MPR AUSTRALIA LIMITED — Annual Report 2017

Aug 30, 2017

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Annual Report 2017

TAG PACIFIC LIMITED ABN 73 009 485 625

Contents

• 01 Chairman’s report

• 04 Directors’ report

• 14 Consolidated statement of profit or loss and other comprehensive income

• 15 Consolidated statement of financial position

• 16 Consolidated statement of changes in equity

• 17 Consolidated statement of cash flows

• 18 Notes to the financial statements

• 45 Directors’ declaration

• 46 Auditor’s independence declaration

• 47 Independent auditor’s report

• 51 Securityholder information

• Corporate directory

tagpac.com

Chairman’s report

Our mission is to invest in niche areas of the power industry to create and enhance value over time. We have invested in a diverse range of companies and activities that operate under the MPower banner, which is now firmly established as a leader in quality integrated power systems and products, with particular expertise in renewable energy, hybrid systems and energy storage.

The revolution occurring within the Australian power sector is the subject of daily media coverage and new trends are constantly emerging. There is community concern about power security and the escalating costs of power and media reports focus on how the future rests with decentralisation – with the generation of power from renewable sources geographically located near to where it is required.

As a small company with a big agenda and impressive competency, MPower is ahead of the curve on these trends and its accomplishments have not yet been recognised by the investment community for what they are.

Revenue for the 2017 financial year was $40 million (2016: $56 million). MPower’s distribution activities attained higher margins on lower revenues, as part of a planned program to focus on areas of maximum benefit and growth. Revenue from new projects originally planned for the second half of the 2017 financial year has now been contracted in the 2018 financial year. The confirmed project order book at the start of the new financial year is in fact larger and more diversified than at any time in the recent past.

MPower’s financial performance was below expectations. Project activities, particularly in the renewable and battery storage sectors, often incorporate an innovation component, and this is a factor contributing to fluctuations in timing of revenue recognition and the firming of new contracts. The Tag Pacific Limited consolidated after-tax loss for the year was $3.9 million after taking head office and listing costs into account.

MPower’s cashflow for the year was positive and overall Tag Group cashflow was neutral.

MPower has achieved technical excellence and an enviable reputation as an innovator. This is demonstrated by the following successes and milestones achieved during the 2017 financial year:

• J MPower completed a ground-breaking battery storage project which sits alongside a 1MW solar PV farm at Karratha Airport in Western Australia. The $1.7 million project incorporates advanced cloud prediction technology that anticipates cloud cover and enables the level of battery storage to be optimised.

• J MPower and Trina BESS formed an alliance for the supply of residential battery storage products across Australia and New Zealand. The range targets residential battery storage, an area that is gradually finding favour with households as the cost of energy from conventional sources increases and households look for ways to time-shift power generated by onsite solar systems.

• J MPower achieved two significant milestones in the evolution of its Bardic emergency lighting range. The first milestone was the launch of a revamped range of advanced LED and remotely monitored light products. The launch was quickly followed by securing significant project orders.

• J MPower’s $14 million solar farm project in Samoa has been completed. The 5 MW project is the largest solar project undertaken by MPower and represents a substantial proportion of Samoa’s generation capacity. The technical and logistics issues that have been overcome in completing this project are a testament to the renewables capability that has been developed within MPower.

• J MPower finalised the formation of a new consortium with Broadspectrum (Australia) Pty Ltd (a subsidiary of the global infrastructure company, Ferrovial) to work together to jointly identify, pursue and construct large scale solar projects in Australia. Broadspectrum leads the construction activities and MPower leads the engineering and design activities, reflecting the strength that each party brings to the consortium. Although the lead times are long, the relationship with Broadspectrum unlocks a new scale of opportunity that is expected to reap longer term rewards moving forward.

• J MPower is taking its new renewable energy storage solutions to a new level after being successful in its bid to build a large-scale energy storage system in the Cook Islands. At 5.6 MWh it is a landmark project and larger than any grid-connect energy storage system currently operating in Australia. The NZ$4.3 million project will enable further renewable energy to be connected to the local grid as the Cook Islands moves towards its target of being 100% renewable.

ANNUAL REPORT 2017

1

Chairman’s report

What these and other successes demonstrate is that MPower’s expertise in the new era power sector is strategic and unique in that its solutions are engineered in-house and encompass work for utilities; global leading energy providers; and a raft of blue chip enterprises.

We have in the past commented that the reduction in the cost of both solar PV and battery storage, combined with technical improvements and changing community and business attitudes towards renewables are factors driving our investment focus. The way power is generated, sourced, stored and distributed is changing and whilst MPower has not yet achieved the financial rewards, we are heavily invested in an area which has limitless opportunity.

Management’s focus has been on improving MPower’s prospects. In addition to an increased order book, the prospective bid pipeline for projects has substantially increased into the hundreds of millions of dollars and is expected to result in a greater order book over time across a range of high specification projects. Beyond the submitted bids, work is continuing on a host of other opportunities, including large scale solar opportunities being pursued by the Broadspectrum MPower Solar Consortium. Business development, design and bid resources have been expanded significantly in anticipation of an increase in proposals in coming months. However the payback for this is likely to be long term.

MPower’s distribution activities across both Australia, New Zealand and the Pacific continue to improve as the focus on batteries, solar componentry and the proprietary Bardic emergency lighting range intensifies and as peripheral product lines, activities and geographies assume less relevance. Of particular note at present is the interest being shown by households in adding battery storage to their exiting rooftop solar systems. This is still in its very early stage of market acceptance and not yet a major revenue item for MPower, but is expected to be an area of growth in the future.

Good progress was made during the year in containing costs and more savings are expected in the 2018 financial year, as premises, logistics and other efficiencies come on stream. A leaner structure is required to ensure the promise of future rewards is balanced against the reduced balance sheet resources available to the group.

Property

The Tag Group continues to hold a 55% majority interest in the Power Property Unit Trust which owns a commercial property in Melbourne leased to MPower. There was no material change to the carrying value of the property of $1.8 million during the year.

Balance sheet

The balance sheet continues to be well controlled with inventory levels and other working capital items being actively managed.

At the consolidated Tag Group level, cash at 30 June 2017 was $3.9 million (2016: $3.8 million). Borrowing levels remained relatively unchanged throughout the year.

In common with past years, no intangibles are carried on the consolidated balance sheet, even though significant intellectual property is held within the group, including development work that has been undertaken. Future tax benefits are also not capitalised on the balance sheet.

Dividends

No dividend has been declared. Franking credits of $7.4 million are available for use at a later date.

Shares and options

No shares were issued during the year; nor were any shares purchased during the half year under the Company’s on market share buy-back facility which remains in place. The Company’s listed options that trade under the ASX code TAGO expire on 4 October 2017.

Directors and staff

Dr Gary Weiss has resigned as a non-executive director of the company because of numerous other commitments. His resignation takes effect on 31 August 2017 and the board wishes to acknowledge the significant contribution Dr Weiss has made to the company and thanks him sincerely for his many years of valuable service.

On behalf of the board, thanks are also due to management and staff for their loyalty, dedication and eagerness to succeed.

TAG PACIFIC LIMITED

2

Chairman’s report

Looking ahead

A satisfactory profit result has been elusive, but MPower has unquestionably succeeded in establishing and positioning itself, in its own unique way, at the hub of the changes in the power sector. This has come at a greater cost than originally envisaged, but it comes at a time when the power sector is undergoing a seismic transformation.

The company is resource constrained in its capacity to fund some of its aspirations moving forward and this may be exacerbated if losses continue for longer than is currently anticipated. In those circumstances, the company would variously seek to raise new capital, partner some of its activities or review its corporate structure.

There is a call for reliable, cheaper and cleaner power, and the sector is reacting by rolling out renewable solutions. These renewable solutions bring with them a transition from centralised power generation facilities to a range of decentralised renewable energy sources. Inherent in this is intermittent power generation; the need to store and regulate power; and the ability to feed power into already established power networks. These are the sweet spots for MPower, both in its project work and also in its supply of products and componentry.

Notwithstanding the financial challenges and those brought about by the dynamic and changing environment of the sector, MPower has improved prospects of taking advantage of its expertise.

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Peter Wise Chairman 31 August 2017

ANNUAL REPORT 2017

3

Directors’ report

The directors present their report on the company (Tag Parent) and its controlled entities (Tag Group) for the financial year ended 30 June 2017 in accordance with the provisions of the Corporations Act 2001 (Cth). The Chairman’s Report (pages 1 to 3) contains a review of the operations of the Tag Group during the financial year and the results of those operations and details of significant changes in the Tag Group. The Chairman’s Report is incorporated into and forms part of this Directors’ Report.

Principal activity

The Tag Group is an investment company that strategically invests in the power sector.

Review of operations

The operating result of the Tag Group for the financial year ended 30 June 2017 after eliminating non-controlling interests and providing for income tax was a loss of $3,887,000 (2016: $1,094,000). Reference should be made to the Chairman’s Report for a more detailed review of operations.

Changes in the state of affairs

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

Subsequent events

There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Tag Group, the results of those operations, or the state of affairs of the Tag Group in future financial years.

Future developments

Details of the future developments of the Tag Group are contained in the Chairman’s Report. To the extent that the disclosure of information regarding likely developments in the activities of the Tag Group in future financial years and the expected results of those activities is likely to result in unreasonable prejudice to the Tag Group, it has not been disclosed in this report.

Dividends

No dividends have been paid or declared during the current or previous financial years.

Indemnification of directors, officers and auditor

During the financial year, the company paid a premium to insure each of the directors and officers against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or officer of the company, other than conduct involving a wilful breach of duty in relation to the company.

The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify a director, officer or auditor of the company or any related body corporate against a liability incurred as an officer or auditor.

Non-audit services

Details of amounts paid or payable to Deloitte Touche Tohmatsu for non-audit services provided during the year by the auditor are outlined in note 28 to the financial statements. The directors are satisfied the provision of nonaudit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The directors are of the opinion the services as disclosed in note 28 to the financial statements do not compromise the external auditor’s independence, based on advice received from the audit committee, for the following reasons:

• J all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

• J none of the services undermine the principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks or rewards.

TAG PACIFIC LIMITED

4

Directors’ report

Proceedings on behalf of the company

No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year.

Environmental regulations

There are no particular or significant environmental regulations under a law of the Commonwealth or of a state or territory affecting the Tag Group.

The Tag Group’s operations do not pose a high risk for breach of environmental legislation and in the directors’ opinion there is no known breach of regulatory requirements that may:

• J potentially result in financial penalties;

Options on issue

At the date of this report, the options on issue over unissued ordinary shares in Tag Pacific Limited were as follows:

Listed options	(ASX: TAGO)
Grant date	Expiry date	Exercise	Number
		price	of options
4 Oct 2012	4 Oct 2017	$0.1929	9,965,872
Total			9,965,872

• J result in the governing authority having the ability to suspend an operation;

• J have a major impact on surrounding ecosystems; or

• J have a financial impact on the operations and results of the Tag Group.

Auditor’s independence declaration

The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 (Cth) for the year ended 30 June 2017 has been received and a copy can be found on page 46 of this report.

Unlisted options (ESOP)

Grant date	Expiry date	Exercise	Number
		price	of options
10 Oct 2013	31 May 2018	$0.2029	160,000
02 Dec 2016	31 May 2019	$0.0700	595,500
02 Dec 2016	31 May 2020	$0.0700	595,500
02 Dec 2016	31 May 2021	$0.0700	794,000
Total			2,145,000

During the year no ordinary shares in Tag Pacific Limited were issued on the exercise of listed options. No unlisted options granted under the Tag Pacific Limited Executive Share Option Plan (ESOP) were exercised during the year.

Rounding off of amounts

The company is a company of the kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191, and in accordance with the Corporations Instrument amounts in the directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

Corporate governance

A copy of the company’s 2017 corporate governance statement can be found at http://tagpac.com/corporate_governance.html.

No person entitled to exercise an option had or has any right, by virtue of the option, to participate in any share issue of any other body corporate.

ANNUAL REPORT 2017

5

Directors’ report

Information on directors

The names and particulars of the current directors of the company during or since the end of the financial year are as follows. References to directors’ relevant interest in shares are current at the date of this report.

