ASX RELEASE 23 October 2020 ANNUAL REPORT 2020 Home Consortium (ASX: HMC) provides the attached Annual Report 2020. It is being despatched today to those securityholders who have elected to receive it. -ENDS- For further information please contact: INVESTORS Will McMicking CFO +61 451 634 991 william.mcmicking@home-co.com.au MEDIA John Frey GRACosway +61 411 361 361 jfrey@gracosway.com.au Tom Kohlen Investor Relations Executive +61 419 953 526 tom.kohlen@home-co.com.au Authorised for release by the Home Consortium Board About HomeCo HomeCo is an internally managed Australian property group focused on ownership, development and management. HomeCo is built on a platform of big brands and hyper-convenience, with each centre anchored by leading brands backed by some of Australia’s most successful property development and retail organisations including predominantly national retailers spanning daily needs, leisure and lifestyle and services enterprises. 19 Bay Street Home Consortium Limited Home Consortium Developments Limited Double Bay NSW 2028 ABN 94 138 990 593 ACN 635 859 700 1300 466 326 (trading as Home Consortium) info@home-co.com.au home-co.com.au H o m e C o . | A n n u a l R e p o r t 2 0 2 0 Focused on the essentials A n n u A l R e p o R t 2 0 2 0 About HomeCo HomeCo is an ASX listed owner, developer and manager of assets Contents portfolio overview 2020 Highlights executive Chairman & Chief executive officer and Deputy Chairman letter Directors’ Report Consolidated Financial Statements Independent Auditor’s Report Related party leases Stapled Security Holder Information Corporate Directory 2 8 10 14 37 89 96 98 IBC “Home Consortium” is a stapled group comprising Home Consortium Limited (ACN 138 990 593) and Home Consortium Developments Limited (ACN 635 859 700). Annual Report 2020 1 Building a sustainable asset portfolio focused on delivering long term securityholder value 2 HomeCo. F o C u Se D o n tH e e S Se n t I A lS Portfolio Overview H o M e C o n S oRt I u M p oRtF o l I o S t A t I S t I C S Number of properties Fair value Weighted Average Capitalisation Rate (“WACR”) Weighted average lease expiry (WALE) (years)2 Jun-20 (actual)1 30 Jun-20 (pro-forma)1 35 $1,014 million $1,200 million 6.6% 8.2 6.6% 8.1 Total land holdings 1.14 million sqm 1.3 million sqm Gross lettable area (GLA) 366,000 sqm 415,000 sqm Site coverage ratio 32% 32% R e n t R e V I e W Co M p o S I tI o n ( B Y G R o S S Re n t ) 3 l e A S e e X p I R Y p R o F I l e ( B Y G R o S S I n C o M e ) 3 ( C Al e n D A R Y e A R ) W A L E 8 . 1 Y E A R S 84.0% 10% 16% Fixed CPI Supermarkets with turnover rent (Fixed rent review weighted average: 3.06% p.a.) 74% 0% 1.1% 0.9% 4.8% 2.9% 6.3% Holdover 2H 2020 2021 2022 2023 2024 2025+ Notes: 1. Excludes Ballarat which is expected to settle in 2022. 2. By gross income for signed leases and MOUs across freehold operating assets. 3. Jun-20 pro-forma reflects 26 operating assets (21 operating as at Prospectus date + opening of Coffs Harbour, 3 Woolworths anchored shopping centres and Aurrum Erina). Excludes Parafield. Annual Report 2020 3 4 HomeCo. F o C u Se D o n tH e e S Se n t I A lS High quality and diversified tenant mix t e n A n C Y M I X ( B Y G R o S S R e n t ) l e I S u R e & l I F eS t Y l e 2 4 % S e R V I C e S ( H e A lt H C o ) 2 1 % Total does not equal 100% due to rounding. Annual Report 2020 5 87 % exposure to leading national retailers and services tenants1 47 % exposure to defensive daily needs and healthcare & wellness services tenants up from 37% exposure at Ipo1 t e n A n C Y M I X ( B Y G R o S S R e n t ) D A I lY n e e D S ( I n C l . S p eC I A lt I eS ) 2 6 % H o M e W A R eS & e l eC t R I C A l 3 0 % Note: 1. By gross income across all 36 freehold centres (including 3 Woolworths anchored shopping centres, Parafield, Aurrum Erina and Ballarat. Based on signed leases and signed MoUs. 6 HomeCo. F o C u Se D o n tH e e S Se n t I A lS Geographically diverse portfolio with 69%1 of centres located in metropolitan growth corridors F R e e H o l D p oRtF o l I o M e tR I C S 3 5 F R e e H o l D C e n tR e S 2 1 . 3 M I l lI o n S Q M l A n D ~ 4 1 5 K S Q M G l A W A S tAt e : 11 % o F t o tA l G l A Perth B u t l e R e l l e n B Ro o K J o o n D A l u p C B D Notes: 1. 24 of Home Consortium’s 35 centres are located in metropolitan areas. 2. Centres classified by anchor tenant(s) based on signed leases and signed MoUs across the Portfolio, percentage based on number of centres. n t S A W A S A S tAt e : 4 % o F t o tA l G l A C B D p A R A F I e l D Annual Report 2020 7 QlD St At e: 2 7 % o F t o tAl GlA nS W St At e: 3 4 % o F t o tAl GlA Ro uSe H Il l M A R S De n p A R K p e nR ItH St M A R Y S C B D pReSt o nS V InCe n tI A MoR AY F Ie lD n oR tH lA KeS C B D tInG Al p A R I C HlAnD S SpR InG - F Ie lD u p p eR Co oMeR A Bu nD Al l C A I RnS M A C K AY QlD t o oWo oM B A Brisbane/ Gold Coast nS W Ru tHeR FoR D AuR RuM eR InA B AtHuR St W A G G A W A G G A V I C Melbourne Sydney Adelaide lI S MoRe CoF F S H A R Bo uR V I C S tAt e : 2 4 % o F t o tA l G l A RoSe n tH Al RoX BuR G H pA R K B R AY B Ro oK So u tH MoR AnG C B D BoX H Il l H A WtHoRn eA St Kn oX F Ie lD KeY S BoRo uG H MoRnInGt o n 8 HomeCo. F o C u Se D o n tH e e S Se n t I A lS 2020 Highlights Annual Report 2020 9 F I n An C I Al +1.7% PORTFOLIO VALUATION GROWTH (NET OF CAPEX) versus Dec-19 $17.2m FY20 FREEHOLD PRO-FORMA FFO +13% increase versus Sep-19 prospectus forecast 12cps FY20 TOTAL DIVIDEND FULLY FRANKED D e V e l o p M e n t & I n V eS t M e n t S 5 3 PROPERTY ACQUISITIONS5 ~$200m of asset acquisitions DEVELOPMENTS COMPLETED $1.2bn ASSETS UNDER MANAGEMENT5 Hawthorn east, Keysborough and Coffs Harbour +30% versus Sep-19 prospectus o p e R A tI o n A l 97.8% OCCUPANCY +5% increase versus Sep-19 prospectus 91.1% trading occupancy increase from 81.3% at Sep-19 prospectus2 +18% ANNUAL FOOT TRAFFIC GROWTH3 like for like Jun-20 versus pcp 99% COVID-19 FY20 TENANT RELIEF DOCUMENTED Notes: 1. All metrics represent the freehold portfolio as at 30 June 2020 unless otherwise indicated. 2. Across 22 freehold operating assets. 3.Across all freehold and leasehold operating centres. 4. As at 26-Aug-20. 5. Includes acquisition of 3 Woolworths neighbourhood centres, Parafield and Aurrum Erina. Excludes Ballarat. 10 HomeCo. Executive Chairman & Chief Executive Officer and Deputy Chairman Letter On behalf of the Board of Directors we would like to welcome you to our inaugural Annual Report. Since our IPO in October 2019, the Group has continued to grow and evolve in what has been a challenging environment with high levels of uncertainty and disruption caused by the ongoing COVID-19 pandemic. Throughout the year we have endeavoured to be proactive and decisive in managing the social and operational risks associated with the pandemic so as to ensure the safety of our employees, customers and the viability of tenants across our centres. Despite the COVID-19 disruption the portfolio has continued to mature. We now have 351 freehold assets covering 1.3 million sqm of land, and importantly our assets have a low site coverage ratio of 32% providing a base for further sustainable growth. The Group’s maiden full year results have delivered against our prospectus forecasts and highlighted the strength of our portfolio. The key financial and operational highlights of the result were: Financial Highlights • FY20 pro-forma freehold FFO of $17.2m, 13% ahead of prospectus forecast; • Jun-20 portfolio valuations increased 5.2% (1.7% net of capex) versus Dec-19 portfolio valuations2; • 12 cps fully franked FY20 total dividend; and • Pro-forma Jun-20 gearing of 32.4% and liquidity of $109 million2. Operational Highlights • $1.2 billion AUM reflecting 30% growth in AUM1 since IPO; • Sustainable and resilient cash flows backed by a long WALE of 8.1 years3; • Occupancy of 97.8%, an increase of over 5% since the IPO4; • Trading occupancy of 91.1%4 increasing from 81.3% at the time of the IPO; and • Annual like-for-like Jun-20 and Jul-20-foot traffic growth of 18% and 16% respectively compared to the prior corresponding period5. It was pleasing to deliver such a strong set of results for our first full year reporting period. HomeCo’s unique tenant mix and the competitive rent levels we offer to our tenants ensure the group is well positioned going forward. Our innovative retail and services property offering has resonated with tenants and consumers throughout the year and has enabled us to establish a portfolio of properties anchored by quality tenants with long term leases. We have also capitalised on a number of value-accretive investment opportunities, through both development and acquisition. We will continue to progress capital partnering and funds management initiatives such as the Daily Needs REIT and the Health and Wellness fund which will generate annuity style management fee income. Importantly we will maintain an appropriate capital structure in pursuing these initiatives so that we can continue to deliver sustainable, above average, risk adjusted returns to Securityholders through a combination of regular dividend income and capital growth. Excludes Ballarat which is expected to settle in 2022. 1. 2. As at 30 June 2020. 3. Based on signed leases and MOU’s across freehold operating assets. 4. By GLA across 22 operating centres. 5. Across all freehold and leasehold operating centres. Annual Report 2020 11 COVID-19 The volatility and uncertainty caused by the ongoing COVID-19 pandemic has caused significant disruption for all our stakeholders, however we have continued to operate effectively, constantly progressing our strategy to Own, Develop and Manage real assets. Our focus on delivering hyper convenient, neighbourhood shopping and services centres and our proactive approach to engaging with our tenants have enabled us to perform throughout the COVID period. In taking a partnership approach with our tenants and pro-actively dealing with the uncertainty generated by the pandemic, we have consolidated an industry leading position with 99% of FY20 tenant COVID-19 rent relief agreed and documented. Our approach has also ensured we are well positioned to continue writing new leases with both existing and new tenants going forward. Importantly, the FY20 cash flow impact from COVID-19 was fully offset by corporate cost savings and a small reduction in the final FY20 Dividend to 7.5 cps. Our pro-active approach has been rewarded with cash collections of approximately 94% over July and August. We believe HomeCo is well placed to withstand any future COVID-19 developments with a strong liquidity position, diversified tenant mix and competitive rent offering. Developments In FY20 we delivered our centres at Hawthorn East, Keysborough and Coffs Harbour. Since the IPO we have leased over 50,000 sqm of Gross Lettable Area (“GLA”) and we are currently developing a number of centres representing approximately 80,000 sqm of GLA. Acquisitions & Equity Raising In July, the Group announced the acquisition of three Woolworths anchored, convenience-based neighbourhood centres from Woolworths Group for $127.8 million and the acquisition of Aurrum Erina, a 250-bed residential aged care home providing person-centred care excellence. The site was acquired for $32.6 million on a sale and leaseback. We also entered a binding contract to acquire the Parafield Retail Complex for $25.5 million. Importantly the acquisitions increased our exposure to daily needs and health & wellness services tenants to 47%6. Pleasingly, the three properties acquired from Woolworths are all anchored by Woolworths supermarkets on brand new 10-year leases, strengthening our relationship with Woolworths as both a partner and key tenant. 6. By gross income. The Aurrum Erina asset is a significant 250 bed aged-care facility located on the NSW Central Coast which will be an important seed asset as HomeCo looks to increase its exposure to Health and Wellness Services tenants in preparation for the establishment of our Health and Wellness fund in 2021. The Parafield Retail Complex is located close to Parafield airport approximately 12km from the Adelaide CBD. The site includes 3.7 hectares of land with total lettable area of approximately 15,500 sqm. The acquisitions were funded by a $140 million placement to institutional investors and a Securityholder Purchase Plan (“SPP”) with existing Securityholders. It was pleasing to receive such a high level of interest from both existing securityholders and new investors, with demand well in excess of the targeted amount. Critically, the acquisitions will form the foundation for the next phase of HomeCo’s evolution under the ‘Own, Develop and Manage’ model. Strategic Initiatives At the time of releasing our FY20 full year results, we also announced our intention to establish an ASX listed Daily Needs REIT (“DN REIT”) and we provided an update on our plans to create a Health & Wellness fund. Planning and execution of the DN REIT is advanced with an ASX listing expected by the end of November 2020 via an in-specie distribution to HomeCo Securityholders. On completion of the in-specie distribution HomeCo Securityholders will have an investment in two companies, each characterised by their own investment attributes: • DN REIT: 100% owned portfolio of stabilised, convenience-based Daily Needs assets with consistent, growing distributions to Securityholders; and • HomeCo: owner, developer and manager of diversified assets including the DN REIT and the Health and Wellness fund. “Despite the COVID-19 disruption the portfolio has continued to develop. We now have 35 freehold centres covering 1.3 million sqm of land, importantly our assets have a low site coverage ratio of 32% providing a base for further sustainable growth.” 12 HomeCo. The portfolio of assets for the Daily Needs REIT will be comprised of metro located, convenience-based assets across Neighbourhood centres, Large Format Retail and Healthcare. The portfolio will be stabilised with approximately 98% occupancy across operating assets and an 8.4-year WALE. It will have approximately 77% exposure to national tenants, and limited exposure to specialty tenants. The portfolio has been designed to achieve diversification across sub-sectors, tenants, and geographies. In designing the portfolio, we have considered long term historical returns across sub-sectors and evolving trends. The portfolio is well positioned to deliver resilient future cash flows and underlying capital growth to securityholders. Following the establishment of the ASX listed DN REIT, the group will focus on the Health & Wellness fund. HomeCo currently has $150 million of Health & Wellness focused assets on its balance sheet and a significant pipeline of development opportunities. Our material exposure to health, childcare & education, government services and wellness tenants means we are well placed to introduce external capital to the Health & Wellness fund. Planning for the fund is well underway and we expect to establish the fund in 2021. We will continue to update Securityholders as plans for the Daily Needs REIT and the Health and Wellness fund develop. Post the establishment of the Daily Needs REIT and the Health & Wellness fund, HomeCo will retain approximately $500 million of existing operating assets on its balance sheet and will be a more capital light vehicle with diversified income streams across rental income, co-investments and management & development fees. This will provide the platform for HomeCo to continue to unlock additional value through capital recycling and the introduction of external capital. Outlook HomeCo remains on track to deliver above average risk-adjusted returns to Securityholders. We will continue to focus on building a platform for sustainable long-term growth via the ‘Own, Develop and Manage’ model. Our team has worked diligently throughout the 2020 financial year to achieve such significant progress since listing on the ASX less than 12 months ago. We firmly believe the quality of our people is a major driver of the value we are creating for Securityholders. On behalf of the Board of Directors we would like to thank our Securityholders for your ongoing support of HomeCo. David Di Pilla Executive Chairman and Chief Executive Officer Chris Saxon Deputy Chairman and Lead Independent Non-Executive Director Annual Report 2020 13 14 HomeCo. Directors’ report The directors of Home Consortium Limited (referred to hereafter as the ‘Company’ or ‘parent entity’ or ‘HCL’) and Home Consortium Developments Limited (‘HCDL’) present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘group’) consisting of Home Consortium Limited and the entities it controlled at the end of, or during, the year ended 30 June 2020, and the financial statements of HCDL. On 11 October 2019, HCL and HCDL were admitted to the official list of the Australian Securities Exchange (‘ASX’). Fully paid ordinary shares in each of HCL and HCDL are stapled together to form stapled securities, and trades under the name “Home Consortium” (ASX code: HMC). HCDL was incorporated in Australia on 29 August 2019 as a public company limited by shares. The current period information presented in the financial statements of HCDL is for the period 29 August 2019 to 30 June 2020. Principal activity The principal activity of the group during the year was the ownership, development and management of a property portfolio comprising hyper‑convenience retail and services centres. Directors David Di Pilla: Executive Chairman and Chief Executive Officer (appointed on 11 October 2017) Chris Saxon: Deputy Chairman and Lead Independent Non‑Executive Director (appointed on 23 September 2019) Zac Fried: Non‑Executive Director (appointed on 23 September 2019) Greg Hayes: Non‑Executive Director (appointed on 23 September 2019) Jane McAloon: Independent Non‑Executive Director (appointed on 23 September 2019) Brendon Gale: Independent Non‑Executive Director (appointed on 23 September 2019) 15 Information on directors Name: Title: Experience and expertise: David Di Pilla Executive Chairman and Chief Executive Officer David led the team that founded and established the consortium to acquire the group in 2016. David is the founder, a director and the major shareholder of the Aurrum Aged Care group. From 2014 to 2016, he was also a strategic advisor and director to operating subsidiaries of the Tenix Group of Companies. David has over 20 years of experience in investment banking. From 2004 to 2015, he was Managing Director and Senior Adviser at UBS Australia and during this time he advised some of Australia’s largest corporations on mergers and acquisitions, debt and equity capital market transactions. Other current directorships: Former directorships (last 3 years): None. None. Interests in shares: 33,167,089 ordinary shares. Interests in rights: 268,365 share rights over ordinary shares. Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Chris Saxon Deputy Chairman and Lead Independent Non‑Executive Director Chris is a leading Australian lawyer and was, until 2019, a partner with Baker McKenzie. Chris’s practice included large‑scale mergers and acquisition (‘M&A’) transactions across a range of sectors, notably energy (gas, electricity, renewable), industrials, infrastructure and mining. He has consistently been ranked as one of Australia’s foremost project and M&A lawyers and has been lead adviser on government restructuring transactions and privatisations, major trade sales and infrastructure projects. Chris served as Chairman of Baker McKenzie Australia for five years (2012‑2017) and has held numerous leadership roles within the firm. None. None. Chair of the Remuneration and Nomination Committee and a member of the Audit and Risk Committee. Interests in shares: 175,776 ordinary shares. Interests in rights: 3,559 share rights over ordinary shares. Annual Report 2020 16 HomeCo. Directors’ report continued Name: Title: Experience and expertise: Zac Fried Non‑Executive Director Zac worked closely with David Di Pilla and the team who founded and established the consortium to acquire the group in 2016. Zac is the Executive Deputy Chairman of the Spotlight Group (‘SGH’). Established in 1973, SGH owns a number of major and iconic Australian retail brands: Spotlight, Anaconda, Mountain Designs and Harris Scarfe. SGH also controls one of Australia’s largest privately‑owned property portfolios, Spotlight Property Group, and operates a significant family office engaged in extensive investment and philanthropic activities. With over 10,000 employees and 250 big box retail outlets across four countries with large greenfield redevelopment opportunities, SGH is one of Australia’s leading retail and property industry participants. Zac’s focus at SGH includes the oversight of SGH’s property development and leasing portfolio. He has almost 30 years of retail and property industry experience and a demonstrable track record of successful site identification, property value creation, and the fostering of many longstanding and close lessee relationships. Zac has played the central role at SGH in the development of many of Australia and New Zealand’s premier retail, office, and homemaker centres. In addition to his role at SGH, Zac is the President of the Large Format Retail Association (‘LFRA’). The LFRA is the pre‑eminent industry association responsible for representing the Australian retail industry interests of operators, investors, property owners, developers and service providers that collectively generate approximately $80 billion or 25% of all retail sales in Australia. Other current directorships: Former directorships (last 3 years): None. None. Interests in shares: 24,536,064 ordinary shares. Interests in rights: 4,448 share rights over ordinary shares. Name: Title: Qualifications: Experience and expertise: Greg Hayes Non‑Executive Director Master of Applied Finance, a Graduate Diploma in Accounting, a Bachelor of Arts, completed an Advanced Management Programme (Harvard Business School, Massachusetts) and Member of the Institute of Chartered Accountants Australia and New Zealand. Greg is currently a director of Aurrum and the Precision Group. Having worked across a range of industries including property, infrastructure, energy and logistics, Greg’s skills and experience include strategy, finance, mergers and acquisitions, and strategic risk management, in particular in listed companies with global operations. Greg was previously Chief Financial Officer and executive director of Brambles Limited, Chief Executive Officer and Group Managing Director of Tenix Pty Ltd, Chief Financial Officer and later interim Chief Executive Officer of the Australian Gaslight Company, Chief Financial Officer Australia and New Zealand of Westfield Holdings, Executive General Manager, Finance of Southcorp Limited, Executive and also held non‑executive director roles at Incitec Pivot Limited and The Star Entertainment Group Ltd. Other current directorships: None. Former directorships (last 3 years): Incitec Pivot Ltd (ASX: IPL) – retired December 2017 and Star Entertainment Group Ltd (ASX: SGR) – retired October 2017. Special responsibilities: Member of the Audit and Risk Committee. Interests in shares: 9,098,835 ordinary shares. Interests in rights: 4,893 share rights over ordinary shares. 17 Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Jane McAloon Independent Non‑Executive Director Bachelor of Economics (Hons) and Bachelor of Laws from Monash University, a Grad Dip Corporate Governance and awarded a Monash University Fellowship in 2018. Jane is a non‑executive director of Viva Energy Group Limited, EnergyAustralia, United Malt Group and Allianz Australia Limited. She is also Chairman of Monash University Foundation, a Director of Bravery Trust and is on the Advisory Board at Allens Linklaters. Jane has worked in the natural resources, energy, infrastructure and utility industries for over 25 years. She was President Governance and Group Company Secretary at BHP Billiton for nine years during which she worked on key strategic issues, corporate transactions, as well as market, regulatory and reputational matters. Prior to this she was a senior executive at AGL Energy Limited. Jane worked in executive leadership roles with the NSW Government Cabinet Office and the Energy, Rail and Natural Resources Departments. She previously worked in private legal practice. Her previous appointments include GrainCorp, Port of Melbourne, Civil Aviation Safety Authority, Cogstate Limited, Healthscope Limited, Defence Reserves Services Council, Referendum Council on Constitutional Recognition for Aboriginal and Torres Strait Islander People and the Australian War Memorial. Non‑executive director of Viva Energy Group Limited (ASX: VEA) – appointed 2018; Energy Australia – appointed December 2012; United Malt Group – appointed February 2020; Allianz Australia Ltd – appointed July 2020. GrainCorp Limited (ASX: GNC) – retired March 2020 with the demerger of United Malt Group; Cogstate Limited (ASX: CGS) – retired October 2019, Port of Melbourne – retired February 2020, Healthscope Limited (ASX: HSO) – retired June 2019, Civil Aviation Safety Authority – retired December 2019, Defence Reserves Support Council – retired November 2019. Special responsibilities: Chair of the Audit and Risk Committee and a member of the Remuneration and Nomination Committee. Interests in shares: 165,175 ordinary shares. Interests in rights: 3,559 share rights over ordinary shares. Name: Title: Qualifications: Experience and expertise: Brendon Gale Independent Non‑Executive Director Master’s Degree in Arts and Bachelor of Laws from Monash University, completed the Advanced Management Program at Harvard Business School, Graduate of the Australian Institute of Company Directors. Brendon is a leading Australian sporting administrator and is the current Chief Executive Officer and Executive Director of the Richmond Football Club, one of the largest and most diversified sports businesses in Australia. He is also an experienced company director, having previously served on the board of the Victorian Equal Opportunity and Human Rights Commission and is a current director of the Richmond Football Club Ltd and Aligned Leisure Pty Ltd. Brendon has experience in high performing and profitable consumer businesses, operating in multi stakeholder environments, involving significant public investment. He has a proven track record in shaping positive corporate culture and setting the tone from the top through the alignment of purpose, values and strategy. Other current directorships: Former directorships (last 3 years): None. None. Special responsibilities: Member of the Remuneration and Nomination Committee. Interests in shares: 231,871 ordinary shares. Interests in rights: 2,669 share rights over ordinary shares. Annual Report 2020 18 HomeCo. Directors’ report continued ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Andrew Selim joined the group in 2017 and is General Counsel and Company Secretary. He is responsible for all legal, compliance and governance activities of the group. Andrew has over 17 years of local and international experience in real estate and corporate law. Before joining the group, Andrew was Senior Legal Counsel and Company Secretary at The GPT Group. Prior to that, he was a Senior Associate at Allens Linklaters. Andrew holds a Master of Laws, Bachelor of Laws (Honours) and Bachelor of Science (Advanced), all from the University of Sydney. He is a Member of the Governance Institute of Australia, a Member of the Association of Corporate Counsel Australia and is a Member of the Australian Institute of Company Directors. He previously sat on the Law Society of NSW In‑House Corporate Lawyers Committee. Andrew has also been recognised in The Legal 500 GC Powerlist and Doyles as a leading in‑house lawyer. Meetings of directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2020, and the number of meetings attended by each director were: David Di Pilla Chris Saxon Zac Fried Greg Hayes Jane McAloon Brendon Gale Full Board Remuneration and Nomination Committee Audit and Risk Committee Attended Held Attended Held Attended Held 13 13 13 13 13 12 13 13 13 13 13 13 – 2 – – 2 2 – 2 – – 2 2 – 5 – 5 5 – – 5 – 5 5 – Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Review of operations and financial performance A summary of the financial performance of the group for the financial year ended 30 June 2020 is outlined below. Currency: $m (unless specified) Total revenue Net profit/(loss) after tax Funds from operation (‘FFO’) FFO per stapled security (cents) Freehold properties 30 June 2020 Leasehold properties 30 June 2020 Consolidated 30 June 2020 Consolidated 30 June 2019 Consolidated Variance Consolidated Variance 62.3 6.0 10.1 5.0 11.0 (8.8) (15.7) (7.9) 73.3 (2.8) (5.6) (2.9) 49.2 (22.6) +24.1 +19.8 +49% +88% (41.0) +35.4 +86% (43.9) +41.0 +93% Home Consortium’s financial performance for the financial year was influenced by the completion of the $325 million ASX listing and refinancing of existing debt facilities in October 2019 resulting in a significant reduction in its cost of debt. 19 The completion of these activities provided the group with increased funding to continue its strategy of owning, developing and managing a freehold portfolio of hyper‑convenience centres. During the financial year, Home Consortium completed the acquisition of three centres (Hawthorn East VIC, Upper Coomera QLD and Coffs Harbour NSW) and the completion of the development of two hyper‑convenience centres (Hawthorn East VIC and Keysborough VIC). During the financial year, agreements were also entered into to acquire the Ballarat and Parafield leasehold properties. At the time of the ASX listing a $60 million Lease Mitigation Account (‘LMA’) was established to provide funding for the lease mitigation strategy to surrender, repurpose or acquire the leasehold properties. Since ASX listing the LMA was used to execute this strategy and as at 30 June 2020 the remaining leasehold properties was reduced to nine and the net leasehold liability to $58.3 million (2019: $110.8 million). Home Consortium reported a consolidated statutory loss after tax of $2.8 million representing a $19.8 million improvement versus the prior comparable period which was driven by: • $24.1 million increase in revenue resulting from completion of acquisitions, developments and lease up of vacancies at operating sites; • $10.7 million decrease in net finance costs; and • $5.1 million increase in net fair value gains on investment properties (both freehold and leasehold). The Coronavirus (COVID‑19) pandemic has also materially impacted the financial performance of the group during the financial year with government imposed trading restrictions and isolation measures impacting tenants across the group. Home Consortium has taken a partnership approach in working with its tenants to support and assist them through the impact of COVID‑19. The group has worked within the framework of the Code of Conduct (‘Code’) for small to medium sized enterprises and in the spirit of the Code for larger tenants. The group also agreed extensions to lease terms for a number of tenants who received its support providing additional contracted future rental revenue. The group provided rental relief to its tenants through a combination of rent waivers, one‑off lease incentives and rent deferrals. Home Consortium’s estimate of the loss of revenue relating to COVID‑19 rental relief is $5.3 million for the financial year, of which $2.8 million was expensed and $2.5 million has been treated as an incentive and capitalised. An additional $1.4 million in rent was deferred and is expected to be collected subsequent to 30 June 2020. The group also received government assistance from JobKeeper of $0.2 million for the financial year. Funds from operations The table below provides a reconciliation between the net loss after tax for the period and funds from operations (‘FFO’): Currency: $m (unless specified) Net profit/(loss) after tax Income tax (expense)/benefit Straight lining and amortisation Amortisation of borrowing costs Acquisition, transaction and legal settlement costs Fair value movements Interest and finance charges on lease liabilities Less: Leasehold rent FFO Freehold properties 30 June 2020 Leasehold properties 30 June 2020 Consolidated 30 June 2020 Consolidated 30 June 2019 6.0 5.9 0.7 7.4 5.8 (14.6) 1.7 (2.8) 10.1 (8.8) (6.4) (0.1) – 3.5 4.9 11.8 (20.6) (15.7) (2.8) (0.5) 0.6 7.4 9.3 (9.7) 13.5 (23.4) (5.6) (22.6) (7.3) (0.6) 4.8 – (5.2) 18.7 (28.8) (41.0) Annual Report 2020 20 HomeCo. Directors’ report continued Summary of financial position A summary of the group’s financial position as at 30 June 2020 is outlined below: Currency: $m (unless specified) Investment properties – freehold Total assets Net tangible assets* Number of shares on issue (m)** Net tangible assets ($ per stapled security) Adjusted net tangible assets ($ per stapled security)*** Consolidated 30 June 2020 Consolidated 30 June 2019 1,013.8 1,277.8 729.5 197.9 3.69 3.20 771.0 1,108.0 423.9 93.3 4.54 4.19 * Net tangible assets include deferred tax assets, right‑of‑use assets and lease liabilities. ** The number of securities on issues as at 30 June 2019 assumes share consolidation of 13.797 share into 1 share had occurred. *** Adjusted net tangible assets exclude the following – LMA, investment property – leasehold, lease liabilities, provisions and deferred tax assets. Investment properties – freehold The freehold portfolio comprised 30 (2019: 27) freehold assets as at 30 June 2020 valued at $1,013.8 million (30 June 2019: $771.0 million). The increase in freehold properties was driven by acquisition and capital expenditure of $213.6 million with the acquisition of Hawthorn East VIC, Upper Coomera QLD, and Coffs Harbour NSW and the completion of two developments Hawthorn East VIC and Keysborough VIC. A fair value gain of $17.6 million was recognised as at 30 June 2020 (2019: $3.2 million). The weighted average capitalisation rate of the portfolio was 6.6% at 30 June 2020, compared to 6.9% at 30 June 2019. The group also commenced the development of three new properties located at Coffs Harbour NSW, Richlands QLD and Cairns QLD during the financial year. Adjusted net tangible assets Adjusted net tangible assets (‘NTA’) is calculated as the NTA of freehold properties only and excludes all NTA associated with the leasehold properties including the LMA (‘Adjusted NTA’). The group reported Adjusted NTA of $3.20 per stapled security as at 30 June 2020 ($4.19 per stapled security as at 30 June 2019). The decrease on the prior comparable period was driven by the impact of the $350 million equity raising of which $60 million was allocated to the LMA for the leasehold properties which is excluded from the calculation. Capital management The group entered into a new senior secured syndicated debt facility totalling $500 million which refinanced all existing debt facilities in October 2019. As at 30 June 2020 the group had $366.0 million of drawn debt, a gearing ratio of 35.6% and cash and undrawn debt of $136.9 million as detailed in the table below. The group also entered into interest rate swaps and hedged debt as a percentage of drawn debt was 47.8% as at 30 June 2020 (30 June 2019: nil). The group’s cost of debt was 2.42% p.a. as at 30 June 2020 (30 June 2019: 6.1%). Currency: $m (unless specified) Debt facility limit Drawn debt Cash and undrawn debt* Gearing ratio (%)** Hedged debt (%) Cost of debt (% p.a.)*** 30 June 2020 30 June 2019 500.0 366.0 136.9 35.60% 47.80% 2.42% 428.4 415.7 41.9 48.70% – 6.10% * Excludes LMA cash balance. ** Gearing ratio (%): Borrowings (excluding unamortised establishment costs) less cash and cash equivalents divided by total assets less cash and cash equivalents, loans to related parties, investment properties – leasehold and deferred tax assets. *** Interest cost includes cost of undrawn commitment fees and interest rate swaps. 21 Leasehold mitigation The $60 million Lease Mitigation Account was established in October 2019 to fund the ongoing cost of leasehold properties, with the foundation securityholders to be liable for leasehold liabilities in excess of $60 million. The LMA was subsequently used to finance the surrender of two leasehold properties and termination payments in relation to all of the four properties with surrender top‑up arrangements. In addition, the group continued re‑purposing other leasehold properties including Chullora as well as additional tenancies across other individual leasehold properties. As a result of the lease mitigation activities for the financial year the leasehold net present value (‘NPV’) reduced to $58.3 million as at 30 June 2020 with nine leasehold properties remaining (30 June 2019: $110.8 million). During the financial year agreements were also entered into to acquire the Ballarat and Parafield leasehold properties. Under the Lease Mitigation Deed, the foundation securityholders have certain obligations to make additional payments to the LMA on each Minimum Balance Review Date at 30 June and 31 December each year, to ensure that the pro‑forma cash balance available in the LMA as at 31 March and 30 September of each year is an amount not less than the lesser of: • $30 million (such amount to increase by CPI at 30 June each year); and • an amount equal to 110% of the NPV of the Leasehold Liabilities (as set out in the audited or reviewed consolidated financial statements of Home Consortium for the period ending 30 June or 31 December of that year, as applicable) unless the NPV is equal to or less than $5 million, where the percentage shall be 100%. A summary of the calculation as at the Minimum Balance Review Date of 30 June 2020 is outlined below. In accordance with the Lease Mitigation Deed, an additional deposit will be required to maintain the required minimum balance as at 30 September 2020. Currency: $m (unless specified) NPV of Leasehold Liabilities Minimum Balance: the lesser of (a) or (b) Initial Minimum Balance x CPI (June 2020)/CPI (June 2019) (a) New Minimum Balance (b) NPV of Leasehold Liabilities x 110% LMA – credit balance as at 30 June 2020 Additional minimum deposit required (prior to 30 September 2020) Dividends Dividends paid during the financial year were as follows: Interim dividend for the year ended 30 June 2020 of 4.50 cents per ordinary share (2019: nil) 30 June 2020 58.3 29.9 30.0 99.65% 29.9 64.2 26.7 3.2 Consolidated 30 June 2020 $m 30 June 2019 $m 8.9 – On 25 August 2020 the directors declared a fully franked dividend of 7.5 cents per ordinary share to be paid on 18 September 2020 to eligible shareholders on the register as at 4 September 2020. Significant changes in the state of affairs Other than the matters described in the ‘Review of operations and financial performance’ detailed above, there were no other significant changes in the state of affairs of the group during the financial year. Annual Report 2020 22 HomeCo. Directors’ report continued Matters subsequent to the end of the financial year Strategic acquisitions and equity raising On 1 July 2020, Home Consortium announced a number of strategic property acquisitions comprising: • Acquisition of three Woolworths anchored convenience‑based neighbourhood centres from Woolworths Group for $127.8 million; and • Acquisition of Aurrum Erina residential aged care property (‘Aurrum Erina’) for $32.6 million on a sale and lease back, subject to securityholder approval. The acquisitions were funded by $140.0 million fully underwritten institutional placement on 7 July 2020 at $2.88 per security and a non‑underwritten share purchase plan which raised $10.6 million on 28 July 2020. New equity raised will also support the funding of the Parafield acquisition announced during the financial year. As part of the Aurrum Erina acquisition Home Consortium is proposing to issue to the vendor $20 million of securities at $2.88 per security together with $12.6 million cash as consideration. The issue of securities and acquisition of Aurrum Erina will be conditional on receiving security holder approval which is scheduled for 1 September 2020. Proposed security restructure On 11 August 2020, Home Consortium announced that it had entered into an agreement with Woolworths Group Limited (‘Woolworths’) and Home Investment Consortium Company Pty Limited as trustee of the Home Investment Consortium Trust (‘HICT’) to propose a restructure of the existing security that Woolworths holds for its guarantee of the leasehold properties. The initial security arrangements were entered into with Woolworths in 2017 as part of the acquisition of the former Masters property portfolio, including a second ranking security over Home Consortium’s assets. As a result of the proposed transaction Home Consortium’s company structure will be simplified with no leasehold properties or legacy guarantees remaining within the group. The entity holding the guaranteed leases and LMA would be transferred to HICT resulting in no change in economic exposure as HICT already provides an indemnity to Home Consortium. Home Consortium will seek security holder approval for this proposal at its 2020 annual general meeting to be held on 18 November 2020. COVID‑19 The impact of the COVID‑19 pandemic is ongoing following the recent Stage 4 restrictions for the Melbourne metropolitan area and Stage 3 restrictions for regional Victoria announced by the Victorian Government. Home Consortium’s Victorian freehold portfolio comprises eight operating centres including the recent acquisition of a Woolworths supermarket in Rosenthal VIC and one development property. Whilst seven of the eight operating centres in Victoria have either a supermarket, pharmacy or medical centre as an anchor tenant the outlook remains uncertain. Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the group’s operations, the results of those operations, or the group’s state of affairs in future financial years. Likely developments and expected results of operations The group’s objective is to provide security holders with above average risk‑adjusted returns through a combination of regular dividend income and capital growth by investing in hyper‑convenience based retail and services assets. The group intends to achieve this objective by continuing to pursue the following activities in delivering its strategy: • own, develop and manage a portfolio of properties that are anchored by tenants with long‑term leases and an increasing exposure to non‑discretionary and healthcare tenants; • capitalise on other value‑accretive investment opportunities, including brownfield and greenfield developments (given a low 32% site coverage ratio) and acquisitions; and • pursue future capital partnering and funds management initiatives to generate annuity style management fee income. 23 Environmental regulation The directors are satisfied that adequate systems are in place to manage the group’s environmental responsibility and compliance with regulations. The directors are not aware of any material breaches of environmental regulations and, to the best of their knowledge and belief, all activities have been undertaken in compliance with environmental requirements. Shares under option There were no shares issued on the exercise of options or unissued ordinary shares of Home Consortium under option outstanding at the date of this report. Shares under share rights Unissued ordinary shares of Home Consortium under share rights at the date of this report are as follows: Grant date 14/10/2019 14/10/2019 25/08/2020 Estimated vesting date Exercise price Number under rights 27/08/2022 14/10/2022 30/09/2022 Nil Nil Nil 374,627 304,478 225,356 904,461 Refer to the ‘Remuneration report’ below that forms part of the director’s report for details of rights issued. No person entitled to exercise the share rights had or has any right by virtue of the share right to participate in any share issue of Home Consortium or of any other body corporate. Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor To the extent permitted by law, Home Consortium has agreed to indemnify its auditors, PricewaterhouseCoopers, as part of its audit engagement agreement against claims by third parties arising from the audit arising from Home Consortium’s breach of their agreement. The indemnity stipulates that Home Consortium will meet the full amount of any such liabilities including a reasonable amount of legal costs. No payment has been made to indemnify PricewaterhouseCoopers during the financial year and up to the date of this report. Proceedings on behalf of Home Consortium No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of Home Consortium, or to intervene in any proceedings to which Home Consortium is a party for the purpose of taking responsibility on behalf of Home Consortium for all or part of those proceedings. Annual Report 2020 24 HomeCo. Directors’ report continued Non‑audit services Details of the amounts paid or payable to the auditor for non‑audit services provided during the financial year by the auditor are outlined in Note 28 to the financial statements. The directors are satisfied that the provision of non‑audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in Note 28 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • all non‑audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision‑making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Officers of the Home Consortium who are former partners of PricewaterhouseCoopers There are no officers of Home Consortium who are former partners of PricewaterhouseCoopers. Rounding of amounts Home Consortium is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest hundred thousand dollars, unless otherwise stated. Related party confirmation The directors confirm that since listing Home Consortium has complied with, and continues to comply with, its Related Party Transaction Policy which is publicly available. In addition, the independent directors confirm that all related party transactions have been considered by the Audit and Risk Committee. 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 immediately after this directors’ report. Auditor PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. 25 Letter from the Chair of the Remuneration and Nomination Committee Dear Securityholders, On behalf of the Board of Directors (‘the Board’) and as Chair of the Remuneration and Nomination Committee, I am pleased to present Home Consortium’s remuneration report for the year ended 30 June 2020. Remuneration philosophy and framework The group’s executive remuneration philosophy is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework is built on rewarding exceptional effort where value is created for securityholders and includes benchmarked total remuneration comprising base salary, short term incentives and long term incentives. The Board strives to ensure that executive reward satisfies key criteria consistent with good reward governance practices, such as competitiveness and fairness, acceptability to stapled security holders, performance alignment of executive compensation as well as transparency and clarity. Performance for the year ended 30 June 2020 The Board considers that the group has performed well in a challenging market. Each member of the management team demonstrated considerable effort, both individually and collectively, to respond to the uncertain financial implications of the COVID‑19 pandemic. Our platform of hyper‑convenience with each centre anchored by predominantly national retailers spanning daily needs and services enterprises, combined with the drive and initiative of the management team proactively engaging with our tenants has positioned the group well during an uncertain and unprecedented time. The group delivered on its value accretive objectives with total shareholder returns outperforming the benchmark S&P/ASX 300 A‑REIT index. Two key highlights achieved in spite of COVID‑19 challenges were: • freehold pro‑forma year ended 30 June 2020 (‘FY20’) FFO of $17.2 million – an out performance of 13.2% versus the Prospectus forecast of $15.2 million; and • 12.35% outperformance versus the S&P/ASX 300 A‑REIT index. COVID‑19 related remuneration adjustments for the year ended 30 June 2020 In response to the impacts on the group from COVID‑19, the directors and executives also agreed an abatement of their cash remuneration for FY20 including: • Executive Chairman and Chief Executive Officer fixed remuneration being reduced by 100% for the period of 3 months to 30 June 2020; • Director’s cash fees being reduced by 50% for the period of 3 months to 30 June 2020; and • Key management personnel forgoing the cash component of their short‑term incentive plan for the full year FY20 period. As compensation for the above reduction in cash remuneration the group announced on 5 June 2020 that it intended to provide a one‑off grant of share rights, the details of which are outlined in this report. Overall, the Board aims to ensure that the group’s remuneration platform is both market competitive and fair to all stakeholders and we will continue to review and assess the effectiveness of our remuneration framework in order to motivate and retain our senior executives. This is the first remuneration report of the group. We are looking to further enhance the report for the coming year and we welcome any feedback that investors may have. Chris Saxon Chair of the Remuneration and Nomination Committee 25 August 2020 Annual Report 2020 26 HomeCo. Directors’ report continued Remuneration report (audited) The remuneration report details the key management personnel (‘KMP’) remuneration arrangements for the group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, including all directors. The KMP of the group consisted of the following directors of Home Consortium: • David Di Pilla – Executive Chairman and Chief Executive Officer (appointed on 11 October 2017); • Chris Saxon – Deputy Chairman and Lead Independent Non‑Executive Director (appointed on 23 September 2019); • Zac Fried – Non‑Executive Director (appointed on 23 September 2019); • Greg Hayes – Non‑Executive Director (appointed on 23 September 2019); • Jane McAloon – Independent Non‑Executive Director (appointed on 23 September 2019); and • Brendon Gale – Independent Non‑Executive Director (appointed on 23 September 2019). The KMP of the group also includes the following executives: • Sid Sharma – Chief Operating Officer; • Will McMicking – Finance and Strategy Director; • Andrew Selim – General Counsel and Company Secretary; and • Andrew Boustred – Development Director. This remuneration report is set out under the following main headings: • Governance framework; • Employment agreements; • Details of remuneration for the financial year; • Share‑based compensation; • Additional information; and • Additional disclosures relating to KMP. Governance framework The Remuneration and Nomination Committee consists of the following three Independent Non‑Executive Directors: • Christopher Saxon (Committee Chair); • Jane McAloon; and • Brendon Gale. The Committee’s role and objectives are to support and advise the Board in fulfilling its responsibilities to security holders and employees of the group by endeavouring to ensure that: • directors and senior executives of the group are remunerated fairly, appropriately and transparently; • the remuneration policies and outcomes of the group strike an appropriate balance between the interests of the group’s security holders and rewarding and motivating executives and employees in order to secure the long term benefits from their energy and loyalty; and • short and long term incentives are linked to the creation of sustainable security holder returns. 27 Principles used to determine the nature and amount of remuneration The Board, with the assistance of Remuneration and Nomination Committee has structured an executive remuneration framework that seeks to be market competitive and to align performance measures to the achievement of the group’s strategic objectives. The reward framework is also designed to align executive reward to stapled security holders’ interests. The Board has considered that it should seek to enhance stapled security holders’ interests by: • having economic profit as a core component of plan design; • focusing on sustained growth in stapled security holder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non‑financial drivers of value; and • attracting and retaining high calibre executives. Additionally, the reward framework seeks to enhance executives’ interests by: • rewarding capability and experience; • reflecting competitive reward for contribution to growth in stapled security holder wealth; and • providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non‑executive director and executive director remuneration is separate. Non‑executive directors remuneration Fees and payments to non‑executive directors reflect the demands and responsibilities of their role. Non‑executive directors’ fees and payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination Committee may, from time to time, receive advice from independent remuneration consultants to ensure non‑executive directors’ fees and payments are appropriate and in line with the market. Subject to ASX listing rules, Home Consortium may from time to time determine the maximum aggregate remuneration to be provided to the directors in a general meeting. Until a different amount is determined, under Home Consortium’s constitution, the amount of the maximum aggregate remuneration is $1,000,000 per annum. The annual non‑executive directors’ base fee agreed to be paid by the group to each of the non‑executive directors is $100,000 per annum. Non‑executive directors will also be paid committee fees of $20,000 per year for each Board Committee of which they are a chair or $10,000 for each Board Committee of which they are a member. All non‑executive directors’ fees are inclusive of statutory superannuation contributions. 50% of the base annual cash fee can be salary sacrificed to be received as rights in any 12‑month period. COVID‑19 grant of share rights in lieu of FY20 directors’ fees The group has provided a one‑off grant of share rights as compensation for the reduction in cash remuneration for non‑executive directors’ fees. The number of rights to be granted has been calculated by dividing the cash remuneration forgone by the volume weighted average price (‘VWAP’) of Home Consortium’s securities over the 20 trading days following Home Consortium’s ASX trading update on 7 May 2020. These dates were selected on the basis that this was the period during which the compensation reductions (and other cash flow preservation measures) were in place and the group’s business was impacted by the COVID‑19 pandemic. The VWAP has been calculated to be $2.81. The rights granted under the offer will vest automatically if the relevant non‑executive director continues to hold office at the vesting date in 2 years and is not subject to any performance hurdles. Annual Report 2020 28 HomeCo. Directors’ report continued Executive remuneration The group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: • base pay; • short‑term performance incentives; • share‑based payments; and • other remuneration such as superannuation and long service leave. The combination of these comprises the relevant executive’s total remuneration. Fixed remuneration, consisting of base salary and superannuation, is reviewed annually by the Remuneration and Nomination Committee based on individual and business unit performance, the overall performance of the group and comparable market remuneration. Short‑term incentive plan (‘STIP’) The STIP is designed to provide executives with an opportunity to be rewarded based on performance over the financial year. It provides them with an ability to earn a maximum percentage of current annual fixed remuneration subject to meeting applicable performance and service conditions over the performance period. STIP payments are granted to executives based on specific annual targets and key performance indicators (‘KPIs’) being achieved as well as an overview of their contribution to the organisation. KPIs vary according to the areas of responsibility for each STIP participant. Following the end of the performance period awards are determined based on the extent to which the performance and service conditions are satisfied. In addition, it is important to note that the group deemed it appropriate to establish a threshold test for STIP payments linked to achievement of the Freehold FFO per share detailed below. The FY20 STIP is subject to the following performance conditions tested over the performance period: • the group’s Prospectus FY20 Freehold FFO per security (as a mandatory condition); and • individual KPIs agreed with each member of the KMP. The STIP is an annual plan with maximum FY20 payments of between 30% to 40% of base salary. David Di Pilla, the Executive Chairman and Chief Executive Officer has elected not to participate in the FY20 STIP. However, his performance, while not relevant to FY20 STIP, has been reviewed by the Board in accordance with the terms of his employment agreement. The FY20 STIP was originally intended to be paid in cash but in response to the impacts from COVID‑19 the executives agreed to forgo any cash payable under the FY20 STIP. The Board has resolved that this cash entitlement be replaced with a one‑off grant of share rights equal to the forgone cash remuneration (the details of which are outlined below). 29 COVID‑19 grant of share rights in lieu of reduced FY20 cash remuneration for executives The group has provided a one‑off grant of share rights as compensation for the reduction in cash remuneration for executives including the Executive Chairman. The number of rights to be granted has been calculated by dividing the cash remuneration forgone by the ‘VWAP’ of Home Consortium’s securities over the twenty trading days following Home Consortium’s ASX trading update on 7 May 2020. These dates were selected on the basis that this was the period during which the compensation reductions (and other cash flow preservation measures) were in place and the group’s business was impacted by the COVID‑19 pandemic. The VWAP has been calculated to be $2.81. The rights granted under the offer will only vest upon satisfaction of the applicable conditions, being (i) continuing employment at the vesting date; and (ii) Home Consortium’s security price reaching $3.35 over 20 trading days following the group’s FY22 full‑year results announcement. In the case of executives other than Chief Executive Officer, who has not participated in FY20 STIP, the quantum of rights granted has been determined by reference to the extent to which their respective STIP performance conditions were satisfied at the end of FY20. Long‑term incentive plan (‘LTIP’) The LTIP awards share‑based payments to executives over a period of three years based on long‑term incentive measures. These include increase in stapled security holders value relative to the increase compared to the group’s direct competitors and achievement of target FFO of the group. The Remuneration and Nomination Committee reviewed the long‑term equity‑linked performance incentives specifically for executives during the year ended 30 June 2020. KMP are eligible to participate in LTIP of up to 40% of their base salary. During the financial year ended 30 June 2020, the group granted 374,627 share rights (‘FY20 LTIP Awards’) to KMP vesting over a three‑year period. The share rights are subject to the KMP meeting the service condition and the following performance conditions: • Total Shareholder Return (‘TSR’) condition: 50% will vest based on group’s total securityholder return measured against a comparator group consisting of Australia Real Estate Investment Trusts in the S&P/ASX300. Vesting occurs at 50% when the group is at the 50th percentile of the comparator group and at 100% at or above the 75th percentile. Between the 50th and 75th percentile, the share rights will vest on a straight‑line basis; and • Freehold FFO per security condition: 50% will vest based on the group’s aggregate Freehold FFO per security. Vesting occurs on a sliding scale of 50% vesting at the threshold (being 97.5% of Freehold FFO target) to 100% vesting at maximum performance (being at or above 100% of Freehold FFO target). LTIP is settled in cash or issue of shares at the discretion of the Board. The FY20 LTIP Awards will be tested over the performance period of approximately three years from the date of grant, will vest immediately following the announcement of the FY22 financial results and expire two years following the vesting date. Use of remuneration consultants During the financial year ended 30 June 2020, the group engaged Ernst & Young to provide remuneration benchmarking insights on the group’s employee equity plan. None of these services contained any remuneration recommendations in relation to KMPs. Annual Report 2020 30 HomeCo. Directors’ report continued Employment agreements Remuneration and other terms of employment for KMP are formalised in employment agreements. The agreements are continuous (i.e. not of a fixed duration) unless otherwise stated. These agreements provide for a total compensation including a base salary, superannuation contribution, incentive arrangements and notice and termination provisions. Details of these employment agreements are as follows: Name: Title: Agreement commenced: David Di Pilla Executive Chairman and Chief Executive Officer With effect from 1 October 2019 Term of agreement: Ongoing – no fixed minimum term Details: Base salary of $500,000 per annum (inclusive of superannuation). The group may also provide additional benefits to David in its absolute discretion. David has elected not to participate in any STIP. David is eligible to participate in the LTIP on the terms determined by the group from time to time. Either party can terminate employment by giving the other party 6 months’ notice (or by the group making payment in lieu of notice of part or all of the notice period). The group may summarily terminate the employment contract in certain circumstances, including acts of serious misconduct, gross negligence, a serious breach of employment agreement or bankruptcy. All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001. The employment contract contains post‑employment restraints including non‑compete clauses and restrictions against soliciting and enticing customers. The restrictions operate for up to 12 months post‑employment and the enforceability of these restraints is subject to all usual legal restriction. Name: Title: Agreement commenced: Sid Sharma Chief Operating Officer With effect from 14 October 2019 Term of agreement: Ongoing – no fixed minimum term Details: Name: Title: Agreement commenced: Base salary of $475,000 per annum (inclusive of superannuation). Sid is eligible to participate in the STIP of up to 40% of his base salary. In addition, Sid is eligible to participate in the