PEET LIMITED — Annual Report 2015

Aug 26, 2015

A P P E N D I X 4 E A N D F I N A N C I A L R E P O R T

Appendix 4E

Preliminary Financial Report under ASX Listing Rule 4.3A for the year ended 30 June 2015

1. Details of the reporting period

This preliminary financial report under ASX listing rule 4.3A covers Peet Limited and its controlled entities and is based on the attached audited financial report.

2. Results for announcement to the market

	2015	2014	Change
	$’000	$’000
Revenue	354,434	276,054	28%
Net profit after tax1	38,460	30,291	27%
Operating profit after tax2	38,460	31,555	22%
Basic and diluted earnings per share (cents)	8.26	7.00	18%

1 Net profit after tax means statutory profit measured in accordance with Australian Accounting Standards, attributable to the owners of Peet Limited. 2

• Operating profit is a non-IFRS measure that is determined to present the ongoing activities of the Group in a way that reflects its operating performance. Operating profit includes the effects of non-cash movements in investments in associates and joint ventures totalling $6.4 million. Operating profit excludes unrealised fair value gains/(losses) arising from the effect of revaluing assets and liabilities and adjustments for realised transactions outside the core ongoing business activities. For the year ended 30 June 2014, operating profit of $31.6 million is calculated as statutory profit attributable to the owners of Peet of $30.3 million, adjusted for write-downs in inventory, after tax, of $1.3 million.

3. Dividends per security

3. Dividends per security
	2015	2014	Change
	Cents	Cents
Interim dividend	1.5	Nil	100%
Final dividend	3.0	3.5	(14%)

Subsequent to year-end, the Directors have declared a final fully franked dividend of 3.0 cents per share in respect to the year ended 30 June 2015. The dividend is to be paid on Wednesday, 30 September 2015, with a record date of Friday, 18 September 2015.

The Directors have resolved to suspend the Company’s Dividend Reinvestment Plan.

4. Net tangible assets per security

4. Net tangible assets per security
	2015 $’000 2014 $’000
Net assets _less_Intangible assets _add back_Deferred tax liabilities, net Net tangible assets Ordinary shares (number – thousands) Net tangible assets per security – book value Net tangible assets per security – market value1	483,894 420,046 (2,589) (2,856) 26,436 18,003
	507,741 435,193
	486,989 433,389 $1.04 $1.00 $1.17 $1.18

1 Market adjusted NTA is based on independent bank instructed mortgage valuations.

Peet Limited Financial Report

1

Appendix 4E

5. Further disclosures

Refer to the table below for further disclosures required under ASX Listing Rule 4.3A:

ASX	Requirement	Cross reference
4E
item:
1	Details of the reporting period	Refer to Section 1 above.
2	Results for announcement to the market	Refer to Section 2 above.
3	Statement of financial performance and notes	Refer to the Consolidated statement of profit or loss and other
		comprehensive income in the attached financial report.
4	Statement of financial position and notes	Refer to the Consolidated balance sheet in the attached
		financial report.
5	Statement of cash flows and notes	Refer to the Consolidated statement of cash flows in the
		attached financial report.
6	Dividends per security	Refer to Section 3 above.
7	Dividend reinvestment plan	Refer to Section 3 above.
8	Statement of retained earnings	Refer to the Consolidated statement of changes in equity in
		the attached financial report.
9	Net tangible assets per security	Refer to Section 4 above.
10	Details of entities over which control was gained or lost during	Refer to note 10 and note 23 in the attached financial report.
	the year
11	Details of associates and joint ventures	Refer to note 10 in the attached financial report.
12	Other significant information	Refer Directors’ Report and financial report.
13	Foreign entities	Not applicable.
14	Commentary on results	Refer to note 3 of the attached Directors’ Report.
15-17	Audit	Refer to Section 1 above.

Peet Limited Financial Report

2

FINANCIAL REPORT 30 JUNE 2015

CONTENTS

Directors’ report	1
Auditor’s independence declaration	26
Corporate governance statement	27
Financial report	28
Directors’ declaration	64
Independent auditor’s report to the members of Peet Limited	65

Directors’ Report Year ended 30 June 2015

Your Directors present their report on the Consolidated Entity consisting of Peet Limited (‘the Parent Entity’ or ‘the Company’) and the entities it controlled at the end of, or during, the financial year ended 30 June 2015 (‘the Group’).

1. Directors

The following persons were Directors of the Company during part or the whole of the financial year and up to the date of this report:

Tony Lennon, FAICD

Non-executive Chairman

Tony Lennon has extensive commercial experience particularly in the property industry.

Mr Lennon is a Fellow of the Australian Institute of Company Directors and an Associate of the Australian Property Institute. A former President of the Real Estate Institute of Western Australia, he has also served as a Councillor of the national body, the Real Estate Institute of Australia.

His industry service has included State Government appointed roles as Chairman of both the Perth Inner City Living Taskforce and the Residential Densities Review Taskforce. He was also a Member of the Commercial Tribunal (Commercial Tenancies).

Mr Lennon is a former President of Western Australia’s Shire of Peppermint Grove and Deputy Chairman of the National Board of the Australia Day Council. He is also a former Chairman of the Curtin Aged Persons Foundation and a founding Director of the Wearne and the Riversea Hostels for the Aged, both of which are locally initiated and managed community facilities.

Brendan Gore, BComm, FCPA, FCIS, FGIA, FAICD

Managing Director and Chief Executive Officer

Brendan Gore has been Managing Director and Chief Executive Officer of Peet Limited since 2007 – successfully leading the company through the global financial crisis, expanding its land bank and developing key new partnerships with Government and major institutions.

Mr Gore’s appointment to the position of Managing Director and CEO followed experience in two other key executive roles within the Company. He began with Peet as Chief Financial Officer and played a key role in expanding the Company’s scope of activities and growing its core residential development and land syndication businesses.

In January 2007 he was appointed inaugural Chief Operating Officer, taking on responsibility for developing Peet’s integrated operational strategy and managing the day-to-day safety and performance of its business divisions. Mr Gore took up his current position later that same year.

Mr Gore’s period in senior executive roles at Peet Limited was preceded by more than two decades’ experience in a range of senior corporate, commercial and operational positions where he gained extensive experience in strategy development and implementation, as well as expertise in debt and equity markets.

He developed a reputation as a strong leader, with operational responsibilities across local and State Government relations, environmental and sustainability management and occupational health and safety.

Mr Gore is a qualified accountant and a Fellow of CPA Australia. He is also a Fellow of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia.

Anthony Lennon, BA, Grad Dip Bus Admin, MAICD

Non-executive Director

Anthony Lennon joined Peet in 1991 and became a Director in 1996.

He moved to Victoria to establish Peet’s operations in Australia’s eastern states and oversaw significant expansion.

Before joining the Company, Mr Lennon worked in the United Kingdom, where he completed his post-graduate Diploma in Business Administration while on a Graduate Management Training Scheme with major international construction and development company, John Laing PLC. His time with this global company saw him gain valuable experience in property planning, marketing, feasibility analysis and project management.

Mr Lennon’s responsibilities during his career with Peet included project management, broadacre acquisitions, marketing and financing and a six-year term as Chairman of one of WA’s largest conveyancing businesses.

Until his transition from Executive to Non-executive Director on 27 August 2012, Mr Lennon was Peet Limited’s National Business Development Director.

1

Directors’ Report Year ended 30 June 2015

He is also a board member of the Urban Development Institute of Australia (Victoria).

Trevor Allen, BComm (Hons), CA, FF, MAICD

Independent Non-executive Director

Trevor Allen joined Peet in April 2012.

Mr Allen has thirty seven years experience in the corporate and commercial sectors, primarily as a Corporate and Financial Adviser to Australian and international public and privately owned companies.

Mr Allen is an independent Non-executive Director of Freedom Foods Group Limited, where he chairs its Audit and Risk Management Committee and is a member of its Remuneration Committee. He is also an Alternate Director, Company Secretary and Public Officer of Australian Fresh Milk Holdings Pty Ltd & Fresh Dairy One Pty Ltd. These are joint venture companies, which have been formed to hold various dairy sector investments as part of the Freedom Group.

He is a Non-executive Director of Eclipx Limited and Aon Superannuation Pty Ltd, the trustee of the Aon Master Trust and he chairs the audit committee of both of these companies. He is also a Non-executive Director of Yowie Limited.

Mr Allen has recently stepped down after seven years as Non-executive Director and honorary treasurer of the Juvenile Diabetes Research Foundation. He was also a member of FINSIA’s Corporate Finance Advisory Group Committee for ten years until December 2013.

Prior to Mr Allen’s non-executive roles, he had senior executive positions including Executive Director – Corporate Finance at SBC Warburg (now part of UBS), at Baring Brothers and as a Corporate Finance Partner at KPMG for 12 years. At the time of his retirement from KPMG in 2011 he was the lead partner in its National Mergers and Acquisitions group.

From 1997 – 2000 he was Director - Business Development for Cellarmaster Wines, having responsibility for the integration and performance of a number of acquisitions made outside Australia in that period.

Vicki Krause, BJuris LLB W.Aust, GAICD

Independent Non-executive Director

Vicki Krause was appointed to the Board of Peet Limited in April 2014.

An experienced commercial lawyer, Ms Krause had a twenty five year career as a senior corporate executive with the Wesfarmers Group, including seven years as its Chief Legal Counsel.

She supported successful outcomes in numerous significant acquisitions (including listed companies, trade sales and a privatisation) and divestments.

As Chief Legal Counsel and a member of the Wesfarmers Executive Committee, Ms Krause led a large legal team and was responsible for the provision of legal advice and strategic planning in relation to the management of legal risk in the Wesfarmers Group with key outputs including the evaluation and completion of major business projects and major supply arrangements.

Ms Krause has completed the PMD Management Course at Harvard Business School.

Robert McKinnon, FCPA, FGIA, MAICD

Independent Non-executive Director

Appointed as Non-executive Director in May 2014, Bob McKinnon has 40 years experience in finance and general management positions in the light manufacturing and industrial sectors in Australia, New Zealand and Canada.

He is the former Managing Director of Austal Ships and Fleetwood Corporation Limited, and spent 28 years with Capral Aluminium (formerly Alcan Australia) in various financial and senior executive positions.

Mr McKinnon was also a Non-executive Director of Bankwest until November 2012 and of Brierty Limited until September 2011.

His other current directorships include Chairman of the Esperance Port Authority and Tox Free Solutions Limited and Nonexecutive Director of Programmed Maintenance Services Limited.

2

Directors’ Report Year ended 30 June 2015

Stephen Higgs, BEc (Syd)

Independent Non-executive Director

Stephen Higgs has held a series of board roles including with listed Australian companies such as Rural Press Limited, Primary Healthcare Limited and Freedom Nutritional Products and other leading roles including Chairman of Orlando Wines, and director of Leigh Mardon, IPAC Securities and Ausoft Limited.

In addition, Mr Higgs worked for 20 years with UBS and its predecessors to cement a leadership position in corporate finance advice and the private equity market.

He recently resigned as Chairman of the Juvenile Diabetes Research Foundation Australia after 12 years in the role. He remains Chairman of the Glycemic Index Foundation.

Mr Higgs’ commitment to the community has extended to include positions working as a Councillor at St Andrew’s College at Sydney University and Trustee of Redkite (formerly the Malcolm Sargent Cancer Fund for Children in Australia).

Mr Higgs joined the Board in June 2004 and retired with effect from the date of announcement of the Group’s FY14 results.

Graeme Sinclair, BComm, CA, ACIS, ACSA, FAICD

Independent Non-executive Director

A qualified Chartered Accountant with more than 40 years accumulated experience in investment and wealth management services, Graeme Sinclair joined the Peet Limited Board in June 2004.

Mr Sinclair gained his accounting qualifications with an international accounting firm including a term in the firm’s London office.

Two years later, he returned to Australia and joined the Myer Family Group, an actively managed long-term investment group, eventually becoming the Group’s Chief Executive Officer and Managing Director of the Myer Family Company Pty Ltd. Mr Sinclair served in this role for 13 years before retiring in mid 2009.

Mr Sinclair is also a Non-executive Director of Mirrabooka Investments Limited, a listed investment company specialising in investing in small and medium-sized companies and a director of several private companies.

He is also a Trustee of the William Buckland Foundation, one of Australia’s largest philanthropic foundations, a Director of Habitat for Humanity Australia (Victoria) Inc. and the Executive Officer of the MCG Trust.

Mr Sinclair retired with effect from the date of announcement of the Group’s FY14 results.

2. Principal activities

The Group acquires, develops and markets residential land predominantly under a capital-efficient funds management model.

Peet was founded in Western Australia in 1895 and has expanded over the years to become Australia’s largest pure-play residential developer. Peet has been listed on the ASX since 2004 and is focussed on creating high-quality master-planned residential communities for homebuyers across Australia, and achieving the best possible results for its shareholders, investors and partners who include State and Federal Government agencies and major Australian institutions.

The Group, including CIC, employs approximately 225 people in offices throughout Australia. As at 30 June 2015, the Group managed and marketed a land bank of more than 47,000 lots in the growth corridors of major mainland Australian cities.

There was no significant change in the nature of the activities during the year.

3

Directors’ Report Year ended 30 June 2015

3. Review of operations and consolidated results

Operating and financial review

Key results[1]

• Operating profit[2] after tax of $38.5 million, up 22%

• Statutory profit[3 ] after tax of $ 38.5 million, up 27%

• FY15 dividends of 4.5 cents per share, fully franked, up 29%

• Earnings per share of 8.3 cents, up 18%

• Revenue[4] of $360.9 million, up 22%

• EBITDA[5] of $92.4 million, up 25%

• Net EBITDA[5] margin of 26%

• Total of 3,266 lots settled

• 2,061[6] contracts on hand as at 30 June 2015

• Gearing[7] of 23.8%, down from 29.8% at 30 June 2014

Financial commentary

The Group achieved an operating profit after tax for the year ended 30 June 2015 of $38.5 million, which represents an increase of 22% on FY14. The Group’s statutory profit after tax was $38.5 million, compared to $30.3 million in the previous year, representing an increase of 27%.

The result reflects the strong performance of Development projects, particularly in Victoria, with continued sound contributions across the balance of the business.

Revenue of $360.9 million was achieved, representing an increase of 22% over FY14, with a marked shift in earnings to the east coast.

The Group’s performance resulted in EBITDA of $92.4 million, compared to $73.7 million in FY14 (an increase of 25%) with the net EBITDA margin of 26% slightly improved on FY14 (25%).

The performance has resulted in earnings per share of 8.3 cents for the year ended 30 June 2015, compared to 7.0 cents per share for FY14, representing an increase of 18%.

As previously announced to the market in the first half of the year, the Group raised equity of approximately $51 million to fund its interests in six high quality strategic residential development projects. Three of the projects were acquired jointly with quality investment partners, providing the Group with the opportunity to further leverage and grow its Funds Management business. Two of the projects were already in production and contributed to earnings in FY15.

In the second half of the year, the $10 million syndication of a parcel of land in Tarneit, Victoria, was closed oversubscribed and, at 30 June 2015, plans for the release of the first lots were well advanced on the back of strong demand from the market.

1 Comparative period is 30 June 2014, unless stated otherwise. The non-IFRS measures have not been audited.

2 Operating profit is a non-IFRS measure that is determined to present the ongoing activities of the Group in a way that reflects its operating performance. Operating profit includes the effects of non-cash movements in investments in associates and joint ventures totalling $6.4 million (FY14: $20.6 million). Operating profit excludes unrealised fair value gains/(losses) arising from the effect of revaluing assets and liabilities and adjustments for realised transactions outside the core ongoing business activities. For the year ended 30 June 2014, operating profit of $31.6 million is calculated as statutory profit attributable to the owners of Peet of $30.3 million, adjusted for write-downs in inventory, after tax, of $1.3 million.

3 Statutory profit after tax means net profit measured in accordance with Australian Accounting Standards, attributable to the owners of Peet Limited.

4 Included is statutory revenue of $354.4 million (FY14 - $276.1 million) and share of net profits from associates and joint ventures of $6.4 million (FY14 - $20.6 million).

5 Pre-write downs of $ nil (FY14 - $1.8 million) (before tax) and includes effects of non-cash movements in investments in associates and joint ventures totalling $6.4 million (FY14 - $20.6 million).

6 Includes equivalent lots.

7 Calculated as (Total interest bearing liabilities (including land vendor liabilities) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets), excluding Syndicates consolidated under AASB10.

4

Directors’ Report Year ended 30 June 2015

Operational commentary

The Group achieved 3,229 sales (with a gross value of $815.9 million) and 3,266 settlements (with a gross value of $812.8 million) for the full year, representing a decrease of 8.4% and 6.4% respectively compared with FY14.

The lower sales and settlements reflected, in part, continuing moderating conditions in the Western Australian property market; the substantial completion in 2014 of the highly successful Warner Lakes project in Queensland and the Crace project in ACT; and a moderating Northern Territory market.

These factors were generally offset by the continued strong performance across the Group’s portfolio of Victorian projects.

Approximately 55% of the Group’s settlements were achieved in the second half of FY15 and, as at 30 June 2015, there were 2,061[8] contracts on hand, with a gross value of $440.9 million providing solid momentum into the new financial year. This compares with 1,990[8] contracts on hand with a gross value of $467.9 million at 30 June in 2014. The decrease in value of the contracts on hand as at 30 June 2015 is predominantly attributable to the settlement of apartment sales at Quayside in the ACT.

Funds management projects

The Group’s Funds Management business performed solidly during FY15, with strong sales and price growth achieved across Victorian projects off-set by the end of the Warner Lakes project in Queensland and the moderating Western Australian market.

• 1,768 lots sold for a gross value of $433.8 million, compared with 1,834 lots ($412.1 million) in FY14.

• 1,718 lots settled for a gross value of $388.9 million, compared with 1,763 lots ($403.6 million) in FY14.

• 1,150 contracts on hand as at 30 June 2015 with a total value of $216.9 million, compared with 968 lots ($195.1 million) as at 30 June 2014.