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Peter Wise Chairman (executive)
Qualifications Dip ID
Experience Appointed Chairman and board member in 1986. Chairman of MPower Group Pty
Limited and other subsidiaries within the Tag Group.
Interest in shares 56,902,518 ordinary shares and 5,013,068 listed options over unissued ordinary
shares in Tag Pacific Limited held by Anthony Australia Pty Ltd.
Nathan Wise Chief Executive Officer and Managing Director
Qualifications BCom, LLM (UNSW)
Experience Appointed Chief Executive Officer and Managing Director in 2012 after serving as
Head of Corporate Development from 2003. Company Secretary from 2006 until
2012. Director of MPower and a number of controlled entities within the Tag Group.
Practiced as a corporate and commercial lawyer before joining the Tag Group.
Interest in shares 56,902,518 ordinary shares and 5,013,068 listed options over unissued ordinary
shares in Tag Pacific Limited held by Anthony Australia Pty Ltd. 900,000 unlisted
options over unissued ordinary shares in Tag Pacific Limited held by Investment
Associates Pty Limited.
Gary Cohen Director (non-executive)
Qualifications B Comm, LLB, LLM (Hons)
Experience Director since 1999. CEO of Invigor Group Limited.
Interest in shares Holds a relevant interest in 1,519,766 ordinary shares and 140,068 listed options over
unissued ordinary shares in Tag Pacific Limited.
Special responsibilities Member of the remuneration committee.
Directorships held in other listed Listed entity Relevant dates
entities in the previous 3 years Invigor Group Limited since 18 July 2012
Robert Constable Director (non-executive)
Qualifications MA (Cantab.)
Experience Director since 1986. Former positions include secretary of the Beecham Group,
director of Sime Darby Holdings Limited and deputy chief executive of Bousteadco
Singapore Limited.
Interest in shares 310,000 ordinary shares and 28,571 listed options over unissued ordinary shares
in Tag Pacific Limited.
Special responsibilities Chairman of the audit committee and a member of the remuneration committee.
Robert Moran Director (non-executive)
Qualifications BEc LLB (Hons)
Experience Director since 2002. Chairman of Oceania Capital Partners. Has extensive experience
in principal investing and previously practiced as a corporate and commercial lawyer.
Interest in shares 1,708,911 ordinary shares and 157,502 listed options over unissued ordinary shares in
Tag Pacific Limited.
Special responsibilities Member of the audit committee.
Directorships held in other listed Listed entity Relevant dates
entities in the previous 3 years Oceania Capital Partners Limited since 25 July 2007
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TAG PACIFIC LIMITED

6

Directors’ report

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Gary Weiss Director (non-executive)
Qualifications LLM (NZ), JSD (Cornell)
Experience Director since 1988. Executive director of Ariadne Australia Limited and a director
of several other public companies.
Interest in shares 232,500 ordinary shares and 21,429 listed options over unissued ordinary shares
in Tag Pacific Limited.
Directorships held in other listed Listed entity Relevant dates
entities in the previous 3 years Ariadne Australia Limited since 28 November 1989
ClearView Wealth Limited 22 October 2012 to 17 May 2016
Estia Health Limited since 24 February 2016
Mercantile Investment Company Limited since 6 March 2012
Premier Investments Limited since 11 March 1994
Pro-Pac Packaging Limited since 28 May 2012
Ridley Corporation Limited since 21 June 2010
Straits Trading Co Limited since 1 June 2014
Thorney Opportunities Limited since 21 November 2013
Darrell Godin Company Secretary
Qualifications BCom, BAcc, CA
Experience Appointed Company Secretary and Chief Financial Officer of Tag Pacific Limited in
2012. Secretary of a number of controlled entities within the Tag Group. Prior to joining
Tag, worked at Investec Bank Australia Limited for approximately 12 years after having
practised as a Chartered Accountant for 12 years.
Interest in shares 200,000 ordinary shares, 2,857 listed options over unissued ordinary shares and
327,000 unlisted options over unissued ordinary shares in Tag Pacific Limited.
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Changes to directors

Changes to the directors of Tag Pacific Limited during the year and up to the date of this report were: J Gary Weiss retired as a non-executive director with effect from 31 August 2017.

Remuneration of directors

Information about the remuneration of directors and senior management is set out in the remuneration report on pages 8 to 13.

Directors’ meetings

The following table outlines the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, ten board meetings, two audit committee meetings and two remuneration committee meetings were held.

		Board meetings	Audit committee	meetings	Remuneration committee	meetings
	Eligible to attend	Attended	Eligible to attend	Attended	Eligible to attend	Attended
Peter Wise	10	10	–	–	–	–
Nathan Wise	10	10	–	–	–	–
Gary Cohen	10	7	–	–	2	2
Robert Constable	10	9	2	2	2	2
Robert Moran	10	9	2	2	–	–
GaryWeiss1	10	6	–	–	–	–

1. Gary Weiss retired as a non-executive director with effect from 31 August 2017.

ANNUAL REPORT 2017

7

Directors’ report

Remuneration report

This report details the remuneration arrangements in respect of each director of Tag Pacific Limited and the key management personnel.

Remuneration policy

The remuneration policy details set out below are relevant to Tag Pacific Limited (‘Tag’) only.

The board of each controlled entity in the Tag Group determines the remuneration policy for the senior managers of that controlled entity. Accordingly, Tag’s remuneration policy does not extend to senior managers of controlled entities. Details of the remuneration of controlled entity senior managers have been included in this report where applicable for compliance reasons.

Tag’s remuneration policy has been designed to align director and senior manager objectives with shareholder and business objectives by providing a fixed remuneration component and, where applicable, offering specific short-term and long-term incentives based on key performance areas affecting Tag’s financial results. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best senior managers and directors to run and manage Tag, as well as create goal congruence between directors, senior managers and shareholders.

The board’s policy for determining the nature and amount of remuneration for executive board members and key management personnel of Tag is as follows:

• J The remuneration policy, setting the terms and conditions for executive directors and other senior managers, was developed by the remuneration committee and approved by the board.

• J Senior managers may receive base remuneration (which is based on factors such as length of service and experience), superannuation, fringe benefits, short-term incentives or long-term incentives.

• J The remuneration committee reviews certain senior manager packages annually by reference to Tag’s performance, senior manager performance and comparable information from industry sectors.

The performance of Tag’s senior managers is measured against criteria agreed regularly with each senior manager and is based predominantly on the forecast growth of the Tag Group’s profits and shareholder value. Short-term incentives, where applicable, are linked to predetermined performance indicators where possible. The board may exercise its discretion in relation to approving short-term and long-term incentives and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance indicators. The policy is designed to attract the highest calibre of senior managers and reward them for performance that results in long-term growth in shareholder wealth.

All remuneration paid to directors and senior managers is valued at the cost to the company and expensed. Options are valued using the Black-Scholes methodology.

The board’s policy is to remunerate non-executive directors for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors based on market practice, duties and accountability. Independent external advice may be sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders. Fees for non-executive directors are not linked to Tag’s performance. However, to align directors’ interests with shareholders’ interests, the directors are encouraged to hold shares in the company.

Performance based remuneration

Tag has a policy which sets out the framework for awarding performance based remuneration to Tag senior managers. Performance based remuneration may comprise both a short-term incentive (‘STI’) and a long-term incentive (‘LTI’) component. The STI takes the form of a cash bonus and the LTI comprises the issue of options under the Tag Pacific Limited Executive Share Option Plan. The remuneration committee has the discretion to determine the STI and LTI for eligible senior managers.

Short-term incentives

The remuneration package for an eligible senior manager may comprise a STI in the form of a performance based cash bonus. The maximum STI component of a remuneration package is expressed as a percentage of the relevant senior manager’s base remuneration. A senior manager may be awarded a STI depending on performance against a set of performance indicators. The performance indicators may differ for each senior manager and are determined by the remuneration committee from time to time. A weighting is given to each performance indicator at the time the performance indicators are set.

Details of the STI’s awarded in respect of the year to 30 June 2017 are as follows:

Nathan Wise

At the date of this report a cash bonus in respect of the year to 30 June 2017 had not been assessed for Nathan Wise. The total STI that is available (subject to performance against set criteria) is in the range of 0% to 40% of his base remuneration of $335,000 per annum ($0 to $134,000).

The performance criteria against which the STI will be assessed are group profitability; shareholder value; long term strategy and people management.

Darrell Godin

A cash bonus of $11,046 in respect of the 30 June 2016 financial year was awarded to Darrell Godin during the 30 June 2017 financial year and remains payable. At the date of this report a cash bonus in respect of the year to 30 June 2017 had not yet been assessed for Darrell Godin. The total STI that is available (subject to performance against set criteria) is in the range of 0% to 25% of his base remuneration of $276,000 for the year ($0 to $69,000).

TAG PACIFIC LIMITED

8

Directors’ report

The performance criteria against which the STI will be assessed are contribution to group profitability, contribution to the enhancement of operational performance of group companies, improvements to systems, processes and efficiencies, and contribution to the strategic direction and growth of the group and enhancement of shareholder value.

In addition to the above, the remuneration committee has the discretion to award super cash bonus payments in excess of the above STI formula in the event of exceptional circumstances or performance by a senior manager.

Long-term incentives

Options over unissued shares in Tag Pacific Limited may be awarded to eligible senior managers in accordance with the Tag Pacific Limited Executive Share Option Plan. The award of options is considered appropriate as it contains an element of reward for individual achievement together with an incentive aligned to the group’s longer term performance. The approach also aligns management’s interests with those of shareholders.

The maximum number of options that can be on issue under the Executive Share Option Plan at any time is 5% of the shares on issue at that time. In addition, the maximum number of options that can be issued to any one senior manager is 2,350,000 (2016: 1,250,000). The remuneration committee must make reference to these and other rules of the Executive Share Option Plan when deciding on long-term incentive components.

1,450,000 executive share options were issued to directors and key management personnel during the year ended 30 June 2017 (2016: Nil).

Option holdings

(i) Unlisted Executive Share Option holdings

2017	Balance	Granted as	Lapsed/	Balance	Unvested	Vested and
	1 July 2016	compensation	exercised	30 June 2017		exercisable
	No.	No.	No.	No.	No.	No.
Nathan Wise1	550,000	900,000	(550,000)	900,000	900,000	–
Darrell Godin	251,000	275,000	(199,000)	327,000	327,000	–
Anthony Csillag	257,000	275,000	(197,000)	335,000	335,000	–
Total	1,058,000	1,450,000	(946,000)	1,562,000	1,562,000	–
2016	Balance	Granted as	Lapsed/	Balance	Unvested	Vested and
	1 July 2015	compensation	exercised	30 June 2016		exercisable
	No.	No.	No.	No.	No.	No.
Peter Wise	400,000	–	(400,000)	–	–	–
Nathan Wise	1,050,000	–	(500,000)	550,000	200,000	350,000
Darrell Godin	410,000	–	(159,000)	251,000	251,000	–
AnthonyCsillag	416,000	–	(159,000)	257,000	257,000	–
Total	2,276,000	–	(1,218,000)	1,058,000	708,000	350,000

1. Shareholder approval for the options issued to Nathan Wise was obtained under ASX Listing Rule 10.14 on 28 October 2016.

2. Under the terms of the Executive Share Option Plan, options may be issued to and held by an executive or their nominee.

Refer to note 29 for the factors and assumptions used in determining share-based payments.

At 30 June 2017, the following share-based payment arrangements were in existence under the Tag Pacific Limited Executive Share Option Plan:

Option series	Grant date	Expiry date	Fair value at grant	Vesting date
			date (cents)
1. Issued 10 October 2013	10 Oct 2013	31 May 2018	1.11	01 Mar 2018
2. Issued 2 December 2016	2 Dec 2016	31 May 2021	0.02	01 Mar 2019 to 01 Mar 2021

There are no performance criteria that need to be met in relation to executive share options granted, however, the options lapse if the relevant senior manager no longer provides services to or is no longer employed by the Group.

ANNUAL REPORT 2017

9

Directors’ report

The following executive share options previously held by directors and key management personnel lapsed during the year:

	No. of options	Grant date
Nathan Wise	350,000	4 Mar 2011
Nathan Wise	200,000	28 Nov 2012
Darrell Godin	160,000	28 Nov 2012
Darrell Godin	39,000	10 Oct 2013
Anthony Csillag	152,000	28 Nov 2012
Anthony Csillag	45,000	10 Oct 2013
Total	946,000

1. Under the terms of the Executive Share Option Plan, options may be issued to and held by an executive or their nominee.

(ii) Listed option holdings

	Balance at	Net other	Balance at
	1 July 2016	change	30 June 2017
	No.	No.	No.
Directors
Peter Wise1 Nathan Wise1 }	5,013,068	–	5,013,068
Gary Cohen	140,068	–	140,068
Robert Constable	28,571	–	28,571
Robert Moran	157,502	–	157,502
Gary Weiss2	21,429	–	21,429
Key management personnel
Darrell Godin	2,827	–	2,827
Anthony Csillag	32,138	–	32,138
Total	5,395,603	–	5,395,603

1. Peter Wise and Nathan Wise are directors of Anthony Australia Pty Ltd which had an interest in 5,013,068 listed options over unissued ordinary shares in Tag Pacific Limited at 30 June 2017.