LTIP of up to 40% of his base salary. Will McMicking Finance and Strategy Director With effect from 14 October 2019 Term of agreement: Ongoing – no fixed minimum term Details: Base salary of $350,000 per annum (inclusive of superannuation). Will is eligible to participate in the STIP of up to 30% of his base salary. In addition, Will is eligible to participate in LTIP of up to 30% of his base salary* 31 Name: Title: Agreement commenced: Andrew Selim General Counsel and Company Secretary With effect from 14 October 2019 Term of agreement: Ongoing – no fixed minimum term Details: Name: Title: Agreement commenced: Base salary of $400,000 per annum (inclusive of superannuation). Andrew is eligible to participate in the STIP of up to 30% of his base salary. In addition, Andrew is eligible to participate in LTIP of up to 30% of his base salary. Andrew Boustred Development Director With effect from 14 October 2019 Term of agreement: Ongoing – no fixed minimum term Details: Base salary of $300,000 per annum (inclusive of superannuation). Andrew is eligible to participate in the STIP of up to 30% of his base salary. In addition, Andrew is eligible to participate in LTIP of up to 30% of his base salary. * For FY21 this base salary will be increased to $400,000 per annum (inclusive of superannuation) to ensure that it reflects remuneration that is market competitive and fair commensurate to an equivalent or similar role in the industry in which the group operates. Terms of termination In general, each employment agreement is terminated by providing 6 months’ notice. The KMP have no entitlement to termination payments in the event of removal for misconduct. Details of remuneration for the financial year Prior to the ASX listing on 11 October 2019, Home Consortium was not required to prepare a remuneration report in accordance with the Corporations Act 2001. As such, remuneration report information is presented only for 2020. Amounts of remuneration Details of the remuneration expense of KMP of the group for the financial year are set out in the following tables. Short‑term benefits Post – employment benefits Cash salary and fees $ Cash bonus $ Annual leave $ Super‑ annuation $ Long‑term benefits Long service leave $ Share‑based payments Equity‑ settled shares $ Equity‑ settled rights $ Total $ 43,617 54,385 59,823 43,617 32,740 234,182 – – – – – – – – – – – – 6,717 5,167 5,683 6,717 5,683 29,967 – – – – – – 113,334 – – 113,334 113,334 3,077 3,847 4,231 3,077 2,309 166,745 63,399 69,737 166,745 154,066 340,002 16,541 620,692 30 June 2020 Non‑Executive Directors: Chris Saxon* Zac Fried* Greg Hayes* Jane McAloon* Brendon Gale* Annual Report 2020 32 HomeCo. Directors’ report continued * Represents remuneration from 23 September 2019 to 30 June 2020. Equity‑settled shares to independent non‑executive directors, represents salary sacrificed fees and a one‑off grant in lieu of cash fees for additional time and effort contributed by Independent Non‑executive Directors in the company achieving its initial public offering (‘IPO’) (‘NED Grant’). The quantum of the one‑off grant was $80,000 and equal to two times the consulting fees payable to the Independent Non‑Executive Director in the lead up to the IPO. Equity‑settled rights to non‑executive directors, represents the one‑off grant as compensation for the reduction in cash remuneration due to the COVID‑19 impact on the business. These deferred shares are expensed over the performance period, which includes the year to which the grant relates and the subsequent vesting period of the rights. Short‑term benefits Post‑ employment benefits Cash salary and fees $ Cash bonus $ Annual leave $ Super – annuation $ Long‑term benefits Long service leave $ Share‑based payments Equity‑ settled shares $ Equity‑ settled rights $ Total $ 30 June 2020 Executive Director: David Di Pilla 239,499 Other KMP: Sid Sharma Will McMicking Andrew Selim 454,132 299,931 431,919 Andrew Boustred 258,548 1,684,029 – – – – – – 5,534 15,752 15,400 6,560 2,331 1,413 31,238 22,936 21,826 21,628 16,346 98,488 – – – – – – – – – – – – 122,989 383,774 138,944 631,412 28,011 51,846 356,328 507,724 43,843 320,150 385,633 2,199,388 Equity‑settled rights to other KMP, represents the LTIP awards, the one‑off grant as compensation for the reduction in cash remuneration due to COVID‑19 and a one‑off grant to KMPs (other than David Di Pilla and Will McMicking) to promote their retention post‑IPO (‘IPO Employee Grant’). These deferred shares are expensed over the performance period, which includes the year to which the payment relates and the subsequent vesting period of the rights. Non‑executive directors’ salaries are 100% fixed. The fixed proportion and the proportion of remuneration linked to performance of executive directors and KMP are as follows: Name Executive Directors: David Di Pilla Other KMP: Sid Sharma Will McMicking Andrew Selim Andrew Boustred Fixed remuneration 30 June 2020 At risk – STI 30 June 2020 At risk – LTI* 30 June 2020 68% 78% 92% 90% 86% – – – – – 32% 22% 8% 10% 14% * At risk – LTI includes FY20 one‑off grant of deferred share rights in lieu of reduction in cash remuneration. 33 Performance based remuneration granted and forfeited during the year The table below outlines those KMP eligible for STIP for the financial year and the proportion awarded and forfeited. The amount of STIP awarded is determined by the Remuneration and Nomination Committee having regard to the satisfaction of performance measures as described in the ‘Short‑term incentive plan’ section above. Name Sid Sharma Will McMicking Andrew Selim Andrew Boustred Maximum FY20 STIP $ 190,000 105,000 120,000 90,000 Awarded $ 171,000 94,500 108,000 81,000 Awarded % 90.00% 90.00% 90.00% 90.00% Forfeited $ 19,000 10,500 12,000 9,000 Forfeited % 10.00% 10.00% 10.00% 10.00% The STIP amounts awarded above have been awarded as deferred share rights (‘COVID‑19 Grant’) as described previously. The STIP amounts awarded reflect the substantial achievement of KPIs that vary according to the responsibility of each STIP participant. While the individual performance of each KMP resulted in 90% award of maximum FY20 STIP, certain measures of their performance were not achieved due to COVID‑19’s impact on the group and on that basis 10% was forfeited. Share‑based compensation Issue of shares Other than rights that converted to shares, there were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2020. Options There were no options over ordinary shares issued to directors and other KMP as part of compensation that were outstanding as at 30 June 2020. There were no options over ordinary shares granted to or vested by directors and other KMP as part of compensation during the year ended 30 June 2020. Share rights The terms and conditions of each grant of share rights over ordinary shares affecting remuneration of directors and other KMP in this financial year or future reporting years are as follows: Grant details NED Grant Grant date Estimated vesting date Particulars 14/10/2019 27/02/2020 FY20 LTIP 14/10/2019 27/08/2022 In accordance with NED Equity Plan Service and performance conditions IPO Employee Grant 14/10/2019 14/10/2022 Service condition only FY20 COVID‑19 Grant 25/08/2020 30/09/2022 Service and performance conditions for executives In accordance with NED Equity Plan for non‑executive directors Rights granted have a $nil exercise price and carry no dividend or voting rights. Number of rights 101,493 Fair value at grant date $3.35 374,627 $1.52 192,538 225,356 $2.81 $1.54 Annual Report 2020 34 HomeCo. Directors’ report continued Share rights holding The number of share rights (including rights granted and vested as part of the compensation during the financial year) over ordinary shares in Home Consortium held during the financial year by each director and other members of KMP of the group, including their personally related parties, is set out below: Share rights over ordinary shares Non‑Executive Directors: Chris Saxon Jane McAloon Brendon Gale Other KMP: David Di Pilla Sid Sharma Will McMicking Andrew Selim Andrew Boustred Balance at the start of the year Rights granted Rights vested and exercised Expired/ forfeited/other Balance at the end of the year* – – – – 33,831 33,831 33,831 (33,831) (33,831) (33,831) 101,493 (101,493) – – – – – – – – Balance at the start of the year Rights granted Rights vested and exercised Expired/ forfeited/other Balance at the end of the year* – – – – – – 223,881 189,552 31,343 65,672 56,717 567,165 – – – – – – – – – – – – 223,881 189,552 31,343 65,672 56,717 567,165 * Balance at the end of the year represents unvested share rights and does not include FY20 COVID‑19 Rights granted on 25 August 2020. Additional information The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: Share price at reporting date ($) TSR of Home Consortium (%)* TSR of S&P/ASX 300 A‑REIT Index (%)* * TSR from 11 October 2019 (ASX listing date) to 30 June 2020. 30 June 2020 IPO listing price 3.00 (9.41) (21.76) 3.35 – – 35 Additional disclosures relating to KMP Shareholding The number of shares in Home Consortium held during the financial year by each director and other members of KMP of the group, including their personally related parties, is set out below: Balance at the start of the year Received as part of remuneration Additions Disposals/other Balance at the end of the year – 33,831 131,344 10,000,000 8,682,539 – – 30,857,979 2,206,306 500,000 – – 33,831 33,831 – – – 10,432,049 403,644 131,344 187,439 2,269,999 114,754 37,911 52,246,824 101,493 13,708,484 – – – – – – – – – 165,175 20,432,049 9,086,183 165,175 221,270 33,127,978 2,321,060 537,911 66,056,801 Ordinary shares Chris Saxon Zac Fried Greg Hayes Jane McAloon Brendon Gale David Di Pilla Will McMicking Andrew Boustred Other transactions There are a number of related party transactions between KMP and the group as disclosed in the notes to the Financial Statements. The terms and conditions of these transactions are considered to be no more favourable than those which it is reasonable to expect would have been adopted if dealing with an unrelated individual at arm’s length in the same circumstances. Finally, as part of the group’s review of salaries to all employees, the Board has approved a uniform increase of 2%* which is reflective of the group’s increase in FFO and asset base over the course of FY20. * Other than in respect of the Finance and Strategy Director – refer to employment agreement section. This concludes the remuneration report, which has been audited in accordance with section 308(3c) of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors David Di Pilla Director 25 August 2020 Annual Report 2020 36 HomeCo. Auditor’s independence declaration Consolidated Financial Statements PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Auditor’s Independence Declaration As lead auditor for the audit of Home Consortium Limited for the year ended 30 June 2020 and Home Consortium Developments Limited for the period ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been: (a)no contraventions of the auditor independence requirements of the Corporations Act 2001 in relationto the audit; and(b)no contraventions of any applicable code of professional conduct in relation to the audit.This declaration is in respect of Home Consortium Limited and the entities it controlled during the year and Home Consortium Developments Limited and the entities it controlled during the period. Scott Hadfield Sydney Partner PricewaterhouseCoopers 25 August 2020 Consolidated Financial Statements Home Consortium Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2020 Revenue Property income Other income Interest revenue Change in assets/liabilities at fair value through profit or loss Expenses Property expenses Corporate expenses Acquisition, transaction and legal settlement costs Finance costs Loss before income tax benefit Income tax benefit Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Loss for the year and total comprehensive income for the year is attributable to: Securityholders of HCL Securityholders of HCDL Basic earnings per security Diluted earnings per security 37 Consolidated 30 June 2020 $m 30 June 2019 $m Note 6 7 8 8 9 35 35 73.3 49.2 0.2 9.7 (33.7) (8.1) (9.3) (35.4) (3.3) 0.5 (2.8) – (2.8) (2.8) – (2.8) Cents (1.67) (1.67) 0.5 5.2 (30.5) (7.9) – (46.4) (29.9) 7.3 (22.6) – (22.6) (22.6) – (22.6) Cents (24.21) (24.21) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Annual Report 2020 38 HomeCo. Home Consortium Consolidated statement of financial position As at 30 June 2020 Assets Current assets Cash and cash equivalents Trade receivables Other receivables Assets classified as held for sale Total current assets Non‑current assets Investment property – freehold Investment property – leasehold Right‑of‑use assets Deferred tax assets Total non‑current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Employee benefit obligations Lease and other financial liabilities Total current liabilities Non‑current liabilities Borrowings Derivative financial instruments Provisions Lease and other financial liabilities Total non‑current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity Consolidated 30 June 2020 $m 30 June 2019 $m Note 10 11 12 13 14 15 9 16 17 19 21 17 20 18 21 22 23 29.6 3.4 5.1 38.1 – 38.1 1,013.8 84.3 0.5 141.1 1,239.7 29.2 0.9 29.8 59.9 11.6 71.5 771.0 129.9 – 135.6 1,036.5 1,277.8 1,108.0 38.2 – 0.5 9.6 48.3 361.4 3.1 2.0 133.5 500.0 548.3 729.5 28.1 332.9 0.6 14.2 375.8 78.4 – 3.4 226.5 308.3 684.1 423.9 3,608.0 39.1 3,291.2 486.6 (2,917.6) (3,353.9) 729.5 423.9 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Home Consortium Consolidated statement of changes in equity For the year ended 30 June 2020 Consolidated Balance at 1 July 2018 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Contributed equity $m 3,291.2 Profits reserve $m 486.6 – – – – – – Balance at 30 June 2019 3,291.2 486.6 Consolidated Balance at 1 July 2019 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) Share‑based payments (note 36) Transfer to accumulated losses Dividends paid (note 24) Contributed equity $m 3,291.2 Profits reserve $m 486.6 – – – 316.8 – – – – – – – – (439.1) (8.9) Share‑based payments reserve $m – – – – – Share‑based payments reserve $m – – – – – 0.5 – – Accumulated losses $m (3,331.3) (22.6) – (22.6) (3,353.9) Accumulated losses $m (3,353.9) (2.8) – (2.8) – – 439.1 – Balance at 30 June 2020 3,608.0 38.6 0.5 (2,917.6) Non‑ controlling interest $m – – – – – Non‑ controlling interest $m – – – – – – – – – 39 Total equity $m 446.5 (22.6) – (22.6) 423.9 Total equity $m 423.9 (2.8) – (2.8) 316.8 0.5 – (8.9) 729.5 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Annual Report 2020 40 HomeCo. Home Consortium Consolidated statement of cash flows For the year ended 30 June 2020 Cash flows from operating activities Receipts from vendors and tenants (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Finance costs paid Net cash (outflow) from operating activities Cash flows from investing activities Payments for acquisition of investment properties Proceeds from disposal of investment property Proceeds from release of deposits Net cash (outflow) inflow from investing activities Cash flows from financing activities Proceeds from issue of shares and convertible notes Share issue transaction costs Loans issued to related party Proceeds from borrowings Repayment of borrowings Borrowing costs paid Repayment of lease liabilities and surrenders Dividends paid Net cash inflow (outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year Consolidated 30 June 2020 $m 30 June 2019 $m Note 58.4 (53.8) 0.2 (28.0) (23.2) 35.9 (42.7) 0.5 (44.1) (50.4) (227.5) (103.9) – 5.3 (222.2) 350.0 (16.0) (1.6) 366.0 (415.7) (7.6) (20.4) (8.9) 245.8 0.4 29.2 29.6 41.8 0.7 (61.4) – – (9.4) 138.9 – – (10.1) – 119.4 7.6 21.6 29.2 37 22 37 24 10 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 41 Home Consortium Notes to the consolidated financial statements For the year ended 30 June 2020 Note 1. General information The financial statements cover Home Consortium as a group consisting of Home Consortium Limited (the ‘Company’, ‘parent entity’ or ‘HCL’) and the entities it controlled at the end of, or during, the year and Home Consortium Developments Limited (‘HCDL’) (collectively referred to as ‘Home Consortium’, ‘group’ or ‘stapled group’) (refer to Note 2). The financial statements are presented in Australian dollars, which is Home Consortium’s functional and presentation currency. Home Consortium Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: 19 Bay Street Double Bay NSW 2028 A description of the nature of the group’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 August 2020. The directors have the power to amend and reissue the financial statements. Note 2. Stapling of Home Consortium Developments Limited and ASX listing of Home Consortium During the year, the shares in HCDL, a newly formed entity, were stapled to the shares in HCL to form stapled securities such that shares in HCL and HCDL must be purchased or sold together. The stapled securities, known as “Home Consortium” were admitted to the official list of the Australian Securities Exchange (‘ASX’) on 11 October 2019 with the ASX code HMC. HCL and HCDL remain separate legal entities in accordance with the Corporations Act 2001. These financial statements present both the financial statements and accompanying notes of HCL and its controlled entities and HCDL jointly as permitted by ASIC Corporations (Stapled Group Reports) Instrument 2015/838. HCL is the deemed parent of the stapled group in accordance with AASB 3 ‘Business Combinations’. The contributed equity and retained earnings of HCDL is shown as a non‑controlling interest in these financial statements even though the equity holders of HCDL (the acquiree) are also equity holders in HCL (the acquirer) by virtue of the stapling arrangement. Note 3. Significant accounting policies 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. New or amended Accounting Standards and Interpretations adopted The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the group for the financial year ended 30 June 2020. With the exception of AASB 16 ‘Leases’ which was early adopted in the previous financial year with effect from 1 July 2018, any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for‑profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Annual Report 2020 42 HomeCo. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of certain financial assets and liabilities, including derivative financial instruments and revaluation of investment properties at fair value through profit or loss. Critical accounting estimates The preparation of the financial statements 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. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the group only. Supplementary information about the parent entity is disclosed in Note 32. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Home Consortium Limited and Home Consortium Developments Limited as at 30 June 2020 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de‑consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non‑controlling interest acquired is recognised directly in equity attributable to the parent. Where the group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non‑controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’), which is the Board of Directors. The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Revenue recognition The group recognises revenue as follows: Property rental income Property rental income is recognised on a straight‑line basis over the lease term for leases with fixed rate or guaranteed minimum rent review clauses, net of incentives. Home Consortium Notes to the consolidated financial statements continued 43 Other property income Other property income represents direct and indirect outgoings. The group recognises direct and indirect outgoings based on actual costs incurred in accordance with the terms of the related leases. Actual costs reflect the service provided. The amount of recoveries revenue is determined by the actual cost incurred and the terms in the lease. The outgoings recovered are recognised over the period the services are provided. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 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. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Home Consortium Limited (the ‘head entity’) and its wholly‑owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Annual Report 2020 44 HomeCo. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Current and non‑current classification Assets and liabilities are presented in the statement of financial position based on current and non‑current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non‑current. A liability is classified as current when: it is either expected to be settled in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non‑current. Deferred tax assets and liabilities are always classified as non‑current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short‑term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Debts that are known to be uncollectable are written off when identified. Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Movements in fair value are recognised directly in profit or loss. Non‑current assets or disposal groups classified as held for sale Non‑current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non‑current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non‑current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non‑current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non‑current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Home Consortium Notes to the consolidated financial statements continued 45 Non‑current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. Investment properties Investment properties comprise of freehold and leasehold investment properties held at fair value through profit or loss. Freehold properties Freehold properties are held for long‑term rental and capital appreciation. Investment properties are initially recognised at cost, including transaction costs, and are subsequently remeasured annually at fair value. Movements in fair value are recognised directly to profit or loss. Investment properties are derecognised when disposed of or when there is no future economic benefit expected. Gains or losses resulting from the disposal of freehold property is measured as the difference between the latest carrying value of the asset at the date of disposal and is recognised when control over the property has been transferred. Leasehold properties Leasehold properties are investment properties that are located on leased premises. In turn these leases are often for long periods of time. The group is a lessee in respect of the lease and applies AASB 16 ‘Leases’ to the lease. The group leases various properties under head lease agreements (ground leases) for the sub‑letting to tenants. Leases range in term from 7 to 16 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The group recognises the right‑of‑use asset as investment property. Right‑of‑use assets are measured at fair value which reflects the expected cash flows, including variable lease payments that are expected to become payable. The value of any recognised lease liability is then added back to the fair value to determine the carrying value of the investment property. Leasing costs and tenant incentives Leasing costs Leasing costs are costs that are directly associated with negotiating and arranging an operating lease (including commissions, fees and costs of preparing and processing documentation for new leases). These costs are capitalised and amortised on a straight‑line basis over the term of the lease. Tenant incentives Incentives such as cash, rent‑free periods, lessee or lessor owned fit‑outs may be provided to lessees to enter into a lease. These incentives are capitalised and are amortised on a straight‑line basis over the term of the lease as a reduction of rental income. The carrying amount of the tenant incentives is reflected in the fair value of investment properties. Right‑of‑use assets A right‑of‑use asset is recognised at the commencement date of a lease. The right‑of‑use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right‑of‑use assets are depreciated on a straight‑line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right‑of‑use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. Right‑of‑use assets that meet the definition of investment property are measured at fair value where the group has adopted a fair value measurement basis for investment property assets, as described above. Annual Report 2020 46 HomeCo. The group has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with terms of 12 months or less and leases of low‑value assets. Lease payments on these assets are expensed to profit or loss as incurred. 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. Due to their short‑term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right‑of‑use asset, or to profit or loss if the carrying amount of the right‑of‑use asset is fully written down. Finance costs Finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the group has a present (legal or constructive) obligation as a result of a past event, it is probable the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre‑tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short‑term employee benefits Liabilities for wages and salaries, including non‑monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Home Consortium Notes to the consolidated financial statements continued 47 Other long‑term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at 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, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share‑based payments Equity‑settled share‑based compensation benefits are provided to directors and employees. Equity‑settled transactions are awards of shares, rights over shares or options over shares, that are provided to directors and employees in exchange for the rendering of services. The cost of equity‑settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black‑Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non‑vesting conditions that do not determine whether the group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity‑settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity‑settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share‑based compensation benefit as at the date of modification. If the non‑vesting condition is within the control of the group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity‑settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Annual Report 2020 48 HomeCo. Fair value measurement When an asset or liability, financial or non‑financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non‑financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non‑recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Contributed capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Company. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Home Consortium, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Home Consortium Notes to the consolidated financial statements continued 49 Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Comparative figures Comparatives in the financial statements have been realigned to the current period presentation. There has been no net effect to the loss or the net assets of the group. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest hundred thousand dollars, unless otherwise stated. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the group for the annual reporting period ended 30 June 2020. The group’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the group, are set out below. Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the group has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the group may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the group’s financial statements. Note 4. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID‑19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID‑19) pandemic has had, or may have, on the group based on known information. This consideration extends to the nature of the products and services offered, tenants, supply chain, staffing and geographic regions in which the group operates. The pandemic has materially impacted the financial performance of the group during the financial year with government‑imposed trading restrictions and isolation measures impacting tenants across the group. These impacts are outlined below and the fair value of assets are noted in Note 26. Annual Report 2020 50 HomeCo. Rent relief provided to tenants that relate to periods after the execution of an agreement with the tenant constitutes a lease modification under AASB 16 ‘Leases’. $2.5 million (Freehold $2.3 million and Leasehold $0.2 million) has been capitalised and amortised over the remaining lease term. Rent relief relating to periods prior to the execution of an agreement have been treated as a write‑off of receivables under AASB 9 ‘Financial Instruments’ which amounted to $2.8 million (Freehold $2.4 million and Leasehold $0.4 million). An additional $1.4 million in rent was deferred and included in receivables and is expected to be collected after the reporting date. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and type of tenants and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID‑19) pandemic and forward‑looking information that is available. The allowance for expected credit losses, as disclosed in Note 11, is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. Fair value measurement hierarchy The group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. The fair value assessment of investment property as at 30 June 2020 has been conducted using the information available at the time of the preparation of the financial statements and best estimates of future performance, however the future impacts of the COVID‑19 pandemic are unknown and may impact property valuations. Refer to Note 26 for details of valuation techniques used. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the group considers it is probable that future taxable amounts will be available to utilise those temporary differences and taxable losses. The group assesses the recoverability of deferred tax assets at each reporting date. In making this assessment, the group considers in particular the future business plans, reasons for past losses, whether the unused tax losses resulted from identifiable causes which are unlikely to recur and if any tax planning opportunities exist in the period in which the taxable losses can be utilised. The recognised deferred tax asset of $141.1 million (2019: $135.6 million) comprises $62.1 million (2019: $45.5 million) of carry forward tax losses and $79.0 million (2019: $90.1 million) of deductible temporary differences, net of applicable offsetting deferred tax liabilities. Uncertainty continues to exist in relation to the utilisation of this asset, which is subject to there being continued future taxable profits over the period of time in which the losses can be utilised. The group has made a judgement that they will be able to generate sufficient taxable profits over the foreseeable future, based upon its future business plans. The uncertainty around the recognition of the deferred tax asset will be resolved in future years if taxable profits are generated. Home Consortium Notes to the consolidated financial statements continued 51 Lease term The lease term is a significant component in the measurement of both the right‑of‑use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the group’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right‑of‑use asset, with similar terms, security and economic environment. Lease make good provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. Note 5. Operating segments Identification of reportable operating segments The group is organised into two operating segments: Freehold properties and Leasehold properties. These operating segments are based on the internal reports that are reviewed by the Chief Operating Decision Makers (‘CODM’), which is the Board of Directors, in assessing performance and in determining the allocation of resources. The CODM monitor the performance of the business on the basis of Funds from Operations (‘FFO’) for each segment. FFO represents the group’s underlying and recurring earnings from its operations, and is determined by adjusting the statutory net profit after tax for items which are non‑cash, unrealised or capital in nature. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. Annual Report 2020 52 HomeCo. Major customers During the year ended 30 June 2020 approximately 12% of the group’s external revenue was derived from sales to one major customer. Operating segment information Consolidated – 30 June 2020 Revenue Property rental income Other property income Total revenue FFO Leasehold rent Interest and finance charges on lease liabilities Fair value movements Acquisition, transaction and legal settlement costs Amortisation of borrowing costs Straight lining and amortisation Profit/(loss) before income tax benefit Income tax benefit Loss after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Freehold properties $m Leasehold properties $m 52.9 9.4 62.3 10.1 2.8 (1.7) 14.6 (5.8) (7.4) (0.7) 11.9 9.9 1.1 11.0 (15.7) 20.6 (11.8) (4.9) (3.5) – 0.1 (15.2) 1,099.5 178.3 389.9 158.4 Total $m 62.8 10.5 73.3 (5.6) 23.4 (13.5) 9.7 (9.3) (7.4) (0.6) (3.3) 0.5 (2.8) 1,277.8 1,277.8 548.3 548.3 Home Consortium Notes to the consolidated financial statements continued 53 Total $m 46.9 2.3 49.2 (41.0) 28.8 (18.7) 5.2 (4.8) 0.6 (29.9) 7.3 (22.6) 1,108.0 1,108.0 684.1 684.1 Freehold properties $m Leasehold properties $m 38.3 1.8 40.1 (1.1) – – 3.4 (4.8) 0.4 (2.1) 8.6 0.5 9.1 (39.9) 28.8 (18.7) 1.8 – 0.2 (27.8) 919.7 188.3 431.4 252.7 Consolidated 30 June 2020 $m 30 June 2019 $m 62.8 10.5 73.3 46.9 2.3 49.2 Consolidated – 30 June 2019 Revenue Property rental income Other property income Total revenue FFO Leasehold rent Interest and finance charges on lease liabilities Fair value movements Amortisation of borrowing costs Straight lining and amortisation Loss before income tax benefit Income tax benefit Loss after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Note 6. Property income Property rental income Other property income Property income Other property income includes recoveries from tenants recognised in accordance with AASB 15 ‘Revenue from contracts with customers’. Disaggregation of revenue The revenue from leases with tenants is all in Australia and recognised on straight‑line basis over the lease term. Revenue from operating segments are set out in Note 5. Annual Report 2020 54 HomeCo. Note 7. Change in assets/liabilities at fair value through profit or loss Net unrealised fair value gain on investment properties – freehold (note 14) Net unrealised fair value (loss)/gain on investment properties – leasehold (note 15) Realised fair value gain on sale of investment properties Loss on remeasurement of other financial liabilities Note 8. Expenses Loss before income tax includes the following specific expenses: Property expenses include COVID‑19 rent relief Finance costs Interest and finance charges on borrowings Interest and finance charges on lease liabilities Amortisation of borrowing costs* Finance costs expensed Superannuation expense Defined contribution superannuation expense Employee benefits expense excluding superannuation Employee benefits expense excluding superannuation** Acquisition, transaction and legal settlement costs IPO costs Lease surrender costs Legal settlements and litigation fees Total acquisition, transaction and legal settlement costs Consolidated 30 June 2020 $m 30 June 2019 $m 17.6 (7.5) – (0.4) 9.7 3.2 1.8 0.2 – 5.2 Consolidated 30 June 2020 $m 30 June 2019 $m 2.8 14.5 13.5 7.4 35.4 0.4 4.8 5.8 0.7 2.8 9.3 – 22.9 18.7 4.8 46.4 0.3 2.2 – – – – * Amortisation of borrowing costs includes $6 million expensed upon refinancing of the previous bank debt of the group. ** Net of Government grant for JobKeeper support of $0.2 million. Home Consortium Notes to the consolidated financial statements continued 55 Note 9. Income tax Income tax benefit Current tax Deferred tax – origination and reversal of temporary differences Aggregate income tax benefit Deferred tax included in income tax benefit comprises: Increase in deferred tax assets Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax benefit Tax at the statutory tax rate of 30% Permanent differences and others Income tax benefit Amounts credited directly to equity Deferred tax assets Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at statutory tax rates Consolidated 30 June 2020 $m 30 June 2019 $m – (0.5) (0.5) (0.5) (3.3) (1.0) 0.5 (0.5) – (7.3) (7.3) (7.3) (29.9) (9.0) 1.7 (7.3) Consolidated 30 June 2020 $m 30 June 2019 $m (5.0) – 2,208.0 662.4 2,216.8 665.0 The group has not brought to account $2,208 million (2019: $2,216.8 million) of tax losses, which includes the benefit arising from tax losses incurred in previous years. The benefits of unused tax losses will only be brought to account (with the recognition of a deferred tax asset) when there is convincing evidence that it is probable that they will be realised. This benefit of tax losses will only be obtained if: • the group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the losses to be realised; • the group continues to comply with the conditions for deductibility imposed by tax legislation, in particular the group continues to meet the Business Continuity Test or Similar Business Test; and • no changes in tax legislation adversely affect the group in realising the benefit from the deductions for the losses. Annual Report 2020 56 HomeCo. Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Tax losses Investment property – freehold Lease liabilities Right‑of‑use assets Others Amounts recognised in equity: Transaction costs on share issue Deferred tax asset Movements: Opening balance Credited to profit or loss Credited to equity Closing balance Note 10. Cash and cash equivalents Current assets Cash at bank – Lease Mitigation Account Cash at bank – other Consolidated 30 June 2020 $m 30 June 2019 $m 62.1 35.4 42.9 (16.1) 11.8 136.1 5.0 141.1 135.6 0.5 5.0 141.1 45.5 51.5 72.3 (39.0) 5.3 135.6 – 135.6 128.3 7.3 – 135.6 Consolidated 30 June 2020 $m 30 June 2019 $m 26.7 2.9 29.6 – 29.2 29.2 The Lease Mitigation Account (‘LMA’) was established in October 2019 with an initial amount of $60 million to fund the ongoing operating and development cost of leasehold properties. Under the Lease Mitigation Deed, the foundation security holders have certain obligations to make additional payments to the LMA on 31 March and 30 September of each year. On these dates the balance in the LMA must be an amount not less than the lesser of: • $30 million (such amount to increase by CPI at 30 June each year); and • 110% of the net present value (‘NPV’) of the Leasehold Liabilities calculated at 30 June and 31 December of that year, unless the NPV is equal to or less than $5 million, where the percentage shall be 100% (the ‘Minimum Balance’). As at 30 June 2020, an additional deposit would be required to maintain the required Minimum Balance, prior to 30 September 2020. Home Consortium Notes to the consolidated financial statements continued 57 Note 11. Trade receivables Current assets Trade receivables Allowance for expected credit losses Consolidated 30 June 2020 $m 30 June 2019 $m 4.1 (0.7) 3.4 1.6 (0.7) 0.9 Allowance for expected credit losses The group has recognised a loss of $nil (2019: $0.7 million) in profit or loss in respect of the expected credit losses for the year ended 30 June 2020. The group has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment or being unable to pay, due to the Coronavirus (COVID‑19) pandemic. As a result, the calculation of expected credit losses has been revised as at 30 June 2020. The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Not overdue 0 to 1 month overdue Over 2 months overdue Note 12. Other receivables Current assets Prepayments Related party receivable* Other deposits Other receivables Carrying amount Allowance for expected credit losses 30 June 2020 $m 30 June 2019 $m 30 June 2020 $m 30 June 2019 $m 1.3 0.9 1.9 4.1 0.6 0.2 0.8 1.6 0.1 0.1 0.5 0.7 – 0.1 0.6 0.7 Consolidated 30 June 2020 $m 30 June 2019 $m 2.5 – 1.8 0.8 5.1 0.5 20.1 7.1 2.1 29.8 * The related party receivable as at 30 June 2019 was extinguished through a share capital reduction during the current financial year (refer to Note 22). Annual Report 2020 58 HomeCo. Note 13. Assets classified as held for sale Asset classified as held for sale Consolidated 30 June 2020 $m 30 June 2019 $m – 11.6 The group had signed a conditional agreement prior to 30 June 2019 to sell part of a block of land at Roxburgh Park VIC to a third‑party subject to the satisfaction of certain conditions precedent. This contract has been cancelled and therefore the asset is now reclassified as investment property (refer to Note 14). Note 14. Investment property – freehold Non‑current assets Investment property – freehold – at fair value 1,013.8 771.0 Consolidated 30 June 2020 $m 30 June 2019 $m Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening balance Additions and acquisitions Classified as held for sale (note 13) Disposals Net unrealised gain from fair value adjustments (note 7) Closing balance Refer to Note 26 for further information on fair value measurement. Lessor commitments Minimum lease commitments receivable but not recognised in the financial statements: Within one year One to two years Two to three years Three to four years Four to five years More than five years 771.0 213.6 11.6 – 17.6 1,013.8 704.7 96.9 (11.6) (22.2) 3.2 771.0 Consolidated 30 June 2020 $m 30 June 2019 $m 54.5 58.1 58.5 56.5 51.7 212.0 491.3 38.9 42.9 43.8 43.5 41.3 181.9 392.3 Home Consortium Notes to the consolidated financial statements continued 59 Note 15. Investment property – leasehold Non‑current assets Investment property – leasehold – at fair value 84.3 129.9 Consolidated 30 June 2020 $m 30 June 2019 $m Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening balance Recognised on adoption of AASB 16 Additions Unrealised fair value (loss)/gain (note 7) Disposals and surrenders Closing balance Refer to Note 26 for further information on fair value measurement. Note 16. Trade and other payables Current liabilities Trade payables Rent received in advance Accrued expenses Other payables Refer to Note 25 for further information on financial instruments. 