PGG Wrightson Limited - Annual Report 2018

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For the year ended 30 June 2018

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Annual
Report
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Helping grow the country
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PERFORMANCE

Introduction

2018 Highlights ...................................................................................2 Deputy Chairman and Chief Executive Officer’s report ................................................4

Our Company

Board of Directors ...........................................................................10 Executive Team .................................................................................12 The year in review ...........................................................................14 Agency group – Creekside Farms ........................................22 Retail and Water group – Crop Monitoring ..................24 Seed and Grain group - Ecotain® environmental plantain ......................................26 Sale of PGW Seeds ..........................................................................28 PGW in the community ..............................................................30 Sustainability ......................................................................................31

Financial information

Key financial disclosures .............................................................33 Directors’ responsibility statement ......................................34 Additional financial disclosures including notes to the financial statements ........................................43 Independent auditor’s report .................................................81

Governance

Corporate governance and Board Charter ...................85 Statutory disclosures.....................................................................93 Shareholder information ............................................................99 Corporate directory ................................................................101

CALENDAR DATES

Annual shareholders’ meeting 30 October 2018

Half-year earnings announcement

19 February 2019

Year-end earnings announcement 13 August 2019

Front cover: Indevin Viticulture Manager Bryce MacKenzie inspects grapes with Fruitfed Crop Monitoring Co-ordinator Rena Mehrtens in Hawke’s Bay in March 2018 two days before harvesting

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$70.2 m
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Operating EBITDA Net Profit after tax
of of
$70.2 m $18.9 m
Earnings per share Fully imputed
(EPS) of dividends of
2.5 ¢ 3.00 ¢
per share per share for the year
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John and Roslyn Weir’s cows return to
pasture after milking at Springmount
Farms in Taranaki in November 2017
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ANNUAL REPORT 2018 | 1

PGG WRIGHTSON LIMITED

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The Agency group delivered a record result with
Operating EBITDA up 12 percent
on their outstanding result in FY2017.
Fruitfed Supplies Go-Beef and This year as part of the
continues to roll out of the Health,
grow the bottom Go-Lamb Safety and Wellbeing
line due to the Strategy, over 520 PGW
products continue to
combination of a employees completed
grow strongly. During
strong horticulture the cognitive behavioural
the year 288,417 sheep
sector and a leading and 41,221 cattle safety programme Zero
market position. entered the scheme. Incident Process (ZIP).
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In August 2018 PGW announced the In March 2018 the Real
Estate team sold a kiwifruit
conditional sale of
orchard pure production
PGW Seeds to DLF block in Te Puke for the
highest price paid in
New Zealand
Seeds.
per canopy
hectare
Seed and Grain launched several
of $1.12
exciting new cultivars to market
this year in both New Zealand and million.
Australia. All products were well
received by growers.
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PGG Wrightson Seeds Arable Business
Unit Manager Graeme Jones inspects
a cereal crop with Peter Mitchell of
Rosedale Farming Company at Weston
near Oamaru in December 2017
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ANNUAL REPORT 2018 | 3

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Group delivered a strong
operating performance
2018 $M 2017 $M
REVENUE 1,193.5 1,133.0
GROSS PROFIT 346.1 328.6
OPERATING EBITDA 70.2 64.5
NET PROFIT AFTER TAX 18.9 46.3
NET CASH FLOW FROM
5.8 20.5
OPERATING ACTIVITIES
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Deputy Chairman and Chief Executive Officer’s REPORT

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Trevor Burt Ian Glasson DEPUTY CHAIRMAN CHIEF EXECUTIVE OFFICER

PGG Wrightson Limited ("PGW", "the Group" or "the Company") delivered a strong Operating earnings before interest, tax, depreciation and amortisation (Operating EBITDA) for the year ended 30 June 2018 of $70.2 million. Net profit after tax (NPAT) was $18.9 million.

PGW delivered a strong Operating EBITDA result of $70.2 million.

Shareholders will receive a final dividend of 1.25 cents per share, which will be paid on 3 October 2018, making a total of 3.00 cents per share fully imputed for the financial year.

complete, these capital gains were consequently much lower in 2018.

It is very pleasing to have seen a significant increase in PGW’s Operating EBITDA throughout the year and especially gratifying to have matched 2016’s record result. In October 2017 we targeted an Operating EBITDA range of $65 to $70 million and we exceeded the top end of that.

In declaring the final dividend, the Board balanced the one-off nature of these items affecting NPAT and the strong underlying trading performance and the cash flows against the reinvestment opportunities available to the business.