2. Gary Weiss retired as a non-executive director with effect from 31 August 2017.

3. The listed options are exerciseable at any time up to their expiry date of 4 October 2017.

TAG PACIFIC LIMITED

10

Directors’ report

Shareholdings

Key management personnel and key management personnel-related entities hold directly, indirectly or beneficially as at the reporting date the following interests in ordinary shares in Tag Pacific Limited:

	Balance at	Net other	Balance at
	1 July 2016	change	30 June 2017
2017	No.	No.	No.
Directors
Peter Wise1 Nathan Wise1 }	56,902,518	–	56,902,518
Gary Cohen	1,519,766	–	1,519,766
Robert Constable	310,000	–	310,000
Robert Moran	1,708,911	–	1,708,911
Gary Weiss2	232,500	–	232,500
Key management personnel
Darrell Godin	200,000	–	200,000
Anthony Csillag	1,557,747	17,000	1,574,747
Total	62,431,442	17,000	62,448,442
	Balance at	Net other	Balance at
	1 July 2015	change	30 June 2016
2016	No.	No.	No.
Directors
Peter Wise1 Nathan Wise1 }	35,073,192	21,829,326	56,902,518
Gary Cohen	980,492	539,274	1,519,766
Robert Constable	200,000	110,000	310,000
Robert Moran	1,102,523	606,388	1,708,911
Gary Weiss2	150,000	82,500	232,500
Key management personnel
Darrell Godin	150,000	50,000	200,000
Anthony Csillag	1,545,747	12,000	1,557,747
Total	39,201,954	23,229,488	62,431,442

1. Peter Wise and Nathan Wise are directors of Anthony Australia Pty Ltd which had an interest in 56,902,518 ordinary shares in Tag Pacific Limited at 30 June 2017.

2. Gary Weiss retired as a non-executive director with effect from 31 August 2017.

Company performance, shareholder wealth and director and senior management remuneration

The Tag remuneration policy has been tailored to increase goal congruence between shareholders, directors and senior managers. The main method applied in achieving this aim has been the issue of options to select senior managers to encourage the alignment of personal and shareholder interests.

The following table shows the gross revenue, profits and dividends for the last five years for Tag Pacific Limited, as well as the share price at the end of the respective financial years.

	2013	2014	2015	2016	2017
Revenue($’000)	64,171	54,650	54,326	56,530	40,123
Other gains($’000)	5	47	82	89	120
Net loss before non-controlling interests($’000)	(3,035)	(5,594)	(12,101)	(1,060)	(3,855)
Dividends paid($’000)	3,534	–	–	–	–
Share price at year end(cents per share)	23.0	10.5	10.0	3.9	4.3
Loss per share
Basic (cents per share)	(3.1)	(6.0)	(12.9)	(1.0)	(3.1)
Diluted (cents per share)	(3.1)	(6.0)	(12.9)	(1.0)	(3.1)

ANNUAL REPORT 2017

11

Directors’ report

Details of remuneration

The remuneration for each director and the key management personnel in respect of the year to 30 June 2017 was as follows:

2017	Salary, fees	Superannuation	Cash	Non-cash	Options	Total	Performance
$	and allowances	Contributions	bonus	benefts			related %
Directors
Peter Wise
Chairman (executive)1	387,000	–	–	–	–	387,000	–
Nathan Wise
Chief Executive Offcer	335,000	–	–	–	596	335,596	0.2
Gary Cohen
Non-executive director	20,000	–	–	–	–	20,000	–
Robert Constable
Non-executive director	20,000	–	–	–	–	20,000	–
Robert Moran
Non-executive director	20,000	–	–	–	–	20,000	–
Gary Weiss
Non-executive director2	20,000	–	–	–	–	20,000	–
Total directors	802,000	–	–	–	596	802,596
Key management personnel
Darrell Godin
Chief Financial Offcer3	251,510	18,889	11,046	7,464	577	289,486	4.0
Anthony Csillag
Managing Director MPower Projects	309,000	29,355	54,075	27,685	533	420,648	13.0
Total key management personnel	560,510	48,244	65,121	35,149	1,110	710,134

1. Management fees of $250,335 are accrued and payable at 30 June 2017.

2. Gary Weiss retired as a non-executive director with effect from 31 August 2017.

3. Cash bonus awarded is accrued and payable at 30 June 2017.

Directors and key management personnel held their positions for the whole year.

The remuneration for each director and the key management personnel in respect of the year to 30 June 2016 was as follows:

2016	Salary, fees	Superannuation	Cash	Non-cash	Options	Total	Performance
$	and allowances	Contributions	bonus	benefts			related %
Directors
Peter Wise
Chairman (executive)	387,000	–	–	–	–	387,000	–
Nathan Wise
Chief Executive Offcer	319,300	–	–	–	1,124	320,424	0.4
Gary Cohen
Non-executive director	20,000	–	–	–	–	20,000	–
Robert Constable
Non-executive director	20,000	–	–	–	–	20,000	–
Robert Moran
Non-executive director	20,000	–	–	–	–	20,000	–
Gary Weiss
Non-executive director	20,000	–	–	–	–	20,000	–
Total directors	786,300	–	–	–	1,124	787,424
Key management personnel
Darrell Godin
Chief Financial Offcer	244,512	19,308	–	6,781	1,114	271,715	0.4
Anthony Csillag
Managing Director MPower Projects	309,000	29,355	–	6,212	1,017	345,584	0.3
Total key management personnel	553,512	48,663	–	12,993	2,131	617,299

Directors and key management personnel held their positions for the whole year.

TAG PACIFIC LIMITED

12

Directors’ report

Contract details

There were no written contracts in place with directors or key management personnel other than the following:

1. A written contract is in place in respect of the services provided by Nathan Wise to Tag Pacific Limited. The contract has no specified duration and requires three months’ notice of termination (equating to a termination payment of $83,750).

2. A written contract is in place in respect of the services provided by Darrell Godin to Tag Pacific Limited. The contract has no specified duration and requires one months’ notice of termination (equating to a termination payment of $23,000).

3. A written contract is in place in respect of the services provided by Anthony Csillag to MPower Projects Pty Limited. The contract has no specified duration and requires six months’ notice of termination (equating to a termination payment of $169,178).

Performance income as a proportion of total remuneration

In some circumstances, senior managers are paid performance bonuses based on set monetary figures and not as a proportion of their salary. These bonuses have been set to encourage achievement of specific goals that have been given a high level of importance in relation to the future growth and profitability of the Tag Group. The payment of bonuses and other incentive payments for specified senior managers are reviewed by the remuneration committee annually as part of the review of executive remuneration and a recommendation is put forward to the board for approval. Bonuses, options and incentives are linked to predetermined performance criteria. The board can exercise its discretion in relation to approving incentives, bonuses and options and can make changes to the committee’s recommendations.

Signed in accordance with a resolution of the directors.

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Peter Wise Chairman 31 August 2017

ANNUAL REPORT 2017

13

For the year ended 30 June 2017

Consolidated statement of profit or loss and other comprehensive income

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2017 2016
Note $’000 $’000
Continuing operations
Revenue 3 40,076 56,408
Other revenue 4 47 122
Other income 5 120 89
Raw materials and consumables used (25,143) (37,679)
Advertising and marketing expense (173) (201)
Depreciation and amortisation expense 7 (315) (465)
Employee benefits expense 7 (12,366) (13,687)
Finance costs 6 (362) (313)
Freight and transport (813) (1,049)
Occupancy expense (1,160) (1,152)
Other expenses (3,766) (3,133)
Loss before income tax (3,855) (1,060)
Income tax expense 8 – –
LOSS FOR THE YEAR (3,855) (1,060)
Attributable to:
Owners of the company (3,887) (1,094)
Non-controlling interest 32 34
(3,855) (1,060)
Other comprehensive income (net of tax)
Items that may be reclassified subsequently to profit or loss:
Loss on cash flow hedges taken to equity (146) (13)
Exchange (loss)/gain on translating foreign operations (21) 69
Other comprehensive (loss)/income net of tax (167) 56
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (4,022) (1,004)
Total comprehensive loss attributable to:
Owners of the company (4,054) (1,038)
Non-controlling interest 32 34
(4,022) (1,004)
Earnings per share
Basic (cents per share) 31 (3.1) (1.0)
Diluted (cents per share) 31 (3.1) (1.0)
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The accompanying notes form part of these financial statements.

TAG PACIFIC LIMITED

14

As at 30 June 2017

Consolidated statement of financial position

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2017 2016
Note $’000 $’000
Assets
Current assets
Cash and cash equivalents 9 3,855 3,834
Trade and other receivables 10 9,486 13,949
Inventories 11 7,449 7,932
Other assets 12 1,428 531
Other financial assets 14 21 124
Total current assets 22,239 26,370
Non-current assets
Property, plant & equipment 15 2,855 2,901
Total non-current assets 2,855 2,901
Total assets 25,094 29,271
Liabilities
Current liabilities
Trade and other payables 18 8,628 9,573
Borrowings 19 4,204 3,771
Provisions 20 1,624 1,875
Other liabilities 21 903 213
Total current liabilities 15,359 15,432
Non-current liabilities
Borrowings 19 1,228 1,316
Provisions 20 90 95
Total non-current liabilities 1,318 1,411
Total liabilities 16,677 16,843
Net assets 8,417 12,428
Equity
Issued capital 22 23,410 23,410
Reserves 23 266 409
Accumulated losses (15,660) (11,773)
Equity attributable to owners of the company 8,016 12,046
Non-controlling interest 24 401 382
Total equity 8,417 12,428
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The accompanying notes form part of these financial statements.

ANNUAL REPORT 2017

15

For the year ended 30 June 2017

Consolidated statement of changes in equity

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Issued Reserves Accumulated Attributable Non- Total
capital losses to owners of controlling
parent entity interest
$’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2015 22,246 297 (10,679) 11,864 333 12,197
Loss for the period – – (1,094) (1,094) 34 (1,060)
Other comprehensive
income/(loss) net of tax
Exchange differences
arising on translation
of foreign operations – 69 – 69 – 69
Loss on cash flow
hedge taken to equity – (13) – (13) – (13)
Total comprehensive
income/(loss) for the period – 56 (1,094) (1,038) 34 (1,004)
Issue of shares (note 22) 1,164 – – 1164 – 1,164
Recognition of revaluation
of property – 50 – 50 45 95
Recognition of share
based payments – 6 – 6 – 6
Payment of distributions – – – – (30) (30)
Balance at 30 June 2016 23,410 409 (11,773) 12,046 382 12,428
Balance at 1 July 2016 23,410 409 (11,773) 12,046 382 12,428
Loss for the period – – (3,887) (3,887) 32 (3,855)
Other comprehensive
income/(loss) net of tax
Exchange differences
arising on translation
of foreign operations – (21) – (21) – (21)
Loss on cash flow
hedge taken to equity – (145) – (145) – (145)
Total comprehensive
income/(loss) for the period – (166) (3,887) (4,053) 32 (4,021)
Recognition of revaluation
of property – 22 – 22 21 43
Recognition of share
based payments – 1 – 1 – 1
Payment of distributions – – – – (34) (34)
Balance at 30 June 2017 23,410 266 (15,660) 8,016 401 8,417
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The accompanying notes form part of these financial statements.

TAG PACIFIC LIMITED

16

For the year ended 30 June 2017

Consolidated statement of cash flows

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2017 2016
Note $’000 $’000
Cash flows from operating activities
Receipts from customers 48,749 59,828
Payments to suppliers and employees (48,558) (62,413)
Cash generated by/(used in) operations 191 (2,585)
Interest received 12 34
Interest and other costs of finance paid (308) (312)
Net cash used by operating activities 9 (105) (2,863)
Cash flows from investing activities
Proceeds on sale of property, plant & equipment 217 90
Payments for property, plant & equipment (329) (280)
Proceeds from sale of investments – 124
Net cash used in investing activities (112) (66)
Cash flows from financing activities
Proceeds from borrowings 3,942 3,289
Repayment of borrowings (3,652) (3,353)
Proceeds from share issue 22 – 1,224
Share issue costs 22 – (60)
Distributions paid by controlled entities to non-controlling interests (34) (31)
Net cash generated by financing activities 256 1,069
Net increase/(decrease) in cash and cash equivalents 39 (1,860)
Cash and cash equivalents at the beginning of the financial year 3,834 5,680
Effects of exchange rate changes on the balance of cash held in foreign currencies (18) 14
Cash and cash equivalents at the end of the financial year 9 3,855 3,834
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The accompanying notes form part of these financial statements.

