EVT LIMITED — Annual Report 2017

Sep 14, 2017

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Annual EVENT HOSPITALITY & ENTERTAINMENT LIMITED Report 2017

EVENT HOSPITALITY & ENTERTAINMENT LIMITED
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2017 ANNUAL REPORT

CONTENTS

Section

Section	Page
Directors’ Report	2
Message from the Chairman regarding the Remuneration Report	16
Directors’ Report: Remuneration Report – Audited	17
Lead Auditor’s Independence Declaration	31
Statement of Financial Position	32
Income Statement	33
Statement of Comprehensive Income	34
Statement of Changes in Equity	35
Statement of Cash Flows	36
Notes to the Financial Statements
Section 1 – Basis of preparation
1.1 – Reporting entity	37
1.2 – Basis of preparation	37
1.3 – Foreign currency	38
1.4 – New standards and interpretations not yet adopted	39
Section 2 – Performance for the year
2.1 – Revenue	40
2.2 – Segment reporting	41
2.3 – Individually significant items	46
2.4 – Taxation	46
2.5 – Earnings per share	49
Section 3 – Operating assets and liabilities
3.1 – Trade and other receivables	50
3.2 – Inventories	51
3.3 – Property, plant and equipment	51
3.4 – Investment properties	55
3.5 – Goodwill and other intangible assets	56
3.6 – Trade and other payables	58
3.7 – Provisions	58
3.8 – Other liabilities	59
Section 4 – Capital structure and financing
4.1 – Share capital	60
4.2 – Dividends	61
4.3 – Reserves	62
4.4 – Loans, borrowings and financing arrangements	63
4.5 – Financial risk management	64
Section 5 – Group composition
5.1 – Business combinations	69
5.2 – Subsidiaries	72
5.3 – Interests in other entities	75
5.4 – Acquisition of additional interests in joint arrangements	78
Section 6 – Employee benefits and related party transactions
6.1 – Share-based payments	79
6.2 – Director and executive disclosures	82
6.3 – Related parties	83
Section 7 – Other information
7.1 – Commitments and leases	84
7.2 – Contingent liabilities	85
7.3 – Reconciliation of profit for the year to net cash provided by operating activities	85
7.4 – Auditors’ remuneration	86
7.5 – Parent entity disclosures	86
7.6 – Events subsequent to reporting date	87
7.7 – Deed of Cross Guarantee	88
Directors’ Declaration	90
Independent Auditor’s Report	91
Shareholder Information	95
Other Information	97

1 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

The directors present their report together with the financial report of EVENT Hospitality & Entertainment Limited, being the Company and its controlled entities (“Group”), for the year ended 30 June 2017 and the auditor’s report thereon.

DIRECTORS

The directors of the Company in office at any time during or since the end of the year are:

AG Rydge (Chairman) Director since 1978

KG Chapman Director since 2010

PR Coates Director since 2009

VA Davies Director since 2011

DC Grant Director since 2013

JM Hastings (Chief Executive Officer) Appointed 1 July 2017

PM Mann Director since 2013

RG Newton Director since 2008

DC Seargeant (Managing Director until 30 June 2017) Director since 2001 and Managing Director since 2002, resigned 30 June 2017

Directors’ qualifications, experience and independent status

Alan Rydge

Non-executive Chairman, Board member since 1978, Chairman of the Board since 1980, Audit and Risk Committee member and Nomination and Remuneration Committee member.

Experience

A company director with 40-plus years experience in the film, hospitality, leisure and tourism industries. Joined the Greater Union group in 1971 and was formerly the Group Managing Director.

Directorships

Mr Rydge is also a director of the listed company, Carlton Investments Limited (appointed 1980, chairman since 1980). In addition, Mr Rydge is chairman of Alphoeb Pty Limited and Enbeear Pty Limited.

Kenneth Chapman MB BS, FAICD, FAIM, AFRACMA

Independent non-executive director and Board member since 2010.

Experience

A company director with 20-plus years senior executive experience in the tourism and real estate sectors. Currently, chief executive officer of Skyrail-ITM and executive director of the Chapman group of companies.

Directorships

Positions held by Mr Chapman during the last three years include:

• director of Aquis Entertainment Limited (appointed 14 August 2015, resigned 3 November 2016);

• chairman of Skyrail Pty Ltd trading as Skyrail Rainforest Cableway;

• chairman of Far North Queensland Hospital Foundation;

• chairman of Skyrail Rainforest Foundation Limited; and

• director of various entities associated with the privately held Chapman group of companies.

2 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Directors’ qualifications, experience and independent status (continued)

Peter Coates AO

Independent non-executive director and Board member since 2009. Mr Coates served as a member of the Audit and Risk Committee and as a member and Chairman of the Nomination and Remuneration Committee until 22 October 2015. Mr Coates is the lead independent director.

Experience

A company director with 40-plus years senior executive experience in the mining and commodities industries. Mr Coates is currently non-executive chairman of Santos Limited, a non-executive director of Glencore plc and non-executive chairman of Glencore majority owned Sphere Minerals Limited. Mr Coates was formerly non-executive chairman of Xstrata Australia Pty Limited and chief executive of Xstrata Coal.

Directorships

Positions held by Mr Coates during the last three years include:

• director of Santos Limited (Chairman from 30 April 2016, Executive Chairman from August 2015 to January 2016);

• director of Glencore plc; and

• director of Sphere Minerals Limited (Chairman).

Valerie Davies FAICD

Independent non-executive director and Board member since 2011.

Experience

A company director with more than two decades of broad experience across diverse sectors, including tourism, property, health and media. In parallel, Ms Davies has more than 20 years senior executive experience in corporate communications, as Principal of her own consultancy One.2.One Communications Pty Ltd.

Directorships

Positions held by Ms Davies during the last three years include:

• director of Cedar Woods Properties Limited;

• director of HBF Health Limited; and

• commissioner of Tourism Western Australia.

David Grant BComm, CA, GAICD

Independent non-executive director, Board member since 2013, Chairman of the Audit and Risk Committee and Chairman of the Nomination and Remuneration Committee.

Experience

Mr Grant is a Chartered Accountant with 25-plus years accounting and finance experience spanning both the accounting profession and the commercial sector. Mr Grant’s executive career included roles with Goodman Fielder Limited and Iluka Resources Limited as well as co-founding a privately held resource exploration venture in New Zealand. Mr Grant was formerly a non-executive director of Consolidated Rutile Limited.

Directorships

Positions held by Mr Grant during the last three years include:

• director of iiNet Limited (resigned 7 September 2015); and

• director of Stylematch Pty Limited.

Jane Hastings BComm (appointed 1 July 2017)

Managing Director and Chief Executive Officer (“CEO”) from 1 July 2017.

Experience

Ms Hastings has more than 20 years’ experience in the tourism, hospitality and entertainment sectors. Ms Hastings  previously held a number of senior positions with APN News & Media Limited, including CEO of The Radio Network (2012  2014) and CEO of New Zealand Media and Entertainment (NZME) (2014 2016). Ms Hastings was appointed as the Group’s Chief Operating Officer with effect from 29 August 2016 and on 27 April 2017, the Group announced that Ms Hastings would succeed Mr DC Seargeant as the Group’s Managing Director and CEO from 1 July 2017.

Directorships

Ms Hastings is also a New Zealand Film Commission board member.

3 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Directors’ qualifications, experience and independent status (continued)

Patria Mann BEc, CA, FAICD

Independent non-executive director and Board member since 2013. Member of the Audit and Risk Committee and Member of the Nomination and Remuneration Committee.

Experience

A company director with over 25 years experience. Mrs Mann is a Chartered Accountant and former partner of KPMG. She has been a professional non-executive director for over 10 years. Mrs Mann has extensive audit, investigation, risk management and corporate governance experience.

Directorships

Positions held by Mrs Mann during the last three years include:

• director of Bellamy’s Australia Limited (appointed 10 March 2016, resigned 18 May 2017);

• director of Ridley Corporation Limited;

• director of First State Superannuation Trustee Corporation (resigned 2015);

• director of Perpetual Superannuation Limited (resigned 31 October 2016); and

• director of Allianz Australia Limited.

Richard Newton BBus (Marketing), FAICD

Independent non-executive director and Board member since 2008.

Experience

A company director with 20-plus years senior executive experience in property investment and development, specifically in hotel operations.

Directorships

Positions held by Mr Newton during the last three years include:

• chairman of Capricorn Village Joint Venture, WA;

• chairman and director of Selpam (Australia) Pty Limited and a director of various companies wholly owned by Selpam (Australia) Pty Limited; and

• director of Bonsey Jaden Pte Ltd, a digital advertising agency.

David Seargeant (resigned 30 June 2017)

Managing Director, Board member since 2001 and appointed Managing Director in January 2002.

Experience

Managing Director with 40-plus years experience in the hospitality and leisure industries. Former managing director of the Rydges Hotels group (1988 – 2002) and the Greater Union group (2000 – 2002).

Directorships

Mr Seargeant is also chairman of the National Association of Cinema Operators, deputy chair of Tourism Accommodation Australia and a director of Tourism Training Australia.

Explanation of abbreviations and degrees: AFRACMA Associate Fellow of The Royal Australasian College of Medical Administrators; AO Officer in the Order of Australia; BBus (Marketing) Bachelor of Business (Marketing ); BComm Bachelor of Commerce ; BEc Bachelor of Economics ; CA Member of Chartered Accountants Australia and New Zealand; FAICD Fellow of the Australian Institute of Company Directors; FAIM Fellow of the Australian Institute of Management; GAICD Graduate Member of the Australian Institute of Company Directors; and MB BS Bachelor of Medicine and Bachelor of Surgery.

COMPANY SECRETARIES

GC Dean CA, ACIS was appointed to the position of Company Secretary for EVENT Hospitality & Entertainment Limited in December 2002. GC Dean was Accounting Manager for the Company (2001 – 2002) and was previously employed by an international mining corporation and a regional accounting practice. GC Dean is a Chartered Accountant and a member of the Governance Institute of Australia.

DI Stone FCA, ACIS was appointed to the position of Company Secretary for EVENT Hospitality & Entertainment Limited in February 2012. Prior to this appointment, DI Stone was an audit senior manager at KPMG. DI Stone is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Governance Institute of Australia.

CORPORATE GOVERNANCE

The Board endorses the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, 3rd Edition. The Group has disclosed its 2017 Corporate Governance Statement in the Corporate Governance section on the EVENT website (https://www.evt.com/investors/). As required, the Group has also lodged the 2017 Corporate Governance Statement and Appendix 4G with the ASX.

4 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

DIRECTORS’ MEETINGS

The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of the Company during the year are set out below:

			Audit	and Risk	Nomination and	Nomination and
	Directors’		Committee		Remuneration
	**meetings **		**meetings **		Committee	**meetings **
	Entitled		Entitled		Entitled
	to attend	Attended	to attend	Attended	to attend	Attended
AG Rydge	10	10	4	4	4	4
KG Chapman	10	10	–	–	–	–
PR Coates	10	10	–	–	–	–
VA Davies	10	9	–	–	–	–
DC Grant	10	10	4	4	4	4
PM Mann	10	10	4	4	4	4
RG Newton	10	10	–	–	–	–
DC Seargeant(a)	10	10	4	4	3	3

(a) DC Seargeant attended Audit and Risk Committee and certain Nomination and Remuneration Committee meetings by invitation. Other directors who are not members of a committee may attend meetings by invitation from time to time.

During the year, directors also visited various sites to improve their understanding of the Group’s locations and operations.

PRINCIPAL ACTIVITIES

The principal activities of the Group during the course of the year include the following:

• cinema exhibition operations in Australia, including technology equipment supply and servicing, and the State Theatre;

• cinema exhibition operations in New Zealand and Fiji;

• cinema exhibition operations in Germany;

• ownership, operation and management of hotels and resorts in Australia and overseas;

• operation of the Thredbo resort including property development activities; and

• property development, investment properties, and investment in shares in listed and unlisted companies.

There were no significant changes in the nature of the activities of the Group during the year.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the year.

OPERATING AND FINANCIAL REVIEW

Overview of the Group

Net profit after tax was $110,819,000 (2016: $130,248,000), a decrease of $19,429,000 or 14.9% below the prior year result. The normalised result before interest and income tax expense was $169,932,000 (2016: $185,945,000), a decrease of $16,013,000 or 8.6% and the normalised result after tax was $113,684,000 (2016: $125,980,000), a decrease of $12,296,000 or 9.8% below the prior year result.

The individually significant items for the year are set out on page 7. The individually significant items were a net expense item after tax of $2,865,000 (2016: net income item after tax of $4,268,000).

5 EVENT Hospitality & Entertainment Limited – Annual Report 2017

2017 2016 2015 Normalised result Reconciliation to reported net profit Normalised result Reconciliation to reported net profit Normalised result *Reconciliation to reported net profit $’000 $’000 $’000 $’000 $’000 $’000 Entertainment Australia 78,957 78,957 88,515 88,515 78,576 78,576 New Zealand 10,787 10,787 10,508 10,508 8,264 8,264 Germany 22,246 22,246 36,042 36,042 25,126 25,126 Hospitality and Leisure Hotels and Resorts 52,734 52,734 51,597 51,597 41,400 41,400 Thredbo Alpine Resort 18,187 18,187 15,007 15,007 13,410 13,410 Property and Other Investments 9,343 9,343 5,584 5,584 7,440 7,440 Unallocated revenues and expenses (22,322) (22,322) (21,308) (21,308) (15,242) (15,242) 169,932 169,932 185,945 185,945 158,974 158,974 Finance revenue 807 807 915 915 1,290 1,290 Finance costs (9,802) (9,802) (8,946) (8,946) (7,897) (7,897) 160,937 160,937 177,914 177,914 152,367 152,367 Income tax expense (47,253) (47,253) (51,934) (51,934) (43,067) (43,067) 113,684 113,684 125,980 125,980 109,300 109,300 Individually significant items – net of tax (2,865) 4,268 (410) Profit for the year 110,819 130,248 108,890 * Normalised result is profit for the year before individually significant items (as outlined in Note 2.3 to the financial statements and in the table below). As outlined in Note 2.2 to the financial statements, this measure is used by the Group’s CEO to allocate resources and in assessing the relative performance of the Group’s operations. The normalised result is an unaudited non-International Financial Reporting Standards measure.

6 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Overview of the Group (continued)

An analysis of the last five years is outlined below:

Overview of the Group (continued) An analysis of the last five years is outlined below:
	2017 2016 2015 2014 2013
Total revenue and other income ($’000) Basic earnings per share (cents) Dividends declared(a)($’000) Dividends per share (cents) Special dividend per share (cents)	1,294,269 1,280,889 1,174,662 1,097,138 1,039,535 69.6 82.2 68.9 49.7 54.3 81,886 81,886 85,097 67,435 67,435 51 51 45 42 42 – – 8 – –

(a) Includes the interim dividend paid and the final and special dividends declared in relation to the financial year ended 30 June.

Individually significant items comprised the following:

Individually significant items comprised the following:
	2017 $’000 2016 $’000
Profit on sale of apartments Profit on sale of an interest in a cinema circuit in Fiji Write-back of expired voucher stock Net proceeds from insurance Pre-opening expenses relating to the launch and opening of hotels Managing Director retirement and transition costs Impairments or disposal of land, buildings and plant and equipment Profit on sale of Mosman cinema site Reversal of impairment charges booked in previous years Total individually significant items before income tax benefit/(expense) Income tax benefit/(expense) relating to individually significant items Total individually significant items after income tax benefit/(expense)	2,105  3,729  5,184  5,457  (3,579)  (5,526)  (10,986) (13,415)  19,615  1,712
	(3,616) 7,912 751 (3,644)
	(2,865) 4,268

Investments

The Group acquired property, plant and equipment totalling $281,325,000 during the year. The significant acquisitions and capital additions include the following:

• the acquisition of the properties located at 458  472 George Street, Sydney for $116 million;

• the QT Melbourne, QT Queenstown and Atura Adelaide Airport hotel developments;

• the redevelopment of QT Museum Wellington;

• the acquisition of Rydges Geelong;

• cinema developments at Smithfield (QLD), Palmerston (NT) and Whitford (WA); and

• refurbishment requirements for the cinemas, hotels and resorts.

Property

The Group’s interest in land and buildings and integral plant and equipment, including long term leasehold land and improvements, is independently valued by registered qualified valuers on a progressive three year cycle. The total value of the Group’s interest in land and buildings, excluding investment properties, based on independent valuations is $1,515,612,000 (refer to Note 3.3 to the financial statements) whilst the total written-down book value of these land and buildings including integral plant and equipment at 30 June 2017 was $1,044,822,000. The total value of the investment properties at 30 June 2017 was $68,250,000.

Capital structure

Cash and term deposits at 30 June 2017 totalled $92,318,000 and total bank debt outstanding was $323,905,000.

7 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Treasury policy

The Group manages interest rate risk in accordance with a Board approved policy covering the types of instruments, range of protection and duration of instruments. The financial instruments cover interest rate swaps and forward rate agreements. Maturities of these instruments are up to a maximum of five years. Interest rate swaps and forward rate agreements allow the Group to raise long term borrowings at floating rates and swap a portion of those borrowings into fixed rates.

The approved range of interest rate cover is based on the projected debt levels for each currency and reduced for each future year. At 30 June 2017, the Group had no interest rate hedges (2016: no interest rate hedges) due to the low level of Group debt.

Liquidity and funding

As at 30 June 2017, the Group’s secured bank debt facilities comprised the following:

• $350,000,000 revolving multi-currency loan facility;

• $30,000,000 credit support facility (for the issue of letters of credit and bank guarantees); and

• $50,000 overdraft limit to support its transactional banking facilities.

The above facilities were to mature on 12 September 2017 and were supported by interlocking guarantees from most Group entities and were secured by specific property mortgages (refer to Note 3.3 to the financial statements).

Subsequent to 30 June 2017, the Group’s secured bank debt facilities were amended and restated on 15 August 2017 and now comprise the following:

• $525,000,000 revolving multi-currency loan facility; and

• $15,000,000 credit support facility (for the issue of letters of credit and bank guarantees).

The above facilities mature on 15 August 2020 and are supported by interlocking guarantees from most Group entities and are secured by specific property mortgages. Debt drawn under these facilities bears interest at the relevant inter-bank benchmark reference rate plus a margin of between 1.15% and 2.1% per annum.

Cash flows from operations

Net operating cash inflows decreased to $188,681,000 from $212,470,000 recorded in the prior comparable year. This decrease was driven by a decrease in operating cash flow from the Group’s major operating businesses together with an increase in income tax paid.

Impact of legislation and other external requirements

There were no changes in environmental or other legislative requirements during the year that have significantly impacted the results of operations of the Group.

REVIEW OF OPERATIONS BY DIVISION ENTERTAINMENT

Entertainment – Australia

REVIEW OF OPERATIONS BY DIVISION ENTERTAINMENT Entertainment – Australia
As at 30 June	2017 2016 Movement
Cinema locations * Cinema screens *	73 72 1 674 668 6

• Managed and joint venture cinema sites (excludes Moonlight Cinema sites and screens).

The normalised profit before interest and income tax expense was $78,957,000, a decrease of $9,558,000 or 10.8% below the prior comparable year.

The normalised profit for the year was impacted by a number of factors including:

• the cessation of the Virtual Print Fee arrangement which concluded during the year ended 30 June 2016;

• the impact of a loyalty provision write-back which favourably impacted the prior comparable year;

• the impact of the reopening of Hoyts Chadstone on the Melbourne market in Victoria; and

• a less favourable mix of film product when compared to the prior comparable year.

The top four titles at the Australian Box Office during the year were: Rogue One: A Star Wars Story ($51.2 million); Beauty and the Beast ($47.7 million); Suicide Squad ($34.2 million); and Guardians of the Galaxy Vol. 2 ($32.7 million). These four titles collectively grossed $165.7 million; however, on a comparative basis the top four grossing titles from the prior year grossed $206.3 million and included: Star Wars: The Force Awakens ($93.7 million); Deadpool ($43.2 million); Spectre ($35.7 million); and Captain America: Civil War ($33.7 million).

8 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

There was pleasing growth in the Group’s Gold Class offering, with an increase in admissions of 9%. Overall merchandising revenue increased 4%, with merchandising revenue spend per admission 3.3% ahead of the prior year, whilst the cost of goods sold for the year reduced to 17.7% from 18.3% in the prior comparable year.

Other revenue, including online booking fee income, sponsorship revenue and screen advertising, increased by 7% over the prior comparable year.

The Group continued to pursue increased market share and visitation loyalty through the Cinebuzz loyalty program and there were 1,546,000 active members at 30 June 2017.

The new GU Film House Adelaide located in Hindley Street opened in September 2016. In addition, the 12 screen BCC Cinema at Maroochydore was fully refurbished during the year. The Group has a further three cinema developments (totalling 20 screens) scheduled to open in the second half of the 2017 calendar year, including new Event Cinemas in Smithfield (Cairns) which will include one Vmax and five traditional screens, Palmerston (Darwin) which will include two Vmax and four traditional screens and Whitford (Perth) which will include two Gold Class, two Vmax and four traditional screens.

Entertainment – New Zealand

Entertainment – New Zealand
As at 30 June	2017 2016 Movement
Cinema locations * Cinema screens *	18 19 (1) 124 132 (8)

• Managed and joint venture cinema sites.

The normalised profit before interest and income tax expense was $10,787,000, an increase of $279,000 or 2.7% above the prior comparable year.

Total New Zealand Box Office increased by 1.5% over the previous financial year. The Group’s Box Office revenues were marginally above the prior year. The five highest-grossing titles within the New Zealand market included: Rogue One: A Star Wars Story (NZ$7.4 million); Moana (NZ$7.3 million); Beauty and the Beast (NZ$ 6.5 million); Guardians of the Galaxy Vol. 2 (NZ$5.4 million); and Suicide Squad (NZ$5.3 million). These five titles achieved a combined total of NZ$31.6 million compared to the top five titles in the prior year which collectively grossed NZ$42.2 million.

Similar to the Australian circuit, the Group’s New Zealand circuit experienced a decline in average admission price driven by a reduced percentage of 3D admissions and pricing initiatives implemented to combat increased competition specifically within the Auckland market. Conversely, merchandising spend per admission increased by 3.7%, driven by an ongoing focus on merchandising sales and a number of successful candy bar combo promotions.

The New Zealand circuit continues to pursue market share through the Cinebuzz loyalty program and there were 242,000 active members in New Zealand at 30 June 2017.

The Group acquired the Downtown Cinemas circuit on 28 July 2016 for NZ$7.65 million and the circuit contributed a total of NZ$7,148,000 in Box Office revenue and NZ$663,000 in earnings for the year. The circuit includes a total of 15 screens across three cinemas located at Palmerston North, Havelock North and Paraparaumu, all located in the southern region of New Zealand’s North Island.

The Group’s nine-screen Queensgate cinema complex in Wellington sustained damage from the earthquake in November 2016. As a result of the damage, the cinema complex was closed and has been demolished. It is expected that the complex will be rebuilt and the Group has appropriate insurance arrangements in place to cover the damage to property and the loss of profits from business interruption (for a two year period). The Group has recognised a receivable at 30 June 2017 for the insurance proceeds expected to be received in relation to property damage at the complex, and the net insurance amount has been excluded from the segment result and disclosed as an individually significant item in the 2017 Annual Report.

The Group disposed of its two-thirds interest in the Fiji Cinema Joint Venture on 29 June 2017. Profit on disposal of $3,729,000 has also been reported as an individually significant item. The normalised segment result includes the Group’s share of earnings from the Fiji Cinema Joint Venture of $742,000.

9 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Entertainment – Germany

Entertainment – Germany
As at 30 June	2017 2016 Movement
Cinema locations * Cinema screens *	52 53 (1) 409 411 (2)

• Managed and joint venture cinema sites.

The normalised profit before interest and income tax expense was $22,246,000, a decrease of $13,796,000 or 38.3% below the prior comparable year.

