 30 June 2017, the directors valued the underlying land asset at $3.0 million which supports the carrying amount of the asset. The acquisition of the option described above for $3.0 million was in lieu of the receipt of cash for the settlement of consultancy fees, trade and other loan amounts as disclosed in Note 6. If cash settlement had been received for the amounts receivable and then cash paid for the option asset acquired, the reported cash receipts from customers and operating cash flows would have increased by $2.67 million and repayments for loans provided would have increased by $0.33 million. Corresponding increases would have been shown in net cash outflows for investing activities for the option purchase. The Group has completed design and pricing for a development on the land and may exercise its option and commence construction on the land of a senior’s rental village. As part of this transaction, the Group has also retained the upside potential of this asset by having been granted an entitlement right to 30% of the proceeds of the sale of certain Couran Cove management and infrastructure rights, if sold in the next 3 years by the current owner. This entitlement is secured by a specific charge over the management and infrastructure rights and a general security agreement over the entity that owns the rights. The Directors have placed no value on this entitlement as receipt of any benefit is dependent on the current owner taking a voluntary action to sell these rights. If the management and infrastructure rights are not sold, the Group’s entitlement to receive 30% of the sale proceeds expires. (ii) A statutory charge, imposed under the Retirement Villages Act 1999 (Qld), exists over all amounts held in capital replacement funds, which restricts the use for which these funds can be applied. These amounts were utilised in the period to satisfy capital replacement obligations. (iii) Amounts included relate to prepaid expenses, deposits for assets and other operational assets used in ordinary business activities. 48 EGH ANNUAL REPORT 2017 48 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 8. OTHER ASSETS Current Deposits Prepayments and other assets (iii) Capital replacement funds (ii) Non-current Other (i) assets. Consolidated 30 June 2017 30 June 2016 $’000 $’000 204 1,419 - 1,623 3,000 3,000 4 221 621 846 - - (i) The Group has acquired by way of a call option an equitable interest in land at Couran Cove. The option has a 3 year life. The option is secured by registered mortgage over land assets at Couran Cove subject to the option and additional land The land which is the subject of the option has a development approval for 60 lots/cabins and up to 120 tenancies. The land is adjacent to the 29 cabins already owned by the Group at Couran Cove. The option is exercisable individually for up to 60 lots during the option period. At the conclusion of the three year term, for any lots for which an option has not been exercised, applied to a $3.0 million value. carrying amount of the asset. The option was acquired on 31 December 2016 for $3.0 million and the nature of the asset is an Other non-current asset which is measured at cost. At 30 June 2017, the directors valued the underlying land asset at $3.0 million which supports the The acquisition of the option described above for $3.0 million was in lieu of the receipt of cash for the settlement of consultancy fees, trade and other loan amounts as disclosed in Note 6. If cash settlement had been received for the amounts receivable and then cash paid for the option asset acquired, the reported cash receipts from customers and operating cash flows would have increased by $2.67 million and repayments for loans provided would have increased by $0.33 million. Corresponding increases would have been shown in net cash outflows for investing activities for the option purchase. The Group has completed design and pricing for a development on the land and may exercise its option and commence construction on the land of a senior’s rental village. As part of this transaction, the Group has also retained the upside potential of this asset by having been granted an entitlement right to 30% of the proceeds of the sale of certain Couran Cove management and infrastructure rights, if sold in the next 3 years by the current owner. This entitlement is secured by a specific charge over the management and infrastructure rights and a general security agreement over the entity that owns the rights. The Directors have placed no value on this entitlement as receipt of any benefit is dependent on the current owner taking a voluntary action to sell these rights. If the management and infrastructure rights are not sold, the Group’s entitlement to receive 30% of the sale proceeds expires. (ii) A statutory charge, imposed under the Retirement Villages Act 1999 (Qld), exists over all amounts held in capital replacement funds, which restricts the use for which these funds can be applied. These amounts were utilised in the period to satisfy capital replacement obligations. Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 9. DEFERRED TAX ASSETS AND LIABILITIES Recognised in the Statement of Financial Position Deferred tax assets Tax losses Deferred tax liabilities Difference in depreciation for tax and accounting Intangible assets Investment properties Net (assessable) and deductible differences on sundry items Net deferred tax assets Not recognised in the Statement of Financial Position Unrecognised deferred tax assets Tax losses Net (assessable) and deductible differences on sundry items the Group will receive a settlement in cash. Settlement will be based on the number of unexercised lots as a % of the 60 lots, Net unrecognised deferred tax assets Reconciliation of Unrecognised tax balances Opening unrecognised amounts Recognition of temporary differences Recognition and use of tax losses Adjustment to prior period balances Total movement Closing balance Consolidated 30 June 2017 $’000 30 June 2016 $’000 4,741 2,812 (257) - (4,271) (213) - 3,968 - 3,968 6,589 - (2,621) - (2,621) 3,968 (187) - (2,869) 244 - 6,589 - 6,589 9,412 - (3,260) 437 (2,823) 6,589 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 until it is probable that future taxable profits will be available against which the Group can utilise these benefits. The benefits of the Group’s recognised and unrecognised tax losses will only be realised if (a) The Group continues to meet the requirements of applicable tax laws to allow the losses to be carried forward and utilised; (b) the Group earns taxable income in future periods; and (c) Applicable tax laws are not changed, causing the losses to be unavailable. 10. LOANS RECEIVABLE (iii) Amounts included relate to prepaid expenses, deposits for assets and other operational assets used in ordinary business Loans – vendor finance activities. EGH ANNUAL REPORT 2017 48 Current Non-current Consolidated 30 June 2017 $’000 30 June 2016 $’000 577 577 76 501 577 605 605 66 539 605 EGH ANNUAL REPORT 2017 49 49 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 The Group acquired a loan book as part of the purchase of Elizabeth Vale Scenic Village Pty Ltd. Security for the loan consists of a first ranking mortgage over the property to which the loan pertains. Vendor finance loans have maturity dates of between 6.5 and 8.1 years and interest is payable on these loans at a rate of between 5.50%-6.25%. 11. INVESTMENT IN SUBSIDIARIES Equity Holding Country of Incorporation 30 June 2017 % 30 June 2016 % Compton's Caboolture Pty Ltd Compton's Villages Australia Unit Trust Easy Living (Bundaberg) Unit Trust Easy Living Unit Trust ECG No. 1 Pty Ltd EGL Finance Pty Ltd Elizabeth Vale Scenic Village Pty Ltd Eureka Care Communities Pty Ltd Eureka Care Communities (Morphetville) Pty Ltd Eureka Care Communities (Mount Gambier) Pty Ltd Eureka Care Communities (Mount Gambier 2) Pty Ltd Eureka Care Communities (Mount Gambier 3) Pty Ltd Eureka Care Communities (Salisbury) Pty Ltd Eureka Care Communities (Wynnum) Pty Ltd Eureka Care Communities Unit Trust Eureka Cascade Gardens (Albert Gardens) Pty Ltd Eureka Cascade Gardens (Ayr) Pty Ltd Eureka Cascade Gardens (Belgian Gardens) Pty Ltd Eureka Cascade Gardens (Bowen) Pty Ltd Eureka Cascade Gardens (Broken Hill) Pty Ltd Eureka Cascade Gardens (Cairns) Pty Ltd Eureka Cascade Gardens (Couran Cove) Pty Ltd Eureka Cascade Gardens (Gladstone) Pty Ltd Eureka Cascade Gardens (Lismore) Pty Ltd Eureka Cascade Gardens (Margate) Pty Ltd Eureka Cascade Gardens (Orange) Pty Ltd Eureka Cascade Gardens (Southport) Pty Ltd Eureka Cascade Gardens (Tivoli) Pty Ltd Eureka Cascade Gardens (Townsville) Pty Ltd Eureka Group Care Pty Ltd Eureka Property Pty Ltd Eureka Easy Living Pty Ltd Eureka Whitsunday Pty Ltd Fig Investments Pty Ltd Rockham Two Pty Ltd Rockham Unit Trust SCV Leasing Pty Ltd SCV Manager Pty Ltd SCV No. 1 Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - 100% 100% - 100% 100% - 100% 100% 100% 100% - - 100% 100% 100% - 100% 100% 100% 100% 100% 100% 50 EGH ANNUAL REPORT 2017 50 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 The Group acquired a loan book as part of the purchase of Elizabeth Vale Scenic Village Pty Ltd. Security for the loan consists of a first ranking mortgage over the property to which the loan pertains. Vendor finance loans have maturity dates of between 6.5 and 8.1 years and interest is payable on these loans at a rate of There are no significant restrictions on the Company’s ability to access or use the assets and settle the liabilities of the Group. All new entities in the period were newly incorporated by the Group to purchase investment property assets and were not acquired in a business combination. Equity Holding Country of 30 June 2017 30 June 2016 Incorporation % Consolidated 30 June 2017 $’000 30 June 2016 $’000 Investment properties at fair value 100,666 86,472 12. INVESTMENT PROPERTY Movements in investment properties: Balance at beginning of reporting period Acquisitions Disposals Subsequent expenditure Transfer to inventory Net increment due to fair value adjustment Balance at end of reporting period 86,472 9,029 (171) 4,290 - 1,046 100,666 39,689 48,235 - 778 (6,271) 4,041 86,472 The Group’s investment properties are shown individually in the table below. The investments consist of twenty six retirement village assets along with associated manager’s units and other rental units. The Group considers their investments reside in one class of asset – Seniors Rental Villages. Independent valuations have been received during the current period for 35% of the portfolio. At 30 June 2017, the Group undertook a review of the fair value of all investment properties held and as shown in the table above, recorded an increment due to fair value adjustment. This adjustment related to all assets in the asset class and was based on inputs and assumptions disclosed in Note 21. The net change in fair value is recognised in profit or loss as net gain/(loss) on change in fair value of investment properties. Fair value hierarchy disclosures for investment properties have been provided in Note 21. Amounts recognised in profit or loss for investment properties: Rental income Direct operating expenses generating rental income Net gain revaluation of investment property to fair value Consolidated 30 June 2017 $’000 30 June 2016 $’000 14,826 (10,630) 1,046 9,735 (6,088) 4,041 The Group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Certain assets are however pledged as security for borrowings – Refer to note 17(a). EGH ANNUAL REPORT 2017 50 EGH ANNUAL REPORT 2017 51 51 between 5.50%-6.25%. 