ANNUAL REPORT 2017

17

Notes to the financial statements for the financial year ended 30 June 2017 1. General information 2. Statement of significant accounting policies

Notes to the financial statements

For the financial year ended 30 June 2017

1. General information

Tag Pacific Limited is a strategic investor and a listed public company, incorporated and domiciled in Australia. Tag Pacific Limited is also the ultimate parent of the Tag Group (Tag Pacific Limited and its controlled entities).

The registered office and principal place of business of the company is:

Tag Pacific Limited Level 30, Piccadilly Tower 133 Castlereagh Street Sydney NSW 2000 Australia

2. Statement of significant accounting policies

Statement of compliance

These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and interpretations, and comply with other requirements of the law.

The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity.

Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the directors on 30 August 2017.

The following is a summary of the material accounting policies adopted by the Tag Group in the preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

Basis of preparation

The accounting policies set out below have been consistently applied to all years presented.

The consolidated financial statements have been prepared on the basis of historical costs, except for certain properties and financial instruments that are measured at revalued amounts or fair value at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars unless otherwise noted. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether the price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and the measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use AASB 136.

The Tag Parent has applied the relief available to it in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2017/191. Accordingly, amounts in the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

Critical accounting judgments and key sources of estimation uncertainty

In the application of the Tag Group’s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key estimates — Construction contracts

Revenue and expenses for power related projects are characterised as construction contracts under AASB 111 and recognised in the profit or loss by reference to the stage of completion of each identifiable component for construction contracts. A fundamental condition for being able to estimate percentage of completion profit recognition is that project revenues and project costs can be established reliably. This reliability is based on such factors as compliance with the Tag Group’s system for project control and that project management team has the necessary skills. Project control also includes a number of estimates and assessments that depend on the experience and knowledge of project management in respect of project control, risk management and prior management of projects.

In determining revenues and expenses for construction contracts, management makes key assumptions regarding estimated revenues and expenses over the life of the contracts. Where variations are recognised in revenue, assumptions are made regarding the probability that customers will approve variations and the amount of revenue arising from variation. In respect of costs, key assumptions regarding costs to complete contracts may include estimation of labour, technical costs, impact of delays and productivity.

TAG PACIFIC LIMITED

18

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued

Accounting policies

(a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of Tag Pacific Limited and entities controlled by Tag Pacific Limited (its subsidiaries).

Control is achieved when Tag Pacific Limited:

• J has the power over the investee;

• J is exposed, or has rights to variable returns from its involvement with the investee; and

• J has the ability to use its power to affect the returns.

Tag Pacific Limited reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. A list of subsidiaries is contained in note 13. All controlled entities have a 30 June financial year-end.

The results of the subsidiaries acquired or disposed of during the year are included in consolidated profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Tag Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the parent entity disclosures in note 34 for Tag Pacific Limited, intra-group transactions (‘common controlled transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities.

Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Tag Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of changes in equity since the date of the combination. Losses applicable to the non-controlling interests in excess of the non-controlling interests’ interest in the subsidiary’s equity are allocated against the noncontrolling interests even if this results in the non-controlling interests having a deficit balance.

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

• J deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;

• J liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payments of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard.

Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.

Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified.

Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139, or AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

Business combinations that took place prior to 1 July 2009 were accounted for in accordance with the previous version of AASB 3.

• J assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard.

ANNUAL REPORT 2017

19

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued

(b) Income tax

Current tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantively enacted by the balance date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is recognised on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in profit or loss except where it relates to items that may be recognised directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. Capitalised losses are only brought to account when it is probable they will be recouped through future taxable gains.

(c) Inventories

Inventories are stated at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. Refer to note 2(p) for the policy in relation to work in progress and construction contracts.

(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less any accumulated depreciation and impairment.

Plant and equipment

Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the Tag Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Tag Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

Land and buildings

Freehold land and buildings are shown at their fair value being the amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date, based on a valuation by external independent valuers, less subsequent depreciation for buildings. Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation surplus in equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity, all other decreases are charged to profit or loss.

Depreciation

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

The depreciable amount of all fixed assets including capitalised lease assets are depreciated on a straight-line and diminishing value basis over their useful lives to the Tag Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

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Class of fixed asset Depreciation rate
Leasehold improvements 6-33%
Plant and equipment 5-40%
Buildings 2.5%
Leased plant and equipment 20-23%
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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit or loss.

(e) Leased assets

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the Tag Group are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight line basis over the life of the lease term. Lease incentives under operating leases are recognised as a liability and amortised over the life of the lease term.

(f) Financial assets

Recognition

Financial assets are initially measured at fair value on trade date, which includes transaction costs (other than financial assets at fair value through profit/loss), when the related contractual rights or obligations exist. Subsequent to initial recognition these financial assets are measured as set out below.

Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments . Specifically, the financial asset forms part of a group of financial assets which is managed and its performance is evaluated on a fair value basis, in accordance with the Tag Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in profit or loss in the period in which they arise.

TAG PACIFIC LIMITED

20

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued

Loans and receivables

Trade receivables, loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method less impairment. Interest income is recognised by applying the effective interest rate.

Fair value

For all quoted investments fair value is determined by reference to observable prices of market transactions for identical assets at or near the measurement date whenever that information is available. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate

The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(g) Impairment of assets

At each reporting date, the Tag Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the Tag Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Losses of an associate in excess of the group’s interest in that associate (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate) are recognised only to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of the acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment.

Any excess of the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the acquisition, after reassessment, is recognised immediately in profit or loss. Where a group transacts with an associate of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant associate.

(i) Intangible assets

Goodwill

Goodwill is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at the date of acquisition. Goodwill on acquisition of controlled entities is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purposes of impairment testing.

If the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (or groups of cash-generating units), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or groups of cash-generating units) and then to reduce the other assets of the cash-generating units pro-rata on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cashgenerating units). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. On disposal of an operation within a cashgenerating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal of the operation.

Patents and trademarks

Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses.

Research and development

Expenditure during the research phase of a project is recognised as an expense as incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs are amortised on a straight line basis over the period during which the related benefits are expected to be realised, once commercial production has commenced.

(h) Investments in associates

An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations . Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the value of individual investments.

ANNUAL REPORT 2017

21

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued

(j) Foreign currency transactions and balances

Functional and presentation currency

The functional currency of each of the Tag Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Tag Parent’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow hedge.

Tag Group companies

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

• J assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

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

• J retained earnings are translated at the historical exchange rates.

Exchange differences arising on translation of foreign operations are transferred directly to the Tag Group’s foreign currency translation reserve in the consolidated statement of financial position. These differences are recognised in the consolidated profit or loss in the period in which the operation is disposed.

(k) Employee benefits

A liability is recognised at balance date for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs.

Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Contributions are made by the Tag Group to employee superannuation funds and are charged as an expense when employees have rendered service entitling them to the contributions.

(l) Provisions

Provisions are recognised when the Tag Group has a present obligation (legal or constructive), as a result of a past event, for which it is probable that the Tag Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(m) Provision for warranties

Provision is made in respect of the Tag Group’s estimated liability on all products and services under warranty at balance date. The provision is measured as the present value of future cash flows estimated to be required to settle the warranty obligation. The future cash flows have been estimated by reference to the Tag Group’s history of warranty claims.

(n) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position.

(o) Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, stock rotation, price protection, rebates and other similar allowances.

Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows:

• J installation fees are recognised by reference to the stage of completion of the installation, determined as the proportion of costs incurred to date bear to the total estimated total cost of the transaction; and

• J revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses are incurred.

Revenue from construction contracts is recognised in accordance with the accounting policy set out in note 2(p).

Sale of goods

Revenue from sale of goods is recognised upon delivery of goods to customers.

Dividend, distribution and interest revenue

Dividend and distribution revenue from investments is recognised when the Tag Group’s right to receive payment has been established. Dividends received from associates are accounted for in accordance with the equity method of accounting.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

All revenue is stated net of the amount of goods and services tax (GST).

(p) Construction contracts and work in progress

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance date, as measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs or completion of a physical proportion of the contract work, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Construction work in progress is valued at cost, plus profit recognised to date less any provision for anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis.

(q) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

TAG PACIFIC LIMITED

22

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued

(r) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

• J where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

J for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the consolidated statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

(s) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

(t) Derivative financial instruments

The Tag Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts.

Note 33 contains details of the fair values of the derivative instruments used for hedging purposes.

Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured at their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated as effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).

A derivative with a positive fair value is recognised as a financial asset; a derivative with a negative fair value is recognised as a financial liability.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Hedge accounting

The Group designates certain hedging instruments, which include derivatives as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in the line of the statement of comprehensive income relating to the hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the statement of comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.

(u) Share-based payments

Share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of the Black-Scholes model. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 29.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the group’s estimate of equity instruments that will eventually vest.

At each reporting date, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with corresponding adjustment to the equity-settled employee benefits reserve.

(v) Adoption of new and revised Accounting Standards

In the current year, the Group has applied a number of amendments to AASBs and a new Interpretation issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2016, and therefore relevant for the current year end.

• J AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’

• J AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’

• J AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101’

• J AASB 1057 ‘Application of Australian Accounting Standards’ and AASB 2015-9 ‘Amendments to Australian Accounting Standards – Scope and Application Paragraphs’

Adoption of the above standards had no material impact on the financial statements.

ANNUAL REPORT 2017

23

Notes to the financial statements for the financial year ended 30 June 2017 2. Statement of significant accounting policies continued 3. Revenue 4. Other revenue

(v.1) Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. The impact of these standards has not been assessed yet.

Standard/Interpretation	Effective for	Expected to be
	annual reporting	initially applied
	periods beginning	in the fnancial
	on or after	year ending
AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:	1 January 2017	30 June 2018
Amendments to AASB 107’
AASB 2017-2 ‘Further Annual improvements 2014-2016 Cycle’	1 January 2017	30 June 2018
AASB 9 ‘Financial Instruments 2014’	1 January 2018	30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’	1 January 2018	30 June 2019
AASB 2016-3 ‘Amendments to Australian Accounting Standards – Clarifcations to AASB 15’	1 January 2018	30 June 2019
AASB 2016-5 ‘Classifcation and Measurement of Share-based Payment Transactions’	1 January 2018	30 June 2019
AASB Interpretation 22 ‘Foreign Currency Translation and Advance Consideration’	1 January 2018	30 June 2019
AASB 16 ‘Leases’	1 January 2019	30 June 2020
		2017 2016
		$’000 $’000
3. Revenue
The following is an analysis of the group’s revenue for the year from continuing operations (excluding other revenue – refer note 4):
– Revenue from sale of goods		27,405 32,109
– Revenue from the rendering of services		2,616 2,338
– Revenue from projects and installations(a)		10,055 21,961
Total revenue		40,076 56,408

(a) Revenue from projects and installations includes revenue characterised as construction contract revenue under AASB 111 of $10.06 million (2016: $21.96 million). Construction contracts in progress are detailed in note 17.

4. Other revenue

4. Other revenue
Interest revenue	12	34
Rental Income	30	36
Other	5	52
Total other revenue	47	122
The following is an analysis of other revenue earned on fnancial assets by category of asset:
Loans and receivables (including cash and bank balances)	12	34
Total interest income for fnancial assets not designated at fair value through proft or loss	12	34
Rental Income	30	36
Other income earned on non-fnancial assets	5	52
Total other revenue	47	122

TAG PACIFIC LIMITED

24

Notes to the financial statements for the financial year ended 30 June 2017 5. Other income 6. Finance costs 7. Loss for the year 8. Income tax expense

	2017	2016
	$’000	$’000
5. Other income
Gain on disposal of assets	120	27
Fair value gain on assets designated at fair value through proft or loss	–	62
Total other income	120	89
6. Finance costs
Finance costs
– banks/fnancial institutions	340	287
– fnance lease charges	22	26
Total fnance costs	362	313
7. Loss for the year
The loss before income tax has been determined after:
Depreciation of property plant & equipment	315	465
Employee benefts expense
– Post-employment benefts	686	806
– Short-term employee benefts	11,679	12,876
– Share-based payments	1	5
Total employee benefts expense	12,366	13,687
Provision for doubtful debts raised	64	75
Operating lease rentals – minimum lease payments	1,067	1,050
Net foreign exchange loss/(gain)	180	(253)
Write down of inventory to realisable values	–	160
8. Income tax expense
(a) The components of income tax expense comprise:
Current tax
In respect of the current year	–	–
Deferred tax
In respect of the current year	–	–
Total income tax expense recognised in the current year	–	–
(b) The prima facie tax on loss before income tax is reconciled to income tax as follows:
Prima facie tax beneft on loss before income tax at 30%	(1,157)	(318)
Add tax effect of:
– unused tax losses not brought to account	1,157	318
Income tax expense attributable to the entity	–	–
The applicable weighted average effective tax rates are as follows:	–	–

The tax rate used for the reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law.