The result was impacted by a 4.0% fall in the total German market admissions which was predominately due to the release disruption caused by the staging of the European Championships (held in June and July 2016) and the outstanding admission result that was achieved in the prior comparable year. The top five titles at the German Box Office during the year were: Rogue One: A Star Wars Story (3.9 million admissions); Finding Dory (3.8 million admissions); The Secret Life of Pets (3.8 million admissions); Beauty and the Beast (3.4 million admissions); and Fantastic Beasts and Where to Find Them (3.3 million admissions). These five films achieved a combined total of 18.2 million admissions compared to the top five films of the prior comparable year which collectively achieved 30.6 million admissions.

Merchandising profit per admission increased by 5.6%, whilst screen advertising revenues declined by 5.4%, reflecting the softening of content appeal comparative to the prior comparable year. German-produced films represented a 12.4% share of the German Box Office compared to 16.8% achieved in the prior comparable year.

Similar to the Australian and New Zealand circuits, the Group has a loyalty program in place for the German cinema operations and the current membership base totals 1,046,000 members.

The number of locations has been consistent over the last few years; however, the two-screen Mainz Residence site was closed in January 2017. Three new leasehold sites are currently under development and are expected to open during the 2018 year. In addition, during the year the Group acquired a freehold retail property at Neumünster at a total acquisition price of €7.1 million (A$10.3 million). The site includes a seven-screen cinema that will transfer to the Group’s control in October 2017.

A write-back of expired voucher stock totalling $5,184,000 was recognised during the year. This has been reported as an individually significant item and excluded from the normalised result.

HOSPITALITY AND LEISURE Hotels and Resorts

HOSPITALITY AND LEISURE Hotels and Resorts
As at 30 June	2017 2016 Movement
Locations * Rooms *	58 55 3 9,132 8,871 261

• Owned and managed hotels.

The normalised profit before interest and income tax expense was $52,734,000, an increase of $1,137,000 or 2.2% above the prior comparable year. The first half result was impacted primarily by redevelopments being undertaken of the Group’s Queenstown (due to open December 2017) and QT Museum Wellington hotels. The second half result was $28,188,000, an increase of 25% on the prior comparable half year period, reflecting favourable demand levels across key locations and market segments.

Occupancy in the Group’s owned hotels (all brands) decreased by half a percentage point to 76.5%, principally due to the factors which affected the first half result. The average room rate increased by 6.5% to $179, resulting in an increase in revenue per room (“revpar”) of 5.7%.

Occupancy in the Group’s owned Rydges hotels decreased by a percentage point to 78.0%, whilst the average room rate increased by 3.6% to $159, resulting in an increase in revpar of 2.5%. The result was materially impacted by the closure of part of Rydges Queenstown for the development of QT Queenstown and, excluding Queenstown, the Rydges properties experienced strong year-on-year growth.

10 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Favourable demand levels prevailed across most key locations and market segments, particularly in Cairns, Sydney and Melbourne, whilst Gladstone and Townsville continued to experience more challenging trading conditions.

The Group’s managed hotels generally performed well. The Rydges hotels at Sydney Airport, World Square, Sydney Central and South Bank Brisbane continued to deliver strong performance, as did the hotels in New Zealand.

Occupancy in the Group’s QT hotels was consistent with the prior comparable year at 76.3%, whilst the average room rate increased by 7.3% to $222, resulting in an increase in revpar of 7.1%. The QT result included a positive contribution from QT Melbourne, which opened in September 2016 and is performing ahead of expectations. Pre-opening costs relating to the initial launch of the hotel have been excluded from the segment result and disclosed as an individually significant item.

QT Sydney and QT Canberra both performed well and generated a material improvement in earnings over the prior comparable year. QT Gold Coast experienced more challenging trading conditions due principally to a softening in food and beverage revenues. QT Wellington’s underlying performance remained strong; however, the property was negatively impacted by refurbishment works, and the November 2016 earthquake.

Occupancy in the Group’s Atura hotels was consistent with the prior comparable year at 70.1%, whilst the average room rate increased by 3.3% to $139, resulting in an increase in revpar of 2.6%. Construction of the new 165-room Atura hotel at Adelaide Airport is underway.

In March 2017, the Group acquired the former Mercure hotel in Geelong for $24.2 million. This property has since been rebranded as Rydges Geelong. The Group also acquired a 39-hectare property in the Hunter Valley, known as Loggerheads, for $6 million in January 2017.

Thredbo Alpine Resort

The normalised profit before interest and income tax expense was $18,187,000, an increase of $3,180,000 or 21.2% above the prior comparable year.

The increase in normalised profit reflects an outstanding result from the 2016 snow season, which despite a late start was able to achieve a 5.9% increase in skier visitations. The increased visitation together with the growth in the average ticket price resulted in an increase in lift pass revenue of 13% for the 2016 season, whilst Snow Sports (ski school) also achieved good revenue growth of 15.5% and food and beverage revenue increased by 11.9%. The prior year acquisition of Kareela Hutte (an on-mountain food outlet) also contributed to the uplift in food and beverage revenues.

The Group has recently completed an additional mountain bike trail and associated revenues from that activity have increased by 48% compared to the prior comparable year to $1,613,000.

PROPERTY AND OTHER INVESTMENTS

The normalised profit before interest and income tax expense was $9,343,000, an increase of $3,759,000 or 67.3% above the prior comparable year. The improved result was primarily driven by the following:

• improved earnings from the Edge serviced offices at 478 George Street (completed in October 2015) and Double Bay (completed in August 2015); and

• rental income from the Flight Centre tenancy at 478 George Street which commenced in July 2016.

In May 2017, the Group completed the acquisition of two properties located at 458-472 George Street, Sydney, adjacent to EVENT’s existing QT Sydney, State Theatre and 478 George Street properties for a purchase price of $116 million. The buildings are currently leased to several retail and commercial tenants. The acquisition increased the Group’s contiguous footprint of Sydney’s central business district to approximately 4,700m[2] including an 88-metre frontage on a prime section of George Street that is currently being converted to a pedestrian zone as part of the light rail development.

Profit totalling $2,105,000 on the sale of 23 residential apartments at QT Melbourne has been excluded from the normalised result and reported as an individually significant item.

UNALLOCATED REVENUES AND EXPENSES

The unallocated revenues and expenses include the Group’s corporate functions and various head office expenses. The increase in the net expense predominately reflects a full year of additional depreciation and other costs relating to the Group’s head office (completed in quarter 2 of the 2016 financial year). Costs associated with the departure of the Group’s Managing Director, David Seargeant, have been excluded from the normalised result and disclosed as an individually significant item.

11 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

BUSINESS STRATEGIES AND PROSPECTS FOR FUTURE FINANCIAL YEARS

The Group’s strategic plan, which includes future expansion, will depend on industry, economic and political conditions, the potential impact of global events, the future financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive opportunities. It is likely that the Group’s strategies will continue to evolve and change in response to these and other factors, and there can be no absolute assurance that these current strategies, as detailed below, will be achieved.

ENTERTAINMENT

The strategic plans for Entertainment are applicable to the Australian, New Zealand and German cinema businesses.

Cinema Exhibition

Whilst the Group has no control over the general audience appeal of available films, providing consumers with a demonstrably superior experience in the cinema to that which can be achieved in the home is a central strategic platform. To provide this enhanced cinema experience, the Group will pursue the following strategies:

• continued refurbishment of existing cinemas and expansion of the number of cinemas with the Event Cinemas brand in Australia and New Zealand;

• expansion of the Gold Class cinema concept to certain cinema locations within the Australian circuit;

• expansion of the Vmax cinema concept which provides the ultimate big screen cinema experience through larger screens and seats than a traditional auditorium;

• continued improvement of food and beverage outlets within the cinemas to maximise food and beverage revenue opportunities; and

• enhanced customer communication and technology for greater efficiency.

Industry developments

The Group believes that there are certain current issues pertaining to the industry that have the capacity to impact the strategic plans and future direction of the cinema operations. The Group will continue to monitor developments in relation to the following issues:

• alternative film delivery methods and the rise in popularity of other forms of entertainment (including over-the-top (“OTT”) internet content, video on demand (“VOD”), DVD ownership and home entertainment systems);

• shortening of the release window of film to other formats such as OTT, VOD and DVD;

• increase in unauthorised recording (piracy) of audio and visual recordings for commercial sale and distribution via the internet; and

• pricing and product competition.

Entertainment Technology

The Group will continue to build knowledge in relation to evolving cinema systems, including immersive audio systems. The Group is focusing on restructuring business processes to reduce the level of operating costs of the existing business and ensuring the appropriate structures are in place for the digital platform. The Group is assessing potential income streams from digital content delivery platforms, including alternate content distribution.

HOSPITALITY AND LEISURE

Rydges Hotels and Resorts

The Group will continue to provide hotel guests with quality 4 star accommodation that consistently delivers a product and service that meets or exceeds guest expectations. To provide this, the Group will continue to pursue the following strategies:

• constant focus on effective recruitment and training practices to ensure talented and dynamic people are attracted to work in the Group’s hotels and resorts;

• maintenance of all hotels at an appropriate standard and when required, rejuvenation of key areas of hotels to ensure the Group’s reputation continues to be enhanced;

• specific focus on creating standout food and beverage experiences that build incremental spend and enhance each hotel’s reputation; and

• maintenance of a leadership position in the online distribution and booking capabilities for guests. The Priority Guest Rewards program and the sales and revenue structure are important support functions for the online strategy.

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DIRECTORS’ REPORT

QT Hotels and Resorts

QT Hotels and Resorts operates in the 4.5 star design hotel segment which presents opportunities for an increased level of average room rate, with the level of operating costs not significantly greater than those for the 4 star segment of the Rydges brand. The segment requires an innovative approach to the operation of the hotel restaurant and bar, and again these operate at a higher margin level.

The flagship QT Sydney opened in 2012 and has set new standards of style and vibrancy within the Australian hotel market and has received many local and international awards and accolades. QT Melbourne opened in September 2016. The Group currently has a total of eight QT properties comprising QT Sydney, QT Melbourne, QT Canberra, QT Bondi, QT Museum Wellington and the QT resorts at Gold Coast, Port Douglas and Falls Creek. In addition, QT Queenstown is expected to open in late 2017, work has commenced on the new QT Perth and the Group has entered into a management agreement for QT Parramatta.

Atura Hotels

Atura Hotels operates in the 3.5 star design hotel segment which presents opportunities for a lower level of operating costs, whilst at the same time delivering hotel guests with quality and service. Atura offers an experience and amenities currently unavailable in the mid-level market including state-of-the-art technology and free WiFi.

The Group currently has a total of three Atura Hotels, comprising Atura Blacktown which opened in 2013, Atura Albury was converted in 2015, and Atura Dandenong which was acquired in 2014. In addition, the Group has finalised an agreement for the development of a new 165-room Atura hotel at Adelaide Airport, which is expected to open in late 2018. The Group is seeking to identify other potential Atura hotel sites whether through redevelopment of existing hotels or freehold acquisitions.

Increasing the number of hotel rooms

The Group will continue to seek opportunities for future growth through gaining of new hotel management agreements and freehold acquisitions.

Maximising returns from existing locations

The Group anticipates achieving continuing improvements in results through growth in market share and initiatives that drive increased spend and capture rates in all hotels.

THREDBO ALPINE RESORT

Premier holiday destination

The key strategy for the Thredbo Alpine Resort is to maintain the facility as one of the premier Australian holiday destinations.

• This strategy includes:

• continuing to ensure the popularity, high quality and ambience of the winter-time resort facility;

• continuing to improve snow making capability to mitigate risk in poor snow seasons;

• increasing the number and quality of sporting and cultural events to increase visitation outside of the snow season;

• expanding the mountain bike trail network to appeal to a broader range of riders; and

• ensuring that the environmental integrity of the Resort is maintained and, where possible, improved.

Maximising returns from existing facility

The Group anticipates that the Resort will achieve growth through shoulder periods, summer revenue and cost improvements, increased visitation and increased occupancy rates.

13 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

DIVIDENDS

Dividends paid or declared by the Company since the end of the previous year were:

	Per share Cents	Total amount $’000 Date ofpayment Tax rate for franking credit
Declared and paid during the year Final 2016 dividend Interim 2017 dividend Declared after the end of the year Final 2017 dividend
	31	49,774 22 September 2016 30%
	20	32,112 16 March 2017 30%
		81,886
	31	49,774 21 September 2017 30%

All the dividends paid or declared by the Company since the end of the previous year were 100% franked.

REMUNERATION REPORT

The Remuneration Report, which forms part of the Directors’ Report, is set out on pages 17 to 30 and has been audited as required by section 308(3C) of the Corporations Act 2001 .

EVENTS SUBSEQUENT TO REPORTING DATE

The Group’s secured bank debt facilities were amended and restated on 15 August 2017. Details of the new facilities are set out in Note 4.4 to the financial statements. Other than the above, there has not arisen in the interval between the end of the year and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future years.

LIKELY DEVELOPMENTS

Likely developments in the operations of the Group are referred to in the Review of Operations by Division, set out within this report.

DIRECTORS’ INTERESTS

The relevant interest of each director of the Company in share capital of the Company, as notified by the directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001, at the date of this report is as follows:

		Ordinary shares held
		by companies in which
	Ordinary shares held	a director has a	Performance shares	Performance rights
Director	directly	beneficial interest(a)	held directly	held directly
AG Rydge	3,824,163	68,948,033		
KG Chapman	3,000	54,000		
PR Coates		46,960		
VA Davies		14,000		
DC Grant	5,000			
JM Hastings				30,303
PM Mann		6,000		
RG Newton		66,000		

(a) Relevant interest under the Corporations Act 2001 differs from the disclosure required under Australian Accounting Standards as presented in the Remuneration Report.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company’s constitution provides an indemnity to each person, including AG Rydge, KG Chapman, PR Coates, VA Davies, DC Grant, JM Hastings, PM Mann and RG Newton, who is or who has been a director or alternate director of the Company or of any related body corporate of the Company. The indemnity also extends to such other officers or former officers, including executive officers or former executive officers, of the Company and of any related body corporate of the Company as the directors of the Company determine.

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DIRECTORS’ REPORT

In terms of the indemnity, the Company will indemnify the directors and other officers of the Company acting as such, to the full extent permitted by law, against any liability to another person (other than the Company or a related body corporate) incurred in acting as a director or officer of the Company, unless the liability arises out of conduct involving a lack of good faith. The indemnity includes any liability for costs and expenses incurred by such person in defending any proceedings, whether civil or criminal, in which judgement is given in that person’s favour, or in which the person is acquitted and in making an application in relation to any proceedings in which the court grants relief to the person under the law.

The Company has provided directors’ and officers’ liability insurance policies that cover all the directors and officers of the Company and its controlled entities. The terms of the policies prohibit disclosure of details of the amount of the insurance cover, its nature and the premium paid.

OFFICERS WHO WERE PREVIOUSLY PARTNERS OF THE AUDIT FIRM

Mrs PM Mann was previously a partner of the current audit firm, KPMG, at a time when KPMG undertook an audit of the Group.

AUDITOR INDEPENDENCE

The lead auditor’s independence declaration is set out on page 31 and forms part of the Directors’ Report for the year ended 30 June 2017.

NON-AUDIT SERVICES PROVIDED BY KPMG

During the year, KPMG, the Group’s auditor, performed certain other services in addition to their statutory duties.

The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit and Risk Committee is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and

• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 has been included in this Directors’ Report.

Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services provided during the year are set out in Note 7.4 to the financial statements.

ROUNDING OFF

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

Signed in accordance with a resolution of the directors:

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AG Rydge Director

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JM Hastings Director

Dated at Sydney this 24[th] day of August 2017.

15 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

MESSAGE FROM THE CHAIRMAN REGARDING THE REMUNERATION REPORT

Dear Shareholder,

On behalf of the Board, I am pleased to introduce the EVENT Hospitality & Entertainment Limited 2017 Remuneration Report. During the 2017 year, the Group’s long-serving Managing Director, David Seargeant, decided to step down after more than 29 years with the Group, having made an extraordinary contribution to the growth of the Group. The Remuneration Report reflects this CEO transition period, and I highlight below a number of important matters which shareholders should be aware of.

Remuneration of the former Managing Director

Mr Seargeant held the position of Managing Director for the full financial year to 30 June 2017. Under the terms of his employment agreement, after his departure Mr Seargeant was entitled to a separation payment of one year’s fixed remuneration, equal to $2,020,000. This amount was adjusted to ensure compliance with the Corporations Act termination benefits cap and the Remuneration Report includes the adjusted separation payment of $1,959,618.

The short term incentive (“STI”) amount disclosed for Mr Seargeant in the Remuneration Report includes an STI in respect of the year ended 30 June 2016 of $1,970,000 that was paid in September 2016, representing 100% of the total potential STI for the year. This reflects the outstanding performance for that year, and the full achievement by Mr Seargeant of the STI targets set by the Board.

Mr Seargeant’s STI for the year ended 30 June 2017 will be $1,010,000, representing 50% achievement of hurdles for that year and approved by the Board on 24 August 2017 for payment in September 2017. The remaining 50% will be forfeited. As the payment will be made in September 2017, it would not normally be reported until next year’s remuneration report; however, the Company has elected to disclose it early given Mr Seargeant’s departure.

Under the terms of the Executive Performance Rights Plan, unvested performance rights held by Mr Seargeant will remain on-foot and will vest or lapse in accordance with the terms on which they were offered. In these circumstances, accounting standards require the recognition of an accelerated share-based payment expense and this charge, totalling $1,911,486, has been included in the performance rights charge disclosed for Mr Seargeant in the remuneration table on page 24. This does not necessarily reflect the value (if any) that Mr Seargeant will receive from these unvested performance rights, because this will depend on whether the hurdles are achieved and, if they are, the share price at the date of vesting.

Remuneration arrangements for the new CEO

Jane Hastings was appointed as the Group’s new CEO with effect from 1 July 2017 following an extensive search process undertaken by the Board, with assistance from the specialist executive search firm, Hattonneale.

Ms Hastings’ fixed and variable components are below those of the long-serving outgoing Managing Director.

As disclosed on page 22, the Board obtained advice from remuneration consultants regarding Ms Hastings’ remuneration arrangements. In approving these arrangements, the Board, with assistance from the remuneration consultants, considered the market capitalisation of the Company and the size, diversity and complexity of the Group’s operations. By market capitalisation, the Company is within the top 150 companies in the All Ordinaries index. Ms Hastings’ remuneration arrangements have been set in this context. Ms Hastings’ remuneration arrangements were previously disclosed to the ASX and have been summarised on page 21.

Review of incentive arrangements

An external review of the Group’s incentive arrangements will be conducted during the year ending 30 June 2018. This review will include consideration of the current structure and long term incentive hurdles to ensure that they remain appropriate for the Group and consistent with current market practice.

The Remuneration Report provides further details regarding the above matters as well as important material on remuneration strategy, structure and outcomes. The Board commends the Remuneration Report to you.

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AG Rydge Chairman

16 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

REMUNERATION REPORT – AUDITED

This report outlines the remuneration arrangements in place for the Group’s key management personnel (“KMP”) as defined in AASB 124 Related Party Disclosures including non-executive directors, the Managing Director and CEO, and other senior executives who have authority for planning, directing and controlling the activities of the Group. The KMP for the financial year are set out on page 23.

Remuneration philosophy

The Nomination and Remuneration Committee is responsible for making recommendations to the Board on remuneration policy and packages applicable to the Board members and senior executives. The objective of the remuneration policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities, and that remuneration is competitive in attracting, motivating and retaining people of the appropriate quality.

Remuneration levels are competitively set to attract appropriately qualified and experienced directors and executives. The Nomination and Remuneration Committee obtains independent advice on the level of remuneration packages. The remuneration packages of the CEO and senior executives include an at-risk component that is linked to the overall financial and operational performance of the Group and based on the achievement of specific goals of the Group. Executives participate in the Group’s Executive Performance Rights Plan. The long term benefits of the Executive Performance Rights Plan are conditional upon the Group achieving certain performance criteria, details of which are outlined below.

Further details in relation to the Group’s share plans are provided in Note 6.1 to the financial statements.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director remuneration is separate and distinct from senior executive remuneration.

Non-executive director remuneration

Objective

The Group’s remuneration policy for non-executive directors aims to ensure that the Group can attract, retain and appropriately remunerate suitably skilled, experienced and committed individuals to serve on the Board and its committees.

Structure

The constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 22 October 2010 when shareholders approved a maximum aggregate remuneration of $1,500,000 per year. Non-executive directors do not receive any performance related remuneration nor are they issued shares or performance rights.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned among directors are reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Each director receives a fee for being a director of the Company. A committee fee is also paid for being a member of the Audit and Risk Committee and the Nomination and Remuneration Committee. The payment of the committee fee recognises the additional time commitment required by directors who serve on those committees. Other Board committees may be appointed from time to time to deal with issues associated with the conduct of the Group’s various activities, and directors serving on such committees may receive an additional fee in recognition of this additional commitment.

The Board has approved non-executive director fees for the year ending 30 June 2018 as follows:

	2018 $ 2017 $
Chairman (including the Committee fee) Other non-executive directors Base fee Committee fee Additional fee for the Chairman of the Board committees	321,000 313,000 131,000 128,000 21,000 20,000 18,000 18,000

17 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Structure (continued)

The remuneration of non-executive directors for the year ended 30 June 2017 is detailed on page 24.

Directors’ fees cover all main Board activities. Non-executive directors are also entitled to be reimbursed for all reasonable business related expenses, including travel, as may be incurred in the discharge of their duties.

CEO and other executive remuneration

Objective

The Group’s remuneration policy aims to reward the CEO and other executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group, and to:

• reward executives for Group, business unit and individual performance against targets set by reference to appropriate benchmarks and key performance indicators (“KPIs”);

• align the interests of executives with those of shareholders;

• link reward with the strategic goals and performance of the Group; and

• ensure total remuneration is competitive by market standards.

Structure

In determining the level and composition of executive remuneration, the Nomination and Remuneration Committee obtains independent advice on the appropriateness of remuneration packages for senior executives, based on remuneration trends in the market, from which recommendations are made to the Board.

It is the Group’s policy that employment contracts are entered into with the CEO and other senior executives. Details of these employment contracts are provided on pages 21  22.

Remuneration consists of both fixed and variable remuneration components. The variable remuneration component includes a short term incentive (“STI”) plan and a long term incentive (“LTI”) plan. The proportion of fixed and variable remuneration (potential short term and long term incentives) is set and approved for each senior executive by the Nomination and Remuneration Committee.

Fixed annual remuneration

Objective

Remuneration levels for executives are reviewed annually to ensure that they are appropriate for the responsibilities, qualifications and experience of each executive and are competitive with the market.

The Nomination and Remuneration Committee establishes and issues an appropriate guideline for the purpose of the annual review of fixed annual remuneration levels. The guideline is based on both current and forecast Consumer Price Index and market conditions. There are no guaranteed fixed remuneration increases in any executives’ contracts.

Structure

Executives have the option to receive their fixed annual remuneration in cash and a limited range of prescribed fringe benefits such as motor vehicles and car parking. Fixed annual remuneration includes superannuation and all prescribed fringe benefits, including fringe benefits tax.

Variable remuneration – STI

Objective

The objective of the STI program is to link the achievement of the operational targets with the remuneration received by the executives charged with meeting those targets. The total potential STI available is set at a level to provide sufficient incentive to the executive to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

Structure

Actual STI payments to each executive are determined based on the extent to which specific operating targets, set at the beginning of the year, are met. The operational targets consist of a number of KPIs covering both financial and non-financial measures of performance. Typically, KPIs and assessment criteria include:

• meeting of pre-determined growth in Group earnings over the prior year;

• meeting of strategic and operational objectives; and

• assessed personal effort and contribution.

The Group has pre-determined benchmarks which must be met in order to trigger payments under the STI. The measures were chosen to directly align the individual’s STI to the KPIs of the Group and to its strategies and performance.

18 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Structure (continued)

On an annual basis, an earnings performance rating for the Group and each division is assessed and approved by the Nomination and Remuneration Committee. The individual performance of each executive is also assessed and rated and the ratings are taken into account when determining the amount, if any, of the STI to be allocated to each executive.

