Prime Media Group Limited Annual Report 2016

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FY2016 Annual Report · Prime Media Group Limited

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2 0 1 6 A N N U A L R E P O R T

CONTENTS

1 CHAIRMAN’S REPORT

2 CHIEF EXECUTIVE OFFICER’S REPORT

4 DIRECTORS’ REPORT

21 FINANCIAL STATEMENTS

CORPORATE INFORMATION

ABN 97 000 764 867
This annual report covers both Prime Media Group Limited (the Company) as an individual entity and the consolidated entity comprising
Prime Media Group Limited and its subsidiaries (the Group). The Group’s functional and presentation currency is AUD($).

NAME

Directors

POSITION

DATE APPOINTED

DATE RESIGNED/RETIRED

John Kenneth Hartigan

Chair

Alexander Andrew Hamill

Chief Executive Officer

Ian Richard Neal

Peter John Macourt

Cass O’Connor

Michael Hastings Hill

Michael Stanley Siddle

Ian Craig Audsley

REGISTERED OFFICE
363 Antill Street
Watson ACT 2602
Ph: 02 6242 3700

SHARE REGISTER
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000

Prime Media Group Limited share are listed on the
Australian Securities Exchange (Listing Code PRT).

15 May 2014

2 October 2003

6 June 2008

1 September 2014

21 April 2015

4 August 2015

17 April 1985

24 June 2010

–

10 November 2015

–

BANK
Australia and New Zealand Banking Group Limited (ANZ)
8/20 Martin Place
Sydney NSW 2000

AUDITORS
Ernst & Young
680 George Street
Sydney NSW 2000

CHAIRMAN’S
REPORT

On behalf of the directors of PRIME Media Group I am pleased
to present the Annual Report for the 2016 financial year.

There is no doubt that 2016 was challenging, and your Board
has made some difficult decisions throughout the financial
year. The Company had a consolidated net loss after tax of
$93,578,000, with total revenue down by 7.2%. Included in the
operating loss was a one-off cash impairment of television
licences and goodwill of $122,931,000. Your Board believes
that this adjustment was necessary in an environment where
we are seeing the impact of new and largely unregulated market
entrants, increased competition from global and national media
platforms, and the comprehensive reach of the internet and
streaming services, all of which are impacting regional television
audience numbers and our revenue.

Critically, our continued focus on advocating for changes
to Australia’s media ownership and control laws is aimed
at positioning the Company for new revenue or transaction
opportunities. We have been at the forefront of this debate,
and have advocated for the repeal of out-dated media laws that
put Australian-owned businesses at a commercial disadvantage.
We face increasing competition for advertising revenue from
global media and technology companies such as Google and
Facebook, and we have called upon all parliamentarians to
support reform that will secure diversity and preserve a viable
and vibrant Australian media sector. Australia also has the most
punitive licence fee regime in the world and the Company
supports much-needed reform to the fees paid by Australian
broadcasters to recognise the shifting media environment
in which we now operate.

We have experienced a rapid decline in our market capitalisation
over the previous reporting period and shareholders will no
doubt be disappointed in the reduction in value of their stocks
in the past twelve months. In the context of the decline in
regional television advertising spending, your directors and senior
executives have been focussed on maximising the Company’s
revenue and audience share. The executive team continues to
work hard to improve the Company’s operational performance
by reducing operating expenses and identifying new technologies
and managed services, as well as divesting non-core assets.

As you will be aware, the Company experienced its first strike
against the Remuneration Report at the 2015 Annual General
Meeting. This has led to your Board, and particularly the
Remuneration and Nomination Committee, looking carefully
at the remuneration arrangements, including the short term
incentive (STI) metrics that have been applied to the Chief
Executive Officer and the senior executives for the most recent
reporting period. The key performance indicator analysis gave
average STI entitlements for the top six executives at just
over 55% of base salary, which, with weighting, totalled 42.2%
of the available STI pool. Given the non-cash impairment, your
Board decided to reduce these measures, so that the individual

entitlement and total pool awards were harmonised at 30%.
The Remuneration and Nomination Committee also noted the
feedback from shareholders and stakeholders regarding the
appropriateness of long term incentive (LTI) performance and
vesting criteria. Your Board has resolved to freeze the current
LTI plan with the objective of introducing an improved LTI
scheme to be put forward for shareholder approval at the 2017
Annual General Meeting. Your Board has also determined that
the current LTI plan structure is not considered appropriate,
and there will not be an FY17 offer of LTI incentives to the
Chief Executive Officer or senior executives. We feel confident
that the 2016 Remuneration Report demonstrates that, after
significant consideration of concerns raised, we have found
an alignment between executive and Company performance
and our shareholders’ interests.

At the 2016 Annual General Meeting we will have two serving
Directors standing for re-election. Ian Neal has served as
a director since 2008. He has a very successful professional
background in banking and finance, is currently a Chair for
the Executive Connection, and serves as the non-executive
Chairman of Dyesol Limited. Ian is the Chair of the Remuneration
and Nomination Committee and a member of the Audit and
Risk Committee.

Peter Macourt is a highly experienced media executive, having
worked as chief operating officer of News Limited and served
as a former director of FOXTEL, Premier Media and Independent
Newspapers Limited, and he is currently Chairman of SKY
Network Television Limited and Virtus Health Limited. Peter
also serves as Chair of the Company’s Audit and Risk Committee.

I would also like to take the opportunity to acknowledge the
retirement of two of our directors on 30 September. Mike Hill
has decided to focus on his other business interests and we
respect that decision and wish him well. Alex Hamill has decided
to reduce his work commitments after making an outstanding
contribution to the Board over the past thirteen years.
We wish him every success for the future and on behalf of the
directors I would like to thank him for his advice, insights and
generous contribution.

On behalf of the Board, I would like to extend my thanks to my
fellow directors and to all our hard working PRIME employees
for their tireless efforts in a very challenging year.

The Board welcomes continued feedback and engagement with
our shareholders.

John Hartigan
CHAIRMAN

PRIME MEDIA GROUP ANNUAL REPORT 2016CHIEF EXECUTIVE
OFFICER’S REPORT

The 2016 financial year was paradoxical for PRIME.
Our television business was successful in maintaining
its leadership status in regional television, taking
the largest share of audience and revenue, however,
disruption to regional audiences and advertising markets
from new competitors and new platforms, positions
PRIME as a very good business in what is currently,
a deteriorating environment.

During the 2016 financial year the competitive environment
in PRIME’s markets increased dramatically as the Seven,
Nine and Ten networks commenced live streaming of their
metropolitan free to air television programming into regional
Australia. Combined with their respective catch-up services,
and the growing popularity and accessibility of Netflix, Stan,
ABC iView and SBS On Demand, the competition for regional
viewers is greater than at any other time in PRIME’s history.

While PRIME remains subject to media regulations introduced
in 1992 that are out of step with current technology, new
streaming services in our markets are unbridled in their ability
to offer audiences and advertisers viewing and advertising
flexibility that free to air television broadcasters, like PRIME,
are precluded from matching. The result is a deterioration
of regional television advertising spends. And in PRIME’s
markets, television advertising fell for the second year
in a row, this time by almost 6%.

As a result of the changing business environment, the
Company reviewed the value of its television licences and
associated goodwill, resulting in a non-cash impairment
charge of $122.9 million. It should be noted that PRIME
is the last television business in Australia to write down
the value of its television licences.

Despite the soft and disrupted advertising market, PRIME’s
core net profit before one-off items was $27.4 million.
The Company’s cash flow remains strong, generating
$33.9 million from operating activities, which enabled
the payment of $18.3 million in fully franked dividends
in FY16, whilst concurrently reducing interest bearing debt
by $15 million.

Initiatives undertaken in the reporting period to mitigate
the market revenue decline included a 2.3% or $1.2 million
reduction in operating expenditure, and the disposal of
non-core assets, which realised $5.5 million. The continuing
program of cost reduction and non-core asset disposals has
delivered cumulative annual savings of $8.5 million since 2013
and total sale proceeds from non-core assets to $32 million.

PRIME is continuing its focus on cost reduction and non-core
asset disposals in 2017 to meet one of the Company’s core
strategy pillars, which is to reduce debt and maintain a strong
balance sheet through a challenging period for all Australian
traditional media companies. As a result of all these
initiatives, PRIME maintains a healthy balance sheet and we
continue to operate comfortably within our bank covenants.

NETWORK AFFILIATIONS

On 1 July 2016, PRIME’s two direct competitors in regional
Australia, WIN Television and Southern Cross Television
swapped respective program suppliers. The period leading
up to and through the change of affiliations in the fourth
quarter of 2016 was one of uncertainty for many advertisers.
As a result PRIME was the only constant in the market, which
played well for PRIME leading into our coverage of the 2016
Rio Olympic Games.

PRIME’s programming arrangements with Seven West Media
are in place until June 2019 and we are confident in Seven’s
ability to maintain its position as the producer of Australia’s
best performing program schedule.

CONTINUING THE FIGHT FOR
REGULATORY CHANGE

The change in the competitive profile of regional television
markets has heightened the need for changes to Australia’s
media regulations. With our industry peers WIN and Southern
Cross, PRIME continues to prosecute the case for media
reform, specifically as it relates to regional broadcasters.

Disappointing is the best adjective to describe the manner
in which this issue has been handled by the Federal
Parliament, and now, almost four years on from the release
of the Convergence Review, which recommended wholesale
reform, regional broadcasters find themselves in an
unenviable position.

PRIME continues to be a leading voice seeking the removal
of three key pieces of broadcasting regulation: the repeal
of the audience reach rule that prevents a television licensee
from reaching more than 75% of the population; repeal of the
2 out of 3 rule that prevents a media company from owning
TV, radio and newspapers in one market; and a reduction
in licence fees, which are significantly out of kilter with those
paid by broadcasters elsewhere in the world.

Over the past few years the Company has met and engaged
with more than 100 federal parliamentarians, including the
Prime Minister and Minister for Communications, both with
our industry peers and on our own, to inform the Government
and Opposition about the issues affecting regional
broadcasters that mean urgent reform should be a priority.

The Company will continue to pursue this core strategy pillar
of advocating for regulatory change to benefit our industry,
our regional audiences and advertisers, and ultimately
our shareholders.

COMMITMENT TO REGIONAL AUSTRALIA

As a regional broadcaster, PRIME prides itself on its regional
engagement, making a significant investment in local news
programming and providing valuable community airtime
sponsorships to support and assist community endeavours.
During 2016, Prime was proudly associated with many
charitable and community-based organisations, including the
Spirit of ANZAC Centenary Experience, Camp Quality, Young
Achiever Awards and Royal Far West.

Ian Audsley
CHIEF EXECUTIVE OFFICER

HIGHLIGHTS

$238.8m

RE V ENUE

$55.4m

EBITDA

$27.4m

CORE NE T PROFIT AF TER TA X^

3.7¢
per share

FULL Y E AR DI V IDEND

^ E xc lud e s non - core s pec ific item s.

PRIME MEDIA GROUP ANNUAL REPORT 2016DIRECTORS’
REPORT

Your directors submit their report for the year ended 30 June 2016.

DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below.
Directors were in office for this entire period unless otherwise stated.

NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES

JOHN K. HARTIGAN

ALEXANDER A. HAMILL

IAN R. NEAL

PETER J. MACOURT

Non-Executive Chairman
(appointed 15 May 2014)

Mr Hartigan headed News
Corporation’s Australian
operations as Chairman and
Chief Executive Officer of News
Limited (now known as News
Corp Australia). He was also
a director of FOXTEL and
chairman of Australian News
Channel, which owns and
operates Sky News. He has
worked in advisory positions
for the American Australian
Association and the NSW
Export and Investment
Advisory Board. Mr Hartigan
is a trustee of the Sydney Cricket
and Sports Ground Trust,
is Chairman of Destination
NSW, a Lifetime Member
of The Bradman Foundation
and is a director of the Australian
Paralympic Committee.

Non-Executive Director
(appointed 2 October 2003)

Non-Executive Director
(appointed 6 June 2008)

Non-Executive Director
(appointed 1 September 2014)

Mr Hamill has worked in
marketing and advertising in
Australia and globally for over
45 years. Mr Hamill was the
media director of the Australian
Olympic Team in Sydney,
Athens and Beijing. Mr Hamill
is a member of the Remuneration
and Nomination Committee.

Mr Macourt is currently Chairman
of SKY Network Television
Limited and Virtus Health
Limited. He is also a former
director and chief operating
officer of News Limited and
a former director of FOXTEL
and Independent Newspapers
Limited. Mr Macourt is Chairman
of the Audit and Risk Committee
and was a member of the
Remuneration and Nomination
Committee until 4 August 2015.

Mr Neal is a Chair for the
Executive Connection and
consults on business strategy
and implementation from
a perspective of maximising
shareholder value. Mr Neal
was co-founder and managing
director of Nanyang Ventures
Pty Limited from 1993 to
2004. Mr Neal’s professional
background is in financial
markets, commencing as an
equities analyst and moving to
various banking positions until
establishing Nanyang Ventures.
Mr Neal is a life member of
the Financial Services Institute
of Australia, a previous National
President of The Securities
Institute of Australia and was
a member of the first Corporate
Governance Council which
established the Corporate
Governance Guidelines. Mr Neal
is Chairman of the Remuneration
and Nomination Committee
and a member of the Audit and
Risk Committee.

CASS O’CONNOR

MICHAEL H. HILL

MICHAEL S. SIDDLE

IAN C. AUDSLEY

Non-Executive Director
(appointed 21 April 2015)

Non-Executive Director
(appointed 4 August 2015)

Non-Executive Director
(appointed 17 April 1985)

Chief Executive Officer
(appointed 16 June 2010)

(retired 10 November 2015)

Mr Siddle has been a director of
the Company since 1985 and was
a member of the Audit and Risk
Committee until 4 August 2015.
He is also Chairman of Ramsay
Health Care Limited and a trustee
of the Paul Ramsay Foundation.

Executive Director
(appointed 24 June 2010)

Mr Audsley has had over 30 years’
experience in the television
industry. He has held various
senior roles at the Seven Network,
Nine Network, TV3 New Zealand
and Southern Cross Television.

Ms O’Connor has over 30 years’
experience as a director of
ASX listed companies, Federal
and State government and
unlisted entities. For the past
15 years she has managed
her own successful corporate
advisory company. Ms O’Connor
is currently a non-executive
director of McGrath Limited,
PS&C Limited and Carriageworks
Limited, and a shareholder and
director of multi-award winning
Goalpost Pictures and other
private entities. Ms O’Connor has
previously worked for Deutsche
Bank, Turnbull & Partners,
Goldman Sachs (Australia), and
Carnegie, Wylie & Company.
Ms O’Connor was appointed
a member of the Remuneration
and Nomination Committee
on 4 August 2015.

Mr Hill has more than 20 years’
experience working on corporate
and private equity transactions
in Australia and the United
Kingdom. He is a former partner
of Ernst & Young and a Director
of Ernst & Young Transaction
Advisory Services Limited. In
2005 Mr Hill joined Ironbridge,
a leading Sydney based private
equity firm. Mr Hill is currently
the Executive Chairman of rhipe
Limited, non-executive Chairman
of Ahalife Holdings Limited, HJB
Corporation Limited and Modun
Resources Limited, and a non-
executive director of JustKapital
Limited. Mr Hill is a member of
Chartered Accountants Australia
and New Zealand and was
appointed a member of the
Audit and Risk Committee on
4 August 2015.

PRIME MEDIA GROUP ANNUAL REPORT 2016DIRECTORS’ INTERESTS
The relevant interest of each director in the shares and performance rights issued by the Company at the date of this report is as follows:

NAME

J.K. Hartigan

A.A. Hamill

I.R. Neal

P.J. Macourt

C.A. O’Connor

M.H. Hill

I.C. Audsley

ORDINARY SHARES

RIGHTS OVER
ORDINARY SHARES

–

222,423

1,850,000

INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE COMPANY
No director has any interest in any contract or proposed contract with the Company other than as disclosed elsewhere in this report.

DIRECTORSHIPS IN OTHER LISTED ENTITIES
Directorships of other listed entities held by directors of the Company during the three years immediately before the end of the year are as follows:

DIRECTOR

COMPANY

PERIOD OF DIRECTORSHIP

P.J. Macourt

SKY Network Television Limited (Non-Executive Chair)

Virtus Health Limited (Non-Executive Chair)

I.R. Neal

Dyesol Limited (Non-Executive Chair)

C.A. O’Connor

PS&C Limited (Non-Executive Director)

McGrath Limited (Non-Executive Director)

M.H. Hill

rhipe Limited (Executive Chair)

Ahalife Holdings Limited (Non-Executive Chair)

HJB Corporation Limited (Non-Executive Chair)

JustKapital Limited (Non-Executive Director)

LiveTiles Limited (formerly Modun Resources Limited) (Non-Executive Director)

Noble Mining Resources Limited (Non-Executive Chair)

M.S. Siddle

Ramsay Health Care Limited (Non-Executive Chair)

From

August 2002

June 2013

September 2006

October 2013

December 2015

March 2013

January 2014

July 2014

September 2014

November 2015

May 1975

Present

COMPANY SECRETARY
Ms Emma McDonald was appointed Company Secretary on 27 February 2012. She has been a solicitor for over 20 years, having worked in a number
of large media companies and for a major law firm. She also holds the role of General Counsel for Prime Media Group Limited.