ANNUAL REPORT 2017

25

Notes to the financial statements for the financial year ended 30 June 2017 9. Cash & cash equivalents

2017 2016 $’000 $’000

9. Cash & cash equivalents

For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the statement of financial position as follows:

Cash and bank balances	3,706	3,685
Short-term bank deposits	149	149
	3,855	3,834
The weighted average effective interest rate on cash and cash equivalents for the fnancial year ended 30 June 2017 was 0.31% (2016: 0.71%).
Reconciliation of loss for the year to net cash fow from operating activities
Loss from operating activities after income tax	(3,855)	(1,060)
Non-cash fows
– depreciation	315	465
– share based payments	1	5
– unrealised currency losses/(gains)	180	(253)
– gain on sale of property, plant and equipment	(120)	(27)
Changes in assets and liabilities
– decrease/(increase) in receivables, prepayments and other assets	3,616	(2,126)
– decrease in inventories	578	846
– decrease in trade creditors & accruals	(522)	(795)
– (decrease)/increase in provisions	(298)	82
Net cash used by operating activities	(105)	(2,863)
Liquidity risk management
Financing facilities 1
Credit facilities	13,415	14,803
Amounts utilised	(8,441)	(7,513)
Unused credit facilities	4,974	7,290

1. Finance facilities include bank guarantees and surety bonds.

Loan and non-financial facilities

Loan and non-financial facilities are arranged with a number of Australian and New Zealand institutions with the general terms and conditions being set and agreed to annually. Interest rates are variable and subject to adjustment.

Non-cash financing and investment activities

During the year the Tag Group did not acquire any plant and equipment by means of finance leases and hire purchases.

TAG PACIFIC LIMITED

26

Notes to the financial statements for the financial year ended 30 June 2017 10. Trade & other receivables 11. Inventories

	2017	2016
	$’000	$’000
10. Trade & other receivables
Trade receivables	7,508	9,129
Allowance for doubtful debts	(141)	(88)
	7,367	9,041
Other debtors	345	852
Accrued revenue receivable	1,774	4,056
Total trade & other receivables	9,486	13,949
Ageing of past due but not impaired
60-90 days	66	511
90-120 days	726	502
Total	792	1,013
Average age of trade receivables (days)	68	59
Movement in the allowance for doubtful debts
Balance at the beginning of the year	88	74
Impairment losses recognised on receivables	66	65
Amounts written off during the year as uncollectible	(13)	(51)
Balance at the end of the year	141	88

The average credit period on sales of goods and rendering of services ranges from 30 to 60 days. The Tag Group has provided for receivables based on estimated unrecoverable amounts from sales of goods and rendering of services, determined by reference to the particular circumstances in relation to the debt and past default experience.

In determining the recoverability of a trade receivable, the Tag Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. There is no security held in relation to these balances.

Ageing	of impaired trade receivables
90-120	days	141	88
Total		141	88

11. Inventories

At lower of cost and net realisable value:

Raw materials	332	307
Goods-in-transit	493	656
Finished goods	6,624	6,969
Total inventories	7,449	7,932

The cost of inventory recognised as an expense during the year was $28.8 million (2016: $43.0 million).

ANNUAL REPORT 2017

27

Notes to the financial statements for the financial year ended 30 June 2017 12. Other assets 13. Subsidiaries 14. Other financial assets

	2017	2016
	$’000	$’000
12. Other assets
Current
Prepayments	1,428	531
Total other assets	1,428	531

13. Subsidiaries

Details of the Group’s subsidiaries at 30 June 2017 are as follows:

Entity	Place of	Class of	% Owned	% Owned
	incorporation	share	2017	2016
Electro Securities Pty Limited	Australia	ord	100	100
Fibumi Pty Ltd(iii)	Australia	ord	100	100
MPower Business Services Pty Limited	Australia	ord	100	100
MPower Group Pty Limited	Australia	ord	100	100
MPower Nominees Pty Limited	Australia	ord	100	100
MPower Products Pty Limited	Australia	ord	100	100
MPower Projects Pty Limited	Australia	ord	100	100
MPower Solar Systems Pty Limited	Australia	ord	100	100
Power Property Nominees Pty Ltd(i)	Australia	ord	75	75
Power Property Unit Trust(i)	Australia	units	55	55
ShareCover Pty Limited	Australia	ord	100	100
ShareCover Services Pty Limited	Australia	ord	100	100
Tagpac Financial Services Pty Limited	Australia	ord	100	100
Tagpac Securities Ltd(iii)	Australia	ord	100	100
Techno Holdings Pty Limited(iii)	Australia	ord and pref	100	100
Flatbat Ltd(ii)	New Zealand	ord	100	100
MPower Pacifc Limited(ii)	New Zealand	ord	100	100
PISL Limited(ii)	New Zealand	ord	100	100
Spedding Ltd(ii)	New Zealand	ord	100	100
MPower Samoa Limited(ii)	Samoa	ord	100	100

(i) The Tag group has majority ownership and board representation of all non-wholly owned subsidiaries. Percentages have been rounded.

(ii) Companies incorporated in New Zealand and Samoa carry on business primarily in their respective countries.

(iii) Deregistered on 19 July 2017.

	2017	2016
	$’000	$’000
14. Other financial assets
Current
Derivatives designated and effective as hedging instruments carried at fair value
Forward exchange contracts	21	124

The financial assets have been classified in this manner as this group of assets is managed and its performance is evaluated monthly on a fair value basis in accordance with an investment strategy.

TAG PACIFIC LIMITED

28

Notes to the financial statements for the financial year ended 30 June 2017 15. Property, plant & equipment

				2017	2016
				$’000	$’000
15. Property, plant &	equipment
Cost or valuation				6,691	6,848
Accumulated depreciation				(3,836)	(3,947)
Total property, plant & equipment				2,855	2,901
Plant & equipment				785	761
Leasehold improvements				–	1
Capitalised leased assets				290	381
Land & buildings				1,780	1,758
Total property, plant & equipment				2,855	2,901
Cost	Plant &	Leasehold	Capitalised	Land &	Total
	equipment	improvements	leased assets	buildings at
	at cost	at cost	at cost	fair value
	$’000	$’000	$’000	$’000	$’000
Balance at 30 June 2015	3,856	188	791	1,805	6,640
Additions	280	–	76	–	356
Revaluation of assets	–	–	–	95	95
Other disposals	(182)	–	(81)	–	(263)
Effect of foreign currency exchange differences	20	–	–	–	20
Balance at 30 June 2016	3,974	188	786	1,900	6,848
Additions	323	–	–	5	328
Revaluation of assets	–	–	–	43	43
Other disposals	(376)	–	(152)	–	(528)
Effect of foreign currency exchange differences	–	–	–	–	–
Balance at 30 June 2017	3,921	188	634	1,948	6,691
Accumulated depreciation	Plant &	Leasehold	Capitalised	Land &	Total
	equipment	improvements	leased assets	buildings
	$’000	$’000	$’000	$’000	$’000
Balance at 30 June 2015	(2,983)	(163)	(394)	(117)	(3,657)
Eliminated on disposals of assets	136	–	58	–	194
Depreciation expense	(346)	(24)	(69)	(25)	(464)
Effect of foreign currency exchange differences	(20)	–	–	–	(20)
Balance at 30 June 2016	(3,213)	(187)	(405)	(142)	(3,947)
Eliminated on disposals of assets	303	–	123	–	426
Depreciation expense	(226)	(1)	(62)	(26)	(315)
Effect of foreign currency exchange differences	–	–	–	–	–
Balance at 30 June 2017	(3,136)	(188)	(344)	(168)	(3,836)
Net Balance at 30 June 2017	785	–	290	1,780	2,855
Net Balance at 30 June 2016	761	1	381	1,758	2,901

Assets pledged as security

The Group’s freehold land and buildings are measured on a fair value basis. The freehold land and buildings have been pledged as security for bank loans under a mortgage that was used to acquire the land and buildings. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity. Buildings are depreciated at the rate of 2.5% per year.

ANNUAL REPORT 2017

29

Notes to the financial statements for the financial year ended 30 June 2017 15. Property, plant & equipment continued 16. Taxation

Fair value measurement of the Group’s freehold land and buildings

An independent valuation of the Group’s land and buildings was performed by Savills Valuations Pty Limited during June 2017 to determine the fair value of the land and buildings. The valuation which conforms to International Valuation Standards, was determined by reference to market transactions on arm’s length terms. The fair value was determined principally based on the income capitalisation method of valuation.

The Group has classified its freehold land and buildings as Level 3 hierarchy assets due to their fair value being based on unobservable inputs as follows:

Class of property Fair value hierarchy Fair value 2017 Valuation technique	Key unobservable inputs Monthly input range 2017 Relationship of unobservable input to fair value
Commercial Level 3 $1,780,000 Income capitalisation method	Market rent $82-$92m2 The higher the passing and market rent per square metre, the higher the fair value.
	Capitalisation rate 7.50%-8.50% The higher the capitalisation rate, the lower the fair value.
	2017 2016 $’000 $’000
Had the Group’s land and buildings been measured on a historical cost Land and buildings	basis, their carrying amount would have been as follows: 856 876
16. Taxation Current tax liabilities	– –
Deferred tax balances	– –
Deferred tax assets not brought to account which will only be realised if – timing differences – revenue losses – capital losses	the conditions for deductibility set out in note 2(b) occur comprise: 901 729 8,177 6,857 4,201 4,015

The recoverability of the deferred tax assets has been determined by reference to forecast future taxable profits of the group. As a result of the uncertainty as to the timing of utilisation of tax losses, deferred tax assets of $8.177 million have not been raised (2016: $6.857 million). This position is reassessed on an ongoing basis. The losses will remain available indefinitely to offset against future taxable profits, subject to continuing to meet the statutory tax tests of continuity of ownership or failing that, the same business test.

Tax consolidation

The company and its wholly-owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Tag Pacific Limited. The wholly-owned Australian resident entities that are members of the tax-consolidated group are included in the list of subsidiaries in note 13. MPower Group Pty Limited and its Australian resident subsidiaries joined the Tag Pacific Limited tax consolidated group on 28 September 2012 on acquisition by Tag of the minority interest.

Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement.

TAG PACIFIC LIMITED

30

Notes to the financial statements for the financial year ended 30 June 2017 17. Construction contracts 18. Trade & other payables 19. Borrowings

2017	2016
$’000	$’000

17. Construction contracts

Contracts in progress

Contracts in progress
Recognised and included in the fnancial statements as amounts due:
Revenue accrued under construction contracts	1,721	4,056
Retentions on construction contracts in progress	118	220
Accrued revenue on construction contracts in progress	1,721	4,056
Accrued costs on construction contracts in progress	1,881	1,567

The above relates to power projects that are characterised as construction contract revenue under AASB 111.

Revenue from construction contracts is detailed in note 3.

18. Trade & other payables

18. Trade & other payables
Current unsecured liabilities
– trade payables	4,129	5,543
– sundry payables and accrued expenses	4,499	4,030
	8,628	9,573

The general policy for subsidiaries within the Tag Group with foreign currency exposure arising from cross border trading is to hedge between 50% and 100% of the exposure.

The credit period on purchases from overseas suppliers generally ranges from 30 to 90 days. No interest is charged on trade payables paid within the relevant supplier term. Average credit periods for local purchases range from 7 to 30 days.

19. Borrowings

Current

Current
– Bank facilities (secured)	3,997	3,547
– Other interest bearing liabilities	93	108
– Asset fnance liabilities (secured) (refer note 26)	114	116
	4,204	3,771
Non-current
– Bank facilities (secured)	1,063	1,037
– Asset fnance liabilities (secured) (refer note 26)	165	279
	1,228	1,316

Bank facilities are fully secured by registered mortgage debentures given by controlled entities over their assets. The total carrying amounts of assets pledged as security are $25,386,476 (2016: $28,709,423).