The aggregate of annual STI payments available for executives across the Group is subject to the approval of the Nomination and Remuneration Committee. STI payments are delivered as a cash bonus.

For the CEO and other executive KMP, the general target bonus opportunity range is from 50% to 100% of fixed annual remuneration. The target bonus range for the CEO and other executive KMP is detailed below:

Maximum STI calculated on fixed annual remuneration(a)	Allocated between:
	Group earnings Divisional earnings Special projects Other KPIs
Managing Director and CEO DC Seargeant (b) 100% Other executive KMP NC Arundel 50% GC Dean 50% MR Duff 50% HR Eberstaller 50% JM Hastings 60% BA Sergeant 50%	(c)40% – 15% 45% 16.7% 16.7% – 16.6% 25% – – 25% 16.7% – 6.7% 26.6% 16.7% 16.7% – 16.6% 20% 20% – 20% 15% – – 35%

(a) Fixed annual remuneration is comprised of base salary, superannuation and benefits provided through salary sacrificing arrangements.

(b) The targets set for the Managing Director’s STI relate to the Group’s performance, the management of current property developments and other business growth targets. These targets may include, for example, the identification of new hotel developments that will provide an acceptable return and fit within the Group’s overall strategic objectives, the delivery of property development projects having regard to timing and budget, and the identification, negotiation and delivery of new cinema sites. The Board considers the specific targets to be commercially sensitive and accordingly further details of these targets have not been disclosed.

(c) The STI payment to the Managing Director related to Group earnings is calculated on a sliding scale according to the annual growth in normalised earnings. The maximum incentive will only be achieved if there is growth of 10% or more in the Group’s normalised profit before tax.

Bonuses may be paid above these levels at the discretion of the Nomination and Remuneration Committee and the Board, if it is assessed that an exceptional contribution has been made by an executive. There is no separate profit-share plan.

Variable remuneration – LTI

Objective

The objectives of the LTI plan are to:

• align executive incentives with shareholder interests;

• balance the short term with the long term Group focus; and

• retain high calibre executives by providing an attractive equity-based incentive that builds an ownership of the Group mindset.

Structure

Executives are awarded performance rights which will only vest on the achievement of certain performance hurdles and service conditions. An offer is made under the Executive Performance Rights Plan to executives each financial year and is based on individual performance as assessed by the annual appraisal process. If an executive does not sustain a consistent level of high performance, they will not be nominated for Executive Performance Rights Plan participation. The Nomination and Remuneration Committee reviews details of executives nominated for participation subject to final Board approval. In accordance with the ASX Listing Rules, approval from shareholders is obtained before participation in the Executive Performance Rights Plan commences for the CEO.

Only executives who are able to directly influence the long term success of the Group participate in the Executive Performance Rights Plan.

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DIRECTORS’ REPORT

Structure (continued)

Each award of performance rights is divided into equal portions, with each portion being subject to a different performance hurdle. The performance hurdles are based on earnings per share (“EPS”) and total shareholder return (“TSR”) growth of EVENT Hospitality & Entertainment Limited as determined by the Board over a three year period (“Performance Period”). The extent to which the performance hurdles have been met will be assessed by the Board at the expiry of the Performance Period.

Performance rights do not carry the right to vote or to receive dividends during the Performance Period.

The performance hurdles for the awards of performance rights to executives in the financial year ended 30 June 2017 are based on EVENT Hospitality & Entertainment Limited’s EPS and TSR growth over the Performance Period of the three years to 30 June 2019, with performance measured against the year ended 30 June 2016 (being the base year).

The performance hurdles for the awards of performance rights to executives in the financial year ended 30 June 2017 are as follows:

EPS hurdle

The EPS hurdle requires that the Group’s EPS growth for the Performance Period must be greater than the target set by the Board. The EPS hurdle was chosen as it provides evidence of the Group’s growth in earnings. The hurdle is as follows:

• if annual compound EPS growth over the Performance Period is less than 4%, no performance rights will vest with the executive;

• if annual compound EPS growth over the Performance Period is equal to or greater than 4% but less than 6%, the proportion of performance rights vesting will be increased on a pro-rata basis between 50% and 100%; or

• if annual compound EPS growth over the Performance Period is equal to or greater than 6%, all of the performance rights awarded (and attaching to this hurdle) will vest with the executive.

TSR hurdle

The TSR hurdle requires that the Group’s relative TSR performance must be above the median of the Company’s comparator group (“comparator group”). The comparator group is the S&P/ASX 200 (excluding trusts, infrastructure groups and mining companies). TSR is defined as share price growth and dividends paid and reinvested on the ex-dividend date (adjusted for rights, bonus issues and any capital reconstructions) measured from the beginning to the end of the Performance Period.

The TSR performance hurdle was chosen as it is widely recognised as one of the best indicators of shareholder value creation. The comparator group for TSR purposes has been chosen as it represents the group with which the Group competes for shareholders’ capital. The hurdle is as follows:

• if the Company’s TSR ranking relative to the comparator group over the Performance Period is less than the 51[st] percentile, no performance rights will vest;

• if the Company’s TSR ranking relative to the comparator group over the Performance Period is equal to or exceeds the 51[st] percentile but is less than the 75[th] percentile, the proportion of performance rights vesting will be increased on a pro-rata basis between 50% and 100%; or

• if the Company’s TSR ranking relative to the comparator group over the Performance Period is equal to or greater than the 75[th] percentile all of the performance rights awarded will vest.

After the Board has assessed the extent to which the above performance hurdles and criteria have been achieved, executives will be allocated ordinary shares equal to the number of vested performance rights held.

The Board has retained the discretion to vary the performance hurdles and criteria.

Group performance

In considering the Group’s performance and benefits for shareholders’ wealth, the Nomination and Remuneration Committee has regard to the following indices in respect of the current year and the previous four years:

	2017 2016 2015 2014 2013
Net profit before individually significant items and income tax ($)(a) Dividends per share (cents) Special dividend per share (cents) Shareprice atyear end($)

20 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Employment contract for JM Hastings from 1 July 2017

JM Hastings was appointed Managing Director and CEO effective 1 July 2017. A summary of the key terms of Ms Hastings’ new employment agreement is set out in the table below:

Contract term	Ms Hastings’ appointment is ongoing, and there is no fixed term.
Fixed annual remuneration	A remuneration package to the value of $1,300,000 per annum gross, comprising base salary, superannuation and, if applicable, any fringe benefits or additional superannuation contributions.
Incentives	Ms Hastings is eligible to participate in the Group’s incentive arrangements (including short term and long term incentives). Ms Hastings is eligible to receive an annual STI bonus payment of up to 80% of her fixed annual remuneration, subject to the achievement of performance criteria determined by the Board. Ms Hastings is also eligible to participate in the Group’s Long Term Incentive Plan (“LTIP”). The current LTIP is the Performance Rights Plan approved by shareholders at the 2013 Annual General Meeting. Subject to any required or appropriate shareholder approval, Ms Hastings’ allocation of performance rights under the LTIP will be determined based on a face value of 80% of the fixed annual remuneration.
Termination	Either party may terminate the agreement at any time by giving six months’ notice. On termination, the Group may at its discretion make a payment in lieu of all or part of the notice period based on Ms Hastings’ fixed annual remuneration at the time of the notice of termination. Ms Hastings may terminate immediately if there is a fundamental change in her responsibilities or authority without her consent. In that case, Ms Hastings is entitled to a payment equivalent to six months’ fixed annual remuneration. The Group may terminate the agreement immediately in circumstances of misconduct, or if Ms Hastings breaches any material term of the agreement, in which case there is no payment in lieu of notice.
Restraint	The agreement contains non-solicitation and other restraints that apply for a restriction period of up to 12 months. Ms Hastings may receive a restraint payment for some or all of the restriction period, calculated based on her fixed annual remuneration at the termination date.

Employment contracts in respect of KMP for the year ended 30 June 2017

It is the Group’s policy that employment contracts for the CEO and other senior executives are unlimited in term.

The employment contracts typically outline the components of remuneration paid to the CEO and other senior executives but do not prescribe how remuneration levels are to be modified from year to year. Generally, remuneration levels are reviewed each year to take into account Consumer Price Index changes, remuneration trends in the market, any change in the scope of the role performed by the executive and any changes required to meet the principles of the remuneration policy.

21 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Employment contracts in respect of KMP for the year ended 30 June 2017 (continued)

Termination provisions in the employment contracts with other executive KMP are summarised in the table below:

Executive	Termination by the executive	Termination by the Group	Expiry date of contract
NC Arundel GC Dean MR Duff HR Eberstaller	The notice period is one month.	The notice period is one month. On termination, the Group may make a payment in lieu of notice, equal to the notice period. The Group retains the right to terminate the contract immediately under certain conditions. On termination, the executive is entitled to accrued annual and long service benefits. There are no other termination payments. Payment of any LTI (or pro-rata thereof) is subject to the rules in operation at the termination date and at the discretion of the Board.	Not applicable, rolling contracts.
BA Sergeant	The notice period is three months.	The notice period is three months. On termination, the Group may make a payment in lieu of notice, equal to the notice period. The Group retains the right to terminate the contract immediately under certain conditions. On termination, the executive is entitled to accrued annual and long service benefits. There are no other termination payments. Payment of any LTI (or pro-rata thereof) is subject to the rules in operation at the termination date and at the discretion of the Board.

Use of remuneration consultants

During the year, the Nomination and Remuneration Committee employed the services of Godfrey Remuneration Group Pty Limited (“GRG”) to provide updated advice in respect of the remuneration of the role of the Managing Director and CEO. Under the terms of the engagement, GRG provided remuneration recommendations as defined in section 9B of the Corporations Act 2001 and was paid $2,500 for these services.

GRG has confirmed all recommendations have been made free from undue influence by members of the Group’s KMP. The following arrangements were made to ensure that the remuneration recommendations were free from undue influence:

• GRG was engaged by, and reported directly to, the Chairman of the Board. The agreement for the provision of remuneration consulting services was executed by the Chairman on behalf of the Board;

• the report containing the remuneration recommendations was provided by GRG directly to the Chairman; and

• GRG was not required to speak to management in relation to the engagement and did not provide any member of management with a copy of their draft or final report that contained the remuneration recommendations.

As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of the KMP.

22 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Key management personnel

The KMP for the financial year are set out in the table below:

Name	Position	Period of responsibility	Employing company
Non-executive directors
Alan Rydge	Chairman and non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Kenneth Chapman	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Peter Coates	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
	and lead independent director		Entertainment Limited
Valerie Davies	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
David Grant	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Patria Mann	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Richard Newton	Independent non-executive director	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Executive director
David Seargeant	Managing Director and CEO	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Other executive KMP
Norman Arundel(a)	Managing Director Rydges Hotels	1 July 2016 to 29 August 2016	Rydges Hotels Limited
	and Resorts
Gregory Dean	Director Finance & Accounting,	1 July 2016 to 30 June 2017	EVENT Hospitality &
	Company Secretary		Entertainment Limited
Mathew Duff	Director Commercial	1 July 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Hans Eberstaller	Managing Director of Commercial,	1 July 2016 to 30 June 2017	The Greater Union
	UK and Europe		Organisation Pty
			Limited
Jane Hastings(b)	Chief Operating Officer	29 August 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited
Brett Sergeant(c)	Director of Hospitality	15 August 2016 to 30 June 2017	EVENT Hospitality &
			Entertainment Limited

(a) Norman Arundel ceased to be a KMP of the Group effective 29 August 2016.

(b) Jane Hastings was appointed Managing Director and CEO effective 1 July 2017. Prior to this appointment, Ms Hastings held the position of Chief Operating Officer from 29 August 2016.

• (c) Brett Sergeant commenced employment with the Group on 15 August 2016.

23 EVENT Hospitality & Entertainment Limited – Annual Report 2017

Proportion of remuneration performance related	Proportion of remuneration performance related	– – – – – – – – – – – – – – 57.3% 61.6%
Total	$	313,000 313,000 128,000 128,000 128,000 136,667 128,000 128,000 166,000 164,000 148,000 141,333 128,000 128,000 9,492,255 5,374,303
Other	Termination payments $	– – – – – – – – – – – – – – 1,959,618 –
Post- employment Share-based Other long term	Accrued annual leave $ Accrued long service leave $	– – – – – – – – – – – – – – – – – – – – – – – – – – – – 36,631 39,100 28,782 66,183
	Performance rights(b) $	– – – – – – – – – – – – – – 3,466,906 1,293,078
	Performance shares(b) $	– – – – – – – – – – – – – – – 126,260
	Superannuation contributions $	19,616 19,308 11,105 11,105 11,105 11,857 11,105 11,105 14,402 14,228 12,840 12,262 11,105 11,105 19,616 19,308
Short term		– – – – – – – – – – – – – – – –
	Insurance premiums(a) $
		– – – – – – – – – – – – – – – –
	Non-cash benefits $
	STI bonuses $	– – – – – – – – – – – – – – 1,970,000 1,890,000
		DIRECTORS Non-executive AG Rydge 2017 293,384 2016 293,692 KG Chapman 2017 116,895 2016 116,895 PR Coates 2017 116,895 2016 124,810 VA Davies 2017 116,895 2016 116,895 DC Grant 2017 151,598 2016 149,772 PM Mann 2017 135,160 2016 129,071 RG Newton 2017 116,895 2016 116,895 Executive DC Seargeant(c) 2017 2,000,384 2016 1,950,692
	Fixed annual remuneration and fees $

		62.0% – 44.3% – 42.9% – 50.3% – 3.9% – 2.9% –
	Proportion of remuneration performance related
Total	$	219,483 908,121 1,124,801 1,042,987 1,134,576 1,035,779 614,788 661,094 808,060 – 633,391 –
Other	Termination payments $	– – – – – – – – – – – –
Post- employment Share-based Other long term	Accrued annual leave $ Accrued long service leave $	5,087 1,527 (6,137) 9,193 (13,419) 24,518 14,067 24,398 8,563 25,099 2,313 25,043 (41,036) (35,599) (30,265) 6,530 21,634 – – – 39,119 – – –
	Performance rights(b) $	30,370 142,943 215,961 166,473 223,380 176,412 124,240 108,309 31,877 – 18,418 –
	Performance shares(b) $	– 14,130 – 12,546 – 13,521 – 5,939 – – – –
	Superannuation contributions $	3,043 19,308 19,616 19,308 19,616 19,308 19,616 19,308 17,311 – 17,981 –
Short term	Insurance premiums(a) $	1,046 6,094 5,241 4,753 3,848 3,440 2,183 2,031 1,650 – 1,035 –
	Non-cash benefits $	– – – – – – – – – – – –
	STI bonuses $	105,750 253,898 282,500 255,750 263,686 250,050 185,000 198,550 – – – –
	Fixed annual remuneration and fees $	72,660 468,692 590,384 545,692 590,384 545,692 360,384 350,692 735,588 – 556,838 –
		OTHER EXECUTIVE KMP NC Arundel(d) 2017 2016 GC Dean 2017 2016 MR Duff 2017 2016 HR Eberstaller 2017 2016 JM Hastings(e) 2017 2016 BA Sergeant(f) 2017 2016

DIRECTORS’ REPORT

Directors’ and executives’ remuneration (continued)

• (a) Amounts disclosed above for remuneration of directors and other executive KMP exclude insurance premiums paid by the Group in respect of directors’ and officers’ liability insurance contracts as the contracts do not specify premiums paid in respect of individual directors and officers. Information relating to the insurance contracts is set out within the Remuneration Report. The amounts disclosed in the table above relate to premiums paid by the Group for group salary continuance insurance.

• (b) Amounts disclosed above for remuneration relating to performance shares and performance rights have been determined in accordance with the requirements of AASB 2 Share-based Payment . AASB 2 requires the measurement of the fair value of performance shares and performance rights at the grant date and then to have that value apportioned in equal amounts over the period from grant date to vesting date. Details of performance shares and performance rights on issue are set out within the Remuneration Report and further details on the terms and conditions of these performance shares and performance rights are set out in Note 6.1 to the financial statements.

• (c) DC Seargeant stepped down as Managing Director on 30 June 2017. The amount disclosed for Mr Seargeant’s STI bonus was paid during the year ended 30 June 2017 based on achievement of personal goals and satisfaction of specified performance criteria for the 30 June 2016 year. A separate amount of $1,010,000 based on achievement of personal goals and satisfaction of specified performance criteria for the year ended 30 June 2017 will be paid in September 2017 (at the same time as STI payments for the year ended 30 June 2017 are made to other executive KMP). This represents 50% of the maximum possible award, and the remainder will be forfeited. Mr Seargeant’s share-based payment expense in relation to the Group’s Executive Performance Rights Plan includes an accelerated charge of $1,911,486 on termination in relation to the 2015, 2016 and 2017 awards which, in accordance with the Plan Rules, remain on-foot and will vest or lapse in accordance with the terms on which they were issued. This does not necessarily reflect the value (if any) that Mr Seargeant will receive for these unvested performance rights, because this will depend on whether the hurdles are achieved and, if they are, the share price at the date of vesting.

• (d) NC Arundel ceased to be a key management person of the Group effective 29 August 2016. Amounts disclosed in the table above are in respect of the period for which NC Arundel was a key management person.

• (e) JM Hastings commenced employment with the Group on 29 August 2016.

• (f) BA Sergeant commenced employment with the Group on 15 August 2016.

Analysis of STI bonuses included in remuneration

The bonus table below is calculated on the basis of including bonuses awarded during the year ended 30 June 2017. It only includes remuneration relating to the portion of the relevant periods that each individual was a KMP. Details of the vesting profile of the STI bonuses awarded as remuneration to the CEO and other executive KMP of the Group are shown below:

	Included in remuneration(a)
	$	Awarded inyear	Not awarded inyear (b)
Managing Director and CEO
DC Seargeant (c)	1,970,000	100%	–
Other executive KMP
NC Arundel	105,750	43.3%	56.7%
GC Dean	282,500	100%	–
MR Duff	263,686	93.3%	6.7%
HR Eberstaller	185,000	100%	–
JM Hastings (d)	–	–	–
BA Sergeant (e)	–	–	–

• (a) Amounts included in remuneration for the year represent the amounts that were awarded in the year based on achievement of personal goals and satisfaction of specified performance criteria for the 30 June 2016 year. No amounts vest in future years in respect of the STI bonus schemes for the 2016 year.

• (b) The amounts not awarded are due to the performance criteria not being met in relation to the assessment period.

• (c) The amount awarded to the Managing Director reflects the achievements discussed in the Review of Operations by Division in the Directors’ Report, the Group’s performance, management of current property developments and other business growth targets. The Board considers the specific targets to be commercially sensitive and accordingly further details of these targets have not been disclosed.

• (d) JM Hastings commenced employment with the Group on 29 August 2016 and consequently was not eligible for an STI payment during the year ended 30 June 2017.

• (e) BA Sergeant commenced employment with the Group on 15 August 2016 and consequently was not eligible for an STI payment during the year ended 30 June 2017.

Other transactions with key management personnel and their related parties

AG Rydge is a director of Carlton Investments Limited. Carlton Investments Limited rents office space from a controlled entity. Rent is charged to Carlton Investments Limited at a market rate. Rent and office service charges received during the year were $20,240 (2016: $21,057). The Company holds shares in Carlton Investments Limited. Dividends received during the year from Carlton Investments Limited totalled $780,420 (2016: $704,799).

AG Rydge paid rent, levies and other costs to Group entities during the year amounting to $98,527 (2016: $96,764). Rent is charged to AG Rydge at market rates.

A controlled entity has entered into a lease agreement for a cinema complex in Townsville with an entity related to KG Chapman. Rent paid under the lease is at market rates.

26 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Other transactions with key management personnel and their related parties (continued)

Apart from the details disclosed in the Remuneration Report, no KMP has entered into a material contract with the Group since the end of the previous year and there were no material contracts involving directors’ interests existing at reporting date.

From time to time, KMP of the Group, or their related parties, may purchase goods or services from the Group. These purchases are usually on the same terms and conditions as those granted to other Group employees. Where the purchases are on terms and conditions more favourable than those granted to other Group employees, the resulting benefits form part of the total remuneration outlined within the Remuneration Report.

~~~~ Executive Performance Rights Plan current LTI plan

Analysis of LTI performance rights granted as remuneration

Details of the vesting profile of performance rights granted as remuneration to the CEO and other executive KMP are shown below:

Executive Performance Rights Plan~~~~ current LTI plan Analysis of LTI performance rights granted as remuneration Details of the vesting profile of performance rights granted as remuneration to the CEO shown below:	and other executive KMP are
Number Grant date Vested during theyear Forfeited during the year Year in which the grant vests	Fair value
	Performance right – EPS $ Performance right – TSR $
Managing Director and CEO DC Seargeant 140,000 16 Feb 2017 – – 30 Jun 2020 140,000 18 Feb 2016 – – 30 Jun 2019 170,000 19 Feb 2015 – – 30 Jun 2018 Other executive KMP NC Arundel(a) 13,650 18 Feb 2016 – – 30 Jun 2019 19,548 19 Feb 2015 – – 30 Jun 2018 GC Dean 20,538 16 Feb 2017 – – 30 Jun 2020 19,755 18 Feb 2016 – – 30 Jun 2019 23,870 19 Feb 2015 – – 30 Jun 2018 MR Duff 20,538 16 Feb 2017 – – 30 Jun 2020 19,755 18 Feb 2016 – – 30 Jun 2019 25,667 19 Feb 2015 – – 30 Jun 2018 HR Eberstaller 10,235 16 Feb 2017 – – 30 Jun 2020 10,349 18 Feb 2016 – – 30 Jun 2019 14,825 19 Feb 2015 – – 30 Jun 2018 JM Hastings 30,303 16 Feb 2017 – – 30 Jun 2020 BA Sergeant 17,508 16 Feb 2017 – – 30 Jun 2020	11.09 3.92 14.01 11.40 10.74 8.40 14.01 11.40 10.74 8.40 11.09 3.92 14.01 11.40 10.74 8.40 11.09 3.92 14.01 11.40 10.74 8.40 11.09 3.92 14.01 11.40 10.74 8.40 11.09 3.92 11.09 3.92

(a) NC Arundel ceased to be a KMP of the Group effective 29 August 2016. No performance rights were granted to Mr Arundel during the period from 1 July 2016 to 29 August 2016.

27 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

~~~~ Executive Performance Rights Plan current LTI plan (continued)

Analysis of movements in performance rights

The movement during the year, by value, of performance rights in the Company held by the Managing Director and other executive KMP is detailed below:

	Granted during	Exercised during	Performance	Amount paid per
	the year(a)	the year	rights exercised	right exercised
	$	$	Number	$
Managing Director and CEO
DC Seargeant	1,050,700	2,913,050	205,000	–
Other executive KMP
NC Arundel(b)	–	–	–	–
GC Dean	154,138	303,469	21,356	–
MR Duff	154,138	326,588	22,983	–
HR Eberstaller	76,810	245,989	17,311	–
JM Hastings	227,420	–	–	–
BA Sergeant	131,398	–	–	–

(a) The value of performance rights granted in the year is the fair value of the performance rights calculated at grant date, estimated using a Binomial tree model for those rights that have EPS hurdles and a Monte Carlo model for those rights that have TSR hurdles. The total value of the performance rights granted is included in the table above. This amount is allocated to remuneration over the vesting period.

(b) NC Arundel ceased to be a KMP of the Group effective 29 August 2016. No performance rights were granted to or exercised by Mr Arundel during the period from 1 July 2016 to 29 August 2016.

No performance rights have been granted since the end of the year.

Performance rights holdings and transactions

The movement during the year in the number of performance rights in EVENT Hospitality & Entertainment Limited held by the CEO and other executive KMP is detailed below:

		Held at					Held at
		the beginning of					the end of
		theyear	Granted	Exercised	Forfeited	Other(a)	theyear
Managing Director and	CEO
DC Seargeant	2017	515,000	140,000	(205,000)	–	–	450,000
	2016	375,000	140,000	–	–	–	515,000
Other executive KMP
NC Arundel(a)	2017	56,083	–	–	–	(56,083)	–
	2016	42,433	13,650	–	–	–	56,083
GC Dean	2017	64,981	20,538	(21,356)	–	–	64,163
	2016	45,226	19,755	–	–	–	64,981
MR Duff	2017	68,405	20,538	(22,983)	–	–	65,960
	2016	48,650	19,755	–	–	–	68,405
HR Eberstaller	2017	42,485	10,235	(17,311)	–	–	35,409
	2016	32,136	10,349	–	–	–	42,485
JM Hastings	2017	–	30,303	–	–	–	30,303
	2016	–	–	–	–	–	–
BA Sergeant	2017	–	17,508	–	–	–	17,508
	2016	–	–	–	–	–	–

(a) NC Arundel ceased to be a KMP of the Group effective 29 August 2016. This movement represents the balance of performance rights held at that date.