11. INVESTMENT IN SUBSIDIARIES Compton's Caboolture Pty Ltd Compton's Villages Australia Unit Trust Easy Living (Bundaberg) Unit Trust Easy Living Unit Trust ECG No. 1 Pty Ltd EGL Finance Pty Ltd Elizabeth Vale Scenic Village Pty Ltd Eureka Care Communities Pty Ltd Eureka Care Communities (Morphetville) Pty Ltd Eureka Care Communities (Mount Gambier) Pty Ltd Eureka Care Communities (Mount Gambier 2) Pty Ltd Eureka Care Communities (Mount Gambier 3) Pty Ltd Eureka Care Communities (Salisbury) Pty Ltd Eureka Care Communities (Wynnum) Pty Ltd Eureka Care Communities Unit Trust Eureka Cascade Gardens (Albert Gardens) Pty Ltd Eureka Cascade Gardens (Ayr) Pty Ltd Eureka Cascade Gardens (Belgian Gardens) Pty Ltd Eureka Cascade Gardens (Bowen) Pty Ltd Eureka Cascade Gardens (Broken Hill) Pty Ltd Eureka Cascade Gardens (Cairns) Pty Ltd Eureka Cascade Gardens (Couran Cove) Pty Ltd Eureka Cascade Gardens (Gladstone) Pty Ltd Eureka Cascade Gardens (Lismore) Pty Ltd Eureka Cascade Gardens (Margate) Pty Ltd Eureka Cascade Gardens (Orange) Pty Ltd Eureka Cascade Gardens (Southport) Pty Ltd Eureka Cascade Gardens (Tivoli) Pty Ltd Eureka Cascade Gardens (Townsville) Pty Ltd Eureka Group Care Pty Ltd Eureka Property Pty Ltd Eureka Easy Living Pty Ltd Eureka Whitsunday Pty Ltd Fig Investments Pty Ltd Rockham Two Pty Ltd Rockham Unit Trust SCV Leasing Pty Ltd SCV Manager Pty Ltd SCV No. 1 Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - - - - - - 100% 100% 100% 100% 100% 100% 100% 100% 100% EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Details of investment properties are as follows: Property Location Acquisition date Carrying amount Carrying amount 30 Jun 17 30 Jun 16 $’000 $’000 92 Primrose Street Belgian Gardens Belgian Gardens QLD Jun-16 1,000 61 Marana Street Bilambil Heights Bilambil Heights NSW Dec-15 2,700 Bowen Village Broken Hill Village Avenell Village on Vasey Bundaberg Lot 21 134-136 King Street Caboolture Bowen QLD Broken Hill NSW Bundaberg QLD Caboolture QLD Dec-15 1,434 Dec-16 1,990 Oct-14 4,988 4,791 Sep-12 70 Lot 43 134-136 King Street Caboolture (manager’s unit) Caboolture QLD May-14 268 53 & 54 34 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 140 80 134-136 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 265 Cascade Gardens Cairns Cairns QLD Jul-14 4,952 Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA Dec-14 260 Elizabeth Vale Scenic Village 1 Elizabeth Vale Scenic Village 2 Rockhampton Village 1 Rockhampton Village 2 15/8 Wicks Street, New Auckland Elizabeth Vale SA Oct-14 4,693 Elizabeth Vale SA Apr-15 3,900 Frenchville QLD Frenchville QLD Gladstone QLD Oct-15 3,201 Dec-15 5,674 Sept-16 50 Lot 49 Hackham Community Centre (manager’s unit) Hackham SA Oct-14 294 97 144 Main South Road Hackham 33 Mardross Court Lavington Lismore Village Cascade Gardens Mackay 176 Victoria Street Mackay 43 Macdonnell Court Margate 344 San Mateo Avenue Mildura Lambert Village 10 Wyatt Street Mt Gambier 2 Retirement Village Amber Lodge Hackham SA Lavington VIC Lismore NSW Mackay QLD Mackay QLD Margate QLD Mildura VIC Mt Gambier SA Mt Gambier SA Mt Gambier SA May-15 294 Jun-15 3,457 May-15 4,751 Apr-14 7,897 Mar-17 547 Jun-16 3,900 Jun-15 3,352 Sept-15 2,408 Aug-16 350 Dec-15 3,862 Morphettville SA Jun-16 2,593 Albert Street Gardens Village Orange NSW Sept-16 5,599 Alexam Place Salisbury East SA Feb-16 4,527 60 Poplar Avenue Shepparton Shepparton VIC Jun-15 3,868 84 10 Winani Street Slacks Creek (manager’s unit) Slacks Creek QLD Jul-04 - 7 Meron Street Southport Southport QLD Jun-16 4,190 Couran Cove Lot 8,9,20,21&22 56A Moores Pocket Road Tivoli Myall Place Retirement Village 40 Federation Street Wynnum Investment Property Enhancements South Stradbroke Island QLD Tivoli QLD Whyalla SA Wynnum QLD In Progress Jun-16 Mar-15 2,747 535 Jan-15 4,013 Oct-15 5,147 June-17 750 52 100,666 86,472 EGH ANNUAL REPORT 2017 52 1,000 2,700 1,320 - 70 280 140 280 4,687 252 4,536 3,900 2,831 4,521 - 291 291 3,450 4,264 7,511 - 2,789 3,100 2,311 - 4,296 4,475 - 4,600 2,925 171 3,373 1,975 80 4,164 5,098 - 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Details of investment properties are as follows: 13. PROPERTY, PLANT & EQUIPMENT Carrying amount Carrying amount 30 Jun 17 30 Jun 16 $’000 $’000 Property Location Acquisition date 92 Primrose Street Belgian Gardens Belgian Gardens QLD Jun-16 1,000 61 Marana Street Bilambil Heights Bilambil Heights NSW Dec-15 2,700 Bowen Village Broken Hill Village Avenell Village on Vasey Bundaberg Lot 21 134-136 King Street Caboolture Bowen QLD Broken Hill NSW Bundaberg QLD Caboolture QLD Dec-15 1,434 Dec-16 1,990 Oct-14 4,988 4,791 Sep-12 70 Lot 43 134-136 King Street Caboolture (manager’s unit) Caboolture QLD May-14 268 53 & 54 34 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 140 80 134-136 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 265 Cascade Gardens Cairns Cairns QLD Jul-14 4,952 Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA Dec-14 260 Elizabeth Vale SA Oct-14 4,693 Elizabeth Vale SA Apr-15 3,900 Lot 49 Hackham Community Centre (manager’s unit) Hackham SA Oct-14 294 Frenchville QLD Frenchville QLD Gladstone QLD Hackham SA Lavington VIC Lismore NSW Mackay QLD Mackay QLD Margate QLD Mildura VIC Mt Gambier SA Mt Gambier SA Mt Gambier SA Oct-15 3,201 Dec-15 5,674 Sept-16 50 May-15 294 Jun-15 3,457 May-15 4,751 Apr-14 7,897 Mar-17 547 Jun-16 3,900 Jun-15 3,352 Sept-15 2,408 Aug-16 350 Dec-15 3,862 Elizabeth Vale Scenic Village 1 Elizabeth Vale Scenic Village 2 Rockhampton Village 1 Rockhampton Village 2 15/8 Wicks Street, New Auckland 97 144 Main South Road Hackham 33 Mardross Court Lavington Lismore Village Cascade Gardens Mackay 176 Victoria Street Mackay 43 Macdonnell Court Margate 344 San Mateo Avenue Mildura Mt Gambier 2 Retirement Village Lambert Village 10 Wyatt Street Amber Lodge Alexam Place Albert Street Gardens Village Orange NSW Sept-16 5,599 Morphettville SA Jun-16 2,593 Salisbury East SA Feb-16 4,527 60 Poplar Avenue Shepparton Shepparton VIC Jun-15 3,868 84 10 Winani Street Slacks Creek (manager’s unit) Slacks Creek QLD Jul-04 - 7 Meron Street Southport Southport QLD Jun-16 4,190 Couran Cove Lot 8,9,20,21&22 56A Moores Pocket Road Tivoli Myall Place Retirement Village 40 Federation Street Wynnum Investment Property Enhancements South Stradbroke Island QLD Tivoli QLD Whyalla SA Wynnum QLD In Progress Jun-16 Mar-15 2,747 535 Jan-15 4,013 Oct-15 5,147 June-17 750 100,666 86,472 EGH ANNUAL REPORT 2017 52 1,000 2,700 1,320 - 70 280 140 280 4,687 252 4,536 3,900 2,831 4,521 - 291 291 3,450 4,264 7,511 2,789 3,100 2,311 4,296 4,475 - - - 4,600 2,925 171 3,373 1,975 80 4,164 5,098 - Buildings at cost Accumulated depreciation Plant & equipment at cost Accumulated depreciation Motor Vehicles at cost Accumulated depreciation Total property, plant & equipment Consolidated 30 June 2017 $’000 30 June 2016 $’000 625 (174) 451 1,973 (827) 1,146 88 (20) 68 1,665 642 (176) 466 1,439 (752) 687 88 (9) 79 1,232 Reconciliation of movements in property, plant & equipment: Opening balance at 1 July 2015 Additions at cost Depreciation expense Closing balance at 30 June 2016 Opening balance at 1 July 2016 Additions at cost Depreciation expense Closing balance at 30 June 2017 Buildings $’000 Plant & Equipment $’000 Motor Vehicle $’000 Total $’000 486 - (20) 466 466 2 (17) 451 378 395 (86) 687 687 560 (101) 1,146 14 72 (7) 79 79 - (11) 68 878 467 (113) 1,232 1,232 562 (129) 1,665 EGH ANNUAL REPORT 2017 53 53 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 14. INTANGIBLE ASSETS Management rights – at cost Accumulated amortisation Carrying amount of management rights Rent rolls – at cost Accumulated amortisation Carrying amount of rent rolls Other intangibles – at cost Accumulated amortisation Carrying amount of other intangibles Goodwill Total intangible assets Consolidated 30 June 2017 $’000 30 June 2016 $’000 4,682 (1,211) 3,471 140 (38) 102 830 (31) 799 4,512 (964) 3,548 140 (35) 105 41 (29) 12 1,955 1,955 6,327 5,620 The Group’s primary business activity is the management (through management rights agreements) of senior’s accommodation throughout Australia. The Group’s primary intangible assets are management rights and goodwill. These intangible assets, although separately classified per accounting standard requirements, all relate to the management of senior’s accommodation. Their separate categorisation has arisen from acquisitions. During the period, the Group also acquired certain trading and operating licences with investment property. These are included in other intangibles. These assets are not amortised as their term is not limited and there is no expectation the licences will be cancelled. Impairment tests for Goodwill Goodwill is monitored by the Board of Directors (who are identified as the chief operating decision makers) based on the share of results of the owner operators’ net profit of the villages that EGH manages, less any overhead costs attributable to the management of these villages. Goodwill has been allocated to the property management cash generating unit. The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets covering a five-year period. Cash flows beyond the five- year period are extrapolated using an estimated long term growth rate. Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. The following key assumptions were used in the discounted cash flow model:      cash flows were projected over a five year period by applying a 2% growth rate (2016: 2%) to the most recent years’ cash flows; the terminal value was calculated using a growth rate of 2% (2016: 2%); cash flows have been discounted using a pre-tax discount rate of 25% (2016: 25%); cash flows do not take into account the management of any new villages; and cash flows are based on historical results. The 2% growth rate for the projected cash flow is considered conservative when compared with the business activities over the previous 12 months. 54 EGH ANNUAL REPORT 2017 54 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 14. INTANGIBLE ASSETS Reconciliation of movements in intangible assets: Management rights – at cost Accumulated amortisation Carrying amount of management rights Rent rolls – at cost Accumulated amortisation Carrying amount of rent rolls Other intangibles – at cost Accumulated amortisation Carrying amount of other intangibles Goodwill Total intangible assets Consolidated 30 June 2017 30 June 2016 $’000 $’000 4,682 (1,211) 3,471 140 (38) 102 830 (31) 799 4,512 (964) 3,548 140 (35) 105 41 (29) 12 1,955 1,955 6,327 5,620 The Group’s primary business activity is the management (through management rights agreements) of senior’s accommodation throughout Australia. The Group’s primary intangible assets are management rights and goodwill. These intangible assets, although separately classified per accounting standard requirements, all relate to the management of senior’s accommodation. Their separate categorisation has arisen from acquisitions. During the period, the Group also acquired certain trading and operating licences with investment property. These are included in other intangibles. These assets are not amortised as their term is not limited and there is no expectation the licences will be cancelled. Impairment tests for Goodwill Goodwill is monitored by the Board of Directors (who are identified as the chief operating decision makers) based on the share of results of the owner operators’ net profit of the villages that EGH manages, less any overhead costs attributable to the management of these villages. Goodwill has been allocated to the property management cash generating unit. The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets covering a five-year period. Cash flows beyond the five- year period are extrapolated using an estimated long term growth rate. Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. The following key assumptions were used in the discounted cash flow model: cash flows were projected over a five year period by applying a 2% growth rate (2016: 2%) to the most recent      years’ cash flows; the terminal value was calculated using a growth rate of 2% (2016: 2%); cash flows have been discounted using a pre-tax discount rate of 25% (2016: 25%); cash flows do not take into account the management of any new villages; and cash flows are based on historical results. The 2% growth rate for the projected cash flow is considered conservative when compared with the business activities over the previous 12 months. Management Rights $’000 Rent Rolls $’000 Goodwill $’000 Other intangibles $’000 Total $’000 Opening balance at 1 July 2015 2,932 108 1,955 Additions at cost Transfer to/from assets held for sale Amortisation expense Closing balance at 30 June 2016 800 (33) (151) 3,548 - - (3) 105 - - - 1,955 Opening balance at 1 July 2016 3,548 105 1,955 Additions at cost Disposals Amortisation expense Closing balance at 30 June 2017 60 - (137) 3,471 - - (3) 102 - - - 1,955 9 4 - (1) 12 12 789 - (2) 799 5,004 804 (33) (155) 5,620 5,620 849 - (142) 6,327 The remaining amortisation period on a weighted average basis of the management rights are 22 years (2016: 23 years). 