EARNINGS PER SHARE

Basic earnings per share

Diluted earnings per share

DIVIDENDS

Final dividend recommended:

– on ordinary shares

Dividends paid in the year:

Interim for the year

– on ordinary shares

Final for 2015 shown as recommended in the 2015 financial report

– on ordinary shares

CENTS

(25.5)

CENTS

$’000

1.7

6,228

2.0

3.0

7,327

10,990

PRINCIPAL ACTIVITIES
The principal activities of Prime Media Group Limited during the year were the provision of free to air commercial television broadcasting services in
regional New South Wales, the Australian Capital Territory, regional Victoria, the Gold Coast area of Southern Queensland and regional Western Australia.

The majority of the Group’s television programming is supplied through an affiliation agreement with the Seven Network and broadcast under the
PRIME7 brand on the east coast and the GWN7 brand in regional Western Australia.

DIRECTORS’ REPORTOPERATING AND FINANCIAL REVIEW

SHAREHOLDER RETURNS

STATUTORY RESULTS
The Company’s consolidated loss after tax attributable to the members
of Prime Media Group Limited for the year ended 30 June 2016 was
$93,578,000 (2015: profit $35,621,000). Total revenue of $235,103,000
was down 7.2% or $18,130,000 on the prior year, while earnings before
interest, tax and depreciation of $55,410,000 fell by $11,455,000 or 17.1%.

Included in the operating loss is a one-off non-cash impairment of
television licences and goodwill of $122,931,000. This adjustment reflects
the impact of new and largely unregulated market entrants, increased
competition in the form of global and national media platforms, and the
comprehensive reach of the internet and streaming services, all of which
impact regional television audiences, and revenues.

In the 2015 calendar survey year, the Group’s total audience in the
aggregated regional market of New South Wales and Victoria fell by 5.6%
on the previous year. Viewers aged between 25 and 54 in this aggregated
market also declined by 12.3% in the 2015 calendar year, which was the
second consecutive survey year of double digit decline. Revenue in this
aggregated market also contracted again, declining 6.0% in the 2016
financial year compared to a decline of 3.9% in the prior year.

The following non-core items improved the Company’s net loss:

• The gain on sale of surplus properties in Wollongong and Albury,

New South Wales of $1,583,000; and

• The gain on sale of the Group’s 15% interest in Gearhouse Broadcast

Pty Limited, resulting in a one-off gain on sale of $501,000.

The Group’s gross profit margin was 45.1%, down 1.4PP on the previous
corresponding period due to increases in program affiliation costs and
other sales related costs.

The Group’s total operating expenses of $50,967,000 were $1,196,000
or 2.3% down on the previous corresponding period, mainly due to
a reduction in employee costs of $1,199,000 or 2.9% on the previous
corresponding period.

Share of associate losses of $1,063,000 relate to the Group’s ventures
to broadcast the TEN television signal in Mildura and regional Western
Australia. The ventures will broadcast the Nine Network television signal
in these regions during the 2017 financial year.

Finance costs of $3,661,000 were 26.6% less than the previous
corresponding reporting period, largely due to lower average debt
levels. The one-off non-cash impairment of $122,931,000 did not impact
bank covenants.

CORE NET PROFIT AFTER TAX
Core net profit after tax and before specific items was $27,351,000 (2015:
$33,468,000), representing a decrease of $6,117,000 or 18.3% on the
previous corresponding period. The Group’s final dividend has been
declared based on the core net profit after tax:

2016
$’000

2015
$’000

Core Earnings Per Share
(cents per share) *

Statutory Earnings Per Share
(cents per share)

Core Return on Assets (ROA) % *

Statutory Return on Assets (ROA) %

Weighted Average Cost of Capital
(pre-tax) (%)

Core Return on Equity (ROE) (%) *^

Statutory Return on Equity (ROE) (%)

Net Debt/Net Debt + Equity Ratio (%)

Share price ($)

Dividends per share (cents)

Total Shareholder Return (%)

2016

2015

7.5

(25.5)

15.9

(54.4)

11.61

43.9

(150.4)

51.3

0.32

3.7

(48.3)

9.1

9.7

11.0

11.7

10.95

19.2

20.5

31.2

0.69

6.8

(27.8)

* These returns have been calculated using core net profit after tax as set out

at Note 4 of this report.

^ Equity has been normalised for the impact of items disclosed as specific items.

STATEMENT OF FINANCIAL POSITION AND CASH FLOW
During the reporting period, the Group’s operating cash flows decreased
by $24,045,000 to $33,925,000. The decrease in operating cash flows was
primarily due to a fall in television advertising revenue.

Net cash flows used in investing activities of $1,085,000 (2015: $4,544,000)
related to capital expenditure, mainly for broadcast and computer
equipment totalling $6,023,000. Net cash flows from investing activities
included the proceeds from the sale of surplus properties in Wollongong
and Albury, New South Wales of $2,583,000 and the proceeds from the
sale of the Group’s 15% interest in Gearhouse Broadcast Pty Limited
of $3,000,000.

A further $645,000 (FY15: $605,000) was used to fund Prime’s interest
in associates, which broadcast the TEN television signal in Mildura and
regional Western Australia.

CAPITAL STRUCTURE
The Group’s secured bank loan facility decreased to $73,402,000
as at 30 June 2016 (2015: $88,064,000). The Group continues to operate
comfortably within the terms of its debt facility, which matures April 2018.
During the reporting period, the debt facility limit was reduced
by $55 million to $120 million. The non-cash impairment of television
broadcast licences and goodwill of $122,931,000 did not impact on
bank covenants.

Interest-bearing loan and finance lease
contracts

Cash and short term deposits

Net debt

Reported (loss)/profit after tax

(93,578)

35,621

Total equity

Impairment of television broadcast
licences and goodwill (non-cash)

Gain on sale of surplus assets

Digital Restack Program Revenue
(non-cash)

Redundancies

Income tax(benefit)/expense related
to specific items

Core net profit after tax and before
specific items

122,931

(2,084)

–

118

(36)

–

(1,157)

(1,501)

427

27,351

33,468

Total capital employed

Gearing

2016
$’000

2015
$’000

73,804

(8,235)

65,569

62,231

127,800

51.3%

88,736

(9,837)

78,899

173,876

252,775

31.2%

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016The profile of the Group’s debt finance is as follows:

PERFORMANCE RIGHTS (EQUITY)

Current

Obligations under finance leases

Non-current

Obligations under finance leases

Secured bank loan facility

Total interest bearing liabilities

2016
$’000

2015
$’000

402

–

73,402

73,804

270

402

88,064

88,466

88,736

RISK MANAGEMENT
The Group’s approach to risk management is addressed in the Corporate
Governance Statement, which is available on the Company’s website
www.primemedia.com.au/investors. The Board is responsible for
ensuring that risks, and also opportunities, are identified on a timely
basis and that the Group’s objectives and activities are aligned with the
risks and opportunities identified by the Board.

The Board has a number of mechanisms in place to ensure that
management’s objectives and activities are aligned with the risks
identified by the Board. These include the following:

• Board approval of strategic plans, which encompass the Group’s

•

vision, mission and strategy statements, designed to meet
stakeholders’ needs and manage business risk; and
implementation of Board approved operating plans and budgets
and Board monitoring of progress against these budgets, including
monitoring of financial and non-financial Key Performance
Indicators (‘KPIs’).

As part of its risk management framework, the Company has identified
the following key risks that may affect the Group’s financial performance:

• fluctuations in consumer demand that impact advertising revenues,
which the Company manages by ensuring it continues to maintain
a strong advertising sales team and strong relationships with
advertisers and agencies;

• change to the operating, market or regulatory environment as a result
of changes in government media policy, which the Company seeks
to manage by engaging with policy-makers and stakeholders to
ensure that the interests of the Company and its shareholders are
represented; and
the impact on audiences as a result of new media platforms
and technologies and the resultant impact on television
advertising revenues.

•

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the Group’s state of affairs.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE
The Group has engaged MediaHub Australia (a joint venture between
the Australian Broadcasting Corporation and WIN Television) to provide
on-air operations services. On-air operations in a television business
augment the program feed with commercials, community service
announcements and other materials, to create the complete schedule
of content for transmission. It is a major component of television
broadcasting. Outsourcing this function to a managed service is an
established practice in the major and mature television markets of Great
Britain and Europe, with impressive continuity of service outcomes.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Board and Executive consider that the future performance of the
Group will be influenced by the outlook for television advertising in
regional Australia and changes in media platforms and technologies
that may result in new entrants accessing advertising markets and
consumers in regions where the Group holds licences to broadcast
free-to-air television.

UNISSUED SHARES
At the date of this report there were 4,925,191 (2015: 4,527,438)
performance rights over unissued ordinary shares under the Prime Media
Group Limited Performance Rights Plan that are yet to vest. Refer to Note
27 of the financial statements for further information.

Performance rights holders do not have any right, by virtue of the
performance right, to participate in any share issue of the Company
or any related body corporate.

SHARES ISSUED OR ACQUIRED AS A RESULT OF THE
EXERCISE OF PERFORMANCE RIGHTS
During the financial year, 1,580,000 (FY15: 966,000) ordinary shares were
acquired on market by the Trustee of the Prime Media Group Limited
Performance Rights Plan (Plan) as a result of the vesting and exercise
of rights under the Plan.

INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND OFFICERS
In accordance with the Corporations Act 2001, the directors disclose
that the Company has a Directors’ and Officers’ Liability policy covering
each of the directors and certain executive officers for liabilities incurred
in the performance of their duties and as specifically allowed under the
Corporations Act 2001. During the year, the Company paid premiums
totalling $134,459 (2015: $107,850) in relation to the Directors’ and
Officers’ Liability policy. The terms of the policy specifically prohibit the
disclosure of any other details relating to the policy. The Company has
also executed a deed of access, indemnity and insurance with Directors
and Officers in their capacity for the Company, its subsidiaries and
related parties.

INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify
its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst
& Young during or since the financial year.

DIRECTORS’ MEETINGS AND COMMITTEE
MEMBERSHIP
The number of meetings of directors, including meetings of committees
of directors, held during the year and the numbers of meetings attended
by each Director were as follows:

AUDIT
AND RISK
COMMITTEE
MEETING

REMUNERATION
AND NOMINATION
COMMITTEE
MEETING

BOARD
MEETINGS

Number of meetings
held:

Number of meetings
attended:

J.K. Hartigan

A.A. Hamill

I.R. Neal

P.J. Macourt

C.A. O’Connor

M.H. Hill (Appointed
4 August 2015)

M.S. Siddle # (Retired
10 November 2015)

I.C. Audsley

7 *

–

1 *

4 *

–

indicates maximum number of meetings the director was eligible to attend
during the period.

the director was eligible to attend 5 meetings during the period.

DIRECTORS’ REPORTMESSAGE FROM THE CHAIR OF THE REMUNERATION AND NOMINATION COMMITTEE

Dear Shareholder

I am pleased to present to you the Prime Media Group’s Remuneration Report for the financial
year to 30 June 2016. In its continual review and assessment of the appropriateness of the current
remuneration framework for senior executives, the Remuneration and Nomination Committee
considers feedback received from shareholders and their advisers, the recommendations of the
ASX Corporate Governance Council and Prime Media’s strategic objectives, with a focus on long
term shareholder wealth creation. Ultimately, the remuneration mix applied to senior executives
is designed to attract and retain the highest calibre talent whilst ensuring that pay outcomes
remain aligned with the shareholder expectations.

Prime Media has experienced a rapid decline in its market capitalisation over the previous
reporting period. In context of reductions in regional television advertising spend, senior
executives have been focussed upon maximising Prime Media’s revenue and audience share
through driving advertiser activity growth. The senior executive team has also been tasked
with improving the Company’s operational performance through reducing operating expenses
by identifying new technologies and managed service options and divesting non-core assets.
Additionally, Prime Media’s focus upon advocating for changes to Australia’s media ownership
and control laws, specifically relating to free-to-air television, is aimed at positioning the Company
for new revenue or transaction opportunities. As such, these objectives have underpinned the
predetermined short term incentive (STI) metrics that have been applied to the senior executive
team for the most recent reporting period.

Although the financial hurdles set for senior executives in FY16 were not achieved, the advertising,
revenue generation and audience share key performance indicators were partially met, whilst
operational performance and cultural metrics were achieved. The key performance indicator
analysis gives average STI entitlements for the top six executives being for just over 55% of base,
which, with weighting, totals 42.2% of the available STI pool. Given the non-cash impairment
reported by the Company, the Remuneration and Nomination Committee has decided to
reduce each of these measures, so that both the individual entitlement and total pool awards
are harmonised at 30%.

As a result of the Remuneration and Nomination Committee’s concerns with the appropriateness
of long term incentive (LTI) performance and vesting criteria, in addition to feedback received
from shareholders and other Company stakeholders, the Board has resolved to freeze the current
LTI plan with the objective of introducing an improved LTI scheme that will be put forward for
shareholder approval at the 2017 Annual General Meeting. This will allow the Board to engage
with executives and stakeholders around designing an LTI that is fit for purpose and that will
appropriately motivate the executive team in delivering strong investment returns and business
growth. Given that the current LTI plan structure is no longer regarded to be appropriate, there
will not be an FY17 offer of LTI incentives to eligible senior executives.

In addition to freezing the LTI scheme in FY17, the base salaries for the reported senior executives
will remain frozen for the period, with the exception of one senior executive who has a contractual
entitlement to an inflationary fixed pay increase.

The Board is confident that 2016 remuneration outcomes demonstrate an alignment between
executive and Company performance and shareholders’ interests. With regard for the evolving
expectations and views of Prime Media’s investors, the Board welcomes continued feedback and
engagement with our shareholders.

Yours sincerely

Mr. Ian Neal
Chair – Remuneration and Nomination Committee

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016REMUNERATION REPORT (AUDITED)
This Remuneration Report for the year ended 30 June 2016 outlines
the remuneration arrangements of the Company and the Group in
accordance with the requirements of the Corporations Act 2001 (the Act)
and its regulations. This information has been audited as required by
section 308(3C) of the Act.

The Remuneration Report is presented under the following sections:

1. Introduction
2. Remuneration Governance

a. Remuneration and Nomination Committee

3. Executive Remuneration Arrangements

a. Remuneration Principles and Strategy
b. Remuneration Mix
4. Detail of Incentive Plans

a. Short Term Incentive Entitlements and Outcomes
b. Long Term Incentives
c. Executive Remuneration Outcomes (including link to performance)

5. Executive Contracts
6. Non-Executive Director Remuneration
7. Additional Statutory Disclosures
8. Corporate Governance

INTRODUCTION

1.
The Remuneration Report details the remuneration arrangements for key
management personnel (KMP) who are defined as those persons having
authority and responsibility for planning, directing and controlling the
major activities of the Group, directly or indirectly, including any director
(whether executive or otherwise).

For the purposes of this report, the term ‘executive’ includes the Chief
Executive Officer (CEO), executive directors, senior executives, and
secretaries of the Company and the Group. KMP for the year ended
30 June 2016 were:

KMP

POSITION

TERM AS KMP

Non-Executive Directors

J.K. Hartigan

Chair; Director

A.A. Hamill

I.R. Neal

P.J. Macourt

Director

C.A. O’Connor Director

M.H. Hill

M.S. Siddle

Director

Full Year

Commenced 4 August 2015

Retired 10 November 2015

Executive KMP

I. Audsley

D. Walker

S. Wood

CEO and Executive
Director

Group General Manager
Sales and Marketing

Group General Manager
Operations

E. McDonald

General Counsel &
Company Secretary

J. Palisi

Chief Financial Officer

A. Hogarth

General Manager
Television

Full Year

2. REMUNERATION GOVERNANCE

REMUNERATION AND NOMINATION COMMITTEE
The Board has appointed a Remuneration and Nomination Committee
consisting of three independent non-executive directors (NEDs) to,
amongst various responsibilities, review and make recommendations
to the Board regarding:

• Executive management remuneration and incentives;
• Executive management performance against agreed performance

targets; and

• The remuneration framework for directors.

The Remuneration and Nomination Committee held 5 meetings during
FY16 and attendance was as follows:

MEETINGS
ATTENDED COMMENTARY

I.R. Neal (Chair)

A.A. Hamill

C.A. O’Connor

P.J. Macourt

5/5

1/5

4/4

1/1

Maximum number
of meetings eligible to attend

The CEO, CFO and Company Secretary have attended certain
Remuneration and Nomination Committee meetings by invitation, where
management input is required. The CEO, CFO and Company Secretary
are not present during any discussions relating to their own remuneration
arrangements. Further information on the Remuneration and Nomination
Committee’s role, responsibilities and membership is available at
www.primemedia.com.au/investors.

