Gowing Bros. Limited Annual Report 2017

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FY2017 Annual Report · Gowing Bros. Limited

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149th Annual Report July 31 2017

Corporate Directory

Contents

Directors

Professor Jonathan West (Chairman)
Mr. John Gowing (Managing Director)
Mr. Sean Clancy (Non-executive Director)
Mr. John Parker (Non-executive Director)

Secretaries

Mr. Garth Grundy
Ms. Belinda Flatters

Stock Exchange Listing

The Australian Securities Exchange
Ticker Code: GOW

Registered Office

Suite 21, Jones Bay Wharf
26 – 32 Pirrama Road
Pyrmont NSW 2009
Phone: 61 2 9264 6321
Fax: 61 2 9264 6240
Email: info@gowings.com

Share Registry Office

Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Phone: 1300 855 080
Fax: 61 2 8234 5050

Auditors

HLB Mann Judd (NSW Partnership)
Level 19, 207 Kent Street
Sydney NSW 2000
Phone: 61 2 9020 4000

ABN

68 000 010 471

ACN

000 010 471

History and Innovation 1868 - 2017

About Gowings

Managing Director’s review of operations

The Board of Directors, executive management and general counsel

Directors’ report

Remuneration report

ASX listing requirements

Financial report

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDHistory and Innovation 1868 - 2017

E S T 1 8 6 8
GOWING BROS.LTD

Gowings open 498 George St

Gowings pioneers promotion
of ‘Australian Made’

1890

1901

Gowings
establishes employee
share scheme

1946

Ted Gowing
establishes
share portfolio
1953

Cash & wrap installed with
self-service to counter
wage explosion

1974

‘Boys Go To Gowings’
Campaign

Market st store refurbished.
Gowings Whale trust established

1991

2000

Gowings establishes
Pacific Coast
Shopping Centres

2010

1868

1890s Australian Depression

Great Depression

WW2

Malay Emergency

1893-95

1929-39

1939-45

1950-60

Gowings is first retailer
to install air con and
music in the lifts

1960

First Gulf War

1990-91

Gowings online store
opens

1998

Gowings sell the
Market St Building

2006

2017

1899-1902

1914-18

1940

1950-53

1987

1995

1999

2008-11

John Ellis Gowing
opens first Gowings
Store

Gowings
Whale Trust partners
with Sea Shepherd

Boer War

WW1

‘GONE TO GOWINGS’
Campaign

Korean war

J.E. (John) Gowing
appointed Managing
Director

Gowings
Reintroduce Own Brand

East Timor
Peacekeeping

Global Financial Crisis

1892

1908

1929

1941

1959-73

1968

1992

1996

2003

Gowings are one of the first
companies to list in the
telephone directory as ‘6321’

John Ellis Dies.
Gowings Book
released

Gowings store George &
Market St opens First steel
structure building in Sydney
CBD & one of the tallest
buildings in Sydney

EJ(Ted ) Gowing
becomes a director

vietnam War

Gowings
100 Birthday
Celebrations

Gowings
Journal re-issued

Oxford St store opens.
Wynyard store opens 319 George
St, with "Blokeatorium"
Gowings open QVB Link.

Second Gulf War

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDHistory

Preston and Isabel’s wedding, 1907

The Company, under 4 generations of the Gowing family, has prospered through 149 years
of economic booms and busts, world wars and market crashes.

The Company’s origins were in retailing which soon led to significant property investments
being made across Sydney’s CBD. At one stage, the Gowings Market Street building
completed in 1929 was the tallest building in the city.

Gowings also had an early interest in equity investments being one of the founding investors
in Woolworths. In the 1950’s, a significant re-allocation of capital was made into listed
equities. Since then, the Company’s investment portfolio mix has shifted between equities,
property and private equity investments according to the prospective outlook for each.

The Gowing
family started the
company in 1868
and continues to
use the company
as its principal
wealth creation and
preservation vehicle.

Gowings store, 1878. Charles Mac, left with toe on kerb;
Preston Robert (wearing jacket) stands near the right
post and John Ellis is the bearded gent, first to the right
of the post.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDAbout Gowings

Net Assets

£92,781
1928

$3.4M
1972

$214M

2017

Our Purpose
Enriching people’s
lives since 1868

Investment Objective

The Company’s focus is to preserve and
grow the value of its underlying financial
and real assets and to grow net income from
ordinary activities as the principal source of
income to pay ordinary dividends.

Investment Philosophy

On 31 July 2017 Gowings completed its
149th year of operations and is looking
forward to celebrating 150 years in 2018.
Gowings is an investment company whose
investment horizon is inter-generational.
In fact, Gowings has had only four managing
directors since its establishment in 1868.
Being a shareholder in Gowings is for
investors who share a similar investment
philosophy and who wish to invest
alongside the Gowings family.

An important investment philosophy
is to generate sustainable and reliable
dividends that can provide income for
shareholders.

Investments are made across different
asset classes to take advantage of
changing economic cycles.

The Company’s investment portfolio
adjusts as opportunity and risk are
managed. Gowings provides investors
with access to opportunities not normally
available to retail investors. The Company
does not limit itself to ASX-listed equities,
to any single national boundary or
currency, or any particular industry type.

Risk is actively managed through portfolio
selection, natural hedges, diversity, and
conservative gearing. The Company does
not attempt to reduce risk and preserve
capital by investing only in so-called “low-
risk” assets, but rather seeks to offset risk
with a balanced and diverse portfolio of
different asset classes.

As an inter-generational investment
vehicle, the Company does not focus on
the day-to-day ASX share price, but rather
on preserving and increasing the long-term
value of underlying assets, which are the
ultimate source of income and growth.

At Gowings, all the Board of Directors and
key senior management are shareholders,
giving rise to our commitment ‘Investing
together for a secure future’

Transparent Communication

As an investor itself, Gowings values
transparent information. An audit review is
conducted half-yearly and formal audited
financial statements are provided annually
along with regular informal company
updates.

All shareholder communication may
be found at the Company’s website
www.gowings.com or on the Australian
Securities Exchange’s website www.asx.
com.au.

Investing in Gowings

Gowings shares can be bought or sold
through the Australian Securities Exchange
under the ticker code GOW.

Gowings is internally managed and does
not pay performance fees to an external
manager in relation to the administration
of the company. There are no entry or
exit fees and no trailing commissions for
investors in Gowings.

Our People
Matter

We’re
Australian

Everyone’s
Business

Environmentally
Aware

Our
Values

Working &
Investing
Together

Commonsense
Pioneers

Customer
First

Integrity

Endless
Possibilities

Quality &
Value

149th ANNUAL REPORT 2017 I Year ended 31 July 2017

INVESTING TOGETHER FOR A SECURE FUTURE

GOWING BROS. LIMITED

149th ANNUAL REPORT 2017 I Year ended 31 July 2017

CommunityManaging Director’s Review of Operations

We have commenced our 150th year of operations which is a
landmark year for a small company established by John Ellis Gowing
in 1868. This is Gowings 149th Annual Report. The entrepreneurial
spirit of the company has not waned over the years and if anything
has accelerated over the last decade as we continue to position the
company for a secure prosperous future.

My father, Ted Gowing, is featured on the cover this year. Following his
return to Australia after five years as a WWll fighter pilot in England,
Ted established the Gowings listed investment portfolio in 1952. Paving
the way for continual growth of the company for the next 65 years.

Building the Team

During the year we have invested in human
resources and inter-generational continuity.
Robert Ambrogio has been appointed to the
position of Chief Financial Officer, Belinda
Flatters has been appointed to the position
of Company Secretary and in-house legal
counsel, Dominic Power has been appointed
as a senior member of the property team
and Christian Hay has been appointed to
the position of Investment Analyst.
We warmly welcome these appointments
to the company.

Ellis Gowing and James Gowing have
both accepted appointments as associate
directors, this allows them to attend board
meetings, to follow and learn the business
and offer opinions, but not vote on matters
before the meeting.

This expanded team and new talent allows
us to progress our business plans in the
areas of property, investment and financial
management.

Key Developments

Some of the key developments during the
year include the acquisition of:

• Surf Hardware International in

December last year for $16 million;

• A DA approved 165 lot residential
sub-division in Lyons Rd Sawtell for
$9 million; and

• The Forestry Department’s mixed-
use development lot in the Jetty
Precinct on Harbour Drive, Coffs
Harbour for $3 million.

The Pacific Coast Shopping
Centres

There has been a significant amount of
work undertaken during the year to add
value to the centres and improve the
investment in the Pacific Coast Shopping
Centre Portfolio.

At Coffs Harbour, following successful
negotiations with Big W to surrender their
lease we entered into a binding agreement
with Kmart to take over an expanded and
fully refurbished space. This refurbishment
forms part of a $35 million upgrade and
extension of the property. The ANZ bank has
provided a flexible construction facility that
transforms into long term finance when the
construction is completed early next year.

At Moonee Marketplace, following the
completion of the upgraded road access from
the Pacific Highway we have undertaken a
strategic leasing campaign resulting in the
centre having over 90% occupancy.

At Port Macquarie, following an unsolicited
letter of offer to purchase Port Central,
we conducted a non-binding expression
of interest campaign. Although we received
a number of expressions of interest for Port
Central, the Board decided it was in the
best interests of shareholders to realise the
longer term potential of the asset.

Over the last several months there has
been a lot of media attention given to the
threat to Australian retailers and shopping
centre owners over the entrance of Amazon
into the Australian market. In spite of this
new entrant risk and the prospect of an

higher interest rate environment, we have
significant development opportunities to
add and capture value for shareholders. Our
regional shopping centres continue to evolve
with a mix of local and national brands
providing a one stop solution with food
as well as lifestyle and fashion offerings to
remain relevant as the main community hub
in the regional towns in which we operate.

Murray Darling Food
Company (MDFC)

As part of our strategy of building exposure
to listed and unlisted agricultural companies
in Australia, we formed part of a consortium
to establish the MDFC in late 2016. MDFC
purchased the 11,500 acres Burrawang
West Station and the Dorper Stud situated
on the Station. In July MDFC settled the
purchase of Bombah, a 6,000 acres mixed
use property near Condobolin in central
NSW. The strategy for MDFC is to continue
building capacity in grass fed and organic
lamb production, and to build its own
vertically integrated brand giving customers
traceability between paddock and plate.

Financial Services

During the year the board made the
strategic decision that for the Company
to continue to grow and prosper over the
next 150 years that we should leverage our
investment expertise and succesful track
record by allowing wholesale investors to
invest alongside Gowings in ventures such
as The Murray Darling Food Company.
To this end we have initiated the process
of applying for an Australian Financial
Services Licence for wholesale investors.

Surf Hardware International

We have owned Surf Hardware International
(SHI) for 7 months, and so far, the
acquisition has been positive. The Board
and senior management have engaged
strategically with the largely autonomous
senior management team at SHI. We have
held 2 off-site strategic planning retreats
in the last 4 months. There are a lot of
opportunities for SHI and we are working to
make sure they have the right resources to
take full advantage of them.

Other Listed and Unlisted
Investments

Our largest single investment following the
sale of our long term holding in Blackmores
last year continues to be our investment in
Boundary Bend Ltd (BBL). Our investment
in BBL has appreciated significantly
over the years and is now valued at $14
million. BBL had a normalised EBITDA per
share this year of 81 cents. Our original
investment cost per share was $1. We sold
a number of other non-strategic long term
investments to fund the establishment of
the capital works at Coffs Harbour. This
accounted for the $5.7 million in capital
gains on sale of shares from our long term
equity portfolio.

The Gowings Whale Trust

The Gowings Whale Trust (GWT) continues to
operate with a presence in both Port Central
and Coffs Central centres. During the year
GWT made a donation to the Sea Shepard to
help with the purchase of “Whale Warrior”
the chase boat for Sea Shepard’s newly
commissioned ship “Ocean Warrior”. Both
boats participated in last year’s campaign to
deter Japanese whalers from illegal whaling
in the Antartic Ocean.

Overview of Current Year
Financial Performance and
Outlook

Last year’s result which included the capital
gain made on the sale of our investment
in Blackmores was always going to be
difficult to match. This year’s result has
been buoyed by further growth in the
Pacific Coast Shopping Centre portfolio,
resulting in unrealised gains of $23.2
million being brought to account. This
performance will be difficult to replicate
next year as we believe we are close to the
top of the property cycle as reflected in the
capitalisation rates. Further gains in value
of our shopping centres will only be made
by value adding activities.

Our investment portfolio remains well
diversified providing a solid mix of income
and capital growth. This is the first year
since the GFC that the Company is near
fully invested as we seek to take advantage
of sound opportunities that will enhance
shareholder wealth over the long term.

Following the acquisition of SHI, Gowings
is now a truly global business, albeit in
a small way. Despite escalating levels
of public and private debt, business
conditions currently appear favourable
around the world.

Final Dividend

The directors have approved a final fully
franked LIC dividend of 6c per share (last
year 6c per share). Net income for ordinary
activities after tax is the principal source
of income to pay dividends. This has
been steadily increasing over the last few
years, however this year’s net income has
been impacted negatively due to rental
abatements during the development work
at Coffs Central. Given that we are fully
invested and have extensive contracted
capital expenditure for the redevelopment
of Coffs Central the directors feel it is
prudent to maintain the final dividend at
6c per share.

More details on the performance of
Gowings and our investments can be found
in the following pages of this report.

Key Highlights

Profit for the Year

$23.2m

Up 6.0% from 2016

Final Fully Franked Dividends

6.0¢

6.0 cents in 2016

Total Shareholder Return

+13.2%

Net asset increase per share
plus dividends

Total Net Assets

$214.0m

$198.6 million in 2016

J. E. Gowing
Director
Sydney
28 September 2017

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Managing Director’s Review of Operations

On behalf of the Board of Directors, I am pleased to comment on the results for the year ended 31 July 2017.

Financial Review

Net Assets per Share

2017

2016

2015

2014

2013

$4.43

$4.02

$3.77

$3.32

$2.90

Net assets per share before tax on unrealised gains increased 10.2% to $4.43 as at 31 July 2017 after the payment of 12c in
dividends. Total Shareholder Return was 13.2% including the growth in net assets per share plus dividends paid to Shareholders.

Net assets per share have grown strongly over the past 5 years driven by continued growth in our Pacific Coast Shopping Centre
portfolio as well as solid returns achieved in the Equity portfolio.

Net Profit After Tax

2017

2016

2015

2014

2013

$23.2m

$22.0m

$19.1m

$14.1m

$7.3m

Net Profit After Tax for the year ended 31 July 2017 includes underlying income from ordinary activities such as rent, interest and
dividends. This year’s profit was bolstered by the capital profit made on share sales within our equity portfolio and the revaluation
upwards of the Company’s investment in the Pacific Coast Shopping Centre portfolio as reflected in the Statement of Profit or Loss.

Dividends per Share

DPS

Total Dividend

2017

2016

2015

2014

2013

12.0c
$6.4m

12.0c
$5.8m

11.5c
$4.9m

The Company paid a total of 12c in fully franked LIC dividends for the 2017 year.

The Company has maintained a prudent approach to dividends given the capital requirements of the Company having various
development and investment opportunities currently under consideration.

Shareholders will be aware that the LIC franking status passes on the benefit of an LIC capital gain through to eligible Shareholders
who may receive up to a 50% reduction in their assessable taxable dividend income depending on their income tax status.

Key Metrics

For the year ended

31 July 2017

31 July 2016

31 July 2015

31 July 2014

31 July 2013

Net Assets

Net Assets per Share

- Before tax on unrealised gains

- After tax on unrealised gains

Net profit after tax

Earnings per Share

Dividends per Share

Total Shareholder Return

Shareholder Returns

$214.0m

$198.6m

$186.8m

$170.2m

$157.2m

$4.43

$3.93

$23.2m

43.29c

12.0c

13.2%

$4.02

$3.70

$22.0m

40.92c

12.0c

9.8%

$3.77

$3.47

$19.1m

35.48c

12.0c

16.3%

$3.34

$3.16

$14.1m

26.10c

12.0c

15.2%

$2.99

$2.92

$7.3m

13.50c

11.5c

9.5%

The graph on the following page is compiled by Bloomberg and Andex Charts illustrating the growth in value of Gowings as an investment
(share price and dividends reinvested) over 40 years in relation to other investments. An investment of $10,000 in Gowings in 1976 would
be worth $1,559,167 in 2017.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
A Strong Investment Over Time

E S T 1 8 6 8
GOWING BROS.LTD

$1,000,000

$100,000

$10,000

15%
10%
5%
0%

76777879808182838485868788899293949596979891907677787980818283848586878889929394959697989190Sources: Australian Bureau of Statistics, ASX Limited, Bloomberg Finance L.P., Commonwealth Bank of Australia, Melbourne Institute of Applied Economic and Social Research, MSCI Inc., Reserve Bank of Australia, Standard & Poors, Thomson Reuters.Notes: 1. One year returns are total returns from 30 June 2016, to 30 June 2017. Five, Ten, Twenty, Thirty and Forty-year returns are per annum returns to 30 June 2017. 2. Gowing Brothers Total Return data calculated by Bloomberg. 3. Index prior to January 1980 is the MSCI Australia Gross Total Return Index. From January 1980 the index is the Standard & Poors ASX All Ordinaries Accumulation Index. 4. MSCI World ex-Australia Gross Total Return Index. 5. S&P500 Total Return Index in AUD. 6. Data used in the construction of the index prior to January 1977 provided by the Reserve Bank of Australia. From January 1977 the index is the Commonwealth Bank All Series Greater than 10 Years Bond Accumulation Index. 7. Data used in the construction of the index prior to March 1987 provided by the Reserve Bank of Australia. 15%10%5%0%US$1.25US$1.00US$0.75US$0.5020%15%10%5%0%HOWARDKEATINGHAWKEFRASERGrowth of A$10,000with no acquisition costs or taxes & all income reinvested$10,000$100,000$1,000,000Stock MarketCrashIraq invades KuwaitAustralian dollar ﬂoatedAustralian population 7,032,034Life expectancy at birth males 69.6 yrsfemales 76.6 yrs"a recessionwe had to have"Asian Currency CrisisJohn Gowing appointed directorGowings 125th BirthdayGowings opens Wynyard storeGowings Market St store fully refurbished98990001020304050607080910111213141516179899000102030405060708091011121314151617Copyright © 2017 Andex Charts Pty Ltd.Reproduction either in whole or in part is expressly prohibited without the written permission of Andex Charts Pty Ltd.www.andex.com.auDisclaimer: The information contained herein is intended for informational purposes only. It is not intended as investment advice, and must not be relied upon as such. No responsibility is accepted for inaccuracies. Past performance does not guarantee future returns.From March 1987 the index is the Bloomberg AusBond Bank Bill Index. 8. Interest Rate prior to July 1981 is a short-term Government Bond rate. From July 1981 the interest rate is the Reserve Bank of Australia's Official Cash Rate. 9. Annualised rate of inflation.15%10%5%0%INFLATION RATE9US$1.25US$1.00US$0.75US$0.50USD/AUD EXCHANGE RATE20%15%10%5%0%INTEREST RATE8HOWARDRUDDGILLARDABBOTTTURNBULL$1,559,16713.1% p.a.$1,231,95112.5% p.a.$1,014,64311.9% p.a.$662,88610.8% p.a.$350,9729.1% p.a.$270,6368.4% p.a.$62,5494.6% p.a.Lehman Brothers collapseUS subprime crisisSydney OlympicGamesEnron & HIH collapseSeptember 11 terrorist attacksSecond Iraq warBoxing Day tsunamiBREXITGowings Market St store fully refurbishedMarket St Building soldGowings purchases Port Central Shopping CentreAustralian population 24,550,000Life expectancy at birth males 80.4 yrsfemales 84.5 yrsINVESTMENT OVER TIMEA STRONGINVESTMENTRETURNS15 YEARS10 YEARS20 YEARS30 YEARS40 YEARSGOWINGBROS217.7%6.4%8.0%8.8%13.4%AUSTRALIANSHARES311.6%3.5%8.1%8.4%12.2%INT.SHARES418.2%5.1%5.3%6.5%10.7%USSHARES521.3%8.2%7.0%9.4%12.5%AUST.BONDS64.3%6.2%6.2%8.5%9.1%CASH72.5%3.9%4.7%6.4%8.3%CPI2.0%2.4%2.6%3.0%4.4%Investment returns assume reinvestment of all dividends and entitlements. All ﬁgures are Australian dollars.149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations

Managing Director’s Review of Operations

Profit and Loss Statement

Gowings at a Glance

Strategic Equity Investments

Surf Hardware International

Boundary Bend Limited

Carlton Investments

Hydration Pharmaceuticals

Murray Darling Food Company

TPI Enterprises Limited

Event Hospitality Group

DiCE Molecules

Hexima

EFTsure

Other listed investments

Total

Private Equity Funds
Macquarie Wholesale Co Investment Fund

OurCrowd Australia

Our Innovation Fund

Five V Capital

Other Private Equity Funds

Total

Pacific Coast Shopping Centre Portfolio
Sub-regional shopping centres

Neighbourhood shopping centres

Borrowings

Total

Other Direct Properties
Sawtell Heights Estate - residential subdivision

Solitary 30 - Coffs Harbour development land

Other Properties

Borrowings

Total

Cash and Other
Cash

Investment lending facility

Tax liabilities

Surf Hardware International consolidation impact¹
Other assets & liabilities

Total

Net assets before tax on unrealised gains on equities and investment properties

Provision for tax on unrealised gains on equities and investment properties

Net assets after tax on unrealised gains on equities and investment properties

31 July 2017 $’000

31 Jul 2016 $’000

16,000

13,961

5,521
2,003

2,045

2,801
1,578
1,230

749

250

3,831

46,969

884

1,092

750

300

275

3,301

173,280

45,300

(56,023)

162,557

9,044

3,190

16,365

(1,675)

26,925

5,886

3,000

(7,067)

(1,581)

(3,621)

(4,834)

237,918

(23,942)

213,976

10,071

5,528
2,659

1,933
1,180
1,349

574

24,480

47,774

1,152

777

750

2,679

147,747

34,238

(47,000)

134,985

16,947

(1,775)

15,172

20,997

2,003

(8,294)

583

15,289

215,899

(17,319)

198,580

Notes

¹ Total Net Income from Ordinary Activities of $11.5 million was 7%
higher than in the prior corresponding period due to the acquisition
of Surf Hardware International.

² Total Head Office Expenses of $4.0 million were 10% higher
than the prior corresponding period largely due to an increase
in administrative expenses due to planning and analysis work
completed around strategic initiatives, and increase in employee
head count to bolster resources to execute those plans.

³ Investment properties – unrealised gains of $23.3 million were
204% higher than the previous period mainly due to the revaluation
of the Pacific Coast Shopping Centre Portfolio.

⁴ SHI – Consolidation acquisition cost of sales adjustment –
GBL acquired Surf Hardware International on the 16 December 2016
and as a result of Australian Accounting Standards was required
to record SHI inventory at fair value as at the date of acquisition.
This represented an uplift of $3.1 million to the carrying value of
inventory compared to cost. Of this $3.1 million uplift, $2.6 million
has been recorded as cost of sales as at 31 July 2017.

⁵ Other Consulting Costs of $0.1 million represents consulting costs
associated with the sales campaign for Port Central.

¹ Difference between the investment in Surf Hardware International (at cost) and net assets attributable to the group on consolidation.

For the year ended31 Jul 2017 $’00031 Jul 2016 $’000MovementNet Income from Ordinary ActivitiesInterest income672306120%Investment properties8,8108,7940%Equities1,1731,587-26%Surf Hardware International (7 months)802-n/aTotal Net Income from Ordinary Activities¹11,45710,6877%Head Office Expenses Administration1,4821,17726%Depreciation1361332%Employee benefits1,8781,7189%Public Company 543609-11%Total Head Office Expenses24,0393,63711%Profit from Ordinary Activities7,4187,0505%Gains / (losses) on sale or revaluationInvestment Properties - Unrealised Gains³23,3027,665204%Equity - Realised Gains5,69618,581-69%Equity - Unrealised impairment(518)(1,640)68%Managed Private Equities(145)1,199-112%Derivatives367(1,100)-133%SHI Subsidiary AcquisitionAcquisition Costs(473)-n/aSHI - Consolidation acquisition cost of sales adjustment⁴(2,578)-n/aOtherConsulting Costs⁵(120)-n/aOther Costs (25)(310)92%Profit Before Tax32,92431,4445%Income tax expense (9,684)(9,455)2%Profit After Tax23,24021,9906%149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations
Pacific Coast Shopping Centre Portfolio

The highlight of the current year is continued growth in the underlying value of the
Pacific Coast Shopping Centre Portfolio.

Coffs Central

Port Central

Kempsey Central

In February, Gowings commenced a $35 million development
of Coffs Central which includes the extension of the centre to
the adjoining site on the corners of Harbour Drive, Gordon and
Vernon Streets. It also includes a reconfiguration of the first floor
following the surrender of the BigW lease, allowing for a new full
line Kmart and an additional 20 specialty stores. The development
also includes additional carparking and two levels of commercial

office space. Approval has been received from the State Government
regional planning authority to build an 80 room hotel on top of
the commercial office space. Allowance has been made in the
foundations of the redevelopment to accommodate the approved
hotel. We are optimistic that the hotel will meet our investment
hurdle rates, however presently we are still in the process of preparing
feasibility analysis.

Moonee Marketplace

The leasing and repositioning upgrade at Moonee Marketplace is
nearing completion and has borne fruit during the period with the
centre going from less than 30% occupancy 18 months ago to over
90% occupancy today. New retailers include: Moonee Beach Early
Learning Centre; Swim Care; Nourished Earth; Maggie’s Dog Café;
The Katsby World of Fashion and Aloy Dee Thai Street Food. Moonee
Marketplace is an illustration of the Gowings approach to partnering
with local operators to successfully lease shopping centres.

Post year end there are a further six new retailers that are expected
to be trading by Christmas. This leasing approach is very important
from a strategic perspective because it results in a higher quality retail
offer which translates into a higher return on investment over the
long term. The significant improvement in occupancy has resulted
in an increase in positive cashflow for the centre with an associated
material appreciation in the underlying value of the centre.

As shareholders know, we recently concluded an on-market
expression of interest (EOI) campaign for the potential sale of Port
Central. Whilst we were pleased with the EOIs received, we believe
that the value to shareholders is greater over the long term through
retaining ownership and realising the full potential of the asset,
particulary when considering the opportunity cost of stamp duty
and capital gains tax that would have been incurred had the sale
proceeded. Retaining Port Central also re-enforces the strategic
benefits of the portfolio and stability of income.

Kempsey Central continues its retail turn-around anchored by Coles
whose sales are growing at a greater rate than its national average.
As shareholders would recall, we partnered with Council and a local
cinema operator to win a $2 million Federal Government grant
to build a cinema to deliver economic benefits to the city centre
of Kempsey. Frustratingly, however, the cinema public-to-private
partnership has still not received final approval by the NSW Office of
Local Government. As well as securing a new tenant in the centre,
the proposed cinema will strategically drive foot traffic and attract
Kempsey’s large tourist population into the centre.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Managing Director’s Review of Operations
Strategic Equity Investments

Surf Hardware International ($16 million)

On the 16 December 2016, the company
made an investment in Surf Hardware
International (SHI), a manufacturer and
global supplier of surf-related products
under four highly recognised brands
including FCS, Gorilla, Softech and Hydro.

SHI was acquired for a total net consideration
of $16 million with $10 million paid
on 16 December 2016 and a deferred
consideration amount of $6 million paid on
30 June 2017. SHI is a profitable business
and is earnings accretive for Gowings.

SHI delivered a EBITDA result of $2.0 million
for the year ended 30 June 2017, and
GBL has consolidated an EBITDA of $1.5
million for the 7 months from 16 December
2016 to 31 July 2017 before any inventory
acquisition revaluation adjustments
impacting cost of goods sold which are
required to adhere to AASB 3 “Business
Combinations”.

The FCS brand began in the early 1990’s
when SHI invented the detachable
surfboard fin system, an innovation which

would revolutionise the way surfboards
were manufactured and ridden forever.
FCS is a global leader in water board sports
accessories and commands a market
leadership position in fin systems and fins.

The Gorilla brand was established in
1988 following the introduction of the
revolutionary ‘Rocket Block’ providing
surfers with an alternative to wax and
paving the way for surfboard grip, and the
Softech Soft board and Hydro Bodyboard
brands which were acquired by SHI in 2010.

See below for a review of the current years operation from Michael Heath, General Manager of SHI.

During the year the business
experienced some challenges
with Surfboard and Stand
Up Paddle Board (SUP)
manufacturing down in key
global markets and difficult
retail conditions in the US and
Australia.

Despite this, growth was
achieved in the key category of
FCS II retail premium fins, along
with the recently relaunched
FCS Traction range and Softech
soft boards continued to
experience strong growth.

At a regional level, while the challenges
in the US market impacted its results,
growth continued in Australasia, Europe
(which included the recent integration of
the key UK market previously managed
under a distribution arrangement) and the
Japanese business continued its growth
momentum.

FCS II patents were secured in the key
US market along with Japan and are
expected to proceed to grant in Australia
and Europe in the near term providing the
company with a key strategic advantage
in the all-important production plug and
retail premium fin markets (the core of
the company’s business and a key growth
driver over the past 3 years).

FCS II system and fins. In total, 54 events
and 11 world titles have now been won by
surfers riding the FCS II system and fins.

During the year Kolohe Andino also joined
the FCS team as a 100% athlete alongside
other key global athletes including world
champion Gabriel Medina, Julian Wilson,
Filipe Toledo, Jeremy Flores and Sally
Fitzgibbons.

Looking ahead, the business is planning
the release of the FCS “Freedom Leash” in
the coming 12 months, a key innovation
project that will drive growth in the leash
category along with further positioning FCS
as the global leader in performance surf
hardgoods.

FCS athletes performed well during the year
collecting 3 WSL event victories and a total
of 16 events were won by surfers riding the

New product launches are also planned
across the balance of the brand portfolio
including the launch of the FCS II system

into the Softech softboard category, an
industry first and key strategic initiative
designed to further drive retail premium
fin sales and a new offering of grip will be
launched under the Gorilla brand, a key
category focus moving forward.

Launching a new brand tagline for the FCS
brand will be a key marketing initiative in
the next 12 months providing the brand
with a platform for communicating one
consistent marketing message globally.

Additionally, the business is planning to
invest in additional product resources
in order to accelerate the product
development process along with
additional investment in the marketing and
communication of its brand portfolio, each
initiative designed to drive earnings growth
in the medium term.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017GOWING BROS. LIMITED149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREManaging Director’s Review of Operations
Strategic Equity Investments

Murray Darling Food Company ($2 million)

TPI Enterprises Limited ($2.8 million)

TPI Enterprises (TPI), manufactures pharmaceutical grade
morphine and successfully moved its manufacturing facility
from Tasmania to Victoria. TPI was originally a private equity
investment of Gowings prior to its listing last year. TPI is
uniquely placed to capitalise on the supply gap in the market
for pharmaceutical grade morphine due to its global leading
efficient production process. During the year TPI announced
two key licence and permit milestones which are central to TPI’s
expansion into the UK, Europe and other open markets.

In March 2017, TPI announced a placement to raise approximately
$44 million in capital in which Gowings invested a further $0.6
million. In July 2017, TPI reached a binding agreement to acquire
for $25.4 million the opiates and tableting division of Vistin Pharma,
making TPE one of only four fully integrated manufacturers of
opiate based pharmaceutical products globally.

To help fund this acquisition TPI conducted an equity offering to
raise $18 million in which Gowings invested a further $0.3 million.

Hexima ($0.7 million)

Hexima is an Australian biotechnology company focused on the
research, development and commercialisation of anti-fungal
technology for both plant and human applications.

The company’s first significant commercial product-development
project is a breakthrough treatment for onychomycosis (fungal
nail infections), a US$3.2 billion global market. Preclinical data
indicate that the company’s lead molecule, HXP124, enjoys
multiple potential advantages over current onychomycosis
therapies, in particular the ability to penetrate nails rapidly when
applied topically and kill cells faster and at lower concentrations
than current drugs.

The company is proceeding to clinical trials for this product in
2017. It is in advanced discussions with possible global partners to
bring the potential drug to market.

In December 2016, Gowings formed a
partnership with agricultural operators to
undertake an investment into establishing
a vertically integrated organic grain fed
lamb business.

As long term shareholders would know,
Gowings has a view that agriculture will
be a long term beneficiary of our world’s
growing population and rising living
standards. Having said that, agriculture
is a difficult and volatile investment class
often met with loss. Gowings was an early
investor in both Tassal and Boundary
Bend which generated significant returns
over the years and we see many potential
similarities to the present opportunity.

Gowings believes that the organic and
grass fed lamb market has the potential to

provide for superior returns with a lower
degree of risk compared to many other
agricultural assets. Over the long term, the
risk will be further mitigated and returns
enhanced through establishing a vertically
integrated business including branded
meat sales. The central investment thesis
to this is a relatively new breed of sheep
which is more productive and resilient
compared to traditional Merino wool
and sheep meat. In this respect we have
partnered with one of Australia’s leading
Dorper studs to establish MDFC. MDFC
raised $12 million including an initial
$2 million cornerstone investment from
Gowings. MDFC acquired its first asset
being Burrawang West Station a Dorper
lamb stud based in Ootha, western NSW.
In January it commenced operations with
sale of 100 Rams with an average price

of $2,900 per ram. There has also been
investment into DNA and IT equipment to
efficiently manage the stud operations.

MDFC’s first 6 months of operations to
30 June 2017 netted both financial and
breeding results above expectations.
The stud is gearing up for a promising
ram sale in October 2017 at Burrawang
West Station. In July 2017, MDFC settled
on “Bombah”, a 6,000 acres property in
Condobolin that will complement the
current operations at Burrawang West
Station.

MDFC management succesfully converted
Bombah’s existing wheat operations to a
higher yielding sheep station.

Managing Director’s Review of Operations
Strategic Equity Investments

Boundary Bend Limited ($14 million)

Hydration Pharmaceuticals ($2 million)

DiCE Molecules ($1.3 million)

EFTsure ($0.3 million)

DiCE Molecules is a US biotech company with unique technology
to identify cures for currently incurable diseases. In 2016, the
company announced a successful agreement with Sanofi,
the largest French Pharmaceutical company, to utilise DiCE’s
technology. The Sanofi agreement validated DiCE’s frontier
technology, and provided substantial financial support to further
its research and development efforts.

In 2017, the company is likely to announce another substantial
partnership with a global pharmaceutical company, and will
continue to pursue its own candidate drug molecules.

EFTsure is an Australian owned IT company incorporated
to deliver electronic payment authentication services to its
customers. EFTsure provides an innovative, cost-effective and
specialised software solution to businesses validating the integrity
of their payment data ensuring prior that the name of the Payee
matches the BSB and account number prior to making an EFT
payment. Gowings holds a small holding in the company and
Our Innovation Fund (in which Gowings is also an investor) made
a subsequent commitment at the same valuation metrics as
Gowings.The EFTsure customer base has grown and a number of
strategic alliances, most notably with PwC, have been formed to
target sales growth.

Boundary Bend Limited, an unlisted public company, is Australia’s
largest vertically integrated olive-oil producer, wholesaler, and
consumer marketer. Boundary Bend owns the well-known brands
Cobram Estate and Red Island. It is now the Company’s 2nd
largest equity investment, having more than doubled in value
during the year.

In July this year, the company completed its olive harvest, which
yielded 89,000 tonnes of fruit, producing 13.2 million litres of oil.
This compared to approximately 55,000 tonnes of fruit in 2016,
producing 9.7 million litres of oil. For the 2016 financial year
Boundary Bend reported an operating cashflow surplus of $12.4
million (up from a surplus of $6.0 million in FY15).
The company also commenced two major growth initiatives:
launch of the Cobram Estate brand in the USA, including
construction of a substantial processing facility in America’s olive
heartland, California; and the launch of a new olive-products
business, including supplements and other products derived from
olives and olive leaves.

In Australia, Aldi supermarkets announced in January this year
that it will commence stocking all three Cobram Estate styles
(Light, Classic, and Robust) in 500ml bottles. Significantly, Aldi’s
policy is to stock almost exclusively “home brand” products in its
stores, with third-party brands carried only when the company
believes customers will defect to other supermarkets if Aldi
doesn’t include them. The list of brands in Australia that meet this
criterion is a Who’s Who of household names including Arnotts,
Milo and Vegemite.

The Hydration Pharmaceuticals Trust owns the global rights to the
Hydralyte brand, Australia’s leading oral rehydration product.
The company’s current focus is establishing its brand in North
America. It has formed a major distribution partnership in the US
with The Emerson Group, a foundation investor in the business.

Hydration Pharmaceuticals successfully launched its range of
products in the US earlier this year. The Hydralyte product, which is
well known in Australia, has been well received in the US, however
it is still very early days. The brand has also launched in Canada,
and in 2016 achieved year-on-year growth of more than 35%.