• EBITDA[9] of $28.4 million compared with $29.7 million in FY14.

• • Net EBITDA[9] margin of 69%, the same as in FY14.

Development projects

The strong performance of Development projects was underpinned by the settlements achieved at the Aston and Greenvale projects in Victoria and the settlements achieved at the Quayside apartment project in ACT.

• 578 lots sold for a gross value of $167.1 million, compared with 501 lots ($141.4 million) in FY14.

• 597 lots settled for a gross value of $195.1 million, compared with 460 lots ($115.3 million) in FY14.

• 245 contracts on hand as at 30 June 2015 with a total value of $58.7 million, compared with 269 lots ($91.6 million) as at 30 June 2014.

• EBITDA[9] of $45.7 million compared with $25.0 million in FY14.

• Net EBITDA[9] margin of 25%, compared with 24% in FY14.

Joint arrangements

The joint venture business’ performance for FY15 was impacted by the Crace project in ACT substantially completing in FY14.

• 883 lots sold for a gross value of $215.1 million, compared with 1,190 lots ($281.7 million) in FY14.

• 951 lots settled for a gross value of $228.8 million, compared with 1,268 lots ($308.9 million) in FY14.

• 666 contracts on hand as at 30 June 2015 with a total value of $165.2 million, compared with 753 lots ($181.2 million) as at 30 June 2014.

• EBITDA[9] of $21.4 million compared with $27.4 million in FY14.

• Net EBITDA[9] margin of 20%, compared with 25% in FY14.

8 Includes equivalent lots.

9 Pre write-downs and includes effects of non-cash movements in associates and joint ventures, where appropriate. Refer to note 4 Segment information in the financial report for further detail.

5

Directors’ Report Year ended 30 June 2015

Land portfolio metrics

		FY15	FY14	Change
Lot sales		3,229	3,525	(8.4%)
-	Retail sales	3,227	3,521
-	Super lots	2	4
Lot settlements		3,266	3,491	(6.4%)
-	Retail sales	3,263	3,488
-	Super lots	3	3
Contracts on hand as at 30 June
-	Number9	2,061	1,990	3.6%
-	Value	$440.9 million	$467.9 million	(5.8%)

Capital management

The Group has maintained its focus on prudent capital management, with gearing[10] reduced to 23.8% as at 30 June 2015, compared with 29.8% as at 30 June 2014. This was at the lower end of its target range of 20-30%.

The Group’s interest-bearing debt (including its convertible notes) stood at $234.9 million at 30 June 2015, compared with $295.5 million at 30 June 2014 (down 21%). Approximately 53% of the Group’s interest-bearing debt was hedged as at 30 June 2015 (2014: 47%), and the Group has executed a number of forward starts, which will further hedge future interest costs.

The Group produced net operating cash flows of $113 million during the year, representing a significant improvement on the $37 million achieved in FY14.

The Group had net cash and debt headroom of $127.4 million at 30 June 2015 positioning it well to optimise future growth opportunities.

The Group is considering its options regarding its $50 million in convertible notes, which mature in June 2016 and the redemption of which can be funded out of existing cash reserves.

Dividends

Subsequent to year end, and on the back of a solid second half, the Directors have declared a final dividend for FY15 of 3.0 cents per share, fully franked. This brings the total dividend for FY15 to 4.5 cents per share, fully franked, and compares to the total FY14 dividend of 3.5 cents per share, unfranked. The dividend is to be paid on Wednesday, 30 September 2015, with a record date of Friday, 18 September 2015.

The Directors have resolved to suspend the Company’s Dividend Reinvestment Plan.

Group strategy

The Group will continue to target the delivery of shareholder value and quality residential communities around Australia by leveraging its land bank; working in partnership with institutional and retail investors; and continuing to meet market demand for a mix of product in the growth corridors of major Australian cities.

Key elements of the Group’s strategy for the year ahead and beyond include:

• continuing to deliver high-quality, masterplanned communities, adding value and facilitating additional investment in amenity and services wherever possible;

• managing the Group’s land bank of more than 47,000 lots to achieve optimal shareholder returns;

9 Includes equivalent lots.

10 Calculated as (Total interest bearing liabilities (including land vendor liabilities) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets), excluding Syndicates consolidated under AASB10.

6

Directors’ Report Year ended 30 June 2015

• continuing to assess opportunities to acquire quality residential land holdings under our funds management platform, with a strategic focus on acquisitions on the east coast;

• an ongoing focus on maximising return on capital employed in all our key markets;

• maintaining a focus on cost and debt reduction; and

• identifying and assessing further growth opportunities in line with our strategic objectives and as appropriate in market conditions.

FY16 will see the commencement of development of a further seven projects in the key markets across Australia.

After the end of the financial year, in August 2015, the Group announced the sale of its Arena project in Greenvale Victoria for a total of $93.1 million with settlement to occur in instalments over three years. This sale is in line with the Group’s continued focus on maximising its return on capital employed, with proceeds from the sale of Arena allowing the Group to redeploy funds into a number of prospective opportunities currently being canvassed.

Risks

The Group’s operating and financial performance is influenced by a number of risks impacting the property sector. These include general economic conditions; government policy influencing a range of matters including population growth; household income and consumer confidence; the employment market; and land development conditions and requirements, particularly in relation to infrastructure and environmental management.

Global and domestic economic factors which may influence capital markets and the movement of interest rates are also risks faced by the Group.

The property market is cyclical and, while the Group is impacted by fluctuations in the market, it has also proved its capacity to manage through various cycles over a very significant period of time.

At an individual project level, residential property developments also face a number of risks related to the price and availability of capital, the timeliness of approvals, delays in construction, and the level of competition in the market. The Group has a long history of managing these risks at an individual project and portfolio level.

The Group’s financial risk management policies are set out in note 16 to the financial report.

Outlook

The Australian property market continues to benefit from good population growth, a low interest rate environment and relatively low unemployment rates. However, there also remain some key challenges including changing consumer and business sentiment; the contracting resources sector, particularly in Western Australia; other job losses in the manufacturing sector, and the ongoing issue of affordability. The challenge of affordability continues to be mitigated by Peet through the delivery of affordable product targeted predominantly at the low and middle market segments, including an increasing focus on medium density projects.

During the year, Peet settled on the sale of 140 apartments, with a further 340 under construction or in the design phase and a pipeline of approximately 1,700 apartments identified across the national portfolio.

The Group’s geographic diversity positions it well to manage through the mixed conditions expected to continue in the Australian property market through FY16:

• in Western Australia, the market has reverted back to more average levels, with demand higher for lower price products;

• the Victorian market remains very positive with increased activity in the residential housing market and positive price growth underpinned by population growth;

• activity in Queensland is increasing, albeit at a reasonably slow rate and coming off historic low levels;

• the Australian Capital Territory market is expected to continue to perform well;

• the South Australian market is expected to continue in recovery mode with increased interest in the affordable market segment and continuing good conditions in the inner ring of Adelaide; and

• the Northern Territory market is moderating after a period of strong demand.

The Group has entered the new financial year in a strong financial position with low gearing and cash and debt headroom of some $127 million. The Group will continue to respond to market conditions and target the delivery of shareholder value and quality residential communities around Australia by leveraging its national land bank; working in partnership with institutional and retail investors; and delivering a mix of product in the growth corridors of major Australian cities.

The Group has the experience, a committed team and right business strategies to target earnings growth. Peet is well positioned to deliver more than 3,500 settlements in FY16, with earnings expected to be skewed to the second half.

7

Directors’ Report Year ended 30 June 2015

4. Earnings per share

4. Earnings per share
	2015	2014
	Cents	Cents
Basic and diluted earnings per share	8.26	7.00

Basic earnings per share is calculated after income tax expense based on the weighted average number of shares on issue for the year ended 30 June 2015. The weighted average number of shares on issue used to calculate earnings per share is discussed at note 7 to the Consolidated Financial report.

5. Significant changes in the state of affairs

In May 2015, CIC Australia Limited (CIC) completed a shareholder-approved scheme of arrangement under which CIC conducted a selective buyback and cancellation of all CIC shares other than the shares held by Peet Limited. Peet became the 100% owner of CIC.

The Group acquired interests in two joint arrangements, Golden Bay Estate and Bluestone Mount Barker Estate during the year ended 30 June 2015 for a total consideration of $30 million.

6. Matters subsequent to the end of the financial year

On 14 August 2015, the Group announced the sale of Arena residential estate in Greenvale, north of Melbourne, Victoria for $93.1 million. The sale is unconditional, with settlement to occur in instalments over three years.

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

7. Dividends

In August 2014, the Directors declared a final unfranked dividend of 3.5 cents per share in respect of the year ended 30 June 2014. The dividend of $10.6 million (net of dividend reinvestment) was paid on 31 October 2014.

In February 2015, the Directors declared an interim dividend of 1.5 cents per share fully franked in respect to the year ending 30 June 2015. The dividend of $4.8 million (net of dividend reinvestment) was paid on Friday, 17 April 2015.

Subsequent to 30 June 2015, the Directors have declared a final dividend of 3.0 cents per share fully franked in respect to the year ended 30 June 2015. The dividend is to be paid on Wednesday, 30 September 2015, with a record date of Friday, 18 September 2015.

The Directors have resolved to deactivate the Company’s Dividend Reinvestment Plan.

8. Environmental regulation

The Group is subject to environmental regulation by way of the Environment Protection and Biodiversity Conservation Act 1999 in respect of its land subdivision activities nationally, as well as other environmental regulations under both Commonwealth and State legislation.

The Group is not aware of any breaches of environmental regulations in respect of its activities. However, from time to time, statutory authorities make enquiries, issue notices requiring documents and/or material to be provided, and undertake investigations or audits to confirm compliance with relevant regulations.

Greenhouse gas and energy data reporting requirements

The Group may be subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 . This requires the Group to report its annual greenhouse gas (GHG) emissions and energy use if it has operational control of facilities (sites) that emit greenhouse gases, produce energy, or consume energy at or above the specified GHG emission and energy thresholds per financial year.

The Group is not required to register and report to the Clean Energy Regulator as the Group passes operational control for each of its projects to the relevant contractor undertaking the works, and the remainder of the Group’s activities fall below the reporting thresholds for the FY15 reporting period.

8

Directors’ Report Year ended 30 June 2015

9. Information on directors and group company secretary

Please refer to the Board of Directors section of this report for information on Directors.

Group Company Secretary

Dom Scafetta is a Chartered Accountant who has worked with Peet Limited since 1998.

Mr Scafetta began his career with major accounting firm Coopers & Lybrand (now PricewaterhouseCoopers) after completing a commerce degree in 1993. He held a senior role with the organisation in its Business Services division and advised a range of clients on accounting, taxation and general business matters.

After four years at Coopers & Lybrand, Mr Scafetta joined Peet as Company Accountant and Company Secretary, which also required him to act as Company Secretary for the Company’s various syndicates and subsidiaries. Prior to Peet being listed on the Australian Securities Exchange, Mr Scafetta was appointed Chief Financial Officer and served in that role until February 2005, when he was appointed as Company Secretary of Peet Limited.

10. Directors’ meetings

The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows:

Director	Board	of Directors	Audit & Risk Management	Audit & Risk Management	Remuneration Committee	Remuneration Committee
			Committee
	Entitled to		Entitled to		Entitled to
	Attend	Attended	Attend	Attended	Attend	Attended
A W Lennon	8	8	-	-	-	-
B D Gore	8	8	-	-	-	-
S F Higgs	2	1	-	-	2	-
G W Sinclair	2	2	2	2	-	-
A J Lennon*	8	7	6	5	-	-
T J Allen	8	8	6	6	5	5
V Krause*	8	7	-	-	5	4
R J McKinnon*	8	6	6	6	5	5

• Directors were absent due to calling of non-scheduled meetings or the rescheduling of the meetings which clashed with prior commitments.

11. Retirement, election and continuation in office of directors

Directors are elected at the Annual General Meeting (AGM) of the Company. Retirement will occur on a rotational basis so that one third of the Directors, but not less than two, shall retire at each AGM. The Directors may also appoint a Director to fill a casual vacancy on the Board or in addition to the existing Directors, who will then hold office until the next AGM. No Director who is not the Managing Director, may hold office without re-election beyond the third AGM following the meeting at which the Director was last elected or re-elected.

At this year’s AGM, both Mr A J Lennon and Ms V Krause will retire by rotation and offer themselves for re-election. Your Board of Directors recommend the re-election of Mr A J Lennon and Ms V Krause.

9

Directors’ Report Year ended 30 June 2015

12. Remuneration

Dear Shareholder,

Peet is pleased to present its Remuneration Report for the year ended 30 June 2015. This report sets out remuneration information for Non-executive Directors, the Managing Director and Chief Executive Officer (MD), and the Executive Team and focuses on the remuneration decisions made by the Board and the pay outcomes that resulted.

The 2015 financial year represented another year of significant financial improvement as Peet achieved an operating net profit after tax of $38.5 million, up 22% from $31.6 million, reduced its total debt, significantly increased net cash flows from operations and reinstated fully franked dividends – while continuing to deliver on its strategy for growth.

To ensure Peet delivers on its growth strategy it must have the right people to lead the Group over the long-term and a competitive remuneration framework that encourages our Executive Team to continue to make decisions with a view to creating long-term value for shareholders and all stakeholders.

In considering remuneration outcomes, the Board Remuneration Committee (Committee):

• (a) balances Peet’s financial performance with the development and implementation of strategies for the long-term benefit of the Group; and

• (b) takes into account the underlying scale of Peet’s operations which are not fully identifiable from a pure focus on the Group’s statutory accounts.

While the statutory financial statements show total revenue of $354.4 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $92.4 million, Peet management remains responsible for a greater scale of business.

In addition to its own land development properties, Peet is also responsible for the management of a significant portfolio of land development properties held within its Funds management business.

If these properties were combined with those of Peet, total Group revenues increase to $812.8 million and total EBITDA increases to $192.3 million.

Accordingly, the scale of business from which Peet derives its revenues and earnings, which drive its capacity to pay dividends to shareholders, is extensive.

Key remuneration outcomes of the Committee’s deliberations are as follows:

• The base pay of the Executive Team for the 2015 financial year increased by less than 4% on a weighted average basis from the base pay for the 2014 financial year (2014 base pay was in line with the base pay for the 2013 financial year).

• The MD received a 3% increase in base pay during the year ended 30 June 2015. Before 2015, his base pay was last increased with effect from 1 July 2011.

• Short–term incentives will be paid to the Executive Team in respect of the year ended 30 June 2015. This follows a positive assessment of the Executive Team’s performance against a balanced scorecard, which includes consideration of both Group financial, strategic and individual targets.

• During the year, long-term incentive performance conditions were tested as at 30 June 2014 resulting in the partial vesting of performance rights and the subsequent issue of ordinary shares during the 2015 financial year to participants in Peet’s long-term incentive plan.

• There was an increase in the base fee of Non-executive Directors during the year. Their base fees were last increased with effect from 1 July 2006.

Peet also takes the opportunity to confirm that the MD’s remuneration package for the year ending 30 June 2016 will be the same as 2015, notwithstanding his contractual entitlement to an adjustment of at least CPI.

We encourage our shareholders to use the cash value of remuneration realised table on page 14 to assess the remuneration outcomes for Executives in the year ended 30 June 2015 and the alignment of these outcomes with the Group’s performance.

The key difference between the cash value of remuneration realised and the statutory remuneration is the value included in the statutory remuneration table for potential future outcomes under the long-term incentive. A value is required to be included in the statutory remuneration table to account for long-term incentives that may or may not vest in the future, while the value for long-term incentives included in the cash value of remuneration realised table represents the value of shares actually issued to executives following the vesting of performance rights.

The Board is satisfied that these remuneration outcomes for the year ended 30 June 2015 are appropriately performance-based while at the same time recognising the strategic needs of the Group, and we commend this report to you.

Robert McKinnon

Chairman, Remuneration Committee Chairmanemuneration Committee

10

Directors’ Report Year ended 30 June 2015

13. Remuneration report (audited)

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

• A. SERVICE AGREEMENTS

• B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION

• C. DETAILS OF REMUNERATION

• D. SHARE-BASED COMPENSATION

• E. ADDITIONAL INFORMATION

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

The key management personnel of the Group (“KMP”) include the Non-executive Directors of the Group, and the following executives (the “Executives”) who have authority and responsibility for planning, directing and controlling the activities of the Group.

Group.
Name	Position
B D Gore	Managing Director and Chief Executive Officer
D J Cooper	Chief Operating Officer (resigned 27 June 2014)
P J Dumas	Chief Investment Officer
D Scafetta	Group Company Secretary
B C Fullarton	Chief Financial Officer

A. SERVICE AGREEMENTS

Remuneration and other terms of employment for the Executives are formalised in service agreements. Each of these agreements provide for the provision of performance related cash bonuses and participation, when eligible, in the Peet Limited Employee Share Option Plan and/or the Peet Limited Performance Rights Plan. The major provisions of the agreements are set out below.

All contracts with Executives may be terminated early by either party with 3 to 6 months notice, subject to termination payments as detailed below.

		Base pay
Name	Terms of Agreement	including Superannuation1	Termination Benefit2,3
B D Gore	On-going renewed 5 August 2011	$937,300	Refer below4
P J Dumas	On-going commenced 4 February 2008	$474,000	3 months base pay inclusive of
			superannuation
D Scafetta	On-going commenced 10 June 1998	$325,000	3 months base pay inclusive of
			superannuation
B C Fullarton	On-going commenced 21 October 2013	$440,000	3 months base pay inclusive of
			superannuation

1. Base pays, inclusive of superannuation, for the year ended 30 June 2015. Base pays are reviewed annually by the Remuneration Committee.

2. Termination benefits are payable on early termination by Peet Limited giving notice in writing. Payment may be made in lieu of notice, other than for gross misconduct.

3. Termination benefits referred to in the above table are in addition to any statutory entitlements payable (e.g. accrued annual leave and long service leave).