3. EXECUTIVE REMUNERATION ARRANGEMENTS

REMUNERATION PRINCIPLES AND STRATEGY
The Company’s executive remuneration strategy aims to attract,
motivate and retain high performing individuals and align the interests
of executives and shareholders. The Remuneration and Nomination
Committee reviews total remuneration packages annually.

To this end, key objectives of the Company’s reward framework are
to ensure that remuneration practices:

• Are aligned to Prime Media Group’s business strategy;
• Offer competitive remuneration benchmarked against the

external market;

• Provide strong linkage between individual and Group performance

and rewards; and

• Align the interest of executives and shareholders.

The Company aims to reward executives with a level and mix of
remuneration commensurate with their position and responsibilities
within the Group and aligned with market practice. When referencing
the external market, the Company carries regard for media sector wages
and remuneration offered amongst the pool of candidates for which
it must compete for talent. KMP remuneration is therefore benchmarked
against industry peers and with regard for market data, insights into
remuneration trends, the performance of the Company and individual,
and the broader economic environment.

Base pay is set with reference to the median of the external market and
is designed to reflect the competence of the individual whilst remaining
competitive amongst similar roles. Total remuneration is targeted
between the median and 75th percentile of the external market and
considers the need to effectively motivate senior executives to exceed
performance expectations and underpin remuneration outcomes that
are consistent with shareholder outcomes. The Remuneration and
Nomination Committee considers this positioning to be appropriate
in attracting and retaining the calibre of talent required to execute
the Company’s strategy and deliver superior long term shareholder
wealth creation.

DIRECTORS’ REPORTREMUNERATION MIX
The following table represents target remuneration at grant assuming that all performance conditions are met. The relative proportions of senior
executive remuneration are as follows:

NAME

CEO and Executive Director

I. Audsley

Other KMP

D. Walker

S. Wood

E. McDonald

J. Palisi

A. Hogarth

FIXED
REMUNERATION
%

AT RISK STI
%

AT RISK LTI
%

TOTAL
%

51%

67%

72%

30%

32%

16%

20%

19%

100%

17%

100%

There is no stretch reward opportunity under the current STI scheme.

Approximately half of the CEO’s total remuneration package is ‘at risk’ and therefore subject to the achievement of both short term and long term
performance requirements that are linked to the Company’s strategy and driving long term shareholder wealth creation.

REMUNERATION COMPONENT

VEHICLE

PURPOSE

LINK TO PERFORMANCE

Fixed remuneration

• Represented by total

• To provide competitive fixed

• Company and individual

employment cost: comprises
base salary, superannuation
contributions and
other discretionary and
non-discretionary benefits.

remuneration set with reference
to the median of comparable
external market roles.

performance are considered
during the annual review process.

STI component

• Paid in cash.

• Rewards executives for their
contribution to achievement
of Group and business unit
outcomes, as well as individual
Key Performance Indicators (KPIs).

LTI component

• Awards are made in the form of

performance rights.

• Rewards executives for their
contribution to the creation
of shareholder value over the
longer term.

• EBITDA;
• Core NPAT;
• Divisional financial performance;
• Operational performance;
• Power ratio; Business

development; Audience share and

• Risk management including
commitment to Work Health
Safety.

• Performance rights vest subject to
achieving core EPS and power ratio
targets.

2017 Financial Year
For the 2017 financial year and with the exception of Mr Dave Walker, who is contractually entitled to an annual base salary increase consistent with
inflation (CPI), the fixed remuneration applicable to the other reported senior executives will remain frozen for the period.

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 20164. DETAIL OF INCENTIVE PLANS

SHORT TERM INCENTIVE ENTITLEMENTS AND OUTCOMES
The Group operates an annual STI program that is available to key management personnel and awards a cash bonus subject to attainment of clearly
defined company wide, business unit and individual measures.

STI Performance Criteria
The actual STI payments awarded to each executive depend on the extent to which specific targets set at the beginning of the financial year are met.
The targets consist of a number of KPIs covering financial and non-financial, corporate and individual measures of performance. A summary of the
measures and weightings is set out below:

PERFORMANCE MEASURES

Chief Executive Officer

Group GM Sales and Marketing

Group GM Operations

General Counsel & Company Secretary

Chief Financial Officer

GM Television

GROUP FINANCIAL
PERFORMANCE
MEASURES:
GROUP EBITDA
CORE NPAT

DIVISIONAL FINANCIAL
PERFORMANCE MEASURES:
POWER RATIO
REVENUE YIELD
REVENUE GENERATION
EXPENSE MANAGEMENT

NON-FINANCIAL MEASURES:
STRATEGIC INCLUDING GROWTH INITIATIVES
OPERATIONAL PERFORMANCE INCLUDING:
BUSINESS DEVELOPMENT AUDIENCE SHARE
COMMITMENT TO RISK MANAGEMENT AND
WORK HEALTH SAFETY

60%

20%

–

45%

30%

57.5%

40%

35%

50%

22.5%

KEY PERFORMANCE OBJECTIVES OUTCOMES

COMMENTARY

Financial results

Not achieved

Operating loss of $93,578,000.
Core net profit after tax of $27,351,000, down $6,117,000 or 18.3% on the pcp.

Not achieved

Group EBITDA of $55,410,000, down $11,455,000 or 17.1% on the pcp.

Maximising advertising revenue
share and yield

Partially achieved Prime reported a power ratio of 0.998, which demonstrates that Prime’s revenue share is

marginally less than its audience share in the aggregated regional market of New South Wales
and Victoria.

Revenue generation

Partially achieved Maintained market leading total advertising revenue share of 41.7% for the aggregated regional

Audience share

market of New South Wales and Victoria despite the market contracting 6.0% on the pcp.

Partially achieved Maintained market leading audience share of 41.8% for total people in the aggregated regional
market of New South Wales and Victoria through effective engagement with regional audiences
including a commitment to local news, community partnerships and channel promotion.

Strategic priorities

Achieved

Lead role in advocating for the removal of media laws that regulate the ownership and control
of traditional media companies.

Operational performance:
Efficient allocation of resources

Achieved

Reduction in operational expenses of $1,196,000 or 2.3% on the pcp.

Sale of non-core assets

Achieved

Sale of surplus premises in Wollongong and Albury NSW and the sale of Prime’s 15% interest
in Gearhouse Broadcast Pty Limited resulting in a one-off gain on sale of $2.1 million.

Risk management culture
including promotion of work
health safety

Achieved

The Executive Risk Management Committee continued to promote a company wide culture
of risk management and work health safety.

After consideration of performance against KPIs, the Remuneration and Nomination Committee recommends to the Board, on an annual basis, the
amount, if any, of STI to be paid to each executive. This process usually occurs within three months after the reporting date. Payments made are
delivered as a cash bonus in the following reporting period.

The Remuneration and Nomination Committee assessed whether STI deferral is appropriate. At this stage it decided not to implement STI deferral but
will continue to review this on an annual basis.

DIRECTORS’ REPORTLONG TERM INCENTIVES
LTI awards to executives are made annually under the Prime Media Group Limited Performance Rights Plan. The cumulative allocations represent
1.3% of the undiluted capital of the Company with a maximum income cost of $3,570,458 (2015: $3,724,786). The performance rights are measured
over a three year performance period, vesting subject to continuous service and the achievement of the following targets:

• 60% of the rights will be subject to achievement of annual core earnings per share (EPS) targets; and
• 40% of the rights will be subject to achievement of annual power ratio targets (revenue share: audience share).

If the LTI performance target is met or exceeded at the point of testing, 100% of that portion of the award will vest. The exercise price of the
performance rights is nil. The rights will lapse 30 days after vesting date.

The EPS targets will be disclosed at the point of testing and to the degree that awards vest under this portion of the LTI scheme.

LTI participants are not entitled to dividends on unvested awards. In a change of control event, the Board retains discretion in determining the manner
in which outstanding equity incentives will be dealt with.

EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE)

Company performance and its link to Short Term Incentives
The financial performance measures driving STI payment outcomes are:

• EBITDA and NPAT before specific non-core items; and
• A power ratio greater than 1. The power ratio is a measure of the Company’s share of revenue to the Company’s share of audience. A power ratio
greater than 1 indicates that the Company is performing ahead of its audience share. The Company achieved a power ratio of 0.998 in a market
characterised by a 5.9% fall in total audience in the regional aggregated market of News South Wales and Victoria and an associated fall in regional
revenue in this aggregated market of 6.0% on the pcp.

The following chart shows the Group’s core NPAT ($million) and EBITDA for the 5 year period ended 30 June 2016. Core NPAT is defined as statutory
net profit after tax and before non-core items.

$63.2

$62.6

$64.7

$66.9

$33.2

$35.4

$33.4

$33.5

$55.4

$27.4

2012

2013

2014

2015

2016

Core NPAT ($ million) including discontinued operations

EBITDA

For the 2015 financial year, 97.2% of the STI cash bonus pool of $1,307,033 as previously accrued in that period vested to key management personnel
and was paid in the 2016 financial year.

The Remuneration and Nomination Committee will consider the STI payments for the 2016 financial year in the first quarter of the 2017 financial
year. As demonstrated in the table below, STI payments have been accrued at 30% of the maximum cash bonus available for the 2016 financial year.
Any adjustments between the actual amounts to be paid as determined by the Remuneration and Nomination Committee and the amounts accrued
will be adjusted in the 2017 financial year.

EXECUTIVE

I. Audsley

D. Walker

S. Wood

E. McDonald

J. Palisi

T. Hogarth

Total

FY16 STI
ACCRUED

FY16 STI
AWARD POOL

FY15 STI PAID
IN CASH

FY15 STI
AWARD POOL

PAID
%

150,000

88,724

30,863

30,810

31,500

33,000

500,000

295,746

102,875

102,700

105,000

110,000

364,897

1,216,321

30.0%

500,000

288,533

115,000

110,000

143,500

113,437

500,000

288,533

115,000

110,000

143,500

150,000

1,270,470

1,307,033

100.0%

75.6%

97.2%

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016Company performance and its link to Long Term Incentives
The Company has adopted the following performance measures for the vesting of LTI performance rights:

• Core EPS (defined as statutory EPS before specific non-core items); and
• Maintenance or growth of the power ratio greater than 1.

The following table shows the Company’s performance over the 4 year period from 1 July 2012 to 30 June 2016. Core EPS is defined as statutory EPS
before non-core items.

CORE EARNINGS PER SHARE (60%)

FY13

FY14

FY15

Target

Actual

Percentage Achieved

POWER RATIO (40%)

Total Revenue: 3AGG Market

All People 06:00 to 23:59

Power Ratio

Percentage Achieved

8.5

9.7

9.1

100.0%

40.22%

39.50%

1.018

100.0%

40.82%

40.00%

1.021

100.0%

42.16%

41.70%

1.011

100.0%

FY16

9.0

7.5

0.0%

41.70%

41.80%

0.998

99.8%

LTI awards
During the 2016 financial year 1,580,000 (FY15: 966,000) ordinary shares were acquired on market by the Trustee of the Prime Media Group Limited
Performance Rights Plan as a result of performance rights that were issued in 2013 and vested under the Plan in 2016. The LTI remuneration for each
KMP is set out within Table 1 and 2 of this section. The equity settled share based payments expense, referenced in tables 1 and 2 of this section,
represents amounts accrued for performance rights that have not vested and do not represent payments made to any KMP.

2017 Financial Year
As a result of the current review that is underway in redesigning the LTI scheme so that it is fit for purpose and reflects corporate governance best
practice standards, there will not be an offer of LTI incentives to eligible senior executives during the FY17 period. The Board intends to put forward
a new LTI plan for shareholder approval by the 2017 Annual General Meeting.

DIRECTORS’ REPORTD
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DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016

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G

DIRECTORS’ REPORT

–

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Table 3: Prime Media Group Limited Performance Rights Plan

GRANTED

TERMS AND CONDITIONS FOR EACH GRANT

VESTED

2016

NUMBER

GRANT DATE

FAIR VALUE PER
PERFORMANCE
RIGHT AT GRANT
DATE

EXERCISE
PRICE PER
PERFORMANCE
RIGHT

EXPIRY DATE

FIRST EXERCISE
DATE

LAST EXERCISE
DATE

NUMBER

750,000

–

10/11/2015

28/11/2012

$0.4160

–

Director

I. Audsley

Executive

D. Walker

S. Wood

E. McDonald

J. Palisi

A. Hogarth

Total

377,753

–

250,000

–

250,000

100,000

1,977,753

28/9/2015

29/10/2012

28/9/2015

29/10/2012

28/9/2015

29/10/2012

28/9/2015

29/10/2012

28/9/2015

29/10/2012

$0.00

–

$0.00

–

$0.00

–

$0.00

9/12/2018

–

27/10/2018

–

27/10/2018

–

27/10/2018

$0.4258

–

$0.4258

–

$0.4258

$0.00

27/10/2018

$0.4258

$0.00

27/10/2018

–

700,000

–

230,000

–

200,000

–

100,000

–

200,000

–

150,000

1,580,000

GRANTED

TERMS AND CONDITIONS FOR EACH GRANT

VESTED

2015

NUMBER

GRANT DATE

FAIR VALUE PER
PERFORMANCE
RIGHT AT GRANT
DATE

EXERCISE
PRICE PER
PERFORMANCE
RIGHT

EXPIRY DATE

FIRST EXERCISE
DATE

LAST EXERCISE
DATE

NUMBER

Director

I. Audsley

Executive

S. Wood

D. Walker

J. Palisi

E. McDonald

A. Hogarth

Total

600,000

–

20/11/2014

23/11/2011

$0.6590

–

200,000

–

217,438

–

200,000

100,000

1,517,438

27/8/2014

30/9/2011

27/8/2014

30/9/2011

27/8/2014

$0.8100

–

$0.8100

–

$0.8100

$0.00

–

$0.00

–

$0.00

–

$0.00

20/12/2017

20/11/2017

20/12/2017

–

26/9/2017

27/8/2017

26/9/2017

–

26/9/2017

27/8/2017

26/9/2017

–

26/9/2017

–

27/8/2017

–

26/9/2017

–

615,000

–

167,000

–

184,000

–

966,000

The Prime Media Group Security Trading Policy applies to all NEDs and executives. The policy prohibits officers and employees from dealing in
Company securities in a way that breaches insider trading laws or would compromise confidence in Prime’s investor practices. This policy is publicly
disclosed and available at www.primemedia.com.au/investors.

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016

Table 4: Value of performance rights granted, exercised, lapsed or cancelled during the year

VALUE OF
PERFORMANCE RIGHTS
GRANTED
DURING THE YEAR ^
$

VALUE OF
PERFORMANCE RIGHTS
EXERCISED
DURING THE YEAR *
$

VALUE OF
PERFORMANCE RIGHTS
LAPSED
DURING THE YEAR
$

VALUE OF
PERFORMANCE RIGHTS
CANCELLED
DURING THE YEAR
$

I. Audsley

D. Walker

S. Wood

E. McDonald

J. Palisi

A. Hogarth

Total

312,000

160,836

106,443

42,577

834,742

^ Determined at the time of grant per AASB 2.
* Determined at the time of exercise.

390,610

121,297

105,475

52,738

105,475

79,106

854,701

–

For details on the valuation of the performance rights, including models and assumptions used, please refer to Note 27. There were no alterations
to the terms and conditions of performance rights granted as remuneration since their grant date. The maximum grant payable assuming that all
service and performance criteria were met, was equal to the number of rights granted multiplied by the fair value at the grant date. The minimum
payable assuming that service and performance criteria were not met was nil.

5. EXECUTIVE CONTRACTS
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are provided below:

NAME

NOTICE PERIOD

TERMINATION PAYMENT

CEO AND EXECUTIVE DIRECTOR

I. Audsley

OTHER KMP

D. Walker

A. Hogarth

Other Executives

12 months

12 months (fixed remuneration)

End of contract

12 months

6 months

Maximum of 6 months

12 months (fixed remuneration)

6 months (fixed remuneration)

Where a participant holds performance rights and becomes a good leaver, all unvested performance rights will automatically lapse unless the
Board determines in its sole and absolute discretion to allow some or all of those performance rights to vest. Under other leaver circumstances,
such as termination for cause, all unvested performance rights will automatically lapse.

6. NON-EXECUTIVE DIRECTOR REMUNERATION

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

All of the current NEDs carry an initial contract duration of three years that remains subject to their re-election by shareholders. The employment
contracts for NEDs do not carry notice provisions or termination entitlements. Board fees are set with reference to comparable ASX-listed companies.
The Company does not currently provide securities as part of NED remuneration and shareholder approval would be sought for this form of
remuneration to be paid.

The amount of the aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid
to NEDs of comparable companies. The Board also considers advice from external consultants when undertaking the annual review process.
The aggregate fees paid to NEDs in the 2016 financial year were $661,536 (excluding superannuation and retirement benefits).

NED fees in the 2017 financial year are estimated to be $675,000, which is less than the determination made at the Annual General Meeting held
in November 2007 when shareholders approved an aggregate fee pool of $750,000 per annum (excluding superannuation and retirement benefits
arising from the Directors’ remuneration plan).