Carlton Investments ($5.5 million) and Event
Hospitality Group ($1.6 million)

Carlton Investments and Event Hospitality are essentially related
investments. Gowings has been a very long term investor in
Carlton Investments whom prior to the sale of the Gowings
Building on the corner of Market and George Streets were our next
door neighbours. Gowings had in fact sold the State Theatre site
to the forerunner of Amalgamated Holdings Ltd in the late 1920s.
These companies are very well run, with significant strategic
property holdings in Sydney CBD, as well as significant exposure
to the Australian, New Zealand and German tourism and Cinema
markets. In April 2017 Event purchased 458-472 George Street
Sydney which now gives them control of the south-eastern corner
of George and Market Streets in Sydney, and subject to Council
approval will look to add value through future redevelopment.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDGrowth Rate of Listed Equity Portfolio
From 1987 To 2017
Gowings has a history of strong results within its listed equity portfolio & has successfully
outperformed the ASX by more than 36% over a 30 year investment period.

E S T 1 8 6 8
GOWING BROS.LTD

1988

1991

1995

1998

1999

2000

2001

2006

2007

2008

2013

2014

2016

2017

Gowings took
advantage of
undervalued shares
in the stock market
and added $2M
worth of shares
to its investment
portfolio

Gowings sold off
its investment in
Lavington Shopping
Centre. The sale
generated a healthy
profit sufficient
to meet Gowings’
capital investment
plans over the next
few years.

Oct 1987 - known
as ‘Black Monday’,
the global stock
market crashed.
Gowings has still
been informed
by ASX that its
shareholders,
for the 4th year
in succession,
achieved a better
return than most
investors in the
market.

Gowings began
actively reviewing
its investments in
the wholesale and
venture capital
markets. First step
in this direction
is a commitment
at wholesale level
to Macquarie
Direct Investment,
a subsidiary of
Macquarie Bank.

Many large
capitalisation
stocks moved up in
valuations which
were considered
unsustainable.
Subsequent
weakness and
unprecedented
volatility in the
Australian and
world equity market
has made Gowings’
decision to realise
these investments
timely.

Gowings gained
exceptional returns
from its private
equity investment
in Open
Telecommunications
Ltd, which
generated over $4M
in profits. Another
tech investment,
Peg Technology Ltd
had a market value
of $4.8M, $3M in
excess of its original
entry price.

The slump of tech
stocks, negatively
affecting the
market value of
our investment in
PEG Technology
Limited to $500K.
On a positive note
Gowings received
its first return
from Macquarie
Investment
Trust IIIB of
approximately
$476K when the
fund successfully
took their stake
in HPAL Limited
to IPO.

Gowings took the
opportunity of
the weak stock
market to increase
its holdings in
resource & energy
stocks, increasing
its weighting in our
shares portfolio to
approximately 25%.

Investments with
increment in market
value over the last
one year includes:
BHP Billiton
increased 33% to
$17.3M; Blackmores
increased 73%
to $4.7M (7x
increase to date);
and Woolworths
increased 43% to
$4.9M (5x increase
to date).
Top realised gains
include: Rural Press
(profit of $1.8M);
West Australian
Newspaper (profit
of $1.1M); and Noni
B (profit of $1M)

Global Financial
Crisis. Realised
Gains includes a
range of write-offs
and negative
returns, notably the
$2.5 million write
off of Coolangatta
Notes and $1.4
million in Babcock
Brown. Top Gains
are: Soul Pattinson
$3.5 million realised
gains, Westpac $2
million, ANZ $1.7
million, Invocare
$1.9million, Hills
$1.4million, Rio
Tinto $1.3 million
(83% gain)

Good returns mainly
from revaluation of
shares. Boundary
Bend doubled its
cost at market value
of $4M while Carlton
Investment more
than tripled its cost
with market value of
$3.9M, 39% increase
from last year

Boundary Bend
increased a further
57% during the year
to a MV of $6.4M.
Carlton Investment
up 29% from prior
year with market
value to $5M,
representing a total
of 330% increase
from cost to date.

$18M realisation
of our investment
in Blackmores, in
excess of $2.9M
paid out in dividend
over the years. Over
300% appreciation
in the market value
of Boundary Bend
Ltd.

Realisation of
financial services
shares provided a
net gain of $3.55M
(ANZ $1.25M,
Westpac $1M & BT
Financial Mgmt
$1.3M)

Returns

51%

13%

15%

-2%

14%

23%

-12%

25%

20%

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

Growth of A$1,000 in Gowings listed equity
portfolio in 1987, with no acquisition costs
or taxes & all income reinvested.

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Gowings Listed Equity Portfolio

ASX AllOrd Accum Index

Bloomberg Ausbond Bank Bill Index (BAUBIL)

RBA Cash Rate

GOWINGS

$243.872
11.00% p.a.

ASX All Ord

$154.695
9.46% p.a.

BAUBIL

$66.457
6.78% p.a.

RBA Cash Rate

$52.613
6.10% p.a.

Managing Director’s Review of Operations
Other Direct Properties
Other Direct Properties

OurCrowd Australia ($1.1 million)

Macquarie Wholesale Co Investment Fund
($0.9 million)

Solitary 30 – Development Site

OurCrowd is the leading global equity crowdfunding platform for
accredited investors. Managed by a team of seasoned investment
professionals, OurCrowd vets and selects opportunities, invests its
own capital, and brings companies to its accredited membership of
global investors. OurCrowd provides post-investment support to its
portfolio companies, assigns industry experts as mentors, and takes
board seats. The OurCrowd community of almost 17,000 investors
from over 110 countries has invested over $400 million into 110
portfolio companies and funds. Gowings has made a $US 0.9
million investment into OurCrowd of which $US 0.6 million has been
deployed across 20 projects of our choice at varying startup stages
with the remaining $US 0.3 million remains available to deploy.

Macquarie Wholesale Co Investment Fund was established
as a specialist investment vehicle formed for the purpose of
making co-investments in Australian and New Zealand unlisted
companies and assets across a range of industries, and making
secondary investments, primarily in Australia where available.
The funds current major investments are in Hirepool New
Zealand’s largest equipment rental provider and SMABBQ a
merger of Super A-Mart (SAM), a leading furniture and bedding
retailer with BBQ’s Galore (BBQ), a barbeques and outdoor
furniture retailer. SMABBQ has continued strong earnings growth
and is positioned for an IPO in the second half of 2017. Currently
Gowings investment in the fund is valued at $0.9m.

Gowings purchased a 3,000m2 development site for $3 million
at the prominent Jetty Village in Coffs Harbour.
The site boasts 270 degree water views and is surrounded by
cafes and restaurants and is considered to be one of the best
development sites in Coffs Harbour.

The site has some potential heritage issues that are to be
addressed as part of the upcoming development planning phase.
The best development use is still being evaluated with current
zoning permitting any combination of residential apartments,
hotel and mixed retail.

Our Innovation Fund ($0.8 million)

Five V Capital ($0.3 million)

Sawtell Heights Estate –
Residential Subdivision

Our Innovation Fund is a newly established incorporated limited
partnership which will invest in early stage businesses with
innovative, high growth or disruptive technologies, processes,
systems or intellectual properties which have significant market
potential. The Fund will seek to make investments throughout
various stages of company development (from seed through to
early expansion), with particular attention given to the experience
and mindset of the founders of potential investee companies,
potential for the long term success of business models and the
potential investment returns for Limited Partners in the Fund.

Five V Capital Fund 2 has been set up and managed by Adrian
McKenzie, an experienced Australian venture capital manager with
whom Gowings have enjoyed a long relationship. Gowings have
committed $1 million to Five V which also gives us co-investment rights
in fund investments should there be additional capacity. The fund was
structured to give free carry of 20% of the performance fee due to the
manager from fund 1, ensuring an alignment of interests.
The principals of Five V have committed $10 million of their own
capital to Fund 2, also driving an alignment of the commercial interests
between the managers and investors.

During the 2016 financial year period Gowings made a $1.5 million
commitment to Our Innovation Fund. The fund has so far made
3 investments including a $1 million commitment of the fund
total of $50 million in EFTsure as discussed above. In April 2017, a
second capital call was announced and Gowings invested a further
$0.4 million to bring the total investment to $0.8million. This
fund is structured to take advantage of the Innovation Package
tax breaks. The fund is being run by the team behind OurCrowd
Australia, with whom Gowings has a strong business relationship.

In March 2017, Five V completed its first investment in Unified Health
Group (UHG), an IT company that provides Australia’s leading B2B
healthcare platform helping large corporates such as insurers, law
firms and corporates search, book, pay and securely manage health
information and services from healthcare providers. Gowings share
of this investment is $0.2 million and additionally made a further
co investment of $0.1 million. Five V has been investigating further
investments in a range of different sectors and is looking to finalise a
deal with a business operating in the cyber security sector.

Lyons Road is a 165 lot approved residential sub-division
located in the south of Coffs Harbour acquired for $ 9 million
in December 2016. We are in the process of preparing a new
development application to increase the lot yield and improve
the quality of offer. Works are due to commence in late 2017 with
pre-sales anticipated for mid-2018. Since acquisition, the supply
of residential land in Coffs Harbour has tightened and we are
optimistic of achieving pre-sales at favourable prices upon release.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDThe Board of Directors

The Board of Directors

Jonathan West

Chairman and Non-executive Director
Bachelor of Arts, PHD (Harvard)
Shareholdings: 397,581 shares

Professor West was appointed Chairman of the Company in 2016 and is a member of
the Audit Committee.

Professor West has served as a strategic and investment advisor to the Company
over the past ten years as an external consultant.

Professor West has devoted most of his academic career to Harvard University, where
he spent 18 years and was Associate Professor in the Graduate School of Business.

In addition to his academic career, Professor West has extensive International and
Australian business experience.

He is a board member of Boundary Bend Ltd, the Hydralyte Pharmaceuticals Trust,
the Bruny Island Cheese Company and chairman of Hexima Ltd.

John Gowing

Managing Director
Bachelor of Commerce, CA, CPA
Shareholding: 20,881,150 shares

John serves as Managing Director and is a member of the Remuneration Committee.

Over the years, John has steered the Company through the various global economic
times and has overseen significant expansion of the Company.

John was first appointed as Non-executive Director of the Company upon
completion of his commerce degree from the University of New South Wales in 1983.
John’s experience includes Arthur Young now known as Ernst & Young where he
worked for 4 years in the audit division. After finishing his professional practice year
and upon graduating as a chartered accountant, he accepted a fulltime position
with the Company as Managing Director in 1987 and he continues in the role.

John Parker

Non-executive Director
Bachelor of Economics
Shareholding: 55,000 shares

John has served as an independent Non-executive Director of Gowings since
January 2002. John is a coach with Foresight’s Global Coaching, providing
one-to-one business coaching to senior executives in Australia. John is
Chairman of the Audit Committee.

John brings considerable experience to the board with over 33 years in
equities research and funds management in Sydney, London and South Africa.

Sean Clancy

Non-executive Director
Diploma of Marketing
Shareholding: 5,000 shares

Sean was appointed as an independent Non-executive Director of the Company in
2016 and is Chairman of the Remuneration Committee and member of the Audit
Committee.

Sean grew his own business Creative Sales and Marketing Group from 1989 until
2007, when the business was sold to Clemenger BBDO. He has been a businessman
with a career focus on sales and marketing. He successfully established and is
currently CEO of Transfusion Ltd a business specialising in shopper marketing,
licensing, merchandising and below the line marketing. Sean is a non-executive
director of Mortgage Choice Ltd and is Board Ambassador to Business Events
Sydney. He is also Chairman of Metropolis, a brand marketing digital and media
agency and Touch To Buy, a mobile application specialist.

Associate Directors*

Ellis Gowing

Associate Director
Bachelor of International Business
Shareholding: 55,368

Ellis has a degree in International Business from the University of Wollongong, he
graduated in 2013. He has been working since 2013 for HLB Mann Judd Chartered
Accountants in the business advisory division, with a focus on investment clients.

Working in business advisory has given Ellis knowledge of the bureaucratic systems
companies and individuals must navigate on their road to success and wealth
generation. His contact with clients has engendered Ellis with great communication
skills, this experience should render Ellis’ services to the company invaluable now,
and moving forward.

James Gowing

Associate Director
Bachelor of Business, CA
Shareholding: 61,909

James graduated from UTS with a Bachelor of Business in 2014 majoring in
Accounting and Marketing. He has worked for William Buck since November 2014,
primarily in Audit and Assurance dealing with a wide range of clients in and around
Sydney. James is also a qualified Chartered Accountant.

While young, James’ work ethic and commitment to furthering his expertise in the
field of accounting will, as the next generation of the family, prove invaluable to the
future of the company and its direction. Importantly James’ work in auditing has
given him an insight into how successful and poor businesses are run.

*Associate Directors have access to board papers and are invited to attend board mettings in an observer capacity.
Associate Directors do not hold any voting rights.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDExecutive Management

Garth Grundy

General Manager and Company Secretary
Bachelor of Commerce, CA, F Fin
Shareholding: 349,707 shares

Garth has 24 years of investment and corporate advisory experience gained from his
past employment with Ernst & Young, Arthur Andersen, Coyne Capital and Hindal
Corporate.

Garth is a Fellow of the Financial Services Institute of Australia and of the Institute of
Chartered Accountants in Australia and New Zealand.

Robert Ambrogio

Chief Financial Officer
Bachelor of Economics, CA
Shareholding: Nil

Robert was appointed as Chief Financial Officer on 1 February 2017 and has
over 20 years’ experience in managing and leading finance teams across
advertising, marketing and social services sectors. Robert’s experience
comes from his past employment with Arthur Andersen, XM Holdings,
Creative Activation, and MTC Australia.

Robert is a Member of the Institute of Chartered Accountants in Australia.

Belinda Flatters

General Counsel and Company Secretary
Dip Law SAB, FGIA FCIS
Shareholding: Nil

Belinda was appointed Company Secretary of Gowing Bros. Limited on 13 March
2017. Belinda joins Gowings after a 19 year career as an in-house corporate counsel,
15 years of which she held the dual roles of company secretary and in-house counsel
for a number of different listed entities. Belinda’s experience comes from previous
roles held with CBHS Health Fund, Pan Pacific Petroleum, Worley Parsons, Novus
Petroleum and Customers Limited.

Belinda was admitted as a solicitor of the Supreme Court of New South Wales in
1998, she was awarded the Graduate Diploma of Corporate Governance in 2005 and
was admitted as a Fellow of the Governance Institute of Australia in 2011.

General Counsel

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDDirectors’ Report

Directors’ Interests

Your Directors are pleased to present their report on the Company for the year ended 31 July 2017.

The following persons were directors or executives of Gowing Bros. Limited either during or since the end of the year.

Results

For the year ended

31 July 2017 $'000

31 July 2016 $'000

Operating profit for the year before income tax

Income tax expense

Net profit after income tax

Net profit attributable to members of Gowing Bros. Limited

32,924

(9,684)

23,240

23,242

31,445

(9,455)

21,990

Dividends

$3,220,816

$3,221,268

$3,221,532

A final fully franked
LIC dividend of 6.0 cents
per share is to be paid to
shareholders on
26 October 2017

An interim fully franked
LIC dividend of 6.0c
per share was paid to
shareholders on
27 April 2017

A final fully franked
LIC dividend of 6.0c
per share was paid to
shareholders on
27 October 2016

An interim fully franked
LIC dividend of 6.0c
per share was paid to
shareholders on
28 April 2016

Review of Operations

The operations of the Company are reviewed in the Managing Director’s ‘Review of Operations’ on page 3.

Environment

The Company is committed to a policy of environmental responsibility in all its business dealings. This policy ensures that when the
Company can either directly or indirectly influence decisions that have an impact on the environment, this influence is used responsibly.

Principal Activities

The principal activity of the Company is investment and wealth management. The Company maintains and actively manages a
diversified portfolio of assets including long-term equity and similar securities, investment properties, managed private equity, property
development projects and cash.

Significant Changes in the State of Affairs

There were no significant changes in the state of affairs of the Company other than as disclosed elsewhere in this report

Matters Subsequent to the End of the Financial Year

No matter or circumstance has arisen since the end of the financial year which has significantly affected, or may significantly affect, the
operations of the Company, the results of those operations or the state of affairs of the Company in future financial years

Likely Developments and Expected Results of Operations

Further information on likely developments in the operations of the Company is included in the Managing Director’s ‘Review of
Operations’ on page 3.

SharesProfessor J. West Non-Executive Chairman (appointed 7 April 2016)BA (Syd), PHD (Harvard) Director since April 2016 Member of the Audit CommitteeProfessor West is a former Associate Professor in the Graduate School of Business at Harvard University and is an experienced global businessman No other directorships held in listed companies over the past 3 years397,581J. E. Gowing Managing Director Executive Director Bachelor of Commerce Member of Chartered Accountants Australia and New Zealand Member of CPA Australia Member of the Remuneration Committee Director since 1983 No other directorships held in listed companies over the past 3 years20,881,150G. J. Grundy General Manager General Manager Bachelor of Commerce, CA, F Fin Company Secretary since December 2015 Garth also serves as General Manager to the Company349,707J. G. Parker Non-Executive DirectorBachelor of Economics Director since 2002 Chairman of the Audit CommitteeMr. Parker is a coach of senior executives, with over three decades as an investment professional. No other directorships held in listed companies over the past 3 years55,000S. J. Clancy Non-Executive Director (appointed 7 April 2016)Diploma of Marketing Director since April 2016 Chairman of the Remuneration Committee Member of the Audit CommitteeMr Clancy is an experienced businessman with a focus on sales and marketing and is presently a director of Mortgage Choice Limited, Metropolis Pty Ltd, Transfusion Pty Ltd and Touch To Buy Pty Ltd.5,000Robert Ambrogio Chief Financial OfficerBachelor of Economics, CAMr Ambrogio was appointed as Chief Financial Officer on 1 February 2017 and has over 20 years’ experience in managing and leading finance teams across advertising, marketing and social services sectors. Mr Ambrogio’s experience comes from his past employment with Arthur Andersen, XM Holdings, Creative Activation, and MTC Australia. _R.D. Fraser Non-Executive Director (resigned 20 December 2016)Bachelor of Economics, Bachelor of Laws (Hons) Director Since 2012A member of the Audit Committee and chairman of the remuneration committee. Mr Fraser is a corporate adviser and company director with over 27 years of investment banking experience. Mr Fraser is a director of Taylor Collison and non-executive director of ARB Corporation, FFI Holdings Limited and Magellan Financial Group Limited. _149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Meetings of Directors

Attendance at Board, Audit Committee & Remuneration Committee meetings by each Director of the Company during the financial year is
set out below:

Audit and Non-Audit Fees

During the year the following fees were paid or payable for services provided by the auditor of the Company and its related practices.

Board Meetings

Audit Committee Meetings

Remuneration Committee Meetings

2017 $

2016 $

Meetings eligible
to attend

Attended

Meetings eligible
to attend

Attended

Meetings eligible
to attend

Attended

Audit services

Prof J. West

J. E. Gowing

J. G. Parker

R. D. Fraser

S. J. Clancy

Remuneration Report

The Company’s remuneration report, which forms a part of the Directors’ Report, is on pages 38 to 40.