We had consistently advised throughout the year that NPAT would be down on FY2017. This year’s NPAT result was affected by a number of one-off nontrading items including a provision for the remediation costs of historical liabilities under the Holidays Act 2003. Last year also benefited from significant gains on the sale of property. With our property divestment programme largely

This is an excellent trading result for PGW, one that we can be proud of.

Almost all of our New Zealand businesses were up on last year, with most achieving double-digit earnings growth. In general the New Zealand agriculture sector was very strong over the course of our 2018 financial year. Our trading result reflects our broad-based

Atahua Stacked, a two year old Angus bull, enjoys the Manawatu sunshine in September 2018

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exposure to New Zealand agriculture and our employees’ passion and commitment to the sector.

We differentiate ourselves in the market through our technical expertise. Strategically we’ve focussed on employing the best people in the field and supporting them with innovative and powerful tools. This allows them to add value to our customers’ operations. Throughout FY2018 we have continued to invest in our people and our systems so we can maintain the momentum we’ve built over recent years with our suppliers and our customers, and continue to grow operating earnings for our shareholders.

MARKET CONDITIONS

Looking back on 2018, conditions were positive for most of our New Zealand customers. The Ministry for Primary Industries estimates that dairy export revenues increased 14 percent in 2018, meat and wool sector export revenues increased 12 percent and horticulture export revenues increased 6 percent.

These overall figures belie the challenges that many of our customers faced.

Wet conditions delayed spring in most parts of the country. This was rapidly followed by hot dry conditions in December 2017 and January 2018 with the National Institute of Water and Atmospheric Research reporting that New Zealand had its hottest summer on record. The dry conditions were felt across New Zealand, but most notably in Taranaki, Manawatu, West Coast,

PGG Wrightson Seeds Arable Agent Phil Prendergast inspects a crop of OD22 broccoli with Mark Bennett in Wakanui in Mid Canterbury in September 2018

Central Otago, and Southland. Drought conditions broke in February assisted by a pair of sub-tropical cyclones. The hot summer was largely positive for kiwifruit and apples, though vegetable and arable production was adversely affected. Wet paddocks delayed the sowing of spring-planted crops and the hot summer lowered crop yields in Canterbury and market garden production in the North Island.

Dairy production for the 2017/18 season is estimated to have fallen by 1 percent from the previous year. During the dry conditions of December 2017 and January 2018 the fall in production was expected to be higher, but the mild autumn helped dairy production recover towards the end of the season. In contrast, red meat production was largely unaffected.

A key event that impacted the rural community in 2018 was the discovery of Mycoplasma bovis in New Zealand. Also known as M bovis, it is a bacterium associated with a plethora of diseases in cattle – both dairy and beef – that reduce production. While commonplace in herds throughout the world, New Zealand had been free of this costly disease. In July 2017 the Ministry for Primary Industries confirmed M bovis was in New Zealand, and in May 2018, the Government agreed a phased eradication programme with the sector. We have mobilised an M bovis response team within PGW; this team is working through our various touchpoints with New Zealand farmers to enhance our processes so we can play our part in combatting this disease, while

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An example of this investment is the establishment of taskforce teams from across our operating groups who have co-developed group wide standards for controlling our critical risks.

managing both short and long-term risk. To date, M bovis has not affected PGW’s financial performance.

planning and talent management tools to maximise our talent pipeline, introducing a revised remuneration policy and framework and implementing a revitalised induction programme.

OUR PEOPLE

Alongside many other large New Zealand employers, PGW has undertaken a programme of work to ensure all our systems and processes are paying our people correctly under the Holidays Act 2003. Through this work we have identified unintentional areas of non-compliance dating back to March 2011. With the guidance of external independent experts we are actively working to remediate any underpayments made to current and former employees. Concurrently we are investing in systems, processes and expertise to ensure future compliance.

At 30 June 2018 PGW employed approximately 2,600 employees (including casual, fixed-term, commission and permanent staff).

OPERATING EBITDA

It is extremely pleasing to be able to report a significant increase in PGW’s trading results.

With PGW’s continued commitment for a customer centric focus for our business, our people remain our key asset, which is demonstrated in the strength of relationships we see across PGW. We continue to invest significantly in our people strategy which is demonstrated by having a passionate, loyal, highly skilled and engaged workforce. As an employer we remain committed to investing in technical expertise programmes as well as leadership development.