4. On 5 August 2011 B D Gore renewed his contractual arrangements with the Company. Under the agreement the components of his remuneration comprise fixed annual remuneration, short-term incentives and long-term incentives. There is no fixed termination date and the agreement is terminable on six months notice by either party. The Company may, at its option, make a payment in lieu of part or all of the notice period and certain conditions exist in relation to payment of long-term and short-term incentives upon termination. A summary of the key contractual terms and remuneration-related arrangements was disclosed to the market on 5 August 2011 with certain parts approved by shareholders at the 2011 AGM.

11

Directors’ Report Year ended 30 June 2015

B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION

The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives for the long-term benefit of the Company and shareholders. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• competitiveness and reasonableness;

• acceptability to shareholders;

• performance linkage/alignment to executive compensation; and

• capital management.

In consultation with external remuneration consultants in prior financial years, the Company has structured, and continues to evolve, an executive remuneration framework that is market competitive and complementary to our reward strategy through the following features.

Alignment to shareholders’ interests

• has a relevant measurement of financial performance as a core component of plan design;

• rewards implementation of strategy focused on building Peet’s Funds management business;

• focuses the executive on other key financial and non-financial drivers of long-term value; and

• attracts and retains high-calibre executives.

In prior years the Remuneration Committee of the Board had given consideration to the most appropriate financial measure to align the creation of shareholder value with incentive arrangements for senior management. Consideration was given to relative performance against comparable listed companies, measuring growth in Earnings before Interest Tax Depreciation and Amortisation (EBITDA), relative performance in measures such as Return on Equity (ROE) and Return on Average Funds Employed (ROAFE) and absolute performance in measures such as ROE and ROAFE.

After due consideration the Remuneration Committee recommended to the Board, and it agreed, to assess financial performance for the purposes of FY15 long-term incentive awards against ROAFE, together with funds under management growth which has been applied for several years.

The Remuneration Committee and the Board will continue to assess the applicability of all short-term and long-term related key performance indicators as they are applied in assessing performance for remuneration purposes.

Alignment to program participants’ interests

• rewards capability and experience;

• provides a clear structure for earning rewards; and

• provides recognition for contribution.

The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. As employees are promoted to executive and senior management roles within the Company, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards.

Non-executive Directors’ fees (including the Chairman’s fees)

Fees and payments to Non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed periodically by the Remuneration Committee and the Board. The Remuneration Committee considers, as appropriate, the advice of independent remuneration consultants to ensure Non-executive Directors’ fees and payments are appropriate and in line with the market. Non-executive Directors do not receive share options or performance rights.

The Non-executive Directors’ remuneration is inclusive of committee fees and fees for their membership on any subsidiary Boards. From 1 July 2014, the fees payable to the Non-executive Directors was increased by 15% along with an increase in fees for Chairman of the Remuneration Committee and the Chairman of the Audit and Risk Management Committee by $10,000 each. Non-executive Directors may also be entitled to fees where they represent Peet on the Board of Syndicates.

Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. Shareholders approved a resolution at the 2012 AGM to increase the aggregate Non-executive Directors’ fees pool to $900,000.

The Non-executive Directors do not receive any form of retirement allowance.

12

Directors’ Report Year ended 30 June 2015

Executive pay

The Company’s pay and reward framework for an Executive Director and other (non-director) key management personnel has the following components:

• base pay and benefits;

• short-term performance incentives; and

• long-term incentives.

The combination of these comprises the total remuneration for the individual concerned.

Base pay and benefits

The base pay for Executives is structured as a total employment cost package, which may be delivered as a mix of cash and prescribed non-financial benefits and includes superannuation.

Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. As and when considered appropriate, external remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. Base pay is reviewed annually to ensure it remains competitive with the market.

Short-term performance incentives (STI)

Executives have a target STI opportunity depending on the accountabilities of their specific role and impact on the Group’s performance. The maximum target bonus opportunity for the Executives for the years ended 30 June 2015 and 2014 ranged between 100% and 25% of the relevant executive’s base pay. However, the Board of Directors has the discretion to pay over and above these amounts.

Each year, the Remuneration Committee considers the appropriate targets and key performance indicators (KPIs) to link to the STI plan and the level of payout if targets are met for the Managing Director and Chief Executive Officer (MD). This may include setting any maximum payout under the STI plan and minimum levels of performance to trigger payment of STI. The MD will then set the STI key performance indicators (KPIs) to apply to his direct reports (being the non-director executive).

KPIs for each executive are set by reference to the following criteria based on their specific role:

• financial targets;

• business growth targets;

• stakeholder engagement;

• people and process improvements; and

• maintenance and enhancement of health, safety and environmental platforms within the Group.

For the year ended 30 June 2015, the MD and other Executives were assessed as follows against the KPIs:

	Weighting	Weighting	%	Achieved		% Forfeited
Category	MD	Executives	MD	Executives	MD	Executives
Financial targets	55.0%	55.0%	55.0%	55.0%	-	-
Business growth targets	25.0%	15.0% to 35.0%	25.0%	15.0% to 35.0%	-	-
Stakeholder engagement	7.5%	0.0% to 7.5%	7.5%	0.0% to 7.5%	-	-
People and process improvements	7.5%	5.0% to 20.0%	7.5%	5.0% to 20.0%	-	-
Health,safetyand environment	5.0%	5.0%	5.0%	5.0%	-	-
	100.0%	100.0%	100.0%	100.0%	-	-

For the year ended 30 June 2014, the KPI’s linked to STI plan were based on very similar criteria.

Long-term incentives (LTI)

Traditionally, the Company has provided its Executives with LTIs through participation in the Peet Limited Employee Share Option Plan (PESOP) and/or the Peet Limited Performance Rights Plan (PPRP).

Executives have a target LTI opportunity depending on the accountabilities of their specific role and impact on the Group’s performance. The maximum target opportunity for the Executives for the years ended 30 June 2015 and 2014 ranged between 100% and 50% of the relevant executive’s base pay.

Each year, the Remuneration Committee considers the appropriate targets and KPIs to link to the LTI plan and the level of payout if targets are met for the Executives. This may include setting any maximum payout under the LTI plan and minimum levels of performance to trigger payment of LTI. Further details of the Company’s LTI structures are included in the section titled ‘Share-based compensation’.

13

Directors’ Report Year ended 30 June 2015

C. DETAILS OF REMUNERATION

Details of the statutory and cash value of remuneration of each Director and Executives of the Group are set out in the tables following.

The table below sets out the total cash value of remuneration realised for the Directors and Executives and provides shareholders with details of the “take-home” pay received during the year. These earnings include cash salary and fees, superannuation, non-cash benefits received during the year and the value of shares issued to Executives following the vesting of Performance Rights (PRs) during the financial year. The table does not include the accounting value of share based payments consisting of performance rights granted in the current and prior years required for statutory purposes. This is because those share based payments are dependent on the achievement of performance hurdles and so may or may not be realised.

	Cash salary and fees1 Bonus2 Value of PRs vested3 Other4 Superannuation Total
Directors A W Lennon 2015 216,712 - - - 20,588 237,300 2014 192,460 - - - 17,796 210,256 S F Higgs5 2015 12,500 - - - 1,188 13,688 2014 75,000 - - - 6,938 81,938 G W Sinclair6 2015 12,500 - - - 1,188 13,688 2014 88,730 - - - 8,208 96,938 T J Allen 2015 136,283 - - - 12,947 149,230 2014 116,190 - - - 10,748 126,938 V Krause7 2015 86,055 - - - 8,175 94,230 2014 18,750 - - - 1,734 20,484 R J McKinnon8 2015 108,886 - - - 10,344 119,230 2014 8,981 - - - 831 9,812 A J Lennon9 2015 146,055 - 88,069 - 8,175 242,299 2014 115,000 - 129,643 - 6,938 251,581 B D Gore 2015 918,517 968,550 693,875 10,000 18,783 2,609,725 2014 892,225 911,375 954,082 10,000 17,775 2,785,457 Total 2015 1,637,508 968,550 781,944 10,000 81,388 3,479,390 2014 1,507,336 911,375 1,083,725 10,000 70,968 3,583,404 Other key management personnel D J Cooper10 2015 - - 277,360 - - 277,360 2014 482,699 - 282,857 - 17,775 783,331 P J Dumas 2015 444,000 315,650 263,063 - 30,000 1,052,713 2014 435,000 309,075 276,122 - 25,000 1,045,197 D Scafetta 2015 306,217 100,000 138,775 - 18,783 563,775 2014 282,225 99,375 134,694 - 17,775 534,069 B C Fullarton 2015 405,000 220,000 - - 35,000 660,000 2014 266,758 135,340 - - 18,168 420,266 Total 2015 1,155,217 635,650 679,198 - 83,783 2,553,848 2014 1,466,682 543,790 693,673 - 78,718 2,782,863	216,712 - - - 20,588 237,300 192,460 - - - 17,796 210,256 12,500 - - - 1,188 13,688 75,000 - - - 6,938 81,938 12,500 - - - 1,188 13,688 88,730 - - - 8,208 96,938 136,283 - - - 12,947 149,230 116,190 - - - 10,748 126,938 86,055 - - - 8,175 94,230 18,750 - - - 1,734 20,484 108,886 - - - 10,344 119,230 8,981 - - - 831 9,812 146,055 - 88,069 - 8,175 242,299 115,000 - 129,643 - 6,938 251,581 918,517 968,550 693,875 10,000 18,783 2,609,725 892,225 911,375 954,082 10,000 17,775 2,785,457
	1,637,508 968,550 781,944 10,000 81,388 3,479,390 1,507,336 911,375 1,083,725 10,000 70,968 3,583,404
	1,155,217 635,650 679,198 - 83,783 2,553,848 1,466,682 543,790 693,673 - 78,718 2,782,863

1. Cash salary and fee, as well as fees paid to Directors for their directorship on Syndicate Boards.

2. All cash bonuses are earned in the financial year to which they relate and are paid during the following financial year.

3. Calculated as the closing price of Peet shares as at 18 September 2014 ($1.22), being the date the Board confirmed the partial vesting of FY12 Performance Rights (PRs).

4. Other includes termination benefits, long service payments, motor vehicle costs, car-parking and other benefits and are inclusive of related fringe benefits tax. 5. Resigned 28 August 2014.

5. Resigned 28 August 2014.

6. Appointed 4 April 2014.

7. Appointed 19 May 2014.

8. Value of PRs vested relate to PRs granted while A J Lennon was an executive. 10. Resigned 27 June 2014.

14

Directors’ Report Year ended 30 June 2015

The table below is calculated in accordance with statutory obligations and Australian Accounting Standards. The amounts in “Shares/Options /Performance Rights” column relate to the component of the fair value of awards from the current year and prior years made under the various incentive plans attributable to the year measured in accordance with AASB 2 Share Based Payments.

prior years made under Payments.	the various incentive plans attributable to the year measured in accordance with AASB 2_Sh_
	Short-term Benefits Post- employment Benefits Share based payments Cash salary and fees1 Bonus2 Other3 Superannuation Shares/Option /Performance Rights4,5 Termination benefits Total $ $ $ $ $ $ $
Directors AW Lennon 2015 2014 S F Higgs6 2015 2014 G W Sinclair7 2015 2014 T J Allen 2015 2014 V Krause8 2015 2014 R J McKinnon9 2015 2014 A J Lennon10 2015 2014 B D Gore 2015 2014 Total 2015 2014 Other key management D J Cooper11 12 2015 2014 P J Dumas 2015 2014 D Scafetta 2015 2014 B C Fullarton 2015 2014 Total 2015 2014	216,712 - - 20,588 - - 237,300 192,460 - - 17,796 - - 210,256 12,500 - - 1,188 - - 13,688 75,000 - - 6,938 - - 81,938 12,500 - - 1,188 - - 13,688 88,730 - - 8,208 - - 96,938 136,283 - - 12,947 - - 149,230 116,190 - - 10,748 - - 126,938 86,055 - - 8,175 - - 94,230 18,750 - - 1,734 - - 20,484 108,886 - - 10,344 - - 119,230 8,981 - - 831 - - 9,812 146,055 - - 8,175 (14,096) - 140,134 115,000 - - 6,938 63,116 - 185,054 918,517 968,550 10,000 18,783 1,274,209 - 3,190,059 892,225 911,375 10,000 17,775 1,452,108 - 3,283,483
	1,637,508 968,550 10,000 81,388 1,260,113 - 3,957,559 1,507,336 911,375 10,000 70,968 1,515,224 - 4,014,903
	personnel - - - - (134,872) - (134,872) 482,699 - - 17,775 65,996 - 566,470 444,000 315,650 - 30,000 378,356 - 1,168,006 435,000 309,075 - 25,000 450,876 - 1,219,951 306,217 100,000 - 18,783 200,395 - 625,395 282,225 99,375 - 17,775 230,989 - 630,364 405,000 220,000 - 35,000 232,819 - 892,819 266,758 135,340 - 18,168 - - 420,266
	1,155,217 635,650 - 83,783 676,698 - 2,551,348 1,466,682 543,790 - 78,718 747,861 - 2,837,051

1. Cash salary and fees include fees paid to Directors for their directorship on Syndicate Boards.

2. All cash bonuses are earned in the financial year to which they relate and are paid during the following financial year.

3. Other includes motor vehicle costs, car-parking and other benefits and are inclusive of related fringe benefits tax.

4. The value placed on options and performance rights in the table above is based on the valuation at the date of grant using a Black-Scholes model (options) or Binomial Model (PRs), pro-rated over the period from grant date to vesting date. These do not represent the value of equity benefits that vested in favour of Executives during the year.

5. Remuneration in the form of options and/or PRs may include negative amounts as a result of changes made to vesting probability assumptions and as a result of options and/or PRs forfeited during the year.

6. Resigned 28 August 2014.

7. Resigned 28 August 2014.

8. Appointed 4 April 2014.

9. Appointed 19 May 2014.

10. Share based payments include PRs granted while A J Lennon was an executive

11. Resigned 27 June 2014.

12. Mr. D Cooper's 2013 and 2014 share based payment amortisation expense was reversed upon the forfeiture of unvested performance rights as a result of his resignation. Details had not been finalised regarding the treatment of the performance rights at the date of his departure.

15

Directors’ Report Year ended 30 June 2015

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

follows:
	Fixed remuneration		At risk STI		At risk LTI
	2015	2014	2015	2014	20151	20141
Directors
A W Lennon	100%	100%	-	-	-	-
S F Higgs2	100%	100%	-	-	-	-
G W Sinclair3	100%	100%	-	-	-	-
T J Allen	100%	100%	-	-	-	-
V Krause4	100%	100%	-	-	-	-
R J McKinnon5	100%	100%	-	-	-	-
B D Gore	30%	28%	30%	28%	40%	44%
A J Lennon6	100%	66%	-	-	-	34%
Other key management	personnel
D J Cooper7	-	88%	-	-	-	12%
P J Dumas	41%	38%	27%	25%	32%	37%
D Scafetta	52%	47%	16%	16%	32%	37%
B C Fullarton	49%	68%	25%	32%	26%	-

1. Since LTIs are provided exclusively by way of options and/or PRs, the percentages disclosed also reflect the value of remuneration consisting of options and/or PRs based on the value of options and/or PRs expensed during the year.

2. Resigned 24 August 2014.

3. Resigned 24 August 2014.

4. Appointed 4 April 2014.

5. Appointed 19 May 2014.

6. Include PRs granted while A J Lennon was an executive. 7. Resigned 27 June 2014.

D. SHARE-BASED COMPENSATION

Options over shares in Peet Limited are granted under the PESOP, which was approved by the Board and shareholders during the 2004 financial year. Performance rights over shares in Peet Limited are granted under the PPRP, which was approved by shareholders at the 2008 AGM. Employees of any Group Company (including an Executive Director) will be eligible to participate in the PESOP and/or PPRP at the discretion of the Board.

The PESOP and PPRP are designed to provide long-term incentives for Executives to deliver long-term shareholder returns. Under the plans, participants are granted options and/or PRs, which only vest if the employees are still employed by the Group at the end of the vesting period, subject to the Board’s discretion, and any set performance hurdles have been met.

Invitations to apply for options and/or performance rights

Eligible employees, at the discretion of the Board, may be invited to apply for options and/or PRs on terms and conditions to be determined by the Board including as to:

• the method of calculation of the exercise price of each option;

• the number of options and/or PRs being offered and the maximum number of shares over which each option and/or PR is granted;

• the period or periods during which any of the options and/or PRs may be exercised;

• the dates and times when the options and/or PRs lapse;

• the date and time by which the application for options and/or PRs must be received by Peet; and

• any applicable conditions which must be satisfied or circumstances which must exist before the options and/or PRs may be exercised.

Eligible employees may apply for part of the options and/or PRs offered to them, but only in specified multiples.

Consideration

Unless the Board determines otherwise, no payment will be required for a grant of options and/or PRs under the PESOP and/or PPRP.

16

Directors’ Report Year ended 30 June 2015

Exercise conditions

Generally, as a pre-condition to exercise, any exercise conditions in respect of an option and/or PR must be satisfied. However, the Board has the discretion to enable an option and/or PR holder to exercise options and/or PRs where the exercise conditions have not been met, including, for example, where a court orders a meeting to be held in relation to a proposed compromise or arrangement in respect of the Company, or a resolution is passed, or an order is made, for winding up the Company.

Options granted under the PESOP and PRs granted under the PPRP carry no dividend or voting rights.

Lapse of options and/or PRs

Unexercised options and/or PRs will lapse upon the earlier to occur of a variety of events specified in the rules of the PESOP and PPRP including, on the date or in circumstances specified by the Board in the invitation, failure to meet the options’ or PRs’ exercise conditions in the prescribed period or on a specified anniversary date of grant of the options or PRs, as determined by the Board.