Corporate Governance

The Company’s statement on the main corporate governance practices in place during the year is set out on the Company’s website at
http://gowings.com/reports-announcements/

Auditor’s Independence Declaration

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 81.

Shares Under Option

There were no unissued shares under option at the date of this report.

Indemnification and Insurance of Directors and Officers

The Company’s constitution provides an indemnity for every officer against any liability incurred in his/her capacity as an officer of the
Company to another person, except the Company or a body corporate related to the Company, unless such liability arises out of conduct
involving lack of good faith on the part of the officer. The constitution further provides for an indemnity in respect of legal costs incurred
by those persons in defending proceedings in which judgement is given in their favour, they are acquitted or the court grants them relief.
During the year the Company paid insurance premiums in respect of the aforementioned indemnities. Disclosure of the amount of the
premiums and of the liabilities covered is prohibited under the insurance contract.

Non-Audit Services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Company are important.
The Board of Directors has considered the position in accordance with advice received from the Audit Committee and is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the
auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact the impartiality and

objectivity of the auditor;

• none of the services undermine the general principles relating to auditor independence as set out in APES110 Code of Ethics for
Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

Audit and review of financial reports and other audit work under the
Corporations Act 2001

98,372

83,500

Taxation services

Tax compliance services, including review of Company income tax returns

General tax advisory services

21,000

30,240

14,000

7,150

Rounding of Amounts

The Company is of a kind referred to in ASIC Corporations (Rounding in the Financial/ Directors’ Reports) Instrument 2016/191 issued by
the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the Directors’ report and financial
report. Amounts in the Directors’ report and financial report have been rounded to the nearest thousand dollars in accordance with that
Legislative Instrument, unless otherwise indicated.

Environmental Regulation

No significant environmental regulations apply to the Company.

This report is made in accordance with a resolution of the Directors of Gowing Bros. Limited.

Professor J. West
Director
Sydney
28 September 2017

J. E. Gowing
Director
Sydney
28 September 2017

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Remuneration Report

The Remuneration Report is set out under the following main
headings:

• Principles used to determine the nature and amount of

remuneration

• Details of remuneration
• Service agreements
• Additional information

The information provided in this remuneration report has been
audited as required by section 308(3C) of the Corporations Act 2001

Principles used to Determine the Nature and
Amount of Remuneration

It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a high quality board and executive
team by remunerating Directors and executives fairly and
appropriately with reference to relevant employment market
conditions and the nature of Company operations.

The Board has established a Remuneration Committee which
consists of the following Directors:

• S. J. Clancy, Chairman of the Remuneration Committee
• J. E. Gowing, Managing Director
• R. D. Fraser (Resigned 20 December 2016)

Non-Executive Directors

For Non-executive Directors, remuneration is by way of Directors’
fees as described below. For the Executive Director and senior
executives, remuneration is by way of a fixed salary component and
a discretionary incentive component as described below.

Persons who were Non-executive Directors of the Company for all or
part of the financial year ended 31 July 2017 were:

• Prof. J. West, Chairman of the Board
• J. G. Parker
• R. D. Fraser (Resigned 20 December 2016)
• S. J. Clancy

Directors’ Fees

The remuneration of Non-executive Directors is determined in
accordance with the Directors’ remuneration provisions of the
Company’s constitution. Fees and payments to Non-executive
Directors reflect the demands which are made on, and the
responsibilities of, the Directors. Non-executive Directors’ fees and
payments are reviewed annually by the Remuneration Committee
in line with the market and approved by the Board. The Chairman’s
fees are determined independently to the fees of Non-executive
Directors based on comparative roles in the external market.
Non-executive Directors do not receive any performance based
remuneration or share options.

There is no scheme to provide retirement benefits to Non-
executive Directors.

Executives

Executives are officers of the Company who are involved in,
concerned with, take part in and are able to influence decisions in
the management of the affairs of the Company. Persons who were
executives for all or part of the financial year ended 31 July 2017 were:

• J. E. Gowing, Managing Director
• G. J. Grundy, General Manager and appointed joint

Company Secretary

• R. Ambrogio, Chief Financial Officer (appointed 1 February

2017)

• J. Chorn, Chief Financial Officer (ceased 1 February 2017)

and Company Secretary (resigned 13 March 2017)

Executive remuneration is a combination of a fixed total
employment cost package and a discretionary incentive element
which may be awarded by cash or invitation to participate in the
Company’s Employee Share & Option Scheme or Deferred Employee
Share Plan Scheme. Remuneration is referenced to relevant
employment market conditions and reviewed annually to ensure
that it is competitive and reasonable.

The incentive element is awarded at the discretion of the
Remuneration Committee and approved by the Board on the
basis of recommendations from the Managing Director.
The Managing Director’s incentive element is awarded at the
discretion of the Remuneration Committee and approved by the
Board. In determining the amount (if any) of bonus payments or of
options or shares issued, consideration is given to an executive’s
effort and contribution to both the current year performance and the
long term performance of the Company, the scope of the executive’s
responsibility within the Company, the scale and complexity
of investments required to be managed, the degree of active
management required and the degree of skill exhibited in the overall
process. Regard is also given to the quantum of an executive’s total
remuneration. The 2017 Financial Year bonus is limited to 40% of the
base package of the relevant executive, subject to the discretion of
the Committee, for exceptional performance.

Details of Remuneration

Details of the remuneration of the Directors and key management personnel are set out in the following tables:

2017

Cash
salary and
fees

Cash
bonus

Movement in
provision for
annual leave

Non-
monetary
benefits

Share
based

Share
bonus

Post –
employment

Superannuation

Long term

Total

Movement in
provision for long
service leave

Non-executive Directors

Prof. J. West (Chairman)

127,397

J. G. Parker

S. J. Clancy

R. D. Fraser 1

55,000

56,315

21,063

Non-executive Directors

259,775

Executive Directors

J. E. Gowing

232,876

Other key management personnel

G. J. Grundy

R. Ambrogio 2

J. Chorn 3

Total key management
personnel
compensation

284,999

109,589

167,453

1,054,692

35,358

3,943

2,603

5,000

5,350

2,001

14,954

130,000

60,000

61,665

23,064

274,729

22,123

(3,595)

290,745

16,239

3,731

(9,370)

17,250

30,000

10,411

14,315

4,772

2,020

353,260

125,751

(3,518)

168,880

45,958

3,943

17,250

91,803

(321)

1,213,325

1 R. D. Fraser resigned 20 December 2016
2 R. Ambrogio was appointed as Chief Financial Officer on 1 February 2017
3 J. Chorn ceased to be Chief Financial Controller on 31 January 2017 and Company Secretary on 13 March 2017

2016

Cash salary
and fees

Cash
bonus

Movement in
provision for
annual leave

Non-
monetary
benefits

Share
based

Share
bonus

Post –
employment

Superannuation

Long term

Total

Movement in
provision for long
service leave

Non-executive Directors

Prof. J. West
(Chairman) 1

J. G. Parker

R. D. Fraser

W. A. Salier
(Chairman) 3

S. J. Clancy 1

Non-executive
Directors

Executive Directors

42,009

50,000

54,795

54,888

14,238

215,930

J. E. Gowing

227,169

100,000

(3,654)

5,582

Other key management personnel4

824

10,000

5,205

1,374

17,403

42,833

60,000

54,888

15,612

233,333

31,081

15,034

375,212

G. J. Grundy 2

J. Chorn2

Total key
management
personnel
compensation

280,582

188,807

(9,320)

9,370

120,000

30,311

17,937

12,975

434,548

3,518

219,632

912,488

100,000

(3,604)

5,582

120,000

96,732

31,527

1,262,725

1 Prof. J. West and S. J. Clancy were both appointed 7 April 2016
2 G. J. Grundy and J. Chorn were both appointed joint Company secretary 8 December 2015
3 W. A. Salier resigned 7 April 2016
4 J. Zulman was Company Secretary to 8 December 2015 and was not remunerated for these services

Share based compensation includes shares issued from the Deferred Employee Share Plan.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDRemuneration Report

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

ASX Listing Requirements

1. Shareholders at 2 October 2017

Fixed

Performance

Range of shares

No. of shareholders

The information provided in this remuneration report has been
audited as required by section 308(3C) of the Corporations Act 2001

JP Morgan Nominees Australia Limited

RBC Investor Services Australia nominees Pty Limited

Additional Information

4. Top 20 Equity Security Holders at 2 October 2017

Executive Directors

J. E. Gowing

Other key management personnel

G. J. Grundy

J. Chorn (Resigned 30 April 2017)

R. Ambrogio

2017 (%)

2016 (%)

2017 (%)

2016 (%)

100

Service Agreements

R. Ambrogio, Chief Financial Officer

There are service agreements in place with J. Parker, R. Fraser,
J. Gowing, Prof. J. West, G. Grundy and R. Ambrogio.

Remuneration and other terms of employment for the Managing
Director, executives and other key management personnel
are approved by the Board and provide for the provision of
performance-related incentives.

Other major provisions relating to remuneration are set out below:

J. E. Gowing, Managing Director

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2017
of $295,000, to be reviewed annually by the Remuneration
Committee

• Non-monetary benefits included motor vehicle and FBT
related charges for the year ended 31 July 2017 of $3,943

• No termination benefit is payable

G. J. Grundy, General Manager and Company Secretary

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2017
of $286,018, to be reviewed annually by the Remuneration
Committee

• Other benefits included motor vehicle allowance for the year

ended 31 July 2017 of $28,982
• No termination benefit is payable

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2017
of $240,000, to be reviewed annually by the Remuneration
Committee

• No termination benefit is payable

Employee Share & Option Scheme:
The scheme is operational. No shares or options were issued under
this scheme during the year.

Deferred Employee Share Plan Scheme:
All employees and non-executive directors are eligible to participate
in the Company’s Deferred Employee Share Plan Scheme. Shares
issued under this plan during the year were purchased on market.

The Company Employee Share & Option Scheme and Deferred
Employee Share Plan Scheme may be utilised as a part of the award
of any incentive payment for all employees which in turn assists in
aligning the interests of employees with the long term performance
of the Company.

The table set out below reflects the relationship between
Remuneration Policies and Company Performance:

The table set out below reflects the relationship between Remuneration Policies and Company Performance:

2017

2016

2015

2014

2013

Net Profit after tax

Basic and diluted earnings per share

Dividends per share

Share buy back – number of shares

Share buy back – value

Share price at financial year end

$23.2m

43.29c

12.0c

12k

$41k

$3.23

$22.0m

40.92c

12.0c

181k

$565k

$3.62

$19.1m

35.48c

12.0c

20k

$58k

$3.20

$14.1m

26.10c

12.0c

$19k

$2.78

$7.3m

13.50c

11.5c

$2.60

1 – 1,000 shares

1,001 – 5,000 shares

5,001 – 10,000 shares

10,001 – 100,000 shares

Over 100,000 shares

Total shareholders

The number of shareholdings held in less than marketable parcels is 97.

2. Voting Rights

Members voting personally or by proxy have one vote for each share.

3. Substantial Shareholders at 2 October 2017

The substantial shareholders as defined by Section 9 of the Corporations Act 2001 are:

John Edward Gowing

Carlton Hotel Limited

288

443

187

335

1,295

20,881,150

4,701,144

3,438,895

3,314,166

Ordinary shares

In accordance with Australian Securities Exchange Listing Rule 4.10, the top 20 equity security holders are:

No. of ordinary shares

% of issued shares

Warwick Pty Limited

Audley Investments Pty Limited

Carlton Hotel Limited

Mr John Edward Gowing

J P Morgan Nominees Australia Limited

RBC Investor Services Australia Nominees Pty Limited

Woodside Pty Limited

Josseck Pty Limited

Mr John Gowing

Mr Frederick Bruce Wareham

Enbeear Pty Limited

Beta Gamma Pty Limited

Mr Graeme Legge

Mrs Jean Kathleen Poole-Williamson

T N Phillips Investments Pty Limited

Mythia Pty Limited

Mr Ronald Langley and Mrs Rhonda Langley

Cadmea Pty Limited

Melbourne Business School Limited

Total

Total issued share capital

7,211,378

5,263,957

4,701,144

3,676,709

3,438,895

3,314,166

3,105,594

1,337,622

1,187,189

1,152,358

636,829

605,000

582,350

568,443

550,000

423,500

374,580

349,707

345,436

300,000

39,124,857

53,680,259

13.43

9.81

8.76

6.85

6.41

6.17

5.79

2.49

2.21

2.15

1.19

1.13

1.08

1.06

1.02

0.79

0.70

0.65

0.64

0.56

72.89

5. Corporate Governance Practices

The Company’s statement on the main corporate governance practices in place during the year is set out on the Company’s website at
www.gowings.com/reports-announcements/.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDFinancial Report

Consolidated Statement of Profit or Loss

Consolidated statement of profit or loss

Consolidated statement of other comprehensive income

Consolidated statement of financial postion

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements

Directors’ declaration

Auditor’s independence declaration

Independent auditor’s report

The consolidated financial statements were authorised for issue by the Directors on 28 September 2017.
The Directors have the power to amend and reissue the consolidated financial statements.

For the year ended

Revenue

Interest income

Equities

Private equities

Investment properties

Revenue from the sale of goods (Surf Hardware International)

Total revenue

Other income

Gains / (losses) on disposal or revaluation of:

Equities

Private equities

Investment properties

Development properties

Derivatives

Other income

Total other income

Total revenue and other income

Expenses

Investment properties

Notes

31 July 2017
$’000

31 July 2016
$’000

672

1,173

173

19,672

24,546

46,236

5,696

(318)

23,302

367

299

29,346

75,582

7,876

26,313

1,532

2,986

469

1,948

543

473

42,140

33,442

(518)

32,924

(9,684)

23,240

23,242

(2)

23,240

306

1,587

1,156

19,094

22,143

18,581

7,665

(1,100)

(327)

24,879

47,022

7,293

1,177

3,007

133

1,718

609

13,937

33,085

(1,640)

31,445

(9,455)

21,990

Finished goods, raw materials and other operating expenses
(Surf Hardware International)

Administration

Borrowing cost

Depreciation

Employee benefits

Public Company

Business acquisition costs

Total expenses

Profit from continuing operations before impairment & income tax expense

Unrealised impairment - equities

Profit before income tax expense

Income tax expense

Profit from continuing operations

Profit from continuing operations is attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Profit from continuing operations

The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying Notes.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Consolidated Statement of Other Comprehensive Income

Consolidated Statement of Financial Position

For the year ended

Notes

31 July 2017
$’000

31 July 2016
$’000

As at

Notes

31 July 2017
$’000

31 July 2016
$’000

Profit from continuing operations

23,240

21,990

Other comprehensive income

Items that may be reclassified to profit or loss:

Transfer from unrealised reserves for realised (gains) / losses net of tax

Increase in fair value of investments net of tax

Exchange rate differences on translating foreign operations net of tax

Gain on revaluation of property, plant and equipment net of tax

Total comprehensive income

Total comprehensive income attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Total comprehensive income

Earnings per share

Basic earnings per share

Diluted earnings per share

(3,528)

1,984

(162)

345

21,879

21,881

(2)

21,879

43.29c

(6,862)

2,716

692

18,536

40.92c

The above Consolidated Statement of Other Comprehensive Income should be read in conjunction with the accompanying Notes.

Current assets
Cash and cash equivalents

Development properties

Loans receivable

Inventories

Trade and other receivables

Other

Total current assets

Non-current assets
Receivables

Equities

Private equities

Development properties

Investment properties

Property, plant and equipment

Intangibles

Deferred tax assets

Other

Total non-current assets

Total assets

Current liabilities
Trade and other payables

Borrowings

Derivatives

Current tax liabilities

Provisions

Total current liabilities

Non-current liabilities
Trade and other payables

Borrowings

Provisions

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity
Contributed equity

Reserves

Retained profits

Contributed equity and reserves attributable to members of Gowing Bros. Limited

Non-controlling interests

Total equity

5,886

297

3,000

6,636

7,527

1,220

24,566

760

33,969

3,301

13,707

226,661

7,828

3,190

4,631

1,839

295,886

320,452

9,902

9,330

733

1,725

1,075

22,765

275

49,023

498

33,915

83,711

106,476

213,976

12,611

103,229

98,138

213,978

(2)

213,976

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.

20,997

535

2,394

1,908

618

26,452

47,774

2,679

1,463

192,716

4,890

4,191

1,827

255,639

282,091

3,332

27,775

1,100

3,943

263

36,413

21,000

237

25,861

47,098

83,511

198,580

12,652

104,590

81,338

198,580

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Capital Profits
Reserve-Pre
CGT Profits
$’000

Revaluation
Reserves
$’000

Foreign
Currency
Reserve
$’000

Contributed
Equity $’000

Balance at 1 August 2015

13,217

90,503

17,541

Retained
Profits
$’000

65,510

21,990

(6,162)

81,338

Non-
Controlling
Interests
$’000

Total
$’000

186,771

18,536

(565)

(6,162)

198,580

Total comprehensive income
for the year

Transactions with owners in
their capacity as owners:

Share buy-back

Dividends paid

Balance at 31 July 2016

Total comprehensive income
for the year

Transactions with owners in
their capacity as owners:

Share buy-back

Dividends paid

Balance at 31 July 2017

(565)

12,652

(41)

12,611

(3,454)

90,503

14,087

(1,199)

(162)

23,242

(2)

21,879

(6,442)

98,138

(41)

(6,442)

(2)

213,976

90,503

12,888

(162)

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.

For the year ended

Notes

31 July 2017
$’000

31 July 2016
$’000

Cash flows from operating activities

Receipts in the course of operations (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Dividends received

Interest received

Borrowing costs

Income taxes paid

Net cash inflows from operating activities

Cash flows from investing activities

Payments for purchases of properties, plant and equipment

Payments for purchases of intangibles

Payments for purchases of development properties

Payments for purchases of investment properties

Payments for purchases of equity investments

Loans made

Proceeds from sale of properties, plant and equipment

Proceeds from sale of financial assets

Proceeds from sale of investment properties

Proceeds from loans on development properties

Payment for subsidiary, net of cash acquired

Proceeds from sale of development properties

Net cash inflows/(outflows) from investing activities

Cash flows from financing activities

Payments for share buy-backs

Proceeds from borrowings

Repayment of borrowings

Dividends paid

Net cash (outflows) from financing activities

Net increase in cash held

Cash and cash equivalents at the beginning of the financial year

Cash and cash equivalents at the end of the financial year

48,300

(36,687)

1,172

465

(2,986)

(5,780)

4,484

(297)

(117)

(12,244)

(12,653)

(6,198)

(997)

22,046

1,600

391

(14,293)

(22,674)

(41)

35,667

(26,105)

(6,442)

3,079

(15,111)

20,997

5,886

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.