Operating EBITDA increased $5.7 million, or 9 percent, to match FY2016’s record result. Our New Zealand businesses were able to capitalise on the better market conditions of FY2018.

Retail and Water increased their contribution by $5.5 million (an increase of 30 percent) with increased sales across key categories.

Agency increased Operating EBITDA by $2.1 million (an increase of 12 percent) over FY2018 as wool market activity picked up from the extremely low volumes of FY2017.

HEALTH, SAFETY AND WELLBEING

We continue to realise efficiencies and improvements through the recent implementation of a suite of peoplerelated online tools. These tools enable PGW to undertake people-related activities in an agile manner whilst also ensuring compliance and driving technology enhancements.

Key to the implementation of our Health, Safety and Wellbeing Strategy is the engagement of our people. One such initiative was the ZIP programme, which was delivered to over 520 PGW employees this year. The programme will continue to be rolled out in New Zealand and Australia in the coming year.

Seed and Grain New Zealand also increased their Operating EBITDA, but overall the Seed and Grain group result was down 4 percent due to the tough conditions in Australia and throughout South America.

During FY2017 we further refined the PGW way for people-related processes and systems by; furthering the transformation of our health, safety and wellbeing culture to one of ‘citizenship’ with the introduction of the Zero Incident Process (ZIP) leadership programme, launching a new careers website, developing our workforce

Overall, PGW’s revenue increased $60.5 million (5 percent) and margins remained the same.

Over the last year PGW have invested in capability and embedded health and safety resources within the operational groups to support the Health, Safety and Wellbeing Strategy and to improve our performance in the reduction of events (lost time injury frequency rate 8.85/total recordable injury frequency rate 37.16).

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Lambs graze at Innesfields near Rakaia in Mid Canterbury in July 2018

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NET PROFIT AFTER TAX

This increase in trading performance did not result in an increase in net profit after tax. NPAT in FY2018 was $27.4 million lower than FY2017 for a number of reasons.

Firstly, FY2017’s NPAT benefited from $8.8 million of non-taxable gains on sale of property. With our property divestment program all but complete, FY2018’s capital gains on the sale of property were $7.1 million lower.

Secondly, a $5.9 million expense (net of tax) has been recognised as remediation costs of historical liabilities under the Holidays Act 2003.

In addition, the recent fall in the New Zealand dollar generated an unrealised loss on our foreign exchange hedges. PGW is a net exporter, and as the New Zealand dollar weakened during FY2018 our hedges moved out of the money. We choose not to hedge account, so this appears as a loss in finance costs. However, this is not a true loss in an economic sense as the loss will be offset by a corresponding gain on the receipt of the foreign currency once the export sale completes.

Also, the extremely challenging market conditions in Uruguay has resulted in a reduction in the carrying value of our investment in our retailing joint venture, Agrocentro.

Lastly, costs relating to the strategic review contributed to the lower NPAT result.

CASH FLOW

Net cash flow from operating activities reduced $14.7 million to $5.8 million, mostly due to an increase in investment in working capital, from $19.5 million the previous year to $27.8 million in FY2018. $7.0 million of this increase was in Go livestock receivables, reflecting the strength and growth of those products, with the remaining growth in working capital concentrated in the Seed and Grain business. After spending a net $20.9 million on capital expenditure and investments, and paying $29.3 million in dividends, net interest-bearing debt increased $40.8 million to $169.1 million.

DIVIDENDS

The Board has resolved to declare a fully imputed final dividend of 1.25 cents per share, which will be paid on 3 October 2018. This will bring the total fullyimputed dividends paid for the 2018 financial year to 3.00 cents per share.

In declaring the final dividend, the Board balanced the one-off nature of these items affecting NPAT, cash flows and the strong underlying trading performance against the reinvestment opportunities available to the business.

OUTLOOK

Market conditions in New Zealand remain strong. There are some signs of weakness in milk commodity pricing, but this weakness is from a relatively high base. Beef prices remain above five-year averages. Lamb prices are strong, as are prices for most horticultural products.

M bovis remains a source of uncertainty in New Zealand, as does the impact of 2018’s tough climatic conditions for the Seed and Grain group in Australia and tough conditions in South America, all of which are potential head winds.

Overall we are reasonably positive about next year’s outlook, and we believe that NPAT will normalise. Should the DLF Seeds transaction complete then PGW will recognise a gain on sale of over $120 million.