DIRECTORS’ REPORTStructure
NED remuneration consists of fixed annual directors’ fees only and therefore NED’s are not entitled to receive performance-based remuneration
or any other entitlements that may be perceived to compromise their independence. Mr Alexander Hamill is currently entitled to benefits under
the Directors’ Retirement Plan, approved by shareholders in November 1997. These fees are summarised in Table 1 and 2 under section 4 above.
The Directors’ Retirement Plan was discontinued in the 2008 financial year for all directors appointed after that date. No further termination benefits
are to be paid to NEDs.

The rates and fees (inclusive of superannuation contributions) for the NEDs in FY16 is as follows:

BOARD POSITION

Chair

NED Base Fee

Committee Chair

Committee Member

ANNUAL FEE

$200,000

$95,000

Nil

7. ADDITIONAL STATUTORY DISCLOSURES

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Directors have received and are satisfied with the ‘Audit Independence Declaration’ provided by the Company’s external auditors, Ernst & Young,
which is included on page 20.

Non-Audit Services
The following non-audit services were provided by the Group’s auditor, Ernst & Young. The directors are satisfied that the provision of the non-audit
services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each
type of non-audit service provided means that the auditor’s independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Income tax return and indirect tax compliance services

Advisory services

Total

31,415

37,506

68,921

Remuneration Consultants
To ensure the Board is fully informed when making decisions, the Remuneration and Nomination Committee has formalised policies that govern
arrangements to engage independent remuneration consultants to provide independent advice and, where required, to make remuneration
recommendations, free from the undue influence by members of the KMP.

Godfrey Remuneration Group (GRG) was engaged during the reporting period to provide advice on various remuneration issues arising from the
Prime Media Group Performance Rights Plan. The Committee is satisfied that the advice received from GRG is free from undue influence from
members of the KMP. GRG’s fees in the current reporting period totalled $14,000 (2015: $8,500).

8. CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Prime Media Group Limited support
and have, unless otherwise disclosed in the corporate governance statement, adhered to the principles of corporate governance. The Company’s
corporate governance statement is available on the Company website www.primemedia.com.au/investors.

Signed in accordance with a resolution of the directors.

P. J. Macourt
Director

Sydney, 22 August 2016

DIRECTORS’ REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au

Auditor’s Independence Declaration to the Directors of Prime Media
Group Limited

As lead auditor for the audit of Prime Media Group Limited for the financial year ended 30 June 2016, I
declare to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in

relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Prime Media Group Limited and the entities it controlled during the
financial year.

Ernst & Young

Christopher George
Partner
22 August 2016

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

AUDITOR’S INDEPENDENCE DECLARATION

FINANCIAL STATEMENTS CONTENTS

FINANCIAL STATEMENTS

Consolidated Statement of Profit or Loss and Other
Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

NOTES TO THE FINANCIAL STATEMENTS

Summary of significant accounting policies

GROUP PERFORMANCE

Revenue

Expenses

4. Core net profit before specific items and after tax

5. Operating segments

Earnings per share

OPERATING ASSETS AND LIABILITIES

7. Cash and short-term deposits

Intangible assets and goodwill

Receivables

10. Prepaid financial assets

11. Payables

12. Provisions

13. Property, plant and equipment

CAPITAL STRUCTURE AND FINANCIAL COSTS
Interest bearing loans and borrowings

14.

15. Financial risk management objectives and policies

16. Contributed equity

17. Capital management

18. Retained earnings and reserves

19. Dividends paid and proposed

GROUP STRUCTURE

20. Assets held for sale

21. Financial assets

22.

Investments in associates

23.

Investments in subsidiaries

UNRECOGNISED ITEMS
24. Commitments

25. Contingent liabilities

OTHER
26.

Income tax

27. Share-based payments expense

28. Related party disclosures

29. Parent entity information

30. Subsequent events

31. Auditor’s remuneration

32. Other accounting policies

FINANCIALS

Directors’ Declaration

Independent Auditor’s Report

ASX INFORMATION

ASX Additional Information

PRIME MEDIA GROUP ANNUAL REPORT 2016

Revenue and other income

Revenue from services

Interest income

Other income

Total revenue and other income

Cost of sales

Gross profit

Broadcasting and transmission expenses

Administration and marketing expenses

Depreciation and amortisation

Impairment of intangibles

Operating (Loss)/Profit

Finance costs

Share of associate losses

(Loss)/Profit before income tax

Income tax expense

(Loss)/Profit for the year

Total comprehensive income for the year

(Loss)/Profit attributable to owners of the parent

Total comprehensive income attributable to owners of the parent

Basic Earnings per share (cents per share)

Diluted Earnings per share (cents per share)

NOTES

CONSOLIDATED

2016
$’000

2015
$’000

235,103

253,233

172

3,543

238,818

(131,206)

107,612

(37,464)

(13,503)

(10,295)

(122,931)

(76,581)

(3,661)

(1,063)

(81,305)

(12,273)

(93,578)

245

5,335

258,813

(138,665)

120,148

(37,564)

(14,599)

(11,351)

–

56,634

(4,987)

(875)

50,772

(15,151)

35,621

(93,578)

35,621

(93,578)

35,621

(93,578)

35,621

(93,578)

35,621

(25.5)

9.7

2222

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2016ASSETS

Current Assets

Cash and short term deposits

Trade and other receivables

Intangible assets

Other assets

Assets classified as held for sale

Total Current Assets

Non-Current Assets

Investment in associates

Non-current financial assets

Property, plant and equipment

Deferred tax assets

Intangible assets and goodwill

Other assets

Total Non-Current Assets

Total Assets

LIABILITIES

Current Liabilities

Trade and other payables

Interest-bearing loans and borrowings

Current tax liabilities

Provisions

Total Current Liabilities

Non-Current Liabilities

Interest-bearing loans and borrowings

Provisions

Total Non-Current Liabilities

Total Liabilities

Net Assets

EQUITY

Equity attributable to equity holders of the parent interest

Contributed equity

Reserves

Accumulated losses

Parent Interests

Total Equity

NOTES

CONSOLIDATED

2016
$’000

2015
$’000

8,235

47,769

1,667

3,923

61,594

584

62,178

927

31,866

1,062

75,034

956

109,854

172,032

32,738

402

2,485

267

35,892

73,402

507

73,909

109,801

62,231

9,837

49,669

1,667

1,273

62,446

963

63,409

1,259

2,508

35,475

993

199,722

1,118

241,075

304,484

35,963

270

5,127

365

41,725

88,466

417

88,883

130,608

173,876

310,262

4,400

(252,431)

62,231

310,262

4,150

(140,536)

173,876

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 2016At 1 July 2015

Loss for the period

Other comprehensive income

Total comprehensive income and expense for the period

Transactions with equity holders in their capacity as equity holders:

Exercise of performance rights

Share–based payments expense

Dividends on ordinary shares

At 30 June 2016

At 1 July 2014

Profit for the period

Other comprehensive income

Total comprehensive income and expense for the period

Transactions with equity holders in their capacity as equity holders:

Exercise of performance rights

Share–based payments expense

Dividends on ordinary shares

At 30 June 2015

ISSUED
CAPITAL
$’000

ACCUMULATED
LOSSES
$’000

EMPLOYEE
BENEFITS
RESERVE
$’000

TOTAL PARENT
ENTITY
INTEREST
$’000

310,262

–

310,262

(140,536)

(93,578)

–

(93,578)

–

(18,317)

(252,431)

4,150

–

(855)

1,105

–

4,400

173,876

(93,578)

–

(93,578)

(855)

1,105

(18,317)

62,231

ISSUED
CAPITAL
$’000

ACCUMULATED
LOSSES
$’000

EMPLOYEE
BENEFITS
RESERVE
$’000

TOTAL PARENT
ENTITY
INTEREST
$’000

310,262

–

310,262

(151,979)

35,621

–

35,621

–

(24,178)

(140,536)

3,957

–

(887)

1,080

–

4,150

162,240

35,621

–

35,621

(887)

1,080

(24,178)

173,876

2424

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYAS AT 30 JUNE 2016OPERATING ACTIVITIES

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Interest received

Borrowing costs paid

Income tax refunds received

Income tax paid

NET CASH FLOWS FROM OPERATING ACTIVITIES

INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment

Purchase of property, plant & equipment and intangible assets

Proceeds from sale of financial assets

Loan funds to related entities

NET CASH FLOWS USED IN INVESTING ACTIVITIES

FINANCING ACTIVITIES

Proceeds from borrowings

Repayments of borrowings

Finance lease liability payments

Share-based payments – performance rights exercised

Dividends paid

NET CASH FLOWS USED IN FINANCING ACTIVITIES

NET DECREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of period

CASH AND CASH EQUIVALENTS AT END OF PERIOD

NOTES

CONSOLIDATED

2016
$’000

2015
$’000

264,190

(212,110)

172

(3,341)

–

(14,986)

33,925

2,583

(6,023)

3,000

(645)

(1,085)

92,000

(107,000)

(270)

(855)

(18,317)

(34,442)

(1,602)

9,837

8,235

285,877

(211,910)

245

(4,779)

457

(11,920)

57,970

1,900

(5,839)

–

(605)

(4,544)

118,000

(149,000)

(246)

(887)

(24,178)

(56,311)

(2,885)

12,722

9,837

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 20161.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial report of Prime Media Group Limited (the Company) for the year ended 30 June 2016 was authorised for issue in accordance
with a resolution of the directors on 22 August 2016.

Prime Media Group Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange.

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

(A) BASIS OF PREPARATION
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements from the Australian Accounting Standards Board. The financial report has
been prepared on a historical cost basis, except for available-for-sale investments that have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under
the option available to the Company under the Australian Securities and Investment Commission (ASIC) Legislative Instrument 2016/191. The Company
is an entity to which this Legislative Instrument applies.

The consolidated financial statements provide comparative information in respect of the previous period.

To improve readability and usefulness the financial report has been re-ordered this year. Significant accounting policies are provided throughout the
notes to the financial statements.

COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
The financial report complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(B) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The carrying amounts of certain assets and liabilities are determined based on estimates and assumptions of future events. The key estimates and
assumptions which are material to the financial reports are found in the following notes:

• Note 8: Intangible assets and goodwill
• Note 12: Provisions
• Note 13: Property, plant and equipment
• Note 26: Income tax
• Note 27: Share-based payments expense

2. REVENUE

Advertising and other external revenue

Finance income

Other revenue

Breakdown of finance income:

Interest received – other persons

Breakdown of other income:

Government grants

Other revenues

CONSOLIDATED

2016
$’000

2015
$’000

235,103

253,233

172

3,543

238,818

172

668

2,875

3,543

245

5,335

258,813

245

926

4,409

5,335

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016ACCOUNTING POLICY
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured,
regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into
account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met
before revenue is recognised:

REVENUE CLASS

RECOGNITION CRITERIA

Advertising revenue

Revenue is recognised when the commercial advertisement has been broadcast.

Advertising production revenue

Revenue is recognised when the production is complete and the customer invoiced.

Rendering of services

Revenue from the provision of production facilities is brought to account after services have been
rendered and the fee is receivable.

Sales representation revenue

Sales representation revenue is brought to account as the service is provided.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received
and all attached conditions have been complied with.

i) Reimbursement of expense

Recognised in profit or loss on a systematic basis over the periods the related costs, which it is intended
to compensate, are expensed.

ii) Reimbursement for cost of asset Recognised in profit or loss over the useful life of the related asset on a systematic basis. When the Group

receives grants of non-monetary assets, the assets and the grant are recorded at nominal amounts and
released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the
underlying asset by equal annual instalments.

Rental income

Dividends

Interest income

Rental income is recognised on a straight-line basis over the term of the lease.

Dividend revenue is recognised when the Group’s right to receive the payment is established.

Interest revenue is recognised as it accrues, based on the effective yield of the financial asset.

3. EXPENSES

Finance Expenses

Interest on debt and borrowings

Finance charges payable under finance leases and hire purchase agreements

Employee Benefit Expense

Wages and salaries

Superannuation expense

Share-based payments expense

Other employee benefits expense

Other Expenses

Bad and doubtful debts and credit notes – trade debtors

Minimum lease payments – operating leases

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

3,616

3,661

34,470

2,759

1,105

1,459

39,793

561

12,619

2015
$’000

4,921

4,987

35,686

2,735

1,080

1,491

40,992

(39)

13,278

Borrowing Costs
Borrowing costs are expensed in the period incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds.

Operating Leases
Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 20164.

CORE NET PROFIT BEFORE SPECIFIC ITEMS AND AFTER TAX

(Loss)/Profit for the year

– Impairment of television broadcast licences and goodwill (non-cash)

– Gain on sale of surplus assets

– Redundancies

– Digital Restack Program revenue (non-cash)

– Income tax (benefit)/expense related to specific items

CONSOLIDATED

2016
$’000

2015
$’000

(93,578)

35,621

122,931

(2,084)

118

–

(36)

–

(1,157)

(1,501)

427

33,468

Core net profit after tax and before specific items attributable to members of Prime Media Group Limited

27,351

The Group’s final dividend has been declared based on the core net profit after tax.

ACCOUNTING POLICY
Specific items are those items of such a nature or size that separate disclosure will assist users to understand the financial statements.

5. OPERATING SEGMENTS

ACCOUNTING POLICY
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose
operating results are regularly reviewed by the entity’s chief operating decision maker to assess performance, make resource allocation decisions
and for which discrete financial information is available.

IDENTIFICATION OF REPORTABLE SEGMENTS
The Group operates as a single regional free-to-air television broadcasting segment. The Group holds commercial television licences to broadcast
in regional New South Wales, the Australian Capital Territory, regional Victoria, the Gold Coast area of Southern Queensland and regional Western
Australia. The majority of the Group’s television programming is supplied through an affiliation agreement with the Seven Network and broadcast
in regional areas under the PRIME7 brand on the east coast of Australia and the GWN7 brand in regional Western Australia.

The Board and Executive monitor the operating performance of the segment based on internal reports and discrete financial information that
is reported to the Board on at least a monthly basis.

6. EARNINGS PER SHARE

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

ACCOUNTING POLICY

CONSOLIDATED

2016

(25.5)

2015

9.7

Basic Earnings Per Share
Basic earnings per share is calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.

Diluted Earnings Per Share
Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016The following reflects the income and share data used in the basic and diluted earnings per share computations:

Earnings used in calculating basic and diluted earnings per share

Weighted average number of ordinary shares used in calculating basic EPS:

Weighted average number of ordinary shares used in calculating diluted EPS:

CONSOLIDATED

2016
$’000

2015
$’000

(93,578)

35,621

2016
NUMBER OF
SHARES

2015
NUMBER OF
SHARES

366,330,303

All performance rights are anti-dilutive, as service and performance conditions are yet to be met. There have been no other transactions involving
ordinary shares or potential ordinary shares between the reporting date and the completion of the financial statements.

INFORMATION ON THE CLASSIFICATION OF SECURITIES

EQUITY SETTLED SHARE-BASED PAYMENTS
Equity settled share-based payments granted to employees (including KMP) as described in Note 27 are considered to be potential ordinary shares
and will be included in the determination of diluted earnings per share to the extent they are dilutive when the performance rights vest.

Basic Earnings per share (cents per share)

Profit from core earnings (Note 4)

Diluted Earnings per share (cents per share)

Profit from core earnings (Note 4)

7. CASH AND SHORT-TERM DEPOSITS

Cash balance comprises:

Cash at bank and on hand

Closing cash balance

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

2015
$’000

7.5

CONSOLIDATED

2016
$’000

8,235

9.1

2015
$’000

9,837

Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise cash at bank and on hand. For the purpose of the consolidated
statement of cash flows, cash and short term deposits consist of cash and short-term deposits as defined above, net of outstanding bank
overdrafts.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 20167. CASH AND SHORT-TERM DEPOSITS (CONTINUED)

RECONCILIATION OF THE NET (LOSS)/PROFIT AFTER TAX TO THE NET CASH FLOWS FROM OPERATIONS

(Loss)/Profit after tax

Non-cash adjustment for:

Depreciation and amortisation

Amortisation of program rights

Provision for doubtful debts

Net gain on disposal of property, plant and equipment

Gain on sale of financial asset

Impairment of television broadcast licences and goodwill

Gain on foreign currency translation

Share of associate losses

Share based payments expense

Working capital adjustments

Decrease in trade and other receivables

(Increase)/decrease in prepayments

Increase in provisions

(Decrease)/increase in trade and other payables

Cash flows from operating activities

(Increase)/decrease in deferred tax assets

(Decrease)/increase in tax provision

Increase in borrowing costs

Net cash flow from operating activities

INTANGIBLE ASSETS AND GOODWILL

Television broadcast licences

Program rights

Goodwill

Infrastructure access licence

Business software and development costs

Total

CONSOLIDATED

2016
$’000

2015
$’000

(93,578)

35,621

8,628

1,667

(53)

(1,329)

(501)

122,931

–

1,063

1,105

1,953

(2,488)

(3,190)

36,298

(69)

(2,642)

338

33,925

9,284

2,067

(101)

(2,539)

–

(12)

875

1,080

4,476

237

2,725

53,794

449

3,390

337

57,970

CONSOLIDATED

2016
$’000

63,513

5,000

–

1,246

6,942

76,701

2015
$’000

182,963

6,667

3,481

1,740

6,538

201,389

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

TELEVISION BROADCAST LICENCES AND GOODWILL

PROGRAM RIGHTS, INFRASTRUCTURE ACCESS LICENCES,
BUSINESS SOFTWARE AND DEVELOPMENT COSTS

Useful lives:

Indefinite

Finite

Amortisation method used:

Not amortised or revalued

Amortised on a straight-line basis over the period
of the expected future benefit

Internally generated or acquired: Acquired

Internally generated/Acquired

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016TELEVISION BROADCAST LICENCES
Television broadcast licences have been acquired through business combinations and consist of the right to broadcast television to specific market
areas. The licences are carried at cost less accumulated impairment losses. The licences are subject to renewal by the Australian Communications and
Media Authority at no significant cost to the Company. The directors have no reason to believe the licences will not be renewed at the end of their
current legal terms and have not identified any factor that would affect their useful life. These assets are not amortised but are tested for impairment
annually.