15. TRADE & OTHER PAYABLES Trade creditors and accruals Retirement Village Resident Loans1 Capital Replacement Obligations Acquisition related accruals 1 Movements from 30 June 2016 represents payments made to residents 16. PROVISIONS Current Employee benefits Non-current Employee benefits Consolidated 30 June 2017 $’000 30 June 2016 $’000 1,625 928 - 107 2,660 289 289 145 145 1,435 1,162 621 470 3,688 144 144 41 41 EGH ANNUAL REPORT 2017 54 EGH ANNUAL REPORT 2017 55 55 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 17. OTHER FINANCIAL LIABILITIES Current Commercial bills – secured Insurance funding Finance lease Motor vehicle loan Non-current Commercial bills – secured Finance lease Motor vehicle loan Consolidated 30 June 2017 $’000 30 June 2016 $’000 (a) 1,538 5,087 - 8 8 12 8 16 1,554 5,123 (a) 49,018 37,374 1 - 9 10 49,019 37,393 (a) Commercial bills and advances Terms and conditions – 30 June 2017 As at 30 June 2017, the Group has access to the following commercial bill facilities: National Australia Bank (“NAB”): During the period, NAB borrowings were consolidated and now comprises of two facilities:   Facility 1 – maximum limit of $20,000,000. Interest rates vary for each loan component within the facility limit. Facility 2 – maximum limit of $35,000,000. Interest rates vary for each loan component within the facility limit. Applicable interest rates on the drawn facilities are provided below:  Commercial bill – secured fully drawn limit $16,700,000. Expires on 31 December 2019. Monthly interest only repayment. Interest on this facility has been fixed until 31 December 2019. Interest is payable at the rate of 4.99%.  Commercial bill – secured fully drawn limit of $2,525,000. Expires on 31 December 2021. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $3,700,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate of 4.85%.  Commercial bill – secured fully drawn limit of $3,000,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate of 4.95% on $2,500,000 and variable rate of $4.47% on $500,000.  Commercial bill – secured fully drawn limit of $6,500,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate on this facility of 4.97%.  Commercial bill – secured fully drawn limit of $2,800,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.07%).  Commercial bill – secured fully drawn limit of $2,461,250. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $6,550,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.01%).  Commercial bill – secured fully drawn limit of $3,050,000. Expires on 31 December 2021. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $2,169,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%). At 30 June 2017, total drawings on the facility were $49,455,250. Westpac Banking Corporation (“Westpac”):  56 Commercial bill – secured fully drawn limit of $1,500,000. Expires on 31 December 2017. Monthly repayment of $100,000 per month. Interest is payable at a variable rate on this facility (currently 5.1%). EGH ANNUAL REPORT 2017 56 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 17. OTHER FINANCIAL LIABILITIES Current Commercial bills – secured Insurance funding Finance lease Motor vehicle loan Non-current Commercial bills – secured Finance lease Motor vehicle loan 1,554 5,123 - 8 8 1 - 12 8 16 9 10 49,019 37,393 (a) Commercial bills and advances Terms and conditions – 30 June 2017 National Australia Bank (“NAB”): As at 30 June 2017, the Group has access to the following commercial bill facilities: During the period, NAB borrowings were consolidated and now comprises of two facilities:   Facility 1 – maximum limit of $20,000,000. Interest rates vary for each loan component within the facility limit. Facility 2 – maximum limit of $35,000,000. Interest rates vary for each loan component within the facility limit. Applicable interest rates on the drawn facilities are provided below: 4.99%.  Commercial bill – secured fully drawn limit of $2,525,000. Expires on 31 December 2021. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $3,700,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate of 4.85%.  Commercial bill – secured fully drawn limit of $3,000,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate of 4.95% on $2,500,000 and variable rate of $4.47% on $500,000.  Commercial bill – secured fully drawn limit of $6,500,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate on this facility of 4.97%.  Commercial bill – secured fully drawn limit of $2,800,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.07%).  Commercial bill – secured fully drawn limit of $2,461,250. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $6,550,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.01%).  Commercial bill – secured fully drawn limit of $3,050,000. Expires on 31 December 2021. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%).  Commercial bill – secured fully drawn limit of $2,169,000. Expires on 31 December 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.05%). At 30 June 2017, total drawings on the facility were $49,455,250. Westpac Banking Corporation (“Westpac”):  Commercial bill – secured fully drawn limit of $1,500,000. Expires on 31 December 2017. Monthly repayment of $100,000 per month. Interest is payable at a variable rate on this facility (currently 5.1%). EGH ANNUAL REPORT 2017 56 Consolidated 30 June 2017 30 June 2016 $’000 $’000 The commercial bill liabilities are secured against a certain amount of the Group’s investment property asset. The total amount of security provided at 30 June 2017 was $100,666,155. This value represents the fair value of assets pledged based on the carrying values recorded by the Group at 30 June 2017. Commercial bill facilities are subject to covenants which are commensurate with normal secured lending terms. (a) 1,538 5,087 As at 30 June 2017, the Group had the following banking covenants:     The Debt Service Cover Ratio for the Group must not be less than or equal to 2.5:1. The Gearing Ratio for the Group must be less than 50%. The LVR must not exceed 57% upto and including 30 March 2017 or 55% 31 March 2017 onwards. The Dividend Payout Amount for the financial year must not exceed 100% of the Net Profit After Tax for the Group for that Financial Year. (a) 49,018 37,374 The Group complied with its covenants through 30 June 2017. Terms and conditions – 30 June 2016 National Australia Bank (“NAB”):         Commercial bill – secured fully drawn limit of $2,349,000. Expires on 31 January 2017. Principal repayment of $30,000 per month. Interest is payable at a variable rate on this facility (currently 4.49%). Commercial bill – secured fully drawn limit $16,700,000. Expires on 31 December 2019. Monthly interest only repayment. Interest on this facility has been fixed until 31 December 2019. Interest is payable at the rate of 4.98% on $7,000,000 and 4.99% on $9,700,000. Commercial bill – secured fully drawn limit of $2,525,000. Expires on 29 March 2018. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.44%). Commercial bill – secured fully drawn limit of $3,700,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate of 4.85%. Commercial bill – secured fully drawn limit of $3,000,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.86%). Commercial bill – secured fully drawn limit of $6,500,000. Expires on 31 August 2020. Monthly interest only repayment. Interest is payable at a fixed rate on this facility of 4.97%. Commercial bill – secured fully drawn limit of $2,800,000. Expires on 29 March 2019. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.45%). Commercial bill – secured fully drawn limit of $2,461,250. Expires on 30 June 2019. Monthly interest only repayment. Interest is payable at a variable rate on this facility (currently 4.39%).  Commercial bill – secured fully drawn limit $16,700,000. Expires on 31 December 2019. Monthly interest only repayment. Interest on this facility has been fixed until 31 December 2019. Interest is payable at the rate of Westpac Banking Corporation (“Westpac”):  Commercial bill – secured fully drawn limit of $2,700,000. Expires on 31 December 2016. Monthly repayment of $100,000 per month commenced from April 2016. Interest is payable at a variable rate on this facility (currently 5.31%). The loans are secured by:  Registered mortgages over its managers’ units and other real estate at its Communities (carrying amount of $92,758,611);  Guarantee and indemnity given by EGH and its controlled entities ($31,045,250); and  Fixed and floating charges over the assets of EGH and its controlled entities (carrying amount of $110,701,756). As at 30 June 2016, the Group had the following banking covenants:  Minimum interest cover of 2.25 times as measured for the 3 month period ending on each quarter.  Minimum capital adequacy of 30% as measured on a daily basis and reported quarterly.  Minimum EBITDA of each of the freehold villages shall be as follows: Elizabeth Vale $202,300, Avenell Heights $172,550, Whyalla $165,750, Mackay $269,025, Smithfield $96,475, Elizabeth Vale 2 $153,000, Lismore $229,500, Mildura $129,625, Albury $108,800 Mt Gambier $127,500, Rockhampton 1 $160,650 and Rockhampton 2 $212,299, Wynnum $182,750, Terranora $168,128 and Salisbury $286,875. The Group complied with its covenants through 30 June 2016. EGH ANNUAL REPORT 2017 57 57 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 18. SHARE CAPITAL Ordinary shares Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and on 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. Balance at start of year Shares issued at $0.54 for cash Shares issued at $0.54 for cash Shares issued at $0.58 for acquisition of villages 1 Shares issued at $0.75 for cash Shares bought back during the period Capital raising costs On issue at end of the year Consolidated 30 June 2017 Number 30 June 2017 $’000 30 June 2016 Number 30 June 2016 $’000 225,784,473 90,860 188,099,927 68,248 - - - 5,263,400 (1,375,950) - - - - 3,948 (523) (30) 7,003,877 12,255,383 1,758,620 3,782 6,618 1,020 16,666,666 12,500 - - - (1,308) 90,860 229,671,923 94,255 225,784,473 1 These shares were issued as part of the non-cash consideration paid to acquire Rockham Two Unit Trust during the period. Share Buy Back During the year ended 30 June 2017, the company announced its intention to buy back up to 10% of the current ordinary shares outstanding, for a period of 1 year from 16 March 2017. As at 30 June 2017, 1,375,950 ordinary shares have been cancelled. Options No options were issued during the period. 19. CASH FLOW INFORMATION (a) Reconciliation of cash Cash at bank and on hand Consolidated 30 June 2017 $’000 30 June 2016 $’000 4,395 6,841 (b) Reconciliation of profit/(loss) for the year to net cash flow from operating activities Profit/(loss) for the year Depreciation and amortisation Impairment – management rights Impairment – assets held for sale Asset revaluation (Gain)/loss on sale of management rights and managers units 58 Consolidated 30 June 2017 30 June 2016 $’000 $’000 6,538 271 - - (1,046) 10 10,467 268 - - (4,041) (450) EGH ANNUAL REPORT 2017 58 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 18. SHARE CAPITAL Ordinary shares Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and on 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. Balance at start of year Shares issued at $0.54 for cash Shares issued at $0.54 for cash Shares issued at $0.58 for acquisition of villages 1 Shares issued at $0.75 for cash Shares bought back during the period Capital raising costs On issue at end of the year period. Share Buy Back cancelled. Options No options were issued during the period. 19. CASH FLOW INFORMATION (a) Reconciliation of cash Cash at bank and on hand (Increase)/decrease in: - Trade and other receivables - Inventories - Other current assets Increase/(decrease) in: - Trade and other payables - Provisions Net cash flow from/(used in) operating activities (c) Non cash investing and financing activities 36 (1,372) (725) 112 249 4,073 (2,848) (10) (39) 772 121 4,240 Refer to note 8 for details of non-cash investing activity which took place during the year. In addition to this, the Group is party to an arrangement where it acquires goods and services by way of non-cash exchanges. During the period, property, plant and equipment and investment property $1,190,648 was acquired in this manner. 