17

Directors’ Report Year ended 30 June 2015

The table below summarises the status of the Company’s options and performance rights granted to Executives:

Executives Date of Grant Performance/ Service Period Expiry Exercise Value per option/ PR at Grant Date Vesting conditions

Balance as at 1 July 14 Granted Exercised/ vested Lapsed/ forfeited Balance at date of report Exercisable at date of report Notes

Options B D Gore 30 Nov 2007 Up to 30 Nov 2011 N/A $4.10 $1.12 Time based Performance Rights B D Gore 15 Nov 2011 3 yrs ended 16 Jan 2017 $0.00 $0.81 1 FUM Growth 30 June 2014 Relative ROE 28 Nov 2012 3 yrs ended 28 Nov 2017 $0.00 $0.95 1 FUM Growth 30 June 2015 EBITDA Growth 26 Nov 2013 3 yrs ended 20 Dec 2018 $0.00 $1.27 1 FUM Growth 30 June 2016 ROAFE 26 Nov 2014 3 yrs ended 22 Dec 2019 $0.00 $1.07 FUM Growth 30 Jun 2017 ROAFE A J Lennon 15 Nov 2011 3 yrs ended 16 Jan 2017 $0.00 $0.81 1 FUM Growth 30 June 2014 Relative ROE Other executives 16 Jan 2012 3 yrs ended 16 Jan 2017 $0.00 $0.64 FUM Growth 30 June 2014 Relative ROE 28 Nov 2012 3 yrs ended 28 Nov 2017 $0.00 $0.95 FUM Growth 30 June 2015 EBITDA Growth 20 Dec 2013 3 yrs ended 20 Dec 2018 $0.00 $1.27 FUM Growth 30 June 2016 ROAFE 8 Sep 2014 3 yrs ended 8 Sep 2019 $0.00 $1.27 FUM Growth 30 Jun 2016 ROAFE 22 Dec 2014 3 yrs ended 22 Dec 2019 $0.00 $0.94 FUM Growth 30 Jun 2017 ROAFE Total*

1,200,000 - - - 1,200,000 1,200,000 2 1,137,500 - (568,750) (568,750) - - 3 4 2,086,677 - (1,786,196) (300,481) - - 5 6 1,023,622 - - - 1,023,622 - 5 7 - 833,897 - - 833,897 - 5 7 144,375 - (72,188) (72,187) - - 3 4 886,094 - (556,719) (329,375) - - 3 4 953,909 - (816,546) (137,363) - - 5 6 479,190 - - - 479,190 - 5 7 - 239,033 - - 239,033 - 5 7 - 593,328 - - 593,328 - 5 7 6,711,367 1,666,258 (3,800,399) (1,408,156) 3,169,070 - 7,911,367 1,666,258 (3,800,399) (1,408,156) 4,369,070 1,200,000

• Include PRs granted while A J Lennon was an executive.

18

Directors’ Report Year ended 30 June 2015

NOTE 1

The issue of a share-based payment award to a Director requires shareholder approval and the value at grant date is taken as the date at which that approval is granted. Accordingly, the value of these performance rights is based on 15 November 2011, 28 November 2012, 26 November 2013 and 26 November 2014, being the dates of Peet Limited’s, 2011, 2012, 2013 and 2014 AGMs, respectively.

NOTE 2

These options are convertible to ordinary shares on a 1:1 basis at the exercise price after the fourth anniversary of the grant date.

The exercise condition in respect of these options is that Mr Gore remains employed as Managing Director for a period of four years. Although the service period requirement has been met, the options have not been exercised.

NOTE 3

These PRs are convertible to ordinary shares on a 1:1 basis, with 50% subject to the Funds under Management (FUM) growth vesting condition.

FUM growth is measured as the cumulative value of properties:

• acquired by Peet on balance sheet and subsequently sold into a Peet syndicate; or

• funded by way of a Peet syndicate; or

• for which Peet has been appointed a joint venture partner; or

• for which Peet has been appointed development manager during the performance period.

The aggregate of the FUM growth during the performance period is then compared to the FUM growth target set by the Board.

Of the performance rights subject to FUM growth, the proportion to vest will be as follows:

Performance level	Aggregate FUM growth target	Proportion of performance rights
	during performance period	that may be eligible to vest
Less than the target	Less than $60 million	0%
Target	$60 million	50%
Target – maximum	$60 million to $100 million	Pro-rata between 50% and 100%
Maximum	Greater than $100 million	100%

The group achieved the FUM growth target of $121.7 million for the three year performance period ended 30 June 2014. Accordingly, the performance condition was met and on 18 September 2014 the Directors resolved that the PRs relating thereto vested.

NOTE 4

These PRs are convertible to ordinary shares on a 1:1 basis, with 50% subject to the Relative Return on Equity (ROE) vesting condition.

Relative ROE is measured as the average net operating profit after tax (NOPAT) over the three-year vesting period divided by the average starting and ending equity, compared to the S&P/ASX 200 Industrials. The ROE hurdle operates as follows:

hurdle operates as follows:
Performance level	ROE result compared to S&P/ASX	Proportion of performance rights
	200 Industrials	that may be eligible to vest
Less than the target	Below 50th percentile	0%
Target	Equal to 50th percentile	50%
Target – maximum	Between 50th and 70th percentile	Pro-rata between 50% and 100%
Maximum	Greater than 70th percentile	100%

The Board has the discretion to amend the calculation of ROE to take account of capital raisings, approved by the Board for the long-term benefit of the Company, but which have short-term implications on the calculation of ROE.

19

Directors’ Report Year ended 30 June 2015

The Group’s ROE for the year three year performance period ended 30 June 2014 was below the 50[th] percentile of the S&P/ASX 200 industrials. Accordingly, the Relative ROE performance condition was not met and on 18 September 2014 the Directors resolved that the proportionate number of PRs relating thereto lapsed.

NOTE 5

These PRs are convertible to ordinary shares on a 1:1 basis, with 40% subject to the FUM growth vesting condition.

FUM growth is measured as detailed in note 3 above.

Of the PRs subject to FUM growth, the proportion to vest will be as follows:

Performance level	Aggregate FUM growth	target	Proportion of performance rights
	during performance period		that may be eligible to vest
Less than the target	Less than $60 million		0%
Target	$60 million		50%
Target – medium	$60 million to $100 million		Pro-rata between 50% and 70%
Medium – maximum	$100 million to $150 million		Pro-rata between 70% and 100%
Maximum	Greater than $150 million		100%

The group achieved the FUM growth of $88.9 million for the three year performance period ended 30 June 2015. Accordingly, performance condition was partially met and on 12 August 2015 the Directors resolved that the 64% number of PRs thereto vested.

The PRs for the performance period ended 30 June 2016 and 30 June 2017 remain unvested.

NOTE 6

These PRs are convertible to ordinary shares on a 1:1 basis, with 60% subject to the Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) growth vesting condition, measured over a three-year period from 1 July 2012 to 30 June 2015 (FY13 Performance Period).

EBITDA growth is measured as the aggregate EBITDA achieved over the FY13 Performance Period, compared to the Board’s internal EBITDA target for the FY13 Performance Period. The calculation of EBITDA is based on “underlying” EBITDA. That is, it does not include either write-downs of inventories and/or development costs or increases in the carrying value of inventories.

Of the performance rights subject to EBITDA growth, the proportion to vest will be as follows:

“underlying” EBITDA. That is, it does not include either increases in the carrying value of inventories. Of the performance rights subject to EBITDA growth, the	write-downs of inventories and/or development costs or proportion to vest will be as follows:
Performance level	Proportion of performance rights that may be eligible
	to vest
Less than 85% of the target	0%
85% of the target	30%
85% to 90% of the target	Pro-rata between 30% and 50%
90% to 100% of the target	Pro-rata between 50% and 70%
100% to 120% of the target	Pro-rata between 70% and 100%
Greater than 120% of the target	100%

The group achieved underlying EBITDA of $219.2 million against the target of $156.8 million for the three year performance period ended 30 June 2015. Accordingly, the EBITDA growth performance conditions attached to the PRs were met and on 12 August 2015 the Directors resolved that 100% of the PRs relating thereto vested.

NOTE 7

These PRs are convertible to ordinary shares on a 1:1 basis, with 60% subject to the Return on Average Funds Employed (ROAFE) vesting condition, measured over a three-year period from 1 July 2013 to 30 June 2016 (FY14 Performance Period) and 1 July 2014 to 30 June 2017 (FY15 Performance Period) respectively. ROAFE is measured as the average of the Earnings before interest, tax and write-downs of inventories and/or development costs or increases in the carrying value of inventories (EBIT) divided by the average of the sum of net debt, convertible notes, contributed equity, non-controlling interests and retained earnings.

20

Directors’ Report Year ended 30 June 2015

The ROAFE is compared to the Board’s internal target ROAFE for the FY14 and FY15 Performance Period respectively.

Of the PRs subject to ROAFE, the proportion to vest will be as follows:

Performance level	Proportion of performance rights that may be eligible
	to vest
Less than 75% of the target	0%
75% of the target	30%
75% to 85% of the target	Pro-rata between 30% and 50%
85% to 100% of the target	Pro-rata between 50% and 70%
100% to 110% of the target	Pro-rata between 70% and 100%
Greater than 110% of the target	100%

These PRs remain unvested.

Option and performance rights holdings

The number of options and PRs over unissued ordinary shares in the Company held during the financial year by Directors and each of the other key management personnel of the Group, including their personally-related entities, is set out below. When exercisable, each option and PR is convertible into one ordinary share of Peet Limited.

Limited.
				Lapsed/		Vested and
	Balance at	Granted		forfeited	Balance at	exercisable
	the start of the year	during the year	Exercised during the year	during the year 1	end of the year	at the end of the year 2
Directors
A W Lennon	-	-	-	-	-		-
S F Higgs	-	-	-	-	-		-
G W Sinclair	-	-	-	-	-		-
T J Allen	-	-	-	-	-		-
V Krause	-	-	-	-	-		-
R J McKinnon	-	-	-	-	-		-
A J Lennon2	144,375	-	(72,188)	(72,187)	-		-
B D Gore	5,447,799	833,897	(568,750)	(869,231)	4,843,715	1,200,000
Other key management personnel
D J Cooper	227,344	-	(227,344)	-	-		-
P J Dumas	1,374,593	253,025	(215,625)	(306,760)	1,105,233		-
D Scafetta	717,256	144,573	(113,750)	(159,978)	588,101		-
B C Fullarton	-	434,763	-	-	434,763		-

1. Includes performance rights for which performance conditions were not met for the performance period.

2. Include PRs granted while A J Lennon was an executive.

During the financial year 1,197,657 PRs (2014: 1,269,570) were exercised by Executives at $ Nil exercise price.

Since year-end, 2,602,742 PRs were vested and exercised at $ Nil exercise price by Executives prior to the date of this report.

Refer note 24 of the financial report for the total options and performance rights outstanding.

21

Directors’ Report Year ended 30 June 2015

E. ADDITIONAL INFORMATION

Performance of Peet Limited

The overall level of executive compensation takes into account the performance of the Group over the past year. Comparison to the previous five years’ performance is tabulated below:

		2011	2012	2013	2014	2015
Net profit after tax (NPAT)	$'000	22,147	5,437	880	30,291	38,460
NPAT growth	Growth%	(47.40%)	(75.50%)	(83.80%)	3342.20%	27.0%
Net operating profit after tax (NOPAT)	$'000	44,023	20,310	18,346	31,555	38,460
NOPAT growth	Growth%	2.80%	(53.90%)	(9.70%)	72.00%	21.88%
Basic EPS	cents per share	7.3	1.7	0.26	7.0	8.26
Basic EPS growth	Growth%	(48.20%)	(76.70%)	(84.70%)	2592.30%	18.0%
Operating EPS	cents per share	14.6	6.3	5.4	7.3	8.26
Operating EPS growth	Growth%	2.10%	(56.80%)	(14.30%)	35.20%	13.15%
Dividends paid/payable	cents per share	8.5	-	-	3.5	4.5
Dividend paid growth	Growth%	0.00%	(100%)	0.00%	100%	29%
Share price 30 June	$	1.47	0.67	1.12	1.35	1.15
Share price growth	Growth%	(30.30%)	(54.40%)	67.20%	20.50%	(14.81%)

Details of remuneration: cash bonuses, options and PRs

For each cash bonus, grant of options and/or PRs included in the tables within the remuneration report, the percentage of the available bonus or grant that was paid, or that vested and the percentage that was forfeited because the person did not meet the service and performance criteria, is set out below. Generally no part of the bonuses forfeited is payable in future years. Subject to the rules of the PESOP and PPRP no options or PRs will vest if the conditions are not satisfied, subject to the discretion of the Board, hence the minimum value of the option and PRs yet to vest is nil. The maximum value of the options and PRs yet to vest has been determined as the amount of the grant date fair value of the options and PRs that is yet to be expensed.

Cash Bonus Paid/ payable Forfeited /deferred % %	Options & Performance Rights Financial year Vested1 Forfeited1,2 Financial years in which options/PRs may vest Maximum total Value of grant yet to vest Granted % % $
Directors A W Lennon - - S F Higgs - - G W Sinclair - - T J Allen - - V Krause3 - - R J McKinnon4 - - A J Lennon5 - - B D Gore 100% -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2012 50% 50% 2015 - 2015 - - 2017 592,878 2014 - - 2017 564,342 2013 85.6% 14.4% 2016 - 2012 50% 50% 2015 -

22

Directors’ Report Year ended 30 June 2015

Directors’ Report Year ended 30 June 2015
Cash Bonus Paid/ payable Forfeited/ deferred % %	Options & Performance Rights Financial year Vested1 Forfeited1,2 Financial years in which options/PRs may vest Maximum total Value of grant yet to vest Granted % % $
Other key management personnel D J Cooper6 - - P J Dumas 100% - D Scafetta 100% - B C Fullarton 100% -	2014 - 100% 2017 - 2013 - 100% 2016 - 2012 - 50% 2015 - 2015 - - 2017 158,441 2014 - - 2017 171,163 2013 85.6% 14.4% 2016 - 2012 50% 50% 2015 - 2015 - - 2017 90,530 2014 - - 2017 93,024 2013 85.6% 14.4% 2016 - 2012 50% 50% 2015 - 2015 - - 2017 122,564 2014 - - 2017 131,784

1. Includes performance rights for which performance conditions were met for the performance period ended 30 June 2015 and confirmed by the Directors after balance date

2. Includes performance rights for which performance conditions were not met for the performance period.

3. Appointed 4 April 2014.

4. Appointed 19 May 2014.

5. Include PRs granted while A J Lennon was an executive. 6. Resigned 27 June 2014.

Further details relating to options and/or PRs, either granted, exercised or lapsed during the year, are set out below. The amounts below are calculated in accordance with Australian Accounting Standards. The KMPs exercised 1,197,657 PRs over shares in the Company and received shares in the Company during the year. Please refer to previous pages of the Remuneration Report for commentary on vesting conditions met during the performance period ended 30 June 2015.

	Remuneration
	consisting of	Value of options &	Value of options &	Value of options &
	options & performance rights1	performance rights granted2	performance rights exercised3	performance rights lapsed4
Directors
B D Gore	40%	888,100	460,972	460,972
A J Lennon5	-	-	58,508	58,508
Other key management personnel
D J Cooper6	-	-	145,136	-
P J Dumas	32%	237,337	137,655	137,655
D Scafetta	32%	135,609	72,618	72,618
B C Fullarton	26%	487,167	-	-

1. The percentage of the value of remuneration consisting of options and performance rights, based on the value of options and performance rights expensed during the current year.

2. The value at grant date calculated in accordance with AASB 2 Share-based payments of options and/or performance rights granted during the year as part of remuneration.

3. The value at exercise date of options and/or PRs that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options and/or PRs at that date.

4. The value at lapse date of options and/or PRs that were granted as part of remuneration and that lapsed during the year.

5. Include PRs granted while A J Lennon was an executive.

6. Resigned 27 June 2014.

23

Directors’ Report Year ended 30 June 2015

Loans to directors and other key management personnel

There were no loans made to any Director or other key management personnel, or their personally-related entities, during the financial year.

Voting and comments made at the Company’s 2014 annual general meeting

The instructions given to validly appointed proxies in respect of the resolution pertaining to the Company’s 2014 Remuneration Report were as follows:

For	Against	Proxy's	Abstain
		discretion
222,343,619	12,086,512	4,143,573	12,020,794
93.2%	5.1%	1.7%

The motion was carried as an ordinary resolution on show of hands.

Interests in the shares and convertible notes of the Company

Shares Balance at the start of the year Received during the year on exercise of PRs Other changes during the year Balance at the end of the year	Convertible notes Balance at the start of the year Other changes during the year Balance at the end of the year
Directors A W Lennon 90,153,815 - 6,658,759 96,812,574 S F Higgs 400,000 100,000 500,000 G W Sinclair 92,044 - - 92,044 T J Allen 83,044 - 9,010 92,054 V Krause - - - - R J McKinnon - - 50,000 50,000 B D Gore 1,171,048 568,750 - 1,739,798 A J Lennon1 1,224,257 72,188 34,899 1,331,344	600 - 600 - - - - - - 4,114 - 4,114 - - - - - - - - - - - -
Other key management personnel P J Dumas 321,463 215,625 (420,000) 117,088 - - - D Scafetta 441,560 113,750 - 555,310 - - -

1. Includes interest in Performance Rights obtained while AJ Lennon was an Executive Director

Since year-end, 2,602,742 PRs were vested and exercised at $ Nil exercise price by Executives prior to the date of this report.

End of Remuneration report (audited)

24

Directors’ Report Year ended 30 June 2015

14. Indemnity of officers and auditors

During the financial year, the Company paid a premium in respect of a Directors’ and Officers’ insurance policy that insures Directors and Officers of the Company. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and Officers in their capacity as such. The Directors have not included more specific details of the nature of the liabilities covered or the amount of the premium paid in respect of Directors’ and Officers’ liability, as such disclosure is prohibited under the terms of the contract.

The Company has not during, or since the beginning of the financial year, in respect of any person who is or has been an auditor of the Company, paid, or agreed to pay, a premium in respect of a contract, that insures against any liability, including liability for costs or expenses to defend legal proceedings.

15. Non-audit services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are considered important.

The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the impartiality and objectivity of the auditor; and

• • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

The fees that were paid or payable for services provided by the auditors of the Group, its related practices and non-related audit firms is set out in note 21 of the Financial report.