22,046

(11,325)

1,587

306

(3,007)

(1,359)

8,248

(197)

(163)

(3,850)

(12,346)

(2,003)

27,463

146

811

866

10,817

(565)

(4,180)

(6,162)

(10,907)

8,158

12,839

20,997

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Notes to the Consolidated Financial Statements

1. Summary of Significant Accounting Policies (Continued)

1. Summary of Significant Accounting Policies

Gowings Bros. Limited (“the Company”) is a company limited by
shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange (“ASX”). The consolidated
financial statements comprise the Company and its controlled
entities (referred herein as “the Group”).

The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.

(a) Basis of preparation
These general purpose consolidated financial statements
have been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.

Compliance with IFRS
The consolidated financial statements comply with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).

Historical cost convention
These consolidated financial statements have been prepared
under the historical cost convention, as modified by the
revaluation of equities (available-for-sale financial assets), private
equities (financial assets at fair value through profit or loss),
investment properties and certain classes of property, plant and
equipment.

Critical accounting estimates
The preparation of consolidated financial statements in
conformity with Australian Accounting Standards requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying
the Group’s accounting policies. Areas involving a higher degree of
judgement and complexity or where assumptions and estimates
are significant to the consolidated financial statements are
disclosed in note 3.

New and amended standards adopted
The Group has adopted all of the new, revised or amending
Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory for the
current reporting period. The adoption of these standards did not
have a material impact.

Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been early
adopted.

Comparative information
Information has been reclassified where applicable to enhance
comparability.

(b) Principles of Consolidation
The consolidated financial statements incorporate all the assets,
liabilities and results of the Company and all the subsidiary
companies and other interests it controlled during the year ended
31 July 2017. The Company controls an entity when it is exposed
to, or has the rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its
power over the entity. Details of subsidiary companies and other
interests of the Company are set out in note 37.

The assets, liabilities and results of its subsidiaries are fully
consolidated into the financial statements of the Group from the
date which control is obtained by the Group. The consolidation
of a subsidiary is discontinued from the date that control ceases.
Intercompany transactions, balances and unrealised gains or
losses on transactions between group entities are fully eliminated
on consolidation. Accounting policies of subsidiaries have been
changed and adjustments made where necessary to ensure
uniformity of the accounting policies of the Group.

Equity interests in a subsidiary not attributable, directly or
indirectly, to the Group are presented as “non-controlling
interests”. The Group initially recognises non-controlling interests
that are present ownership interests in subsidiaries and are
entitled to a proportionate share of the subsidiary’s net assets
on liquidation at either fair value or at the non-controlling
interests’ proportionate share of the subsidiary’s net assets.
Subsequent to initial recognition, non-controlling interests are
attributed their share of profit or loss and each component
of other comprehensive income. Non-controlling interest are
shown separately with the equity section of the consolidated
statement of financial position and consolidated statement of
comprehensive income.

A business combination is accounted for by applying the
acquisition method, unless it is a combination involving entities or
businesses under common control. The business combination will
be accounted for from the date that control is attained, whereby
the fair value of the identifiable assets acquired and liabilities
(including contingent liabilities) assumed is recognised (subject to
certain limited exceptions).

When measuring the consideration transferred in the business
combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial
recognition, contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset or liability
is remeasured in each reporting period to fair value, recognising
any change to fair value in profit or loss, unless the change in value
can be identified as existing at acquisition date.

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

Goodwill is tested for impairment annually and is allocated to the
Group’s cash-generating units or groups of cash-generating units,
which represents the lowest level at which goodwill is monitored
but where such level is not larger than an operating segment.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill related to the entity sold.

All transaction costs incurred in relation to business combinations
are recognised as expenses in profit and loss when incurred.

The acquisition of a business may result in the recognition of
goodwill or a gain from a bargain purchase.

(d) Goodwill
Goodwill is carried at cost less any accumulated impairment
losses. Goodwill is carried as the excess of the sum of:

(i)

(ii)

(iii)

the consideration transferred;

any non-controlling interest (determined under either
the full goodwill or proportionate interest method); and

the acquisition date fair value of any previously held
equity interest;

over the acquisition date fair value of net identifiable net assets
acquired.

The acquisition date fair value of the consideration transferred for
a business combination plus the acquisition date fair value of any
previously held equity interest form the cost of the investment.

Fair value re-measurements in any pre-existing equity holdings are
recognised in profit or loss in the period in which they arise. Where
changes in the value of such equity holdings had previously been
recognised in other comprehensive income, such amounts are
recycled to profit or loss.

The amount of goodwill recognised on acquisition of each
subsidiary in which the Group holds a less than 100% interest will
depend on the method adopted in measuring the non-controlling
interest. The Group can elect in most circumstances to measure
the non-controlling interest in the acquiree either at fair value
(“full goodwill method”) or at the non-controlling interest’s
proportionate share of the subsidiary’s identifiable net assets
(“proportionate interest method”). In such circumstances, the
Group determines which method to adopt for each acquisition and
this is stated in the respective notes to these financial statements
disclosing the business combination.

Under the full goodwill method, the fair value of the non-
controlling interests is determined using valuation techniques
which make the maximum use of market information where
available. Under this method, goodwill attributable to the non-
controlling interest is recognised in the consolidated financial
statements.

Goodwill on acquisitions of subsidiaries is included in intangible
assets.

Changes in the ownership interests in a subsidiary that do not
result in a loss of control are accounted for as equity transactions
and do not affect the carrying amounts of goodwill.

(e) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
including:

• Cash and fixed interest
• Equities
• Private equities
•
Investment properties
• Development properties
• Surf Hardware International business
• Other

(f) Foreign currency translation

(i)

(ii)

Functional and presentation currency
Items included in the consolidated financial statements
of the Group are measured using the currency of the
primary economic environment in which the Group
operates (“functional currency”).
The consolidated financial statements are presented in
Australian dollars, which is the Group’s functional and
presentation currency.

Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Translation differences
on private equities and development properties held at
fair value through profit or loss are recognised in profit
or loss as part of the fair value gain or loss. Translation
differences on equities are recognised in equity.

(iii) Foreign Operations

The financial results and position of foreign operations,
whose functional currency is different from the Group’s
presentation currency, are translated as follows:

(a)

(b)

(c)

assets and liabilities are translated at exchange rates
prevailing at the end of the reporting period;

income and expenses are translated at average
exchange rates for the period; and

retained earnings are translated at the exchange rates
prevailing at the date of the transaction.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED1. Summary of Significant Accounting Policies (Continued)

1. Summary of Significant Accounting Policies (Continued)

Exchange differences arising on translation of foreign
operations with functional currencies other than Australian
dollars are recognised in other comprehensive income and
included in the foreign currency translation reserve in the
consolidated statement of financial position. The cumulative
amount of these differences is reclassified into profit or loss in
the period in which the operation is disposed of.

(g) Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses. Deferred income
tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial
statements. Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled.

No deferred tax asset or liability is recognised in relation to these
temporary differences if they arose in a transaction, other than
a business combination, that at the time of the transaction did
not affect either accounting profit or loss or taxable profit or
loss. Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset tax assets
and liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities are
offset where the Group has a legally enforceable right to offset
and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously. Current and deferred
tax is recognised in profit or loss, except to the extent that it
relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.

(h) Impairment of assets
Assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets
or groups of assets (cash generating units). Non-financial assets
that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.

(i) Property, plant and equipment
Property, plant and equipment (excluding freehold properties)
are measured at cost. Costs are measured at fair value of assets
given up, shares issued or liabilities undertaken at the date of

acquisition plus incidental costs directly attributable to the
acquisition. Freehold properties are measured at fair value, with
changes in fair value recognised in other comprehensive income.
Depreciation is calculated on a straight-line basis to write off the
net cost or revalued amount of each item of plant and equipment
(excluding freehold land) over its expected useful life to the
Group. Estimates of remaining useful lives are made on a regular
basis for all assets, with annual reassessments for major items.
Land is not depreciated. Depreciation is calculated to allocate
cost or revalued amounts, net of their residual values, over their
estimated useful lives, as follows:

Furniture, fittings and equipment
Motor vehicles
Buildings

3 to 10 years
6 years
40 years

The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each statement of financial position
date. An asset’s carrying amount is written down immediately to
its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. Gains and losses on
disposal are determined by comparing proceeds with carrying
amount. These are included in profit or loss.

(j) Inventories
Inventories comprise raw materials and finished goods and are
stated at the lower of cost and net realisable value. Costs of raw
materials and finished goods are determined after deducting
rebates and discounts. Net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.

(k) Intangibles Other than Goodwill
Intangible assets are identifiable non-monetary assets without
physical substance. They are recognised only if it is probable the
asset will generate future benefits for the Group. Those assets
with an indefinite useful life are tested for impairment annually.
All intangible assets are tested for impairment when there is an
indication that carrying amounts may be greater than recoverable
amounts as set out in note 1(h).

(i)

(ii)

Patents and trademarks
Patents and trademarks have a finite useful life and
are carried at cost less accumulated amortisation and
impairment losses. Amortisation is calculated using the
straight-line method to allocate the cost of patents and
trademarks over their useful lives which is currently 20
years.

Brand Names
Brand names are initially recognised at fair value when
acquired in a business combination. Brand names are
assessed to have an indefinite useful and are carried at
cost less accumulated impairment. An indefinite useful life
is considered appropriate when there is no foreseeable
limit to the period over which the brand name is expect to
generate cash flows.

(l) Revenue recognition
Revenue is recognised for the major business activities as follows:

(i)

(ii)

Equities
Dividend income is recognised when received. Revenue
from the sale of investments is recognised at trade
date.

Property rental
Rental income is recognised in accordance with the
underlying rental agreements.

(iii) Land development and sale

Revenue is recognised on settlement.

(iv) Sales of goods

(v)

Revenue from the sales of goods is recognised at the
point of delivery as this corresponds to the transfer of
significant risks and rewards of ownership of the goods
and the cessation of all involvement with those goods.

Property construction and sale
Contract revenue and expenses are recognised in
accordance with the percentage completion method
unless the outcome of the contract cannot be reliably
estimated. Where the outcome of a contract cannot be
reliably estimated, contract costs are recognised as an
expense when incurred, and where it is probable that
costs will be recovered, revenue is recognised to the
extent of costs incurred. Where it is probable that a loss
will arise from a construction contract, the excess of the
total expected contract costs over total expected contract
revenue is recognised as an expense immediately.

(vi) Other investment revenue

Changes in fair value of private equities are recognised
through profit or loss. Trust income and option income
is recognised when earned.

(vii) Other property revenue

Other property revenue is recognised in accordance
with underlying agreements.

(viii) Interest revenue

Interest income is recognised on an accrual basis.

(m) Trade and other receivables
Receivables consists mainly of amounts due from rental income.
Amounts are usually due within seven days from invoice date.
Amounts due for the sale of financial assets and properties are
usually due on settlement unless the specific contract provides for
extended terms.

(n) Investments and other financial assets
The Group classifies its investments in the following categories:
private equities (financial assets at fair value through profit or loss)
and equities (available-for-sale financial assets). The classification
depends on the purpose for which it was acquired. Management
determines the classification on initial recognition.

(i)

Equities
Equities, comprising principally marketable equity
securities, are either designated in this category or

not classified in any of the other categories. They are
included in non-current assets unless management
intends to dispose of the investment within 12 months
of the statement of financial position date.

(ii)

Private equities
Private equities are held with the view that they are
long term investments.

Recognition/de-recognition and subsequent measurement
Regular purchases and sales of investments are recognised on
trade-date - the date on which the Group commits to the purchase
or sale of the asset. Investments in equities are initially recognised
at fair value plus transaction costs. Investments in private equities
are initially recognised at fair value, and transaction costs are
expensed in profit or loss.

Interests in equities are brought to account at fair value, with the
change in fair value reflected in the long term revaluation reserve.
Interests in private equities are brought to account at fair value, with
any change in fair value reflected in profit or loss. The interest in joint
ventures is accounted for as set out in note 38. Financial assets are
derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.

The fair values of quoted investments are based on current market
prices. If the market for a financial asset is not active (and for unlisted
securities), the Group establishes fair value by using valuation
techniques. These include the use of recent arm’s length transactions,
reference to other instruments that are substantially the same and
relying as little as possible on Group-specific inputs.

Impairment
The Group assesses at each balance date whether there is objective
evidence that a financial asset or group of financial assets is impaired.
In the case of equities, a significant or prolonged decline in the fair
value of a security below its cost is considered as an indicator that
the security is impaired. If any such evidence exists for equities, the
cumulative loss – measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that asset
previously recognised in profit or loss, is transferred to profit or loss.
Impairment losses recognised in profit or loss on equities are not
reversed through profit or loss.

(o) Investment properties
Investment property, principally comprising freehold commercial and
retail buildings, is held for long-term rental yields and is not occupied
by the Group. Investment property is carried at fair value determined
annually by management. Changes in fair values are recorded in profit
or loss as part of other income.

(p) Joint ventures
Jointly controlled assets
The proportionate interests in the assets, liabilities and expenses of
joint venture activities have been incorporated in the consolidated
financial statements under the appropriate headings. Details of the
joint ventures are set out in note 38.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

1. Summary of Significant Accounting Policies (Continued)

The changes made to accounting requirements by these standards
include:

• simplifying the classifications of financial assets into those
carried at amortised cost and those carried at fair value and
an allowance for debt instruments to be carried at fair value
through other comprehensive income in certain circumstances

• simplifying the requirements for embedded derivatives
• allowing an irrevocable election on initial recognition to

present gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income.
Dividends in respect of these investments that are a return on
investment can be recognised in profit or loss and there is no
impairment or recycling on disposal of the instrument

•

financial assets will need to be reclassified where there is
a change in an entity’s business model as they are initially
classified based on (a) the objective of the entity’s business
model for managing the financial assets; and (b) the
characteristics of the contractual cash flows

• amending the rules for financial liabilities that the entity

The Group is yet to assess its full impact however initial indications
are that it may affect the Group’s accounting of its available-for-sale
financial assets, since AASB 9 only permits the recognition of fair value
gains and losses in other comprehensive income if they relate to equity
investments that are not held for trading.

AASB 15 Revenue from Contracts with Customers (applicable for
annual reporting periods commencing on or after 1 January 2018)

AASB 15 establishes a single, comprehensive framework for revenue
recognition, and replaces the previous revenue Standards AASB 118
Revenue and AASB 111 Construction Contracts.

The new standard is based on the principle that revenue is recognised
when control of a good or service transfers to a customer.

The Group is yet to assess its full impact on the Group’s financial
statements.

AASB 16 Leases (applicable for annual reporting periods
commencing on or after 1 January 2019)

elects to measure at fair value, requiring changes in fair value
attributed to the entity’s won credit risk to be presented in
other comprehensive income

AASB 16 removes the classification of leases between finance and
operating leases, effectively treating all leases as finance leases for the
lessee.

•

introducing new general hedge accounting requirements
intended to more closely align hedge accounting with
risk management activities as well as the addition of new
disclosure requirements

requirements for impairment of financial assets

The Group is yet to assess its full impact on the Group’s financial
statements.

The Group has decided against early adoption of these standards.

(q) 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. The amounts are unsecured and are usually paid within 30
days after the end of the month of recognition.

(r) Borrowings
Bills payable are carried at their principal amounts. 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 statement of financial position date.

(s) Dividends
Provision is made for the amount of any dividend declared,
determined or publicly recommended by the Directors on or before
the end of the financial year but not distributed at balance date.

(t) Employee entitlements

(i) Wages, salaries and annual leave

(ii)

Liabilities for wages, salaries and annual leave are
recognised in other creditors, and are measured as
the amount unpaid at the reporting date in respect
of employees’ services up to that date at pay rates
expected to be paid when the liabilities are settled.

Long service leave
A liability for long service leave is recognised, and
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 to expected future wage and salary levels and
periods of service.

(u) Borrowing costs
Borrowing costs are recognised as expenses in the period in which
they are incurred except where they are included in the costs of
qualifying assets. Only borrowing costs relating specifically to the
qualifying asset are capitalised. Borrowing costs include interest
on bank overdrafts and short-term and long-term borrowings,
including amounts paid or received on interest rate swaps.

(v) Cash and cash equivalents
For purposes of the statement of cash flows, cash includes
deposits at call which are readily convertible to cash on hand
and are subject to an insignificant risk of changes in value, net of
outstanding bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the consolidated statement of
financial position.

(w) 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 other short-term and long-term payables. Each lease
payment is allocated between the liability and finance costs. The
finance cost is charged to profit or 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.

(x) Earnings per share

(i)

Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the Group,
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 year.

(ii) 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 tax effect of the 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.

(y) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations
(Rounding in the Financial/ Directors’ Reports) Instrument
2016/191 issued by the Australian Securities and Investments
Commission relating to the “rounding off” of amounts in the
directors’ report and financial report. Amounts in the directors’
report and financial report have been rounded to the nearest
thousand dollars in accordance with that Legislative Instrument,
unless otherwise indicated.

(z) New accounting standards and interpretations
The AASB has issued new and amended accounting standards and
interpretations that have mandatory application dates for future
reporting periods and which the Group has decided not to early
adopt. A discussion of those future requirements and their impact
on the Group is as follows:

AASB 9 Financial Instruments (applicable for annual reporting
periods commencing on or after 1 January 2018)

AASB 9 includes requirements for the classification and
measurement of financial assets, the accounting requirements for
financial liabilities, impairment testing requirements and hedge
accounting requirements.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED2. Financial Risk Management

2. Financial Risk Management (Continued)

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest
rate risk), liquidity risk, credit risk and fair value estimation risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group through
the mix of investment classes. The Board of Directors and management undertake various risk management practices, both informally
on a daily basis and formally on a monthly basis at board level. Risks are identified and prioritised according to significance and
probability. Progress towards managing these risks is documented and formally reviewed on a monthly basis.

Market risk

(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the Group’s functional currency. The Group does not have a policy with regard to hedging currency risk. The Group has not
hedged its foreign currency investments. The multiple currencies provide diversification benefits to the portfolio. The Group monitors
foreign currency movements daily and seeks advice from foreign currency specialists as to potential courses of action that may protect
or enhance the value of the Group’s investments.