16,666,666 12,500 In the prior financial year, the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:    The Group assumed borrowings of $2,525,000 and issued $1,020,000 of shares as part of the acquisition of Rockhampton 2 village; The Group assumed borrowings of $3,000,000 as part of the acquisition of Mt Gambier 2 village; and The Group acquired $357,200 of plant and equipment with non-cash consideration. Consolidated 30 June 2017 30 June 2017 30 June 2016 30 June 2016 Number $’000 Number $’000 225,784,473 90,860 188,099,927 68,248 - - - - 5,263,400 (1,375,950) - - - 3,948 (523) (30) 7,003,877 12,255,383 1,758,620 - - 229,671,923 94,255 225,784,473 3,782 6,618 1,020 - (1,308) 90,860 1 These shares were issued as part of the non-cash consideration paid to acquire Rockham Two Unit Trust during the 20. FINANCIAL INSTRUMENTS Overall policy During the year ended 30 June 2017, the company announced its intention to buy back up to 10% of the current ordinary shares outstanding, for a period of 1 year from 16 March 2017. As at 30 June 2017, 1,375,950 ordinary shares have been The Board of Directors have overall responsibility for the establishment and oversight of the risk management framework. The Board of Directors are responsible for developing and monitoring risk management policy. Risk management policy is to identify and analyse the risks faced by the entity, to set limits and controls, and to monitor risks and adherence to limits. Risk management policy and systems are reviewed regularly to reflect changes in market conditions and Group’s activities. The Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. a) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and amounts due from the senior independent living communities in accordance with management agreements in place. Credit risk arises principally from the Group’s cash and cash equivalents, receivables and other loans. (b) Reconciliation of profit/(loss) for the year to net cash flow from operating activities Maximum exposure to credit risk Cash and cash equivalents Trade and other receivables Loans receivable Consolidated 30 June 2017 $’000 30 June 2016 $’000 4,395 2,632 577 7,604 6,841 3,407 605 10,853 Profit/(loss) for the year Depreciation and amortisation Impairment – management rights Impairment – assets held for sale Asset revaluation (Gain)/loss on sale of management rights and managers units Cash and cash equivalents Deposits of cash are only held with approved banks and financial institutions. The Group currently banks with National Australia Bank. EGH ANNUAL REPORT 2017 59 59 Consolidated 30 June 2017 30 June 2016 $’000 $’000 4,395 6,841 Consolidated 30 June 2017 30 June 2016 $’000 $’000 6,538 271 - - (1,046) 10 10,467 268 - - (4,041) (450) EGH ANNUAL REPORT 2017 58 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristic of each customer or resident. The Group has a diverse range of customers and residents and therefore there is no significant concentration of credit risk with any single counterparty or group of counterparties. The Directors have established a credit policy under which each new customer is analysed individually for creditworthiness before the Group does business with them. The Group monitors and follows-up its accounts receivable to ensure collections are being made promptly in accordance with contractual terms and conditions and actively pursues amounts past due. Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect to trade and other receivables. The Group has no concentrations of credit risk that have not been provided for. A significant component of trade debtors that are past due and greater than 90 days ageing are either on a payment plan or considered recoverable. The Group has not provided for the remaining amounts past due as management believes these amounts will be received. The ageing of trade receivables and other receivables at the reporting date was: Due 0-30 days Past due 30-60 days Past due 60-90 days Past due 90 + days 30 June 2017 30 June 2016 Gross amount receivable $’000 Provision for Impairment $’000 Gross amount receivable $’000 Provision for Impairment $’000 2,455 11 7 248 2,721 - - - (89) (89) 1,072 637 574 1,222 3,505 - - - (98) (98) Loans receivable The Group’s exposure to credit risk is limited to the vendor finance book balance which was part of the acquisition of Elizabeth Vale Scenic Village Pty Ltd during the prior year. The loan book consists of 10 individual loan contracts. The Group manages the units which are being held as security for the loans. Repayments are received monthly in accordance with the individual contracts or alternative agreed arrangements in place. Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect to the loans receivable. The Group has no concentrations of credit risk that have not been provided for. Loans receivable Current Non-current b) Liquidity risk 30 June 2017 Gross amount receivable $’000 Provision for Impairment $’000 76 501 577 - - - Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. This process involves the review and updating of cash flow forecasts and, when necessary, the obtaining of credit standby arrangements and loan facilities. There were unused borrowing facilities of $5,544,750 at the reporting date. The tables below shows the Group’s financial liabilities classified into relevant maturity groupings based on their contractual maturities. 60 EGH ANNUAL REPORT 2017 60 2016-2017 ANNUAL REPORTFor personal use only The Directors have established a credit policy under which each new customer is analysed individually for creditworthiness before the Group does business with them. The Group monitors and follows-up its accounts receivable to ensure collections are being made promptly in accordance with contractual terms and conditions and actively pursues amounts past due. Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect to trade and other receivables. The Group has no concentrations of credit risk that have not been provided for. A significant component of trade debtors that are past due and greater than 90 days ageing are either on a payment plan or considered recoverable. The Group has not provided for the remaining amounts past due as management believes these amounts will be received. The ageing of trade receivables and other receivables at the reporting date was: 30 June 2017 30 June 2016 Gross amount Provision for Gross amount Provision for receivable Impairment receivable Impairment $’000 $’000 $’000 $’000 2,455 11 7 248 2,721 - - - (89) (89) 1,072 637 574 1,222 3,505 - - - (98) (98) The Group’s exposure to credit risk is limited to the vendor finance book balance which was part of the acquisition of Elizabeth Vale Scenic Village Pty Ltd during the prior year. The loan book consists of 10 individual loan contracts. The Group manages the units which are being held as security for the loans. Repayments are received monthly in accordance with the individual contracts or alternative agreed arrangements in place. Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect to the loans receivable. The Group has no concentrations of credit risk that have not been provided for. Due 0-30 days Past due 30-60 days Past due 60-90 days Past due 90 + days Loans receivable Loans receivable Current Non-current b) Liquidity risk 30 June 2017 Gross amount receivable Provision for Impairment $’000 $’000 76 501 577 - - - Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. This process involves the review and updating of cash flow forecasts and, when necessary, the obtaining of credit standby arrangements and loan facilities. There were unused borrowing facilities of $5,544,750 at the reporting date. Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristic of each customer or resident. The Group has a diverse range of customers and residents and therefore there is no significant concentration of credit risk with any single counterparty or group of counterparties. 30 June 2017 Trade and other payables Commercial bills Other financial liabilities Total 30 June 2016 Trade and other payables Commercial bills Other financial liabilities Total c) Market risk Contractual cash flows $’000 Less than 6 months $’000 Consolidated 6 - 12 months $’000 1 – 2 years $’000 More than 2 years $’000 2,660 57,256 18 59,934 2,660 2,937 11 5,608 - - - 1,136 13,801 39,382 6 1 - 1,142 13,802 39,382 Contractual cash flows $’000 Less than 6 months $’000 Consolidated 6 - 12 months $’000 1 – 2 years $’000 More than 2 years $’000 3,688 50,562 55 54,305 3,688 6,203 25 9,916 - 921 12 933 - 4,313 16 4,329 - 39,125 2 39,127 Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. d) Interest rate risk The Group’s exposure to market interest rates arises from long term borrowings in the form of Commercial Bills. Borrowings issued at variable rates expose the Group to interest rate risk. $21,555,250 of the commercial bills are at variable rates while $29,400,000 is fixed (refer to note 17). The variable portion of the debt does not expose the Group to any material interest rate risk. The Group constantly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative financing, alternate hedging positions and the mix of fixed and variable interest rates. 21. FAIR VALUE MEASUREMENTS Fair value hierarchy Investment properties and retirement village resident loans are measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:    Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability There were no transfers between levels during the financial year. The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. The tables below shows the Group’s financial liabilities classified into relevant maturity groupings based on their contractual maturities. The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature. Fair value of financial instruments (unrecognised) The Group has a number of financial assets and financial liabilities (loans receivable and commercial bills) which are not measured at fair value in the statement of financial position. The fair values are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market rates or the instruments are short-term in nature, and therefore have not been disclosed. EGH ANNUAL REPORT 2017 60 EGH ANNUAL REPORT 2017 61 61 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Consolidated – 2017 Assets Investment properties Total assets Liabilities Retirement Village Resident Loans Total liabilities Consolidated – 2016 Assets Investment properties Total assets Liabilities Retirement Village Resident Loans Total liabilities Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - - - - - - - - - - - - - - - 100,666 100,666 100,666 100,666 928 928 928 928 86,472 86,472 86,472 86,472 1,162 1,162 1,162 1,162 Valuation techniques for fair value measurements categorised within level 2 and level 3 At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair value estimates. Investment properties have been valued using 2 methods, the capitalisation method and direct comparison approach. Under the capitalisation method, fair value is estimated using assumptions regarding the expectation of future benefits. The capitalisation method involves estimating the expected income projections of the property into perpetuity and applying a capitalisation rate. The capitalisation rate is based on current market evidence. Future income projections take into account occupancy, rental income and operating expenses. Under the direct comparison approach, key inputs are the recent sales of comparable units in comparable villages. All resulting fair value estimates for properties are included in level 3. Retirement village resident loans are measured as the ingoing contribution less deductions over time for the period of resident stay as a % of the length of expected residence term. Although the expected average residency term is between one to ten years, these obligations are classified as current liabilities, as required by the Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting date. The liability stated is stated net of accrued deferred management fees at reporting date, because the Group’s contract with residents require net settlement of those obligations. These are included in trade creditors. The level 3 assets significant unobservable inputs and sensitivity are as follows: Description Valuation technique Significant unobservable inputs Range (weighted average) 2017 2016 Relationship of unobservable input to fair value Investment properties Retirement Villages Capitalisation method (1) – Capitalisation rate 9.75%- 12.50% (11.04%) 5.67%-14.00% (10.90%) Capitalisation has an inverse relationship to valuation. Stabilised occupancy 81%-100% (91%) 68%-98% (88%) Occupancy has a direct correlation to valuation (i.e. the higher the occupancy, the greater the value). 