No performance rights have been granted since the end of the year. No performance rights are held by any related parties of KMP.

28 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Executive Performance Share Plan ~~~~ previous LTI plan

Performance shares exercised during the year

Details of performance shares in the Company exercised during the year by the CEO and other executive KMP are shown below:

	Exercised during	Performance	Amount paid per
	the year (a)	shares exercised	performance share
	$	Number	$
Managing Director and CEO
DC Seargeant	–	–	–
Other executive KMP
NC Arundel(b)	–	–	–
GC Dean	–	–	–
MR Duff	585,434	38,617	Nil
HR Eberstaller	135,151	8,915	Nil
JM Hastings	–	–	–
BA Sergeant	–	–	–

(a) The value of performance shares exercised during the year is calculated as the market price of shares of the Company on the ASX as at close of trading on the date that the performance shares were exercised.

(b) NC Arundel ceased to be a KMP of the Group effective 29 August 2016. No performance shares were exercised by Mr Arundel during the period from 1 July 2016 to 29 August 2016.

Performance share holdings and transactions

The movement during the year in the number of performance shares in EVENT Hospitality & Entertainment Limited held by the Managing Director and other executive KMP is detailed below:

		Held at					Held at
		the beginning					the end of
		of theyear	Granted	Exercised	Forfeited	Other(a)	theyear
Managing Director and CEO
DC Seargeant	2017	402,500	–	–	–	–	402,500
	2016	802,500	–	(400,000)	–	–	402,500
Other executive KMP
NC Arundel(a)	2017	23,502	–	–	–	(23,502)	–
	2016	73,037	–	(49,535)	–	–	23,502
GC Dean	2017	–	–	–	–	–	–
	2016	33,413	–	(33,413)	–	–	–
MR Duff	2017	85,665	–	(38,617)	–	–	47,048
	2016	85,665	–	–	–	–	85,665
HR Eberstaller	2017	35,529	–	(8,915)	–	–	26,614
	2016	35,529	–	–	–	–	35,529
JM Hastings	2017	–	–	–	–	–	–
	2016	–	–	–	–	–	–
BA Sergeant	2017	–	–	–	–	–	–
	2016	–	–	–	–	–	–

(a) NC Arundel ceased to be a KMP of the Group effective 29 August 2016. This movement represents the balance of performance shares held at that date.

No performance shares have been granted since the end of the year. There were no performance shares held by the related parties of KMP.

29 EVENT Hospitality & Entertainment Limited – Annual Report 2017

DIRECTORS’ REPORT

Equity holdings and transactions

The movement during the year in the number of ordinary shares of EVENT Hospitality & Entertainment Limited held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:

				Received on
				release of
		Held at		performance			Held at
		the beginning of		shares or			the end of
		theyear	Purchases	rights	Sales	Other(a)	theyear
Directors
AG Rydge (Chairman)	2017	72,788,603	–	–	–	–	72,788,603
	2016	72,234,355	554,248	–	–	–	72,788,603
KG Chapman	2017	57,500	–	–	–	–	57,500
	2016	57,500	–	–	–	–	57,500
PR Coates	2017	46,960	–	–	–	–	46,960
	2016	46,960	–	–	–	–	46,960
VA Davies	2017	10,000	4,000	–	–	–	14,000
	2016	10,000	–	–	–	–	10,000
DC Grant	2017	3,000	2,000	–	–	–	5,000
	2016	2,000	1,000	–	–	–	3,000
PM Mann	2017	6,000	142	–	–	–	6,142
	2016	2,000	4,000	–	–	–	6,000
RG Newton	2017	66,840	–	–	–	–	66,840
	2016	66,840	–	–	–	–	66,840
DC Seargeant	2017	469,490	–	205,000	–	–	674,490
(Managing Director)	2016	469,490	–	400,000	(400,000)	–	469,490
Other KMP
NC Arundel(a)	2017	59,781	–	–	–	(59,781)	–
	2016	10,246	–	49,535	–	–	59,781
GC Dean	2017	101,508	–	21,356	–	–	122,864
	2016	68,095	–	33,413	–	–	101,508
MR Duff	2017	–	–	61,600	(38,401)	–	23,199
	2016	–	–	–	–	–	–
HR Eberstaller	2017	–	–	26,226	(15,126)	–	11,100
	2016	–	–	–	–	–	–
JM Hastings	2017	–	–	–	–	–	–
	2016	–	–	–	–	–	–
BA Sergeant	2017	–	–	–	–	–	–
	2016	–	–	–	–	–	–

(a) NC Arundel ceased to be a key management person of the Group effective 29 August 2016. This movement represents the balance of shares held at that date.

No shares were granted to KMP as compensation in the year ended 30 June 2017. Performance rights were granted to certain KMP as disclosed on page 28.

End of Directors’ Report: Remuneration Report – Audited

30 EVENT Hospitality & Entertainment Limited – Annual Report 2017

==> picture [78 x 31] intentionally omitted <==

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Event Hospitality & Entertainment Limited:

I declare that, to the best of my knowledge and belief, in relation to the audit of Event Hospitality & Entertainment Limited for the financial year ended 30 June 2017 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [93 x 51] intentionally omitted <==

KPMG

==> picture [93 x 59] intentionally omitted <==

Anthony Travers Partner

Sydney 24 August 2017

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

31 EVENT Hospitality & Entertainment Limited – Annual Report 2017

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
Note	2017 $’000 2016 $’000
ASSETS Current assets Cash and cash equivalents 4.4 Trade and other receivables 3.1 Inventories 3.2 Prepayments and other current assets Total current assets Non-current assets Trade and other receivables 3.1 Other financial assets Available-for-sale financial assets 4.5 Investments accounted for using the equity method 5.3 Property, plant and equipment 3.3 Investment properties 3.4 Goodwill and other intangible assets 3.5 Deferred tax assets 2.4 Other non-current assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 3.6 Loans and borrowings 4.4 Current tax liabilities 2.4 Provisions 3.7 Deferred revenue 2.1 Other current liabilities 3.8 Total current liabilities Non-current liabilities Loans and borrowings 4.4 Deferred tax liabilities 2.4 Provisions 3.7 Deferred revenue 2.1 Other non-current liabilities 3.8 Total non-current liabilities Total liabilities Net assets EQUITY Share capital 4.1 Reserves 4.3 Retained earnings Total equity	92,318 145,040 55,051 38,855 20,409 32,731 10,458 8,730
	178,236 225,356
	1,519 1,123 1,396 1,396 19,928 20,067 10,942 11,969 1,237,708 1,042,683 68,250 68,500 108,899 106,595 6,333 7,871 3,115 4,207
	1,458,090 1,264,411
	1,636,326 1,489,767
	106,895 100,607 325,441 2,025 790 20,198 20,613 19,961 88,235 88,575 3,841 3,808
	545,815 235,174
	2,360 202,610 12,192 15,558 14,340 13,470 8,720 6,453 2,610 3,758
	40,222 241,849
	586,037 477,023
	1,050,289 1,012,744
	219,126 219,126 54,933 46,321 776,230 747,297
	1,050,289 1,012,744

The Statement of Financial Position is to be read in conjunction with the notes to the financial statements on pages 37 to 89.

32 EVENT Hospitality & Entertainment Limited – Annual Report 2017

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2017

Note	2017 $’000 2016 $’000
Revenue and other income Revenue from sale of goods and rendering of services 2.1 Other revenue and income 2.1 Expenses Employee expenses Occupancy expenses Film hire and other film expenses Purchases and other direct expenses Depreciation, amortisation and impairments Other operating expenses Advertising, commissions and marketing expenses Finance costs Equity profit Share of net profit of equity accounted associates and joint ventures 5.3 Profit before tax Income tax expense 2.4 Profit for the year Earnings per share Basic earnings per share 2.5 Diluted earnings per share 2.5	1,217,058 1,211,447 77,211 69,442
	1,294,269 1,280,889
	(308,536) (284,532) (256,145) (251,405) (244,231) (256,764) (118,698) (103,963) (84,591) (82,916) (80,291) (73,944) (37,338) (34,866) (9,802) (8,946)
	(1,139,632) (1,097,336)
	2,684 2,273
	157,321 185,826 (46,502) (55,578)
	110,819 130,248
	2017 Cents 2016 Cents
	69.6 82.2 68.7 81.0

The Income Statement is to be read in conjunction with the notes to the financial statements on pages 37 to 89.

33 EVENT Hospitality & Entertainment Limited – Annual Report 2017

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017

	2017 $’000 2016 $’000
Profit for the year Other comprehensive income Items that may be reclassified to profit or loss Foreign currency translation differences for foreign operations – net of tax Transfer from foreign currency translation reserve to the Income Statement on sale of interest in Fiji Cinema Joint Venture Net change in fair value of available-for-sale financial assets – net of tax Net change in fair value of cash flow hedges – net of tax Other comprehensive income for the year – net of tax Total comprehensive income for the year	110,819 130,248
	381 6,054 306  (97) 66 (20) 
	570 6,120
	111,389 136,368

The Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements on pages 37 to 89.

34 EVENT Hospitality & Entertainment Limited – Annual Report 2017

Share capital $’000 Reserves $’000 Retained earnings $’000 Total equity $’000		110,819					(73,844)	1,050,289	708,568 962,904	130,248 130,248	– 6,054 – 66	– 6,120	130,248 136,368	– 4,991 (91,519) (91,519)	(91,519) (86,528)	747,297 1,012,744
	1,012,744		381 306 (97) (20)	570	111,389	8,042 (81,886)
		110,819					(81,886)	776,230
	747,297		– – – –	–	110,819	– (81,886)
		–					8,042	54,933	35,210	–	6,054 66	6,120	6,120	4,991 –	4,991	46,321
	46,321		381 306 (97) (20)	570	570	8,042 –
	219,126		– – – –	–	–	– –

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017

Note	2017 $’000 2016 $’000
Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Cash provided by operations Dividends from associates and joint ventures Other revenue Dividends received Interest received Finance costs paid Income tax refunds Income tax paid Net cash provided by operating activities 7.3 Cash flows from investing activities Proceeds from disposal of interest in joint operation Proceeds from disposal of other non-current assets Payments for property, plant and equipment and redevelopment of properties Payments for businesses acquired, including intangible assets Purchase of management and leasehold rights, software and other intangible assets Payment for additional interests in joint arrangements, net of cash acquired (Decrease)/increase in loans from other entities Net cash used by investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Dividends paid 4.2 Net cash provided/(used) by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the year	1,366,585 1,372,026 (1,162,968) (1,148,113)
	203,617 223,913 3,692 2,415 56,745 45,667 795 715 807 915 (9,793) (8,902)  863 (67,182) (53,116)
	188,681 212,470
	9,088  5 22,000 (258,956) (173,841) (31,249) (26,549) (1,405) (6,429)  (6,813) (472) 288
	(282,989) (191,344)
	275,765 193,858 (150,127) (113,698) (81,886) (91,519)
	43,752 (11,359)
	(50,556) 9,767 145,040 133,680 (2,166) 1,593
	92,318 145,040

The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements on pages 37 to 89.

36 EVENT Hospitality & Entertainment Limited – Annual Report 2017

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S E C T I O N  1  –  B A S I S  O F  P R E P A R A T I O N

This section explains the basis of preparation for the Group’s financial statements, including information regarding the impact of the adoption of new accounting standards.

1.1 – REPORTING ENTITY

EVENT Hospitality & Entertainment Limited (“Company”) is a company domiciled in Australia. The consolidated financial report of the Company as at and for the year ended 30 June 2017 comprises the Company and its subsidiaries (collectively referred to as the “Group”) and the Group’s interest in associates, joint ventures and joint operations.

EVENT Hospitality & Entertainment Limited is a for-profit company incorporated in Australia and limited by shares. The shares are publicly traded on the ASX. The nature of the operations and principal activities of the Group are described in Note 2.2.

The financial report was authorised for issue by the Board of Directors of EVENT Hospitality & Entertainment Limited on 24 August 2017.

1.2 – BASIS OF PREPARATION

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board and the Corporations Act 2001. The financial report also complies with International Financial Reporting Standards and interpretations adopted by the International Accounting Standards Board.

Basis of measurement

The financial report is prepared on the historical cost basis except for the following material items in the Statement of Financial Position which are measured at fair value: derivative financial instruments, financial assets classified as availablefor-sale, liabilities for cash-settled share-based payments and investment properties. Assets held for sale are stated at the lower of carrying amount and fair value less costs to sell.

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with the Instrument, amounts in the financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Use of estimates and judgements

The preparation of a financial report in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods if affected. Judgements made by management in the application of AASBs that have a significant effect on the financial report and estimates with a significant risk of material adjustment in the next year are discussed in Notes 2.4 (Taxation), 3.3 (Property, plant and equipment), 3.4 (Investment properties) and 3.5 (Goodwill and other intangible assets).

37 EVENT Hospitality & Entertainment Limited – Annual Report 2017

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S E C T I O N 1 – B A S I S O F P R E P A R A T I O N

1.2 – BASIS OF PREPARATION (continued)

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Notes 3.3 (Property, plant and equipment), 3.4 (Investment properties) and 4.5 (Financial risk management).

1.3 – FOREIGN CURRENCY

Functional and presentation currency

All amounts are expressed in Australian dollars, which is the Group’s presentation currency. Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of the Company is Australian dollars.

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss, except for differences arising on retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is effective, which are recognised in other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the dates of the transactions. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Australian dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of an associate or joint venture whilst retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations, and the effective portion of related hedges, are taken to the foreign currency translation reserve. They are released to profit or loss as an adjustment to profit or loss on disposal. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in other comprehensive income and presented in the foreign currency translation reserve in equity.

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S E C T I O N  1  –  B A S I S  O F  P R E P A R A T I O N

1.4 – NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of other new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2017, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except for:

• AASB 9 Financial Instruments ;

• AASB 15 Revenue from Contracts with Customers ; and

• AASB 16 Leases .

The Group does not plan to adopt these standards early and the Group’s initial assessment of the likely extent of their impact is set out below.

AASB 9 Financial Instruments

The adoption of this standard is not expected to have a material impact on the amounts recognised in the Group’s financial statements. However, the new standard introduces expanded disclosure requirements and changes in presentation which are expected to change the nature and extent of the Group’s disclosures regarding its financial instruments.

AASB 15 Revenue from Contracts with Customers

The Group is assessing the impact on its consolidated financial statements resulting from the application of the new standard. A majority of the Group’s revenue is received in cash from customers for the provision of services and sale of goods, and there is not expected to be any impact of the new standard on these cash transactions. There may be an impact on the Group’s accounting policies in relation to its loyalty programs, certain long-term sponsorship agreements, and hotel management agreements; however, it is not anticipated that the impact of any changes in these policies will be material to the Group’s financial statements.

AASB 16 Leases

This standard will have a material impact on the Group’s accounting for operating leases. The Group has extensive operating lease arrangements, details of which are disclosed in Notes 5.3 and 7.1 in accordance with AASB 117 Leases . The new standard requires the recognition of a right-of-use (“ROU”) asset and lease liability for each operating lease, with certain limited exceptions. Rental expense will no longer be recognised in respect of operating leases. Instead, the ROU asset will be depreciated over the lease term, whilst interest expense will be incurred in respect of the lease liability. These changes will have the effect of materially increasing the Group’s earnings before interest, tax, depreciation and amortisation, and materially increasing the Group’s depreciation and interest expenditure, whilst also potentially having a material impact on net profit after tax, which will vary from year to year, and has yet to be quantified by the Group.

AASB 16 allows entities to apply certain transitional provisions on initial adoption of the standard. The Group has yet to determine whether any of these transitional provisions will be applied on initial adoption in the Group’s financial statements for the year ending 30 June 2020.

Further information regarding the likely impact of this new standard will be disclosed in the financial report for the year ending 30 June 2018.

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S E C T I O N 2 – P E R F O R M A N C E F O R T H E Y E A R

This section focuses on the results and performance of the Group. On the following pages are disclosures explaining the Group’s revenue, segment information, individually significant items, taxation and earnings per share.

2.1 – REVENUE

Accounting policy

Revenue represents the total amount received or receivable, usually in cash, for goods sold or services provided to customers and excludes sales related taxes, discounts and intra-Group transactions.

Revenue recognition criteria for the Group’s key classes of revenue are as follows:

Rendering of services

• Box office ticket revenue is recognised on the date the customer views the relevant film. When tickets are sold in advance or gift cards are sold to customers, this revenue is recorded as deferred revenue in the Statement of Financial Position until this date or expiry, whichever is earlier;

• Hotel room revenue is recognised when the room is occupied; and

• Ski pass revenue is recognised as the customer uses the service. For season and other passes, revenue is recorded as deferred revenue in the Statement of Financial Position initially and is then recognised over the period that the pass is valid.

The Group also operates loyalty programs in its cinema exhibition and hotel businesses where customers earn points when they purchase cinema tickets or stay at a qualifying hotel. These points can be redeemed by the customer at a later date for discounts on future purchases.

The consideration received from the customer who is a member of the loyalty program is allocated at the point of sale between the award points earned and the respective box office or hotel room revenue. This is the fair value of the points, which is adjusted to take into account the expected rates of forfeiture, and is recognised in deferred revenue in the Statement of Financial Position. The awards revenue is then recognised when the points are redeemed or expire, whichever is earlier.

Sale of goods

• Merchandise (including food and beverages) is recognised at the point of sale.

Other revenue and income

• Rental revenue is recognised on a straight-line basis over the term of the lease;

• Management and consulting fees are earned from hotels managed by the Group, usually under long term contracts with the hotel owner; and

• Other revenue, including interest, dividends and profit on disposal of non-current assets, is recognised in the period to which it relates.

Revenue Rendering of services Sale of goods Other revenue Rental revenue Management and consulting fees Apartment sales Finance revenue Dividends Sundry Other income Reversal of impairment charges booked in previous years Insurance proceeds Increase in fair value of investment properties Profit on sale of the Group’s interest in the Fiji Cinema Joint Venture Profit on sale of property, plant and equipment	2017 $’000 2016 $’000
	849,453 850,284 367,605 361,163
	1,217,058 1,211,447
	26,470 24,182 20,594 21,074 15,130 – 807 915 795 715 961 411
	64,757 47,297
	– 1,712 8,720 155 – 580 3,729 – 5 19,698
	12,454 22,145
	1,294,269 1,280,889

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S E C T I O N 2 – P E R F O R M A N C E F O R T H E Y E A R

2.2 – SEGMENT REPORTING

Accounting policy

An operating segment is a component of the Group that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses from transactions with other Group segments. All segments’ operating results are regularly reviewed by the Group’s CEO to make decisions about resources to be allocated to a segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment, before individually significant items, as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate head office assets, head office expenses, and income tax assets and liabilities.

Additions to non-current segment assets are the total cost incurred during the period to acquire assets that include amounts expected to be recovered over more than 12 months after the year end date. Amounts include property, plant and equipment, but exclude financial instruments and deferred tax assets.

Segment information is presented in respect of the Group’s reporting segments. These are the Group’s main strategic business segments and have differing risks and rewards associated with the business due to their different product or service and geographic markets. For each of these operating segments, the Group’s CEO regularly reviews internal management reports.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax as included in the internal management reports. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of segments relative to those of other businesses. Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest bearing loans and borrowings and borrowing costs, interest income and corporate head office assets and expenses.

Operating segments

The Group comprises the following main operating segments:

Entertainment Australia

Includes the cinema exhibition operations in Australia, technology equipment supply and servicing, and the State Theatre.

Entertainment New Zealand

Includes cinema exhibition operations in New Zealand and Fiji.

Entertainment Germany

Includes the cinema exhibition operations in Germany.

Hotels and Resorts

Includes the ownership, operation and management of hotels in Australia and overseas.

Thredbo Alpine Resort

Includes all the operations of the resort including property development activities.

Property and Other Investments

Includes property rental, investment properties and available-for-sale financial assets.

Geographical information

Also presented is information on the Group’s split of revenue and non-current assets by geographic location. Geographic revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The Group operates in Australia, New Zealand and Germany.

41 EVENT Hospitality & Entertainment Limited – Annual Report 2017

	Consolidated $’000						192,254			110,819
		1,260,095 800	807 27	1,261,729 32,540	1,294,269	189,570 2,684		(22,322) (8,995) (3,616)	157,321 (46,502)		(73,605) (10,986)	(84,591)
	Property and Other Investments $’000						9,343
		14,732 780				9,343 –					(2,653) –	(2,653)
Thredbo Alpine Resort $’000		66,609 –	18,187 –				18,187	(3,820) (2,116)				(5,936)
	Hotels and Resorts $’000						52,734
		306,383 20				52,734 –					(21,433) (8,870)	(30,303)
Entertainment 2.2 – SEGMENT REPORTING (continued) Australia New Zealand Germany Operating segments $’000 $’000 $’000

			1,603,494	6,333 26,499		240,265		586,037
	Consolidated $’000	1,592,552 10,942			1,636,326		12,192 333,580		291,747
Entertainment 2.2 – SEGMENT REPORTING (continued) Australia New Zealand Germany Hotels and Resorts Thredbo Alpine Resort Property and Other Investments Operating segments $’000 $’000 $’000 $’000 $’000 $’000

			Consolidated	$’000			1,257,051	1,533	915	63	1,259,562	21,327	1,280,889		204,980	2,273	207,253	(21,308)	(8,031)	7,912	185,826	(55,578)	130,248	(69,501)	(13,415)	(82,916)	1,712
Entertainment	Thredbo Property and	2.2 – SEGMENT REPORTING (continued) Hotels and Alpine Other	Australia New Zealand Germany Resorts Resort Investments	Operating segments $’000 $’000 $’000 $’000 $’000 $’000	2016	Revenue and other income	External segment revenue 477,947 89,341 340,166 278,159 60,431 11,007	Other income – external – – – 169 79 1,285	Finance revenue	Other unallocated revenue	Revenue and other income before individually significant items	Individually significant items	Revenue and other income	Result	Segment result before individually significant items 88,262 10,508 34,022 51,597 15,007 5,584	Share of net profit of equity accounted investees 253 – 2,020 – – –	Total segment result before individually significant items 88,515 10,508 36,042 51,597 15,007 5,584	Unallocated revenue and expenses	Net finance costs	Individually significant items	Profit before related income tax expense	Income tax expense	Profit after income tax expense	Amortisation and depreciation (net of impairment write-downs) (23,587) (6,525) (10,754) (22,321) (3,795) (2,519)	Impairment write-downs of property, plant and equipment – – – (13,415) – –	Amortisation and depreciation (23,587) (6,525) (10,754) (35,736) (3,795) (2,519)	Reversal of impairment write-downs made in prior years – – – 1,712 – –

			1,461,071	7,871 20,825		237,938		477,023
	Consolidated $’000	1,449,102 11,969			1,489,767		15,558 223,527		216,673
Entertainment 2.2 – SEGMENT REPORTING (continued) Australia New Zealand Germany Hotels and Resorts Thredbo Alpine Resort Property and Other Investments Operating segments $’000 $’000 $’000 $’000 $’000 $’000

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S E C T I O N 2 – P E R F O R M A N C E F O R T H E Y E A R

2.3 – INDIVIDUALLY SIGNIFICANT ITEMS

Profit before income tax expense includes the following revenues/(expenses) whose disclosure is relevant in explaining the financial performance of the Group:

financial performance of the Group:
Profit on sale of apartments Profit on sale of an interest in a cinema circuit in Fiji Write-back of expired voucher stock Net proceeds from insurance Pre-opening expenses relating to the launch and opening of hotels Managing Director retirement and transition costs Impairments or disposal of land, buildings and plant and equipment Profit on sale of Mosman cinema site Reversal of impairment charges booked in previous years	2017 $’000 2016 $’000
	2,105 – 3,729 – 5,184 – 5,457 – (3,579) – (5,526) – (10,986) (13,415) – 19,615 – 1,712
	(3,616) 7,912

2.4 – TAXATION

Accounting policy

Income tax expense in the Income Statement for the periods presented comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

The Company and its Australian wholly-owned subsidiaries are part of a tax consolidated group. As a consequence, all members of the tax consolidated group are taxed as a single entity. EVENT Hospitality & Entertainment Limited is the head entity within the tax consolidated group.