16. Auditor’s independence declaration

A copy of the auditor’s independence declaration, as required under section 307C of the Corporation Act 2001, is set out on page 26.

17. Rounding of amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Director’s Report. Amounts in the Director’s Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

Signed for and on behalf of the Board in accordance with a resolution of the Board of Directors.

==> picture [120 x 39] intentionally omitted <==

Brendan Gore

Managing Director and Chief Executive Officer Perth, Western Australia 27 August 2015

25

Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843

==> picture [71 x 81] intentionally omitted <==

Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Auditor’s independence declaration to the Directors of Peet Limited

In relation to our audit of the financial report of Peet Limited for the financial year ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [96 x 28] intentionally omitted <==

Ernst & Young

==> picture [42 x 59] intentionally omitted <==

G Lotter Partner

27 August 2015

26

Corporate Governance Statement Year ended 30 June 2015

A copy of the Group’s corporate governance policies and practices in place during the financial year ended 30 June 2015 is available at the following link:

http://www.peet.com.au/PeetNational/media/PDF-s/corporate%20governance/Corporate-Governance-Statement.pdf

Unless otherwise stated, these are consistent with the 3[rd] edition of the ASX Corporate Governance Council’s Principles and Recommendations (released March 2014).

27

Financial report Year ended 30 June 2015

Consolidated statement of profit or loss and other comprehensive income	29
Consolidated balance sheet	30
Consolidated statement of changes in equity	31
Consolidated statement of cash flows	32
Notes to the consolidated financial statements	33

This financial report covers the consolidated financial statements for the Group consisting of Peet Limited and its subsidiaries. The financial report is presented in Australian currency. Peet Limited is a for profit company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is; Level 7, 200 St Georges Terrace, Perth WA 6000. The financial report was authorised for issue by the Directors on 27 August 2015. The Directors have the power to amend and reissue the financial report. Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are accessible via our website; www.peet.com.au

28

Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2015

Notes	2015 $’000 2014 $’000
Revenue 5 Expenses 6 Finance costs (net of capitalised borrowing costs) 6 Share of net profit of associates and joint ventures 10 Write-down in carrying value of inventories 6 Profit before income tax Income tax expense 8 Profit for the year Attributable to: Owners of Peet Limited Non-controlling interests Other comprehensive income Items that may subsequently be reclassified to profit or loss Realised losses transferred to profit or loss Unrealised losses on cash flow hedges Share of other comprehensive income of associates Income tax relating to components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: Owners of Peet Limited Non-controlling interests Earnings per share for profit attributable to the ordinary equity holders of the Company Notes	354,434 276,054 (295,323) (244,640) (5,838) (8,758) 6,425 20,620 - (1,806)
	59,698 41,470 (17,769) (9,884)
	41,929 31,586
	38,460 30,291 3,469 1,295
	41,929 31,586
	1,978 3,588 (2,085) (781) (2) 12 32 (842)
	(77) 1,977
	41,852 33,563
	38,359 32,107 3,493 1,456
	41,852 33,563
	Cents Cents
Basic and diluted earnings per share 7	8.26 7.00

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

29

Consolidated balance sheet As at 30 June 2015

Consolidated balance sheet As at 30 June 2015
Notes	2015 2014 $’000 $’000
Current assets Cash and cash equivalents Receivables 11 Inventories 9 Current tax receivable Total current assets Non-current assets Receivables 11 Inventories 9 Investments accounted for using the equity method 10 Property, plant and equipment Deferred tax assets 8 Intangible assets Total non-current assets Total assets Current liabilities Payables 12 Land vendor liabilities 13 Borrowings 16 Derivative financial instruments 16 Current tax liabilities Provisions 14 Total current liabilities Non-current liabilities Land vendor liabilities 13 Borrowings 16 Derivative financial instruments 16 Deferred tax liabilities 8 Provisions 14 Total non-current liabilities Total liabilities Net assets Equity Contributed equity 17 Reserves 17 Retained profits Capital and reserves attributable to owners of Peet Limited Non-controlling interests Total equity	57,723 38,783 53,512 43,014 100,676 143,112 - 1,189
	211,911 226,098
	47,965 38,183 419,858 397,485 181,826 152,641 10,932 11,360 - 18,509 2,589 2,856
	663,170 621,034
	875,081 847,132
	63,346 55,533 5,000 7,500 65,825 50,639 1,917 - 3,324 - 11,099 11,124
	150,511 124,796
	43,181 16,949 169,100 244,907 1,473 3,285 26,436 36,512 486 637
	240,676 302,290
	391,187 427,086
	483,894 420,046
	385,962 328,609 10,628 8,791 82,264 66,291
	478,854 403,691 5,040 16,355
	483,894 420,046

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

30

Consolidated statement of changes in equity For the year ended 30 June 2015

Consolidated statement of changes in equity For the year ended 30 June 2015	Consolidated statement of changes in equity For the year ended 30 June 2015
Notes Contributed equity Reserves Retained profits Total $’000 $’000 $’000 $’000		Non- controlling interests Total equity $’000 $’000
Balance at 1 July 2013 325,193 4,239 36,000 365,432 Profit for the year - - 30,291 30,291 Other comprehensive income - 1,816 - 1,816 Total comprehensive income for the year - 1,816 30,291 32,107 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs and tax 17 3,416 - - 3,416 Share based payments - 2,736 - 2,736 Balance at 30 June 2014 328,609 8,791 66,291 403,691 Balance at 1 July 2014 328,609 8,791 66,291 403,691 Profit for the year - - 38,460 38,460 Other comprehensive income - (101) - (101) Total comprehensive income for the year - (101) 38,460 38,359 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs and tax 17 57,353 - - 57,353 Transactions with non-controlling interest - (439) - (439) Share based payments - 2,377 - 2,377 Dividends paid - - (22,487) (22,487) Balance at 30 June 2015 385,962 10,628 82,264 478,854	325,193 4,239 36,000 365,432	14,899 380,331
	- - 30,291 30,291 - 1,816 - 1,816	1,295 31,586 161 1,977
	- 1,816 30,291 32,107	1,456 33,563
		- 3,416 - 2,736
	328,609 8,791 66,291 403,691	16,355 420,046
	328,609 8,791 66,291 403,691	16,355 420,046
	- - 38,460 38,460 - (101) - (101)	3,469 41,929 24 (77)
	- (101) 38,460 38,359	3,493 41,852
		- 57,353 (14,808) (15,247) - 2,377 - (22,487)
	385,962 10,628 82,264 478,854	5,040 483,894

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

31

Consolidated statement of cash flows For the year ended 30 June 2015

Consolidated statement of cash flows For the year ended 30 June 2015
Notes	2015 $’000 2014 $’000
Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Payments for purchase of land Interest and other finance costs paid Distributions and dividends received from associates and joint ventures Income tax paid Net cash inflow from operating activities 19 Cash flows from investing activities Payments for property, plant and equipment Payment for intangibles Payments for investment in associates Proceeds from capital returns from associates Loans to related parties Repayment of loans by related parties Interest received Net cash outflow from investing activities Cash flows from financing activities Dividends paid to Group’s shareholders Repayment of borrowings Proceeds from borrowings Proceeds from issue of equity securities (net of equity raising costs) Transactions with non-controlling interests - share buyback (net of costs) Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year	383,724 297,704 (234,952) (234,375) (19,903) (12,811) (20,371) (26,967) 9,122 18,119 (4,320) (4,468)
	113,300 37,202
	(2,457) (1,435) - (480) (33,017) (19,826) 2,331 24,559 (19,397) (12,366) 100 320 741 610
	(51,699) (8,618)
	(21,361) - (108,512) (147,122) 46,660 117,489 49,786 3,412 (9,234) -
	(42,661) (26,221)
	18,940 2,363 38,783 36,420
	57,723 38,783

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

32

Notes to the consolidated financial statements Year ended 30 June 2015

CONTENTS

Basis of reporting

1.	Reporting entity	34
2.	Basis of preparation	34
3.	How to read the annual report	35
Performance for the year
4.	Segment information	36
5.	Revenue	38
6.	Expenses	39
7.	Earnings per share	39
8.	Taxes	40
Operating assets and liabilities
9.	Inventories	42
10.	Investments accounted for using the equity method	42
11.	Receivables	45
12.	Payables	46
13.	Land vendor liabilities	46
14.	Provisions	46
15.	Interest in joint operations	47
Capital management
16.	Borrowings and derivative financial instruments	48
17.	Contributed equity and reserves	52
18.	Dividends	53
19.	Reconciliation of profit after income tax to net cash inflow from operating activities	53
20.	Fair value management	54
Other notes
21.	Remuneration of auditors	55
22.	Contingencies and commitments	55
23.	Parent entity financial information and subsidiaries	56
24.	Share based payments	59
25.	Matters subsequent to the end of the financial year	61
26.	Other accounting policies	61

33

Notes to the consolidated financial statements Year ended 30 June 2015

Basis of reporting

This section of the financial report sets out the basis of preparation of the consolidated financial statements. Where an accounting policy is specific to one note, the policy is described in the note to which it relates.

1. Reporting entity

This financial report covers the consolidated financial statements for the Consolidated Entity consisting of Peet Limited and its subsidiaries (“Group”). The Financial report is presented in the Australian currency. Peet Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is; Level 7, 200 St Georges Terrace, Perth WA 6000. The nature of the operations and principal activities of the Group are described in the Directors’ report. Peet Limited is a for-profit entity.

2. Basis of preparation

The financial report is a general purpose financial report which:

• has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 ;

• comply with International Financial reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB);

• has been prepared under the historical cost convention, except for derivative instruments which have been measured at fair value;

• provide comparative information in respect of the previous period; and

• is rounded off to the nearest thousand dollars or in certain cases to the nearest dollar in accordance with ASIC Class Order 98/100.

a. Principles of consolidation

The consolidated financial statements comprise the financial statements of the Group and the entities it controlled at the end of, or during the year ended 30 June 2015. The Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee; and

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

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

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

b. Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. In the case of syndicates, significant influence can exist with a lower shareholding by virtue of the Group’s position as project manager. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.

The Group’s share of its associates’ post-acquisition profits or losses are recognised in the consolidated statement of profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

c. Investment in joint arrangements

Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual agreed sharing of control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint arrangements are classified as either a joint operation or joint venture , based on the rights and obligations arising from the contractual obligations between the parties to the arrangement.

34

Notes to the consolidated financial statements Year ended 30 June 2015

To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint arrangement, the arrangement is classified as a joint operation and as such, the Group recognises its:

• Assets, including its share of any assets held jointly;

• Liabilities, including its share of any liabilities incurred jointly;

• Share of revenue from the sale of the output by the joint operation; and

• Expenses, including its share of any expenses incurred jointly.

To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is classified as a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-acquisition changes in the Group’s share of the net assets of the venture.

d. Changes in ownership interests

The Group treats transactions with non-controlling interests that do not result in a gain or loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to noncontrolling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Peet Limited.

e. Changes in accounting policies

The Group has adopted all new and amended Australian Accounting Standards and Interpretations effective from 1 July 2014. New and amended Standards and Interpretations did not result in any significant changes to the Group’s accounting policies. The Group has not elected to early adopt any other new or amended Standards or Interpretations that are issued by not yet effective. (refer Note 26 (ix)).

3. How to read the annual report

The notes to the financial statements are set out into four specific sections:

• Performance for the year;

• Operating assets and liabilities;

• Capital management; and

• Other

Where an accounting policy is specific to one note, the policy is described in the note to which it relates.

Key estimates are described in the following notes:

• Note 5 - sales fall over rates on project management and selling fees;

• Note 8 - deferred tax assets; and

• Note 9 - net realisable value.

Financial instrument risk management is carried out by the finance department under policies approved by the Board of Directors and the Audit and Risk Management Committee. The department identifies, evaluates and mitigates financial risks in close co-operation with the Group’s operating units. The Board and Audit and Risk Management Committee provide written principles for overall risk management, as well as written policies covering specific areas, such as mitigating interest rate and credit risks, use of derivative financial instruments and investing excess liquidity.

Financial risks and its management are detailed in the respective notes it pertains to. The Group’s activities expose it to financial risks including:

• credit risk (note 11);

• liquidity risk (note 16); and

• interest rate risk (note 16).

Related party transactions are disclosed within the notes they relate to. Transactions which occur between the Group and significant controlled entities are classified as related parties. Significant controlled entities are interests held in associates and joint ventures, which are set out in note 10. Details relating to the key management personnel, including remuneration paid, are included in item 13 of the Directors’ report.

35

Notes to the consolidated financial statements Performance for the year Year ended 30 June 2015

Performance for the year

Highlights for the year

• Revenue up by 28%

• Net profit after tax up by 27%

• EBITDA[1 ] up by 25%

• Basic EPS up by 18%

This section focuses on the results and performance of the Group.

Funds management

Peet enters into asset and funds management agreements with external capital providers. Peet and/or the external capital provider commit equity funds towards the acquisition of land and this is generally supplemented with debt funds either at the time of acquisition or during the development phase of a project.

The Group derive fees from underwriting, capital raising and asset identification services. Ongoing project related fees (mainly project management and selling fees as well as performance fees) are then derived by the Group for the duration of a particular project.

Company-owned projects

4. Segment information

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive management group.

The executive management group assesses the performance of the operating segments based on multiple measures including earnings before interest (including interest and finance charges amortised through cost of sales), tax, depreciation and amortisation (“EBITDA”), earnings before interest (including interest and finance charges amortised through cost of sales) and tax (“EBIT”) and profit after tax.

The share of profits from associates and joint ventures is included as segment revenue as it is treated as revenue for internal reporting purposes.

The Group operates only in Australia.

The executive management group considers the business to have the following reportable business segments:

The Group acquires parcels of land in Australia, primarily for residential development purposes. Certain land holdings will also produce non-residential blocks of land.

Joint arrangements

Joint arrangements are entered into with government, statutory authorities and private landowners. The form of these arrangements can vary from project to project but generally involves Peet undertaking the development of land on behalf of the landowner or in conjunction with the coowner. The Group is typically entitled to ongoing fees for management of the development project and also a share of the profits.

Inter-segment transfers and other unallocated

Segment revenue, expenses and results include transfers between segments. Such transfers are based on an arm’s length basis and are eliminated on consolidation.

The adoption of AASB 10 Consolidated Financial Statements from 1 July 2013, resulted in certain property syndicates being consolidated. These entities however, continue to be managed and reported to the executive management group as part of the funds management business segment. Adjustments are included in "Inter‑Segment Eliminations and Other Unallocated" to reconcile reportable business segment information to the Group's consolidated statement of profit or loss.

1 Excludes inventory write-downs

36

Notes to the consolidated financial statements

Performance for the year Year ended 30 June 2015

	Funds management 2015 2014 $’000 $’000	Asset management company owned projects 2015 2014 $’000 $’000	Asset management joint arrangement 2015 2014 $’000 $’000	Inter-segment eliminations and other unallocated 2015 2014 $’000 $’000	Consolidated 2015 2014 $’000 $’000
Revenue by segment Sales to external parties Other revenue Share of net profit of associates and JVs Corporate overheads EBIT and EBITDA by segment EBITDA excluding write-down in inventories Write-down of inventories EBITDA 1 Depreciation and amortisation EBIT 2	37,027 32,500 1,614 3,649 2,836 7,141	185,272 103,047 711 1,195 - -	100,144 93,405 757 2,220 4,731 14,229	28,036 40,627 873 (589) (1,142) (750)	350,479 269,579 3,955 6,475 6,425 20,620
	41,477 43,290	185,983 104,242	105,632 109,854	27,767 39,288	360,859 296,674
				(10,214) (11,332)	(10,214) (11,332)
	28,420 29,718 - -	45,683 24,955 - (1,806)	21,390 27,440 - -	(3,074) (8,415) - -	92,419 73,698 - (1,806)
	28,420 29,718 (73) (55)	45,683 23,149 (1,502) (1,024)	21,390 27,440 (424) (876)	(3,074) (8,415) (932) (858)	92,419 71,892 (2,931) (2,813)
	28,347 29,663	44,181 22,125	20,966 26,564	(4,006) (9,273)	89,488 69,079
Financing costs (includes interest and finance costs expensed through cost of sales) Profit before income tax Income tax (expense) / benefit Profit for the year					(29,790) (27,609)
					59,698 41,470 (17,769) (9,884)
					41,929 31,586

Profit for the year

1. EBITDA: Earnings Before Interest (including interest and finance charges amortised through cost of sales) Tax, Depreciation and Amortisation. 2. EBIT: Earnings Before Interest (including interest and finance charges amortised through cost of sales) and Tax.

37

Notes to the consolidated financial statements Performance for the year Year ended 30 June 2015

5. Revenue

5. Revenue
	2015 2014 $’000 $’000
Revenue from sales of land Project management and performance fees Other revenue	300,034 223,771 47,260 44,372 7,140 7,911
	354,434 276,054

Key estimates

Sales fall over rates on project management and selling fees

An analysis of sales fallen over is performed on a monthly basis for all business segments by location. This analysis is used to determine an appropriate provision for sales fall overs to be recognised against project management and selling fees.

Recognition and measurement

Revenue is recognised at the fair value of consideration received or receivable. The main streams of revenue are recognised if it meets the criteria outlined below.

Sale of land

Revenue from the sale of blocks from completed stages of land subdivision are recognised on settlement of the sale. This represents the point when risks and rewards have passed to the buyer.

Project management and selling fees

Project management and selling fees are recognised where there is a signed sales contract with a buyer as this is the point at which revenue has been earned by the project manager, adjusted for estimates of sales fall over rates.

Performance fees

Performance fee revenue is based on a profitability measurement in accordance with the relevant development management agreement.

Revenue from related parties included above

	2015 2014 $’000 $’000
Revenue from related parties1 Associates Project management and performance fees Syndicate administration fees Interest Other Joint ventures Project management and performance fees	43,067 30,488 1,506 1,436 1,655 2,611 209 373 1,963 12,221
	48,400 47,129

1. Refer to note 3 for information on related party transactions.

Other revenue

Other revenue includes:

• Interest – this is recognised when earned, which is determined using the effective interest rate method.