62 EGH ANNUAL REPORT 2017 62 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Consolidated – 2017 Assets Investment properties Total assets Retirement Village Resident Loans Liabilities Total liabilities Consolidated – 2016 Assets Investment properties Total assets Liabilities Total liabilities Retirement Village Resident Loans Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - - - - - - - - - - - - - - - 100,666 100,666 100,666 100,666 928 928 928 928 86,472 86,472 86,472 86,472 1,162 1,162 1,162 1,162 Valuation techniques for fair value measurements categorised within level 2 and level 3 At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair value estimates. Investment properties have been valued using 2 methods, the capitalisation method and direct comparison approach. Under the capitalisation method, fair value is estimated using assumptions regarding the expectation of future benefits. The capitalisation method involves estimating the expected income projections of the property into perpetuity and applying a capitalisation rate. The capitalisation rate is based on current market evidence. Future income projections take into account occupancy, rental income and operating expenses. Under the direct comparison approach, key inputs are the recent sales of comparable units in comparable villages. All resulting fair value estimates for properties are included in level 3. Retirement village resident loans are measured as the ingoing contribution less deductions over time for the period of resident stay as a % of the length of expected residence term. Although the expected average residency term is between one to ten years, these obligations are classified as current liabilities, as required by the Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting date. The liability stated is stated net of accrued deferred management fees at reporting date, because the Group’s contract with residents require net settlement of those obligations. These are included in trade creditors. Description Valuation technique Significant unobservable inputs Range (weighted average) 2017 2016 Relationship of unobservable input to fair value Investment properties Retirement Villages Capitalisation Capitalisation rate – method (1) 5.67%-14.00% Capitalisation has an (10.90%) inverse relationship to 9.75%- 12.50% (11.04%) Stabilised occupancy 81%-100% 68%-98% (91%) (88%) valuation. Occupancy has a direct correlation to valuation (i.e. the higher the occupancy, the greater the value). EGH ANNUAL REPORT 2017 62 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Investment properties – Individual Village Units Direct comparison approach Comparable sales evidence N/A Retirement village resident loans Ingoing contribution less deductions for length of stay Estimated length of stay of residents 1 – 10 years Comparable sales evidence has a direct relationship to valuation. The longer the length of stay, the lower the value of resident loans. (1) Significant increases (decreases) in any of the significant unobservable valuation inputs under the capitalisation method would result in a significantly higher(lower) fair value measurement. Fair value measurements using significant unobservable inputs (level 3) Movements in level 3 asset items during the current and previous financial year are set out in note 12. Valuation processes Independent valuations have been obtained for a number of Retirement Villages during the year ended 30 June 2017 and were used as the basis for determining their fair values. Selection criteria include market knowledge, experience and qualifications, reputation, independence and whether professional standards are maintained. Where an independent valuation has not been performed on an investment property as at 30 June 2017, management has estimated the fair values by performing internal valuations based on valuations performed by an independent valuer commissioned by the Group when acquiring the properties. 22. COMMITMENTS a) Operating leases: group as lessee Non‑cancellable operating leases The Group leases various managers’ units under non-cancellable operating leases expiring within two to twenty-five years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Within 1 year Greater than 1 year but not longer than 5 years Greater than 5 years Consolidated 30 June 2017 $’000 30 June 2016 $’000 234 692 840 1,766 164 491 951 1,606 The amount disclosed for the lease of office space does not include any adjustments for CPI or market rental reviews. The level 3 assets significant unobservable inputs and sensitivity are as follows: b) Capital expenditure The Group had no capital commitments for property, plant and equipment as at 30 June 2017. As at 30 June 2017, the Group had a contractual capital commitment for the acquisition of the Gympie Village totalling $3,830,000 less the deposit paid of $100,000. This commitment was not recognised as a liability as the relevant assets had not yet been received. EGH ANNUAL REPORT 2017 63 63 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 23. EARNINGS PER SHARE Net profit used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares & potential ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share 30 June 2017 $’000 30 June 2016 $’000 6,538 10,467 Thousands Thousands 230,603 201,505 230,603 201,505 2.84 cents 5.19 cents 2.84 cents 5.19 cents For the year ended 30 June 2017, there were no dilutive transactions to be included in the diluted earnings per share calculation. 24. RELATED PARTY TRANSACTIONS (a) Key management personnel compensation Short term employee benefits Post-employment benefits Total Consolidated 30 June 2017 30 June 2016 $’000 $’000 1,014 28 1,042 1,026 18 1,044 Detailed disclosures relating to key management personnel are set out in the remuneration report within the Directors' Report. (b) Other transactions with key management personnel (i) Loans from key management personnel Shareholder loan: Kathlac Pty Ltd Balance at beginning of the year Increase in loan amount Loan repayments made Interest charged Balance at end of the year - - - - - - 410 (411) 1 - 64 EGH ANNUAL REPORT 2017 64 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 23. EARNINGS PER SHARE (ii) Purchases from entities controlled by key management personnel: For the year ended 30 June 2017, there were no dilutive transactions to be included in the diluted earnings per share Net profit used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares & potential ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share calculation. 24. RELATED PARTY TRANSACTIONS (a) Key management personnel compensation Short term employee benefits Post-employment benefits Total (b) Other transactions with key management personnel (i) Loans from key management personnel Shareholder loan: Kathlac Pty Ltd Balance at beginning of the year Increase in loan amount Loan repayments made Interest charged Balance at end of the year 30 June 2017 30 June 2016 $’000 $’000 6,538 10,467 Thousands Thousands 230,603 201,505 230,603 201,505 2.84 cents 5.19 cents 2.84 cents 5.19 cents Consolidated 30 June 2017 30 June 2016 $’000 $’000 1,014 28 1,042 1,026 18 1,044 - - - - - 410 (411) - 1 - Detailed disclosures relating to key management personnel are set out in the remuneration report within the Directors' Report. The Group acquired the following goods and services from entities that are controlled by members of the Group’s key management personnel: Consulting fees Commission Rent Capital raising fees Amounts outstanding at the end of the reporting period in relation to these transactions (included in Trade and other payables) (iii) Fees received from entities controlled by Key Management Personnel: Consolidated 30 June 2017 30 June 2016 $’000 $’000 206 - 86 - - 398 10 91 347 272 The Group received fees for the following services from entities that are controlled by members of the Group’s Key Management Personnel: Caretaking and management fees Amounts outstanding at the end of the reporting period in relation to these transactions (included in Trade and other receivables) 19 - 16 25 (iv) Terms and conditions All transactions were made on commercial terms and conditions and at market rates. Outstanding balances are unsecured and are repayable in cash. 25. ULTIMATE PARENT ENTITY The parent entity within the group is Eureka Group Holdings Limited, which is the ultimate parent entity within Australia. 26. CONTINGENCIES There are no contingent liabilities or contingent assets at 30 June 2017 that require disclosure in the financial report. 27. OPERATING SEGMENTS Identification of reportable operating segments and principal services For the period ended 30 June 2017, the Group is organised into two operating segments, all located in Australia:  Rental Villages – Ownership of senior’s rental villages; and  Property Management - Management of seniors independent living communities. The results not included in the two operating segments identified are treated as:  Unallocated – Represents the consulting fees charged, corporate services functions costs, inventory, cash balances and capital replacement funds. The operating segments have been identified based on reports reviewed by the Board of Directors (who are identified as the chief operating decision makers) who are responsible for assessing performance and determining the allocation of resources. There is no aggregation of operating segments and the Board of Directors views each segments performance based on profit after tax. The accounting policies adopted for internal reporting to the chief operating decision makers are consistent with those adopted in the financial statements. EGH ANNUAL REPORT 2017 64 EGH ANNUAL REPORT 2017 65 65 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Segment information is prepared in conformity with the accounting policies of the group as discussed in note 2 and Accounting Standard AASB 8. No reporting or reviews are made of cash flows and as such this is not measured or reported by segment. Consolidated - 30 June 2017 Rental Villages $’000 Property Management $’000 Unallocated $’000 Total $’000 Revenue Interest revenue Other revenue Total Revenue Expenses Interest expense Total expenses Profit before income tax expense Income tax expense Profit after income tax expense Segment Assets Segment Liabilities 17,213 - 2,244 19,457 10,629 2,454 13,083 6,374 - 6,374 103,252 53,117 5,426 - - 5,426 2,751 - 2,751 2,675 - 2,675 6,203 93 - 172 1,418 1,590 3,9381 153 4,091 (2,501) - (2,501) 19,0792 5063 22,639 172 3,662 26,473 17,318 2,607 19,925 6,548 - 6,548 128,534 53,716 1 Included within unallocated expenses is employee benefits expense of $2.57 million and other administrative expenses of $1.37 million. 2 Included within unallocated assets is inventory of $7.64 million, Couran Cove land option of $3 million, trade and other receivables of $1.94 million, cash balances of $4.39 million, property, plant and equipment of $0.99 million and Other assets of $1.12 million. 3 Included within segment liabilities is Provisions of $0.19 million and Superannuation and PAYG withholding payable $0.1 million. Non-cash and other significant items included in profit above: Gain on revaluation of investment property Depreciation & amortisation 1,046 (129) - (142) - - 1,046 (271) Segment acquisitions: Acquisition of property, plant and equipment Acquisition of investment property Acquisition of intangibles Acquisition of inventory - 13,148 789 - 2 - 60 - 558 - - 1,349 560 13,148 803 1,349 Consolidated - 30 June 2016 Rental Villages $’000 Property Management $’000 Unallocated $’000 Total $’000 Revenue Interest revenue Other revenue Total Revenue Expenses Interest expense Total expenses 66 12,222 - 4,041 16,263 6,088 1,601 7,689 6,438 - 450 6,888 3,426 - 3,426 446 314 244 1,004 2,4421 131 2,573 19,106 314 4,735 24,155 11,956 1,732 13,688 EGH ANNUAL REPORT 2017 66 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Segment information is prepared in conformity with the accounting policies of the group as discussed in note 2 and Accounting Standard AASB 8. No reporting or reviews are made of cash flows and as such this is not measured or reported by segment. Consolidated - 30 June 2017 Rental Villages $’000 Property Management Unallocated $’000 $’000 Total $’000 1 Included within unallocated expenses is employee benefits expense of $2.57 million and other administrative expenses of $1.37 million. 2 Included within unallocated assets is inventory of $7.64 million, Couran Cove land option of $3 million, trade and other receivables of $1.94 million, cash balances of $4.39 million, property, plant and equipment of $0.99 million and Other assets of $1.12 million. 