GOVERNANCE AND EXECUTIVE

TEAM CHANGES

The PGG Wrightson Limited Board had one change to membership when Wah Kwong (WK) Tsang retired as a Director on 16 October 2017. Joo Hai Lee was appointed to the Board on 31 October 2017.

The PGW executive team had two changes. Ian Glasson was appointed as Chief Executive on 1 November 2017 following the resignation of Mark Dewdney. Grant Edwards (formerly General Manager Finance and Insurance) was appointed General Manager Wool on 1 October 2017, following the retirement of Cedric Bayly.

ACKNOWLEDGEMENTS

This year’s excellent trading result is an achievement that PGW’s dedicated, hard-working and passionate people can share with our stakeholders. As a business we cannot continue to achieve year-on-year growth without the support of our loyal customers, supply partners and our dedicated employees.

On behalf of the Board and management team, we extend our thanks to the over 2,600 outstanding individuals who make up the PGW team, along with our customers and suppliers.

Trevor Burt

Deputy Chairman

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Ian Glasson

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BOARD OF DIRECTORS

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TREVOR BURT

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JOO HAI LEE

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LIM SIANG (RONALD) SEAH

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GUANGLIN (ALAN) LAI

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BRUCE IRVINE

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JOHN NICHOL

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KEAN SENG U

GUANGLIN ALAN LAI

Bachelor of Business (Accounting), M.Fin, FCPA Chairman

Alan Lai was appointed as Chairman of PGG Wrightson Limited on 22 October 2013 and has been a Director since 30 December 2009. Alan has served as the Chairman of Agria Corporation’s Board of Directors since June 2007 and is a member of Agria’s Remuneration Committee. Alan is the sole Director of Brothers Capital Limited, which is Agria’s largest shareholder. Alan holds a Masters degree in Finance from The Chinese University of Hong Kong, a Bachelor’s degree in Accounting from Monash University, Melbourne and is a Fellow certified public accountant in Australia. Alan is a Fellow of Monash University and also a member of the Global Advisory Council of the Faculty of Business and Economics at Monash University. Alan is the Vice Chairman of Shenzhen General Chamber of Commerce in China and Vice Chairman of China Chamber of Commerce in New Zealand.

TREVOR BURT

B.Sc

Deputy Chairman

Trevor Burt joined the PGG Wrightson Limited Board on 11 December 2012 and was appointed as Deputy Chairman on 11 August 2014. Trevor has had extensive international experience in the industrial gas industry, joining BOC Gases New Zealand in 1986 and retiring from the Executive Board of Linde AG in 2007 (Linde AG acquired BOC in 2006). During his time with BOC, he served as Managing Director China, Managing Director North Asia and later president for North America. As an executive Board member for Linde AG his accountabilities included overall responsibility for Asia-Pacific operations. In addition to being past Chairman/Director of Ngai Tahu Holdings Corporation Limited and chairing Lyttelton Port Company Limited, Trevor is also a Director on a number of other well-known New Zealand businesses including Silver Fern Farms Limited, Landpower Holdings Limited and Market Gardeners Limited. He holds a Bachelor’s degree in Science from Canterbury University, and has completed postgraduate studies in marketing and public relations.

BRUCE IRVINE

B.Com, LLB, FCA, AF Inst D Independent Director

Bruce Irvine was appointed to the PGG Wrightson Limited Board on 24 June 2009 and is Chairman of the Audit Committee and the Committee of Independent Directors. Bruce was Managing Partner at Deloitte Christchurch from 1995 to 2007 before his retirement in May 2008. He now acts as an independent Director on various boards including: Heartland Bank Limited and subsidiaries, House of Travel Holdings Limited, Market Gardeners Limited and subsidiaries, Rakon Limited and subsidiaries, Scenic Hotels Limited and Skope Industries Limited.

JOO HAI LEE

ACA (ICAEW), CPA (Australia), FCCA (UK), CA (ISCA)

Joo Hai Lee was appointed as a nonindependent Director of PGG Wrightson Ltd on 31 October 2017. He is a member of the Audit Committee. He was appointed as an Independent Director of Agria Corporation in November 2008. Mr Lee, aged 61, has more than 30 years' experience in accounting and auditing. He was a partner of an international public accounting firm in Singapore until his retirement from the firm in 2012. He has serviced clients in the manufacturing, hospitality, insurance, insurance brokers and other service industries. His clients include large multinational corporations and listed entities. His professional memberships include those of the Institute of Chartered Accountants in England and Wales, CPA (Australia), ACCA (UK), Institute of Directors of both Hong Kong and Singapore. Mr Lee also sits on the board of several listed companies in Singapore and one in Hong Kong.