Summary of borrowing and financial facility arrangements

The covenants and specific conditions which apply to the bank facilities are as follows:

• (a) The Power Property Unit Trust has $1.1 million of the bank borrowings from National Australia Bank Limited charged at an interest rate of 5.67%. With effect from February 2017, the loan commenced capital repayments of $1,500 per month. The facility has no financial covenants for the year ending 30 June 2017.

• (b) MPower Group Pty Ltd (and subsidiaries) has $4.0 million of borrowings from St George Bank Limited charged at a weighted average interest rate of 5.95%. At 30 June 2017 the MPower Group was required to maintain a maximum gearing ratio of two times net tangible assets and a minimum liquidity ratio of current assets to current liabilities (excluding provisions) of 1.25 times.

There were no breaches of any covenants at 30 June 2017 (2016: nil).

The lease liabilities are secured by the leased assets as disclosed in note 15.

ANNUAL REPORT 2017

31

Notes to the financial statements for the financial year ended 30 June 2017 20. Provisions 21. Other liabilities 22. Issued capital

	2017	2016
	$’000	$’000
20. Provisions
Employee benefts(a)	1,609	1,799
Warranties(b)	105	171
Total provisions	1,714	1,970
Current	1,624	1,875
Non-current	90	95
Total provisions	1,714	1,970
Warranties
Opening balance at beginning of year	171	295
Provisions raised/(reversed) during year	30	(110)
Amounts used	(96)	(14)
Balance at end of year	105	171

(a) The provision for employee benefits represents annual leave and long service leave entitlements accrued by employees. A provision has been recognised for employee entitlements relating to long service leave. The calculation for the present value of future cash flows in respect of long service leave is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in note 2.

(b) The provision for warranty claims represents the present value of the directors’ best estimate of the future outflow of economic benefits that will be required under the Tag Group’s warranty program for projects undertaken or products sold. The estimate has been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes, other events affecting product quality or changes in the nature of projects undertaken.

21. Other liabilities

Current

Current
Forward exchange contract liability	339	150
Customer deposits in advance	564	63
Total current other liabilities	903	213

22. Issued capital

22. Issued capital
124,328,175 (2016: 124,328,175) fully paid ordinary shares	23,410	23,410
	Number of	Share
	shares	capital
	’000	$’000
Balance at 30 June 2015	93,717	22,246
Shares issued during the year(a)	30,611	1,164
Balance at 30 June 2016	124,328	23,410
Shares issued during the year(a)	–	–
Balance at 30 June 2017	124,328	23,410

Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the company does not have authorised capital or par value in respect of the issued shares.

TAG PACIFIC LIMITED

32

Notes to the financial statements for the financial year ended 30 June 2017 22. Issued capital continued 23. Reserves

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 is entitled to one vote for each share held.

• (a) No shares were issued during the current financial year. During the 2016 year 30,610,426 shares were issued through a non-renounceable rights issue raising a total of $1,164,000 net of issue costs. Eligible shareholders were entitled to apply for 11 fully paid ordinary shares for every 20 ordinary shares held.

• (b) During the financial year, an on-market share buy-back facility was in place. No shares were acquired under the facility during the year and to date a total of 1,532,983 shares have been purchased for $368,541.

• (c) 9,965,872 listed options exerciseable at $0.1929 per option and expiring on 4 October 2017 remain on issue at 30 June 2017 (2016: 9,965,872).

• (d) 2,145,000 unlisted executive share options remain on issue at 30 June 2017 (refer note 29).

• (e) On 28 October 2016 the shareholders approved a share placement facility which allows the issue of equity securities up to 10% of the issued capital of the company (at the time of the issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2.

	2017	2016
	$’000	$’000
23. Reserves
Revaluation reserve(a)	373	351
Share option reserve(b)	256	255
Foreign currency translation reserve(c)	(176)	(155)
Cash fow hedge reserve(d)	(187)	(42)
Total reserves	266	409
(a) Revaluation reserve
Balance at beginning of the year	351	301
Revaluation of property net of minority interests	22	50
Balance at end of the year	373	351
The revaluation reserve records a revaluation of land and buildings (refer note 15).
(b) Share option reserve
Balance at beginning of the year	255	249
Share based payments for the year	1	6
Balance at end of the year	256	255
The share option reserve records items recognised as expenses in relation to executive share options.
(c) Foreign currency translation reserve
Balance at beginning of the year	(155)	(224)
Exchange differences arising on translating the foreign operations	(21)	69
Balance at end of the year	(176)	(155)
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled entities.
(d) Cash fow hedge reserve
Balance at beginning of the year	(42)	(29)
Cash fow hedges movements for the year net of tax	(145)	(13)
Balance at end of the year	(187)	(42)

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognised and accumulated under the heading of cash flow hedge reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or is included as an adjustment to the non-financial hedged item, consistent with the relevant accounting policy.

Losses arising on changes in fair value of hedging instruments reclassified from equity into profit or loss during the year are included in the following line item in the consolidated statement of profit or loss and other comprehensive income:

Other expenses (130) (15)

ANNUAL REPORT 2017

33

Notes to the financial statements for the financial year ended 30 June 2017 24. Non-controlling interest in controlled entities 25. Dividends 26. Capital and leasing commitments 27. Segment information

2017	2016
$’000	$’000

24. Non-controlling interest in controlled entities

24. Non-controlling interest in controlled entities	$’000	$’000
Non-controlling interest comprises:
– profts	401	382
25. Dividends
Recognised amounts
No dividends were paid during the current or previous years.
Balance of franking account at year end adjusted for franking credits arising from payment of provision
for income tax, amounts transferred in and franking debits arising from payment of dividends	7,420	7,420

26. Capital and leasing commitments

Operating lease commitments

Operating leases are non-cancellable property leases with varying terms, with variable renewable options and contingent rental provisions.

Non-cancellable operating leases contracted for but not capitalised in the fnancial statements
Minimum lease payments payable
– not later than one year	949	528
– later than one year but not later than fve years	904	1,419
Minimum lease payments	1,853	1,947

Finance lease commitments

Finance leases relate principally to motor vehicles with terms up to 5 years typically with a 20% residual value.

Minimum lease payments payable
– not later than one year	128	138
– later than one year but not later than fve years	178	306
Minimum lease payments	306	444
Less: future fnance charges	(27)	(49)
Present value of minimum lease payments	279	395

27. Segment information

(a) Products and services from which reportable segments derive their revenues

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided. The Group’s reportable segments under AASB 8 are therefore as follows:

• J Power investments – consists of MPower Group Pty Limited, MPower Business Services Pty Ltd, MPower Products Pty Ltd, MPower Pacific Ltd, MPower Projects Pty Ltd, MPower Samoa Limited, MPower Solar Systems Pty Ltd and MPower Nominees Pty Ltd (all 100% owned at 30 June 2017). This group is a leading provider of innovative and dependable power solutions for use in all manner of emergency, back-up, generated and renewable power situations in Australia, New Zealand and the Pacific Islands.

• J Property investments consist principally of Tag’s investments in the Power Property Unit Trust which owns a property occupied by MPower Group in Melbourne, Victoria.

TAG PACIFIC LIMITED

34

Notes to the financial statements for the financial year ended 30 June 2017 27. Segment information continued

(b) Segment revenues and results

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment:

	Segment	revenue	Segment	proft/(loss)
	2017	2016	2017	2016
	$'000	$'000	$'000	$'000
Continuing operations
Power investments	40,011	56,485	(1,792)	782
Property investments	171	171	156	163
Other (net of inter-segment eliminations)	61	(126)	61	(126)
Total for continuing operations	40,243	56,530	(1,575)	819
Depreciation and amortisation expense			(315)	(465)
Finance costs			(362)	(313)
Unallocated costs			(1,603)	(1,101)
Consolidated segment loss for the year			(3,855)	(1,060)

Revenue reported above represents revenue generated from external customers. The only inter-segment sale during the year was rental income charged by the other investments segment to the power investments segment of $170,720 which was eliminated on consolidation (2016: $170,720).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2. Segment profit represents the profit earned by each segment without allocation of central administration costs and directors’ salaries, profits of associates, depreciation and amortisation costs, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

(c) Segment assets and liabilities

(c) Segment assets and liabilities
	2017	2016
	$’000	$’000
Segments assets
Power investments	23,212	26,800
Property investments	2,037	2,005
Total segment assets	25,249	28,805
Unallocated assets	(155)	466
Consolidated assets	25,094	29,271
Segments liabilities
Power investments	14,677	15,112
Property investments	1,095	1,098
Total segment liabilities	15,772	16,210
Unallocated liabilities	905	633
Consolidated liabilities	16,677	16,843

For the purposes of monitoring performance and allocating resources between segments:

(i) All assets are allocated to reportable segments. There are no assets used jointly by reportable segments.

(ii) All liabilities are allocated to reportable segments. There are no liabilities for which reportable segments are jointly liable.

(d) Other segment information

(d) Other segment information
	Depreciation and			Additions to
		amortisation	non-current assets
	2017	2016	2017	2016
	$’000	$’000	$’000	$’000
Power investments	286	436	323	356
Property Investments	26	26	5	–
Unallocated	3	3	–	–
Total	315	465	328	356

ANNUAL REPORT 2017

35

Notes to the financial statements for the financial year ended 30 June 2017

27. Segment information continued 28. Auditor’s remuneration 29. Employee benefits

(e) Revenue from major products and services

The following is an analysis of the Group’s revenue from continuing operations from its major products and services.

	2017	2016
	$’000	$’000
Power investments – project and installations revenue(i)	10,055	21,961
Power investments – other revenue(ii)	29,956	34,524
Other	232	45
Total	40,243	56,530

• (i) Project and installations revenue includes revenue characterised as construction contract revenue under AASB 111 of $10.06 million (2016: $21.96 million).

(ii) Other revenue relates to the sale of goods and rendering of services.

(f) Geographical information

The investment in the power sector has business segments located across Australia and New Zealand. Specifically, geographical segments consist of branches across Australia in New South Wales, Victoria, Queensland, Western Australia and South Australia and includes overseas projects (including Samoa) managed in Australia. The New Zealand segment includes branches in Auckland, Wellington and Christchurch.

The Group’s revenue from continuing operations from external customers and information about its non-current assets by geographical location are detailed below.

		Revenue from		Non-current
	external customers			assets
	2017	2016	2017	2016
	$’000	$’000	$’000	$’000
Australia	33,587	49,154	2,420	2,559
New Zealand	6,536	7,376	435	342
Total	40,123	56,530	2,855	2,901

(g) Information about major customers

Included in revenues arising from power projects and installation revenue of $10.06 million (2016: $21.96 million) are revenues of $2.1 million (2016: $13.0 million) which arose from sales to the Group’s largest customer.

28. Auditor’s remuneration

28. Auditor’s remuneration
	2017	2016
	$	$
Remuneration of the auditor of Tag Group:
Deloitte Touche Tohmatsu (including network member frms)
– Auditing or reviewing fnancial statements	115,000	115,000
– Taxation services	4,646	17,203
Total	119,646	132,203

29. Employee benefits

Executive Share Option Plan

The following share-based payment arrangement existed at 30 June 2017.

Under the Tag Pacific Limited Executive Share Option Plan, the remuneration committee may offer options to executives having regard to their length of service with the group, the contribution made to the Tag Group by the executive, the potential contribution of the executive and any other matters considered relevant.

The maximum number of options that can be on issue at any time is 5% of the shares on issue at that time. In addition, the maximum number of options that can be issued to any one executive is 2,350,000 (2016: 1,250,000).

An option may be exercised, if vested, by the relevant participant lodging a Notice of Exercise of Option and Application for Shares, together with the exercise price for each share to be issued on exercise. Options may only be exercised by a participant at the times and in the numbers and subject to the satisfaction of any conditions set by the remuneration committee at the time of the offer of the options. The remuneration committee may stipulate that options may only be exercised if the company achieves stipulated performance benchmarks.

TAG PACIFIC LIMITED

36

Notes to the financial statements for the financial year ended 30 June 2017 29. Employee benefits continued 30. Related parties

There are no performance criteria that need to be met in relation to the options currently on issue, however, an option not exercised will lapse on the expiry of the exercise period or if the relevant senior manager no longer provides services to or is no longer employed by the company. Unless the remuneration committee determines otherwise, options may not be transferred.

1,985,000 options were granted under the Tag Pacific Limited Executive Share Option Plan during the year ended 30 June 2017 (2016: Nil).