3 Included within segment liabilities is Provisions of $0.19 million and Superannuation and PAYG withholding payable $0.1 million. Non-cash and other significant items included in profit above: Gain on revaluation of investment property Depreciation & amortisation 1,046 (129) - (142) Revenue Interest revenue Other revenue Total Revenue Expenses Interest expense Total expenses Profit before income tax expense Income tax expense Profit after income tax expense Segment Assets Segment Liabilities Segment acquisitions: Acquisition of property, plant and equipment Acquisition of investment property Acquisition of intangibles Acquisition of inventory Revenue Interest revenue Other revenue Total Revenue Expenses Interest expense Total expenses 17,213 - 2,244 19,457 10,629 2,454 13,083 6,374 - 6,374 103,252 53,117 13,148 789 - - 12,222 - 4,041 16,263 6,088 1,601 7,689 2,675 (2,501) 2,675 (2,501) 19,0792 5063 128,534 53,716 5,426 5,426 2,751 2,751 - - - - 6,203 93 2 - 60 - 6,438 - 450 6,888 3,426 - 3,426 - 172 1,418 1,590 3,9381 153 4,091 - - - - - 558 1,349 446 314 244 1,004 2,4421 131 2,573 22,639 172 3,662 26,473 17,318 2,607 19,925 6,548 - 6,548 1,046 (271) 560 13,148 803 1,349 19,106 314 4,735 24,155 11,956 1,732 13,688 Consolidated - 30 June 2016 Rental Villages $’000 Property Management Unallocated $’000 $’000 Total $’000 Profit before income tax expense Income tax expense Profit after income tax expense Segment Assets Segment Liabilities 8,575 - 8,575 87,908 43,137 3,462 - 3,462 6,380 2,528 (1,570) - (1,570) 17,0352 724 10,467 - 10,467 111,323 46,389 1 Included within unallocated expenses is employee benefits expense of $1.37 million and other administrative expenses of $1.07 million. 2 Included within unallocated assets is inventory of $6.27 million, trade and other receivables of $2.83 million, cash balances of $6.84 million and capital replacement funds of $0.62 million. Non-cash and other significant items included in profit above: Gain on revaluation of investment property Gain on sale of management rights Depreciation & amortisation Impairment of receivables Segment acquisitions: Acquisition of property, plant and equipment Acquisition of investment property Acquisition of intangibles Acquisition of inventory 28. REMUNERATION OF AUDITORS 4,041 - (50) (39) 72 46,472 - - - 490 (175) (7) 29 - 800 - - - (43) (52) 367 - 3 6,300 4,041 490 (268) (98) 468 46,472 803 6,300 During the financial year the following fees were paid or payable for services provided by the auditor of the company and its related practices: (i) Audit and other assurance services – Ernst and Young Audit and review of financial statements (ii) Audit and other assurance services –BDO Audit Pty Ltd 1 Audit and review of financial statements 1 Outgoing auditor Consolidated 30 June 2017 30 June 2016 $ $ 123,000 79,000 - 72,475 123,000 151,475 EGH ANNUAL REPORT 2017 66 EGH ANNUAL REPORT 2017 67 67 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 29. PARENT ENTITY DISCLOSURES Information relating to Eureka Group Holdings Limited (parent entity): Results of the parent entity Profit/(loss) for the period Other comprehensive income Total comprehensive income for the year Financial position of parent entity at year-end Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Share capital Accumulated losses Total equity Consolidated 30 June 2017 30 June 2016 $’000 $’000 (1,334) - (1,334) 81,633 12,477 94,110 479 43,816 44,295 94,253 (44,438) 49,815 770 - 770 77,370 5,618 82,989 2,837 32,397 35,234 90,858 (43,104) 47,754 Guarantees entered into by the parent entity The parent entity has provided financial guarantees in respect of the commercial bills amounting to $6,486,250 and is secured by:  Registered mortgages over managers’ units and other real estate at its Communities;  Guarantee and indemnity given by EGH and its controlled entities; and  Fixed and floating charges over the assets of EGH and its subsidiaries. Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. For information about guarantees given by the parent entity, please see above. Contractual commitments for capital items The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017. 30. SUBSEQUENT EVENTS The Group has completed the acquisition of the 42 unit village in Gympie QLD on 19 July 2017, otherwise known as ‘Freshwater Villas’ for $3.8 million. Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2017 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 subsequent financial years. 68 EGH ANNUAL REPORT 2017 68 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 29. PARENT ENTITY DISCLOSURES Eureka Group Holdings Limited and controlled entities Directors’ Declaration Directors’ Declaration FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017 Information relating to Eureka Group Holdings Limited (parent entity): a. The accompanying financial statements and notes are in accordance with the Corporations Act 2001, Consolidated 30 June 2017 30 June 2016 $’000 $’000 In accordance with a resolution of the directors of Eureka Group Holdings Limited, I state: 1. In the opinion of the Directors of Eureka Group Holdings Limited (the “company”): Results of the parent entity Profit/(loss) for the period Other comprehensive income Total comprehensive income for the year Financial position of parent entity at year-end Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Share capital Accumulated losses Total equity (1,334) - (1,334) 81,633 12,477 94,110 479 43,816 44,295 94,253 (44,438) 49,815 770 - 770 77,370 5,618 82,989 2,837 32,397 35,234 90,858 (43,104) 47,754 including: i. giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; 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; and c. The financial statements and notes thereto are in accordance with International Financial Reporting Standards as disclosed in Note 2. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017. On behalf of the Board Robin Levison Executive Chairman Dated in Brisbane this 24th day of August, 2017 Guarantees entered into by the parent entity The parent entity has provided financial guarantees in respect of the commercial bills amounting to $6,486,250 and is secured by:  Registered mortgages over managers’ units and other real estate at its Communities;  Guarantee and indemnity given by EGH and its controlled entities; and  Fixed and floating charges over the assets of EGH and its subsidiaries. The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. For information about guarantees The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017. Contingent liabilities of the parent entity given by the parent entity, please see above. Contractual commitments for capital items 30. SUBSEQUENT EVENTS ‘Freshwater Villas’ for $3.8 million. The Group has completed the acquisition of the 42 unit village in Gympie QLD on 19 July 2017, otherwise known as Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2017 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 subsequent financial years. EGH ANNUAL REPORT 2017 68 EGH ANNUAL REPORT 2017 69 69 EUREKA GROUP HOLDINGSFor personal use only Ernst & Young Ernst & Young 111 Eagle Street 111 Eagle Street Brisbane QLD 4000 Australia Eureka Group Holdings Limited and controlled entities Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 GPO Box 7878 Brisbane QLD 4001 Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY Independent Auditor's Report to the Members of Eureka Group Holdings Independent Auditor's Report to the Members of Eureka Group Holdings Limited Limited Independent Auditor's Report to the Members of Eureka Group Holdings Limited Report on the Audit of the Financial Report Report on the Audit of the Financial Report Opinion Opinion Report on the Audit of the Financial Report We have audited the financial report of Eureka Group Holdings Limited (the Company) and its We have audited the financial report of Eureka Group Holdings Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as Opinion subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the We have audited the financial report of Eureka Group Holdings Limited (the Company) and its changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as financial statements, including a summary of significant accounting policies, and the directors' declaration. at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of declaration. changes in equity and consolidated statement of cash flows for the year then ended, notes to the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations financial statements, including a summary of significant accounting policies, and the directors' In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: declaration. Act 2001, including: a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 In our opinion, the accompanying financial report of the Group is in accordance with the Corporations giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 a) and of its consolidated financial performance for the year ended on that date; and Act 2001, including: and of its consolidated financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 complying with Australian Accounting Standards and the Corporations Regulations 2001. and of its consolidated financial performance for the year ended on that date; and b) a) b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion b) 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 We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Basis for Opinion Report section of our report. We are independent of the Group in accordance with the auditor those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Report section of our report. We are independent of the Group in accordance with the auditor We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Report section of our report. We are independent of the Group in accordance with the auditor ethical responsibilities in accordance with the Code. Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting ethical responsibilities in accordance with the Code. Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other our opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ethical responsibilities in accordance with the Code. our opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for Key Audit Matters our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit Key audit matters are those matters that, in our professional judgment, were of most significance in our Key Audit Matters of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate audit of the financial report of the current year. These matters were addressed in the context of our audit opinion on these matters. For each matter below, our description of how our audit addressed the matter of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate Key audit matters are those matters that, in our professional judgment, were of most significance in our is provided in that context. opinion on these matters. For each matter below, our description of how our audit addressed the matter audit of the financial report of the current year. These matters were addressed in the context of our audit is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate Financial Report section of our report, including in relation to these matters. Accordingly, our audit opinion on these matters. For each matter below, our description of how our audit addressed the matter We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the included the performance of procedures designed to respond to our assessment of the risks of material is provided in that context. Financial Report section of our report, including in relation to these matters. Accordingly, our audit misstatement of the financial report. The results of our audit procedures, including the procedures included the performance of procedures designed to respond to our assessment of the risks of material performed to address the matters below, provide the basis for our audit opinion on the accompanying We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the misstatement of the financial report. The results of our audit procedures, including the procedures financial report. Financial Report section of our report, including in relation to these matters. Accordingly, our audit performed to address the matters below, provide the basis for our audit opinion on the accompanying included the performance of procedures designed to respond to our assessment of the risks of material financial report. misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation EGH ANNUAL REPORT 2017 70 70 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY AUDIT REPORT TO BE SUPPLIED BY EY Independent Auditor's Report to the Members of Eureka Group Holdings Limited Recognition and Valuation of Investment Properties Report on the Audit of the Financial Report Why significant How our audit addressed the key audit matter In obtaining sufficient and appropriate audit evidence, we: Investment properties is a key audit matter due to the Opinion size of the recorded asset (30 June 2017: $100,666,000) and the degree of estimation and • Assessed all material additions to investment properties We have audited the financial report of Eureka Group Holdings Limited (the Company) and its assumptions required to be made by the Group, during the year and the Group’s assessment as to subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as specifically concerning classification and fair value. whether these are classified as an asset or business