The Group’s exposure to foreign currency risk at the reporting date was as follows:

Currency exposure in AUD

Cash

Development and investment properties

Loans receivable

Trade and other receivables

Trade and other payables

Equities

Private equities

USD
$’000

915

1,189

2,222

(168)

3,233

1,092

EUR
$’000

352

1,784

(58)

272

31st July 2017

GBP
$’000

JPY
$’000

137

826

31st July 2016

EUR
$’000

236

GBP
$’000

1,179

JPY
$’000

USD
$’000

2,696

1,109

391

4,008

777

Based on the cash held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the US dollar cash would have been
$101,667 higher / $83,182 lower (2016: $299,583 higher / $245,114 lower). If the Australian dollar weakened / strengthened by 10% against
the GBP cash would have been $3,000 higher / $2,455 lower (2016: $130,983 higher / $107,168 lower). If the Australian dollar weakened /
strengthened by 10% against the EUR cash would have been $39,111 higher / $32,000 lower (2016: $nil higher / $nil lower). If the Australian
dollar weakened / strengthened by 10% against the JPY cash would have been $15,222 higher / $12,455 lower (2016: $nil higher / $nil lower).

Based on the development and investment properties held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the
US dollar development and investment properties would have been $132,111 higher / $108,091 lower (2016: $123,170 higher / $100,775 lower).

Based on the trade and other receivables held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the US
dollar receivables would have been $246,889 higher / $202,000 lower (2016: $nil higher / $nil lower). If the Australian dollar weakened/
strengthened by 10% against the Euro, the receivables would have been $198,222 higher/ $162,182 lower (2016: $nil higher/$nil lower).
If the Australian dollar weakened / strengthened by 10% against the JPY, the receivables would have been $91,778 higher / $75,091 lower
(2016: $nil higher / $nil lower).

Based on the trade and other payables held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the US
dollar payables would have been $18,667 higher / $15,273 lower (2016: $nil higher / $nil lower). If the Australian dollar weakened/
strengthened by 10% against the Euro, the payables would have been $6,444 higher/ $5,273 lower (2016: $nil higher/$nil lower).

Based on the equities held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the US dollar equities would
have been $359,222 higher / $293,909 lower (2016: $295,444 higher / $241,729 lower).

Based on the private equities held at 31 July 2017, if the Australian dollar weakened / strengthened by 10% against the Euro private equities
would have been $30,222 higher / $24,727 lower (2016: $26,203 higher / $21,439 lower). If the Australian dollar weakened / strengthened by
10% against the US dollar private equities would have been $121,333 higher / $99,273 lower (2016: $86,327 higher / $70,632 lower).

The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable
possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date.

(ii) Price risk
The Group is exposed to asset price risk. This arises from equities and private equities held by the Group and classified on the
Consolidated Statement of Financial Position either as available-for-sale or at fair value through profit or loss. A price reduction at 5%
and 10% spread equally over the investment portfolio would reduce its value by $1,863,505 (2016: $2,522,665) and $3,727,010 (2016:
$5,045,830) respectively.

The Group seeks to reduce market risk at the investment portfolio level by ensuring that it is not overly exposed to one company or
one particular sector of the market. The relative weightings of the individual investments and the relevant market sectors are reviewed
regularly and risk can be managed by reducing exposure where necessary. The Group does not have set parameters as to a minimum or
maximum amount of the portfolio that can be invested in a single company or sector. The writing and purchasing of options provides
some protection against a fall in market prices by both generating income to partially compensate for a fall in capital values and buying
put protection to lock in asset prices.

(iii) Cash flow and fair value interest rate risk
The Group’s interest-rate risk arises from long-term borrowings and cash on deposit. Borrowings issued at variable rates expose the
Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group’s
interest bearing assets include deposits on the overnight money market. Interest earnt on these deposits varies according to the Reserve
Bank’s monetary policy decisions.

As at the reporting date, the Group had the following variable rate borrowings and embedded derivative interest rate swap contracts in use:

Weighted average
interest rate

31st July 2017
Balance $’000

Weighted average
interest rate

31st July 2016
Balance $’000

Borrowings

Interest rate swaps (notional principal
amount)

Net exposure to cash flow interest rate risk

3.09%

3.53%

58,342

(35,000)

23,342

3.87%

4.73%

48,775

(35,000)

13,775

Credit risk

The Group has loan receivables of $3.0m (2016: $2.4m) which are secured against land and development properties. The Group has no
material exposure to trade receivables.

Liquidity risk

This is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity risk
management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount
of committed credit facilities and the ability to close-out market positions. Management monitors its cash flow requirements daily.
Furthermore, management monitors the level of contingent payments on a weekly basis by reference to known sales and purchases of
securities and dividends and distributions to be paid or received.

Maturity of Financial Liabilities

31 July 2017

Non-derivatives

Non-interest bearing

Variable rate

Total non-derivatives

Derivatives

Fixed rate

Less than
1 year

$’000

9,902

9,319

19,221

733

Between
1-2 years

Between
2-5 years

Over
5 years

Total contractual
cash flow

$’000

275

1,023

1,298

$’000

14,000

34,000

10,177

58,342

68,519

733

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED2. Financial Risk Management (Continued)

Maturity of Financial Liabilities (Continued)

31 July 2016

Non-derivatives

Non-interest bearing

Variable rate

Total non-derivatives

Derivatives

Fixed rate

Fair value estimation risk

Less than
1 year

$’000

3,332

27,775

31,107

1,100

Between
1-2 years

$’000

7,000

Between
2-5 years

$’000

Over
5 years

Total contractual
cash flow

$’000

14,000

3,332

48,775

52,107

1,100

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

Fair value hierarchy

The Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2: inputs other quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3: unobservable inputs for the assets or liability.

The following tables present the Group’s assets and liabilities measured at fair value at 31 July 2017 and 31 July 2016.

31 July 2017

Financial assets - available for sales

Investments - Australian equities

Investments - Global equities

Financial assets - designated at fair value through profit or loss

Investments - private equities

Investments - properties

Other assets - designated at fair value

Freehold - properties

Financial liabilities - designated at fair value through profit or loss

Derivatives

Total financial assets and liabilities

31 July 2016

Financial assets - available for sales

Investments - Australian equities

Investments - Global equities

Financial assets - designated at fair value through profit or loss

Investments - private equities

Investments - properties

Other assets - designated at fair value

Freehold - properties

Level 1
$’000

13,731

Level 1
$’000

33,097

Level 2
$’000

(733)

Level 2
$’000

Level 3
$’000

17,004

3,234

3,301

226,661

Total
$’000

30,735

3,234

3,301

226,661

6,401

256,601

Level 3
$’000

(733)

269,599

Total
$’000

10,669

43,766

4,008

2,679

192,716

2,679

192,716

4,217

Financial liabilities - designated at fair value through profit or loss

Derivatives

Total financial assets and liabilities

33,097

(1,100)

214,289

246,286

2. Financial Risk Management (Continued)

There were no transfers between level 1 and level 2 for recurring fair value measurements during the year. For transfers in and out of
level 3 see below.

The Group had no assets or liabilities measured at fair value on a non-recurring basis in the current period.

• The fair value of listed equities is based on quoted market prices at the reporting date.
• The fair value of directly held unlisted equity investments is determined by management valuations in accordance with the AVCAL
valuation guidelines. A variety of methods are used including reference to recent shares issued and net assets of underlying
investments.

• The fair value of investment properties are determined by capitalisation rates derived by using the income approach method and/

or using external registered property valuers: refer to note 17.

•

Investments in private equities primarily consist of investments in managed private equity funds, each of which consists of a
number of investments in individual companies, none of which are material. Fair value of managed private equity investments
has been determined using fund manager valuations, which are prepared in accordance with AVCAL Guidelines. Directors
have reviewed those valuations. The valuations have been based on appropriate multiples applied to estimated maintainable
earnings. Estimated maintainable earnings have been based on historical results, and expected future results.

• The fair value of freehold properties included in Property, Plant and equipment is determined by Directors based on comparable

property market information.

31 July 2017 Reconciliation of level 3 fair value movements

31 July 2017
$’000

31 July 2016
$’000

Opening balance

Transfers to level 1

Transfers from development properties

Purchases

Sales

Amortisation and depreciation

Gain recognised in profit or loss or other comprehensive income

Closing balance

Refer to the following notes for reconciliation for individual class of assets:

• Equities
• Private equities
•

Investment properties

- refer to note 14

- refer to note 15

- refer to note 17

3. Critical Accounting Estimates & Judgements

214,289

153

19,780

(2,109)

(1,260)

25,748

256,601

197,640

(2,000)
-
7,500

(388)

(1,178)

12,715

214,289

Managed and Direct Private Equity

The Group’s practice for ‘Managed Private Equity’ valuations is
to procure each Fund Manager’s published unit price valuation
and review it for reasonableness, potential misstatements and
impairments. In reviewing each Fund Manager’s valuation,
consideration is given to audited accounts, compliance with
Australian Venture Capital Association (AVCAL) valuation
guidelines, Australian Accounting Standards, valuation
methodology and assumptions, peer valuations, recent market
prices, liquidity and control provisions, discussions with the Fund
Manager and, where considered relevant, meetings with the
underlying investee company’s management.

The impact of the revaluation of managed private equities at
31 July 2017 was a loss of $318,123 (2016: a loss of $17,824)
recognised in profit or loss.

The Group holds ‘Direct Private Equity’ investments in unlisted
private companies which have been valued using the Board and
management’s best estimation of market value. The valuation
considerations for managed private equity are applied to direct
private equity based on recent shares issued and net assets
of underlying investments, liquidity and minority shareholder
provisions.

Investment property

Investment property valuations are estimated by the board
and management with reference where possible to external
valuations, market appraisals, recent comparable sales, date of
purchase and capitalisation rate valuations. The impact on profit
or loss relating to the revaluation of investment properties was a
gain of $23,302,000 (2016: gain of $7,665,000).

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

4. Segment Information

4. Segment Information (Continued)

The Group comprises of the following business segments, based on the group’s management reporting systems:

For the year ended

• Cash and fixed interest
• Equities
• Private equities
•
Investment properties
• Development properties
• Surf Hardware International business
• Other

For the year ended

Segment revenue

Cash and fixed interest – interest received

Equities – dividends and option income

Private equities – distributions received

Investment properties – rent received

Surf Hardware International business – sale of goods

Segment other income

Equities – realised gains on disposal

Private equities – unrealised fair value gains/(losses)

Investment properties – unrealised fair value gains

Development properties – realised gains on disposal

Other

Total segment revenue and other income

Segment result

Cash and fixed interest

Equities

Private equities

Investment properties

Development properties

Surf Hardware International business

Other

Income tax (expense)

Net profit after tax

Revenue from external customers by geographical region

Australia

United States of America

Japan

Europe

Total revenue from external customers

31 July 2017
$’000

31 July 2016
$’000

25,459

8,458

3,937

6,364

44,218

19,094

31 July 2017
$’000

31 July 2016
$’000

The Group only derives revenue from external customers in the Investment properties and Surf Hardware International business segments.

672

1,173

173

19,672

24,546

46,236

5,696

(318)

23,302

342

29,022

75,258

672

6,351

(145)

32,112

(1,776)

(4,290)

32,924

(9,684)

23,240

306

1,587

1,156

19,094

22,143

18,581

7,665

(1,427)

24,879

47,022

306

18,528

1,199

16,459

(5,064)

31,445

(9,455)

21,990

As at

Segment assets

Cash

Equities

Private equities

Investment properties

Development properties

Surf Hardware International business

Unallocated assets

Total assets

Segment liabilities

Investment properties

Surf Hardware International business

Unallocated liabilities

Total liabilities

Non-current assets by geographical region

Australia

United States of America

Japan

Europe

Total non-current assets

31 July 2017
$’000

31 July 2016
$’000

5,886

33,969

3,301

226,661

14,004

14,841

21,790

320,452

57,698

3,743

45,035

106,476

290,255

5,294

216

121

20,997

47,774

2,679

192,716

2,389

15,536

282,091

48,775

34,736

83,511

250,280

5,359

295,886

255,639

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
4. Segment Information (Continued)

As at

Payments for the acquisition of:

- Investment properties

- Development properties

- Equities

- Surf Hardware International business, net of cash acquired

Gains / (losses) on disposal or revaluation of:

- Investment properties

- Development properties

- Equities

- Private equities

- Impairment – equities

Unallocated:

31 July 2017
$’000

31 July 2016
$’000

12,653

12,244

6,198

14,293

23,302

5,696

(318)

(518)

3,850

163

12,346

7,665

18,581

(1,640)

- Payments for the acquisition of property, plant and equipment

297

197

Accounting policies
Segment information is prepared in conformity with the accounting policies of the Group as disclosed in note 1.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can
be allocated to a segment on a reasonable basis.

All segments other than Surf Hardware International business segment
Segment assets include all assets used by a segment and consist primarily of operating cash, investments, investment properties and
plant and equipment, net of related provisions. While most of these assets can be directly attributable to individual segments, the
carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities
consist of borrowings. Segment assets and liabilities do not include income taxes. Tax assets and liabilities, trade and other creditors
and employee entitlements are represented as unallocated amounts.

Surf Hardware International business segment
Segment assets include all assets used by a segment and consist primarily of operating cash, trade and other payables, inventories,
plant and equipment and intangibles, net of related provisions. While most of these assets can be directly attributable to individual
segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage.
Segment liabilities consist of borrowings, trade and other payables and employee entitlements. Segment assets and liabilities do not
include income taxes. Tax assets and liabilities are represented as unallocated amounts.

Segment cash flows
Segment information is not prepared for cash flows as management consider it not relevant to users in understanding the financial
position and liquidity of the Group.

5. Operating Profit

For the year ended

Profit from continuing operations before income tax expense includes the
following specific items:

Gains

Private equity investment distributions

Expenses

Interest paid

Employee benefits

Cost of sales

6. Income Tax Expense

For the year ended

Current tax

Deferred tax

(Over) / under provided in prior years

Income tax attributable to:

Profit from continuing operations

Aggregate income tax expense on profit

Reconciliation of income tax expense to prima facie tax payable

Profit from continuing operations before income tax expense

Tax at the Australian tax rate of 30% (2016: 30%)

Deferred tax assets not recognised

Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:

Non-assessable income

Franked dividends

(Over) / under provision in prior year

Income tax expense

Amounts recognised directly in equity
Aggregated current and deferred tax arising in the reporting period and not
recognised in net profit or loss but directly debited or (credited) to equity

7. Cash and Cash Equivalents

As at

Cash at bank and on hand

8. Current Development Properties

31 July 2017
$’000

31 July 2016
$’000

173

2,986

7,908

16,795

1,156

3,007

2,871

31 July 2017
$’000

31 July 2016
$’000

2,421

7,658

(395)

9,684

32,924

9,877

409

(256)

(395)

9,684

(503)

4,409

4,695

351

9,455

31,445

9,433

(383)

351

9,455

(1,480)

31 July 2017
$’000

5,886

31 July 2016
$’000

20,997

Development Properties

297

535

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

9. Current Trade and Other Receivables

15. Non-Current Private Equities

31 July 2017
$’000

31 July 2016
$’000

As at

31 July 2017
$’000

31 July 2016
$’000

7,770

(243)

7,527

2,130

(222)

1,908

At fair value through profit or loss

Balance at beginning of year

Revaluation to fair value

Additions

Disposal proceeds

Net gain on disposal

Balance at end of year

2,679

(318)

1,449

(509)

3,301

Prepayments

1,220

618

Changes in fair values of private equities at fair value through the profit or loss are recorded in other income.

16. Non-Current Development Properties

As at

Trade debtors

Less: Provision for doubtful debts

Balance at end of year

10. Other Current Assets

11. Current Inventories

At cost of net realisable value
Raw materials and finished goods

Balance at end of year

12. Current Loan Receivables

6,636

At cost or net realisable value

Balance at beginning of year

Additions

Balance at end of year

Loan to property developers

3,000

2,394

17. Non-Current Investment Properties

Loans to property developers are charged at commercial interest rates. The Directors believe that the fair value of loan receivables
equals their carrying amounts.

13. Non-Current Receivables

Loans to employees

Other loans

Balance at end of year

14. Non-Current Equities

At fair value

Balance at beginning of year

Revaluation to fair value

Additions

Impairment

Disposal proceeds

Net gain on disposal

Balance at end of year

Changes in fair value of equities are recorded in equity.

758

760

47,774

(2,195)

4,749

(518)

(21,537)

5,696

33,969

51,905

(5,923)

12,072

(1,640)

(27,221)

18,581

47,774

Balance at beginning of year

Additions

Disposal proceeds

Transfers in/(out)

Amortisation on incentives

Net gain from fair value adjustment

Balance at end of year

Amounts recognised in profit of loss for investment properties

Rental revenue

Direct operating expenses from rental generating properties

Gain on revaluation

Changes in fair values of investment properties are recorded in other income.

2,604

(18)

274

(242)

2,679

1,454

1,463

182,787

4,435

(146)

(880)

(1,145)

7,665

192,716

19,094

(7,293)

7,665

19,466

1,463

12,244

13,707

192,716

15,041

(1,600)

(1,582)

(1,216)

23,302

226,661

19,672

(7,876)

23,302

35,098

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

17. Non-Current Investment Properties (Continued)

18. Non-Current Property, Plant and Equipment

Valuation
Method

Weighted
average cap
rate 2017

Weighted
average cap
rate 2016

31 July 2017
$’000

31 July 2016
$’000

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

Sub-regional shopping centres (Coffs Central
& Port Central)

Neighbourhood shopping centres (Kempsey
Central and Moonee Marketplace)

Other properties

(a)

(b)

6.47%

7.38%

n/a

7.29%

173,280

147,747

8.26%

n/a

45,300

34,238

8,081

226,661

10,731

192,716

(a)

Fair value is based on capitalisation rates, which reflect vacancy rates, tenant profile, lease expiry, developing potential and
the underlying physical condition of the centre. The higher the capitalisation rate, the lower the fair value. Capitalisation
rates used at 31 July 2017 were based on management prepared valuations and externally prepared valuations.

Where a property is under development, the investment property fair value is based on the fair value of the property “as if
complete” less the estimated costs to complete. Development risks (such as construction and letting risks) are taken into
consideration when determining the fair value of investment property.

(b) Current prices in an active market for properties of similar nature or recent prices of different nature in less active markets.

Year ended 31 July 2017

Opening net book amount

Acquired on business combination (note 32)

Additions

Disposals

Transfers in/(out)

Revaluation to fair value

Depreciation charge

Closing net book amount

At 31 July 2017

Cost or fair value

Accumulated depreciation

Net book amount

Year ended 31 July 2016

Opening net book amount

Additions

Disposals

Transfers in / (out)

Revaluation to fair value

Depreciation charge

Closing net book amount

At 31 July 2016

Cost or fair value

Accumulated depreciation

Net book amount

4,217

1,735

493

(44)

6,401

6,774

(373)

6,401

227

(46)

247

499

(252)

247

446

821

297

(5)

(379)

1,180

6,577

(5,397)

1,180

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

2,381

880

989

(33)

4,217

4,546

(329)

4,217

278

115

(117)

(49)

227

414

(187)

227

415

(51)

446

940

(494)

446

Total
$’000

4,890

887

297

(5)

1,735

493

(469)

7,828

13,850

(6,022)

7,828

Total
$’000

3,074

197

(117)

880

989

(133)

4,890

5,900

(1,010)

4,890

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

19. Non-Current Intangibles

21. Other Non-Current Assets

As at

Goodwill

Brand names

Patents

Balance at end of year

31 July 2017
$’000

31 July 2016
$’000

2,023

1,050

117

3,190

As at

Other assets

22. Current Trade and Other Payables

Intangible assets, other than goodwill and brand names have finite useful lives. Goodwill and brand names have an indefinite useful life.