		Tag Group	Weighted average	Weighted average
				exercise price
	2017	2016	2017	2016
	No.	No.	$	$
Movement in the number of share options held by executives are as follows:
Opening balance	1,523,000	3,029,000	0.2394	0.2410
Issued during year	1,985,000	–	0.0700	–
Lapsed during the year	(1,363,000)	(1,506,000)	0.2510	0.2274
Balance at end of the year	2,145,000	1,523,000	0.0800	0.2394

Details of the options on issue at year end were as follows:

	Expiry	Exercise	Fair value at	Number of
Grant date	date	price	grant date	options
10 October 2013	31 May 2018	$0.2029	$0.01	160,000
2 December 2016	31 May 2019	$0.0700	$0.01	595,500
2 December 2016	31 May 2020	$0.0700	$0.01	595,500
2 December 2016	31 May 2021	$0.0700	$0.01	794,000
Total				2,145,000

During the year 1,985,000 options were issued under the Tag Pacific Limited Executive Share Option Plan, no options were exercised, and 1,363,000 share options lapsed. No person entitled to exercise an option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

The options outstanding at 30 June 2017 had a weighted average exercise price of $0.0800, a weighted average remaining contracted life

of 2.86 years and the exercise prices range from $0.0700 to $0.2029.

The fair value of options issued is calculated by using a Black Scholes option pricing model. Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of potential future movements, which may not eventuate.

Included under employee benefits expense in the statement of profit or loss and other comprehensive income is an expense of $2,355 (2016: $5,232) relating to equity-settled share-based payment transactions.

30. Related parties

Parent entity

The parent entity and ultimate parent entity of the group is Tag Pacific Limited.

Controlled entities

Information relating to controlled entities is set out in note 13.

Director related entities

(a) Anthony Australia Pty Limited

Peter Wise has a controlling interest in Anthony Australia Pty Ltd through family interests and Nathan Wise is a director of the company. During the year the company was entitled to management fees and allowances for services rendered of $387,000 (2016: $387,000). Management fees of $250,335 were accrued and payable at 30 June 2017. The company did not acquire any ordinary shares in Tag Pacific Limited (2016: 21,829,326). The details of the fees and executive share options are included in the remuneration of directors’ disclosures in the Directors’ Report. The company held no unlisted executive share options during the year. 400,0000 executive share options held by the company over unissued ordinary shares in Tag Pacific Limited lapsed during 2016.

(b) Investment Associates Pty Limited

Nathan Wise has a controlling interest in Investment Associates Pty Ltd through family interests. During the year the company received management fees for services rendered of $335,000 (2016: $319,300). 900,000 unlisted executive share options over unissued ordinary shares in Tag Pacific Limited were granted during the year (2016: Nil). The details of the fees and executive share options are included in the remuneration of directors’ disclosures in the Directors’ Report. 350,000 unlisted executive share options held by the company over unissued ordinary shares in Tag Pacific Limited lapsed during the year (2016: 500,000).

Directors

The names of the directors of the Tag Group during the year under review were Peter Wise, Nathan Wise, Gary Cohen, Robert Constable, Robert Moran and Gary Weiss. Information on the remuneration of directors and their respective periods of service is set out in the Directors’ Report. Information on directors’ interests in shares is detailed in the Directors’ Report.

ANNUAL REPORT 2017

37

Notes to the financial statements for the financial year ended 30 June 2017

30. Related parties continued continued 31. Earnings per share 32. Subsequent events

Key management personnel

The names and positions held by key management personnel of the Tag Group who have held office during the current and previous financial years are:

• J Peter Wise – Chairman (executive)

• J Nathan Wise – Chief Executive Officer and Managing Director

• J Gary Cohen – Non-executive Director

• J Robert Constable – Non-executive Director

• J Robert Moran – Non-executive Director

• J Gary Weiss – Non-executive Director – retired with effect from 31 August 2017

• J Richard Peterson – Non-executive Director – retired 27 April 2016

• J Darrell Godin – Chief Financial Officer and Company Secretary

• J Anthony Csillag – Managing Director, MPower Projects Pty Limited

The aggregate compensation made to directors and other key management personnel of the parent entity and consolidated group are set out below:

		Tag Group
	2017	2016
	$	$
Short-term employee benefts	1,427,631	1,356,479
Post-employment benefts	48,244	48,663
Other payments	35,149	12,993
Share based payments	1,706	3,255
	1,512,730	1,421,390

Key management personnel remuneration has been included in the remuneration section of the Directors’ Report.

31. Earnings per share

31. Earnings per share
	2017	2016
	cents	cents
	per share	per share
Basic earnings per share	(3.1)	(1.0)
Diluted earnings per share	(3.1)	(1.0)
	2017	2016
	$’000	$’000
Reconciliation of earnings to net loss
Net loss after income tax	(3,855)	(1,060)
Attributable to non-controlling interests	(32)	(34)
Earnings used in the calculation of basic and diluted earnings per share	(3,887)	(1,094)
Weighted average number of shares used in the calculation of basic earnings per share	124,328,175	109,148,758
Weighted average number of shares used in the calculation of diluted earnings per share	124,328,175	109,148,758

No dilution has been included as losses were incurred in the current and previous years.

32. Subsequent events

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Tag Group, the results of those operations, or the state of affairs of the Tag Group in future financial years.

TAG PACIFIC LIMITED

38

Notes to the financial statements for the financial year ended 30 June 2017 33. Financial instruments

33. Financial instruments

(a) Capital risk management

The Tag Group manages its capital to ensure that entities in the Tag Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. This strategy remains unchanged from the previous year.

The capital structure of the Tag Group consists of cash and cash equivalents, debt (including the borrowings disclosed in note 19), and equity attributable to equity holders of the Tag Parent, comprising issued capital (disclosed in note 22), reserves (disclosed in note 23) and retained earnings. The Tag Group also utilises certain off-balance sheet bank financing arrangements, including documentary credit facilities to facilitate the purchase of goods from overseas suppliers and the provision of performance guarantees to customers. The Tag Group operates internationally through subsidiary companies established in Samoa, New Zealand and a branch in Fiji. None of the Tag Group entities are subject to externally-imposed capital requirements other than those specific bank covenants and conditions referred to under note 19. Operating cash flows are used to maintain and expand the group’s manufacturing and distribution assets, as well as to make routine outflows of tax, dividends and repayment of maturing debt.

Gearing ratio

The Tag Group’s senior management reviews the capital structure on a semi-annual basis. As part of this review, senior management considers the cost of capital and the risks associated with each class of capital. The Tag Group has a target gearing ratio in line with the industry custom that is determined as a proportion of net debt to equity. The Tag Group balances its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

The gearing ratio at year-end was as follows:

	2017	2016
	$’000	$’000
Debt(i)	5,432	5,087
Cash and cash equivalents	(3,855)	(3,834)
Net debt	1,577	1,253
Equity(ii)	8,417	12,428
Net debt to equity ratio	18.7%	10.1%

(i) Debt is defined as long-term and short-term borrowings, as detailed in note 19.

(ii) Equity includes all capital, reserves and non-controlling interests.

(b) Categories of financial instruments

(b) Categories of fnancial instruments
	2017	2016
	$’000	$’000
Financial assets
Loans and receivables	9,486	13,949
Cash and cash equivalents	3,855	3,834
Forward exchange contract assets	21	124
Total fnancial assets	13,362	17,907
Financial liabilities
Amortised cost	14,060	14,660
Forward exchange contract liabilities	339	150
Total fnancial liabilities	14,399	14,810

(c) Financial risk management objectives

The Tag Group’s corporate treasury function provides services to the business, including negotiation and ongoing co-ordination of financing facilities, and monitors and manages the financial risks relating to the operations of the Tag Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk where appropriate.

The Tag Group generally hedges 50% to 100% of its foreign currency exposures. For certain entities within the Tag Group the use of these derivatives is subject to prior approval of the Tag corporate treasury function and of the board of the relevant entity.

The Tag Group does not enter into or trade financial instruments for speculative purposes.

The board of Tag Pacific Limited is ultimately responsible for ensuring that there is an effective risk management control framework in place.

ANNUAL REPORT 2017

39

Notes to the financial statements for the financial year ended 30 June 2017

33. Financial instruments continued

(d) Market risk

The Tag Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer note 33(e)) and interest rates (refer note 33(f)).

Market risks are reviewed at least monthly at a Tag Group level and at a subsidiary company level.

There has been no change to the Tag Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous year.

(e) Foreign currency risk management

The Tag Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.

To manage its exposure to foreign currency risk the Tag Group enters into forward foreign exchange contracts to hedge the exchange rate risk arising on sales denominated in foreign currencies and the import of power related products from countries including Europe, China, Singapore and the United States.

The carrying amount of the Tag Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

		Liabilities		Assets
	2017	2016	2017	2016
	$’000	$’000	$’000	$’000
New Zealand Dollars	1,335	1,305	3,329	3,126
US Dollars	1,396	643	1,609	–
Euros	25	–	–	59
Singapore Dollars	94	442	–	–
British Pounds	–	–	–	5
Fiji Dollars	–	15	–	2
Total	2,850	2,405	4,938	3,192

Foreign currency sensitivity analysis

The following table details the Tag Group’s sensitivity to a 10% increase or decrease in the Australian Dollar against the relevant foreign currencies. This sensitivity of 10% represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number indicates an increase in profit where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian Dollar against the respective currency, there would be an equal and opposite impact on the profit, and the balances below would be negative.

	2017	2016
	$’000	$’000
Proft or loss
US Dollars	(19)	58
NZ Dollars	(181)	(166)
Euros	2	(5)
Singapore Dollars	8	40
Fiji Dollars	–	1
Total	(190)	(72)

Forward foreign exchange contracts

The Tag Group has entered into contracts to purchase power related products from suppliers in countries including the United States, China, Singapore and Europe. The Tag Group has also entered contracts with customers denominated in USD and NZD. The relevant subsidiaries have entered into forward foreign exchange contracts for terms not exceeding 2 years to cover anticipated foreign currency payments and receipts within 50% to 100% of their respective exposures, which are designated into cash flow hedges.

At 30 June 2017, the aggregate amount of gains/(losses) under forward foreign exchange contracts recognised in other comprehensive income and accumulated in the cash flow hedging reserve relating to these anticipated future transactions is a loss of $130,302 (2016: profit of $15,067). It is anticipated the purchases of products will take place during the first 6 months of the next financial year at which time the amount deferred in equity will be included in the carrying amount of inventory. It is anticipated the inventory will be sold within 6 months after purchase, at which time the amount deferred in equity will be reclassified to profit or loss.

TAG PACIFIC LIMITED

40

Notes to the financial statements for the financial year ended 30 June 2017 33. Financial instruments continued

The following table details the forward foreign currency contracts for the Tag Group outstanding as at reporting date:

Outstanding contracts		Average	Foreign	currency	Contract	value		Fair value
	exchange rate			amount		in A$		in A$
	2017	2016	2017	2016	2017	2016	2017	2016
			FC’000	FC’000	$’000	$’000	$’000	$’000
Consolidated
Buy US Dollars
Less than 3 months	0.7552	0.7075	1,203	102	1,594	144	(27)	(6)
3 to 12 months	0.7542	0.7385	3,301	2,876	4,376	3,894	(74)	1
Sell US Dollars
Less than 3 months	–	0.7290	–	3,296	–	4,521	–	79
3 to 12 months	0.8147	0.8949	424	429	521	479	(32)	(102)
Sell NZ Dollars
Less than 3 months	1.1038	–	4,268	–	3,867	–	(191)	–
3 to 12 months	–	–	–	–	–	–	–	–
Buy Euro
Less than 3 months	–	–	–	–	–	–	–	–
3 to 12 months	0.6961	0.6332	110	12	158	20	7	–
Buy Singapore Dollars
Less than 3 months	–	0.9986	–	483	–	484	–	(1)
3 to 12 months	1.0257	1.0118	80	270	78	267	(2)	3
Total					10,594	9,809	(319)	(26)

(f) Interest rate risk management

The Tag Group is exposed to interest rate risk as entities in the Tag Group borrow funds at both fixed and floating interest rates. The risk is managed by the Tag Group by maintaining an appropriate mix between fixed and floating rate borrowings. The Tag Group does not enter into interest rate hedging activities.

Exposures to interest rates on the financial liabilities of the Tag Group are detailed in note 33(h) below.

Interest rate sensitivity analysis

The following analysis illustrates the Tag Group’s sensitivity to a 200 basis point (i.e. 2% p.a.) increase or decrease in nominal interest rates, based on exposures in existence at the reporting date. This represents management’s assessment of the reasonably possible change in interest rates as at that date.