PROGRAM RIGHTS
Consists of television program rights arising from the Group’s affiliation with the Seven Network. Program rights represent the purchased rights
to broadcast certain programs at some time in the future. These program rights are amortised to the profit and loss over the term of the contract
to which the rights relate. The carrying value of the rights is cost less accumulated amortisation and impairment losses.

GOODWILL
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not
amortised but is subject to impairment testing on an annual basis or whenever there is indication of impairment.

INFRASTRUCTURE ACCESS LICENCES
Infrastructure access licenses represent licences acquired to use transmission facilities for periods up to 10 years. The licences are amortised to the
profit and loss over the term of the licence.

BUSINESS SOFTWARE AND DEVELOPMENT COSTS
Business software and development costs represent the cost to implement a television sales and traffic software system and a newsroom management
system. Amortisation of the asset begins when the development is complete and the asset is available for use. It will be amortised over the period
of the expected future benefit. The carrying value of the software and development costs is cost less accumulated amortisation and impairment
losses.

Reconciliation of carrying amounts at the beginning and end of the period.

GOODWILL
$’000

BROADCAST
LICENCES
$’000

PROGRAM
RIGHTS
$’000

INFRA-
STRUCTURE
ACCESS
LICENCE
$’000

BUSINESS
SOFTWARE
AND
DEVELOPMENT
COSTS
$’000

WEBSITE
DEVELOPMENT
COSTS
$’000

TOTAL
$’000

Cost

At 1 July 2014

Additions

Disposals

At 30 June 2015

Additions

Disposals

18,355

182,963

14,000

–

18,355

182,963

14,000

–

At 30 June 2016

18,355

182,963

14,000

Amortisation and impairment

At 1 July 2014

Amortisation charges

Disposals

At 30 June 2015

Amortisation charges

Impairment charges

Disposals

At 30 June 2016

Net Book Value

At 30 June 2016

Total Current

Total Non-Current

At 30 June 2015

Total Current

Total Non-Current

(14,874)

–

(14,874)

–

(3,481)

(119,450)

–

(5,267)

(2,066)

–

(7,333)

(1,667)

–

(18,355)

(119,450)

(9,000)

(2,999)

–

3,481

–

3,481

63,513

–

63,513

182,963

–

182,963

5,000

1,667

3,333

6,667

1,667

5,000

1,246

–

1,246

1,740

–

1,740

3,885

167

–

4,052

193

–

4,245

(1,625)

(687)

–

(2,312)

(687)

–

16,438

1,608

(2,237)

15,809

1,933

(1,386)

16,356

(10,098)

(1,408)

2,235

(9,271)

(1,488)

–

1,345

(9,414)

6,942

–

6,942

6,538

–

6,538

550

236,191

–

1,775

(2,237)

550

235,729

–

2,126

(1,386)

550

236,469

(519)

(31)

–

(550)

–

(32,383)

(4,192)

2,235

(34,340)

(3,842)

(122,931)

1,345

(550)

(159,768)

–

76,701

1,667

75,034

201,389

1,667

199,722

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 20168.

INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE LIVES

ACCOUNTING POLICY

Impairment of non-financial assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at
cost less any accumulated amortisation and accumulated impairment losses. The useful lives of intangible assets are assessed as either finite
or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed
at the end of each reporting period. Changes in the expected useful life of the expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets with finite useful lives is recognised in the statement of profit or loss in the expense
category that is consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating
unit (CGU) level. When an asset is tested for impairment, the Group estimates the assets recoverable amount. An assets recoverable amount
is the higher of an assets or CGU’s fair value less costs of disposal and its value in use. When the carrying amount of an asset of CGU exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects the markets assessment of the time value of
money and the risks specific to the asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously
recognised impairment losses should be reversed. A previously recognised impairment loss is reversed only if there has been a change in the
assumptions used to determine the assets recoverable amount since the last impairment was recognised. The reversal is limited so that the
carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been calculated in prior years. A reversal is recognised in the statement of profit or loss unless
the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Goodwill is tested for impairment annually as at 30 June and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates.
When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating
to goodwill cannot be reversed in future periods.

KEY ASSUMPTIONS USED IN VALUE-IN-USE CALCULATIONS AND SENSITIVITY TO CHANGES IN ASSUMPTIONS
In accordance with the Group’s accounting policies, the Group performed annual impairment tests as at 30 June 2016 and 30 June 2015. In assessing for
impairment, the Group considered the impact of new and largely unregulated market entrants, increased competition in the form of global and national
media platforms, and the comprehensive reach of the internet and streaming services, all of which impact regional television audiences, and revenues.

In the 2015 calendar survey year, the Group’s total audience in the aggregated regional market of New South Wales and Victoria fell by 5.6% on the
previous year. Viewers aged between 25 and 54 in this aggregated market also declined by 12.3% in the 2015 calendar year, which was the second
consecutive survey year of double digit decline. Revenue in this aggregated market also contracted again, declining 6.0% in the 2016 financial year
compared to a decline of 3.9% in the prior year.

The Company maintained its lead revenue share in the aggregated markets of 41.7%, however this was down 0.5 share points on the previous year.
The Company’s revenue from television advertising in this market fell by 7.0% compared to the previous corresponding period. The decline in regional
viewing audiences has led to a decline in regional television advertising markets, both of which indicate a potential impairment of goodwill and
television broadcast licences. The Group also considers the relationship between its market capitalisation and its book value, in addition to other
factors, when reviewing for indicators of impairment. As at 30 June 2016, the market capitalisation of the Group, based on the volume weighted
average share price for the 30 day period to the reporting date, was below the book value of its equity, indicating a potential impairment of goodwill
and television broadcast licences.

The Group, which has been identified as the CGU, has completed a value-in-use assessment of its carrying value to which television broadcasting
intangible assets, including television broadcast licences and goodwill, are allocated, to test for impairment.

VALUE-IN-USE CASH FLOWS

APPROACH

Year 1

Years 2–5 cash flows

Based on the annual budget approved by the Board.

Free-to-air television advertising revenue has been assumed to decline post 2016 Olympics consistent
with the decline in regional television advertising audiences.
Expenses have been forecast to increase in line with long term CPI and/or agreed contractual increases.

Long-term growth rate – terminal

The rate is consistent with industry forecasts specific to the CGU in which the industry operates.

Discount rate

Reflects the current market assessment of the time value of money.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016The value-in-use assessment is based on the following key assumptions:

VALUE-IN-USE ASSUMPTIONS

5 year compound annual growth rate for free-to-air advertising revenue

Long-term growth rate – terminal

Discount rate (pre-tax)

Discount rate (post-tax)

2016

(1.8%)

(1.7%)

11.61%

11.01%

2015

0.0%

2.0%

10.95%

10.54%

The discounted cash flow (DCF) valuation of the intangibles assets gives a recoverable amount which is less than the current carrying value resulting
in an impairment charge of $122,931,000. Following the impairment, the recoverable amount of the Group is equal to its carrying amount.

Carrying amount of Intangibles allocated to each of the cash generating units

Television Broadcasting Licences

Broadcast Licences

Goodwill

Goodwill on acquisition

CONSOLIDATED

2016
$’000

2015
$’000

63,513

–

182,963

3,481

The Group recognises that the speed of technological change and the impact of new viewing platforms can have a significant impact on growth rate
assumptions. The value-in-use calculation is most sensitive to changes in the following assumptions:

VALUE-IN-USE ASSUMPTIONS – SENSITIVITY

5 year compound annual growth rate for free-to-air advertising revenue

+0.5%

-0.5%

Long-term growth rate – terminal

+1.0%

-1.0%

Discount rate (pre-tax)

+2.0%

-2.0%

9. RECEIVABLES

Current

Trade receivables

Allowance for impairment loss

Other receivables

Related party receivables

Carrying amount of trade and other receivables

ACCOUNTING POLICY

IMPACT ON
IMPAIRMENT
$’000

9,941

(9,941)

3,557

(3,038)

(10,191)

13,515

CONSOLIDATED

2016
$’000

2015
$’000

44,111

(248)

43,863

3,421

485

47,769

45,948

(281)

45,667

3,512

490

49,669

Trade Receivables
Trade receivables are carried at original invoice amount less an allowance for any uncollectible debts. Trade receivables are generally
settled within 30 to 45 days and are not interest bearing. Due to the short term nature of these receivables, their carrying value is assumed to
approximate their fair value. The collectability of trade receivables is reviewed on an ongoing basis and bad debts are written off when identified.
An allowance for impairment loss is made when there is objective evidence that the Group will not be able to collect a debt. The maximum
exposure to credit risk is the fair value of receivables (refer to Note 15 regarding information on the Group’s exposure to credit and market risk).

Refer to Note 28 regarding receivables from related parties.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 20169. RECEIVABLES (CONTINUED)

ALLOWANCE FOR IMPAIRMENT LOSS
Movement in the provision for impairment loss in relation to trade receivables was as follows:

At July 1

Charge/(recovery) for the year

Amounts written off

At June 30

CONSOLIDATED

2016
$’000

281

561

(594)

248

2015
$’000

404

(39)

(84)

281

At 30 June, the ageing analysis of trade receivables is as follows:

2016

2015

TOTAL

44,111

45,948

0-30
DAYS

25,154

24,473

31-60
DAYS

61-90
DAYS PDNI*

61-90
DAYS CI*

+91
DAYS PDNI*

+91
DAYS CI*

18,056

20,581

592

597

–

248

281

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

Receivables past due but not considered impaired incorporate those customers on payment plans or those with a good payment history for which
we expect payment in the short term.

Other balances within trade and other receivables do not contain impaired assets. It is expected that these other balances will be received.

10. PREPAID FINANCIAL ASSETS

Current

Prepayments

Non-current

Prepayments

Total

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

3,923

956

4,879

2015
$’000

1,273

1,118

2,391

Prepayments
Prepayments are recognised when a payment is made for goods or services the company expects to receive or consume in future periods.
Prepayments are expensed to profit or loss as they are received or consumed.

11. PAYABLES

Current

Trade payables

Accrued expenses

Accrued employee entitlements

Total

CONSOLIDATED

2016
$’000

2015
$’000

3,158

22,768

6,812

32,738

3,366

24,722

7,875

35,963

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016ACCOUNTING POLICY

Trade Payables and Other Accrued Expenses
Liabilities for trade creditors and other amounts are carried at amortised cost, which is the fair value of the consideration to be paid in the future
for goods and services received. Trade payables are non-interest bearing and are normally settled on 30 day terms.

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

Accrued employee entitlements
Liabilities for wages and salaries, including non-monetary benefits and leave expected to be settled within 12 months of the reporting date are
recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid
when the liabilities are settled.

12. PROVISIONS

Current

Provision for asset decommissioning

Director’s retiring provision

Total

Non-current

Long service leave

Total

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

2015
$’000

–

267

507

115

250

365

417

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. When the Group expects some or all of a provision to be reimbursed the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss net
of any reimbursement.

NATURE AND TIMING OF THE PROVISIONS

At 1 July 2015

Arising during the year

Utilised

At 30 June 2016

Current 2016

Non-current 2016

Total

Current 2015

Non-current 2015

Total

DIRECTOR’S
RETIRING
PROVISION
$’000

PROVISION
FOR ASSET
DECOM-
MISSIONING
$’000

LONG SERVICE
LEAVE
$’000

250

–

267

–

267

250

–

250

115

–

(115)

–

115

–

115

417

125

(35)

507

–

507

–

417

TOTAL
$’000

782

142

(150)

774

267

507

774

365

417

782

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201612. PROVISIONS (CONTINUED)

PROVISION FOR ASSET DECOMMISSIONING
The Group recorded a provision for decommissioning costs of analogue transmitters and related assets. The provision was fully utilised at the
reporting date.

DIRECTOR’S RETIRING PROVISION
Refer to Remuneration Report. The Directors’ Retiring provision was approved by shareholders in November 1997.

LONG SERVICE LEAVE PROVISION
The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the reporting date using the projected unit credit method. 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 corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

13. PROPERTY, PLANT AND EQUIPMENT

LAND AND
BUILDINGS 1
$’000

LEASEHOLD
IMPROVEMENTS
$’000

PLANT AND
EQUIPMENT
$’000

LEASED
PLANT AND
EQUIPMENT
$’000

Cost or valuation

At 1 July 2014

Additions

Disposals

Classification transfer

Reclassification to asset held for sale

At 30 June 2015

Additions

Disposals

Reclassification to asset held for sale

At 30 June 2016

Depreciation and amortisation

At 1 July 2014

Depreciation charges

Amortisation charges

Disposals

Classification transfer

Reclassification to asset held for sale

At 30 June 2015

Depreciation charges

Amortisation charges

Disposals

Reclassification to asset held for sale

At 30 June 2016

Net Book Value

At 30 June 2016

At 30 June 2015

13,241

2,052

–

(38)

13,253

(48)

(843)

12,396

(4,464)

(317)

–

(22)

(4,770)

(318)

–

292

(474)

–

1,684

387

(549)

–

1,522

(1,415)

(166)

–

441

–

(1,140)

(276)

–

536

–

108,976

5,541

(20,522)

–

94,018

3,328

(13,549)

(234)

83,563

(81,732)

(6,499)

–

19,844

(33)

–

(68,420)

(5,732)

–

13,273

201

TOTAL
$’000

126,511

5,639

(20,996)

–

2,242

–

2,242

111,197

–

2,242

3,749

(14,146)

(1,077)

99,723

(1,215)

(88,826)

–

(177)

–

(6,982)

(177)

20,285

–

(22)

(1,392)

(75,722)

–

(127)

–

(6,326)

(127)

13,825

493

(4,780)

(880)

(60,678)

(1,519)

(67,857)

7,616

8,483

642

544

22,885

25,598

723

850

31,866

35,475

Includes land located in the Australian Capital Territory, under the ACT legislation, the land has a 99-year lease period, and also includes Leasehold Strata Units located
in Sydney, which are held under a 99 year lease.

ASSETS PLEDGED AS SECURITY
All plant and equipment under lease is pledged as security for the associated lease liabilities.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016ACCOUNTING POLICY

Property, plant and equipment
Plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. When significant parts
of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific
useful lives and depreciates them accordingly.

Land and buildings are measured at cost less accumulated depreciation on buildings.

Depreciation is calculated on a straight-line basis on all property, plant and equipment, other than freehold and leasehold land, over the
estimated useful life of the assets. Major depreciation periods are:

– Land:

– Freehold buildings:

– Leasehold improvements:

– Plant and equipment:

– Plant and equipment under lease:

– Motor vehicles:

Not depreciated

40 years

The lease term

3 to 15 years

5 to 15 years

6 years

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and
adjusted prospectively, if appropriate.

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale
transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower
of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding the
finance costs and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the
asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale within one year from
the date of classification.

Property, plant and equipment is not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are
presented separately as current items in the statement of financial position.

14. INTEREST BEARING LOANS AND BORROWINGS

Current

Obligations under finance lease contracts (Note 24)

Total

Non-current

Obligations under finance lease contracts (Note 24)

$120 million secured bank loan facility (2015: $175 million)

Total

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

402

–

73,402

2015
$’000

270

402

88,064

88,466

2016

2017

2018

Borrowing Costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Subsequent Measurement

Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective
interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the
effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference
in the respective carrying amounts is recognised in the statement of profit or loss.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201614. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)

TERMS AND CONDITIONS

SECURED BANK LOAN FACILITY
The Company’s secured bank loan facility with a limit of $120 million matures in April 2018. The facility is secured by a charge over the assets of the
borrower group comprising all wholly owned entities in Australia, but excluding Broadcast Production Services Pty Limited and its subsidiaries. Interest
is charged at the BBSW rate plus a margin of between 1.50% and 1.80% (Level 2).