Goodwill and brand names are allocated to the Surf Hardware International business segment (“the cash-generating unit”). The Group
tests whether goodwill has suffered any impairment at each reporting period. The recoverable amount of the cash-generating unit is
determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a five
year period with the period extending beyond four years extrapolated using an estimated growth rate.

Five year projected cash flows in respect of the Surf Hardware International business segment are $7.5m. Key assumptions include: (a)
12.5% discount rate; (b) 3% per annum projected gross margin growth rate; (c) 3% per annum increase in operating expenses; and (d)
3% terminal growth rate. Based on these assumptions the Directors have determined that no impairment charge shall be recognised
during the current reporting period.

Trade creditors

Other creditors and accruals

Balance at end of year

23. Current Borrowings

Bill payable – secured

Trade facility – secured

Finance lease – secured

Balance at end of year

31 July 2017
$’000

1,839

31 July 2016
$’000

1,827

5,507

4,395

9,902

8,675

644

9,330

1,893

1,439

3,332

27,775

20. Deferred Tax Assets

As at

The balance comprises temporary differences attributable to:

Employee benefits

Accruals

Equities

Private equities

Derivatives

Other

Net deferred tax assets

Movements:

Opening balance at 1 August

Acquired on business combination (note 32)

(Debited) / credited to profit or loss

Closing balance at 31 July

Deferred tax assets to be recovered after 12 months

Deferred tax assets to be recovered within 12 months

31 July 2017
$’000

31 July 2016
$’000

329

915

1,229

1,655

220

283

4,631

4,191

258

182

4,631

1,534

3,097

4,631

140

283

1,961

1,134

330

343

4,191

4,331

(140)

4,191

877

3,314

4,191

Risk
The Group’s exposure to interest rate changes arising from current and non-current borrowings is set out in note 2.

Refinancing / Repayment
The Group expects to renew or refinance current borrowing facilities on normal commercial terms and rates that are acceptable to the
Group prior to the respective repayment dates. Alternatively, the Group believes it has the ability to repay any outstanding debt under
these facilities from excess cash reserves, proceeds received from the disposal of assets or from cash sourced or raised through the
Group’s operating or financing activities.

Security
Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 26.

24. Current Tax Liabilities

As at

Income tax

25. Current Provisions

Employee entitlements

Other

Balance at end of year

26. Non-Current Borrowings

31 July 2017
$’000

1,725

31 July 2016
$’000

3,943

1,075

248

263

Bill payable - secured

49,023

21,000

Risk
The Group’s exposure to interest rate changes arising from current and non-current borrowings is set out in note 2.

Security
Details of the security relating to each of the secured liabilities and further information on banks loans are set out below.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

26. Non-Current Borrowings (Continued)

Total secured liabilities

The total secured liabilities (current and non-current) are as follows:

Bills payable¹

Trade facility – secured²

Finance lease – secured

Assets pledged as security

31 July 2017
$’000

31 July 2016
$’000

57,698

644

58,353

48,775

The interest rates during the year and at balance date were up to a maximum of 8.65% on the secured bill facilities (2016: 5.5%).

On-balance sheet
The fair value of borrowings is based upon market prices where a market exists or by discounting the expected future cash flows by the
current interest rates for liabilities with similar risk profiles.

Off-balance sheet
There are no off-balance sheet borrowings or contingencies other than as referred to in note 2.

27. Non-Current Provisions

As at

Employee entitlements

Other provisions

28. Deferred Tax Liabilities

The balance comprises temporary differences attributable to:

Prepayments

Intangibles

Investment properties

Equities

Other

Net deferred tax liabilities

Movements:

Opening balance at 1 August

Acquired on business combination (note 32)

Charged/(credited) to profit or loss

Charged/(credited) to equity

Closing balance at 31 July

Deferred tax liabilities to be settled within 12 months

Deferred tax liabilities to be settled after 12 months

1$1.675m bill is secured against 328-332 Bong Bong St, Bowral; the facility is BBSY plus 1.68%.

1$34.0 million bill is secured against Port Central Shopping Centre (“SC”); the facility is BBSY plus 0.95%. The bank requires the business
and Company to meet certain financial ratios: the SC business must have a minimum interest coverage ratio of 2.5 times; the SC loan to
valuation ratio not to exceed 40% (the LVR is measured against the specific asset/debt under this approval); the Company gearing ratio
must not exceed 40%.

1$7.0 million bill is secured against Kempsey Central SC; the facility is BBSY plus 1.95%. The bank requires the business and Company to
meet certain financial ratios: the SC business must have a minimum interest coverage ratio of 1.80 times; the SC loan to valuation ratio not
to exceed 57% on day one and 51% 18 months from funding (the LVR is measured against the specific asset/debt under this approval); the
Company gearing ratio must not exceed 40% and total tangible assets less total liabilities must be no less than $60 million.

1$14.0 million and $1.02 million bills are secured against Coffs Central SC; the facility is BBSY plus 1.55% and 1.7% respectively. The bank
requires the business and Company to meet certain financial ratios: the SC business must have a minimum interest coverage ratio of 2.0
times and the SC loan to valuation ratio not to exceed 40% (the LVR is measured against the specific asset/debt under this approval.

2 $0.64 million trade facility is held by Gowings SHI Pty Limited and secured by the assets of Gowings SHI Pty Limited, Fin Control
Systems Pty Ltd, Oz4u Holdings Pty Ltd, SHI Holdings Pty Ltd, Sunbum technologies Pty Ltd, Surfing Hardware International Holdings
Pty Ltd, Surf Hardware International Pty Ltd, Surf Hardware International Pty Ltd and Surf Hardware International Asia Pty Ltd. Interest
is 8.65% and the bank requires that that Gowings SHI Pty Limited meet certain financial ratios: minimum EBITDA of $1 million and total
tangible assets less total liabilities must be no less than $5 million.

As at

Financing Arrangements
Unrestricted access was available at balance date to the following lines of credit:

31 July 2017
$’000

31 July 2016
$’000

Total facilities

Secured bank overdrafts

Secured bill facilities

Secured trade facilities

Used at balance date

Secured bill facilities

Secured trade facilities

Unused at balance date

Secured bank overdrafts

Secured bill facilities

Secured trade facilities

1,000

82,240

2,000

85,240

57,698

644

58,342

1,000

24,542

1,356

26,898

1,000

48,775

49,775

48,775

1,000

31 July 2016
$’000

31 July 2015
$’000

498

303

315

27,699

5,047

551

33,915

25,861

729

7,828

(503)

33,915

398

33,517

33,915

219

237

186

19,674

5,705

296

25,861

22,867

4,474

(1,480)

25,861

186

25,675

25,861

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
29. Contributed Equity

Share capital

Ordinary shares fully paid

Movements in ordinary share capital

Date

Details

31/07/2016

Balance

27/10/16

Share buy back

31/07/2017

Balance

Number of
shares 2017

Number of
shares 2016

2017
$’000

2016
$’000

53,680,259

53,692,199

12,611

12,652

Number of
shares

53,692,199

(11,940)

53,680,259

Issue price per
share

3.45

$’000

12,652

(41)

12,611

Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the 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 upon a poll each share is entitled to one vote.

Dividend Reinvestment Plan
The Dividend Reinvestment Plan may be offered to shareholders by Directors, and allows shareholders to reinvest dividends into shares
in the Company. The Dividend Reinvestment Plan remains suspended for current and future dividends.

Deferred Employee Share Plan
The Deferred Employee Share Plan may be used as part of any incentive payments for all employees. For transaction cost reasons,
where possible shares bought back as part of the Company’s ongoing capital reduction program are recognised for this purpose rather
than cancelled.

Options
There were no options on issue at the time of this report.

On-market share buy back
11,940 shares were bought back during the year (2016: 181,402).

Capital risk management
The Company’s objective when managing capital is to safeguard the ability to continue as a going concern, so that continued returns to
shareholders and benefits for other stakeholders can be provided while maintaining an optimal capital structure.

30. Reserves

As at

Movements

Capital profits reserve¹

Opening balance

Transfer from retained profits

Closing balance

Long term investment revaluation reserve²

Opening balance

Fair value adjustments on available for sale assets

- Equities

- Deferred tax applicable to fair value adjustments

Closing balance

Asset revaluation reserve³

Opening balance

Fair value adjustments on property, plant and equipment

- Property, plant and equipment

- Deferred tax applicable to fair value adjustments

Closing balance

Foreign currency translation reserve⁴

Opening balance

Exchange differences on translation of foreign operations

Closing balance

Total reserves

31 July 2017
$’000

31 July 2016
$’000

90,503

13,395

(2,195)

651

11,851

692

493

(148)

1,037

(162)

103,229

90,503

17,541

(5,923)

1,777

13,395

989

(297)

692

104,590

¹ The capital profits reserve is used to record pre-CGT profits.
² The long term investment revaluation reserve is used to record increments and decrements on equities recognised in other comprehensive
income. Amounts are reclassified to profit or loss when the equities are sold. Impaired amounts are recognised in profit or loss.
³ The asset revaluation reserve is used to record increases and decreases in the fair value of property, plant and equipment recognised in
other comprehensive income.
⁴ The foreign currency translation reserve records exchange rate differences arising on translation differences on foreign controlled subsidiaries.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

31. Dividends

As at

Ordinary shares

2016 final dividend of 6.0 cents (2015: 6.0 cents final) per share

2017 interim dividend of 6.0 cents (2016: 6.0 cents interim) per share

Total dividends declared

Dividends paid in cash

31 July 2017
$’000

31 July 2016
$’000

3,221

6,442

2,940

3,222

6,162

Franked dividends declared and paid during the year were fully franked at the tax rate of 30% (2016: 30%).

Dividends declared after year end
Subsequent to year end the Directors have declared the payment of a final dividend of 6.0 cents per ordinary share fully franked based
on tax paid at 30%. The maximum amount of the proposed dividend expected to be paid on 26 October 2017 out of retained profits at
31 July 2017 is $3,221,816.

The financial effect of the dividend declared subsequent to the reporting date has not been brought to account in the financial
statements for the year ended 31 July 2017 and will be recognised in subsequent financial reports.

The Dividend Reinvestment Plan (DRP) remains suspended for the final dividend declared.

Franked dividends
The franked portions of the final dividends declared after 31 July 2017 will be franked out of existing franking credits or out of franking
credits arising from the payment of income tax in the year ending 31 July 2018.

Franking credits available for subsequent financial years (tax paid basis)

13,700

10,092

The above amounts are based on the balance of the franking account at year end, adjusted for:
(a) franking credits that will arise from the payment of the current tax liability;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(d) franking credits that may be prevented from being distributed in subsequent financial years.

32. Business Combination

Acquisition of SHI Holdings Pty Limited
On 16 December 2016, a subsidiary of the Group, Gowings SHI Pty Ltd, acquired 100% of the issued shares in SHI Holdings Pty Limited
and its controlled entities (“Surf Hardware International”) for total consideration of $16,000,000. Surf Hardware International is a
manufacturer and global supplier of surf related hardware products. The acquisition is aligned with the Group’s continued focus of
investing in selected direct private equity investments in its investment portfolio.

Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
The acquisition-date fair value of the total purchase consideration was $16,000,000. The purchase consideration is split into two
tranches as follows:

32. Business Combination (Continued)

Purchase consideration was payable in two tranches, the first tranche was paid on the acquisition date in cash and the second tranche
was paid in cash on 30 June 2017. At 31 July 2017 no purchase consideration remains outstanding in relation to this acquisition.

Fair value of identifiable assets and liabilities recognised as a result of the acquisition
Fair value of identifiable assets recognised as a result of the acquisition are as follows:

Cash and cash equivalents

Trade and other receivables

Inventories

Other assets

Property, plant and equipment

Intangibles

Deferred tax assets

Total fair value of identifiable assets acquired

Fair value of identifiable liabilities recognised as a result of the acquisition are as follows:

Trade and other payables

Employee provisions

Other provisions

Lease liability

Income tax payable

Deferred tax liabilities

Total fair value of identifiable assets acquired

$’000

1,707

4,655

10,392

324

887

1,050

258

19,273

$’000

1,726

989

334

1,501

729

5,296

The fair value of assets and liabilities acquired have been recorded on a provisional basis at the end of the year. The Group may
retrospectively adjust the provisional amounts recognised and also recognise additional assets and liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the date of acquisition. The measurement
period ends on either the earlier of (i) 12 months from the date of acquisition; or (ii) when the Group receives all possible information to
determine the fair value of assets and liabilities acquired.

Goodwill
The Group has measured the fair value of identifiable assets and liabilities acquired at acquisition date (refer to (b) above) with the
remainder of the purchase price being attributed to goodwill. This treatment is consistent with the Group’s accounting policy at note 1(d)

Goodwill recorded in relation to the acquisition of Surf Hardware International is as follows:

Purchase price

Less: net fair value of identifiable assets and liabilities acquired

Goodwill recorded on acquisition

$’000

16,000

(13,977)

2,023

Purchase consideration (first tranche) – cash paid on acquisition date

Purchase consideration (second tranche) – cash paid on 30 June 2017

Total fair value of the total purchase consideration

$’000

10,000

6,000

16,000

The goodwill is attributed to Surf Hardware’s strong position in the global surf related hardware market and future growth potential.

Goodwill is not deductible for tax purposes.

Revenue and profit contribution
During the period from acquisition through to 31 July 2017, Surf Hardware International contributed sales revenue of $24,546,236 and a
loss before tax of $2,080,601 to the Group’s results. The loss includes an amount of $2,577,653 relating to fair value adjustments made to
Surf Hardware International’s inventory on acquisition.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

32. Business Combination (Continued)

36. Related Parties (Continued)

Acquisition costs
Acquisition costs of $473,143 have been expensed in the consolidated statement of profit or loss in relation to the acquisition of Surf
Hardware International.

Acquired receivables
The gross contractual amount for trade receivables due is $4,729,720, of which $74,601 is expected to be uncollectible.

33. Remuneration of Auditors

Audit and review – parent entity

Audit and review – subsidiary companies

Tax services

34. Commitments for Expenditure

31 July 2017
$’000

31 July 2016
$’000

102

230

105

Capital commitments – Private equities
The Group has uncalled capital commitments of up to $1,528,000 (2016: $4,950,000) over a period of up to 10 years in relation to private
equity and property fund investments held at year end.

Capital commitments – Investment properties
The Group has capital commitments of $18,939,143 (2016: $nil) in relation to construction works on investment properties at year end.

Operating lease commitments
The Group has entered into leases for commercial premises and office equipment. Commitments for minimum lease payments in
relation to non-cancellable operating leases are payable as follows:

Within one year

Later than one year but not later than five years

Later than five years

35. Employee Entitlements

Long service leave (note 27)

Accrual for annual leave (note 24)

Other accruals

36. Related Parties

1,193

1,539

168

2,900

498

1,075

771

2,344

219

248

435

902

Directors
The names of persons who were Directors of Gowing Bros. Limited at any time during the financial year were Messrs J. E. Gowing, J. G.
Parker, R. D. Fraser, Prof. J. West and S. J. Clancy.

Those persons that were also Directors during the year ended 31 July 2016 were Messrs J. E. Gowing, J. G. Parker, R. D. Fraser, Prof. J.
West and S. J. Clancy.

Remuneration
Information on remuneration of Directors and other key management personnel is disclosed in the remuneration report.

Directors and other key management personnel

Short-term employee benefits

Share based compensation

Post-employment benefits

Long-term benefits

Detailed remuneration can be found in the remuneration report on pages 38 to 40.

31 July 2017
$

31 July 2016
$

1,104,593

17,250

91,803

(321)

1,213,325

1,014,466

120,000

96,732

31,527

1,262,725

Movement in shares

Key management person

J. E. Gowing

J. G. Parker

Prof. J. West

S. J. Clancy

R. D. Fraser

G. J. Grundy

*Directly and indirectly

Shares acquired/

Shares held* at

(disposed) during

Shares held* at

(disposed) during

Shares held* at

31-Jul-15

No.

18,989,368

50,000

63,118

260,148

the year

No.

1,891,782

5,000

397,581

5,000

6,311

84,559

31-Jul-16

No.

20,881,150

55,000

397,581

5,000

69,429

344,707

the year

No.

N/A

5,000

31-Jul-17

No.

20,881,150

55,000

397,581

5,000

N/A

349,707

Mr R. D. Fraser resigned as Non-executive Director during the year. Other key management personnel did not hold shares in the company.

Receivables from Directors and Executives
At year end there were no receivables from the Directors and executives (2016: $nil).

Transactions with key Management Personnel & Directors

Key management person

Transaction type

J. E. Gowing

Marketing services

Associate director services

31 July 2017
$

44,640

3,650

31 July 2016
$

65,891

The wife of Mr J E Gowing, Managing Director, is a Director of Creative License Pty Limited. Creative License Pty Limited provided marketing
services totalling $34,094 for the year. Dealings were at commercial rates (2016: $63,161). The sons of Mr J E Gowing provided marketing
services at market rates during the year on a casual basis, $10,546 (2016: $2,730) and associate director services $3,650 (2016: $nil).

There were no other transactions with Directors and Director related entities and Executives.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED36. Related Parties (Continued)

Other Related Party Matters

Mr John E Gowing, the managing director of Gowing Bros. Limited was a minority shareholder of the following entities controlled by the Group.

38. Interests in Joint Ventures

The Group has entered into a joint venture operation known as Regional Retail Properties, a long term investment in a small regional
retail centre. The Group has a 50% participating interest in this joint venture and is entitled to 50% of its output.

Ownership Interest %

The Group’s interests in the assets employed in the joint ventures are included in the consolidated statement of financial position, in
accordance with the accounting policy described in note 1(p), under the following classifications:

Entity Name

Gowings SHI Pty Ltd

Pacific Coast Developments 357 Fund

Pacific Coast Developments 112 Fund

The interests in these entities were no longer held by Mr John E Gowing at 31 July 2017.

37. Interests in Other Entities (Excluding Joint Ventures)

The Group’s principal subsidiaries and other interests are set out below:

0.1

Unless otherwise stated, subsidiaries and other interests listed below have share capital comprising of ordinary shares or ordinary units
which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group.