At reporting date, if interest rates on borrowings had been 200 basis points higher (or lower) and all other variables were held constant, the Tag Group’s net profit would decrease/(increase) by $101,000 (2016: $92,000). This is mainly attributable to the Tag Group’s exposure to interest rates on its variable rate borrowings.

There was no significant change in the Tag Group’s sensitivity to interest rates during the current year.

At reporting date, if interest rates had been 200 basis points higher (or lower) and all other variables were held constant, the Tag Group’s net profit would increase/(decrease) on deposits by $77,000 (2016: $74,000). This is mainly attributable to the Tag Group’s exposure to interest rates on its cash and cash equivalents.

(g) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Tag Group. The Tag Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Tag Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management of each operating subsidiary on a regular basis.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate and available, credit guarantee insurance is purchased.

The Tag Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

ANNUAL REPORT 2017

41

Notes to the financial statements for the financial year ended 30 June 2017

33. Financial instruments continued

The following table sets out the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, representing the Tag Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained:

		Maximum risk
	2017	2016
	$’000	$’000
Tag Group
Trade and other receivables	9,486	13,949
Total	9,486	13,949

(h) Liquidity risk management

Liquidity risk is the risk that the Tag Group will encounter difficulty in meeting its obligations associated with financial liabilities.

Ultimate responsibility for liquidity risk management rests with the Tag Parent board of directors, who have built an appropriate liquidity risk management framework for the management of the Tag Group’s short, medium and long-term funding and liquidity management requirements. The Tag Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 9 is a listing of additional undrawn facilities that the Tag Group has at its disposal to further reduce liquidity risk.

Liquidity and interest risk tables

The following tables detail the Tag Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Tag Group can be required to pay. The table includes both interest and principal cash flows.

Tag Group	Weighted average	Less than	3	months	1-5 years	5+ years
	effective interest rate	3 months	to 1 year
	%	$’000		$’000	$’000	$’000
2017
Non-interest bearing liability	–	6,860		1,768	–	–
Finance lease liability	6.20	32		96	178	–
Variable interest rate instruments	5.78	4,077		14	361	701
Forward exchange contract liabilities	–	27		312	–	–
Total		10,996		2,190	539	701
2016
Non-interest bearing liability	–	8,164		1,409	–	–
Finance lease liability	6.41	34		104	306	–
Variable interest rate instruments	6.29	3,497		50	483	554
Forward exchange contract liabilities	–	7		144	–	–
Total		11,702		1,707	789	554

There were performance guarantee and surety bond contracts in respect of open construction contracts at year end of $940,488 (2016: $952,000). At the end of the year it was not probable that the counterparty to any of the performance guarantee contracts will claim under the contract. Consequently, the amount included in the above table is nil.

The Tag Group is planning to finance the payment of the above liabilities by way of expected cash-flow arising from operating activities based upon prepared forecasts and budgets.

TAG PACIFIC LIMITED

42

Notes to the financial statements for the financial year ended 30 June 2017 33. Financial instruments continued

The following table details the Group’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

Tag Group	Weighted average	Less than	3	months	1-5 years	5+ years
	effective interest rate	3 months	to 1 year
	%	$’000		$’000	$’000	$’000
2017
Non-interest bearing	–	7,853		–	–	–
Variable interest rate instruments	0.39	3,706		–	–	–
Fixed interest rate instruments	1.82	46		100	3	–
Forward exchange contracts	–	–		21	–	–
Total		11,605		121	3	–
2016
Non-interest bearing	–	9,981		–	–	–
Variable interest rate instruments	0.65	3,685		–	–	–
Fixed interest rate instruments	2.05	46		100	3	–
Forward exchange contracts	–	79		45	–	–
Total		13,791		145	3	–

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

(i) Fair value measurements recognised in the statement of financial position

Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis

Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

	Fair	value as at
Financial assets/ fnancial liabilities	30 June 2017	30 June 2016	Fair value hierarchy	Valuation technique and key inputs	Signifcant unobservable	Relationship of unobservable
					inputs	inputs to
						fair value
	$’000	$’000
Foreign currency			Level 2	Discounted cash fow. Future	N/A	N/A
forward contracts				cash fows are estimated based
				on forward exchange rates (from
				observable forward exchange rates
Assets	21	124		at the end of the reporting period)
				and contract forward rates,
Liabilities	339	150		discounted at a rate that refects the
				credit risk of various counterparties.

Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required)

The directors consider that the carrying amounts of the following financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values at 30 June:

	2017	2016
	$’000	$’000
Financial assets
Trade and other receivables	9,486	13,949
Cash and cash equivalents	3,855	3,834
Total	13,341	17,783
Financial liabilities
Trade and other payables	8,628	9,573
Borrowings	5,432	5,087
Total	14,060	14,660

ANNUAL REPORT 2017

43

Notes to the financial statements for the financial year ended 30 June 2017

34. Parent entity disclosures 35. Contingent liabilities and contingent assets

		Tag Parent
	2017	2016
	$’000	$’000
34. Parent entity disclosures
(a) Financial position
Assets
Current assets	8,342	8,954
Non-current assets	1,130	1,135
Total assets	9,472	10,089
Liabilities
Current liabilities	1,446	1,169
Non-current liabilities	–	–
Total liabilities	1,446	1,169
Equity
Issued capital	23,410	23,410
Accumulated losses	(15,640)	(14,744)
Share option reserve	256	254
Total equity	8,026	8,920
(b) Financial performance
Loss for the year	(1,503)	(1,206)
Other comprehensive income	–	–
Total comprehensive loss	(1,503)	(1,206)

(c) Guarantees entered into by the parent entity

Tag Pacific Limited has not provided any guarantees in relation to any of its subsidiaries.

(d) Contingent liabilities of the parent entity

There are no contingent liabilities for the parent entity.

(e) Commitments for the acquisition of property, plant and equipment by the parent entity

There are no commitments for the acquisition of property, plant and equipment by the parent entity.

35. Contingent liabilities and contingent assets

There are no contingent liabilities or contingent assets at balance date.

TAG PACIFIC LIMITED

44

Directors’ declaration

Directors’ declaration

The directors of Tag Pacific Limited declare that:

• (a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;

• (b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2 to the financial statements;

• (c) in the director’s opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and

• (d) the directors have been given the declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the directors

==> picture [77 x 33] intentionally omitted <==

Peter Wise Chairman

Sydney, 31 August 2017

ANNUAL REPORT 2017

45

Auditor’s independence declaration

TAG PACIFIC LIMITED

46

Independent auditor’s report

ANNUAL REPORT 2017

47

Independent auditor’s report

TAG PACIFIC LIMITED

48

Independent auditor’s report

ANNUAL REPORT 2017

49

Independent auditor’s report

TAG PACIFIC LIMITED

50

Securityholder information

Securityholder information

The following information is current as at 29 August 2017:

1. Shareholders

Spread of shareholders

Spread of shareholders
Range	Number of	Percentage
	shareholders
1-1,000	524	0.20
1,001-5,000	532	1.15
5,001-10,000	165	1.02
10,001-100,000	230	5.44
100,001 and over	74	92.19
Total	1,525	100.00

1,178 shareholders held less than a marketable parcel.

Substantial shareholders

Substantial shareholders
Name	Number of	Percentage
	shares
ANTHONY AUSTRALIA PTY LTD	66,111,448	53.17
TAG PACIFIC LIMITED	9,208,930	7.41
PAUL SHARP & ASSOCIATES	9,208,930	7.41
KV MANAGEMENT (NOMINEES) PTY LTD	6,630,141	7.08
Twenty largest shareholders
Name	Number of	Percentage
	shares
ANTHONY AUSTRALIA PTY LTD	56,902,518	45.77
KV MANAGEMENT (NOMINEES) PTY LTD	8,914,152	7.17
PACIFIC SPECTRUM INVESTMENTS PTY LTD	6,214,125	5.00
MR GEORGE CHIEN-HSUN LU	3,159,338	2.54
MRS PENELOPE MARGARET SIEMON	2,242,635	1.80
MR GEORGE CHIEN HSUN LU + MRS JENNY CHIN PAO LU	2,058,650	1.66
EXCALIBUR NOMINEES LIMITED	2,014,807	1.62
PAUL DOUGLAS SHARP + LISA MARIE SHARP	1,940,737	1.56
ASCE ENGINEERING PTY LTD	1,574,747	1.27
MR DWAYNE PAUL LANGE + MRS ANGELA GAYE LANGE	1,526,275	1.23
CLYME PTY LTD	1,443,417	1.16
DR JOHN ALOIZOS + MRS MURIEL PATRICIA ALOIZOS	1,379,904	1.11
MR BRIAN ROBERT O’MALLEY	1,342,344	1.08
ANDREW HAAVISTO	1,337,143	1.08
MR PAUL DOUGLAS SHARP	1,054,068	0.85
MRS JANET EUGENIE SALEK	1,000,000	0.80
SROG INVESTMENTS PTY LTD	1,000,000	0.80
MR DAVID C SCICLUNA + MR ANTHONY A SCICLUNA	983,695	0.79
MRS NICOLA HELEN MORAN	957,325	0.77
RJL INVESTMENTS PTY LIMITED	938,684	0.76
Total	97,984,564	78.82

ANNUAL REPORT 2017

51

Securityholder information

Voting rights

At meetings of members each member may vote in person or by proxy, attorney or (if the member is a body corporate) corporate representative. On a show of hands every person present who is a member or a representative of a member has one vote and on a poll every member present in person or by proxy or attorney has one vote for each fully paid ordinary share held.

On-market buy-back

Tag Pacific Limited has an on-market buy-back facility in place for up to 10% of its issued shares and operating with no fixed duration. A total of 1,532,983 shares have been purchased by the company under the on-market buy-back for an amount of $368,541.

Stock exchange listing

Fully paid ordinary shares issued by Tag Pacific Limited are quoted on the Australian Securities Exchange (under the code TAG).

2. Listed option holders

Spread of listed option holders

Range	Number of	Percentage
	option holders
1-1,000	1,106	2.97
1,001-5,000	250	5.31
5,001-10,000	31	2.17
10,001-100,000	49	15.08
100,001 and over	8	74.47
Total	1,444	100.00
Twenty largest listed option holders
Name	Number of	Percentage
	listed options
ANTHONY AUSTRALIA PTY LTD	5,013,068	50.30
KV MANAGEMENT (NOMINEES) PTY LTD	947,163	9.50
DINWOODIE INVESTMENTS PTY LTD	414,036	4.15
MR GEORGE CHIEN-HSUN LU	388,476	3.90
DR JOHN ALOIZOS + MRS MURIEL PATRICIA ALOIZOS	253,441	2.54
EXCALIBUR NOMINEES LIMITED	185,696	1.86
MR DONALD STUART CROMBIE	111,842	1.12
MR BRUCE SIEMON	107,374	1.08
MRS NICOLA HELEN MORAN	88,232	0.89
RJL INVESTMENTS PTY LIMITED	86,514	0.87
MR GREGORY HYAM COHEN + MRS KAREN LEE COHEN	69,374	0.70
ALAN ERNEST PERKINSON	65,569	0.66
MRS SOPHIE GELSKI	57,142	0.57
MR DANIEL SEKERS	50,085	0.50
PUSHPA RAMA	50,000	0.50
ALISTAIR WOODSIDE CUNNINGHAM	48,571	0.49
SEVEN BOB INVESTMENTS PTY LTD	45,714	0.46
RJL INVESTMENTS PTY LIMITED	40,257	0.40
GRAHAM BALL PTY LTD	39,364	0.39
ALAN ERNEST PERKINSON	36,732	0.37
Total	8,098,650	81.25

Voting rights

The options do not confer any voting rights in the company. When exercised into fully paid ordinary shares in the company in accordance with their terms of issue, the voting rights of the ordinary shares as set out above will apply.

Stock exchange listing

Listed options issued by Tag Pacific Limited are quoted on the Australian Securities Exchange (under the code TAGO).

TAG PACIFIC LIMITED

52

Corporate directory

Directors

Peter Wise (Chairman) Nathan Wise (CEO) Gary Cohen Robert Constable Robert Moran Gary Weiss

Company secretary Darrell Godin (CFO)

Registered office

Level 30 Piccadilly Tower 133 Castlereagh Street Sydney NSW 2000 Australia

Phone +61 2 8275 6000 Fax +61 2 8275 6060

Websites

tagpac.com mpower.com.au

Auditors

Deloitte Touche Tohmatsu Grosvenor Place 225 George Street Sydney NSW 2000 Australia

Share registry

Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney NSW 2000

Phone 1300 85 05 05

Design: 3-degrees.com.au

tagpac.com