FAIR VALUES
The carrying amount of the Group’s current and non-current borrowings approximates their fair value. The fair values have been calculated by
discounting the expected future cash flows at prevailing market interest rates varying from 3.4% to 4.0% (2015: 3.6% to 4.4%), depending on the type
of borrowing (Level 2).

The parent entity and certain controlled entities have potential financial liabilities which may arise from certain contingencies disclosed in Note
25. However the directors do not expect those potential financial liabilities to crystallise into obligations and therefore financial liabilities disclosed
in the previous table are the directors’ estimate of amounts that will be payable by the Group. No material losses are expected and as such, the fair
values disclosed are the directors’ estimate of amounts that will be payable by the Group.

Details regarding interest rate risk are disclosed in Note 15.

DEFAULTS AND BREACHES
During the current and prior years, there were no defaults or breaches on any of the loans.

15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities
is to finance the Group’s operations. The Group’s principal financial assets include trade and other receivables, and cash and short-term deposits that
are derived directly from its operations. The Group also holds available-for-sale investments and from time to time enters into derivative transactions.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Group
manages its exposure to key financial risks including interest rate risks in accordance with the Group’s financial risk management policy. The objective
of the policy is to support the delivery of the Group’s financial targets while protecting future financial security.

The Board of directors reviews risks in accordance with its approach to risk management as set out in the Directors’ Report and the Group’s Corporate
Governance Statements which are displayed on the Company’s website www.primemedia.com.au/investors.

INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group’s exposure to market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The level
of interest bearing debt is disclosed in Note 14.

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

Financial Assets

Cash and short-term deposits

Financial Liabilities

Secured bank loan facility

Net exposure

CONSOLIDATED

2016
$’000

8,235

(73,402)

(65,167)

2015
$’000

9,837

(88,064)

(78,227)

The Group analyses its interest rate exposure from time to time. Within this analysis consideration is given to potential renewals of existing positions,
alternative financing, alternative hedging positions and the mix of fixed and variable interest rates.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 30 June 2016, if interest rates had
moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

JUDGEMENTS OF REASONABLY POSSIBLE MOVEMENTS:

Consolidated

+0.25% (25 basis points)

–0.25% (25 basis points)

POST TAX PROFIT
HIGHER/(LOWER)

EQUITY
HIGHER/(LOWER)

2016
$’000

2015
$’000

2016
$’000

2015
$’000

(114)

114

(196)

196

–

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016CREDIT RISK
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
The Group is exposed to credit risk from its operating activities, primarily for trade receivables and from its financing activities, including deposits
with banks and financial institutions.

It is the Group’s policy that all customers who trade on credit terms are subject to credit verification procedures including an assessment of their
independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer and are regularly
monitored.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

An impairment analysis is performed at each reporting date on an individual basis for major clients. Additionally, a large number of minor receivables
are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actually incurred historical data.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed at Note 9. The Group does
not hold collateral as security.

A small number of media buying agencies account for approximately 55.7% of Prime’s revenue and no individual agency accounts for more than 15.0%
of the Group’s revenue. Agency clients operate with strict credit terms of 45 days and are required to provide detailed financial information as part
of their credit approval process. Late payments are closely monitored and followed up if the 45 day terms are not met.

LIQUIDITY RISK
The Group manages its liquidity risk by monitoring the total cash inflows and outflows expected on a daily or weekly basis. The Group’s objective
is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, finance leases and hire purchase agreements.
The Group currently has funding through:

• $120 million secured bank loan facility (2015: $175 million), which is currently drawn to 62% of the facility limit (2015: 51%); and
• Long-term finance lease contracts over specific items of plant and equipment.

Currently the Group secures up to 68% of the drawn down balance of the interest bearing debt facility for 3 to 6 month terms. In addition to
maintaining sufficient liquid assets to meet short-term payments, at balance date, the Group has available approximately $46 million of undrawn
committed borrowing facilities, subject to continued compliance with the bank loan covenants. The facility is repayable in full on expiry in April 2018.
Interest will be charged at a rate of BBSW plus a margin between 1.50% and 1.80%. At 30 June 2016, 0.5% of the Group’s debt will mature in less than
one year. The remaining contractual maturities of the Group’s financial assets and liabilities are:

YEAR ENDED 30 JUNE 2016

Financial assets

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Trade and other payables

Finance lease contracts (refer note 24)

Finance lease contracts – finance charges (refer note 24)

Interest bearing loans (refer note 14)

Interest bearing loans – finance charges

Net inflow/(outflow)

YEAR ENDED 30 JUNE 2015

Financial assets

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Trade and other payables

Finance lease contracts (refer note 24)

Finance lease contracts – finance charges (refer note 24)

Interest bearing loans (refer note 14)

Interest bearing loans – finance charges

Net inflow/(outflow)

≤ 6
MONTHS
$’000

6 – 12
MONTHS
$’000

1 – 5
YEARS
$’000

> 5
YEARS
$’000

8,235

47,769

56,004

(32,738)

(201)

(9)

–

(509)

(33,457)

22,547

–

(201)

(9)

–

(210)

≤ 6
MONTHS
$’000

6 – 12
MONTHS
$’000

9,837

49,669

59,506

(35,963)

(135)

(23)

–

(1,065)

(37,186)

22,320

–

(135)

(22)

–

(157)

–

(73,402)

–

(73,402)

1 – 5
YEARS
$’000

–

(402)

(18)

(88,064)

–

(88,484)

–

> 5
YEARS
$’000

–

TOTAL
$’000

8,235

47,769

56,004

(32,738)

(402)

(18)

(73,402)

(509)

(107,069)

(51,065)

TOTAL
$’000

9,837

49,669

59,506

(35,963)

(672)

(63)

(88,064)

(1,065)

(125,827)

(66,321)

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201616. CONTRIBUTED EQUITY

ISSUED AND PAID UP CAPITAL

Ordinary shares fully paid

366,330,303 shares (2015: 366,330,303 shares)

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

2015
$’000

310,262

Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or performance rights are shown in equity
as a deduction, net of tax, from the proceeds.

MOVEMENTS IN SHARES ON ISSUE

ORDINARY

Beginning of the financial year

End of the financial year

EQUITY SETTLED SHARE-BASED PAYMENTS

2016

2015

NUMBER OF
SHARES

$’000

NUMBER OF
SHARES

366,330,303

310,262

366,330,303

$’000

310,262

PRIME MEDIA GROUP LIMITED PERFORMANCE RIGHTS PLAN
During the financial year 1,977,753 performance rights (2015: 1,517,438) were issued over ordinary shares. The Trustee of the Prime Media Group Limited
Performance Rights Plan purchases shares on-market when the performance rights are exercised. Nil performance rights were cancelled by the
Company during the year (2015: Nil).

At the end of the year there were 4,925,191 (2015: 4,527,438) un-issued ordinary shares in respect of which performance rights were outstanding.
The performance rights over ordinary shares are non-dilutive.

TERMS AND CONDITIONS OF CONTRIBUTED EQUITY

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

17. CAPITAL MANAGEMENT

Capital includes equity attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure that
it maintains a strong credit rating and healthy capital ratios to support its business and maximise shareholder value.

The Group manages its capital structure and has regard for changes in economic conditions. To maintain or adjust the capital structure, the Group
may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares or sell assets to reduce debt.

During 2016, the Company paid dividends of $18,317,000 (2015: $24,178,000). The Board’s target for dividend payments is currently up to 50% of core
earnings per share. The Board reviews the dividend target as necessary.

The Board and management monitor capital requirements with regard to its banking covenant requirements as well as comparative guidance
to companies of similar size and nature of operations. The key capital management measures that the Company reviews on an ongoing basis are:

Shareholder funds (Net Assets)

Total debt to EBITDA

Interest cover to EBITDA

TARGET

AT BALANCE
DATE

> $135,000,000 $192,758,000

< 3.25 times

> 3.0 times

1.4

14.8

The key capital management measures have been calculated excluding the one-off non-cash impairment charge of $122,931,000 as it does not impact
bank covenants. Shareholder funds has been adjusted to reflect the value of television licences consistent with the most recent independent valuation
obtained in November 2015.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201618. RETAINED EARNINGS AND RESERVES

Employee benefits equity reserve

Accumulated losses

EMPLOYEE BENEFITS EQUITY RESERVE
Movements in reserve

Balance at beginning of year

Exercise of performance rights

Share based payment

Balance at end of year

ACCUMULATED LOSSES
Balance at the beginning of year

Net (loss)/profit attributable to members of Prime Media Group Limited

Total accumulated losses

Dividends provided for or paid

Balance at end of year

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

4,400

2015
$’000

4,150

(252,431)

(140,536)

4,150

(855)

1,105

4,400

3,957

(887)

1,080

4,150

(140,536)

(93,578)

(234,114)

(18,317)

(252,431)

(151,979)

35,621

(116,358)

(24,178)

(140,536)

Employee Benefits Reserve
The employee benefits reserve is used to record the value of benefits provided to employees and directors as part of their remuneration under
the Prime Media Group Limited Performance Rights Plan.

19. DIVIDENDS PAID AND PROPOSED

RECOGNISED AMOUNTS

DECLARED AND PAID DURING THE YEAR

Current year interim franked dividends 2.0 cents per share (2015: 3.8 cents)

Previous year final franked dividends 3.0 cents per share (2015: 2.8 cents)

Total

CONSOLIDATED

2016

2015

$’000

7,327

10,990

18,317

$’000

13,921

10,257

24,178

PROPOSED DIVIDENDS ON ORDINARY SHARES NOT RECOGNISED AS A LIABILITY

Final cash dividend fully franked for 2016: 1.7 cents per share (2015: 3.0 cents)

6,228

10,990

FRANKING CREDIT BALANCE

Franking account balance as at the end of the financial year at 30% (2015: 30%)

Franking credits that will arise from the payment of income tax payable as at the end of the financial year

Franking debits that will arise from the payment of dividends as at the end of the financial year

Impact on the franking account of dividends proposed or declared before the financial report was authorised
for issue but not recognised as a distribution to equity holders during the period

Total

TAX GROUP

2016
$’000

39,024

2,485

–

41,509

(2,669)

38,840

2015
$’000

31,889

5,127

–

37,016

(4,710)

32,306

TAX RATES
The tax rate at which paid dividends have been franked is 30% (2015: 30%). Dividends proposed will be franked at the rate of 30% (2015: 30%).

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201620. ASSETS HELD FOR SALE

Total current assets held for sale

Property, plant and equipment

Investment in associates

Total non-current assets held for sale

Assets classified as held for sale

CONSOLIDATED

2016
$’000

–

584

–

584

2015
$’000

–

877

963

The Group’s investment in Mildura Digital Television Pty Limited has been re-classified as an investment in associates in the current year, as the sale
is not highly probable.

ACCOUNTING POLICY

Non-current assets held for sale
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale
transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of
their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding the finance
costs and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset
or disposal group is available for immediate sale in its present condition. Management must be committed to the sale within one year from the
date of classification.

Property, plant and equipment are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale
are presented separately as current items in the statement of financial position.

21. FINANCIAL ASSETS

Investments at fair value:

Shares in uncontrolled entities (Level 1) (i)

Investments at cost:

Shares in uncontrolled entities (Level 3) (ii)

Available-for-sale investments at fair value:

Shares in uncontrolled entities (Level 3) (iii)

Total

CONSOLIDATED

2016
$’000

2015
$’000

–

2,500

2,508

Financial assets consist of investments in ordinary shares which do not have a fixed maturity date or coupon rate.

(i) Quoted equity shares (Level 1)
The fair value of listed financial assets has been determined directly by reference to published price quotations in an active market. There are
no individually material investments.

(ii) Unquoted equity shares at cost (Level 3)
Investments in shares of unlisted entities are carried at cost where fair value cannot be reliably measured. The financial instruments held are shares
of an entity that has a small shareholder base and a relatively stable share register with few exchanges of shareholdings.

(iii) Unlisted shares at fair value (Level 3)
The Company does not have unquoted available-for-sale investments at the reporting date. In the previous comparative period, the Company
estimated the fair value of the unquoted available-for-sale investments using valuation techniques based on assumptions that are not supported
by observable market information. Cash flow projections were determined assuming the disposal of the shares. A multiple of earnings before
interest, tax and depreciation (‘EBITDA multiple’) was applied to the disposal cash flows to determine fair value. The results were compared to similar
companies with observable market sales data.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016ACCOUNTING POLICY

Financial assets

Initial recognition and measurement
Financial assets are recognised initially at fair value plus, in the case of financial assets not subsequently measured at fair value through profit
or loss, transaction costs that are attributable to the acquisition of the financial asset.

All assets (and liabilities) for which fair value is measured or disclosed are characterised within the fair value hierarchy, described below, based
on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1: quoted (unadjusted) market prices in active markets for identical assets (and liabilities).
• Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
• Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Subsequent Measurement
The subsequent measurement of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss or other comprehensive income
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition
at fair value through profit or loss. The Group has not designated any financial assets at fair value through profit or loss.

Available-for-sale financial assets
Available-for-sale financial assets include equity investments. Equity investments classified as available-for-sale are those that are neither
classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses
recognised as other comprehensive income in reserves until the investment is derecognised, at which time the cumulative gain or loss is
recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from reserves
to the statement of profit or loss in finance costs.

For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new
amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life
of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised
over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount
recorded in equity is reclassified to the statement of profit or loss.

Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

•
•

the rights to receive cash flows from the asset have expired;
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a ‘pass through’ arrangement; and either the Group has transferred substantially all the risks and
rewards of the asset, or the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.

22. INVESTMENTS IN ASSOCIATES

UNLISTED

Mildura Digital Television Pty Limited

West Digital Television Pty Limited

West Digital Television No2 Pty Limited

West Digital Television No3 Pty Limited

West Digital Television No4 Pty Limited

WA SatCo Pty Limited

Broadcast Transmission Services Pty Limited

Total Investment in Associates

CONSOLIDATED

2016
$’000

841

–

2015
$’000

–

1,259

–

927

1,259

The Group’s investment in Mildura Digital Television Pty Limited has been re-classified in the current year from held for sale to investment in associates
as the sale is not highly probable.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201622. INVESTMENTS IN ASSOCIATES (CONTINUED)

ACCOUNTING POLICY

Investments in Associates
The Group’s investments in its associates are accounted for using the equity method. An associate is an entity over which the Group has
significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee.

Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted
to recognise changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to an associate is included
in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The statement of profit or loss reflects the Group’s share of the results of operations of the associate. When there has been a change recognised
directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity.
Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the
associate.

The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of profit or loss outside operating profit
or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associates are prepared for the
same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s
investment in its associate. At each reporting date, the Group determines whether there is any objective evidence that the investment in the
associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the
associate and its carrying value and recognises the amount in the “share of associate losses” in the statement of profit or loss.

THE CONSOLIDATED ENTITY HAS A MATERIAL INTEREST IN THE FOLLOWING ENTITIES

OWNERSHIP INTEREST

CONTRIBUTION TO NET LOSS

UNLISTED

Mildura Digital Television Pty Limited

West Digital Television Pty Limited

West Digital Television No2 Pty Limited

West Digital Television No3 Pty Limited

West Digital Television No4 Pty Limited

WA SatCo Pty Limited

Broadcast Transmission Services Pty Limited

Total

2016
%

50%

33%

2015
%

50%

33%

MOVEMENTS IN THE CARRYING AMOUNT OF THE GROUP’S INVESTMENT IN ASSOCIATES

At July 1

Contributions made

Share of losses after income tax

Reclassification from/(to) assets held for sale

At June 30

2016
$’000

(645)

(418)

–

2015
$’000

(434)

(441)

–

(1,063)

(875)

CONSOLIDATED

2016
$’000

1,259

645

(1,063)

927

2015
$’000

140

2,080

(875)

(86)

1,259

Contributions made reflect loan funds advanced to associates under short term loan arrangement or in accordance with requirements of shareholder
agreements. These payments are deemed to be part of the Investment in Associates for the purposes of equity accounting.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201623. INVESTMENTS IN SUBSIDIARIES

CLOSED GROUP CLASS ORDER DISCLOSURES

ENTITIES SUBJECT TO CLASS ORDER RELIEF
Pursuant to Class Order 98/1418, relief has been granted to Prime Television (Holdings) Pty Limited, Prime Television (Southern) Pty Limited, Prime
Television (Victoria) Pty Limited, Prime Television (Northern) Pty Limited, Golden West Network Pty Limited, and Prime Television Investments Pty
Limited from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.

As a condition of the Class Order, Prime Media Group Limited and its 100% owned Australian resident subsidiaries entered into a Deed of Cross
Guarantee on 17 October 2006 (Closed Group) as amended from time to time by assumption deed for the addition and removal of controlled entities.
The effect of the deed is that Prime Media Group Limited has guaranteed to pay any deficiency in the event of winding up of any of the controlled
entities within the Closed Group. The controlled entities within the Closed Group, listed below, have also given a similar guarantee in the event that
Prime Media Group Limited is wound up.