Deferred tax

Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for taxation purposes. The following temporary differences are not provided for:

• taxable temporary differences on the initial recognition of goodwill;

• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and

• differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

Deferred tax assets and liabilities are disclosed net to the extent that they relate to taxes levied by the same authority and the Group has the right of set off.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available to utilise the temporary difference.

The Group has unrecognised deferred tax assets in respect of certain foreign tax revenue losses as disclosed on page 48. The utilisation of the tax revenue losses is dependent upon the generation of sufficient future taxable profits within the applicable foreign tax entities and a deferred tax asset is only recognised to the extent that it is supported by sufficient forecast taxable profits. Assumptions regarding the generation of future taxable profits relevant to those foreign tax entities has been based upon management’s budget estimates and forecasts. Management considers that the forecast of taxable profits for the applicable foreign tax entities is subject to risk and uncertainty; hence, the Group has not recognised all of the losses as a deferred tax asset.

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S E C T I O N 2 – P E R F O R M A N C E F O R T H E Y E A R

2.4 – TAXATION (continued)	2017 $’000 2016 $’000
Income tax expense The major components of income tax expense are: Income tax recognised in profit or loss Current income tax Current income tax expense Income tax over provided in prior year Deferred income tax Relating to origination and reversal of temporary differences Income tax expense reported in the Income Statement Income tax (credited)/charged directly in equity Deferred income tax related to items (credited)/charged directly in equity: Relating to other comprehensive income Effective portion of changes in fair value of cash flow hedges Unrealised gain on available-for-sale financial assets Currency translation movements of deferred tax balances of foreign operations Net loss/(gain) on hedge of net investment in overseas subsidiaries Relating to other equity balances Adjustment to shared-based payments reserve Income tax benefit reported in equity Reconciliation between income tax expense and pre-tax profit A reconciliation between income tax expense and accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit before income tax expense Prima facie income tax expense calculated at the Group’s statutory income tax rate of 30% (2016: 30%) on accounting profit Increase in income tax expense due to: Impairment write-down of land and buildings Non-deductible items and losses in non-resident controlled entities Amortisation of management rights and other intangible assets Depreciation and amortisation of buildings Other Decrease in income tax expense due to: Tax losses from prior years now recognised or utilised Share of incorporated joint venture net profit Non-assessable profit on disposal of interest in the Fiji Cinema Joint Venture Other Income tax over provided in prior year Unrecognised deferred tax assets Revenue losses – foreign	46,502 55,578
	49,958 56,109 (1,908) (190) (1,548) (341)
	46,502 55,578
	(4) – (42) 29 (373) 395 32 (879)
	(387) (455) – 19
	(387) (436)
	157,321 185,826
	47,196 55,748
	1,057 1,199 1,757 2,628 936 1,324 404 400 542 815
	4,696 6,366
	523 4,102 969 846 212 – 1,778 1,398
	3,482 6,346
	(1,908) (190)
	46,502 55,578
	2,027 2,277
	2,027 2,277

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S E C T I O N  2  –  P E R F O R M A N C E  F O R  T H E  Y E A R

2.4 – TAXATION (continued)

Included in the deferred tax assets not recognised is the gross value of tax revenue losses arising in Germany of $6,757,000 (2016: $7,591,000). The availability of these tax losses is subject to certain utilisation limits and ongoing availability tests under German tax law. At 30 June 2017, there was no recognised deferred income tax liability (2016: $nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or incorporated joint ventures.

Deferred tax liabilities and assets Deferred tax liabilities Deferred tax liabilities comprise: Difference in depreciation and amortisation of property, plant and equipment for accounting and income tax purposes Investment properties Available-for-sale financial assets Share of joint arrangement timing differences Expenditure immediately deductible for tax but amortised for accounting purposes Accrued revenue Prepayments Interest and deferred financing costs Share-based payments immediately deductible for tax but deferred and amortised for accounting purposes Unrealised foreign exchange gains not currently assessable Sundry items Less: deferred tax assets of the tax consolidated group offset against deferred tax liabilities Deferred tax assets Deferred tax assets comprise: Difference in depreciation and amortisation of property, plant and equipment and intangible assets for accounting and income tax purposes Share of joint arrangement timing differences Provisions and accrued employee benefits not currently deductible Deferred revenue Accrued expenses Discounted long term lease and non-interest bearing loan liabilities Difference between book and tax values of residential apartment development Share-based payments not currently deductible for tax Tax losses carried forward Unrealised foreign exchange losses not currently deductible Sundry items Less: deferred tax liabilities of the tax consolidated group offset against deferred tax assets Deferred tax benefit	Statement of Financial Position	Income Statement
	2017 $’000 2016 $’000	2017 $’000 2016 $’000
	29,888 27,163 8,801 8,120 4,461 4,503 49 75 4,342 4,606 262 653 79 96 563 886 321 1,432 1,518 1,631 557 871	3,049 (1,076) 681 240 (1) – (26) (82) (267) 1,373 (375) (462) (4) (67) (323) (78) (1,111) (113) (147) (426) (310) 64 (1,879) 497 (898) (977) 543 382 (200) 1,637 (1,037) (331) – – 479 – (1,288) (1,385) 2,072 116 211 462 (719) (115)
	50,841 50,036 (38,649) (34,478)
	12,192 15,558
	6,296 4,440 10,105 9,207 8,527 9,037 4,864 4,664 2,024 987 34 34 17 496 3,472 2,184 5,398 7,578 2,744 2,952 1,501 770
	44,982 42,349 (38,649) (34,478)
	6,333 7,871
		(1,550) (341)

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2.5 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated by dividing the profit for the period attributable to members of the Company by the weighted average number of ordinary shares of the Company.

Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Profit attributable to ordinary shareholders (basic and diluted) Weighted average number of ordinary shares (basic) Effect of performance shares and performance rights Weighted average number of ordinary shares (diluted)	2017 2016 $’000 $’000
	110,819 130,248
	Number Number 159,162,961 158,516,676 2,076,392 2,212,859
	161,239,353 160,729,535

Further details in relation to the Executive Performance Rights Plan and Executive Performance Share Plan are provided in Note 6.1.

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This section shows the assets used to generate the Group’s trading performance and the liabilities incurred as a result. Liabilities relating to the Group’s financing activities are addressed in section 4. Deferred tax assets and liabilities are shown in Note 2.4.

On the following pages, there are sections covering working capital balances, property, plant and equipment, investment properties, intangible assets and provisions.

3.1 – TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at fair value, and subsequently at the amounts considered recoverable (amortised cost). Where the payment terms for the sale of an asset are deferred, the receivable is discounted using the prevailing rate for a similar instrument of an issuer with similar credit terms. The unwinding of the discount is treated as finance revenue.

Trade receivables are non-interest bearing and are generally on 30 to 90 day terms. The Group’s exposure to credit and foreign exchange risks related to trade and other receivables is disclosed in Note 4.5.

Estimates are used in determining the level of receivables that will not be collected, and these estimates take into account factors such as historical experience. Allowances are made for impairment losses when there is sufficient evidence that the Group will not be able to collect all amounts due. These allowances are made until such time that the Group is satisfied that no recovery of the amount owing is possible; at that point, the amount considered irrecoverable is written off against the asset directly.

The carrying value of trade and other receivables is considered to approximate fair value.

Receivables are stated with the amount of goods and services tax (“GST”) or equivalent tax included.

Current Trade receivables Less: allowance for trade receivables Other receivables Non-current Other receivables Receivable from associates Present value of loans provided under the Employee Share Plan	2017 $’000 2016 $’000
	26,581 18,705 (615) (743)
	25,966 17,962 29,085 20,893
	55,051 38,855
	1,476 1,070 43 43 – 10
	1,519 1,123

As at 30 June 2017, trade receivables with a value of $615,000 (2016: $743,000) were impaired and fully provided for. The movement in the allowance is not considered material.

As at 30 June 2017, trade receivables for the Group that were past due but not impaired were $4,048,000 (2016: $3,837,000), of which $2,112,000 (2016: $1,986,000) was less than 30 days overdue. The remainder is not considered material and consequently an ageing analysis has not been provided.

Other current receivables of $29,085,000 (2016: $20,893,000) do not contain impaired assets and are not past due. Based on the credit history of these other receivables, it is expected that these amounts will be recovered when due.

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3.2 – INVENTORIES

Inventories are measured at the lower of cost and net realisable value. Work in progress is valued at cost. Cost is based on the first-in-first-out principle and includes expenditure incurred in bringing inventories to their existing condition and location.

3.3 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment

Property, plant and equipment are the physical assets used by the Group to generate revenue and profit. These assets include land and buildings, and plant and equipment. Property, plant and equipment are recognised at cost (which is the amount initially paid for them) less accumulated depreciation (the estimate of annual wear and tear) and impairment losses.

The Group leases properties in the normal course of business, principally to conduct its cinema exhibition businesses. On inception of a lease, the estimated cost of decommissioning any additions to these properties (known as leasehold improvements) is included within property, plant and equipment and depreciated over the lease term. A corresponding provision is set up as disclosed in Note 3.7.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for separately.

Depreciation is charged to the Income Statement on a straight-line basis over the asset’s estimated useful life. The major categories of property, plant and equipment are depreciated as follows:

• plant and equipment 3 – 20 years;

• buildings and improvements subject to long term leases Shorter of estimated useful life and term of lease;  freehold buildings 40 – 80 years; and  resort apartments and share of common property 40 – 80 years.

Freehold land and land subject to long term leases are not depreciated. Similarly, assets under construction (classified as capital work in progress) are not depreciated until they come into use, when they are transferred to buildings or plant and equipment as appropriate.

Impairment of property, plant and equipment

Property, plant and equipment that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include changes in technology and business performance.

The process of impairment testing is to estimate the recoverable amount of the assets concerned, and recognise an impairment loss in the Income Statement whenever the carrying amount of those assets exceeds the recoverable amount.

Impairment testing of property, plant and equipment is performed at an individual hotel or cinema site level, with the exception of cinema sites within a single geographic location, which are tested as one cash-generating unit. Details regarding impairment testing performed at 30 June 2017 is set out below.

51 EVENT Hospitality & Entertainment Limited – Annual Report 2017

			Total	$’000		1,863,237			(820,554)	1,042,683	258,956	22,369	1,105	(3,561)	(5,703)	(66,986)	(10,986)	(169)	1,237,708		1,658,815			(746,873)	911,942	173,841	21,497	2,710	(3,560)	(61,746)	(11,107)	9,106	1,042,683
Buildings and Resort	Land subject to improvements apartments and	Freehold land long term subject to long share of common Plant and Capital work in	and buildings leases term leases property equipment progress	$’000 $’000 $’000 $’000 $’000 $’000	2017	Gross balance at the beginning of the year 662,557 1,345 340,045 31,860 730,939 96,491	Accumulated depreciation, amortisation	and impairments at the beginning of the	year (114,799) – (193,266) (23,652) (488,837) –	Net balance at the beginning of the year 547,758 1,345 146,779 8,208 242,102 96,491	Additions 11,670 – 5,189 – 12,624 229,473	Additions from acquisitions 16,241 – 377 – 5,751 –	Transfers 68,183 – 5,089 – 41,924 (114,091)	Disposals (141) – – – (3,420) –	Disposal of business (2,096) – (430) – (3,177) –	Depreciation and amortisation (9,177) – (12,778) (227) (44,804) –	Impairment (6,179) – – – (2,691) (2,116)	Effect of movement in foreign exchange 33 (1) (36) – (352) 187	At 30 June 2017 626,292 1,344 144,190 7,981 247,957 209,944	2016	Gross balance at the beginning of the year 579,253 56 300,186 31,860 670,480 76,980	Accumulated depreciation, amortisation	and impairments at the beginning of the	year (95,195) – (183,700) (18,414) (449,564) –	Net balance at the beginning of the year 484,058 56 116,486 13,446 220,916 76,980	Additions 16,752 50 4,397 – 10,857 141,785	Additions from acquisitions – 1,002 17,644 – 2,851 –	Transfers 59,668 190 16,612 – 49,082 (122,842)	Disposals (2,829) – (47) – (684) –	Depreciation and amortisation (7,968) – (11,794) (411) (41,573) –	Impairment (4,324) – 912 (4,827) (2,868) –	Effect of movement in foreign exchange 2,401 47 2,569 – 3,521 568	At 30 June 2016 547,758 1,345 146,779 8,208 242,102 96,491

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3.3 – PROPERTY, PLANT AND EQUIPMENT (continued)

Independent valuations of interest in land and buildings

In assessing current values for the Group’s interest in land and buildings and integral plant and equipment, including long term leasehold land and improvements, the directors have relied in most cases upon independent valuations from registered qualified valuers or management value in use calculations. Except for investment properties, which are revalued every half year (refer to Note 3.4), valuations are generally carried out on a progressive three year cycle. The last valuations were completed as at June 2016 and June 2015.

Measurement of fair values

Amounts disclosed below represent the fair value of the Group’s interest in land and buildings, excluding investment properties, as determined at the time of the most recent independent valuation report. Independent registered qualified valuers are engaged to perform the valuations. The values are determined based on the highest and best use of each property. In most cases, the existing use is the highest and best use and values are determined on a going concern basis. For certain properties, the highest and best use may differ from the current use, and consideration may be given to the development of such properties at an appropriate time in the future in order to realise the full value of the property.

This fair value disclosure has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used. Going concern value is based on capitalisation and discounted cash flow methodologies, and significant unobservable inputs include the forecast net income for each property, and the capitalisation and discount rates used in determining fair value. In the most recent valuations, capitalisation rates utilised ranged from 5.25% to 14.00% and pre-tax discount rates utilised ranged from 6.00% to 13.75% per annum. For certain sites where the going concern value was not the highest and best use, fair value was determined using a direct comparison methodology with reference to recent sales of similar properties.

The fair values determined by the independent registered qualified valuers are sensitive to changes in these significant unobservable inputs. However, overall the fair value of the Group’s interest in land and buildings, excluding investment properties, is significantly higher than the book value of these interests as noted below.

properties, is significantly higher than the book value of these interests as noted below.
Most recent valuations of interest in land and buildings, excluding investment properties A summary of recent independent valuations, by year of the last valuation, is set out as follows: Existing use is highest and best use Independent valuation – 2016 – 2015 Alternate use is highest and best use Independent valuation – 2015 Land and buildings not independently valued Book value of land and buildings not independently valued	2017 $’000 2016 $’000
	474,326 474,460 576,110 602,665
	1,050,436 1,077,125 75,600 85,200 389,626 170,796
	1,515,662 1,333,121

The book value of the above interests at 30 June 2017 was $1,044,822,000 (2016: $843,646,000). The written-down book value of plant and equipment which is deemed integral to land and buildings, has been determined to total approximately $139,857,000 as at 30 June 2017 (2016: $127,622,000).

The above valuations do not take into account the potential impact of capital gains tax.

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3.3 – PROPERTY, PLANT AND EQUIPMENT (continued)

Impairment considerations at 30 June 2017

The trading performance of certain hotel properties caused the Group to assess their recoverable amount. Hotel properties are treated as separate cash-generating units and their recoverable values were estimated based on their value in use. In determining the estimated value in use, a discount rate of pre-tax 9.23% (2016: 9.06% to 13.00%) per annum was used. Cash flows were projected based on operating forecasts, with longer term cash flows, after the initial forecast periods, extrapolated using an average expected growth rate of 1.5% (2016: 1.5%) per annum. As a result of these assessments, impairment losses totalling $10,986,000 (2016: $13,415,000) were recognised in respect of hotel properties.

For hotels that had been subject to impairments in previous years, the trading performance and recoverable amount were also reviewed during the year. As a result of the review, there were no impairment charges booked in previous years, that were required to be reversed in the year. The 2016 year included impairment reversals totalling $1,712,000 that were recognised in respect of hotel properties. The recoverable amount was based on the most recent independent valuation as outlined above.

Given the long-life nature of these assets, the estimates of their recoverable value in use are particularly sensitive to changes in certain key assumptions. Although all assumptions used are considered to be appropriate at this time, an increase of one percentage point in the discount rate, for the hotel properties assessed would increase the impairment loss by $1,405,000. A 10% decrease in the forecast earnings would increase the impairment loss by $1,265,000.

The trading performance of certain cinema sites caused the Group to assess their recoverable amount. No impairment losses were recorded as a result of this assessment (2016: $nil).

Security

The following assets, whose carrying values are listed below, are subject to mortgage security to secure the Group’s bank loan facilities (refer to Note 4.4):

Freehold land and buildings Freehold land and buildings classified as investment properties Capital commitments Capital expenditure commitments contracted but not provided for and payable	2017 $’000 2016 $’000
	257,622 239,603 13,750 17,250
	271,372 256,853
	2017 $’000 2016 $’000
	70,715 26,537

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3.4 – INVESTMENT PROPERTIES

Accounting policy

Investment properties comprise land and buildings which are held for long term rental yields or for capital appreciation, or both, and are not occupied by the Group in the ordinary course of business or for administration purposes. Initially, investment properties are measured at cost including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value with any change therein recognised in profit or loss. Property that is being constructed or redeveloped for future use as an investment property is also measured at fair value (unless a fair value cannot be reliably determined).

When the use of a property changes from owner occupied to investment property, the property is reclassified as an investment property. Any difference at the date of transfer between the carrying amount of the property immediately prior to transfer and its fair value is recognised directly to the investment property revaluation reserve if it is an increase and to profit or loss if it is a decrease. A gain may be recognised to profit on remeasurement only to the extent it reverses a previous impairment loss on the property. Subsequent transfers from investment property to property, plant and equipment or inventories occur when there is a change in use of the property, usually evidenced by commencement of redevelopment for own use.

Investment properties are derecognised when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on derecognition of an investment property are recognised in profit or loss in the period of derecognition.

Fair value of investment properties

Investment properties are independently revalued to fair value each reporting period, with any gain or loss arising on remeasurement being recognised in profit or loss. The fair value of investment property has been categorised as a Level 3 fair value based on the inputs to the valuation technique used. In assessing the fair value of investment properties, a number of assumptions are made at the end of each reporting period regarding future cash flows, future property market economic conditions and other factors including cash flow discount rates, rental capitalisation rates, and recent market transactions for similar properties.

The carrying amount of investment properties is the fair value of the properties as determined by an independent registered qualified valuer. The significant unobservable inputs used by the valuer in determining the fair value of the investment properties held by the Group at 30 June 2017 included capitalisation rates on reversionary rental yields in the range of 6.75% to 8.50% (2016: 6.875% to 8.500%).

Investment properties comprise a number of commercial properties that are leased to third parties and which are held to derive rental income or capital appreciation or both. Each of the leases for investment properties contains an initial non-cancellable period of between five and 15 years. Subsequent renewals are negotiated with the lessee. No contingent rents are charged for these investment properties.

During the year ended 30 June 2017, $4,494,000 (2016: $6,331,000) was recognised as rental income for investment properties in the Income Statement, with $1,377,000 (2016: $1,353,000) incurred in respect of direct costs, including $145,000 (2016: $156,000) for repairs and maintenance.

Freehold land and buildings At fair value (Level 3 fair values) Summary of movements: Balance at the beginning of the year Additions Net transfer to property, plant and equipment Fair value (decrement)/increment Balance at the end of the year	2017 $’000 2016 $’000
	68,250 68,500
	68,500 71,050 – 20 – (3,150) (250) 580
	68,250 68,500

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3.5 – GOODWILL AND OTHER INTANGIBLE ASSETS

Accounting policy

Goodwill

Goodwill arises from business combinations as described in Note 5.1 and represents the future economic benefits that arise from assets that are not capable of being individually identified and separately recognised.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised, but instead is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Goodwill is allocated to cash-generating units, and impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised in respect of goodwill cannot be reversed.

The carrying amount of goodwill in respect of associates and joint ventures is included in the carrying amount of the investment in the associate or joint venture.

Construction rights

Construction rights relate to the Group’s ability to develop accommodation in the Thredbo Alpine Resort. Construction rights are recognised at cost and are derecognised as the rights are either sold or developed. The carrying value of construction rights is reviewed annually. Any amounts no longer considered recoverable are written off, with the impairment loss recorded in profit or loss.

Other intangible assets

Other intangible assets, which largely comprise management and leasehold rights and software, are stated at cost less accumulated amortisation and impairment losses. Management and leasehold rights are amortised over the life of the agreements, which range from 10 to 20 years, on a straight-line basis. Software for major operating systems is amortised over a four to five year period on a straight-line basis.

Impairment

The carrying amounts of the Group’s non-financial assets, other than investment properties (see Note 3.4), are reviewed at each reporting date to determine whether there is any indication of impairment. Where an indicator of impairment exists, the Group makes a formal estimate of the asset’s recoverable amount. For goodwill, the recoverable amount is estimated each year at the same time.

The recoverable amount of assets or cash-generating units is the greater of their fair value less costs to sell, and their value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Where the carrying amount of an asset or its related cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying value of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amounts of the other assets in the cash-generating unit on a pro-rata basis.

Impairment losses are recognised in profit or loss unless the asset or its cash-generating unit has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of the previous revaluation, with any excess recognised in profit or loss.

An impairment loss in respect of goodwill cannot be reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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3.5 – GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

Reconciliations

Summaries of the carrying amount movements of each class of intangible assets between the beginning and end of the year are set out below:

2017 Gross balance at the beginning of the year Accumulated amortisation and impairment losses at the beginning of the year Net balance at the beginning of the year Acquisitions and initial contributions Transfers Amortisation Disposals Net foreign currency differences on translation of foreign operations Net balance at the end of the year 2016 Gross balance at the beginning of the year Accumulated amortisation and impairment losses at the beginning of the year Net balance at the beginning of the year Acquisitions and initial contributions Transfers Amortisation Disposals Net foreign currency differences on translation of foreign operations Net balance at the end of the year	Goodwill $’000 Construction rights $’000 Liquor licences $’000 Management and leasehold rights $’000 Software $’000 Total $’000
	62,079 1,388 196 54,368 15,055 133,086
	– – – (17,067) (9,424) (26,491)
	62,079 1,388 196 37,301 5,631 106,595
	3,593 – – 5,712 1,117 10,422
	– – – – 146 146
	– – – (3,684) (2,114) (5,798)
	(2,164) – – – (43) (2,207)
	(36) – – (54) (169) (259)
	63,472 1,388 196 39,275 4,568 108,899
	50,935 1,388 196 43,146 14,915 110,580 – – – (12,950) (8,075) (21,025)
	50,935 1,388 196 30,196 6,840 89,555 9,857 – – 10,291 1,177 21,325 – – – 600 169 769 – – – (4,027) (2,709) (6,736) – – – – (12) (12) 1,287 – – 241 166 1,694
	62,079 1,388 196 37,301 5,631 106,595

Impairment losses recognised

No impairment losses in relation to goodwill have been recognised in the year ended 30 June 2017 (2016: $nil).

Impairment tests for cash-generating units containing goodwill The following units have carrying amounts of goodwill: Entertainment – Australia Entertainment – New Zealand Entertainment – Germany Hotels – New Zealand Hotels – Australia Multiple units without significant goodwill	2017 $’000 2016 $’000
	33,260 33,260 9,605 11,778 3,817 3,836 10,200 10,211 3,593 – 2,997 2,994
	63,472 62,079

The recoverable value of goodwill relating to the exhibition business in Australia and New Zealand, and goodwill relating to the Group’s share of a cinema joint venture in Germany, have been determined by value in use calculations. This calculation uses cash flow projections based on operating forecasts and projected five year results, with cash flows beyond the five year period being projected using a per annum growth rate of 2.5%, which is considered appropriate given economic indicators and the expected long term increase in revenue and operating costs in these markets. Pre-tax discount rates of 7.86% to 12.0% (2016: 7.7% to 12.0%) per annum have been used in discounting the projected cash flows. In management’s assessment, there are no reasonable possible changes in assumptions that would give rise to an impairment.