Entity Name

Pacific Coast Developments 357 Pty Ltd

Pacific Coast Developments 357 Fund

Pacific Coast Developments Pty 112 Ltd

Pacific Coast Developments 112 Fund

Gowings SHI Pty Ltd

SHI Holdings Pty Ltd*

Fin Control Systems Pty Ltd*

Surfing Hardware International Holdings Pty Ltd*

Surf Hardware International Asia Pty Ltd*

Surf Hardware International Europe SARL*

Surf Hardware International UK*

OZ4U Holdings Pty Ltd*

Sunbum Technologies Pty Ltd*

Surfing Hardware International USA Inc.*

Surf Hardware International USA Inc.*

Surf Hardware International Hawaii Inc.*

Surf Hardware International Japan KK*

Surf Hardware International Pty Ltd*

Surf Hardware International Brazil Com. De Mat. Esportivos LTDA*

Country of
Incorporation

Ownership
Interest % 2017

Non-controlling
Interest % 2017

Australia

United States of America

Japan

France

Brazil

100

99.9

100

99.9

0.1

*SHI Holdings Pty Limited and controlled entities acquired by Gowings SHI Pty Ltd during the year (note 32).

No other interests in subsidiaries or other entities (excluding joint ventures) were held by the Group in the 31 July 2017 financial year.

Non-controlling interests in subsidiaries and other interests of the Group are not material to the Group.

Significant Restrictions
Other than certain assets pledged as security for the secured trade facility which is detailed in note 26, there are no significant
restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group.

Current assets

Cash

Trade and other receivables

Total current assets

Non-current assets

Investme properties

Total non-current assets

Current share of assets employed in joint venture

Current liabilities

Trade and other payables

Borrowings

Total current liabilities

Non-current liabilities

Borrowings

Total non-current liabilities

Current share of liabilities employed in joint venture

Net assets employed in joint venture

31 July 2017
$’000

31 July 2016
$’000

3,000

3,075

1,675

1,680

1,395

3,000

3,048

1,775

1,796

1,252

$1.675 million of borrowings is secured against investment properties of Regional Retail Properties (note 26).

39. Share Based Payments

The Deferred Employee Share Plan has been in operation since 2006 which allows fully paid ordinary shares to be issued for no cash
consideration from shares held by the Plan. All Australian resident permanent employees and non-executive directors are eligible to
participate in the scheme. Employees may elect not to participate in the scheme.

Shares are acquired on-market prior to the issue. Shares issued under the scheme may not be sold until the earlier of three years after issue
or cessation of employment of the Group. In all other respects the shares rank equally with other fully-paid ordinary shares on issue.

Options
No options were on issue at year end (2016: Nil).

40. Earnings Per Share

Basic earnings per share (cents)

Diluted earnings per share (cents)

Weight average number of ordinary shares on issue

Net profit after tax

31 July 2017

31 July 2016

43.29c

53,683,040

$23,240,000

40.92c

53,736,761

$21,990,000

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
41. Parent Entity Information

42. Reconciliation of Net Profit to Net Cash Inflow from Operating Activites

The following information has been extracted from the books and records of the Company and has been prepared in accordance with
Australian Accounting Standards:

Statement of Financial Position

31 July 2017
$’000

31 July 2016
$’000

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Capital profits reserve

Long term investment revaluation reserve

Asset revaluation reserve

Retained earnings

Total equity

10,403

308,163

318,566

19,540

82,770

102,310

216,256

12,611

90,503

11,851

1,037

100,254

216,256

26,452

255,639

282,091

36,413

47,098

83,511

195,580

12,652

90,503

13.395

692

81,338

195,580

Profit from ordinary activities after income tax

Amortisation

Depreciation

Impairment – equities

Net gain on sale of equities and private equities

Net loss on sale of development properties

Net loss on sale of property, plant and equipment

Revaluation of investment properties to market value

Revaluation of equities and private equities to market value

Revaluation of derivative to market value

Other (expense) / income

Decrease / (increase) in receivables

Decrease / (increase) in prepayments

Decrease / (increase) in inventories

Increase / (decrease) in income taxes

Increase / (decrease) in employee entitlements

Increase / (decrease) in trade creditors and accruals

Net cash inflow from operating activities

43. Subsequent Events

31 July 2017
$’000

31 July 2016
$’000

23,240

1,396

469

518

(5,696)

(23,302)

318

(367)

(17)

(2,184)

(475)

3,755

5,435

1,310

4,484

21,990

1,325

133

1,640

(18,642)

(17)

(7,665)

1,100

(270)

8,101

126

320

8,248

No matter or circumstance has arisen since the end of the financial year which has significantly affected, or may significantly affect, the
operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

Statement of Profit or Loss and other Comprehensive Income

44. Other Information

Net profit after income tax

Total comprehensive income

31 July 2017
$’000

31 July 2016
$’000

25,358

24,159

21,990

18,856

Parent entity contractual commitments
The Company has no contractual commitments other than uncalled capital commitments for private equities and commitments for
construction works on investment properties as noted in note 34 (2016: Uncalled capital commitments for private equities as noted in note 34).

Parent entity contingent liabilities
The Company has no contingent liabilities at year end (2016: None).

Gowing Bros. Limited is incorporated and domiciled in New South Wales. The registered office, and principal place of business, is Unit
21, Jones Bay Wharf, 26 – 32 Pirrama Rd, Pyrmont NSW 2009.

Phone:

61 2 9264 6321

Facsimile:

61 2 9264 6240

Email:

info@gowings.com

Website:

www.gowings.com

Gowing Bros. Limited shares are listed on the Australian Securities Exchange.

The joint Company Secretaries are Mr G. J. Grundy and Ms B. J. Flatters.

Parent entity guarantees in respect to debts of its subsidiaries
The Company has not entered into any guarantees in respect to debts of its subsidiaries at year end (2016: None).

The share register is maintained by Computershare Investor Services Pty. Limited, Level 3, 60 Carrington Street, Sydney NSW 2000,
Telephone 1300 855 080, Overseas callers +61 (0)2 8234 5000, Facsimile + 61 (0)2 8234 5050.

149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Directors’ Declaration

In the directors’ opinion:

(a)

the consolidated financial statements and notes set out on pages 43 to 79 are in accordance with the
Corporations Act 2001, including:

(i)

ccomplying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and

(i) giving a true and fair view of the Group’s financial position as at 31 July 2017 and of its performance for the financial

year ended on that date; and

(b)

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.

2. The notes to the consolidated financial statements include a statement of compliance with International Financial Reporting

Standards.

3. The directors have been given the declarations by the chief executive officer and chief financial officer for the year ended 31 July

2017 required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year
ended 31 July 2017, I declare that, to the best of my knowledge and belief, there have been no
contraventions of:

(a)

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(b) any applicable code of professional conduct in relation to the audit.

This declaration is in relation to Gowing Bros. Limited and the entities it controlled during the year.

Professor J. West
Director

Sydney
28 September 2017

J. E. Gowing
Director

Sydney
28 September 2017

Sydney, NSW
28 September 2017

S Grivas
Partner

INDEPENDENT AUDITOR’S REPORT

To the Members of Gowing Bros. Limited

REPORT ON THE AUDIT OF THE FINANCIAL REPORT

Opinion

We have audited the financial report of Gowing Bros. Limited (“the Company”) and its controlled entities (“the Group”), which comprises
the consolidated statement of financial position as at 31 July 2017, the consolidated statement of profit or loss, the consolidated
statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, and 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 Group’s financial position as at 31 July 2017 and of its financial performance for
the year then ended; 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

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Key Audit Matter How our audit addressed the key audit matter

Valuation of subregional and neighbourhood shopping centre investment properties
Note 17

The aggregate fair value of the Group’s subregional and
neighbourhood shopping centre investment properties as at 31
July 2017 is $218.580 million, representing 68.2% of the Group’s
total assets as at that date.

The fair values of the Group’s investment properties were assessed
either by management and /or assessed by management based on
independent valuations prepared by an independent valuer.

The valuation of the Group’s investment properties requires
judgement and the use of subjective assumptions and estimates
in determining fair value including selecting the appropriate
valuation methodology, market rental rates, vacancy allowances
and capitalisation rates and, for investment properties under
development, an estimation of costs to complete the investment
property.

We have identified the valuation of the Group’s investment
properties as a key audit matter because of the significance to the
Group’s consolidated financial statements and level of significant
judgements and assumptions applied to determine fair value.

Our audit procedures to assess the valuation of investment
properties included:

• assessing the competence, capability, experience,

independence and objectivity of external valuers appointed
by management.

• evaluating the valuation methodology applied.
•

testing the reliability and reasonableness of inputs to
underlying contracts and supporting documentation.

•

testing the appropriateness of assumptions and estimates
with reference to historical rates and results, available
market data and other supporting documentation.
• checking the mathematical accuracy of valuation

calculations.

•

for investment properties under development, evaluated
management’s estimated costs to complete with reference
to construction contracts, quantity surveyor reports and
other supporting documentation.

reviewing the Group’s disclosures with reference to
Australian Accounting Standards.

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report
of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of Unlisted Equities
Note 2, 14 & 15

At 31 July 2017 the Group owned investments of $23.539 million
in a number of unlisted equities which have been included in the
Group’s consolidated statement of financial position. Management
assess the value of these investments at least annually, using
various valuation techniques, such as a recent arm’s length
transaction, reference to other instruments that are of a similar
nature and relying as little as possible on unobservable inputs.
This is considered a key audit matter due to the significant
judgment involved in assessing the valuation of these assets, as
they are often traded in low volume markets.

Our audit procedures to assess the valuation unlisted equities
included:

• assessing the valuation methodology applied by

management.

•

reviewing valuation inputs including evidence of recent
arm’s length transactions and agreeing these transactions
to external sources.

reviewing the Group’s disclosures with reference to
Australian Accounting Standards.

AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year ended 31 July 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a)the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and(b)any applicable code of professional conduct in relation to the audit.This declaration is in relation to Gowing Bros. Limited and the entities it controlled during the year. Sydney, NSW S Grivas 28 September 2017 Partner INDEPENDENT AUDITOR’S REPORT To the Members of Gowing Bros. Limited REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Gowing Bros. Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 31 July 2017, the consolidated statement of profit or loss, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and 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 Group’s financial position as at 31 July 2017 and of its financialperformance for the year then ended; 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 judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the key audit matterValuation of subregional and neighbourhood shopping centre investment properties Note 17 The aggregate fair value of the Group’s subregional and neighbourhood shopping centre investment properties as at 31 July 2017 is $218.580 million, representing 68.2% of the Group’s total assets as at that date. The fair values of the Group’s investment properties were assessed either by management and /or assessed by management based on independent valuations prepared by an independent valuer. The valuation of the Group’s investment properties requires judgement and the use of subjective assumptions and estimates in determining fair value including selecting the appropriate valuation methodology, market rental rates, vacancy allowances and capitalisation rates and, for investment properties under development, an estimation of costs to complete the investment property. We have identified the valuation of the Group’s investment properties as a key audit matter because of the significance to the Group’s consolidated financial statements and level of significant judgements and assumptions applied to determine fair value. Our audit procedures to assess the valuation of investment properties included: •assessing the competence, capability,experience, independence and objectivity ofexternal valuers appointed by management.•evaluating the valuation methodologyapplied.•testing the reliability and reasonableness ofinputs to underlying contracts andsupporting documentation.•testing the appropriateness of assumptionsand estimates with reference to historicalrates and results, available market data andother supporting documentation.•checking the mathematical accuracy ofvaluation calculations.•for investment properties underdevelopment, evaluated management’sestimated costs to complete with referenceto construction contracts, quantity surveyorreports and other supportingdocumentation.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.Valuation of Unlisted Equities Note 2, 14 & 15 At 31 July 2017 the Group owned investments of $23.539 million in a number of unlisted equities which have been included in the Group’s consolidated statement of financial position. Management assess the value of these investments at least annually, using various valuation techniques, such as a recent arm’s length transaction, reference to other instruments that are of a similar nature and relying as little as possible on unobservable inputs. This is considered a key audit matter due to the significant judgment involved in assessing the valuation of these assets, as they are often traded in low volume markets. Our audit procedures to assess the valuation unlisted equities included: •assessing the valuation methodologyapplied by management.•reviewing valuation inputs includingevidence of recent arm’s length transactionsand agreeing these transactions to externalsources.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Key Audit Matter How our audit addressed the key audit matter

Acquisition of Subsidiary
Note 32

During the year, a subsidiary of the Group, Gowings SHI Pty
Limited acquired 100% of SHI Holdings Pty Ltd and its controlled
entities (the “acquisition”). The acquisition is accounted for on a
provisional basis at 31 July 2017.

Accounting for this acquisition is a complex and judgemental
exercise, requiring management to determine the existence
and fair value of acquired assets and liabilities, in particular
determining the allocation of purchase consideration to goodwill
and separately identifiable intangible assets such as brand names.
The fair value of certain assets acquired on acquisition were
assessed by management based on an independent valuation
prepared by an external valuer.

We have identified the acquisition as a key audit matter as the
determination of the fair value of assets and liabilities on the date
of acquisition is judgemental.

Our audit procedures to assess the allocation of the acquisition
purchase price and the acquisition accounting included:

•

•
•

reading the sale and purchase agreement to understand
key terms and conditions.

reviewing management’s assessment of the identified
assets and liabilities (including separately identifiable
intangible assets) acquired including the fair value
attributable to these assets and liabilities.

reviewing the calculation of goodwill on acquisition.

reviewing the Group’s disclosures with reference to
Australian Accounting Standards.

Our audit procedures in relation to the independent valuation
used by management included:

• assessing the competence, capability, experience,
independence and objectivity of external valuer.
• evaluating the valuation methodology applied.
•

testing the reliability and reasonableness of inputs and
assumptions.

• checking the mathematical accuracy of valuation

calculations.

Information Other than the Financial Report and Auditor’s Report Thereon

The directors are responsible for the other information. The other information comprises the information included in the Group’s
Directors report for the year ended 31 July 2017, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and 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, in doing so, consider whether
the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to
be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Responsibilities of the Directors for the Financial Report

Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance
such internal control as the directors determine is necessary to enable the preparation of the financial
with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern,
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
operations, or have no realistic alternative but to do so.
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report
Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
scepticism throughout the audit. We also:
on the basis of this financial report.

•

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

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 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 involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
disclosures made by the directors.
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
control.
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
effectiveness of the Group’s internal control.
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
may cause the Group to cease to continue as a going concern.
estimates and related disclosures made by the directors.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
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
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
Group audit. We remain solely responsible for our audit opinion.
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
continue as a going concern.
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
a manner that achieves fair presentation.
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
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.

•

INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the key audit matterAcquisition of Subsidiary Note 32 During the year, a subsidiary of the Group, Gowings SHI Pty Limited acquired 100% of SHI Holdings Pty Ltd and its controlled entities (the “acquisition”). The acquisition is accounted for on a provisional basis at 31 July 2017. Accounting for this acquisition is a complex and judgemental exercise, requiring management to determine the existence and fair value of acquired assets and liabilities, in particular determining the allocation of purchase consideration to goodwill and separately identifiable intangible assets such as brand names. The fair value of certain assets acquired on acquisition were assessed by management based on an independent valuation prepared by an external valuer. We have identified the acquisition as a key audit matter as the determination of the fair value of assets and liabilities on the date of acquisition is judgemental. Our audit procedures to assess the allocation of the acquisition purchase price and the acquisition accounting included: •reading the sale and purchase agreementto understand key terms and conditions.•reviewing management’s assessment of theidentified assets and liabilities (includingseparately identifiable intangible assets)acquired including the fair value attributableto these assets and liabilities.•reviewing the calculation of goodwill onacquisition.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.Our audit procedures in relation to the independent valuation used by management included: •assessing the competence, capability,experience, independence and objectivity ofexternal valuer.•evaluating the valuation methodologyapplied.•testing the reliability and reasonableness ofinputs and assumptions.•checking the mathematical accuracy ofvaluation calculations.Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s Directors report for the year ended 31 July 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and 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, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDINDEPENDENT AUDITOR’S REPORT (CONTINUED)

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 identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.

REPORT ON THE REMUNERATION REPORT

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 38 to 40 of the directors’ report for the year ended 31 July 2017.

In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2017 complies with section 300A of the
Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.

HLB Mann Judd
Chartered Accountants

Sydney, NSW
28 September 2017

S Grivas
Partner

Issues to Shareholders Since 19 September 1985

Date

31/10/1985

30/04/1986

31/10/1986

16/03/1987

30/04/1987

30/04/1988

31/10/1988

30/04/1989

16/11/1989

31/10/1990

31/10/1991

30/04/1992

31/10/1992

29/10/1993

29/04/1994

28/04/1995

03/10/1995

31/10/1995

26/04/1996

30/10/1996

25/04/1997

15/05/1997

31/10/1997

30/04/1998

03/11/1998

28/04/1999

18/11/1999

28/04/2000

27/10/2000

27/04/2001

19/10/2001

18/12/2001

22/04/2002

25/10/2002

18/12/2002

24/04/2003

24/10/2003

23/04/2004

25/10/2004

22/04/2005

17/07/2009

05/11/2010

17/12/2010

05/11/2015

Particulars

Bonus issue in lieu

1 for 2 Bonus issue

Bonus issue in lieu

Dividend Re-investment

Special Scrip dividend

Dividend Re-investment

1 for 10 Bonus issue

1 for 20 Bonus issue

Dividend Re-investment

Bonus in Lieu Share Plan

1 for 10 Bonus issue

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

2 for 1 Share Split

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

In Specie Distribution

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

1 for 8 Rights issue

1 for 10 Bonus issue

Issued From

Asset Revaluation reserve

Accumulated profits

Share Premium – Special Dividend Reserve

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

G Retail Ltd shares issued on listing

Accumulated profits

Share capital

Issue Price $

2.50

3.70

3.75

4.35

3.75

3.80

3.60

3.50

2.60

3.00

2.90

3.10

4.50

2.60

2.35

2.10

1.90

1.95

1.80

2.36

1.95

1.90

1.80

1.95

1.90

2.40

2.55

2.70

2.87

2.42

2.20

INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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 identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 23 the directors’ report for the year ended 31 July 2017. In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2017 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd S Grivas Chartered Accountants Partner Sydney, NSW 28 September 2017 INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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 identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 23 the directors’ report for the year ended 31 July 2017. In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2017 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd S Grivas Chartered Accountants Partner Sydney, NSW 28 September 2017 149th ANNUAL REPORT 2017 I Year ended 31 July 2017149th ANNUAL REPORT 2017 I Year ended 31 July 2017INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
“Investing Together for
a Secure Future”

- John Gowing -

E S T 1 8 6 8
G O W I N G B R O S . L T D