at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of acquisition. In doing so, we vouched material additions changes in equity and consolidated statement of cash flows for the year then ended, notes to the The Group assesses whether new acquisitions are to contracts of purchase and settlement statements. classified as an asset (individual acquisitions of financial statements, including a summary of significant accounting policies, and the directors' • Evaluated the Group’s assessment of each property that investment property assets) or business acquisitions. declaration. it continues to be classified as an investment property Each period end all assets are assessed to determine if under Australian Accounting Standards with they continue to meet the requirements under consideration as to how significant returns are derived In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Australian Accounting Standards to be classified as from these assets. Act 2001, including: investment property. • On a sample basis we agreed investment properties to • Assessed the Group’s fair value assessment of giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 and of its consolidated financial performance for the year ended on that date; and applicable title and other documents evidencing ownership. a) All investment properties are recorded at their fair value. Fair values are determined each reporting period by reference to independent valuations or internal valuations with reference to current market conditions. b) Changes in fair value are recognised on the consolidated statement of profit and loss. complying with Australian Accounting Standards and the Corporations Regulations 2001. investment properties (where material). In doing so, we performed the following procedures with the involvement of our real estate valuation specialists: • Assessed the sustainable earnings for each Basis for Opinion property, including occupancy assumptions. Note 2 and 12 to the financial report discloses the • Considered the capitalisation rates for each investment property assets, and Note 21 discloses the We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under assumptions used in valuing these assets. • Assessed the independent valuations obtained by those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial the Group including, the independence (in respect Report section of our report. We are independent of the Group in accordance with the auditor of external valuations) and competence of the independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting valuers and the methodology of the valuations. Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the • Conducted analysis of a sample of properties for 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. comparable sales evidence. property. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. EGH ANNUAL REPORT 2017 70 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation EGH ANNUAL REPORT 2017 71 71 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY Independent Auditor's Report to the Members of Eureka Group Holdings Impairment Testing of Intangible Assets Limited Impairment Testing of Intangible Assets disclosure included in Note 14 to the financial report. • Assessed the adequacy of the impairment tests How our audit addressed the key audit matter complying with Australian Accounting Standards and the Corporations Regulations 2001. Why significant Report on the Audit of the Financial Report Impairment testing of intangible assets is a key audit In obtaining sufficient audit evidence in respect of the Why significant How our audit addressed the key audit matter matter due to the size of the recorded asset valuation of intangible assets, we: Opinion ($6,327,000) and the degree of estimation and Impairment testing of intangible assets is a key audit In obtaining sufficient audit evidence in respect of the assumptions required to be made by the Group, matter due to the size of the recorded asset valuation of intangible assets, we: • Evaluated the Group’s assessment of impairment specifically concerning future discounted cash flows. We have audited the financial report of Eureka Group Holdings Limited (the Company) and its ($6,327,000) and the degree of estimation and indicators for management and letting rights. assumptions required to be made by the Group, subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as • Checked the mathematical accuracy of the cash flow • Evaluated the Group’s assessment of impairment Note 14 to the financial report discloses the Group’s specifically concerning future discounted cash flows. at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of forecasts and impairment model. indicators for management and letting rights. intangible assets and the key assumptions used in changes in equity and consolidated statement of cash flows for the year then ended, notes to the • Considered the accuracy of the Group’s historical cash • Checked the mathematical accuracy of the cash flow testing these assets, including those used in the cash Note 14 to the financial report discloses the Group’s financial statements, including a summary of significant accounting policies, and the directors' flow forecasts. We agreed the forecasts to Board forecasts and impairment model. flow forecasts. intangible assets and the key assumptions used in approved budgets and compared these forecasts to declaration. • Considered the accuracy of the Group’s historical cash testing these assets, including those used in the cash previously achieved results and any adjustments flow forecasts. We agreed the forecasts to Board We focused on the impairment assessment of goodwill flow forecasts. required for current trading and market activities. approved budgets and compared these forecasts to In our opinion, the accompanying financial report of the Group is in accordance with the Corporations and management and letting rights. The Group • Applied our knowledge of the business and corroborated previously achieved results and any adjustments Act 2001, including: performs an annual impairment assessment of goodwill, We focused on the impairment assessment of goodwill our work with external information where possible, required for current trading and market activities. while definite life intangible assets are assessed for and management and letting rights. The Group including multiples based on current sales activity for • Applied our knowledge of the business and corroborated giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 a) indicators of impairment. Due to the range of judgments performs an annual impairment assessment of goodwill, management and letting rights assets. our work with external information where possible, and of its consolidated financial performance for the year ended on that date; and and assumptions used in the impairment models and while definite life intangible assets are assessed for • Assessed the key assumptions within the impairment including multiples based on current sales activity for impairment assessments, this was an area considered indicators of impairment. Due to the range of judgments model including the growth rate and discount rate. management and letting rights assets. to be at risk of material misstatement. and assumptions used in the impairment models and b) • Assessed the adequacy of the impairment tests • Assessed the key assumptions within the impairment impairment assessments, this was an area considered disclosure included in Note 14 to the financial report. model including the growth rate and discount rate. to be at risk of material misstatement. Basis for Opinion Information Other than the Financial Report and Auditor’s Report We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Information Other than the Financial Report and Auditor’s Report The directors are responsible for the other information. The other information comprises the information those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial included in the Group’s 2017 Annual Report, but does not include the financial report and our auditor’s Report section of our report. We are independent of the Group in accordance with the auditor The directors are responsible for the other information. The other information comprises the information report thereon. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting included in the Group’s 2017 Annual Report, but does not include the financial report and our auditor’s Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other express any form of assurance conclusion thereon. ethical responsibilities in accordance with the Code. Our opinion on the financial report does not cover the other information and accordingly 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, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for in doing so, consider whether the other information is materially inconsistent with the financial report or our opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, our knowledge obtained in the audit or otherwise appears to be materially misstated. 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 Key Audit Matters information, we are required to report that fact. We have nothing to report in this regard. If, based on the work we have performed, we conclude that there is a material misstatement of this other Key audit matters are those matters that, in our professional judgment, were of most significance in our information, we are required to report that fact. We have nothing to report in this regard. audit of the financial report of the current year. These matters were addressed in the context of our audit Responsibilities of the Directors for the Financial Report of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter Responsibilities of the Directors for the Financial Report is provided in that context. 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 We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the The directors of the Company are responsible for the preparation of the financial report that gives a true such internal control as the directors determine is necessary to enable the preparation of the financial Financial Report section of our report, including in relation to these matters. Accordingly, our audit and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for report that gives a true and fair view and is free from material misstatement, whether due to fraud or included the performance of procedures designed to respond to our assessment of the risks of material such internal control as the directors determine is necessary to enable the preparation of the financial error. misstatement of the financial report. The results of our audit procedures, including the procedures report that gives a true and fair view and is free from material misstatement, whether due to fraud or performed to address the matters below, provide the basis for our audit opinion on the accompanying error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to financial report. continue as a going concern, disclosing, as applicable, matters relating to going concern and using the In preparing the financial report, the directors are responsible for assessing the Group’s ability to going concern basis of accounting unless the directors either intend to liquidate the Group or to cease continue as a going concern, disclosing, as applicable, matters relating to going concern and using the operations, or have no realistic alternative but to do so. 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation EGH ANNUAL REPORT 2017 72 72 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY AUDIT REPORT TO BE SUPPLIED BY EY a) • b) • Independent Auditor's Report to the Members of Eureka Group Holdings Limited Auditor's Responsibilities for the Audit of the Financial Report 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 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 Report on the Audit of the Financial Report 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 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 Opinion 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, 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 We have audited the financial report of Eureka Group Holdings Limited (the Company) and its 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. subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as of users taken on the basis of this financial report. at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of As part of an audit in accordance with the Australian Auditing Standards, we exercise professional changes in equity and consolidated statement of cash flows for the year then ended, notes to the As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: financial statements, including a summary of significant accounting policies, and the directors' judgment and maintain professional scepticism throughout the audit. We also: declaration. Identify and assess the risks of material misstatement of the financial report, whether due to fraud • Identify and assess the risks of material misstatement of the financial report, whether due to fraud • or error, design and perform audit procedures responsive to those risks, and obtain audit evidence In our opinion, the accompanying financial report of the Group is in accordance with the Corporations or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a Act 2001, including: that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. and of its consolidated financial performance for the year ended on that date; and control. Obtain an understanding of internal control relevant to the audit in order to design audit complying with Australian Accounting Standards and the Corporations Regulations 2001. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. our opinion. continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. a manner that achieves fair presentation. Key audit matters are those matters that, in our professional judgment, were of most significance in our • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or audit of the financial report of the current year. These matters were addressed in the context of our audit • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely opinion on these matters. For each matter below, our description of how our audit addressed the matter responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. is provided in that context. responsible for our audit opinion. 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 auditor • 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. • • Key Audit Matters We communicate with the directors regarding, among other matters, the planned scope and timing of the We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we Financial Report section of our report, including in relation to these matters. Accordingly, our audit audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. included the performance of procedures designed to respond to our assessment of the risks of material identify during our audit. misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. EGH ANNUAL REPORT 2017 72 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation EGH ANNUAL REPORT 2017 73 73 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY Independent Auditor's Report to the Members of Eureka Group Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Eureka Group Holdings Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the 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 consolidated financial position of the Group as at 30 June 2017 and of its consolidated financial 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 auditor 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. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 74 EGH ANNUAL REPORT 2017 74 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Eureka Group Holdings Limited and controlled entities Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au AUDIT REPORT TO BE SUPPLIED BY EY AUDITOR INDEPENDENCE DECLARATION TO BE SUPPLIED BY EY Independent Auditor's Report to the Members of Eureka Group Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Eureka Group Holdings Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the 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 consolidated financial position of the Group as at 30 June 2017 and of its consolidated financial 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 auditor 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. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. EGH ANNUAL REPORT 2017 74 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation EGH ANNUAL REPORT 2017 75 75 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Corporate Governance Statement Corporate Governance Statement The Board has prepared a corporate governance statement that set outs the key corporate governance practices approved by the Board and to which both the Board collectively and the Directors individually are committed. In formulating and adopting its corporate governance principles, the Directors have adopted and other than where explicitly stated complies with ASX Corporate Governance Principles and Recommendations, 3rd Edition and is current as at 30 June 2017. The Company's ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in the statement Corporate Governance Statement, the Company's 2017 Annual Report and other relevance governance documents and materials on the Company's website, are provided in the corporate governance section of the Company's website at http://www.eurekagroupholdings.com.au/governance/. The Company's Corporate Governance Statement together with the ASX Appendix 4G and this Annual Report, were also lodged with the ASX on 24 August 2017. Owing to the size of the Group and the transition necessary to grow and fund the business, the Board has three non- executive Directors with one Director who is independent. The independent Director is chairman of the two board committees and the committees are made up of non-executive Directors. Whilst this composition does not fully comply with its charter and ASX recommendations, the Board believes the experience and skill set of the non-executive Directors ensures both independent judgement and oversight of management is exercised by a majority of the Board. The Board has also established the following charters that are available on the Company’s website:  Board Charter  Audit & Risk Committee Charter  Nomination & Remuneration Committee Charter  Share Trading Policy  Code of Conduct Policy 76 EGH ANNUAL REPORT 2017 76 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Corporate Governance Statement The Board has prepared a corporate governance statement that set outs the key corporate governance practices approved by the Board and to which both the Board collectively and the Directors individually are committed. In formulating and adopting its corporate governance principles, the Directors have adopted and other than where explicitly stated complies with ASX Corporate Governance Principles and Recommendations, 3rd Edition and is current as at 30 The Company's ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in the statement Corporate Governance Statement, the Company's 2017 Annual Report and other relevance governance documents and materials on the Company's website, are provided in the corporate governance section of the Company's website at http://www.eurekagroupholdings.com.au/governance/. The Company's Corporate Governance Statement together with the ASX Appendix 4G and this Annual Report, were also lodged with the ASX on 24 June 2017. August 2017. Owing to the size of the Group and the transition necessary to grow and fund the business, the Board has three non- executive Directors with one Director who is independent. The independent Director is chairman of the two board committees and the committees are made up of non-executive Directors. Whilst this composition does not fully comply with its charter and ASX recommendations, the Board believes the experience and skill set of the non-executive Directors ensures both independent judgement and oversight of management is exercised by a majority of the Board. The Board has also established the following charters that are available on the Company’s website:  Board Charter  Audit & Risk Committee Charter  Nomination & Remuneration Committee Charter  Share Trading Policy  Code of Conduct Policy Eureka Group Holdings Limited and controlled entities Corporate Directory Corporate Directory Postal Address Suite 2D 7 Short St, Southport QLD 4215 Board of Directors Robin Levison (Non - Executive Chairman) Lachlan McIntosh Nirmal Hansra Chief Executive Officer Jeff Weigh Company Secretary Oliver Schweizer Solicitors Romans & Romans Lawyers 609 Logan Rd, Greenslopes QLD 4120 Tel: 07 3847 3333 Fax: 07 3847 3336 Mills Oakley Level 14 145 Ann Street Brisbane QLD 4000 Tel: 07 3228 0400 Fax: 07 3012 8777 Auditors Ernst & Young 111 Eagle St Brisbane Qld 4000 Tel: 07 3011-3333 Fax: 07 3011-3344 Share Registry Link Market Services – Brisbane Level 12, 300 Queen Street Brisbane Qld 4000 Call Centre: 02 8280-7454 Fax: 07 3228-4999 Listing Details ASX Limited Brisbane Code: Shares – EGH Australian Business Number 15 097 241 159 EGH ANNUAL REPORT 2017 76 EGH ANNUAL REPORT 2017 77 77 EUREKA GROUP HOLDINGSFor personal use only Eureka Group Holdings Limited and controlled entities Security Holder Information Security Holder Information Distribution of Securities as at 24 August 2017 Number of Securities 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Security Holders No of Shareholders 343 316 170 481 200 1,510 Marketable Shares There were 271 holders of less than a marketable parcel of 667 shares holding a total of 51,112 shares. Voting Rights Ordinary Shares carry voting rights of one vote per share. Options carry no voting rights. Twenty Largest Ordinary Shareholders as at 24 August 2017 National Nominees Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited Ignition Capital Pty Ltd Wavet Fund No 2 Pty Ltd NGE Capital Limited BNP Paribas Noms Pty Ltd Kathlac Pty Ltd 22 Capital Pty Ltd Brazil Farming Pty Ltd Tolani Estate Pty Ltd Navigator Property Group One Managed Investment Funds Limited Folkestone Maxim A-Reit Securities Account Ignition Capital No 2 Pty Ltd Mr Alister Charles Wright Armada Trading Pty Ltd RBC Investor Services Australia Nominees Pty Ltd Richard Mews and Wee Khoon Mews TNWDG Pty Ltd G & P Investments (NSW) Pty Limited Total Securities in which Directors have a Relevant Interest at 24 August 2017 Robin Levison Lachlan McIntosh Nirmal Hansra Total No of Ordinary Shares Held 40,148,968 % of Issued Share Capital 17.48% 16,203,796 13,091,251 10,150,000 9,250,000 8,840,949 8,213,531 6,700,138 5,216,028 4,900,000 4,400,000 3,938,762 3,125,000 2,580,000 2,361,557 2,318,937 2,266,973 2,188,607 2,050,000 1,770,000 7.06% 5.70% 4.42% 4.03% 3.85% 3.58% 2.92% 2.27% 2.13% 1.92% 1.71% 1.36% 1.12% 1.03% 1.01% 0.99% 0.95% 0.89% 0.77% 149,714,497 65.19% Ordinary Shares 12,905,000 11,916,166 839,834 25,661,000 Options - - - - 78 EGH ANNUAL REPORT 2017 78 2016-2017 ANNUAL REPORTFor personal use only Eureka Group Holdings Limited and controlled entities Security Holder Information Distribution of Securities as at 24 August 2017 No of Shareholders Marketable Shares There were 271 holders of less than a marketable parcel of 667 shares holding a total of 51,112 shares. Voting Rights Ordinary Shares carry voting rights of one vote per share. Options carry no voting rights. Twenty Largest Ordinary Shareholders as at 24 August 2017 No of Ordinary % of Issued Shares Held Share Capital Number of Securities 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Security Holders 343 316 170 481 200 1,510 National Nominees Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited Ignition Capital Pty Ltd Wavet Fund No 2 Pty Ltd NGE Capital Limited BNP Paribas Noms Pty Ltd Kathlac Pty Ltd 22 Capital Pty Ltd Brazil Farming Pty Ltd Tolani Estate Pty Ltd Navigator Property Group Ignition Capital No 2 Pty Ltd Mr Alister Charles Wright Armada Trading Pty Ltd Robin Levison Lachlan McIntosh Nirmal Hansra Total RBC Investor Services Australia Nominees Pty Ltd Richard Mews and Wee Khoon Mews TNWDG Pty Ltd G & P Investments (NSW) Pty Limited Total One Managed Investment Funds Limited Folkestone Maxim A-Reit Securities Account Securities in which Directors have a Relevant Interest at 24 August 2017 Options 40,148,968 16,203,796 13,091,251 10,150,000 9,250,000 8,840,949 8,213,531 6,700,138 5,216,028 4,900,000 4,400,000 3,938,762 3,125,000 2,580,000 2,361,557 2,318,937 2,266,973 2,188,607 2,050,000 1,770,000 Ordinary Shares 12,905,000 11,916,166 839,834 25,661,000 17.48% 7.06% 5.70% 4.42% 4.03% 3.85% 3.58% 2.92% 2.27% 2.13% 1.92% 1.71% 1.36% 1.12% 1.03% 1.01% 0.99% 0.95% 0.89% 0.77% - - - - 149,714,497 65.19% This page has been left intentionally blank. EGH ANNUAL REPORT 2017 78 79 EUREKA GROUP HOLDINGSFor personal use only Delivering affordable, caring and inclusive communities SUPPORT OFFICE ABN 15 097 241 159 Level 2, 7 Short Street, Southport Qld 4215 P: (07) 5568 0205 F: (07) 5302 6605 E: info@eurekagroupholdings.com.au For personal use only

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