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3.6 – TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost. Trade payables are normally non-interest bearing and settled within 30 days. Payables are stated with the amount of GST or equivalent tax included.

The carrying value of trade and other payables is considered to approximate fair value.

The carrying value of trade and other payables is considered to approximate fair value.
Trade payables Other payables and accruals	2017 $’000 2016 $’000
	20,381 21,582 86,514 79,025
	106,895 100,607

3.7 – PROVISIONS

Accounting policy

Employee benefits

Provision is made for employee benefits including annual leave and long service leave for employees. The provision is calculated as the present value of the Group’s net obligation to pay such benefits resulting from the employees’ services provided up to the reporting date. The provisions due or available to be settled within 12 months have been calculated at undiscounted amounts based on the remuneration rates the employer expects to pay after the reporting date and includes related on-costs.

The liability for employees’ benefits to long service leave represents the present value of the estimated future cash outflows to be made by the employer resulting from employees’ services provided up to the reporting date.

Liabilities for employee benefits which are not due to be settled within 12 months are discounted using the rates attaching to national government securities at reporting date, which most closely match the terms of maturity of the related liabilities.

In determining the liability for employee benefits, consideration has been given to future increases in wage and salary rates, and the Group’s experience with staff departures. Related on-costs have also been included in the liability.

Insurance loss contingencies and other claims

The insurance loss contingencies and other claims provision relates to estimated costs to be incurred in respect of various claims that are expected to be settled within 12 months of the balance date.

Decommissioning of leasehold improvements

A provision for the estimated cost of decommissioning leasehold improvements is made where a legal or constructive obligation exists.

In determining the provision for decommissioning costs, an assessment is made for each location of the likelihood and amount of the decommissioning costs to be incurred in the future. The estimated future liability is discounted to a present value, with the discount amount unwinding over the life of the leasehold asset as a finance cost in profit or loss. The estimated decommissioning cost recognised as a provision is included as part of the cost of the leasehold improvements at the time of installation or during the term of the lease, as the liability for decommissioning is reassessed. This amount capitalised is then depreciated over the life of the asset.

The decommissioning of leasehold improvements provision has been raised in respect of “make-good” obligations under long term lease contracts for various cinema sites. In determining the provision, an assessment has been made, for each location, of the likelihood that a decommissioning cost will be incurred in the future and, where applicable, the level of costs to be incurred. Uncertainty exists in estimating the level of costs to be incurred in the future because of the long term nature of cinema leases. The basis of accounting is set out in Note 3.3.

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3.7 – PROVISIONS (continued)

Other

Other provisions are recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Current Employee benefits Insurance loss contingencies and other claims Decommissioning of leasehold improvements Non-current Employee benefits Decommissioning of leasehold improvements Movements in provisions Movements in the carrying amounts of each class of provisions, except for employee benefits, are set out below: Insurance loss contingencies and other claims Carrying amount at the beginning of the year Payments Provided Reversed Net foreign currency differences on translation of foreign operations Carrying amount at the end of the year Decommissioning of leasehold improvements Carrying amount at the beginning of the year Provided Payments Reversed Notional interest Net foreign currency differences on translation of foreign operations Carrying amount at the end of the year	2017 $’000 2016 $’000
	20,532 19,886 81 75 – –
	20,613 19,961
	2,830 2,093 11,510 11,377
	14,340 13,470
	75 218 (20) (59) 26 59 – (145) – 2
	81 75
	11,377 8,718 96 2,490 – (148) (50) (52) 114 210 (27) 159
	11,510 11,377

3.8 – OTHER LIABILITIES

Other liabilities include contract deposits received in advance and deferred lease incentive balances arising from operating leases. Refer to Note 7.1 for further details regarding operating lease arrangements.

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This section outlines the Group’s capital structure, including how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt).

On the following pages, there are sections on the Group’s share capital, dividends, reserves, loans and borrowings, and financial risk management.

4.1 – SHARE CAPITAL

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. The Company does not have authorised capital or par value in respect of its issued shares.

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Share capital Fully paid ordinary shares Movements in share capital Balance at the beginning of the year Performance shares exercised and withdrawn from the trust Balance at the end of the year Share capital consists of: Ordinary shares Tax Exempt Share Plan shares Employee Share Plan shares Treasury shares Performance shares	2017 Shares 2016 Shares	2017 $’000 2016 $’000
	159,488,932 158,732,489	219,126 219,126
	158,732,489 158,106,883 756,443 625,606	219,126 219,126 – –
	159,488,932 158,732,489	219,126 219,126
	159,369,264 158,584,722 27,548 34,647 92,120 113,120
	159,488,932 158,732,489 1,070,991 1,827,434
	160,559,923 160,559,923

Share buy-back

There is no current on-market buy-back.

Dividend Reinvestment Plan

The Dividend Reinvestment Plan was suspended in August 2010.

Treasury shares

Treasury shares consist of shares held in trust in relation to the Group’s Executive Performance Share Plan. As at 30 June 2017, a total of 1,070,991 (2016: 1,827,434) shares were held in trust and classified as treasury shares. Information relating to the Group’s share-based payment arrangements is set out in Note 6.1.

Options

Other than the performance rights disclosed in Note 6.1, there were no share options on issue as at 30 June 2017 (2016: nil).

Capital management

The Group manages its capital with the objective of maintaining a strong capital base so as to maintain investor, creditor and market confidence and to have the capacity to take advantage of opportunities that will enhance the existing businesses and enable future growth and expansion. The Board monitors the return on capital, which the Group defines as operating profit after income tax divided by shareholders’ equity and long term debt. The Board also monitors the Group’s gearing ratio, being net debt divided by shareholders’ equity.

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4.1 – SHARE CAPITAL (continued)

It is recognised that the Group operates in business segments in which operating results may be subject to volatility and the Board continuously reviews the capital structure to ensure sufficient:

• surplus funding capacity is available;

• funds are available for capital expenditure and to implement longer term business development strategies; and

• funds are available to maintain appropriate dividend levels.

There were no changes in the Group’s approach to capital management during the year. No Group entity is subject to externally imposed capital requirements.

4.2 – DIVIDENDS

Per share Cents Total amount $’000 Date ofpayment Tax rate for franking credit Percentage franked Dividends on ordinary shares paid during the year were: 2017 Final 2016 dividend 31 49,774 22 September 2016 30% 100% Interim 2017 dividend 20 32,112 16 March 2017 30% 100% 81,886 2016 Final 2015 dividend 29 46,562 17 September 2015 30% 100% Special dividend 8 12,845 17 September 2015 30% 100% Interim 2016 dividend 20 32,112 17 March 2016 30% 100% 91,519 Subsequent events Since the end of the year, the directors declared the following dividends: Final 2017 dividend 31 49,774 21 September 2017 30% 100%	Per share Cents	Total amount $’000 Date ofpayment Tax rate for franking credit Percentage franked
	the year we	re:
	31	49,774 22 September 2016 30% 100%
	20	32,112 16 March 2017 30% 100%
		81,886

The financial effect of the final dividend in respect of the year has not been brought to account in the financial statements for the year ended 30 June 2017 and will be recognised in subsequent financial statements.

Franking credit balance The amount of franking credits available for future reporting periods	2017 $’000 2016 $’000
	140,314 138,821

The 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 is to reduce the balance by $21,332,000 (2016: $21,332,000). The ability to utilise franking credits is dependent upon the Company being in a sufficient positive net asset position and also having adequate available cash flow liquidity.

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4.3 – RESERVES

Available-for-sale financial assets revaluation reserve

This reserve includes the cumulative net change in the fair value of available-for-sale financial assets. Amounts are recognised in the Income Statement when the associated assets are sold or impaired.

Investment property revaluation reserve

This reserve relates to property that has been reclassified as an investment property and represents the cumulative increase in the fair value of the property at the date of reclassification.

Hedging reserve

This reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Share-based payments reserve

This reserve includes the cumulative fair value of the executive performance shares and performance rights which have been recognised as an employee expense in the Income Statement. See Note 6.1 for further details regarding share-based payment arrangements.

Foreign currency translation reserve

This reserve records the foreign currency differences arising from the translation of foreign operations, the translation of transactions that hedge the Group’s net investment in a foreign operation or the translation of foreign currency monetary items forming part of the net investment in a foreign operation and the Group’s share of associates’ increment or decrement in their foreign currency translation reserve.

Movements in reserves during the year At 1 July 2016 Movement in fair value of available-for-sale financial assets – net of tax Movement in fair value of cash flow hedging instruments – net of tax Amount recognised in the Income Statement as an employee expense Transfer to the Income Statement on sale of interest in the Fiji Cinema Joint Venture Currency translation adjustment on controlled entities’ financial statements Other adjustments At 30 June 2017	Available-for- sale financial assets revaluation $’000 Investment property revaluation $’000 Hedging $’000 Share-based payments $’000 Foreign currency translation $’000 Total $’000
	14,091 5,121 10 21,779 5,320 46,321
	(97) – – – – (97)
	– – (20) – – (20)
	– – – 7,873 – 7,873
	– – – – 306 306
	– – – – 381 381
	– – – 169 – 169
	13,994 5,121 (10) 29,821 6,007 54,933

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4.4 – LOANS, BORROWINGS AND FINANCING ARRANGEMENTS

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

Loans and borrowings

Interest bearing and non-interest bearing loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings using the effective interest method. The carrying value of loans and borrowings is considered to approximate fair value.

Finance costs

Finance costs include interest, unwinding of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with arrangement of borrowings and lease finance charges. Ancillary costs incurred in connection with the arrangement of loans and borrowings are capitalised and amortised over the life of the borrowings. Finance costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is that incurred in relation to that borrowing, net of any interest earned on those borrowings. Borrowing costs that are not directly attributable to the acquisition, construction or production of qualifying assets are recognised in profit or loss using the effective interest method.

Bank debt – secured

At 30 June 2017, the Group’s secured bank debt facilities comprised the following:

• $350,000,000 revolving multi-currency loan facility;

• $30,000,000 credit support facility (for the issue of letters of credit and bank guarantees); and

• $50,000 overdraft limit to support its transactional banking facilities.

The above facilities were to mature on 12 September 2017 and were supported by interlocking guarantees from most Group entities and were secured by specific property mortgages. Debt drawn under these facilities bears interest at the relevant inter-bank benchmark reference rate plus a margin of between 1.1% and 2% per annum. At 30 June 2017, the Group had drawn $323,905,000 (2016: $198,364,000) under the debt facilities, of which $nil (2016: $nil) was subject to interest rate swaps used for hedging, and had drawn $2,948,000 under the credit support facility (2016: $2,748,000).

Subsequent to 30 June 2017, the Group’s secured bank debt facilities were amended and restated on 15 August 2017 and now comprise the following:

• $525,000,000 revolving multi-currency loan facility; and

• $15,000,000 credit support facility (for the issue of letters of credit and bank guarantees).

The above facilities mature on 15 August 2020 and are supported by interlocking guarantees from most Group entities and are secured by specific property mortgages. Debt drawn under these facilities bears interest at the relevant inter-bank benchmark reference rate plus a margin of between 1.15% and 2.1% per annum.

Other facility – secured

Certain wholly owned German subsidiaries have arranged a secured five year guarantee facility of €17,000,000 (A$25,260,000) (for the issue of letters of credit and bank guarantees)

The facility is supported by interlocking guarantees from certain (non-Australian based) Group entities and are secured against a specific property in Germany. Debt drawn under the facility bears interest at the relevant inter-bank benchmark rate plus a margin of between 0.75% and 2.75% per annum. At 30 June 2017, the Group had drawn €15,052,000 (A$22,365,000) under the facility.

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4.4 – LOANS, BORROWINGS AND FINANCING ARRANGEMENTS (continued)

Loans and borrowings Current Interest bearing loans and borrowings Bank loans – secured Deferred financing costs Non-interest bearing loans and borrowings Loans from other companies – unsecured Non-current Interest bearing loans and borrowings Bank loans – secured Deferred financing costs Non-interest bearing loans and borrowings Loans from other companies – unsecured	2017 $’000 2016 $’000
	323,905 776 (98) –
	323,807 776 1,634 1,249
	325,441 2,025
	– 200,640 – (570)
	– 200,070 2,360 2,540
	2,360 202,610

4.5 – FINANCIAL RISK MANAGEMENT

Derivative financial instruments

From time to time, the Group uses derivative financial instruments to hedge its exposure to interest rate and foreign exchange risks arising from operating activities, investing activities and financing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.

Derivative financial instruments are recognised at fair value within prepayments and other current assets. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the reporting date, taking into account current interest rates and the creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the reporting date, being the present value of the quoted forward price.

Available-for-sale financial assets

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with the investment.

After initial recognition, investments, which are classified as available-for-sale, are measured at fair value. Available-for-sale financial assets comprise marketable equity securities.

For investments that are actively traded in organised financial markets, fair value is determined by reference to securities exchange quoted market bid prices at the close of business at reporting date.

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4.5 – FINANCIAL RISK MANAGEMENT (continued)

Gains or losses on available-for-sale financial assets are recognised as a separate component of equity in the available-for-sale financial assets revaluation reserve until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in profit or loss.

An impairment loss recognised in profit or loss in respect of an available-for-sale investment is reversed through profit or loss to the extent that the investment’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

if no impairment loss had been recognised.
Available-for-sale financial assets Investment in a listed company	2017 $’000 2016 $’000
	19,928 20,067

The Group’s investment is in a company listed on the ASX. No reasonably possible change in the share price of this company would have a material effect on the available-for-sale financial assets balance or the related revaluation reserve at the reporting date.

Financial risks

The Group’s exposure to financial risks, objectives, policies and processes for managing the risks including methods used to measure the risks, and the management of capital are presented below.

The Group’s activities expose it to the following financial risks:

• credit risk;

• liquidity risk; and

• market risk, including interest rate and foreign exchange risks.

The Board has overall responsibility for the oversight of the risk management framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly and modified as appropriate to reflect changes in market conditions and the Group’s activities.

The Audit and Risk Committee oversees how management has established and monitors internal compliance and control systems and to ensure the appropriate and effective management of the above risks. The Audit and Risk Committee is assisted in its oversight role by the Internal Audit function. The Internal Audit function undertakes reviews of risk management controls and procedures in accordance with an annual plan approved by the Audit and Risk Committee. The results of these Internal Audit reviews are reported to the Audit and Risk Committee.

Credit risk

Credit risk arises from trade and other receivables outstanding, cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. It is the risk of financial loss to the Group if a customer or counterparty to the financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables. Information regarding the Group’s trade receivable balances is disclosed in Note 3.1. The Group’s exposure to credit risk is not considered material.

The Group’s maximum exposure to credit risk at the reporting date was considered to approximate the carrying value of receivables at the reporting date.

Investments and derivatives

Investments of surplus cash and deposits and derivative financial instruments are with banks with high credit ratings. Given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

At 30 June 2017, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the Statement of Financial Position.

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4.5 – FINANCIAL RISK MANAGEMENT (continued)

Guarantees

All guarantees are in respect of obligations of subsidiaries, associates, joint ventures or joint operations in which the Group has an interest, and principally relate to operating lease arrangements. The Group’s operating lease commitments are disclosed in Note 7.1, and details of guarantees given by the parent entity are provided in Note 7.5.

Security deposits

Security deposits relate to the Group’s operating lease arrangements. Certain lease agreements require an amount to be placed on deposit, which should then be returned to the Group at the conclusion of the lease term.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows. The Group’s treasury function aims to maintain flexibility in funding by maintaining committed credit lines with a number of counterparties.

The Group’s financial liabilities

The contractual maturities of the Group’s financial liabilities, including interest payments and excluding the impact of netting agreements, are as follows:

2017 Non-derivative financial liabilities Secured loans Unsecured non-interest bearing loans from other companies Trade payables Other payables and accruals Derivative financial liabilities Forward exchange contracts 2016 Non-derivative financial liabilities Secured loans Unsecured non-interest bearing loans from other companies Trade payables Other payables and accruals Derivative financial liabilities Forward exchange contracts	Carrying amount $’000 Contractual cash flows $’000 6 months or less $’000 6 to 12 months $’000 1 to 2 year(s) $’000 2 to 5 years $’000 Over 5 years $’000
	323,905 (325,754) (325,754)    
	3,994 (3,994) (817) (817) (1,128) (1,328) 96
	20,381 (20,381) (20,381)    
	86,514 (86,514) (86,514)    
	14 (14) (14)    
	434,808 (436,657) (433,480) (817) (1,128) (1,328) 96
	Carrying amount $’000 Contractual cash flows $’000 6 months or less $’000 6 to 12 months $’000 1 to 2 year(s) $’000 2 to 5 years $’000 Over 5 years $’000
	201,416 (209,234) (4,046) (3,194) (199,832) (2,162)  3,789 (3,789) (625) (624) (1,173) (1,202) (165) 21,582 (21,582) (21,582)     79,025 (79,025) (79,025)     (14) 14 14    
	305,798 (313,616) (105,264) (3,818) (201,005) (3,364) (165)

For derivative financial assets and liabilities, maturities detailed in the table above approximate periods that cash flows and the impact on profit or loss are expected to occur.

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4.5 – FINANCIAL RISK MANAGEMENT (continued)

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimising the return.

The Group uses derivative financial instruments such as interest rate swaps and forward exchange contracts to hedge exposures to fluctuations in interest rates and foreign exchange rates. Derivatives are used exclusively for hedging purposes and are not traded or used as speculative instruments. This is carried out under Board approved treasury policies.

Hedge of net investment in foreign operations

The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation, that is determined to be an effective hedge, is recognised in other comprehensive income and presented in equity in the foreign currency translation reserve. The ineffective portion is recognised immediately in profit or loss.

Interest rate risk

The Group manages interest rate exposures on borrowings in accordance with a Board approved treasury policy that specifies parameters for hedging including hedging percentages and approved hedging instruments. The policy specifies upper and lower hedging limits set for specific timeframes out to five years. These limits may be varied with the approval of the Board.

At reporting date, the interest rate profile of the Group’s interest bearing financial instruments was:

Fixed rate instruments Financial assets Financial liabilities Variable rate instruments Financial assets Financial liabilities		2017 $’000 2016 $’000
		   
		 
		83,506 138,913 (323,905) (200,640)
		(240,399) (61,727)

The Group manages interest rate risk in accordance with a Board approved treasury policy covering the types of instruments, range of protection and duration of instruments. The financial instruments cover interest rate swaps and forward rate agreements. Maturities of these instruments are up to a maximum of five years. Interest rate swaps and forward rate agreements allow the Group to raise long term borrowings at floating rates and swap a portion of those borrowings into fixed rates.

The approved range of interest rate cover is based on the projected debt levels for each currency and reduced for each future year. Due to the current low level of Group debt, there were no interest rate hedges at 30 June 2017 (2016: no interest rate hedges).

The Group classifies interest rate swaps as cash flow hedges and recognises them at fair value in the Statement of Financial Position.

The Group accounts for fixed rate financial assets and liabilities at fair value. The Group had no fixed rate instruments for the year ended 30 June 2017 (2016: no fixed rate instruments) and accordingly no sensitivity analysis has been prepared in the current or prior year.

Foreign exchange risk

The Group is exposed to currency risk on purchases, borrowings and surplus funds that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Australian dollar (“AUD”), but also the New Zealand dollar (“NZD”), Euro (“EUR”) and Great British pound (“GBP”). Transactions undertaken by Group entities are primarily denominated in AUD, NZD, EUR and the US dollar (“USD”).

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4.5 – FINANCIAL RISK MANAGEMENT (continued)

The Group manages foreign currency exposures in accordance with a Board approved treasury policy that specifies parameters for hedging, including hedging percentages and approved hedging instruments. At any point in time, the Group hedges up to 60% of “highly probable” foreign currency exposures and 100% of confirmed foreign currency exposures. Typically, foreign currency exposures are hedged with the utilisation of forward exchange contracts.

The Group’s exposure to foreign currency risk in AUD equivalents at the reporting date was as follows, based on notional amounts:

Cash and cash equivalents Trade receivables Secured bank loans Trade payables Gross balance sheet exposure Forward exchange contracts Net exposure	2017 2016 NZD $’000 EUR $’000 GBP $’000 USD $’000 NZD $’000 EUR $’000 GBP $’000 USD $’000
	842 4,666 10 1,270 399 1,848 223 1,701 108 – – – 225 – – – (81,905) – – – (74,364) – – – (316) – – – (451) – – –
	(81,271) 4,666 10 1,270 (74,191) 1,848 223 1,701
	– – – (14) – – – 14
	– – – (14) – – – 14
	(81,271) 4,666 10 1,256 (74,191) 1,848 223 1,715

Sensitivity analysis

No reasonably possible change in prevailing foreign exchange rates would have a significant impact on the Income Statement or hedging reserve in the current or prior year.

Hedging of net investment in foreign subsidiaries

The Group’s NZD denominated bank loan is designated as a hedge of the foreign currency exposure to the Group’s net investment in its subsidiaries in New Zealand. The carrying amount of the loan at 30 June 2017 was $81,905,000 (2016: $74,364,000). A foreign exchange loss of $25,000 (2016: loss of $5,007,000) was recognised in equity on translation of the loan to AUD.

Financial instruments fair value determination method grading

Valuation methods for financial instruments carried at fair value are defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Available-for-sale financial assets are classified as Level 1 financial instruments. Derivative financial instruments are classified as Level 2 financial instruments.

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This section explains the composition of the Group.

On the following pages, there are sections on businesses acquired during the year, a list of subsidiaries, investments in associates and joint ventures, and disclosures regarding interests in other entities including cinema partnership interests.

5.1 – BUSINESS COMBINATIONS

Accounting policy

Business combinations are accounted for using the acquisition method as at the date when control is transferred to the Group. Under the acquisition method, consideration transferred in a business combination is generally measured at fair value, as are the identifiable net assets acquired. Consideration transferred includes the fair value of any contingent consideration, and share-based payment awards of the acquiree that are required to be replaced in the business combination.

The Group measures goodwill arising from the business combination at the acquisition date as the fair value of the consideration transferred, including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. Any goodwill that arises is tested annually for impairment; see Note 3.5. If the consideration transferred is lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in profit or loss.

A contingent liability of the acquiree is assumed in a business combination only if the liability represents a present obligation and arises from past events, and its fair value can be measured.

The Group measures any non-controlling interest at its proportionate interest of the fair value of identifiable net assets of the acquiree.

Transaction costs incurred by the Group in connection with a business combination, such as due diligence fees, legal fees and other professional costs, are expensed as incurred.

Business combination in the year ended 30 June 2017

The Group acquired the following businesses during the year:

Downtown Cinemas

Effective 28 July 2016, Event Cinemas Limited, a wholly-owned subsidiary in New Zealand, acquired three cinemas in Palmerston North, Paraparaumu and Havelock North, New Zealand. The consideration paid was $7,255,000 (NZ$7,650,000).

The Group recognised the fair value of the following identifiable assets and liabilities relating to this acquisition:

Plant and equipment Inventories Sub-total Leasehold and management rights Total net value of identifiable assets	Fair value at acquisition date $’000
	1,762 69
	1,831 5,424
	7,255

Leasehold and management rights

Leasehold and management rights were recognised as a result of the acquisition as follows:

Total cash consideration paid, net of cash acquired Less: net value of other identifiable assets and liabilities Leasehold and management rights	$’000
	7,255 (1,831)
	5,424

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5.1 – BUSINESS COMBINATIONS (continued)

Leasehold and management rights will be amortised over the remaining term of the lease. Amortisation of leasehold and management rights is not expected to be deductible for income tax purposes.

The Group incurred direct costs relating to this acquisition of $33,000 which have been expensed in the Income Statement for the period.