129.9 – 12.5 (7.5) (50.6) 84.3 – 94.9 33.2 1.8 – 129.9 Consolidated 30 June 2020 $m 30 June 2019 $m 21.7 2.4 8.8 5.3 38.2 22.3 0.4 5.3 0.1 28.1 Annual Report 2020 60 HomeCo. Note 17. Borrowings Current liabilities Senior secured bank debt Capitalised borrowing costs Non‑current liabilities Senior secured bank debt Capitalised borrowing costs Mezzanine facility Consolidated 30 June 2020 $m 30 June 2019 $m – – – 366.0 (4.6) – 361.4 361.4 337.3 (4.4) 332.9 – – 78.4 78.4 411.3 Refer to Note 25 for further information on financial instruments. During the financial year, the group has completed a new $500 million senior debt facility to replace the previous facilities. The first tranche consists of a three‑year $325.0 million term loan facility and the second tranche consists of a $175.0 million revolving facility both expiring on 15 October 2022. The interest comprises a base rate plus a variable margin, determined by the prevailing loan to valuation ratio. The bank loans are secured by first mortgages over the group’s freehold properties, including any classified as held for sale. The group has complied with the financial covenants during the financial year. Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Total facilities Senior secured bank debt Mezzanine facility Used at the reporting date Senior secured bank debt Mezzanine facility Unused at the reporting date Senior secured bank debt Mezzanine facility Consolidated 30 June 2020 $m 30 June 2019 $m 500.0 – 500.0 366.0 – 366.0 134.0 – 134.0 350.0 78.4 428.4 337.3 78.4 415.7 12.7 – 12.7 Home Consortium Notes to the consolidated financial statements continued 61 Note 18. Provisions Non‑current liabilities Make good provision Lease make good Consolidated 30 June 2020 $m 30 June 2019 $m 2.0 3.4 The provision represents the present value of the estimated costs to make good the premises leased by the group at the end of the respective lease terms. Movements in provisions Consolidated – 30 June 2020 Carrying amount at the start of the year Additional provisions recognised Unused amounts reversed Carrying amount at the end of the year Note 19. Employee benefit obligations Current liabilities Annual leave Employee benefits Note 20. Derivative financial instruments Non‑current liabilities Derivative liability Refer to Note 25 for further information on financial instruments. Refer to Note 26 for further information on fair value measurement. Make good provision $m 3.4 – (1.4) 2.0 Consolidated 30 June 2020 $m 30 June 2019 $m 0.2 0.3 0.5 0.1 0.5 0.6 Consolidated 30 June 2020 $m 30 June 2019 $m 3.1 – Annual Report 2020 62 HomeCo. Note 21. Lease and other financial liabilities Current liabilities Lease liability Other financial liability Non‑current liabilities Lease liability Other financial liability Consolidated 30 June 2020 $m 30 June 2019 $m 9.6 – 9.6 133.5 – 133.5 143.1 14.0 0.2 14.2 218.1 8.4 226.5 240.7 Refer to Note 25 for further information on financial instruments. Other financial liability represents contractual obligations to pay rental top‑ups on four properties where the group no longer had a leasehold interest in place. These were all extinguished through surrender payments during the financial year. Note 22. Contributed equity Consolidated 30 June 2020 Shares 30 June 2019 Shares 30 June 2020 $m 30 June 2019 $m Ordinary shares – fully paid 197,912,426 1,287,740,632 3,608.0 3,291.2 Movements in ordinary share capital Details Balance Balance Date 1 July 2018 30 June 2019 Shares 1,287,740,632 1,287,740,632 Share‑consolidation of 13.797 shares held into one share 29 August 2019 (1,194,407,297) Capital reduction 6 September 2019 – Conversion of convertible notes into shares 16 October 2019 7,462,687 Issue of shares at initial public offering (at $3.35 per ordinary share) Issue of shares on vesting of share rights Share issue transaction costs, net of tax 16 October 2019 27 February 2020 97,014,911 101,493 – $m 3,291.2 3,291.2 – (21.7) 25.0 325.0 0.3 (11.8) Balance 30 June 2020 197,912,426 3,608.0 The issued shares of the group are made up of stapled securities comprising one share of HCL and one share of HCDL. Home Consortium Notes to the consolidated financial statements continued 63 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of Home Consortium in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and Home Consortium does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy‑back There is no current on‑market share buy‑back. Capital risk management The group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for stapled security holders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to stapled security holders, return capital to stapled security holders, issue new shares or sell assets to reduce debt. The group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the prior year. Note 23. Reserves Profits reserve Share‑based payments reserve Profits reserve Consolidated 30 June 2020 $m 30 June 2019 $m 38.6 0.5 39.1 486.6 – 486.6 The profits reserve is an amount arising from previous years profits and retained as a separate reserve that will be used for distribution as dividends in future years. Share‑based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration. Annual Report 2020 64 HomeCo. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2018 Balance at 30 June 2019 Share‑based payments Dividends paid (note 24) Transfer to accumulated losses Balance at 30 June 2020 Note 24. Dividends Dividends Profits reserve $m Share‑based payments reserve $m 486.6 486.6 – (8.9) (439.1) 38.6 – – 0.5 – – 0.5 Total $m 486.6 486.6 0.5 (8.9) (439.1) 39.1 Dividends paid during the financial year were as follows: Interim dividend for the year ended 30 June 2020 of 4.50 cents per ordinary share (2019: nil) Consolidated 30 June 2020 $m 30 June 2019 $m 8.9 – On 25 August 2020 the directors declared a fully franked dividend of 7.5 cents per ordinary share to be paid on 18 September 2020 to eligible shareholders on the register as at 4 September 2020. Franking credits Consolidated 30 June 2020 $m 30 June 2019 $m Franking credits available for subsequent financial years based on a tax rate of 30% 37.1 40.9 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: • franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date; • franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and • franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. Home Consortium Notes to the consolidated financial statements continued 65 Note 25. Financial instruments Financial risk management objectives The group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity 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. The group uses derivative financial instruments such as interest rate swap contracts to hedge certain risk exposures. The group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and ageing analysis for credit risk. Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the group’s operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The group is not exposed to any significant foreign currency risk. Price risk The group is not exposed to any significant price risk. Interest rate risk The group’s main interest rate risk arises from long‑term borrowings. Borrowings obtained at variable rates expose the group to interest rate risk. Borrowings obtained at fixed rates expose the group to fair value risk. The policy is to maintain approximately 50% of borrowings at fixed rates using interest rate swaps to achieve this when necessary. As at the reporting date, the group had the following variable rate borrowings and interest rate swap contracts outstanding: Consolidated Bank loans Mezzanine facility Interest rate swaps (notional principal amount) Net exposure to cash flow interest rate risk 30 June 2020 30 June 2019 Weighted average interest rate % 2.04% – 0.83% Weighted average interest rate % 5.33% 9.25% – Balance $m 366.0 – (175.0) 191.0 Balance $m 337.3 78.4 – 415.7 An analysis by remaining contractual maturities in shown in ‘liquidity and interest rate risk management’ below. An official increase/decrease in interest rates of 50 (2019: 50) basis points would have an adverse/favourable effect on profit before tax of $1.0 million (2019: $2.1 million) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Derivatives interest rate swap The group has entered into interest rate swap contracts with notional/principal value as at 30 June 2020 of $175.0 million (2019: $nil). The interest rate swap contract hedges the group’s risk against an increase in variable interest rate. However, hedge accounting is not applied. The contracts mature in the 2023 financial year. Weighted average fixed rate is 1.0% (2019: Not applicable). Annual Report 2020 66 HomeCo. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The group does not hold any collateral. The group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all tenants of the group based on recent experience, historical collection rates and forward‑looking information that is available. The group has credit risk exposure with one major tenant, which as at 30 June 2020 owed the group $1.4 million (34.0% of trade receivables) (2019: Not applicable). This balance was within its terms of trade and no impairment was made as at 30 June 2020. There are no guarantees against this receivable but management closely monitors the receivable balance on a monthly basis and is in regular contact with this tenant to mitigate risk. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year. Liquidity risk Vigilant liquidity risk management requires the group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Refer to Note 17 for details of unused borrowing facilities at the reporting date. Remaining contractual maturities The following tables detail the group’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated – 30 June 2020 Non‑derivatives Non‑interest bearing Trade payables Other payables Interest‑bearing – variable Bank loans Interest‑bearing – fixed rate Lease liability Total non‑derivatives Derivatives Interest rate swaps inflow Total derivatives 1 year or less $m Between 1 and 2 years $m Between 2 and 5 years $m Over 5 years $m Remaining contractual maturities $m 21.7 5.3 7.5 20.0 54.5 1.5 1.5 – – – – 7.5 368.2 19.6 27.1 1.5 1.5 58.6 426.8 0.6 0.6 – – – 114.1 114.1 – – 21.7 5.3 383.2 212.3 622.5 3.6 3.6 Home Consortium Notes to the consolidated financial statements continued 67 Consolidated – 30 June 2019 Non‑derivatives Non‑interest bearing Trade and other payables Other payables Other financial liabilities Interest‑bearing – variable Bank loans Other loans Interest‑bearing – fixed rate Lease liability Total non‑derivatives 1 year or less $m Between 1 and 2 years $m Between 2 and 5 years $m Over 5 years $m Remaining contractual maturities $m 22.3 0.1 0.9 337.3 – 31.8 392.4 – – 0.8 – 78.4 31.8 111.0 – – 1.7 – – 94.3 96.0 – – 5.3 – – 203.5 208.8 22.3 0.1 8.7 337.3 78.4 361.4 808.2 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Note 26. Fair value measurement Fair value hierarchy The following tables detail the group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. Consolidated – 30 June 2020 Assets Investment property – freehold Investment property – leasehold Total assets Liabilities Derivatives Total liabilities Consolidated – 30 June 2019 Assets Investment property – freehold Investment property – leasehold Assets classified as held for sale Total assets Level 1 $m Level 2 $m Level 3 $m Total $m – – – – – – – – 3.1 3.1 1,013.8 84.3 1,098.1 – – Level 1 $m Level 2 $m Level 3 $m – – – – – – – – 771.0 129.9 11.6 912.5 1,013.8 84.3 1,098.1 3.1 3.1 Total $m 771.0 129.9 11.6 912.5 Annual Report 2020 68 HomeCo. Assets and liabilities held for sale are measured at fair value on a non‑recurring basis. There were no transfers between levels during the financial year. The carrying amounts of trade and other receivables and trade and other payables approximate their fair values due to their short‑term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities. Valuation techniques for fair value measurements categorised within level 2 and level 3 The basis of valuation of investment properties is fair value. Independent valuations are obtained on a rotational basis to ensure each property is valued at least once every 24 months by an independent external valuer. Valuations are based on current prices in an active market for similar properties of the same location and condition, subject to similar leases and takes into consideration occupancy rates and returns on investment. The discounted cash flow method and the capitalisation method is also considered for fair value. For properties not independently valued during a reporting period, a directors’ valuation is carried out to determine the appropriate carrying value of the property as at the date of the report. Where directors’ valuations are performed, the valuation methods include using the discounted cash flow method and the capitalisation method. Derivative financial instruments have been valued using observable market rates. This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates. Level 3 assets and liabilities The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Unobservable inputs Range (weighted average) 2020 Range (weighted average) 2019 Investment property – freehold (i) Capitalisation rate 5.50% to 8.00% (6.62%) 6.00% to 8.25% (6.94%) (ii) Discount rate 6.25% to 9.00% (7.33%) 6.50% to 9.00% (7.31%) (iii) Terminal yield 5.75% to 8.25% (6.89%) 6.25% to 8.50% (7.20%) (iv) Rental growth 1.15% to 3% (2.29%) 2.31% to 3.31% (2.64%) Investment property – leasehold (i) Discount rate 7.75% to 8.50% (8.13%) 7.25% to 8.50% (8.09%) (ii) Rental growth 2.50% to 3.07% (2.88%) 2.50% to 3.64% (2.84%) A higher capitalisation rate, discount rate or terminal yield will lead to a lower fair value. A higher growth rate will lead to a higher fair value. The capitalisation rate is the most significant input into the valuation of investment property and therefore most sensitive to changes in valuation. A 25 basis point change in capitalisation rate would increase/decrease fair value by $37.0 million. The ongoing COVID‑19 pandemic requires a higher degree of judgement when considering the significant inputs that are assessed to determine the fair value of investment property. This is due to the uncertain future impact of the pandemic on key market inputs as well as the future financial performance of the investment properties. External valuation firms have acknowledged a ‘material valuation uncertainty’, which does not invalidate the market valuation however serves to highlight that the fair value assessment has been conducted using the information available at the time of the report and best estimates of future performance, however the future impacts of the COVID‑19 pandemic are unknown and may impact property valuations. Home Consortium Notes to the consolidated financial statements continued 69 Note 27. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the group is set out below: Short‑term employee benefits Post‑employment benefits Share‑based payments Consolidated 30 June 2020 $’000 30 June 2019 $’000 1,949 129 742 2,820 952 63 – 1,015 Note 28. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the Company: Audit services – PricewaterhouseCoopers Audit or review of the financial statements Other services – PricewaterhouseCoopers Other assurance services Note 29. Contingent liabilities Consolidated 30 June 2020 $’000 30 June 2019 $’000 369 28 397 250 130 380 As at 30 June 2020 the group holds 9 (30 June 2019: 12) operating leases of which Woolworths Limited (‘Woolworths’) (the previous parent entity) remains the guarantor. If more than 5 (30 June 2019: 5) of these Woolworths guarantees remain in place by the last business day of the month during which the 5th anniversary of change of control occurs (i.e. by 31 October 2022) a liability of $5,000,000 will be due to Woolworths. Refer to Note 38 for proposal to restructure these guarantees. The group had no other contingent liabilities as at 30 June 2020 and 30 June 2019. Annual Report 2020 70 HomeCo. Note 30. Commitments Significant capital expenditure contracted for in relation to investment properties at the end of the reporting year but not recognised as liabilities is as follows: Consolidated 30 June 2020 $m 30 June 2019 $m 32.3 – 32.3 41.5 135.5 177.0 Capital expenditure Property acquisitions Note 31. Related party transactions Parent entity Home Consortium Limited is the deemed parent entity of the Group. Subsidiaries Interests in subsidiaries are set out in Note 33. Key management personnel Disclosures relating to key management personnel are set out in Note 27 and the remuneration report included in the directors’ report. Transactions with related parties The following transactions occurred with related parties: Sale of goods and services: Property rental and other property income from Spotlight Pty Ltd, a related entity of Zac Fried, Director Property rental and other property income from Anaconda Group Pty Ltd, a related entity of Zac Fried, Director Property rental and other property income from CW Leasing Services Pty Ltd an entity controlled by a Director of Home Investment Consortium Company Pty Ltd, which has a material shareholding interest in the group Property rental and other property income from Aurrum Pty Ltd, a related entity of David Di Pilla, Executive Chairman and Chief Executive Officer and Greg Hayes, Director Payment for goods and services: Payment for office space, associated costs and reimbursement of expenses from Aurrum Pty Ltd, a related entity of David Di Pilla, Executive Chairman and Chief Executive Officer and Greg Hayes, Director Consolidated 30 June 2020 $’000 30 June 2019 $’000 1,905 2,453 1,163 8 – – – – 265 240 Home Consortium Notes to the consolidated financial statements continued Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: 71 Current receivables: Trade receivables from Spotlight Pty Ltd Trade receivables from Anaconda Group Pty Ltd Trade receivables from CW Leasing Services Pty Ltd Current payables: Trade payables to Aurrum Pty Ltd Consolidated 30 June 2020 $’000 30 June 2019 $’000 95 154 46 68 – – – 131 Loans to/from related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Consolidated 30 June 2020 $’000 30 June 2019 $’000 Current receivables: Loan to previous controlling entity prior to public listing – 20,145 All related party receivables are considered to be recoverable. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Annual Report 2020 72 HomeCo. Note 32. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Contributed equity Profits reserve Share‑based payments reserve Accumulated losses Total equity Parent 30 June 2020 $m 30 June 2019 $m (57.1) (57.1) (58.9) (58.9) Parent 30 June 2020 $m 30 June 2019 $m 5.4 1,107.0 2.3 367.3 3,608.0 38.6 0.5 38.4 899.8 0.2 411.4 3,291.2 486.6 – (2,907.4) (3,289.4) 739.7 488.4 * The 30 June 2019 comparatives have been restated to reflect the following: a reversal of impairment in FY18 of loans receivable from subsidiaries of $255.9 million reducing the opening accumulated losses in FY19; and an overall impairment of loans receivable from subsidiaries of $56.8 million increasing the total comprehensive loss for the year FY19. Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity and its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others. Refer to Note 34 for further details. Contingent liabilities Refer to Note 29 for the Company’s contingent liabilities. The parent entity had no other contingent liabilities as at 30 June 2020 and 30 June 2019. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019. Significant accounting policies The accounting policies of the parent entity are consistent with those of the group, as disclosed in Note 3, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Home Consortium Notes to the consolidated financial statements continued 73 Note 33. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 3: Name Subsidiaries of Home Consortium Limited: Home Consortium Property Pty Ltd Home Consortium Leasehold Pty Ltd Home Consortium Property Trust Subsidiaries of Home Consortium Developments Limited: HomeCo Childcare Pty Ltd Home Consortium Developments Property Trust Note 34. Deed of cross guarantee Principal place of business/ Country of incorporation 30 June 2020 % 30 June 2019 % Ownership interest Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% – – The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: Home Consortium Ltd (holding entity) Home Consortium Property Pty Ltd* Home Consortium Leasehold Pty Ltd* Home Consortium Property Trust* By entering into the deed, the entities (denoted above by an asterisk (*)) have opted to obtain relief from the requirement to prepare financial statements and Directors’ report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a ‘Closed Group’ for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Home Consortium, they also represent the ‘Extended Closed Group’. The statement of profit or loss and other comprehensive income and statement of financial position are substantially the same as the group and therefore have not been separately disclosed. Annual Report 2020 74 HomeCo. Note 35. Earnings per security Loss after income tax Weighted average number of ordinary shares used in calculating basic earnings per security Weighted average number of ordinary shares used in calculating diluted earnings per security Basic earnings per security Diluted earnings per security Consolidated 30 June 2020 $m 30 June 2019 $m (2.8) (22.6) Number Number 167,301,599 93,333,335 167,301,599 93,333,335 Cents (1.67) (1.67) Cents (24.21) (24.21) The weighted average number of ordinary securities for 30 June 2019 has been restated for the effect of the share consolidation (one share for every 13.797 shares held) completed in August 2019, in accordance with AASB 133 ‘Earnings per share’. 674,627 (2019: nil) share rights over ordinary shares have been excluded from the calculation of diluted earnings per security as they are anti‑dilutive. Note 36. Share‑based payments The share‑based payment expense for the year was $0.7 million (2019: $nil). Share rights During the financial year, the group granted 783,583 share rights for $nil cash consideration as part of non‑executive director grant (‘NED Grant’), employee long‑term incentive plan (‘FY20 LTIP’) and IPO employee grant (2019:Nil share rights granted). The performance period is between one to three years. For FY20 LTIP, vesting of the share rights is subject to meeting predetermined service and market conditions including Total Shareholder Return (‘TSR’), and Earnings Per Share (‘EPS’) growth targets over the performance period. Set out below are summaries of share rights granted under the plans: 30 June 2020 Plan details NED Grant FY20 LTIP Grant date Estimated vesting date 14/10/2019 27/02/2020 14/10/2019 27/08/2022 IPO employee grant 14/10/2019 14/10/2022 Balance at the start of the year – – – – Granted Exercised 101,493 374,627 307,463 (101,493) – – 783,583 (101,493) Expired/ forfeited/ other Balance at the end of the year – – (7,463) (7,463) – 374,627 300,000 674,627 There are no share rights that are vested and exercisable as at 30 June 2020. The weighted average remaining contractual life of share rights outstanding at the end of the financial year was 2.2 years (2019: Nil). Home Consortium Notes to the consolidated financial statements continued 75 For the share rights granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Plan details FY20 LTIP Grant date Vesting date 14/10/2019 27/08/2022 IPO employee grant 14/10/2019 14/10/2022 Share price at grant date $ Expected volatility % Dividend yield % Risk‑free interest rate % Fair value at grant date $ 3.35 3.35 17.00% 17.00% 6.00% 6.00% 0.90% 0.90% 1.520 2.810 The fair value of the 101,493 NED Grant share rights granted on 14 October 2019 was $3.35 based on the share issue price at that date as there were no performance conditions. On 25 August 2020, Home Consortium granted 225,356 share rights as compensation for the reduction in cash remuneration for Directors and other key management personnel during the financial year ended 30 June 2020 due to the COVID‑19 pandemic. These deferred shares are expensed over the performance period, which includes the year to which the grant relates and the subsequent vesting period of the rights. Note 37. Cash flow information Reconciliation of loss after income tax to net cash (outflow) from operating activities Loss after income tax benefit for the year Adjustments for: Share‑based payments Provision for credit loss Net fair value adjustment to investment property – freehold Net fair value adjustment to investment property – leasehold Net gain on sale of investment properties Straight‑lining of rent Finance cost – non‑cash Change in operating assets and liabilities: Increase in trade receivables Increase in deferred tax assets Increase in other operating assets Decrease in trade and other payables Increase in derivative liabilities Increase/(decrease) in other provisions Net cash (outflow) from operating activities Consolidated 30 June 2020 $m 30 June 2019 $m (2.8) (22.6) 0.8 – (17.6) 7.5 – (11.1) 7.4 (5.4) (0.3) (0.2) (3.1) 3.1 (1.5) – 0.8 (3.2) (1.8) (0.2) (16.2) 4.8 (0.7) (7.3) – (4.7) – 0.7 (23.2) (50.4) Interest on lease liabilities has been reclassed to operating activities in the 30 June 2019 comparative period. Annual Report 2020 76 HomeCo. Non‑cash investing and financing activities Consolidated 30 June 2020 $m 30 June 2019 $m Shares issued under employee share plan Related party receivable extinguished via non‑cash share capital reduction 0.3 (21.7) (21.4) Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2018 Net cash from/(used in) financing activities Changes in fair value Balance at 30 June 2019 Net cash from/(used in) financing activities Non‑cash surrender of leasehold property Acquisition of leasehold property Surrender fees transferred to other payables Changes in fair value Balance at 30 June 2020 Senior secured bank debt $m Mezzanine facility $m Lease liability $m 276.8 60.5 – 337.3 28.7 – – – – 366.0 – 78.4 – 78.4 (78.4) – – – – – 241.3 (10.1) 0.9 232.1 (20.4) (8.5) (56.7) (5.3) 1.9 143.1 – – – Total $m 518.1 128.8 0.9 647.8 (70.1) (8.5) (56.7) (5.3) 1.9 509.1 Note 38. Events after the reporting period Strategic acquisitions and equity raising On 1 July 2020, Home Consortium announced a number of strategic property acquisitions comprising: • Acquisition of three Woolworths anchored convenience‑based neighbourhood centres from Woolworths Group for $127.8 million; and • Acquisition of Aurrum Erina residential aged care property (‘Aurrum Erina’) for $32.6 million on a sale and lease back, subject to securityholder approval. The acquisitions were funded by $140.0 million fully underwritten institutional placement on 7 July 2020 at $2.88 per security and a non‑underwritten share purchase plan which raised $10.6 million on 28 July 2020. New equity raised will also support the funding of the Parafield acquisition announced during the financial year. As part of the Aurrum Erina acquisition Home Consortium is proposing to issue to the vendor $20 million of securities at $2.88 per security together with $12.6 million cash as consideration. The issue of securities and acquisition of Aurrum Erina will be conditional on receiving security holder approval which is scheduled for 1 September 2020. Home Consortium Notes to the consolidated financial statements continued 77 Proposed security restructure On 11 August 2020, Home Consortium announced that it had entered into an agreement with Woolworths Group Limited (‘Woolworths’) and Home Investment Consortium Company Pty Limited as trustee of the Home Investment Consortium Trust (‘HICT’) to propose a restructure of the existing security that Woolworths holds for its guarantee of the leasehold properties. The initial security arrangements were entered into with Woolworths in 2017 as part of the acquisition of the former Masters property portfolio, including a second ranking security over Home Consortium’s assets. As a result of the proposed transaction Home Consortium’s company structure will be simplified with no leasehold properties or legacy guarantees remaining within the group. The entity holding the guaranteed leases and LMA would be transferred to HICT resulting in no change in economic exposure as HICT already provides an indemnity to Home Consortium. Home Consortium will seek security holder approval for this proposal at its 2020 annual general meeting to be held on 18 November 2020. COVID‑19 The impact of the COVID‑19 pandemic is ongoing following the recent Stage 4 restrictions for the Melbourne metropolitan area and Stage 3 restrictions for regional Victoria announced by the Victorian Government. Home Consortium’s Victorian freehold portfolio comprises eight operating centres including the recent acquisition of a Woolworths supermarket in Rosenthal VIC and one development property. Whilst seven of the eight operating centres in Victoria have either a supermarket, pharmacy or medical centre as an anchor tenant the outlook remains uncertain. Apart from the dividend declared as disclosed in Note 24, no other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the group’s operations, the results of those operations, or the group’s state of affairs in future financial years. This concludes the notes to the consolidated financial report of Home Consortium Limited. Annual Report 2020 78 HomeCo. Home Consortium Developments Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2020 Profit before income tax expense Income tax expense Profit after income tax expense for the period attributable to the owners of Home Consortium Developments Limited Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to the owners of Home Consortium Developments Limited Basic earnings per security Diluted earnings per security Consolidated Period from 29 August 2019 to 30 June 2020 $ – – – – – Cents – – The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Home Consortium Developments Limited Statement of financial position As at 30 June 2020 Assets Current assets Other receivables Total current assets Total assets Liabilities Total liabilities Net assets Equity Contributed equity Total equity 79 Consolidated 30 June 2020 $ Note 4 5 6 6 6 – 6 6 6 The above statement of financial position should be read in conjunction with the accompanying notes. Annual Report 2020 80 HomeCo. Home Consortium Developments Limited Statement of changes in equity For the year ended 30 June 2020 Consolidated Balance at 29 August 2019 Profit after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive income for the period Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 5) Balance at 30 June 2020 Contributed equity $ Retained profits $ Total equity $ – – – – 6 6 – – – – – – – – – – 6 6 The above statement of changes in equity should be read in conjunction with the accompanying notes. Home Consortium Developments Limited Statement of cash flows For the year ended 30 June 2020 Net cash from operating activities Net cash from investing activities Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period The above statement of cash flows should be read in conjunction with the accompanying notes. 81 Consolidated Period from 29 August 2019 to 30 June 2020 $ – – – – – – Annual Report 2020 82 HomeCo. Home Consortium Developments Limited Notes to the consolidated financial statements For the year ended 30 June 2020 Note 1. General information The financial statements cover Home Consortium Developments Limited as a consolidated entity consisting of Home Consortium Developments Limited (the ‘Company’, ‘parent entity’ or ‘HCDL’) and the entities it controlled at the end of, or during, the period (collectively referred to as the ‘group’). The financial statements are presented in Australian dollars, which is Home Consortium Developments Limited’s functional and presentation currency. Home Consortium Developments Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: 19 Bay Street Double Bay NSW 2028 The current reporting period is from 29 August 2019 (incorporation date of HCDL) to 30 June 2020. During the period the shares in HCDL were stapled to the shares in Home Consortium Limited (‘HCL’) to form stapled securities such that shares in HCL and HCDL must be purchased or sold together. The stapled securities, known as “Home Consortium” were admitted to the official list of the Australian Securities Exchange (‘ASX’) on 11 October 2019 with the ASX code HMC. HCL and HCDL remain separate legal entities in accordance with the Corporations Act 2001. HCDL remained dormant throughout the reporting period. A description of the nature of Home Consortium’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 August 2020. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. New or amended Accounting Standards and Interpretations adopted The Company has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. There was no impact on the adoption of these Standards and Interpretations. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the AASB and the Corporations Act 2001, as appropriate for for‑profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the group only. Supplementary information about the parent entity is disclosed in Note 9. Home Consortium Developments Limited Notes to the consolidated financial statements continued 83 Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Home Consortium Developments Limited as at 30 June 2020 and the results of all subsidiaries for the period then ended. Subsidiaries are all those entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de‑consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non‑controlling interest acquired is recognised directly in equity attributable to the parent. Where the group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non‑controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 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. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Annual Report 2020 84 HomeCo. Current and non‑current classification Assets and liabilities are presented in the statement of financial position based on current and non‑current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non‑current. A liability is classified as current when: it is either expected to be settled in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non‑current. Deferred tax assets and liabilities are always classified as non‑current. Other receivables Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial period and no longer at the discretion of the group. Note 3. Operating segments The Company was dormant during the period and therefore there were no reportable operating segments. Note 4. Current assets – other receivables Other receivables Consolidated 30 June 2020 $ 6 Home Consortium Developments Limited Notes to the consolidated financial statements continued 85 Note 5. Equity – contributed equity Ordinary shares – fully paid Movements in ordinary share capital Details Balance Initial allotment of shares Conversion of convertible note Issue of shares at initial public offering Issue of shares on vesting of share rights Balance Ordinary shares Consolidated 30 June 2020 Shares 30 June 2020 $ 197,912,426 6 Date 29 August 2019 29 August 2019 16 October 2019 16 October 2019 27 February 2020 30 June 2020 Shares – 93,333,335 7,462,687 97,014,911 101,493 197,912,426 $ – 3 – 3 – 6 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of Home Consortium in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and Home Consortium does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy‑back There is no current on‑market share buy‑back. Note 6. Equity – dividends Refer to Note 24 to the consolidated financial statements of HCL for details of any dividends paid or proposed by the Home Consortium stapled group. Note 7. Contingent liabilities and commitments Refer to notes 29 and 30 to the consolidated financial statements of HCL for details of contingent liabilities and commitments of the Home Consortium stapled group. Note 8. Related party transactions Parent entity Home Consortium Developments Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in Note 10. Annual Report 2020 86 HomeCo. Transactions with related parties There were no transactions with related parties during the financial period. Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the reporting date. Loans to/from related parties There were no loans to or from related parties at the reporting date. Note 9. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Contributed equity Total equity Parent Period from 29 August 2019 to 30 June 2020 $ – – Parent 30 June 2020 $ 6 6 – – 6 6 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2020. Home Consortium Developments Limited Notes to the consolidated financial statements continued 87 Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020. Significant accounting policies The accounting policies of the parent entity are consistent with those of the group, as disclosed in Note 2, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity; and • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Note 10. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2: Name HomeCo Childcare Pty Ltd Home Consortium Developments Property Trust Principal place of business/ Country of incorporation Australia Australia Ownership interest 30 June 2020 % 100.00% 100.00% Note 11. Events after the reporting period On 7 July 2020, the Company issued 48,611,111 stapled securities through an institutional placement. On 28 July 2020, the Company issued 3,758,565 stapled securities through security purchase plan. Apart from the dividend declared as disclosed in Note 6, no other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the group’s operations, the results of those operations, or the group’s state of affairs in future financial years. This concludes the notes to the consolidated financial report of Home Consortium Developments Limited. Annual Report 2020 88 HomeCo. Directors’ declaration In the directors’ opinion: • the attached financial statements and notes of Home Consortium (‘HMC’) and Home Consortium Developments Limited (‘HCDL’) comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes of HMC and HCDL comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 3 to the HMC financial statements and Note 2 to the HCDL financial statements; • the attached financial statements and notes of HMC give a true and fair view of the group’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date; • the attached financial statements and notes of HCDL give a true and fair view of the group’s financial position as at 30 June 2020 and of its performance for the financial period ended on that date; • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and • at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 34 to the HMC financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001, from the Chief Executive Officer and Chief Financial Officer for the year/period ended 30 June 2020. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors David Di Pilla Director 25 August 2020 Independent auditor’s report 89 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report To the Stapled Security Holders of Home Consortium Limited and the shareholders of Home Consortium Developments Limited. Report on the audit of the financial reports Our opinion In our opinion: The accompanying financial reports of Home Consortium, being the consolidated stapled entity, which comprises Home Consortium Limited (HCL) and the entities it controlled during the full-year (together, the Group), and Home Consortium Developments Limited (HCDL) and the entities it controlled during the period, are in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Group's and HCDL’s financial position as at 30 June 2020 and oftheir financial performance for the year and period respectively, then ended;(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Group financial report comprises: ●the consolidated statement of financial position as at 30 June 2020●the consolidated statement of changes in equity for the year then ended●the consolidated statement of cash flows for the year then ended●the consolidated statement of profit or loss and other comprehensive income for the year then ended●the notes to the consolidated financial statements, which include a summary of significant accountingpolicies●the directors’ declaration.The HCDL financial report comprises:●the consolidated statement of financial position as at 30 June 2020●the consolidated statement of changes in equity for the period from 29 August 2019 to 30 June 2020●The consolidated statement of cash flows for the period from 29 August 2019 to 30 June 2020●The consolidated statement of profit or loss and other comprehensive income for the period from 29August 2019 to 30 June 2020●the notes to the financial statements, which include a summary of significant accounting policies●the directors’ declaration.Together, the Group and HCDL financial reports are referred to as “the financial reports”.Annual Report 2020 90 HomeCo. Independent auditor’s report continued 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 reports section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group and HCDL 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial reports in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Our audit approach An audit is designed to provide reasonable assurance about whether the financial reports are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial reports. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial reports as a whole, taking into account the geographic and management structure of the Group and HCDL, their accounting processes and controls and the industry in which they operate. Materiality Audit scope Key audit matters For the purpose of our audit we used overall Group materiality of $3.65 million, which represents approximately 0.5% of the net assets of the Group. We applied this threshold, together with qualitative Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. Amongst other relevant topics, we communicated the following key audit matters, applicable to Group only, to the Audit and Risk Committee: -Valuation ofinvestment properties 91 considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. We chose net assets because, in our view, it is a key benchmark against which the performance of the Group is measured. We utilised a 0.5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. (freehold and leasehold) -Recoverability ofdeferred tax assetsThese are further described in the Key audit matters section of our report. 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 for the current period. The key audit 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. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Group Key audit matter How our audit addressed the key audit matter Valuation of investment properties (freehold and leasehold) (Refer to notes 14 and 15) $1,098.1m Investment properties are measured at the fair value of each property. The fair value of investment property is inherently subjective and impacted by, among other factors, prevailing market conditions, the individual nature and condition of each property, its location and the expected future income for each property. Amongst others, the capitalisation rate, discount rate, market rents and capital expenditure assumptions used in the valuation process are key in establishing fair value. This was a key audit matter because the: Procedures performed in relation to the valuation of freehold and leasehold investment properties included: We read recent property market reports to develop our understanding of the prevailing market conditions in locations in which the Group invests. Met with management to discuss the specifics of the property portfolio including any new leases entered into during the year, lease expiries, vacancy rates and planned capital expenditure. We also enquired about the impact of COVID-19 on investment property valuations and how this has been considered in determining fair value at 30 June 2020. For a sample of leases, we compared the rental income used in the valuation to the relevant underlying lease agreements. For all properties, we agreed the fair values recorded in the accounting records to the external valuations or internal valuation models and assessed the competency, capability and objectivity of the relevant valuer. We have also assessed the adequacy of the related disclosures in notes 14 and 15 considering the requirements of Australian Accounting Standards. In particular, we considered the adequacy of the disclosures made that explain the significant estimation uncertainty in relation to the valuation of investment properties. Specific procedures performed in relation to the audit of the valuation of freehold investment properties included: Annual Report 2020 92 HomeCo. Independent auditor’s report continued ●investment propertybalances are financiallysignificant in theconsolidated statement offinancial position●impact of changes in thefair value of investmentproperties can have asignificant effect on theGroup’s comprehensiveincome●investment propertyvaluations are inherentlysubjective due to the use ofunobservable inputs in thevaluation methodology.●valuations are sensitive tokey input assumptions,specifically capitalisationand discount rates and netmarket rents●COVID-19 impact isuncertain and has affectedthe certainty of the rentalincome cash-flows, and asa consequence, thevaluation of theinvestment properties.We evaluated the design effectiveness and implementation of certain controls over the process for determining the fair value, including the control that the Board reviews and approves the valuations adopted. For all properties, we checked compliance with the Group’s policy that properties had been externally valued at least once in the last two years and checked that the Group followed its policy on rotation of valuation firms. We selected a sample of leases from the tenancy schedules used in the valuations and tied the key terms to signed lease agreements. We performed a risk-based assessment over the freehold investment property portfolio to determine those properties at greater risk of being carried at an amount not equal to fair value. Our risk-based selection criteria included quantitative and qualitative measures and were informed by our knowledge of each property, site visits during the year and our understanding of current market conditions. For those properties which met our selection criteria, we performed procedures to assess the reasonableness of key assumptions used in the external valuations and internal valuation models. These procedures included, amongst others: ●We assessed the reasonableness of the capitalisation rate,discount rate, outgoings and market rents used in the valuationsagainst industry benchmarks and market data, includingcomparable transactions where possible.●We assessed the reasonableness of other assumptions in thevaluations such as growth rates, vacancies, rent free periods andincentives through discussions with management and valuers,and obtaining other audit evidence such as new lease agreementsor modified leases due to COVID-19.Specific procedures in relation to the audit of the valuation of leasehold properties, included: We performed a risk-based assessment over the leasehold investment property portfolio to determine those properties at greater risk of being carried at an amount not equal to fair value. Our risk-based selection criteria include quantitative and qualitative measures and are informed by our knowledge of each property, and our understanding of current market conditions. For those properties which met our selection criteria, we assessed the reasonableness of key assumptions included in the internal valuation models. These procedures included, amongst others: ●We assessed the reasonableness of the discount rate used in thediscounted cash flows in the internal valuations against industrybenchmarks and market data, including comparable transactionswhere possible.●On a sample basis, we compared the key input data relating torental income and outgoings used in the discounted cash flows inthe internal valuations to signed leases and accounting records.●We assessed the reasonableness of the rental income, outgoingsand capital expenditure used in the forecast cash flows throughdiscussions with management and obtaining other audit evidence 93 such as existing and new leases, prior transactions and industry benchmarks Additional procedures performed as a result of COVID-19 impact, included: We obtained an understanding of specific assumptions included in information provided to the valuers, such as the rent relief packages given to individual tenants and considered how these rent relief packages have been treated in the valuation reports and the financial statements. We obtained and reconciled the rent relief packages provided to the tenants to the general ledger. For a sample of tenants, we obtained the rent relief contract accepted by the tenant and agreed it to the accounting records. We considered how any recent market transactions impacted the fair values adopted in the valuations. We met with valuers, on a sample basis with a specific focus on understanding the basis for any uncertainty caveats included in their valuation reports, as well as developing an understanding of their valuation approach, sources of information and key judgments made. Recoverability of deferred tax assets - tax losses (Refer to note 9) $141.1m The Group continues to recognise a deferred tax asset comprising carry forward tax losses and deductible temporary differences. It also discloses a total of $2,208m in tax losses which have not been recognised due to the uncertainty of its utilisation. The recoverability of the deferred tax asset depends upon the growth of the business, its future profitability, the period over which tax losses will be available for recovery, and the execution of any future tax planning opportunities. We considered this a key audit matter due to the high level of judgement required by the Group to assess the recoverability of the deferred tax asset and its financial significance. The procedures performed to assess the Group’s ability to utilise the tax losses recognised as deferred tax assets included, amongst others: We obtained an understanding of the nature of the tax losses and management’s assessment as to their availability and recoverability. We read the external advice received from the Group’s advisor on the availability of the tax losses, and in particular, on the satisfaction of the continuity ownership test (“CoT”) and business continuity tests (“BCT”). Together with PwC tax specialists, we assessed management’s assessment on the availability and treatment of tax losses. We considered whether the accounting treatment adopted was in line with the requirements of Australian Accounting Standards. We recalculated deferred tax asset balances which comprise a combination of timing differences between tax and accounting bases, and tax losses. We obtained the calculations of forecast taxable income for the next twelve years and reconciled next year’s amounts to the latest forecast. We compared the Board approved budgets to historical performance to assess the consistency and accuracy of the Group’s approach to budgeting. We assessed the reasonableness of the relevant selected assumptions such as rental income, expenses, corporate tax rate and weighted average lease expiry (WALE) in the cash flow budget and forecasts. We evaluated whether the cash flows had been appropriately adjusted for the differences between accounting profits and taxable income. As a result of the impacts of COVID-19, we considered the reasonableness of the assumptions used in preparing the forecast of the Group’s taxable profits considering the available evidence. We have also assessed the adequacy of the related disclosures in note 9 considering the requirements of Australian Accounting Standards. Annual Report 2020 94 HomeCo. Independent auditor’s report continued Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2020, 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 on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial reports The directors of HCL and HCDL are responsible for the preparation of the financial reports that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial reports that give a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the financial reports, the directors are responsible for assessing the ability of the Group and HCDL to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or HCDL or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial reports Our objectives are to obtain reasonable assurance about whether the financial reports as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial reports. A further description of our responsibilities for the audit of the financial reports is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. 95 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 26 to 35 of the directors’ report for the year ended 30 June 2020. In our opinion, the remuneration report of Home Consortium Limited and Home Consortium Development Limited for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of HCL and HCDL 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. PricewaterhouseCoopers Scott Hadfield Sydney Partner 25 August 2020Annual Report 2020 96 HomeCo. Related party leases HomeCo leases a number of its premises to related parties. The existing lease arrangements with the respective tenants listed below have been entered into on arm’s length terms and reflect customary provisions commonly found in commercial leases of a similar nature. Details of leases with Spotlight Pty Ltd (‘Spotlight’), which is controlled by Zac Fried, Director, with aggregate annual rent (excluding GST) of $2.0 million is provided below: Location Terms and renewal Location Terms and renewal HomeCo Bathurst 3 Pat O’Leary Drive Kelso NSW 2795 HomeCo South Lismore 28 Bruxner Highway South Lismore NSW 2480 HomeCo Mackay Mackay‑Bucasia Road and Holts Road Mackay QLD HomeCo Northland (T6) 85 Chifley Drive Preston VIC Initial term of 10 years commencing in February 2016, with 3 options to renew for 10 years each. Initial term of 10 years commencing in July 2018, with 3 options to renew for 10 years each. Initial term of 10 years commencing in July 2018, with 3 options to renew for 10 years each. Initial term of 7 years commencing in July 2020, with 3 options to renew for 7 years each. HomeCo Upper Coomera Corner Days Road and Old Coach Road Upper Coomera QLD 4209 Initial term of 10 years commencing in July 2018, with 3 options to renew for 10 years each. HomeCo Northland (T2) 85 Chifley Drive Preston VIC HomeCo Butler 1 Butler Boulevard Butler WA 6036 Initial term of 10 years commencing in August 2018, with 3 options to renew for 10 years each. Initial term of 10 years commencing in April 2019, with 3 options to renew for 10 years each. Details of leases with Anaconda Group Pty Ltd (‘Anaconda’), which is controlled by Zac Fried, Director, with aggregate annual rent (excluding GST) of $3.1 million is provided below: Location Terms and renewal Location Terms and renewal HomeCo Coffs Harbour 211 Pacific Highway Coffs Harbour NSW 2450 HomeCo Marsden Park 17‑43 Hollinsworth Road Marsden Park NSW 2765 HomeCo Rutherford Corner Mustang Drive and Anambah Road Rutherford NSW 2320 HomeCo Wagga Wagga 129‑145 Hammond Avenue Wagga Wagga NSW 2650 HomeCo Mackay Mackay‑Bucasia Road and Holts Road Mackay QLD Initial term of 10 years commencing in March 2020, with 3 options to renew for 10 years each. Initial term of 10 years commencing in October 2018, with 3 options to renew for 10 years each. Initial term of 10 years commencing in September 2017, with 3 options to renew for 10 years each. Initial term of 10 years commencing in December 2013, with 2 options to renew for 6 years each. Initial term of 10 years commencing in July 2018, with 3 options to renew for 10 years each. HomeCo Tingalpa Corner of Manly Road and New Cleveland Road Tingalpa QLD Initial term of 10 years commencing in October 2017, with 3 options to renew for 10 years each. HomeCo Hawthorn East 740‑742 Toorak Road Hawthorn East VIC 3123 HomeCo Butler 1 Butler Boulevard Butler WA 6036 HomeCo Joondalup 11 Injune Way Joondalup WA 6027 Initial term of 10 years commencing in November 2018, with 3 options to renew for 10 years each. Initial term of 10 years commencing in August 2019, with 3 options to renew for 10 years each. Initial term of 10 years commencing in November 2018, with 3 options to renew for 10 years each. 97 Details of leases with CW Leasing Services Pty Ltd (‘Chemist Warehouse’), which is controlled by a director of Home Investment Consortium Company Pty Ltd, which has, and will continue to have, a material interest in HomeCo, with aggregate annual rent (excluding GST) of $2.5 million is provided below: Location Terms and renewal Location Terms and renewal HomeCo North Lakes 77‑95 North Lakes Drive North Lakes QLD 4509 HomeCo Box Hill 249 Middleborough Road Box Hill VIC 3128 HomeCo Braybrook 340 Ballarat Road Braybrook VIC HomeCo Keysborough Corner Springvale Road and Cheltenham Road Keysborough VIC 3173 HomeCo Hawthorn East 740‑742 Toorak Road Hawthorn East VIC 3123 Initial term of 5 years commencing in February 2018, with 3 options to renew for 5 years each. Initial term of 5 years commencing in September 2018, with 3 options to renew for 5 years each. Initial term of 5 years commencing in September 2018, with 3 options to renew for 5 years each. Initial term of 5 years commencing in October 2019, with 3 options to renew for 5 years each. Initial term of 5 years commencing in November 2019, with 3 options to renew for 5 years each. HomeCo Mornington 75 Mornington‑Tyabb Road Mornington VIC 3931 HomeCo Northland 85 Chifley Drive Preston VIC HomeCo Butler 1 Butler Boulevard Butler WA 6036 HomeCo Joondalup 11 Injune Way Joondalup WA 6027 Initial term of 5 years (not commenced), with 3 options to renew for 5 years each. Initial term of 5 years commencing in August 2018, with 3 options to renew for 5 years each. Initial term of 5 years commencing in February 2020, with 3 options to renew for 5 years each. Initial term of 5 years commencing in September 2019, with 3 options to renew for 5 years each. Annual Report 2020 98 HomeCo. Stapled Security Holder information The stapled security holder information set out below was applicable as at 31 July 2020. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders – stapled securities The names of the twenty largest security holders of quoted equity securities are listed below: Number of holders of stapled securities 242 980 941 1,124 58 3,345 47 HSBC Custody Nominees (Australia) Limited Home Investment Consortium Company Pty Ltd HICC 2 Pty Ltd UBS Nominees Pty Ltd Goat Properties Pty Ltd Citicorp Nominees Pty Limited National Nominees Limited Netwealth Investments Limited HSBC Custody Nominees (Australia) Limited Bridgebox Pty Ltd JP Morgan Nominees Australia Pty Limited CW Property Nominees Pty Ltd BNP Paribas Nominees Pty Ltd Longmorn Pty Ltd Balmoral Financial Investments Pty Ltd Tripel Pty Ltd SG Foundation Investments Pty Ltd Seymour Group Pty Ltd BNP Paribas Noms Pty Ltd BNP Paribas Nominees Pty Ltd Ordinary shares Number held 67,692,562 62,232,824 31,121,713 7,888,275 6,716,418 6,589,884 4,559,017 4,216,010 2,804,074 2,759,639 2,537,699 2,238,806 1,364,283 1,350,000 549,402 545,824 482,612 460,000 430,648 422,584 % of total securities issued 27.05 24.87 12.43 3.15 2.68 2.63 1.82 1.68 1.12 1.10 1.01 0.89 0.55 0.54 0.22 0.22 0.19 0.18 0.17 0.17 206,962,274 82.67 Unquoted equity securities Share rights Substantial holders – stapled securities Substantial holders in the Company are set out below: Home Investment Consortium Company Pty Ltd Spotlight Group Holdings Pty Ltd* CW Properties Nominees Pty Ltd* Perpetual Limited 99 Number on issue 674,627 Number of holders 21 Ordinary shares Number held 94,292,318 107,251,780 95,572,141 15,667,954 % of total shares issued 37.67 42.85 38.19 6.26 * Includes 93,333,335 stapled securities held by Home Investment Consortium Company Pty Ltd due to a deemed relevant interest. Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. Restricted – stapled securities Class Ordinary shares Ordinary shares Expiry date 16 October 2021 Upon retirement from the Board Number of shares 93,333,335 101,493 93,434,828 Annual Report 2020 100 HomeCo. THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. Stock exchange listing Home Consortium shares are listed on the Australian Securities Exchange (ASX code: HMC) Website https://www.homeconsortium.com.au/ Business objectives In accordance with the Listing requirements ASX 4.10.19, the directors confirm that the group has used cash and cash equivalents that are held at the time of listing in a way consistent with its stated business objectives. Corporate Governance Statement The directors and management are committed to conducting the business of Home Consortium in an ethical manner and in accordance with the highest standards of corporate governance. Home Consortium has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (‘Recommendations’) to the extent appropriate to the size and nature of its operations. The group’s Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement and Home Consortium’s other corporate governance policies and charters can be found on its website at: https://investors.home-co.com.au/investor-centre/ ?page=corporate-governance Corporate Directory Directors David Di Pilla Chris Saxon Zac Fried Greg Hayes Jane McAloon Brendon Gale Company secretary Andrew Selim Registered office and Principal place of business 19 Bay Street Double Bay NSW 2028 Telephone: 1300 466 326 Share register Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Telephone: 1300 554 474 Auditor PricewaterhouseCoopers Tower One, International Towers Sydney Level 17, 100 Barangaroo Avenue Barangaroo NSW 2000 www.colliercreative.com.au #HOC0002 H o m e C o . | A n n u a l R e p o r t 2 0 2 0 H O M E - C O . C O M . A U
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