• Dividends – this is recognised when the Group's right to receive payment is established.

• Other trading activities – this is recognised as the service required under the contract is performed.

38

Notes to the consolidated financial statements Performance for the year Year ended 30 June 2015

6. Expenses

6. Expenses
	2015 $’000	2014 $’000
Profit before income tax includes the	following specific expenses:
Land and development cost	193,894	149,074
Amortised interest and finance expense Total land and development cost	23,952 217,846	18,851 167,925
Depreciation	2,668	2,612
Amortisation	263	201
Total depreciation and amortisation1	2,931	2,813
Employee benefits expense2	33,957	35,886
Project management, selling and
other operating costs Other expenses	22,787 17,802	20,738 17,278
Total other expenses	74,546	73,902
Total expenses	295,323	244,640
Finance costs
Interest and finance charges paid/payable	16,666	25,915
Interest on convertible notes	5,867	5,755
Amount capitalised	(16,695)	(22,912)
Write-down in carrying value of	5,838	8,758
inventories and development
costs
Write-down of inventory to net realisable value	-	1,806
	-	1,806

1. Refer to Note 26 (ii) and (iii) for accounting policies

2. Refer to Note 26 (iv), (v) and (vi) for accounting policies

Related party expenses

Land and development costs

Land and development costs represent the portion of the land and development costs associated with the lots sold during the year.

Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period they are incurred. The capitalisation rate used to determine the amount of finance costs to be capitalised is the weighted average interest rate applicable to the Group's outstanding borrowings during the year (refer Note 16).

7. Earnings per share

7. Earnings per share
	2015	2014
Profit attributable to the ordinary	38,460	30,291
equity holders of the Company
($’000)
Weighted average number of	465,473,536	432,997,427
ordinary shares used as the
denominator in calculating basic
earningsper share
Basic and diluted earnings per	8.26	7.00
share (cents)

There are 1,200,000 options and 500,000 convertible notes excluded from the calculation of diluted earnings per share as they are anti-dilutive. They could potentially dilute basic earnings per share in the future.

Refer note 24 for the number of Performance Rights (PRs) outstanding at 30 June 2015. These PRs are contingently issuable shares and accordingly not included in diluted earnings per share.

	2015	2014
	$000	$000
Expenses3
Interest paid on shareholder loan	-	656
KMP remuneration	6,509	6,852

1. Refer to note 3 for information about related party transactions.

39

Notes to the consolidated financial statements Performance for the year Year ended 30 June 2015

8. Taxes

a. Income tax expense

8. Taxes a. Income tax expense
	2015	2014
	$’000	$’000
Major components of tax expense Current income tax expense Current tax Adjustments for prior periods	8,097 736 8,833	- (1,210) (1,210)
Deferred income tax expense
Deferred tax	8,936	9,166
Adjustments for prior periods	- 8,936 17,769	1,928 11,094 9,884
Deferred income tax expense included in income		tax
expense comprises: Decrease in deferred tax assets (Increase) / decrease in deferred tax liabilities	10,338 (1,402)	4,692 6,402
	8,936	11,094
Tax reconciliation
Profit before income tax Tax at Australian tax rate of 30%	59,698 17,909	41,470 12,441
Tax effect of amounts which are not	deductible:
Share of net profit of associates Employee benefits Sundry items Under provision in prior years	(851) 713 (107) 105	(4,482) 821 386 718
	17,769	9,884

Recognition and measurement Current taxes

The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Deferred taxes

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply, when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction by the end of the reporting period. The relevant tax rates are applied to the amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arise in a transaction other than a business combination that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Key estimates

Deferred tax assets

The Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity, to satisfy certain tests at the time the losses are recouped.

40

Notes to the consolidated financial statements Performance for the year Year ended 30 June 2015

b. Deferred tax assets

At 1 July 2013 Credited/(charged): - to profit or loss - to other comprehensive income - directly to equity Total deferred tax assets Set off against deferred tax liabilities pursuant to set off provisions At 30 June 2014 At 1 July 2014 Credited/(charged): - to profit or loss - to other comprehensive income - directly to equity Total deferred tax assets Set off against deferred tax liabilities pursuant to set off provisions At 30 June 2015 c. Deferred tax liabilities Movements			Inventory Cash flow hedges Capital raising costs Tax losses Other $’000 $’000 $’000 $’000 $’000		Total $’000 37,076 (4,692) (842) 4 31,546 (13,037) 18,509 31,546 (10,338) 32 471 21,711 (21,711) - Total $’000
			9,594 1,828 1,029 20,526 4,099 (5,801) - (290) (658) 2,057 - (842) - - - - - 4 - -
			3,793 986 743 19,868 6,156
			3,793 986 743 19,868 6,156 319 (14) (238) (9,267) (1,138) - 32 - - - - - 471 - -
			4,112 1,004 976 10,601 5,018
			Interest and finance charges Accrued income Inventory Share of joint arrangements deferred tax liabilities Other $’000 $’000 $’000 $’000 $’000
At 1 July 2013 Charged/ (credited): - to profit or loss Total deferred tax liabilities Set off against deferred tax liabilities pursuant to set off provisions At 30 June 2014 At 1 July 2014 Charged/ (credited): - to profit or loss Total deferred tax liabilities Set off against deferred tax liabilities pursuant to set off provisions At 30 June 2015			30,183 8,654 2,244 1,541 525 2,050 2,058 3,393 (1,355) 256		43,147 6,402
			32,233 10,712 5,637 186 781		49,549
			32,233 10,712 5,637 186 781 (925) (2,272) 1,091 395 309		(13,037)
					36,512
					49,549 (1,402)
			31,308 8,440 6,728 581 1,090		48,147
					(21,711)
					26,436

41

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

Operating assets and liabilities

Highlights for the year

• Acquired interest in Golden Bay Estate, W.A. and Bluestone Mount Barker Estate, S.A.

• Acquired land adjacent to Aston, Craigieburn, Victoria estate on deferred terms

This section shows the assets used to generate the Group’s trading performance and the liabilities incurred as a result. Liabilities relating to the Group’s financing activities are addressed in the capital management section.

9. Inventories

9. Inventories
	2015 2014 $’000 $’000
Current Cost of acquisition Capitalised development costs Capitalised finance costs Non-current Cost of acquisition Capitalised development costs Capitalised finance costs Total Inventory at cost	15,144 24,862 71,722 96,592 13,810 21,658
	100,676 143,112
	255,238 221,830 90,725 92,955 73,895 82,700
	419,858 397,485
	520,534 540,597

Recognition and measurement

Land held for development and resale is stated at the lower of cost and net realisable value. Cost includes the cost of acquisition, development and borrowing costs during development. When development is completed, borrowing costs and other holding charges are expensed as incurred.

Land purchased for residential subdivision is initially classified as non-current. It is subsequently reclassified to current if the subdivided lots are expected to be sold within the next 12 months.

Key estimates

Net Realisable Value

The Group is required to carry inventory at lower of cost and net realisable value. The net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the inventories are expected to realise and the estimate of costs to complete. The key assumptions require the use of management judgement and are reviewed annually.

10. Investment accounted for using the equity method

Investments in associates and joint ventures are accounted for using the equity method of accounting.

a. Movements in carrying amounts of investments in associates and joint ventures

associates and joint ventures
	2015 2014 $’000 $’000
Carrying amount at the beginning of the financial year Acquisitions Dividends Disposals/capital returns Share of profit after income tax Share of other comprehensive income Carrying amount at the end of the financial year	152,641 147,112 34,211 27,376 (9,122) (18,119) (2,331) (24,360) 6,425 20,620 2 12
	181,826 152,641

The Group acquired interests in two joint arrangements, Golden Bay Estate and Bluestone Mount Barker Estate during the year ended 30 June 2015 for a total consideration of $30 million. Peet and its investment partners have joint control.

42

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

10. Investment accounted for using the equity method (continued)

The Group assesses, at each balance date, the carrying value of investments in associates and joint ventures to ensure the assets are not impaired.

b. Investments in associates and joint ventures (JVs) including summarised financial information

b. Investments in associates and joint ventures (JVs) including summarised financial	information
Ownership Current assets Non-current assets Current liabilities Non-current liabilities Net assets As at 30 June 2015 % $’000 $’000 $’000 $’000 $’000	Carrying value of interest in associate or joint venture Revenue Net Profit/ (loss) $’000 $’000 $’000	Share of profit/(loss) $’000
Associates Peet Alkimos Pty Limited, WA 26 51,403 314,919 17,974 116,181 232,167 Peet Caboolture Syndicate Limited, QLD 20 8,293 43,776 20,627 19,339 12,103 Joint Ventures Peet Flagstone City Pty Limited, QLD 50 2,098 110,956 17,004 - 96,050 Peet Golden Bay Pty Limited, WA 50 20,870 23,296 6,040 - 38,126 Peet Mt Barker Pty Limited, SA 50 7,901 22,199 3,196 5,098 21,806 Crace Developments Pty Limited, ACT 80 446 1,057 33 8 1,462 Googong Township Unit Trust, NSW 50 53,882 132,861 107,537 6,788 72,418 Forde Developments Pty Ltd, ACT 50 210 1,950 15 434 1,711 Other associates Other JVs Total As at 30 June 2014**	60,758 38,191 2,675 2,421 7,383 (1,379) 48,025 21 (965) 19,063 14,119 1,815 10,903 7,616 810 1,170 2,347 592 36,209 50,447 8,450 856 175 112 2,402 19 181,826	896 (276) (483) 908 405 474 4,225 56 230 (10)
		6,425
Associates Peet Alkimos Pty Limited, WA 26 73,216 283,813 17,903 110,570 228,556 Peet Caboolture Syndicate Limited, QLD 20 9,093 40,710 12,340 23,998 13,465 Joint Ventures Peet Flagstone City Pty Limited, QLD 50 319 105,915 14,241 - 91,993 Crace Developments Pty Limited, ACT 80 14,565 907 3,603 - 11,869 Googong Township Unit Trust, NSW 50 31,941 103,417 33,319 39,002 63,037 Forde Developments Pty Ltd, ACT 50 2,020 - 422 - 1,598 Other associates Other JVs Total**	59,813 56,801 (5,713) 2,693 4,720 (1,016) 45,997 4 (993) 9,495 20,005 12,113 30,776 72,787 11,088 799 738 (2,114) 2,786 282 152,641	6,952 * (203) (497) 9,690 5,544 (1,057) 139 52
		20,620

• Includes the effect of fair value adjustments of $7.5 million on acquisition of the additional interest in the Syndicate.

** Refer to note 10(c) for further breakdown of financial information of joint ventures

The associates and joint ventures finance their operations through unitholder/shareholder contributions and also through external banking facilities. The Group also provides a loan facility to some of these entities which is disclosed in Note 11. The Group has no further contractual obligations to provide ongoing financial support.

43

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

10. Investment accounted for using the equity method (continued)

c. Additional summarised information in relation to amounts included in assets, liabilities and profit/(loss) of joint ventures

ventures
	Cash and	Current	Non-current	Interest	Income tax
	cash equivalents	financial liabilities1	financial liabilities1	expense	expense/ (benefit)
As at 30 June 2015	$’000	$’000	$’000	$’000	$’000
Peet Flagstone City Pty Limited	1,775	16,369	-	-	(412)
Peet Golden Bay Pty Limited	7,289	-	-	-	741
Peet Mt Barker Pty Limited	1,973	-	-	-	346
Crace Developments Pty Limited	210	-	-	8	39
Googong Township Unit Trust	10,060	97,500	-	6	61
Forde Developments Pty Ltd	210	-	217	34	(18)
As at 30 June 2014
Peet Flagstone City Pty Limited	206	13,935	-	-	(418)
Crace Developments Pty Limited	4,423	-	-	-	5,109
Googong Township Unit Trust	10,162	21,656	39,000	636	30
Forde Developments Pty Ltd	82	400	-	-	220

1 Excluding trade and other payables and provisions

44

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

11. Receivables

11. Receivables
	2015 2014 $’000 $’000
Current Trade receivables(a) Accrued income(b) Loans to associates and joint ventures(c) Other receivables(d) Non-current Loans to associates and joint ventures(c) Other receivables(d) Total receivables	13,646 10,142 12,100 15,065 23,346 14,446 4,420 3,361
	53,512 43,014
	36,499 27,808 11,466 10,375
	47,965 38,183
	101,477 81,197

a. Trade receivables are non-interest bearing and generally have 30-60 day terms. There were no impaired trade receivables at the end of the year for the Group (2014: $Nil).

b. These amounts represent project management and performance fees from associates and other managed entities.

c. The Group has provided certain associates and JVs of the Group with working capital loan facilities on commercial terms. The loans provided to associates and JVs are unsecured with interest rates based on Bank Bill Swap Bid Rate (BBSY) plus a margin up to 4%.

d. Includes deferred facilities fee - Those that purchase homes in the Lattitude Lakelands retirement village enter into an agreement to pay deferred facilities fees (DFF) on departure, which is based on 3% of the market value of the unit for each year of occupation (up to 24%). The deferred facilities fee is based on independent valuations.

Related party balances included above:

	2015 $’000 2014 $’000
Current Trade and other receivables 15,179 16,084 Loans to associates and JVs 23,346 14,446 Non-current Other receivables 7,139 5,964 Loans to associates and JVs 36,499 27,808 Total 82,163 64,302 Movements in loans to associates and JVs: Carrying amount at 1 July 42,254 32,528 Loans advanced to associates 19,397 12,366 Loan repayments from associates (100) (320) Other (1,706) (2,320) Carrying amount at 30 June 59,845 42,254	15,179 16,084 23,346 14,446 7,139 5,964 36,499 27,808
	82,163 64,302
	59,845 42,254

Recognition and measurement

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance date which are classified as non-current assets.

Trade receivables generally mentioned in (a) are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method, less allowance for impairment. Other receivables are recognised on an accrual basis as the services to which they relate are performed.

Refer note 20 for fair value disclosures.

Credit risk

The credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The maximum exposure to credit risk as at 30 June 2015 is the carrying amount of the financial assets in the consolidated financial statements.

The credit risk arising on trade and other receivables is monitored on an ongoing basis which results in the exposure to bad debts for the Group not being significant. There are no significant financial assets that have had renegotiated terms that would otherwise have been past due or impaired.

Based on the credit history of these classes, it is expected that these amounts will be received. The Group does not hold any collateral in relation to these receivables. There is no significant concentration of credit risk with respect to receivables as the Group have a large number of balances with related parties and the remaining with other parties that have a good credit history with the Group.

The Group manages this risk by:

• transacting with credit worthy counterparties that have an appropriate credit history;

• providing loans as an investment into joint ventures and associates where it is comfortable with the underlying property exposure within that entity;

• performing ongoing checks to ensure that settlement terms detailed in individual contracts are adhered to;

• regularly monitoring the performance of its associates, joint ventures and third parties; and

• obtaining collateral as security (where appropriate).

45

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

12. Payables

Recognition and measurement

12. Payables
	2015 2014 $’000 $’000
Current Trade payables Unearned income GST payable Accruals Other payables	11,236 12,029 4,609 3,079 8,711 6,594 19,484 16,450 19,306 17,381 63,346 55,533

Where the Group enters into unconditional contracts with land vendors to purchase properties for future development that contain deferred payment terms, these borrowings are disclosed at their present value. The unwinding of the discount applied to the acquisition price is included in finance costs. Generally, the land vendor holds the title over the property until settlement has occurred. Refer note 20 for fair value disclosures.

The below table analyses the maturity of the Group’s land vendor liability obligation:

vendor liability obligation:
	2015 2014 $’000 $’000
0-1 years 1-2 years 2-5 years Total contractual cash flows Carrying amount of liabilities	5,000 7,500 16,100 10,000 37,225 10,200
	58,325 27,700
	48,181 24,449

Recognition and measurement

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. These amounts are unsecured and usually paid within 30 days of recognition.

Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

14. Provisions

14. Provisions
	2015	2014
	$’000	$’000
Current
Rebates	7,992	7,639
Employee entitlements	3,107	3,485
	11,099	11,124
Non-current
Employee entitlements	486	499
Other	-	138
	486	637
Total provisions	11,585	11,761

Refer note 20 for fair value disclosures.

13. Land vendor liabilities

		14. Provisions
			2015 2014 $’000 $’000
		Current Rebates Employee entitlements	7,992 7,639 3107 3485
	2015 2014 $’000 $’000 5,000 7,500 5,000 7,500 53,325 20,200 (10,144) (3,251) 43,181 16,949 48,181 24,449 , , 11,099 11,124 Non-current Employee entitlements 486 499 Other - 138 486 637 Total provisions 11,585 11,761 Movements in the provision for rebates during the financial year are set out below: 2015 2014 $’000 $’000 Carrying amount at 1 July 7,639 4,547 Charged/(credited) to the statement of profit or loss: - Additional provision recognised 4,037 5,129 - Paid during year (3,684) (1,991) - Expired during the year - (46) Carrying amount at 30 June 7,992 7,639	Non-current Employee entitlements Other Total provisions	, ,
			11,099 11,124
Current Instalment for purchase of development property Non-current Instalment for purchase of development property Future interest component of deferred payment Total land vendor liabilities			486 499 - 138
			486 637
			11,585 11,761
			7,639 4,547 4,037 5,129 (3,684) (1,991) - (46)
			7,992 7,639

46

Notes to the consolidated financial statements Operating assets and liabilities Year ended 30 June 2015

Recognition and measurement

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

Rebates

The Group may be required under the terms of certain sale contracts to provide rebates for expenditures undertaken by land holders in respect of developments. These expenditures relate to landscaping and fencing and are generally payable where the land purchaser completes the construction of their dwelling within a specified period of time. This period is generally 12 to 18 months from the date of settlement. A liability is recorded at settlement and a related adjustment to profit or loss is recorded upon the expiration of the time limit if the rebate has not been paid.