NAME

Prime Television (Holdings) Pty Limited

Zamojill Pty Limited

Prime Television (Southern) Pty Limited

Prime Television (Northern) Pty Limited

Prime Television (Victoria) Pty Limited

Prime Properties (Albury) Pty Limited

Prime Television Digital Media Pty Limited

Prime Television Investments Pty Limited

Golden West Network Pty Limited

Mining Television Network Pty Limited

Telepro Pty Limited

Golden West Satellite Communications Pty Limited

135 Nominees Pty Limited

Mid-Western Television Pty Limited

Seven Affiliate Sales Pty Limited

Prime Digital Media Pty Limited

Prime Digitalworks Pty Limited

Prime Media Broadcasting Services Pty Limited

Prime Media Communications Pty Limited

Prime Growth Media Pty Limited

Prime Media Group Services Pty Limited

Prime New Media Investments Pty Limited

Geraldton Telecasters Pty Limited

EQUITY INTEREST

COUNTRY OF
INCORPORATION

2016
%

2015
%

Australia

100

The consolidated statement of comprehensive income and statement of financial position of the entities which are members of the Closed Group
are as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Operating (loss)/profit before income tax

Income tax expense attributable to operating profit

Operating (loss)/profit after tax

Retained losses at beginning of the financial year

Share cancellation – Prime Television New Zealand Limited

Dividends provided for or paid

Retained losses at end of the financial period

CLOSED GROUP

2016
$’000

(81,315)

(11,964)

(93,279)

(61,444)

(29,865)

(18,317)

(202,905)

2015
$’000

51,667

(15,804)

35,863

(73,129)

–

(24,178)

(61,444)

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201623. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Equity

24. COMMITMENTS

CAPITAL EXPENDITURE COMMITMENTS

Estimated capital expenditure contracted for at reporting date, but not provided for, payable:

– not later than one year

LEASE EXPENDITURE COMMITMENTS – GROUP AS LESSEE

Operating leases (Group as lessee):

Minimum lease payments

– not later than one year

– later than one year and not later than five years

– later than five years

Aggregate lease expenditure contracted for at reporting date

CLOSED GROUP

2016
$’000

2015
$’000

61,958

170,783

232,741

35,891

86,945

122,836

109,905

63,205

329,466

392,671

41,722

99,310

141,032

251,639

CONSOLIDATED

2016
$’000

2015
$’000

459

333

6,425

18,448

6,973

31,846

7,079

19,492

10,757

37,328

ACCOUNTING POLICY

Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception of the lease.
The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement
conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a Lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards
incidental to ownership to the Group is classified as a finance lease. An operating lease is a lease other than a finance lease.

Finance leases are capitalised at the lease’s inception at the lower of fair value of the leased property or the estimated present value of the
minimum lease payments. Lease payments are apportioned between finance charges and reduction of lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership
by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term.

Operating leases have an average lease term of 3 years for motor vehicles, 3 to 5 years for building leases, and 5 to 15 years for transmission site access
agreements. Motor vehicle leases are fixed monthly rentals for the term of the lease. Building leases are generally fixed for the initial lease term, then
subject to Consumer Price Index adjustments if options are taken up. The majority of the transmission site leases are rentals that are subject to annual
Consumer Price Index adjustment. There are no restrictions placed upon the lessee by entering into these leases.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016LEASE EXPENDITURE COMMITMENTS – GROUP AS LESSOR
Certain assets owned or under operating leases with excess capacity have been sub-let to third parties. These non-cancellable leases have remaining
terms of between 1 to 15 years. All leases include clauses to enable upward revision of the rental charges on an annual basis according to increases
in the Consumer Price Index.

Operating leases (non-cancellable Group as lessor):

Minimum lease payments receivable

– not later than one year

– later than one year and not later than five years

– later than five years

Aggregate lease income contracted for at reporting date

CONSOLIDATED

2016
$’000

2015
$’000

1,528

4,064

1,088

6,680

1,731

4,470

1,740

7,941

OTHER COMMITMENTS COVERING THE RENTAL OF TECHNICAL EQUIPMENT UNDER A LONG TERM AGREEMENT
The technical communications equipment that is fundamental to the distribution of the television programming and data communications is leased
through long term operating leases between 5 and 15 years.

– not later than one year

– later than one year and not later than five years

– later than five years

Total

FINANCE LEASE COMMITMENTS

– not later than one year

– later than one year and not later than five years

Total minimum lease payments

– future finance charges

Lease liability

– current liability

– non-current liability

Total

FINANCE LEASE COMMITMENTS AT PRESENT VALUE

– not later than one year

– later than one year and not later than five years

Present value of minimum lease payments

CONSOLIDATED

2016
$’000

4,326

18,641

1,254

24,221

2015
$’000

4,400

18,098

6,123

28,621

CONSOLIDATED

2016
$’000

2015
$’000

420

–

420

(18)

402

–

402

CONSOLIDATED

2016
$’000

402

–

402

315

420

735

(63)

672

270

402

672

2015
$’000

301

371

672

OTHER COMMITMENTS COVERING TRANSMISSION MAINTENANCE, SITE INSTALLATION AND
MANAGEMENT SERVICES
The Company entered into a contract with Broadcast Transmission Services Pty Limited (refer to Note 28) on 1 April 2008, for the provision of site
maintenance services over a 10 year period at an annual cost of $1,200,000 per annum.

– not later than one year

– later than one year and not later than five years

Total

CONSOLIDATED

2016
$’000

1,200

2,400

2015
$’000

1,200

2,100

3,300

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201624. COMMITMENTS (CONTINUED)

ACCOUNTING POLICY

Group as a Lessor
Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the leased asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised
as an expense over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they
are earned.

25. CONTINGENT LIABILITIES

The Group has guaranteed to an unrelated third party the payment of a contractual commitment of WA SatCo Pty Limited, an associate company
in which the Group holds 50% of the share capital. WA SatCo Pty Limited has entered into a non-cancellable contract for the purchase of satellite
services in WA until 30 June 2020 at the rate of $2,346,192 per annum. In the event that WA SatCo Pty Limited defaults on any payments under this
contract, the Group may be liable for full payment under the guarantee it has provided. WA SatCo Pty Limited has simultaneously entered into
an agreement with the Commonwealth Government which provides for 100% funding of this satellite service to 30 June 2020. This agreement can
be terminated without notice by the Commonwealth Government.

Maximum potential contingent commitment arising from the above mentioned guarantee:

– not later than one year

– later than one year and not later than five years

– later than five years

Maximum contingent commitments

As noted above the entire maximum potential contingent commitment is offset by government funding.

26. INCOME TAX

The major components of income tax expense are:

Consolidated Statement of Profit or Loss

Current income tax

Current income tax charge

Adjustments in respect of current income tax of previous years

Deferred income tax

Relating to origination and reversal of temporary differences

Adjustments in respect of deferred income tax of previous years

Income tax expense in the Consolidated Statement of Profit or Loss

CONSOLIDATED

2016
$’000

2,346

7,038

–

9,384

2015
$’000

2,346

9,384

–

11,730

CONSOLIDATED

2016
$’000

2015
$’000

12,146

116

–

12,273

15,296

(182)

160

(123)

15,151

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by Australia’s domestic income tax rate
is as follows:

Accounting (loss)/profit before income tax

Prima facie tax (benefit)/expense at 30% (2015: 30%)

Expenses not deductible for tax

Income not assessable for tax

Impairment charge not deductible for tax

Adjustments in respect of current tax of previous years

Deferred tax asset derecognised

Foreign tax rate adjustment

Income tax expense reported in the Statement of Profit or Loss

Effective tax rate

CONSOLIDATED

2016
$’000

(81,305)

(24,392)

653

(878)

36,879

–

12,273

(15.1%)

2015
$’000

50,772

15,232

912

(787)

–

(305)

15,151

29.8%

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016DEFERRED TAX ASSETS AND LIABILITIES

Opening balance

Charged to income

Other payments and utilisation of tax losses

Closing balance

Tax expense in statement of comprehensive income

Amounts recognised in the statement of financial position:

Deferred tax asset

Deferred tax liability

Deferred income tax as at 30 June relates to the following:

Deferred tax liabilities

Accelerated depreciation for tax

Leased assets

Prepaid expenses deductible for tax

Income not yet assessable for tax

Fair value of television licences on acquisition

Set-off of deferred tax assets

Net deferred tax liabilities

Deferred income tax as at 30 June relates to the following:

Deferred tax assets

Employee entitlements

Provisions

Expenses not yet deductible for tax

Difference between accounting and tax on building write off

Impairments of investments

Tax losses

Set-off of deferred tax liabilities

Net deferred tax assets

INCOME TAX LOSSES

(a)

(b)

Deferred tax assets arising from tax losses of a controlled entity which at balance date are recognised as being
highly probable of recovery. These losses relate to the Australian Tax Consolidated Group.

Deferred tax assets arising from tax losses of controlled entities not recognised at reporting date as realisation
of the benefit is not regarded as highly probable

CONSOLIDATED

2016
$’000
CURRENT
INCOME TAX

2016
$’000
DEFERRED
INCOME TAX

2015
$’000
CURRENT
INCOME TAX

2015
$’000
DEFERRED
INCOME TAX

(5,127)

(12,494)

15,136

(2,485)

(1,737)

(15,055)

11,665

(5,127)

993

221

(152)

1,062

12,273

1,062

–

1,062

1,442

(36)

(413)

993

15,151

993

–

993

CONSOLIDATED STATEMENT
OF FINANCIAL POSITION

2016
$’000

2015
$’000

(1,202)

(28)

(1,821)

(4)

(6,690)

(9,745)

9,745

–

1,698

1,910

105

6,690

361

10,807

(9,745)

1,062

2016
$’000

361

–

(1,048)

(53)

(2,367)

–

(6,690)

(10,158)

10,158

–

1,654

1,983

252

6,690

513

11,151

(10,158)

993

2015
$’000

513

–

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201626. INCOME TAX (CONTINUED)

TAX CONSOLIDATION

(i) Members of the tax consolidated group and the tax sharing arrangements
Effective 1 July 2002, for the purposes of income taxation, Prime Media Group Limited and its 100% owned Australian resident subsidiaries formed
a tax consolidated group. Prime Media Group Limited is the head entity of the tax consolidated group. Members of the tax consolidated group
have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default
on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the
possibility of default is remote.

(ii) Tax effect accounting by members of the consolidated group

MEASUREMENT METHOD ADOPTED UNDER UIG 1052 TAX CONSOLIDATION ACCOUNTING
The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts.
The Group has applied the Group Allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate
to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the
broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below.

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and deferred tax assets
arising from unused tax losses and unused tax credits from controlled entities in the tax consolidated group.

NATURE OF THE TAX FUNDING AGREEMENT
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current
taxes to members of the tax consolidated group in accordance with their taxable income for the period, while deferred taxes are allocated to members
of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes. Allocations under the tax funding agreement are made
at the end of each half year.

The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ intercompany accounts with the
tax consolidated group head company, Prime Media Group Limited. In accordance with UIG 1052: Tax Consolidation Accounting, the Group has
applied the “separate taxpayer within group” approach in determining the appropriate amount of current taxes to allocate to members of the tax
consolidated group.

PRIME MEDIA GROUP LIMITED

2016
$’000

2015
$’000

Prime Media Group Limited has recognised the following amounts as tax consolidation contribution adjustments:

Total increase to inter-company assets of Prime Media Group Limited

13,997

16,762

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016ACCOUNTING POLICY

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

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management
periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.

Deferred Income Taxes
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the reporting date. Deferred income tax liabilities are recognised for all taxable temporary
differences except:

• when the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

•

combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.

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

• when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability

•

in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss.
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred
tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred
tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.

Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST. The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the statement of financial position. Commitments and contingencies are disclosed net
of the amount of GST recoverable from, or favourable to, the taxation authority. Cash flows are included in the statement of cash flows on a gross
basis and the GST component of the cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority is classified as part of operating cash flows.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201627. SHARE-BASED PAYMENTS EXPENSE

Expense arising from equity-settled share-based payment transactions

ACCOUNTING POLICY

CONSOLIDATED

2016
$’000

1,105

2015
$’000

1,080

Share-based payments
Employees (including senior executives) of the Group receive remuneration in the form of performance rights which are share-based payment
transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).

Equity-settled transactions
The cost of equity-settled transactions is recognised, together with a corresponding increase in employee benefits reserves in equity, over the
period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions
at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the
number of equity instruments that will ultimately vest. The statement of profit or loss expense or credit for a period represents the movement
in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon
a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not
been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair
value of the share-based payment transaction, or is otherwise beneficial to the employee, as measured at the date of modification.

When an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the
award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee
are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted,
the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

Outstanding performance rights are reflected as additional share dilution in the computation of diluted earnings per share (see Note 6).

The share-based payment plan is described below. During the financial year, nil performance rights lapsed (2015: Nil), nil performance rights were
forfeited (2015: Nil) and nil performance rights were cancelled (2015: Nil).

PRIME MEDIA GROUP LIMITED PERFORMANCE RIGHTS PLAN
At the 2011 Annual General Meeting, shareholders approved the Prime Media Group Limited Performance Rights Plan, which was established for
senior executives of the consolidated entity. The rights are issued for nil consideration and are granted in accordance with the plan’s guidelines
established by the Directors of Prime Media Group Limited. The rights vest over a 36 month period subject to continuing service and achieving
the following targets:

• 60% of the rights will be subject to achievement of annual core earnings per share targets; and
• 40% of the rights will be subject to achievement of annual power ratio targets (revenue share: audience share).

The rights cannot be transferred and will lapse 30 days after vesting date.

The Board has resolved to freeze the current plan with the objective of introducing an improved LTI scheme that will be put forward for shareholder
approval at the 2017 Annual General Meeting.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016SUMMARY OF RIGHTS GRANTED UNDER PRIME MEDIA GROUP LIMITED PERFORMANCE RIGHTS
The following table outlines the number (No.) and weighted average exercise price (WAEP) of, and movements in, performance rights on issue during
the year.

Balance at beginning of year

– granted

– exercised

– lapsed

– cancelled

– forfeited

Balance at end of year

Exercisable at end of year

2016

NO.

4,527,438

1,977,753

(1,580,000)

–

WAEP

$0.00

–

2015

NO.

3,976,000

1,517,438

(966,000)

–

WAEP

$0.00

–

4,925,191

$0.00

4,527,438

–

$0.00

–

PERFORMANCE RIGHTS PRICING MODEL

PRIME MEDIA GROUP PERFORMANCE RIGHTS PLAN
Employees must remain in service for a period of three years from date of grant. The fair value of performance rights granted in 2016, 2015 and 2014
was estimated at the date of the grant using a Black-Scholes methodology, taking into account the terms and conditions upon which the performance
rights were granted.

The fair value of performance rights granted in 2013 and prior years was estimated at the date of the grant using a Monte-Carlo methodology, taking
into account the terms and conditions upon which the performance rights were granted. The fair value of performance rights granted during the year
was estimated on the date of grant using the following inputs to the model:

Expected annual dividends

Expected volatility (%)

Expected life (years)

Exercise price ($)

Share price at grant date ($)

2016

2015

2014

2013

NOV 15

SEP 15

NOV 14

AUG 14

NOV 13

NOV 12

OCT 12

6.80

30.60

0.00

0.62

6.80

30.60

0.00

0.63

6.80

26.94

0.00

0.86

7.30

27.45

0.00

1.03

6.89

29.00

0.00

1.06

8.23

35.02

0.00

0.81

8.23

33.65

0.00

0.80

The dividend yield reflects the assumption that the current dividend payout will continue. The expected life of the performance rights is based
on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE
The weighted average remaining contractual life of performance rights outstanding as at 30 June 2016 is 1.4 years (2015: 1.3 years).

RANGE OF EXERCISE PRICE
The range of exercise price for performance rights outstanding at the end of the year was $0.00 (2015: $0.00).

WEIGHTED AVERAGE FAIR VALUE
The weighted average fair value of performance rights granted during the year was $0.42 (2015: $0.75).

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201628. RELATED PARTY DISCLOSURES

(A) SUBSIDIARIES
The consolidated financial statements include the financial statements of Prime Media Group Limited and the subsidiaries listed in the following table:

EQUITY INTEREST

COUNTRY OF
INCORPORATION

2016
%

2015
%

NAME

Prime Television (Holdings) Pty Limited

Prime Television Digital Media Pty Limited

Prime Digital Media Pty Limited

Prime Media Group Services Pty Limited

Prime Media Communications Pty Limited

Prime New Media Investments Pty Limited

Prime Growth Media Pty Limited

Prime Television (Victoria) Pty Limited

Prime Properties (Albury) Pty Limited

Prime Television (Southern) Pty Limited

Prime Television (Northern) Pty Limited

Prime Television Investments Pty Limited

Golden West Network Pty Limited

Mining Television Network Pty Limited

Telepro Pty Limited

135 Nominees Pty Limited

Golden West Satellite Communications Pty Limited

Mid-Western Television Pty Limited

Geraldton Telecasters Pty Limited

Zamojill Pty Limited

Seven Affiliate Sales Pty Limited

Prime Media Broadcasting Services Pty Limited

Broadcast Production Services Pty Limited

Production Strategies Pty Limited as trustee for Production Strategies Discretionary Trust

Wastar International Pty Limited

Screenworld Pty Limited

OSB Holdings Pty Limited as trustee for the OSB Unit Trust

On Site Broadcasting Pty Limited

OSB Australia Pty Limited

OSB Corporation Pty Limited

On Corporation Pty Limited

Prime Digitalworks Pty Limited

Broadcast Rentals Pty Limited

Australia

Prime Television New Zealand Limited (de-registered 14 July 2015)

New Zealand

(B) ULTIMATE PARENT
Prime Media Group Limited is the ultimate Australian entity and the ultimate parent entity of the Group.