The Income Statement includes revenue and net profit for the year ended 30 June 2017 of $6,734,000 and $625,000 respectively as a result of this acquisition.

Rydges Geelong

On 3 March 2017, the Group acquired a hotel property in Geelong in Victoria, Australia. The total consideration paid for the acquisition was $23,994,000.

The Group recognised the fair value of the following identifiable assets and liabilities relating to the acquisition:

	Fair value at acquisition date
	$’000
Property, plant and equipment	20,607
Other assets and liabilities	(206)
Total net value of identifiable assets	20,401
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
	$’000
Total cash consideration paid, net of cash acquired	23,994
Less: net value of identifiable assets and liabilities	(20,401)
Goodwill	3,593

The goodwill is attributable mainly to the trading reputation and other intangible assets which are not separately identifiable. Goodwill recognised is not expected to be deductible for income tax purposes.

The Group incurred direct costs relating to this acquisition of $1,159,702 which have been expensed in the Income Statement for the year.

The Income Statement includes revenue and net loss for the year ended 30 June 2017 of $2,150,000 and $9,000 respectively as a result of this acquisition. Had the acquisition occurred at the beginning of the year, it is estimated that the Income Statement would have included additional revenue and net profit of approximately $7,597,000 and $1,465,000 respectively.

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5.1 – BUSINESS COMBINATIONS (continued)

Business combination in the year ended 30 June 2016

The Group acquired the following business during the prior year:

Museum Art Hotel, Wellington, New Zealand

On 3 August 2015, the Group acquired the Museum Art Hotel, Wellington, New Zealand. The total consideration paid for the acquisition was $26,549,000 (NZ$28,846,000).

The Group recognised the fair value of the following identifiable assets and liabilities relating to the acquisition:

Property, plant and equipment Other assets and liabilities Deferred tax liabilities Total net value of identifiable assets	Fair value at acquisition date $’000
	20,755 318 (4,381)
	16,692

Goodwill
Goodwill was recognised as a result of the acquisition as follows:
	$’000
Total cash consideration paid, net of cash acquired	26,549
Less: net value of identifiable assets and liabilities	(16,692)
Goodwill	9,857

The goodwill is attributable mainly to the trading reputation and other intangible assets which are not separately identifiable. Goodwill recognised is not expected to be deductible for income tax purposes.

The Group incurred direct costs relating to this acquisition of $96,000 which have been expensed in the Income Statement for the year.

The Income Statement includes revenue and net profit for the year ended 30 June 2016 of $13,568,000 and $3,187,000 respectively as a result of this acquisition. Had the acquisition occurred at the beginning of the year, it is estimated that the Income Statement would have included additional revenue and net profit of approximately $1,363,000 and $276,000 respectively.

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5.2 – SUBSIDIARIES

Accounting policy

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Intra-Group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial report.

Subsidiaries Note Albury Hotel Property Unit Trust Amalgamated Cinema Holdings Limited (c) Amalgamated Holdings Superannuation Fund Pty Limited Ancona Investments Pty Limited Atura Adelaide Airport Unit Trust Atura Holdings Pty Limited Atura Hotels and Resorts Pty Limited Bay City Cinemas Limited (c) Birch, Carroll & Coyle Limited BLN Hotels Property Unit Trust Bryson Centre Unit Trust Bryson Hotel Property Unit Trust Bryson Hotel Pty Limited Canberra Theatres Limited CMS Cinema Management Services GmbH & Co. KG (a)(e) CMS Cinema Verwaltungs GmbH (a)(e) Edge Digital Cinema Pty Limited Edge Digital Technology Pty Limited Edge Investments BV (a)(d) Elsternwick Properties Pty Limited Event Cinema Entertainment Pty Limited Event Cinemas (Australia) Pty Limited Event Cinemas (Fiji) Limited (f) Event Cinemas Limited (c) Event Cinemas Nominees Limited (c) Event Cinemas (NZ) Limited (c) Event Cinemas Queen Street Nominees Limited (c) Event Hotels and Resorts Pty Limited Event Hotels (NZ) Limited (a)(c) EVT Administration Pty Limited Filmpalast am ZKM Karlsruhe Beteiligungs GmbH (a)(e) Filmpalast Konstanz Beteiligungs GmbH (a)(e) First Cinema Management BV (a)(d) 2015 First Holding GmbH (a)(e) Flaggspelt Vermogensverwaltungsgesellschaft mbH (a)(e) Glenelg Theatres Pty Limited Greater Entertainment Pty Limited Greater Occasions Australia Pty Limited Greater Union Betriebsmittel GmbH (a)(e) Greater Union Filmpalast Cubix in Berlin GmbH (a)(e)

Ownership interest 2017 % 2016 %

100 100 100 100 100 100 100 100 100  100  100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100  100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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S E C T I O N 5 – G R O U P C O M P O S I T I O N
5.2 – SUBSIDIARIES (continued) Note	Ownership interest 2017 % 2016 %
Greater Union Filmpalast Dortmund GmbH & Co. KG (a)(e) Greater Union Filmpalast GmbH (a)(e) Greater Union Filmpalast in der Kulturbrauerei Berlin GmbH (a)(e) Greater Union Filmpalast in Hamburg GmbH (a)(e) Greater Union Filmpalast Rhein-Main GmbH (a)(e) Greater Union First Cinema BV and Co. KG (a)(e) Greater Union International BV (a)(d) Greater Union International GmbH (a)(e) Greater Union International Holdings Pty Limited Greater Union Limited (b) Greater Union Media & Event GmbH (a)(e) Greater Union Nominees Pty Limited Greater Union Real Estate 40 GmbH (a)(e) Greater Union Real Estate Mainz GmbH (a)(e) Greater Union Screen Entertainment Pty Limited Greater Union Theaters Beteiligungs GmbH (a)(e) Greater Union Theaters Dritte GmbH & Co. KG (a)(e) Greater Union Theaters Dritte Verwaltungs GmbH (a)(e) Greater Union Theaters GmbH (a)(e) Greater Union Theaters Management Mainz GmbH (a)(e) Greater Union Theaters Verwaltungs GmbH (a)(e) Greater Union Theaters Zweite GmbH & Co. KG (a)(e) Greater Union Theaters Zweite Verwaltungs GmbH (a)(e) Greattheatre Pty Limited GU Real Estate Mainz Management GmbH (a)(e) GUO Investments (WA) Pty Limited Gutace Holdings Pty Limited Haparanda Pty Limited Haymarket’s Tivoli Theatres Pty Limited Kidsports Australia Pty Limited Kosciuszko Thredbo Pty Limited KTPL Unit Trust Kvarken Pty Limited Lakeside Hotel Property Unit Trust Lakeside Hotel Pty Limited Lakeside International Hotel Unit Trust Mamasa Pty Limited Multiplex Cinemas Magdeburg GmbH (a)(e) Multiplex Cinemas Oberhausen GmbH (a)(e) Neue Filmpalast GmbH & Co. KG (a)(e) Neue Filmpalast Management GmbH (a)(e) NFP Erste GmbH & Co. KG (a)(e) NFP Erste Verwaltungs GmbH (a)(e) Noahs Hotels (NZ) Limited (a)(c) Noahs Limited Northside Gardens Hotel Property Unit Trust Northside Gardens Hotel Pty Limited Pantami Pty Limited 203 Port Hacking Road Pty Limited QT Gold Coast Pty Limited QT Hotels and Resorts Pty Limited QT Resort Port Douglas Pty Limited RH Hotels Pty Limited	100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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S E C T I O N 5 – G R O U P C O M P O S I T I O N
5.2 – SUBSIDIARIES (continued) Note	Ownership interest 2017 % 2016 %
RQ Motels Pty Limited Rydges Bankstown Pty Limited Rydges Cronulla Pty Limited Rydges Gladstone Hotel Property Unit Trust Rydges Hobart Hotel Property Unit Trust Rydges Hobart Hotel Pty Limited Rydges Hotels Limited Rydges Hotels Property Unit Trust Rydges HPT Pty Limited Rydges Property Holdings Pty Limited Rydges Rotorua Hotel Limited (a)(c) Rydges Townsville Hotel Property Unit Trust Sonata Hotels Pty Limited Southport Cinemas Pty Limited Sunshine Cinemas Pty Limited Tannahill Pty Limited The Geelong Theatre Company Limited The Greater Union Organisation Pty Limited Thredbo Resort Centre Pty Limited Tourism & Leisure Pty Limited Vierte Kinoabspielstatten GmbH & Co. KG (a)(e) Vierte Kinoabspielstatten Verwaltungs GmbH (a)(e) Western Australia Cinemas Pty Limited Zollverein Pty Limited Zweite Kinoabspielstatten GmbH & Co. KG (a)(e) Zweite Kinoabspielstatten Verwaltungs GmbH (a)(e)	100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

(a) These companies are audited by other member firms of KPMG International.

(b) This company was incorporated in and carries on business in the United Kingdom.

(c) These companies were incorporated in and carry on business in New Zealand.

(d) These companies were incorporated in and carry on business in The Netherlands.

(e) These companies were incorporated in and carry on business in Germany.

(f) This company was incorporated and is domiciled in Fiji, and was sold on 29 June 2017.

All companies, except those stated above, were incorporated in Australia. All trusts were established in Australia.

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5.3 – INTERESTS IN OTHER ENTITIES

Accounting policy

Interests in equity accounted investees

The Group’s interests in equity accounted investees comprise interests in associates and interests in joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Interests in associates and joint ventures (see below) are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, until the date on which significant influence or joint control ceases.

Unrealised gains arising from transactions with equity accounted investees are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control, in which the parties are bound by a contractual arrangement, and the contractual arrangement gives two or more of those parties joint control of the arrangement.

The Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group’s rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances.

The Group’s interests in joint operations, which are arrangements in which the parties have rights to the assets and obligations for the liabilities, are accounted for on the basis of the Group’s interest in those assets and liabilities. The Group’s interests in joint ventures, which are arrangements in which the parties have rights to the net assets, are equity accounted.

Investments in associates and joint ventures Associates Joint ventures	2017 $’000 2016 $’000
	147 150 10,795 11,819
	10,942 11,969

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Joint ventures Details of the Group’s investments in joint ventures, which are accounted for using the equity method, are as follows: Ownership interest Investment carrying amount Contribution to operating profit Country of 2017 2016 2017 2016 2017 2016 Name Principal activities incorporation % % $’000 $’000 $’000 $’000	(73) 1,193 1,015 325 (188)	2,272	Group also has a June. to operating ofit 2016 $’000	1 – – – –	1
		2,687	Joint Venture. The enture is 50%. nt ventures is 30 Contribution pr 2017 $’000
	(65) 1,341 879 532 –			(3) – – – –	(3)
	881 1,571 873 8,205 289	11,819	s Plains Multiplex s Multiplex Joint V e Group’s joi t carrying unt 2016 $’000	150  – – –	150
		10,795	3% of the Brown the Browns Plain te of each of th Investmen amo 2017 $’000
	816 1,446 809 7,437 287			147 – – – –	147
	(a)50 50 50 50 50 y Limited owns 3 fective interest in he balance da ip interest 2016 %
		Pt ef T h
	(a)50 50 50 50 50	ns Cinemas roup’s total 15,000). follows: Owners 2017 %
		ai G ,4 s
	Browns Plains Cinemas Pty Limited Operator of a multiscreen cinema complex Australia Filmpalast am ZKM Karlsruhe GmbH & Co. KG Operator of a multiscreen cinema complex Germany Filmpalast Konstanz GmbH & Co. KG Operator of a multiscreen cinema complex Germany Loganholme Cinemas Pty Limited Operator of a multiscreen cinema complex Australia Red Carpet Cinema Communication GmbH & Co. KG Event management Germany (a) The Group acquired a 50% interest in Browns Plains Cinemas Pty Limited on 29 September 2015 (see Note 5.4). Browns Pl direct 33% share in the Browns Plains Multiplex Joint Venture which is accounted for as a joint operation (see page 77). The Dividends received from joint ventures for the year ended 30 June 2017 amount to $3,692,000 (2016: $2 Associates Details of the Group’s investments in associates, which are accounted for using the equity method, are a Name Principal activities Country of incorporation

Joint operations	Details of the Group’s investments in joint operations, which are accounted for on a line-by-line basis, are as follows:	Ownership interest	2017 2016	Name Principal activities Country of operation % %	Australian Theatres Joint Venture Operator of multiscreen cinema complexes Australia 50 50	Browns Plains Multiplex Joint Venture Operator of a multiscreen cinema complex Australia (a)33 (a)33	Castle Hill Multiplex Cinema Joint Venture Operator of a multiscreen cinema complex Australia (b)50 (b)50	Casuarina Cinema Centre Joint Venture Operator of a multiscreen cinema complex Australia 50 50	Fiji Cinema Joint Venture Operator of multiscreen cinema complexes Fiji  (c)66.7	Garden City Cinema Joint Venture Operator of a multiscreen cinema complex Australia 33 33	Rialto Joint Venture Operator of multiscreen cinema complexes New Zealand 50 50	Toowoomba Cinema Centre Joint Venture Operator of a multiscreen cinema complex Australia 50 50	(a) In addition to the 33% interest in the Browns Plains Multiplex Joint Venture held directly, the Group acquired a 50% interest in Browns Plains Cinemas Pty Limited on 29 September 2015 (see Note 5.4), which is classified as a joint	venture and equity accounted. Browns Plains Cinemas Pty Limited owns 33% of the Browns Plains Multiplex Joint Venture. The Group’s total effective interest in the Browns Plains Multiplex Joint Venture is 50%.	(b) The Group acquired an additional 17% interest in the Castle Hill Multiplex Cinema Joint Venture on 29 September 2015 (see Note 5.4).	(c) The Group’s interest in the Fiji Cinema Joint Venture was disposed of on 29 June 2017. Prior to the disposal of the Group’s interest in the Fiji Cinema Joint Venture, it was not consolidated as the Group did not have control.	Operating lease commitments of joint operations	The Group’s share of future minimum operating lease rentals in respect of the above joint operations is not provided for but is payable:	2017 2016	$’000 $’000	Within one year 31,591 31,019	Later than one year but not later than five years 85,649 92,464	Later than five years 92,152 87,582	209,392 211,065

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5.4 – ACQUISITION OF ADDITIONAL INTERESTS IN JOINT ARRANGEMENTS

Interest in Joint Arrangements in the year ended 30 June 2017

There were no acquisitions of interests in Joint Arrangements in the current year.

Interest in Joint Arrangements in the year ended 30 June 2016

The Group acquired the following interest in Joint Arrangements during the prior year:

Castle Hill cinema complex

Effective 29 September 2015, The Greater Union Organisation Pty Limited, a wholly owned subsidiary, acquired an additional 17% interest in the Castle Hill Multiplex Cinema Joint Venture, taking the ownership interest in this leasehold site to 50%. The consideration paid was $5,971,000.

The Group recognised the fair value of the following identifiable assets and liabilities relating to this acquisition:

Plant and equipment Cash and cash equivalents Other assets Trade and other payables Employee benefits Deferred revenue Sub-total Leasehold and management rights Total net value of identifiable assets	Fair value at acquisition date $’000
	742 113 204 (85) (15) (27)
	932 5,039
	5,971

Leasehold and management rights

Leasehold and management rights were recognised as a result of the acquisition as follows:

Total cash consideration paid Less: net value of other identifiable assets and liabilities Leasehold and management rights	$’000
	5,971 (932)
	5,039

Leasehold and management rights will be amortised over the remaining term of the respective leases for each site. Amortisation of leasehold and management rights is not expected to be deductible for income tax purposes.

The Group incurred direct costs relating to this acquisition of $311,000 which were expensed in the Income Statement for the prior year.

Browns Plains cinema complex

Birch, Carroll & Coyle Limited, a wholly owned subsidiary, acquired a 50% interest in Browns Plains Cinemas Pty Limited on 29 September 2015 for total consideration of $955,000. As disclosed in Note 5.3, the investment in Browns Plains Cinemas Pty Limited has been classified as a joint venture and equity accounted.

Browns Plains Cinemas Pty Limited owns 33% of the Browns Plains Multiplex Joint Venture. The Group also has a direct 33% share in the Browns Plains Multiplex Joint Venture which is accounted for as a joint operation (see page 77). The Group’s total effective interest in the Browns Plains Multiplex Joint Venture is 50%.

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S E C T I O N 6 – E M P L O Y E E B E N E F I T S A N D R E L A T E D P A R T Y T R A N S A C T I O N S

This section explains the remuneration of executives and other employees, and transactions with related parties including directors.

On the following pages, there are sections on share-based payments, director and executive disclosures and related party transactions.

6.1 – SHARE-BASED PAYMENTS

The Group’s share-based payment arrangements include the Executive Performance Share Plan and the Executive Performance Rights Plan. Grants were made under the Executive Performance Share Plan from 2007 to 2013 inclusive. The Group conducted a review of its long term incentive (“LTI”) arrangements in 2013 and resolved that the existing performance share-based LTI should be replaced with a performance rights-based LTI. Shareholders approved the Executive Performance Rights Plan at the 2013 Annual General Meeting. Grants have subsequently been made under the Executive Performance Rights Plan in February 2014, February 2015, February 2016 and February 2017.

Accounting policy

The fair value of performance shares and rights granted under the Executive Performance Share Plan and the Executive Performance Rights Plan is recognised as an employee expense over the period during which the employees become unconditionally entitled to shares in the Company. There is a corresponding increase in equity, being recognition of a share-based payments reserve. The fair value of performance shares and rights granted is measured at grant date.

To facilitate the operation of the Executive Performance Share Plan and Executive Performance Rights Plan, a third party trustee is used to administer the trust which holds shares in the Company allocated under the Executive Performance Share Plan or otherwise held or acquired on market in order to satisfy the Group’s future obligations under the Executive Performance Rights Plan. The trust is controlled by the Group and therefore its financial statements are included in the consolidated financial statements. The shares in the Group held by the trust are therefore shown as treasury shares (see Note 4.1). The Group incurs expenses on behalf of the trust. These expenses are in relation to administration costs of the trust and are recorded in the Income Statement as incurred.

Performance shares and performance rights are subject to performance hurdles. The performance shares are recognised in the Statement of Financial Position as restricted ordinary shares. Performance shares are included within the weighted average number of shares used as the denominator for determining basic earnings per share and net tangible asset backing per share. Performance rights are not recognised in the Statement of Financial Position, but are included within the weighted average number of shares issued as the denominator for determining diluted earnings per share.

The Group measures the cost of the Executive Performance Share Plan and Executive Performance Rights Plan by reference to the fair value of the equity instruments at the date at which the instruments are granted. The fair value of performance rights granted is determined by an external valuer using a Monte Carlo simulation model and Binomial tree model using the assumptions detailed below.

Executive Performance Rights Plan

The establishment of the Executive Performance Rights Plan was approved by shareholders at the 2013 Annual General Meeting. Employees receiving awards under the Executive Performance Rights Plan are those of a senior level and above (including the CEO).

An employee awarded performance rights is not legally entitled to shares in the Company before the performance rights under the plan vest, and during the vesting period the performance rights do not carry the right to vote or to receive dividends. Once the rights have vested, which is dependent on the Group achieving its earnings per share (“EPS”) and total shareholder return (“TSR”) targets, participants are issued one ordinary share in the Company for each vested performance right held. Award, vesting and the issue of ordinary shares under the plan are made for no consideration. The performance period is three years.

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6.1 – SHARE-BASED PAYMENTS (continued)

Set out below are summaries of performance rights awarded under the plan:

		Balance at				Balance at
		the start of				the end of
Type of right	Grant date	theyear	Granted	Exercised	Forfeited	theyear
2017
Performance rights	20 February 2014	611,269		(611,269)		–
Performance rights	19 February 2015	663,443			(30,883)	632,560
Performance rights	18 February 2016	550,958			(35,275)	515,683
Performance rights	16 February2017		581,616		(3,376)	578,240
		1,825,670	581,616	(611,269)	(69,534)	1,726,483
		Balance at				Balance at
		the start of				the end of
Type of right	Grant date	theyear	Granted	Exercised	Forfeited	theyear
2016
Performance rights	20 February 2014	632,834	–	–	(21,565)	611,269
Performance rights	19 February 2015	707,404	–	–	(43,961)	663,443
Performance rights	18 February2016	–	563,893	–	(12,935)	550,958
		1,340,238	563,893	–	(78,461)	1,825,670

Fair value of performance rights granted

The assessed fair value at grant date of performance rights granted under the Executive Performance Rights Plan during the year ended 30 June 2017 was $11.09 (2016: $14.01) for those rights that have EPS hurdles and $3.92 (2016: $11.40) for those rights that have TSR hurdles. The fair value of each performance right is estimated on the date of grant using a Binomial tree model for those rights that have EPS hurdles, and a Monte Carlo simulation model for those rights that have TSR hurdles with the following weighted average assumptions used for each grant:

	Granted	Granted	Granted
	16 February 2017	18 February 2016	19 February 2015
Dividend yield (per annum)	4.2%	3.4%	4%
Expected volatility	19%	19%	17%
Risk-free rate (per annum)	1.92%	1.85%	1.83%
Share price	$12.38	$15.31	$11.93
Expected life	3years	3years	3years

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.

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6.1 – SHARE-BASED PAYMENTS (continued)

Executive Performance Share Plan

Employees who received awards under the Executive Performance Share Plan were those of a senior level and above (including the CEO). An employee awarded performance shares is not legally entitled to shares in the Company before the performance shares allocated under the plan vest. However, the employee can vote and receive dividends in respect of shares allocated to them. Once the shares have vested, which is dependent on the Group achieving its EPS and TSR targets, they remain in the trust until the earliest of the employee leaving the Group, the seventh anniversary (for grants made from 2010) or the 10[th] anniversary (for grants made from 2007 to 2009) of the date the performance shares were awarded, or the date the Board approves an application for their release. Award, vesting and exercise under the plan are made for no consideration. The performance period is three years.

Set out below are summaries of performance shares awarded under the plan:

		Balance at			Forfeited	Balance at
		the start of			shares	the end of
Year	Type of right	theyear	Granted	Exercised	reallocated	theyear (a)
2017	Performance shares	1,827,434	–	(145,174)	(611,269)	1,070,991
2016	Performance shares	2,453,040	–	(625,606)	–	1,827,434

(a) The balance at the end of the year includes a total of 183,261 shares (2016: 794,530 shares) that have been forfeited by employees due to cessation of employment. The forfeited shares are held within the trust and can be utilised in settlement of future obligations under the Group’s LTI plans, including the Executive Performance Rights Plan.

No performance shares were granted during the year ended 30 June 2017 (2016: nil).

Share-based payment expense

Total share-based payment expense included within employee expenses for the year ended 30 June 2017 was $8,042,000 (2016: $4,991,000).

Tax Exempt Share Plan

The Tax Exempt Share Plan enabled participating employees to make salary sacrifice contributions to purchase shares on market on a monthly basis. The shares in the Tax Exempt Share Plan are restricted from being traded and must be held for a minimum of three years whilst the participant remains an employee of the Group. Trading restrictions are lifted on the cessation of employment.

Offers under the Tax Exempt Share Plan are at the discretion of the Company. All shares acquired under the Tax Exempt Share Plan rank equally with all other ordinary shares. The Tax Exempt Share Plan did not operate during the year ended 30 June 2017 and consequently no shares were purchased during the year by employees under this plan (2016: nil).

Employee Share Plan

The Group has in prior years issued shares to certain employees under the Employee Share Plan. No shares have been issued under this plan since February 1998. Other than costs incurred in administering the scheme which are expensed as incurred, the plan does not result in any expense to the Group.

At 30 June 2017, the total shares issued under the plan were 92,120 (2016: 113,120). There were no shares issued during the year. The plan is closed to new members and no offers have been made under the plan since 1998.

The market value of ordinary shares at 30 June 2017 was $13.37 (2016: $14.53). Note 4.1 provides details of the movement in the ordinary share capital during the year.