15. Interests in joint operations

Details of aggregate share of assets, liabilities, revenue, expenses and results of joint operations

Group’s	Total	Total	Revenue	Expenses
share of:	assets	liabilities
	$’000	$’000	$’000	$’000
As at 30 June	2015
The Village at Wellard, WA	39,395	21,772	36,084	23,121
Lightsview
Joint Venture, SA	10,489	3,934	15,738	12,947
The Heights Durack, NT	8,002	2,500	30,222	26,216
As at 30 June	2014
The Village at Wellard, WA	39,665	20,606	34,308	27,800
Lightsview Joint Venture, SA	10,191	4,427	14,071	10,743
The Heights Durack, NT	15,793	6,674	31,345	26,915

Employee entitlements

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of the employee, departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash out flows.

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

47

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

Capital management

This section outlines how the Group manages its capital and related financing costs.

For the purpose of the Group’s capital management, capital includes:

• issued capital;

• debt facilities; and

• other equity reserves attributable to the equity holders of the parent.

The Group's objectives when managing capital are to:

• safeguard its ability to continue as a going concern;

• continue to provide returns to shareholders and benefits for other stakeholders;

• maintain an efficient capital structure to reduce the cost of capital; and

• ensure all covenants are complied with.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total interest bearing liabilities (including deferred payment obligations) less cash, divided by total assets adjusted for market value, net of cash and cash equivalents less intangible assets. At 30 June 2015, the bank covenant gearing ratio was 23.8% (2014: 29.8%).

16. Borrowings and derivative financial instruments

Net debt	2015 2014 $’000 $’000
Borrowings – Current Borrowings – Non-current Total borrowings* Cash and cash equivalents Net debt	65,825 50,639 169,100 244,907
	234,925 295,546 (57,723) (38,783)
	177,202 256,763

Recognition and measurement

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of profit or loss over the period of the borrowings using the effective interest method.

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. Subsequent to initial recognition the liability is carried on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder, representing the equity component of the convertible bonds is recognised and included in reserves, net of income tax effects. Refer note 20 for fair value disclosures.

Debt facilities

The following provides details of the loans and borrowings utilised as at 30 June 2015:

30 June 2015	Facility amount Utilised amount Available amount Effective interest rate $’000 $’000 $’000 %
Bank loans¹ – note a Convertible notes² – note b Fixed rate loan ²	265,000 185,784 79,216 6.84% 50,000 48,744 1,256 12.23% 397 397 - 5.39% 315,397 234,925 80,472

1. Secured 2. Unsecured

2. Excludes vendor financing. Refer note 13 for vendor financing on deferred payment terms.

48

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

a. Bank loans

The bank facilities are secured by a first registered fixed and floating charge over the assets and undertakings of the Group being inventories with a carrying amount of $521 million (2014: $541 million) (note 9), cash and cash equivalents of $58 million (2014: $39 million), receivables of $101 million (2014: $81 million) (note 11) and property, plant and equipment of $11 million (2014: $11 million). Under these facilities the Group is required to meet bank covenants relating to interest cover, gearing ratio, real property ratio and minimum shareholders equity. All bank covenants have been met during the reporting period and as at 30 June 2015.

The Group’s main bank facility of $220 million was extended to October 2017. The table below analyses the maturity of the Group’s bank loans based on the remaining period at reporting date to the contractual maturity date:

	2015 2014 $’000 $’000
0-1 years 1-2 years 2-5 years Total contractual cash flows Carrying amount of liabilities	28,525 46,323 23,434 27,064 160,075 214,661
	212,034 288,048
	185,784 239,928

b. Convertible notes

Peet Limited issued 500,000 convertible notes for $50 million on 16 June 2011. The notes are convertible into ordinary shares of Peet Limited, at the option of the holder, or repayable on 16 June 2016. The conversion rate is 44.44 shares for each note held, which is based on a fixed conversion price of $2.25 (subject to adjustment for certain dilutionary and other capital transactions).

The convertible notes are presented in the balance sheet as follows:

follows:
	2015 2014 $’000 $’000
Face value of notes issued Transaction cost Other equity securities - value of conversion rights Cumulative interest expense1 Cumulative coupon payable Current liability	50,000 50,000 (2,316) (2,316) (2,761) (2,761)
	44,923 44,923 23,034 17,148 (19,213) (14,432)
	3,821 2,716
	48,744 47,639

1. Interest expense is calculated by applying the effective interest rate of 12.23% to the liability component

The convertible note is expected to be paid within a year. The total contractual cash flows are $50 million.

c. Derivative financial instruments

c. Derivative financial instruments
	2015 2014 $’000 $’000
Current Interest rate swap contracts - cash flow hedges Non-current Interest rate swap contracts - cash flow hedges Total derivative financial instruments	1,917 - 1,473 3,285
	3,390 3,285

The below table analyses the maturity of the Group’s interest rate swaps on a net settled basis:

The below table analyses the maturity of the rate swaps on a net settled basis:	Group’s interest
	2015 2014 $’000 $’000
0-1 years 1-2 years 2-5 years >5 years Total contractual cash flows Carrying amount of liabilities	1,917 - - 3,285 379 - 1,094 -
	3,390 3,285
	3,390 3,285

49

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

Interest rate swap contracts - cash flow hedges

Recognition and measurement

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently measured at fair value at each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).

The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

The gain or loss from remeasuring the hedging instruments at fair value is recognised in other comprehensive income and deferred in equity in the hedge reserve, to the extent that the hedge is effective. It is reclassified into profit or loss when the hedged interest expense is recognised. The ineffective portion is recognised in the statement of profit or loss immediately. There was no ineffectiveness in the current or prior year.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the statement of profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to the statement of profit or loss.

Bank loans of the Group currently bear a weighted average variable interest rate before hedges of 2.53% (2014: 2.96%). It is the Group’s policy to protect part of the loans from exposure to increasing interest rates. Accordingly, the Group has entered into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates.

The notional principal amounts and periods of expiry of the interest rate swap contracts were as follows:

	2015 2014 $’000 $’000
0-1 years 1-2 years 2-3 years1 >5 years1 1. Commencing April 2016	75,000 10,000 - 75,000 50,000 - 100,000
	225,000 85,000

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, otherwise current.

Liquidity risk

Liquidity risk includes the risk that the Group, as a result of their operations:

• will not have sufficient funds to settle a transaction on due date;

• will be forced to sell financial assets at a value which is less than what they are worth; or

• may be unable to settle or recover a financial asset at all.

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities to meet obligations when due, and the ability to close-out market positions. Due to the dynamic nature of the underlying business, the Group aims at maintaining flexibility in funding by keeping committed credit lines available, and regularly updating and reviewing its cash flow forecasts to assist in managing its liquidity. The maturity analysis of the Group’s derivative and non-derivative financial instruments can be located in their respective notes.

The Group has unused borrowing facilities which can further reduce liquidity risk.

Credit risk

The cash component of financial assets is considered to have low credit risk as the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Swaps currently cover approximately 40% (2014: 35%) of the variable bank loan principal outstanding and are timed to expire as each loan repayment falls due. The fixed interest rate swaps range between 5.05% to 5.08% (2014: 4.54% and 5.69%) and the variable rates are between 2.08% and 2.72% (2014: 2.56% and 3.30%).

The contracts require settlement of net interest receivable or payable monthly. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

50

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

Interest rate risk

The Group’s main interest rate risk arises from cash and long-term borrowings.

Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly monthly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.

The Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate risk as defined in AASB 7.

Interest rate sensitivity

The sensitivity analysis below has been determined based on the exposure to interest rates in existence at balance date, and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease used in the interest rate sensitivity analysis was determined based on the level of debt that was renewed and forecasters’ economic expectations and represents management’s assessment of the possible change in interest rates.

At 30 June 2015, the Group had the following mix of financial assets and liabilities exposed to variable interest rates:

	2015 2014 $’000 $’000
Financial assets Cash and cash equivalents (floating) Financial liabilities Borrowings (floating) Interest rate swap Net movement	57,723 38,783 (110,784) (154,928) (3,390) (3,285)
	(56,451) (119,430)

The potential impact of a change in interest rates by +/-50 basis points on profit and equity has been tabulated below:

		Post-tax profits Increase/(decrease)	Post-tax profits Increase/(decrease)	Equity Increase/(decrease)
		2015	2014	2015 2014
		$’000	$’000	$’000 $’000
	- 50 basis points	186	406	198 395
	+50 basis points	(186)	(406)	(198) (395)

51

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

17. Contributed equity and reserves

a. Movements in ordinary share capital

17. Contributed equity and reserves a. Movements in ordinary share capital
Date Details	Number of Shares $’000
30 June 2013 Opening balance 1 July 2013 Capital raising 1 11 October 2013 Vested Performance rights less transactions costs Deferred tax credit recognised in equity (note 8) Movement for the year 30 June 2014 Closing balance 22 September 2014 Vested Performance rights less transaction costs 31 October 2014 Dividend reinvestment plan 14 November 2014 Institutional placement less transaction costs 2 12 December 2014 Share purchase plan 3 22 December 2014 Capital raising 4 30 April 2015 Dividend reinvestment plan 5 Deferred tax credit recognised in equity Movement for the year 30 June 2015 Closing balance	429,008,507 325,193 2,978,261 3,425 1,402,580 (13) - 4
	4,380,841 3,416
	433,389,348 328,609
	1,292,657 (6) 3,905,709 4,608 36,036,036 38,539 3,923,628 4,306 6,306,306 6,946 2,135,489 2,489 - 471
	53,599,825 57,353
	486,989,173 385,962

1. In July 2013, the Company issued 2,978,261 shares to participating eligible shareholders under the Peet Share Purchase Plan (SPP).

2. In November 2014 the Company completed an institutional placement of 36,036,036 ordinary shares at an issue price of $1.11 per share.

3. In December 2014, the Company issued 3,923,628 at an issue price of $1.11 per share to participating eligible shareholders under the Peet Share Purchase Plan (SPP).

4. In December 2014, the Company issued 6,306,306 shares at an issue price of $1.11 per share under a conditional placement to Scorpio Nominees Pty Ltd (a company and trust associated with the Chairman of Peet Limited).

5. In April 2015, the Company issued 2,135,489 shares at an issue price of $1.1652 pursuant to the Dividend Reinvestment Plan.

The nature of the Group’s contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares of options and/or performance rights are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares, options and/or performance rights for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Parent Entity in proportion to the number of and amounts paid on the shares held. On a show to hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share held is entitled to one vote.

b. Reserves

b. Reserves
	Cash flow hedge reservea Share based payments reserveb Convertible notes reservec Non- controlling interest reserved $’000 $’000 $’000 $’000	Total $’000
At 1 July 2013 Cash flow hedges (gross) Associates - cash flow hedge reserve Deferred tax Option expense At 30 June 2014 At 1 July 2014 Cash flow hedges (gross) Associates - cash flow hedge reserve Deferred tax Option expense Acquisition of additional ownership in CIC At 30 June 2015	(4,243) 6,009 1,933 540 2,577 - - - 12 - - - (773) - - - - 2,736 - -	4,239 2,577 12 (773) 2,736
	(2,427) 8,745 1,933 540	8,791
	(2,427) 8,745 1,933 540 (141) - - - (2) - - - 42 - - - - 2,377 - - - - - (439)	8,791 (141) (2) 42 2,377 (439)
	(2,528) 11,122 1,933 101	10,628

a. The cash flow hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that is recognised directly in equity. Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

• b. The share-based payments reserve is used to recognise the fair value of options and performance rights granted.

c. The convertible notes reserve is used to recognise the value of the conversion rights relating to the 9.5% convertible notes, details of which are shown in note 16(b). d. This reserve is used to record the differences described in note 2(d) which may arise as a result of transactions with non-controlling interests that do not result in a loss of control.

52

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

18. Dividends

19. Reconciliation of profit after income tax to net cash inflow from operating activities

	2015 2014 $’000 $’000 15,214 - 7,273 - 22,487 - 14,610 15,214 24,570 (560) 3,324 (1,189) (6,261) - 21,633 (1,749) inflow from operating activities 2015 2014 $’000 $’000 Profit after income tax 41,929 31,586 Add/(deduct) non cash items: Depreciation 2,668 2,612 Amortisation of intangible assets 263 201 Write-down of inventories and development costs - 1,806 Employee share-based payments 2,377 2,736 Equity accounting for investments in associates and joint ventures (6,425) (20,620) Convertible notes effective interest 1,104 996 Write-down/loss on sale investments - 262 Add/(deduct) other items: Interest received (1,222) 2,654 Distributions and dividends from associates and joint ventures 9,122 18,119 Change in operating assets and liabilities during the financial year Increase in receivables (1,504) (8,386) (Increase)/ decrease in inventories 63,526 (259) (Decrease)/ increase in tax liabilities 4,513 (5,678) (Decrease)/ increase in payables (11,811) (1,184) Increase in provisions (176) 1,263 Increase/ (decrease) in deferred tax liabilities 8,936 11,094 Net cash inflow from operating activities 113,300 **37,202 **	2015 2014 $’000 $’000 15,214 - 7,273 - 22,487 - 14,610 15,214 24,570 (560) 3,324 (1,189) (6,261) - 21,633 (1,749) inflow from operating activities 2015 2014 $’000 $’000 Profit after income tax 41,929 31,586 Add/(deduct) non cash items: Depreciation 2,668 2,612 Amortisation of intangible assets 263 201 Write-down of inventories and development costs - 1,806 Employee share-based payments 2,377 2,736 Equity accounting for investments in associates and joint ventures (6,425) (20,620) Convertible notes effective interest 1,104 996 Write-down/loss on sale investments - 262 Add/(deduct) other items: Interest received (1,222) 2,654 Distributions and dividends from associates and joint ventures 9,122 18,119 Change in operating assets and liabilities during the financial year Increase in receivables (1,504) (8,386) (Increase)/ decrease in inventories 63,526 (259) (Decrease)/ increase in tax liabilities 4,513 (5,678) (Decrease)/ increase in payables (11,811) (1,184) Increase in provisions (176) 1,263 Increase/ (decrease) in deferred tax liabilities 8,936 11,094 Net cash inflow from operating activities 113,300 **37,202 **
Declared and paid during the period Prior year unfranked dividend 3.5 cents, paid on 31 October 2014 Fully franked interim dividend for 2015: 1.5 cents Dividend not recognised at year end Final dividend 3.0 cents per share to be paid 30 September 2015 (2014: 3.5 cents per share) Franking credit balance Franking account balance as at the end of the financial year at 30% (2014: 30%) Franking credits/(debits) that will arise from the payment/(receipt) of income tax Impact on the franking account of dividends proposed before the financial report was issued but not recognised as a distribution to equity holders during the period
		113,300 **37,202 **

53

Notes to the consolidated financial statements Capital management Year ended 30 June 2015

20. Fair value measurement

Valuation of financial instruments

For financial assets and liabilities, the Group uses the following fair value measurement hierarchy:

• Level 1: the fair value is calculated using quoted prices in active markets for identical assets and liabilities.

• Level 2: the fair value is determined using inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices).

• Level 3: the fair value is based on inputs for the asset or liability that are not based on observable market data.

Financial instruments measured at fair value

The Group’s derivative financial instruments were valued using market observable inputs (Level 2) at the carrying value of $3.4 million (2014: $3.3 million).

There have been no transfers between levels during the year

Key Estimation

Fair value estimation

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

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and available for sale securities) is based on quoted market prices at the balance date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, unlisted securities) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date.

Other financial instruments – fair value disclosures

The carrying value of receivables, payables and borrowings is considered to approximate fair values.

The fair value of convertible notes is the quoted market value (on ASX) of a convertible note which at 30 June 2015 was $102.5 per note (Level 2).

• Interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs such as forward pricing and swap models.

• Receivables/borrowings are evaluated by the Group based on parameters such as interest rates and individual creditworthiness of the counter party. Based on this evaluation, allowances are taken into account for the expected losses of these receivables

• • Fair value of the convertible notes is based on price quotations at the reporting date.

The carrying amount of trade receivables and payables less impairment provision of trade receivables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

54

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

Other notes

21. Remuneration of auditors

21. Remuneration of auditors
	2015 2014 $ $
Audit services Audit and review of financial reports and other audit work under theCorporations Act 2001 Ernst & Young Non-Ernst & Young audit firms Total remuneration for audit services Other assurance services Ernst & Young Non-Ernst & Young audit firms Total remuneration for other assurance services Total remuneration for audit and other assurance services Other services Ernst & Young Taxation services Tax compliance services including review of Company income tax returns Ernst & Young	521,430 517,086 2,000 5,100
	523,430 522,186
	5,000 - - 11,550
	5,000 11,550
	528,430 533,736
	41,316 29,870 361,458 117,908

22. Contingencies and commitments

Details of the estimated maximum amounts of contingent liabilities (for which no amounts are recognised in the financial statements) are as follows:

financial statements) are as follows:
	2015 2014 $’000 $’000
Bank guarantees outstanding Insurance bonds outstanding	26,235 19,450 10,422 13,079
	36,657 32,529

All contingent liabilities are expected to mature within 1 year.

The Directors are not aware of any circumstances or information, which would lead them to believe that these contingent liabilities will eventuate and consequently no provisions are included in the accounts in respect of these matters.