Short-term employee benefits

Post-employment benefits

Long-term benefits

Share based payments

Total

100

–

100

CONSOLIDATED

2016
$’000

3,995

162

108

1,105

5,370

2015
$’000

4,568

154

1,080

5,857

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period that related to KMP. Details of remuneration
amounts paid to individual KMP are disclosed in tables 1 and 2 of section 4 of the Remuneration Report.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016(D) TRANSACTIONS WITH RELATED PARTIES

WHOLLY OWNED GROUP TRANSACTIONS
Sales and purchases are made within the wholly owned group in arm’s length transactions both at normal market prices and on normal commercial
terms. Outstanding balances at year end are unsecured, interest free and settled through intercompany accounts.

RBA HOLDINGS PTY LIMITED
This company is owned by regional television operators. This company operates as a provider of transmission facilities under the Digital Black Spots
Infill licence. The Company has entered into agreements under normal commercial terms and conditions with this company to use these transmission
facilities for periods up to 10 years.

REGIONAL TAM PTY LIMITED
This company is owned by regional television operators to facilitate and manage the audience metering services for the regional television markets.
The Company is party to a commercial agreement in which it purchases ratings services from Regional TAM Pty Limited. This agreement is under
normal commercial terms and conditions.

WA SATCO PTY LIMITED
WA SatCo Pty Limited is owned by the Company and WIN Television Pty Limited and has been engaged by the Commonwealth Government
to provide the WA Vast Service until 30 June 2020. The shareholders of the company provide services to WA SatCo to enable its operations.
These services are recovered from WA SatCo on a cost recovery basis.

BROADCAST TRANSMISSION SERVICES PTY LIMITED (BTS)
The Company has a 33% shareholding in BTS. BTS provides transmission maintenance, site installation and management services to regional
broadcasters and other third party customers. The Company entered into a contract with BTS for the provision of site maintenance services for the
period to 2018 at an annual cost of $1,200,000 per annum under normal commercial terms and conditions.

CHANNEL SEVEN QUEENSLAND PTY LIMITED
The Company provides sales representation services to Channel Seven Queensland Pty Limited, an entity associated with one of the Company’s major
shareholders. The fees payable by Channel Seven Queensland Pty Limited are based on normal commercial terms and conditions applicable to this
type of service.

RILEY STREET CONSULTING PTY LIMITED
In the prior year this company provided consulting services to the Group to the value of $10,190. This company has an association with the Group’s
General Counsel and Company Secretary. The consultancy fees payable by the Group were reviewed and approved by the CEO prior to the services
being provided, and were based on normal commercial terms and conditions applicable to this type of service.

29. PARENT ENTITY INFORMATION

Current assets

Total assets

Current liabilities

Total liabilities

Issued capital

Retained earnings

Employee benefits reserve

Total shareholders’ equity

Loss of the parent entity

Total comprehensive loss of the parent entity

PRIME MEDIA GROUP LIMITED

2016
$’000

105

205,572

2,835

140,487

310,262

(249,577)

4,400

65,085

(125,069)

2015
$’000

106

312,078

5,477

103,515

310,262

(105,849)

4,150

208,563

(3,550)

Parent entity total assets include investments in subsidiaries (refer Note 23). The value of the investments has reduced in the 2016 financial year
consistent with the one-off non-cash impairment of television licences and goodwill held by subsidiaries, totalling $122,931,000.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201629. PARENT ENTITY INFORMATION (CONTINUED)

GUARANTEES ENTERED INTO BY PRIME MEDIA GROUP LIMITED IN RELATION TO THE DEBTS
OF ITS SUBSIDIARIES
As a condition of the Class Order, Prime Media Group Limited and its 100% owned Australian resident subsidiaries (Closed Group) entered into
a Deed of Cross Guarantee on 17 October 2006 as amended from time to time by assumption deed for the addition and removal of controlled entities.
The effect of the deed is that Prime Media Group Limited has guaranteed to pay any deficiency in the event that a controlled entity within the Closed
Group is wound up. The controlled entities within the Closed Group have also given a similar guarantee in the event that Prime Media Group Limited
is wound up. (Refer Note 23).

CONTINGENT LIABILITIES OF PRIME MEDIA GROUP LIMITED
By virtue of being a member of the Deed of Cross Guarantee mentioned above, the Company has guaranteed to pay any deficiency in the event
of winding up Golden West Network Pty Limited (GWN), a wholly owned subsidiary and party to the Deed of Cross Guarantee. GWN has guaranteed
to an unrelated third party the payment of a contractual commitment on behalf of WA SatCo Pty Limited, an associate company in which GWN
holds 50% of the share capital. WA SatCo Pty Limited has entered into a non-cancellable contract for the purchase of satellite services in WA until
30 June 2020 at the rate of $2,346,192 per annum. In the event that WA SatCo Pty Limited defaults on any payments under this contract, GWN
may be liable for full payment under the guarantee it has provided. WA SatCo Pty Limited has simultaneously entered into an agreement with the
Commonwealth Government which provides for 100% funding of this satellite service to 30 June 2020. This agreement can be terminated without
notice by the Commonwealth Government.

30. SUBSEQUENT EVENTS

The Group has engaged MediaHub Australia (a joint venture between the Australian Broadcasting Corporation and WIN Television) to provide
On-Air operations services to the company. On air operations in a television business augment the program feed with commercials, community service
announcements and other materials, to create the complete schedule of content for transmission. It is a major component of television broadcasting.
Outsourcing this function to a managed service is an established practice in the major and mature TV markets of Great Britain and Europe with
impressive continuity of service outcomes.

31. AUDITOR’S REMUNERATION

Amounts received or due and receivable by Ernst & Young Australia for:

– an audit or review of the financial report of the entity and any other entity in the consolidated entity

– other services in relation to the entity and any other entity in the consolidated entity

– amounts received or due and receivable by related practices of Ernst & Young

Total

32. OTHER ACCOUNTING POLICIES

CONSOLIDATED

2016
$

2015
$

239,990

90,245

–

330,235

264,974

57,344

23,870

346,188

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

The consolidated financial statements provide comparative information in respect of the previous period.

(B) COMPLIANCE WITH AUSTRALIAN ACCOUNTING STANDARDS AND INTERNATIONAL FINANCIAL

REPORTING STANDARDS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.

Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous financial year.

The following Australian Accounting Standards and Interpretations have recently been issued or amended, but are not yet effective. The Company will
continue to review the changes and their impact on the financial statements of the Group as the application dates arises.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016REFERENCE

TITLE

APPLICATION DATE
OF STANDARD

APPLICATION DATE
FOR GROUP

AASB 9/IFRS 9

AASB 2014-4

AASB 15

AASB 2015-1

AASB 2015-2

AASB 16

AASB 2016-1

AASB 2016-2

Financial Instruments

Clarification of Acceptable Methods of Depreciation and Amortisation
(Amendments to AASB 116 and AASB 138)

Revenue from Contracts with Customers

Amendments to Australian Accounting Standards – Annual Improvements to
Australian Accounting Standards 2012-2014 cycle

Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101

Leases

Amendments to Australian Accounting Standards – Recognition of Deferred Tax
Assets for Unrealised Losses [AASB 112]

Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107

IFRS 2 (Amendments)

Classification and Measurement of Share-based Payment Transactions
[Amendments to IFRS 2]

1 January 2018

1 January 2016

1 July 2018

1 July 2016

1 January 2018

1 January 2016

1 July 2018

1 July 2016

1 January 2016

1 July 2016

1 January 2019

1 January 2017

1 July 2019

1 July 2017

1 January 2017

1 July 2017

1 January 2018

1 July 2018

(D) BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of Prime Media Group Limited and its subsidiaries (as outlined in Note 28)
as at and for the year ended 30 June 2016. Interests in associates are equity accounted and are not part of the consolidated Group (see Note 22).

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. The Group controls an investee if and only if the Group has:

• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the trustee;
•

the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption, and when the Group has less than
a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power
over an investee including:

•
•
•

the contractual arrangement(s) with the other vote holders of the investee;
rights arising from other contractual arrangements; and
the Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and any other
component of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

(E) CURRENT VERSUS NON-CURRENT CLASSIFICATION
The Group presents assets and liabilities in the statement of financial position based on current and non-current classification. An asset is current
when it is:

• expected to be realised or intended to be sold or consumed in the normal operating cycle;
• held primarily for the purpose of trading;
• expected to be realised within 12 months after the reporting date; or
• cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

All other assets are classified as non-current. A liability is current when:

•
•
•
•

it is expected to be settled in the normal operating cycle;
it is held primarily for the purpose of trading;
it is due to be settled within 12 months after the reporting date; or
there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period.

The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 201632. OTHER ACCOUNTING POLICIES (CONTINUED)

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported
amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected
in future periods.

JUDGEMENTS
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect
on the amounts recognised in the consolidated financial statements:

OPERATING LEASE COMMITMENTS – GROUP AS LESSEE
The Group has entered into operating leases that have an average lease term of 3 years for motor vehicles, 3 to 5 years for building leases, and
5 to 15 years for transmission site access agreements. The Group has determined, based on an evaluation of the terms and conditions of the
arrangements, that it does not retain all the significant risks and rewards of ownership of these sites and equipment and accounts for the contracts
as operating leases.

OPERATING LEASE COMMITMENTS – GROUP AS LESSOR
The Group has entered into site sharing agreements in relation to transmission sites and equipment it owns. The Group has determined, based
on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these sites and
equipment and accounts for the contracts as operating leases.

ESTIMATES AND ASSUMPTIONS
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next year, are described below. The Group based its assumptions and
estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.

IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment exists when the carrying value of an asset or cash generating unit exceeds the recoverable value amount, which is the higher of its fair
value less costs to sell and its value in use. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from
the budget for next year, plus growth assumptions and do not include restructuring activities that the Group is not yet committed to or significant
future investments that will enhance the assets performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate
used for the discounted cash flow model as well as the future cash inflows and the growth rate for extrapolation purposes. The key assumptions used
to determine the recoverable amount for different CGUs, including a sensitivity analysis, are further explained at Note 8.

IMPAIRMENT OF INVESTMENTS IN FINANCIAL ASSETS (INCLUDING ASSOCIATES)
The Group assesses impairment of investments in financial assets including associates at each reporting date in accordance with the measurement
rules established in the accounting standards.

For financial assets determined to be associates, the Group assesses at each balance date the circumstances and conditions specific to that associate.
These include operating performance, market and environmental factors. If management believes that an impairment trigger exists then the
recoverable value of the investment in the associate is determined.

RENEWAL OF BROADCASTING LICENCES
The Group’s television broadcasting licences consist of the right to broadcast television services to specific market areas. These licences are issued
by the relevant broadcasting authority for periods of 5 years. The ownership and renewal processes of these licences is such that in the absence
of major breaches of licensing and broadcasting regulations, licence renewal is virtually guaranteed for the existing licence holders.

CLASSIFICATION OF ASSETS AND LIABILITIES AS HELD FOR SALE
The Group classifies assets and liabilities as held for sale when the carrying amount will be recovered through a sale transaction. The assets and
liabilities must be available for immediate sale and the Group must be committed to selling the asset either through entering into a contractual sale
agreement or the activation and commitment to a program to locate a buyer and dispose of the assets and liabilities.

VALUATION OF INVESTMENTS
The fair value of listed shares has been determined by reference to published price quotations in an active market.

The fair values of unlisted securities not traded in an active market are determined using valuation assumptions that are not observable market prices
or rates. Future likely cash flows are determined to most likely arise from the disposal of the securities. Disposal cash flows are determined using
earnings before interest, tax, depreciation and amortisation (EBITDA) multiples and compared to similar companies with observable market sales data.

SHARE-BASED PAYMENT TRANSACTIONS
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date
at which they are granted. The fair value is determined by an external valuer using a binomial model, using the assumptions detailed in Note 27.

TAXES
Deferred tax assets are recognised for deductible temporary differences and unused tax losses to the extent management considers it is probable
that future taxable profits will be available to utilise those temporary differences.

Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing
and the level of future taxable profits together with future tax planning strategies.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016In accordance with a resolution of the directors of Prime Media Group Limited, I state that:

1. In the opinion of the directors:

a. the financial statements and notes of Prime Media Group Limited for the financial year ended 30 June 2016 are in accordance with the

Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended

on that date; and

ii. complying with Accounting Standards and the Corporations Regulations 2001;

b. the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 32(b); and
c. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the Directors by the Chief Executive Officer and Chief

Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2016.

On behalf of the Board

P.J. Macourt
Director

Sydney, 22 August 2016

DIRECTORS’ DECLARATIONFOR THE YEAR ENDED 30 JUNE 2016PRIME MEDIA GROUP ANNUAL REPORT 2016200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au

Independent auditor's report to the members of Prime Media Group
Limited

Report on the financial report

We have audited the accompanying financial report of Prime Media Group Limited, which comprises
the consolidated statement of financial position as at 30 June 2016, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors' declaration of the
consolidated entity comprising the company and the entities it controlled at the year's end or from
time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal controls relevant to the entity's
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.

Independence

In conducting our audit we have complied with the independence requirements of the Corporations
Act 2001. We have given to the directors of the company a written Auditor’s Independence
Declaration, a copy of which is included in the directors’ report.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

INDEPENDENT AUDIT REPORT

Opinion

In our opinion:

the financial report of Prime Media Group Limited is in accordance with the Corporations Act
2001, including:

ii.

giving a true and fair view of the consolidated entity's financial position as at 30 June
2016 and of its performance for the year ended on that date; and

complying with Australian Accounting Standards and the Corporations Regulations
2001; and

the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2.

Report on the remuneration report

We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2016. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Prime Media Group Limited for the year ended 30 June
2016, complies with section 300A of the Corporations Act 2001.

Ernst & Young

Christopher George
Partner
Sydney
22 August 2016

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

INDEPENDENT AUDIT REPORTPRIME MEDIA GROUP ANNUAL REPORT 2016

Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information
is current as at 18 August 2016.

A. DISTRIBUTION OF EQUITY SECURITIES

ORDINARY SHARES
As at 18 August 2016, total number of fully paid up shares on issue is 366,330,303.

The number of shareholders, by size of holding, in each class of share is:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

The number of shareholders holding less than a marketable parcel of shares:

B. TWENTY LARGEST REGISTERED SHAREHOLDERS
The names of the twenty largest registered holders of quoted shares at 18 August 2016 are:

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NETWORK INVESTMENT HOLDINGS PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BIRKETU PTY LTD
MR GEORGE WALTER MOORATOFF
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
CVC LIMITED
IQ RENTAL & FINANCE PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
FRANED PTY LIMITED
S M & R W BROWN PTY LTD
BRISPOT NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED

Total

NUMBER OF HOLDERS

588

1,091

714

1,384

195

3,972

808

LISTED ORDINARY SHARES

NUMBER OF
SHARES

PERCENTAGE
OF ORDINARY
SHARES

41,920,818
41,701,955
37,837,761
35,011,975
23,509,595
16,055,982
11,529,201
11,479,764
11,464,146
9,000,000
5,000,000
3,641,935
2,951,432
2,789,260
1,800,000
1,670,162
1,650,000
1,500,000
1,362,667
1,344,486

11.44
11.38
10.33
9.56
6.42
4.38
3.15
3.13
3.13
2.46
1.36
0.99
0.81
0.76
0.49
0.46
0.45
0.41
0.37
0.37

263,221,139

71.85

C. SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:

PERPETUAL LIMITED

NETWORK INVESTMENT HOLDINGS PTY LTD AND SEVEN GROUP HOLDINGS LIMITED 1

ASHBLUE HOLDINGS PTY LIMITED AND MR KERRY STOKES 1

NORTH ASTON PTY LIMITED, WROXBY PTY LIMITED, AUSTRALIAN CAPITAL EQUITY PTY LIMITED, ACE GROUP
ENTITIES AND MR KERRY STOKES 1

IOOF HOLDINGS LIMITED

1 These substantial shareholdings relate to the same parcel of shares.

D. VOTING RIGHTS
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

NUMBER OF
SHARES

PERCENTAGE
OF ORDINARY
SHARES

51,781,999

41,701,955

23,661,544

14.14%

11.38%*

6.46%

ASX ADDITIONAL INFORMATIONFOR THE YEAR ENDED 30 JUNE 2016Designed and produced by ArmstrongQ – www.armstrongQ.com.au