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S E C T I O N  6  –  E M P L O Y E E  B E N E F I T S  A N D  R E L A T E D  P A R T Y  T R A N S A C T I O N S

6.1 – SHARE-BASED PAYMENTS (continued)

Superannuation

Group entities contribute to several defined contribution superannuation plans. The superannuation contributions recognised as an employee expense in the Income Statement are detailed below:

Superannuation Group entities contribute to several defined contribution superannuation plans. The recognised as an employee expense in the Income Statement are detailed below:	superannuation contribution
Superannuation contributions recognised as an employee expense	2017 $’000 2016 $’000
	15,917 14,678

6.2 – DIRECTOR AND EXECUTIVE DISCLOSURES

Information regarding individual directors’ and executives’ compensation and some equity instruments disclosures, as permitted by the Corporations Regulations 2001, are provided in the Remuneration Report contained within the Directors’ Report. The relevant sections of the Remuneration Report are outlined below:

Section of Remuneration Report	Directors’ Report page reference
Non-executive director remuneration	17
CEO and other executive remuneration	18
Fixed annual remuneration	18
Variable remuneration – short term incentive	18
Variable remuneration – long term incentive	19
Employment contracts	21
Directors’ and executives’ position and period of responsibility	23
Directors’ and executives’ remuneration	24
Performance rights holdings and transactions	28
Performance share holdings and transactions	29
Equity holdings and transactions	30

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S E C T I O N 6 – E M P L O Y E E B E N E F I T S A N D R E L A T E D P A R T Y T R A N S A C T I O N S

6.2 – DIRECTOR AND EXECUTIVE DISCLOSURES (continued)

Key management personnel remuneration

The key management personnel remuneration included in employee expenses is as follows:

Employee benefits Short term Post-employment Termination payments Equity compensation Other long term	2017 $ 2016 $
	9,842,862 7,782,816 54,645 187,510 1,959,618  4,111,152 2,059,611 208,077 131,347
	16,176,354 10,161,284

Other transactions with the Company or its controlled entities

AG Rydge is a director of Carlton Investments Limited. Carlton Investments Limited rents office space from a controlled entity. Rent is charged to Carlton Investments Limited at a market rate. Rent and office service charges received during the year were $20,240 (2016: $21,057). The Company holds shares in Carlton Investments Limited. Dividends received during the year from Carlton Investments Limited totalled $780,420 (2016: $704,799).

AG Rydge paid rent, levies and other costs to Group entities during the year amounting to $98,527 (2016: $96,764). Rent is charged to AG Rydge at market rates.

A controlled entity has entered into a lease agreement for a cinema complex in Townsville with an entity related to KG Chapman. Rent paid under the lease is at market rates.

Apart from the details disclosed in the Remuneration Report, no KMP has entered into a material contract with the Group since the end of the previous year and there were no material contracts involving directors’ interests existing at reporting date.

From time to time, KMP of the Group, or their related parties, may purchase goods or services from the Group. These purchases are usually on the same terms and conditions as those granted to other Group employees. Where the purchases are on terms and conditions more favourable than those granted to other Group employees, the resulting benefits form part of the total remuneration outlined within the Remuneration Report.

6.3 – RELATED PARTIES

Relationships with associates

Transactions with associates were receipt of property rentals from associates of $57,000 (2016: $55,000) and costs of $104,000 (2016: $102,000) paid on behalf of an associate, $nil (2016: $nil) of which is refundable by that associate.

Refer also to Notes 3.1 and 5.3.

Relationships with joint ventures and joint operation partners

Refer to Note 5.3.

Key management personnel

Disclosures relating to directors of the Company and named executives are set out in the Remuneration Report contained within the Directors’ Report, and in Note 6.2.

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S E C T I O N  7  –  O T H E R  I N F O R M A T I O N

This section contains other information required to be disclosed by accounting standards.

7.1 – COMMITMENTS AND LEASES

The Group leases various properties, including cinema sites, under operating leases. The leases typically run for periods up to 20 years, with varying terms, escalation clauses and renewal or extension options. The head lease in respect of the Thredbo Village and ski area is for a longer period, being 50 years from 29 June 2007.

A small number of leases have commitments in respect of contingent rental payments which arise when the operating performance of a site exceeds a pre-determined amount. Also, there are rentals which are determined as the higher of a base rental and a fixed percentage of a defined amount reflecting the operating performance of a site or a base rental plus a fixed percentage of the net profit from the site. Contingent rental payments recognised as an expense in the period for the Group amounted to $6,907,000 (2016: $7,924,000).

Payments made under operating leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. Lease incentives, for example a rent-free period on commencement of a lease, are deferred and recognised over the lease term on a straight-line basis. Deferred lease incentives are recognised within other liabilities in the Statement of Financial Position. Operating lease rental expense (including contingent rent) for the year ended 30 June 2017 was $136,516,000 (2016: $137,395,000).

The Group does not have finance lease or hire purchase arrangements either as a lessor or a lessee.

Lease commitments for future years are set out below:

Operating lease commitments – as lessee Future minimum operating lease rentals not provided for and payable: Within one year Later than one year but not later than five years Later than five years	2017 $’000 2016 $’000
	96,737 97,474 279,791 284,673 214,146 245,449
	590,674 627,596

The Group receives rental income from a number of properties, both leased and owned. With the exception of sub-leases under the Thredbo head lease, leases are for periods ranging between one to 15 years and have varying terms, escalation clauses and renewal or extension options. There are approximately 700 sub-leases under the Thredbo head lease. Thredbo sub-leases consist of long term accommodation sub-leases for holiday apartments, chalets and lodges and also retail premises. Long term accommodation sub-leases are typically for periods mirroring the head lease, which was renewed for a further 50 year period from 29 June 2007.

Operating lease rental income for future years is set out below:

Sub-lease receivables – as lessor Future lease receivables in relation to sub-leases of property space under operating leases not recognised and receivable: Within one year Later than one year but not later than five years Later than five years Operating leases – as lessor Future operating lease rentals for owned properties not recognised and receivable: Within one year Later than one year but not later than five years Later than five years	2017 $’000 2016 $’000
	10,654 10,755 32,872 35,740 238,959 246,251
	282,485 292,746
	14,334 12,358 49,474 46,657 21,689 33,036
	85,497 92,051

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7.2 – CONTINGENT LIABILITIES

Claims for personal injury

The nature of the Group’s operations results in claims for personal injury being received from time to time. The directors believe that the outcome of any current claims outstanding, which are not provided against in the financial statements, will not have a significant impact on the operating result of the Group in future reporting periods.

The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement at balance date.

7.3 – RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Reconciliation of profit for the year to net cash provided by operating activities Profit for the year Adjustments for: Depreciation and amortisation Profit on sale of non-current assets Net impairment adjustment Fair value decrement/(increment) of investment properties Equity accounted investment dividends Share of equity accounted investees’ net profit Share-based payments expense Receivables impairment adjustment Unrealised foreign exchange losses/(gains) (Decrease)/increase in income taxes payable Net cash provided by operating activities before change in assets and liabilities Change in assets and liabilities adjusted for effects of consolidation of controlled entities acquired/disposed during the year: (Increase)/decrease in trade and other receivables Decrease/(increase) in inventories (Increase)/decrease in prepayments and other current assets Increase in deferred tax items Increase in trade and other payables Increase in provisions Decrease in other liabilities Increase in deferred revenue Increase in financing costs payable Net cash provided by operating activities	2017 $’000 2016 $’000
	110,819 130,248 73,605 69,501 (5) (18,860) 10,986 11,703 250 (580) 3,692 2,415 (2,684) (2,273) 8,042 4,991 (128) 387 369 (123) (19,009) 3,988
	185,937 201,397 (16,445) 8,538 12,307 (12,335) (1,178) 7,659 (1,853) (1,303) 7,477 3,892 1,573 3,669 (1,303) (963) 2,156 1,872 10 44
	188,681 212,470

Cash flows are included in the Statement of Cash Flows on a gross basis. The GST or equivalent tax components of cash flows arising from investing and financing activities which are recoverable from, or payable to, taxation authorities are classified as operating cash flows.

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7.4 – AUDITORS’ REMUNERATION

Audit services: Auditors of the Group – KPMG Australia Audit and review of financial statements Other assurance services Overseas KPMG firms Audit and review of financial statements Other assurance services Other auditors Audit and review of financial statements Other assurance services Other services: Auditors of the Group – KPMG Australia Tax compliance and advice Other services Overseas KPMG firms Tax compliance and advice Other auditors Tax compliance and advice Other services	2017 $ 2016 $
	1,187,000 1,157,000 146,756 110,368 438,000 404,000 86,192 20,083
	1,857,948 1,691,451
	57,618 68,798  68,326
	57,618 137,124
	1,915,566 1,828,575
	263,949 207,815 172,016 139,276
	435,965 347,091
	362,039 251,800
	3,663 2,154 75,029 16,890
	78,692 19,044
	876,696 617,935

7.5 – PARENT ENTITY DISCLOSURES

As at, and throughout the financial year ended, 30 June 2017, the parent entity of the Group was EVENT Hospitality & Entertainment Limited.

Results of parent entity Profit for the year Other comprehensive income for the year Total comprehensive income for the year Financial position of parent entity at year end Current assets Total assets Current liabilities Total liabilities Net assets	2017 $’000 2016 $’000
	68,598 62,719 4,895 2,640
	73,493 65,359
	646 1,087
	402,095 420,760
	9,175 21,374
	14,239 27,562
	387,856 393,198

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S E C T I O N 7 – O T H E R I N F O R M A T I O N

7.5 – PARENT ENTITY DISCLOSURES (continued)

Total equity of parent entity comprises: Share capital Available-for-sale financial assets revaluation reserve Share-based payments reserve Retained earnings Total equity Parent entity contingencies Details of contingent liabilities for the parent entity, which although considered remote, are as follows: Controlled entities The Company has guaranteed the obligations of some subsidiary entities in respect of a number of operating lease commitments. Operating lease commitments of subsidiary entities that have been guaranteed are due: Not later than one year Later than one year but not later than five years Later than five years Joint ventures and joint operations The Company has guaranteed the obligations of some joint ventures and joint operations in respect of a number of operating lease commitments. Operating lease commitments of joint ventures and joint operations are due: Not later than one year Later than one year but not later than five years Later than five years	2017 $’000 2016 $’000
	219,126 219,126 13,994 14,091 29,820 21,778 124,916 138,203
	387,856 393,198
	50,938 49,347 74,582 87,904 43,735 60,286
	169,255 197,537
	34,368 33,875 92,259 101,026 117,433 111,764
	244,060 246,665
	413,315 444,202

Parent entity guarantees

Subsidiaries

The Company has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of most of its Australian incorporated subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in Note 7.7.

Bank debt facilities

The Company is a guarantor under the Group’s secured bank debt facilities, as disclosed in Note 4.4.

7.6 – EVENTS SUBSEQUENT TO REPORTING DATE

Dividends

For final dividends declared after 30 June 2017, refer to Note 4.2.

Secured bank debt facilities

The Group’s secured bank debt facilities were amended and restated on 15 August 2017. Details of the new facilities are set out in Note 4.4.

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7.7 – DEED OF CROSS GUARANTEE

Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, the wholly owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ reports.

It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the deed is that the Company guarantees to each creditor, payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.

The subsidiaries subject to the deed are:

Atura Hotels and Resorts Pty Limited Kvarken Pty Limited Birch, Carroll & Coyle Limited Lakeside Hotel Pty Limited Bryson Hotel Pty Limited Mamasa Pty Limited Canberra Theatres Limited Noahs Limited Edge Digital Technology Pty Limited Northside Gardens Hotel Pty Limited Elsternwick Properties Pty Limited Pantami Pty Limited Event Cinema Entertainment Pty Limited 203 Port Hacking Road Pty Limited Event Cinemas (Australia) Pty Limited QT Hotels and Resorts Pty Limited Event Hotels and Resorts Pty Limited QT Resort Port Douglas Pty Limited Glenelg Theatres Pty Limited RQ Motels Pty Limited Greater Entertainment Pty Limited Rydges Bankstown Pty Limited Greater Occasions Australia Pty Limited Rydges Cronulla Pty Limited Greater Union International Holdings Pty Limited Rydges Hotels Limited Greater Union Nominees Pty Limited Sonata Hotels Pty Limited Greater Union Screen Entertainment Pty Limited Tannahill Pty Limited Greattheatre Pty Limited The Geelong Theatre Company Limited GUO Investments (WA) Pty Limited The Greater Union Organisation Pty Limited Gutace Holdings Pty Limited Thredbo Resort Centre Pty Limited Haparanda Pty Limited Tourism & Leisure Pty Limited Haymarket’s Tivoli Theatres Pty Limited Western Australia Cinemas Pty Limited Kidsports Australia Pty Limited Zollverein Pty Limited. Kosciuszko Thredbo Pty Limited

A consolidated Statement of Comprehensive Income and a consolidated Statement of Financial Position, comprising the Company and controlled entities which are a party to the deed, after eliminating all transactions between parties to the deed, for the year ended, and as at, 30 June 2017 respectively is set out on the following page:

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7.7 – DEED OF CROSS GUARANTEE (continued)

Statement of Comprehensive Income Profit before tax Income tax expense Profit for the year Retained earnings at the beginning of the year Dividends paid Retained earnings at the end of the year Statement of Financial Position ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments and other current assets Total current assets Non-current assets Receivables Loans to controlled entities Other financial assets Available-for-sale financial assets Investments in controlled entities Investments accounted for using the equity method Property, plant and equipment Investment properties Goodwill and other intangible assets Deferred tax assets Other non-current assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Other loans and borrowings Current tax liabilities Provisions Deferred revenue Other current liabilities Total current liabilities Non-current liabilities Loans from controlled entities Other loans and borrowings Provisions Deferred revenue Total non-current liabilities Total liabilities Net assets EQUITY Share capital Reserves Retained earnings Total equity	2017 $’000 2016 $’000
	110,283 144,386 (35,315) (42,135)
	74,968 102,251 596,777 586,045 (81,886) (91,519)
	589,859 596,777
	29,541 27,412 29,943 18,921 15,627 28,917 7,579 5,905
	82,690 81,155
	1,519 1,052 188,506 176,079 1,392 1,392 19,928 20,067 71,227 71,227 8,400 9,236 926,004 747,219 68,250 68,500 74,034 73,329 2,979 1,341 2,158 2,496
	1,364,397 1,171,938
	1,447,087 1,253,093
	68,715 67,022 324,059 – 2,352 18,153 17,193 16,636 56,358 54,948 2,216 2,643
	470,893 159,402
	103,053 25,982 859 198,652 7,339 6,349 5,936 4,332
	117,187 235,315
	588,080 394,717
	859,007 858,376
	219,126 219,126 50,022 42,473 589,859 596,777
	859,007 858,376

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DIRECTORS’ DECLARATION

1. In the opinion of the directors of EVENT Hospitality & Entertainment Limited:

2. (a) the consolidated financial statements and notes that are set out on pages 33 to 89 and the Remuneration Report in the Directors’ Report set out on pages 17 to 30, are in accordance with the Corporations Act 2001, including:

   • (i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and

   • (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

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

4. There are reasonable grounds to believe that the Company and the Group entities identified in Note 7.7 to the financial statements will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those subsidiaries pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

5. The directors have received the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and the Director Finance & Accounting for the year ended 30 June 2017.

6. The directors draw attention to Note 1.2 to the financial statements, which includes a statement of compliance with International Financial Reporting Standards.

Signed in accordance with a resolution of the directors:

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AG Rydge Director

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JM Hastings Director

Dated at Sydney this 24[th] day of August 2017.

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Independent Auditor’s Report

To the shareholders of Event Hospitality & Entertainment Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of Event Hospitality & Entertainment Limited (the Company).

In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001 , including:

• giving a true and fair view of the Group ’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and

• complying with Australian Accounting Standards and the Corporations Regulations 2001 .

The Financial Report comprises:

• Consolidated statement of financial position as at 30 June 2017

• Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended

• Notes including a summary of significant accounting policies

• Directors’ Declaration.

The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Key Audit Matters

The Key Audit Matters we identified are:

• Asset valuation – Hotel and Cinema Property, Plant and Equipment Assets

Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Report of the current period.

These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Asset valuation – Hotel and Cinema Property, Plant and Equipment Assets

Refer to Note 3.3 to the Financial Report

Asset valuation – Hotel and Cinema Property, Plant and Equipment Assets	Asset valuation – Hotel and Cinema Property, Plant and Equipment Assets
Refer to Note 3.3 to the Financial Report
The key audit matter	How the matter was addressed in our audit
This is a key audit matter due to: � the significant value of property, plant and equipment (being 76% of total assets); and � the high level of judgement required by us in assessing the significant judgements used by the Group to determine the carrying value of property, plant and equipment. The Group use a combination of external independent valuation experts and internal analysis to determine asset valuations. Internal analysis is the preparation of value in use models on an individual hotel, cinema site or collections thereof into a cash generating unit (‘CGU’). There are a number of judgements, made by the Group and their external independent valuation experts when estimating the recoverable value of these assets, some more complex as they are dependent on assumptions about the future, such as revenue and cost growth rates and discount rates. Examples of specific judgments made in relation to hotel asset valuation include forecasted occupancy and room rates. Examples of specific judgements made in relation to cinema valuation include forecasted ticket and merchandising revenue. For each asset valuation, the geographic location and local economic conditions, such as the decline in mining activity in central Queensland, are also taken into consideration when assessing the carrying value. These forward-looking estimations and the current market conditions increase the range of possible outcomes and the complexity for the audit.	Our procedures included: � Evaluating the Group’s asset valuation assessment process and tested controls such as the review and approval of forecasts; � Assessing management’s determination of the Group’s CGUs based on our understanding of the Group’s business. We also analysed the internal reporting of the Group to assess how result streams are monitored and reported, and the implications to CGU identification in accordance with the accounting standards; � Evaluating all external independent valuations obtained by the Group regarding the carrying value of hotel and cinema assets at reporting date by assessing the valuation methodology adopted, the data used by the valuers and competence of valuers. We evaluated the appropriateness of the valuation approach adopted considering revaluation requirements of the accounting standard and industry practice. We compared key amounts in the independent expert’s valuation to a combination of board approved budgets and business forecast plans. To assess competency of the valuer we consider evidence of capability and objectivity along with the nature and scope of work that the valuer was engaged by the Group to complete. � Assessing the accuracy of previous forecasting to inform our evaluation of forecasts included in the value in use models. We applied increased scepticism to current period forecasts in areas where previous forecasts were not achieved and/or where future uncertainty is greater, volatility is expected, or specific local conditions are

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present;

• Assessing the accuracy of previous occupancy, room rates, ticketing and merchandise revenue, cost and capital expenditure forecasts to inform our evaluation of the Group’s ability to forecast accurately. We corroborated forecasts with external data, such as forecast tourism visitation and box office scheduling;

• Performing sensitivity analysis on those CGU’s with a higher risk of impairment in two main areas being the discount rate and terminal growth assumptions; and

• Comparing carrying values with recent market transactions to further challenge assumptions within management’s internal valuations.

Other Information

Other Information is financial and non-financial information in Event Hospitality & Entertainment Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error

• assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

93 EVENT Hospitality & Entertainment Limited – Annual Report 2017

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Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and

• to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report.

Report on the Remuneration Report

Opinion

In our opinion, the Remuneration Report of Event Hospitality & Entertainment Limited for the year ended 30 June 2017, complies with Section 300A of the Corporations Act 2001 .

Directors’ responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001 .

Our responsibilities

We have audited the Remuneration Report included in pages 16 to 30 of the Directors’ report for the year ended 30 June 2017.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

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KPMG

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KPMG

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Anthony Travers Partner

Sydney 24 August 2017

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Tracey Driver Partner

Sydney 24 August 2017

94 EVENT Hospitality & Entertainment Limited – Annual Report 2017

SHAREHOLDER INFORMATION

Additional information required by the ASX Listing Rules and not disclosed elsewhere in the Annual Report is set out below:

SHAREHOLDINGS (AS AT 25 AUGUST 2017)

SUBSTANTIAL SHAREHOLDERS

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

Corporations Act 2001 are:
Shareholder	Number of ordinary shares held
Enbeear Pty Limited	56,598,377*--
Carlton Investments Limited	56,588,377
Perpetual Limited	21,113,669

• Includes Carlton Investments Limited holding.

VOTING RIGHTS

Ordinary shares

There were 7,075 holders of ordinary shares of the Company. The voting rights attaching to the ordinary shares, set out in clause 7.8(a) of the Company’s Constitution, are:

“Subject to this constitution and to any rights or restrictions attached to any shares or class of shares, at a general meeting:

• (1) on a show of hands, every member present has one vote; and

• (2) on a poll, every member present has one vote for each share held as at the Record Time by the member entitling the member to vote, except for partly paid shares, each of which confers on a poll only the fraction of one vote which the amount paid (not credited) on the shares bears to the total amounts paid and payable (excluding amounts credited) on the share. An amount paid in advance of a call is disregarded for this purpose.”

Options

There were no outstanding options of the Company as at 25 August 2017.

DISTRIBUTION OF SHAREHOLDERS

DISTRIBUTION OF SHAREHOLDERS
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Number of shareholders Number of shares held
	3,673 1,592,264 2,340 5,672,490 512 3,671,543 506 12,888,957 44 136,734,669
	7,075 160,559,923

The number of shareholders holding less than a marketable parcel is 302.

UNQUOTED ORDINARY SHARES

There were 1,163,111 unquoted ordinary shares issued pursuant to the employee share plans. The shares were held by 142 holders. The unquoted ordinary shares have been included within the distribution of shareholders table above.

95 EVENT Hospitality & Entertainment Limited – Annual Report 2017

SHAREHOLDER INFORMATION

TWENTY LARGEST SHAREHOLDERS

The names of the 20 largest shareholders of the quoted shares are:

TWENTY LARGEST SHAREHOLDERS The names of the 20 largest shareholders of the quoted shares are:
	Number of Percentage of shares held capital held
Enbeear Pty Limited HSBC Custody Nominees (Australia) Limited Eneber Investment Company Limited JP Morgan Nominees Australia Limited Citicorp Nominees Pty Limited Alphoeb Pty Limited The Manly Hotels Pty Limited Carlton Hotel Limited National Nominees Limited Mr Alan Graham Rydge BNP Paribas Noms Pty Limited (DRP) Argo Investments Limited Citicorp Nominees Pty Limited (Colonial First State Investment Account) BNP Paribas Nominees Pty Limited (Agency Lending DRP Account) Australian United Investment Company Limited TN Phillips Investments Pty Limited Australian Foundation Investment Company Limited Milton Corporation Limited Netwealth Investments Limited (Wrap Services Account) RBC Investor Services Australia Nominees Pty Limited (VFA Account)	32,134,031 20.01% 20,925,269 13.03% 19,777,772 12.32% 11,364,094 7.08% 7,373,349 4.59% 6,027,315 3.75% 5,732,812 3.57% 5,276,103 3.29% 4,034,280 2.51% 3,824,163 2.38% 2,594,408 1.62% 2,272,387 1.42% 2,020,802 1.26% 1,839,711 1.15% 1,500,000 0.93% 1,346,000 0.84% 1,030,258 0.64% 1,010,921 0.63% 771,234 0.48% 649,591 0.40%
	131,504,500 81.90%

ON-MARKET BUY-BACK

There is no current on-market buy-back.

SECURITIES EXCHANGE

EVENT Hospitality & Entertainment Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. Shares are listed on the ASX under the code EVT.

96 EVENT Hospitality & Entertainment Limited – Annual Report 2017

OTHER INFORMATION

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 10:00am on Friday 20 October 2017 at:

Event Cinemas 505 – 525 George Street Sydney NSW 2000

REGISTERED OFFICE

478 George Street Sydney NSW 2000

Telephone +61 2 9373 6600 Facsimile +61 2 9373 6534

www.evt.com

SHARE REGISTRY

Computershare Investor Services Pty Limited Level 4 60 Carrington Street Sydney NSW 2000 GPO Box 2975 Melbourne VIC 3001

Telephone 1300 850 505 Facsimile +61 3 9473 2500

www.computershare.com

For more information on EVENT Hospitality & Entertainment Limited, please refer to our website at www.evt.com.

97 EVENT Hospitality & Entertainment Limited – Annual Report 2017