55

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

23. Parent entity financial information and subsidiaries

a. Parent entity financial information

Summary financial information

The individual financial statements for the Parent entity show the following aggregate amounts:

Summary financial information The individual financial statements the following aggregate amounts:	for the Parent entity show
	2015 2014 $’000 $’000
Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves Share-based payments reserve Convertible Notes reserve Retained profits Total equity (Loss)/profit for the year Total comprehensive income	77,040 62,107 511,164 475,076 61,780 9,482 61,908 59,043 385,962 328,609 11,123 8,746 1,933 1,933 51,238 76,745
	450,256 416,033
	(3,020) 12,810
	(3,020) 12,810

Guarantees entered into by the Parent entity

Details of the estimated maximum amounts of contingent liabilities (for which no amounts are recognised in the financial statements) are as follows:

financial statements) are as follows:
	2015	2014
	$’000	$’000
Underwriting obligations outstanding	-	-
Bank guarantees outstanding	231	203

b. Subsidiaries

Significant investments in subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following significant subsidiaries in accordance with the accounting policy described in note 2(a):

described in note 2(a):
	Holding
Name of Subsidiary CIC Australia Limitedc	2015 % 100	2014 % 86.03
Peet Craigieburn Pty Limitedb Peet Greenvale No 2 Pty Limitedb Peet Southern JV Pty Limitedb Peet Brigadoon Pty Limitedb Secure Living Pty Limitedb Peet No 85 Pty Limitedb Peet No 108 Pty Limitedb Peet No 112 Pty Limitedb Peet No 113 Pty Limitedb Peet Treasury Pty Ltdb	100 100 100 100 100 100 100 100 100 100	100 100 100 100 100 100 100 100 100 100
Peet Estates (VIC) Pty Ltdb	100	100
Peet Development Management Pty Limitedb	100	100
Peet Estates (QLD) Pty Ltdb	100	100
Peet No 130 Pty Limitedb	100	100
Peet Estates (WA) Pty Ltdb	100	100
Peet Funds Management Limitedb Peet Yanchep Land Syndicateb Peet Tri-State Syndicate Ltda,b	100 66.4 24.43	100 66.4 24.43

• a. Peet has a direct interest of more than 20% and has decision making authority in its capacity as manager and earns remuneration for development and management activities. Peet has also provided a loan to this syndicate. The combination of the investment, together with its remuneration and exposure to credit risk, creates exposure to variability of returns from the activities of the fund that is of such a magnitude that it indicates that Peet is deemed to be acting principal.

• b. Incorporated in WA.

• c. Incorporated in ACT.

56

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

Material partly-owned subsidiaries

Financial information of subsidiaries that have material non-controlling interests is provided below. This information is based on amounts before inter-company eliminations.

	CIC Australia Limited1	CIC Australia Limited1	Peet Yanchep Land	Peet Yanchep Land	Peet Tri-State Syndicate	Peet Tri-State Syndicate
			Syndicate			Limited
	2015	2014	2015	2014	2015	2014
	$ ’000	$ ’000	$ ’000	$ ’000	$ ’000	$ ’000
Current assets	-	92,891	24,950	19,576	1,857	6,100
Non-current assets	-	72,729	62,137	59,947	14,299	14,309
Current liabilities	-	53,862	21,085	10,189	22,276	8,640
Non-current liabilities	-	6,889	12,500	16,839	-	22,751
Non-controlling interest	-	-	17,974	17,636	(4,625)	(8,300)
Revenue	-	62,473	16,680	26,630	12,245	15,999
Profit or loss after tax	-	13,731	1,007	1,078	4,862	201
Profit attributable to non- controlling interest	-	-	338	360	3,675	154
Total comprehensive income	-	-	-	182	33	133

Summarised cashflow information:

	CIC Australia Limited Peet Yanchep Land Syndicate Peet Tri-State Syndicate Limited 2015 2014 2015 2014 2015 2014 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000
Operating Investing Financing Net inflow/(outflow)	- (1,335) (8,477) 9,350 7,677 7,383 - (1,078) (13) (13) - - - 3,513 7,050 (10,349) (5,901) (7,574)
	- 1,100 (1,440) (1,012) 1,776 (191)

Peet has provided loans to material partly owned subsidiaries amounting to $17.7 million (2014: $17.7 million). The Group has no further contractual obligations to provide ongoing financial support.

1 In May 2015, CIC Australia Limited (“CIC”) completed a shareholder approved scheme of arrangement under which CIC conducted a selective buy-back and cancellation of all CIC shares other than the shares held by Peet Limited. Peet became the 100% owner of CIC. CIC paid $15.2 million (including $0.5 million of transaction costs) for buy-back of the shares. The non-controlling interests were carried at $14.8 million at the date of the transaction. The transaction was accounted for as an equity transaction, and resulted in a decrease of shareholders equity by $0.4 million representing the excess of consideration over carrying value.

In 2014, there was a non-controlling interest of 13.97%, an accumulated non-controlling interest of $13.2 million and a profit attributable to non-controlling interest of $1.9 million for CIC.

57

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

Deed of cross guarantee

Peet Limited and certain wholly owned subsidiaries are parties to a deed of cross guarantee under which each company guarantees the debts of the other. By entering into the deed, the wholly-owned entities have been relieved from the requirements to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.

The companies represent a ‘closed group’ for the purposes of the Class Order.

	2015*	2014
	$’000	$’000
Consolidated statement of profit or loss
Revenue	326,388	174,600
Expenses	(272,082)	(149,203)
Finance costs	(4,905)	(5,124)
Share of net profit of
associates accounted for	7,567	2,390
using the equity method
Write-down in carrying value of inventories	-	(1,806)
Profit before income tax	59,968	20,857
Income tax expense	(17,650)	(7,143)
Profit for the year	39,318	13,714
Other comprehensive income
Items that may be reclassified to profit or
loss
Changes in the fair value of cash flow hedges	(153)	2,357
Share of other comprehensive income of	6	44
associates
Income tax relating to
components of other comprehensive income Other comprehensive income for the year, net	46 (101)	(707) 1,694
of tax
Total comprehensive income for the year	39,217	15,408
Summary of movement in Retained profits at the beginning of the financial	consolidated retained 69,292	profits 43,925
year*
Profit for the year	39,318	13,714
Dividends paid	(22,487)	-
Non-controlling interest	(1,625)	-
Retained profits at the end of the financial year	84,498	57,639

Consolidated balance sheet

Set out below is a consolidated balance sheet at 30 June 2015 of the closed group consisting of Peet Limited and its wholly owned subsidiaries.

2015 of the closed group consisting of wholly owned subsidiaries.	Peet Limited and its
	2015 2014 $’000 $’000*
Current assets Cash and cash equivalents Receivables Inventories Current tax receivable Total current assets Non-current assets Receivables Inventories Investments accounted for using the equity method Investments in subsidiaries and associates Property, plant & equipment Intangible assets Total non-current assets Total assets Current liabilities Payables Land vendor liabilities Borrowings Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Land vendor liabilities Borrowings Derivative financial instruments Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity	53,979 25,512 56,372 29,823 74,713 81,401 - 1,123
	185,064 137,859
	70,214 60,042 349,839 297,911 214,615 110,427 - 102,068 10,847 8,052 2,589 2,856
	648,104 581,356
	833,168 719,215
	54,260 28,475 5,000 7,500 49,140 453 1,917 - 3,257 9,749 5,557
	123,323 41,985
	43,181 16,949 156,600 232,119 1,473 3,238 27,727 30,296 486 129
	229,467 282,731
	352,790 324,716
	480,378 394,499
	385,962 328,609 9,918 8,251 84,498 57,639
	480,378 394,499

• Closed group at 30 June 2015 includes CIC Australia Limited and its wholly owned subsidiaries.

58

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

24. Share based payments

Peet Employee Share Option Plan (PESOP) and Peet Performance Rights Plan (PPRP)

The establishment of the PESOP was approved by the Board and shareholders during the 2004 financial year and the Peet Limited PPRP was approved by shareholders at the 2008 AGM. Employees of any Group Company (including Executive Directors) will be eligible to participate in the PESOP and/or PPRP at the discretion of the Board.

Invitations to apply for options and/or performance rights

Eligible employees, at the discretion of the Board, may be invited to apply for options and/or performance rights on terms and conditions to be determined by the Board including as to:

• the method of calculation of the exercise price of each option;

• the number of options and/or performance rights being offered and the maximum number of shares over which each option and/or performance rights is granted;

• the period or periods during which any of the options and/or performance rights may be exercised;

• the dates and times when the options and/or performance rights lapse;

• the date and time by which the application for options and/or performance rights must be received by Peet; and

• any applicable conditions which must be satisfied or circumstances which must exist before the options and/or performance rights may be exercised.

Eligible employees may apply for part of the options and/or performance rights offered to them, but only in specified multiples.

Consideration

Unless the Board determines otherwise, no payment will be required for a grant of options and/or performance rights under the PESOP and/or PPRP.

Vesting and exercise conditions

Under the plans, options and/or PRs only vest if the employees are still employed by the Group at the end of the vesting period, subject to the Board’s discretion, and any set performance hurdles have been met.

Generally, as a pre-condition to exercise, any exercise conditions in respect of an option and/or performance right must be satisfied. However, the Board has the discretion to enable an option and/or performance right holder to exercise options and/or performance rights where the exercise conditions have not been met, including, for example, where a court orders a meeting to be held in relation to a proposed compromise or arrangement in respect of the Company, or a resolution is passed or an order is made for winding up the Company. Options granted under the PESOP and performance rights under the PPRP carry no dividend or voting rights.

Lapse of options and performance rights

Unexercised options and/or performance rights will lapse upon the earlier to occur of a variety of events specified in the rules of the PESOP and PPRP including, on the date or in circumstances specified by the Board in the invitation, failure to meet the options’ or performance rights’ exercise conditions in the prescribed period or on the expiry date of options and/ or performance rights, as determined by the Board.

Fair value of options and performance rights granted

The fair value of an option and PRs at grant date is determined using a Black-Scholes option pricing model and the value of a performance right at grant date is determined using a Binomial pricing model. The models take into account the exercise price, the term of the option and/or performance right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option or performance right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option and/or performance right.

The inputs for assessing the fair value of the performance rights issued during the year under the PPRP were:

Grant Date	Exercise Price	Expiry date	Share price at	Expected price	Risk free	Assessed fair
			grant date	volatility of	interest rate	value
				shares
26 Nov 14	$0.00	30 Jun 19	$1.155	30%	2.45%	$1.065
22 Dec 14	$0.00	30 Jun 19	$1.025	30%	2.92%	$0.938

The expected price volatility is based on the historic volatility (based on the remaining life of the options and/or performance rights), adjusted for any expected changes to future volatility due to publicly available information.

Total expenses arising from share-based payment transactions recognised during the year as part of employee benefit expense is $ 2,377,000 (2014: $2,736,000).

59

Notes to the consolidated financial statements

Other notes

Year ended 30 June 2015

Set out below are summaries of options and performance rights granted under the plans:

Grant date Expiry date Exercise Price $ Assessed fair value $	Balance at start of year Granted during the year Exercised during the year Lapsed/ forfeited during the year Balance At end of year Exercisable at end of the year
30 June 2015 Options 30 Nov 07 N/A $4.10 $1.12 Performance rights 16 Jan 12 16 Jan 17 $0.00 $0.81 28 Nov 12 28 Nov 17 $0.00 $0.95 20 Dec 13 20 Dec 18 $0.00 $1.27 8 Sep 14 8 Sep 19 $0.00 $1.27 22 Dec 14 22 Dec 19 $0.00 $0.938 Total	1,200,000 - - - 1,200,000 1,200,000 2,481,719 - (1,292,656) (1,189,063) - - 3,632,193 - - (137,583) 3,494,610 - 1,896,513 - - - 1,896,513 - - 328,459 - - 328,459 - - 1,822,691 - - 1,822,691 -
	8,010,425 2,151,150 (1,292,656) (1,326,646) 7,542,273 -
	9,210,425 2,151,150 (1,292,656) (1,326,646) 8,742,273 1,200,000
30 June 2014 Options 30 Nov 07 N/A $4.10 $1.12 Performance rights 24 Dec 10 24 Dec 15 $0.00 $1.58 16 Jan 12 16 Jan 17 $0.00 $0.81 28 Nov 12 28 Nov 17 $0.00 $0.95 20 Dec 13 20 Dec 18 $0.00 $1.27 Total	1,200,000 - - - 1,200,000 1,200,000 1,699,952 - (1,402,461) (297,491) - - 2,709,063 - - (227,344) 2,481,719 - 4,299,471 - - (667,278) 3,632,193 - - 2,223,847 - (327,334) 1,896,513 -
	8,708,486 2,223,847 (1,402,461) (1,519,447) 8,010,425 -
	9,908,486 2,223,847 (1,402,461) (1,519,447) 9,210,425 1,200,000

60

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

25. Matters subsequent to the end of the financial year

On 14 August 2015, the Group announced the sale of Arena residential estate in Greenvale, north of Melbourne, Victoria for $93.1 million. The sale is unconditional, with settlement to occur in instalments over three years. The first instalment of $29 million is due in December 2015, the second instalment of $26 million is due in June 2016 and the third instalment of $40.1 million is due in June 2018.

Further, the Directors have declared a final franked dividend of 3.0 cents per share in respect to the year ended 30 June 2015. The dividend is to be paid on Wednesday 30 September 2015, with a record date of Friday 18 September 2015. No provision has been made for this dividend in the financial report as the dividend was not declared or determined by the directors on or before the end of the financial year.

26. Other Accounting Policies

i. Investments and other financial assets

Recognition and derecognition

Regular purchases and sales of investments are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the statement of profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to the statement of profit or loss as gains and losses from investment securities.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Available for sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair

value through profit and loss is recognised in the statement of profit or loss as part of revenue from continuing operations when the Group’s right to receive payments is established.

Fair value

Details on how the fair value of financial instruments is determined are disclosed in note 20.

Impairment

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available for sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is removed from equity and recognised in the statement of profit or loss. Impairment losses recognised in the statement of profit or loss on equity instruments classified as available for sale are not reversed through the statement of profit or loss.

ii. Intangible assets

Intangible assets primarily consist of management rights. The management rights acquired by the Company are initially carried at cost. Amortisation is calculated based on the timing of projected cash flows of the management rights over their estimated useful lives.

• Management rights – 10 to 25 years

iii. Property, plant and equipment

Property, plant and equipment are shown at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation on property, plant and equipment is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:

• Fixtures and fittings – 3 to 10 years

• Leasehold improvements – 10 years

• Property – 40 years

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 carrying amount. These are included in the statement of profit or loss.

61

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

iv. Profit sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit sharing based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

v. Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits because of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance date are discounted to present value.

vi. Retirement benefit obligations

Contributions to defined contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

vii. Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Parent entity financial information

Tax consolidation legislation

Peet Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. Peet Limited is the head entity of the tax consolidated group. Members of the group are taxed as a single entity and the deferred tax assets and liabilities of the entities are set-off in the consolidated financial statements.

The entities in the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly owned entities in the case of a default by the head entity, Peet Limited. At the balance sheet date the possibilities of default were remote.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

Any difference between the amount assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) the wholly owned entity.

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the individual financial statements of Peet Limited. Such investments include both investments in shares issued by the subsidiary and other Parent Entity interests that in substance form part of the Parent Entity’s investment in the subsidiary. These include investments in the form of interest-free loans which have no fixed repayment terms and which have been provided to subsidiaries as an additional source of long-term capital.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

viii. Leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

62

Notes to the consolidated financial statements Other notes Year ended 30 June 2015

ix. New accounting standards and interpretations

Except as disclosed below, accounting policies have been consistently applied over all periods presented. The Group has adopted all new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2014; including:

Reference	Description
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non- Financial Assets	AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal.
AASB 2013-4 Amendments to AASB 139s – Novation of Derivatives and Continuation of Hedge Accounting	AASB 2013-4 amends AASB 139 to permit the continuation of hedge accounting in specified circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations.
	AASB 2013-5 provides an exception to the consolidation requirement for entities
AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities	that meet the definition of an investment entity under AASB 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to
	accountforsubsidiaries atfair value throughprofit or loss.
	The Standard contains three main parts and makes amendments to a number
AASB 2013-9 Amendments to Australian	Standards and Interpretations. Part A of AASB 2013-9 makes consequential
Accounting Standards – Conceptual	amendments arising from the issuance of AASB CF 2013-1. Part B makes
Framework, Materiality and Financial	amendments to particular Australian Accounting Standards to delete references to
Instruments	AASB 1031 and also makes minor editorial amendments to various other
	standards.
	AASB 2015-2 makes amendments to AASB 101 Presentation of Financial
	Statements arising from the IASB’s Disclosure Initiative project. The amendments
	are designed to further encourage companies to apply professional judgment in
AASB 2015-2 Amendments to Australian	determining what information to disclose in the financial statements. For example,
Accounting Standards – Disclosure Initiative:	the amendments make clear that materiality applies to the whole of financial
Amendments to AASB 101	statements and that the inclusion of immaterial information can inhibit the
	usefulness of financial disclosures. The amendments also clarify that companies
	should use professional judgment in determining where and in what order
	information is presentedinthefinancialdisclosures.

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

			Impact on Group	Application date for
Reference	Title	Summary	financial report	Group year ending
AASB 9	Financial	AASB 9 includes requirements for the classification	The Group is in the	1 July 2018
	Instruments	and measurement of financial assets.	process of
		These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139.	determining the extent of the impact of the amendment, if any.
IFRS 15	Revenue from	IFRS 15 establishes principles for reporting useful	The Group is in the	1 July 2018
	Contracts with	information to users of financial statements about the	process of
	Customers	nature, amount, timing and uncertainty of revenue	determining the
		and cash flows arising from an entity’s contracts with	extent of the impact
		customers.	of the amendment, if
			any.

63

Directors’ Declaration Year ended 30 June 2015

In the Directors’ opinion:

• a. the financial statements and notes set out on pages 28 to 63 are in accordance with the Corporations Act 2001 , including:

• i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• ii. giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and

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

• c. at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 23 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 23.

Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

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

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Brendan Gore

Managing Director and Chief Executive Officer Perth, Western Australia 27 August 2015

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Ernst & Young Tel: +61 8 9429 2222 11 Mounts Bay Road Fax: +61 8 9429 2436 Perth WA 6000 Australia ey.com/au GPO Box M939 Perth WA 6843

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Independent auditor’s report to the members of Peet Limited

Report on the financial report

We have audited the accompanying financial report of Peet Limited, which comprises the consolidated balance sheet as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

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

Auditor's responsibility

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

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

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

Independence

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

65

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Opinion

In our opinion:

• i. the financial report of Peet Limited is in accordance with the Corporations Act 2001 , including:

• i giving a true and fair view of the consolidated entity's financial position as at 30 June 2015 and of its performance for the year ended on that date; and

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

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

Report on the remuneration report

We have audited the Remuneration Report included in pages 11 to 24 of the directors' report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Peet Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001 .

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Ernst & Young

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G Lotter Partner Perth 27 August 2015

66