JOHN NICHOL

CA

Independent Director

John Nichol was appointed to the PGG Wrightson Limited Board on 22 October 2013. John has been Managing Director of Optica Life Accessories Limited for the past 14 years. Prior to that he held a number of executive roles within the banking and finance sector and for 10 years was Managing Director of the investment company, Broadway Industries Limited.

John is a Director of Watson & Son Limited KEAN SENG U and he has been a Director of a number of LLB (Hons), B.Ec businesses within the primary sector including Fortex Group Limited, The New Zealand Salmon Company Limited, Alpine Dairy Products Limited, Craigpine Timber Limited, the New Zealand Dairy Board and The New Zealand Merino Company Limited. He has also been a Director of a number of significant other New Zealand businesses including New Zealand Post Limited and State Insurance Limited.

Kean Seng U was appointed to the PGG Wrightson Limited Board on 4 December 2012. Kean Seng is Head of Corporate and Legal Affairs for Agria Corporation, a role he has held since December 2008. Kean Seng previously practiced as a partner at Singaporean law firm, Shooklin & Bok LLP, focused on East Asia, and he led a corporate finance team in Allen & Overy Shooklin & Bok, JLV, an international law venture partnership with London based Allen & Overy LLP. Kean Seng sits as an independent and non-executive Director of several public listed corporations. He received a Bachelor of Laws (Honours) degree from Monash University Australia. He is a Barrister and Solicitor, Supreme Court of Victoria, Australia; Advocate and Solicitor, Supreme Court of Singapore and Solicitor of England and Wales. In addition to his extensive legal knowledge, Kean Seng is also a qualified economist, having completed his degree majoring in Economics and Accounting, B.Ec at Monash University, Australia.

LIM SIANG RONALD SEAH

B.Soc.Sc (Hons in Economics) Independent Director

Ronald Seah was appointed to the PGG Wrightson Limited Board on 4 December 2012. Ronald is a Singapore Citizen with a background in banking and fund management. Over a 26 year period between 1980 and 2005, he had held various senior positions within the AIG Group in Singapore, initially as AIA Singapore’s Vice-President and Chief Investment Officer where he was responsible for managing the investment portfolio of AIA Singapore and later as AIG Global Investment Corporation (Singapore) Ltd’s Vice President of Direct Investments. Between 2001 and 2005, Ronald was the Chairman of the Board of AIG Global Investment Corporation (Singapore) Ltd. From 1978 to 1980, Ronald managed the investment portfolio of Post Office Savings Bank as Deputy Head of the Investment and Credit Department. Prior to that, he worked at Singapore Nomura Merchant Bank as an Assistant Manager where he was responsible for the sale of bonds and securities and offshore (ACU) loan administration for the Bank. Between 2002 and 2003, Ronald served on the panel of experts of the Commercial Affairs Department of Singapore.

JOHN FULTON

John Fulton is an Alternate Director for Joo Hai Lee.

WAH KWONG WK TSANG

WK Tsang resigned from the Board of PGG Wrightson Ltd effective 16 October 2017.

Ronald currently serves as independent Director on the board of a number of listed companies in Singapore, namely Global Investment Limited, Yanlord Land Group Ltd; and Telechoice International Ltd, LeuLife Healthcare Ltd and Innovative Healthcare Limited. He is also a Director of M&C REIT Management Limited and M&C Business Trust Management Limited. Ronald is Chairman of Nucleus Connect Pte Ltd, a fibre broadband company in Singapore.

Ronald graduated with a Bachelor of Arts and Social Sciences (Second Class Honours–Upper) in Economics from the then University of Singapore in 1975.

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EXECUTIVE
TEAM
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GRANT EDWARDS

IAN GLASSON

Ian was appointed as PGG Wrightson Limited’s Chief Executive Officer (CEO) on 1 November 2017. Based in Singapore from March 2013 Ian was CEO of Zuellig Agriculture and Gold Coin, which was subsequently spun out of the Zuellig Group of businesses. Gold Coin manufactured and sold animal and aqua feed from over 20 mills operating in 10 countries including China and throughout South East Asia. Ian has had a long career in food and agriculture in Australia and overseas. He has held roles as Managing Director (MD) of Gresham Rabo Management Limited, a private equity fund specialising in Food and Agribusiness investments; he spent nine years with Goodman Fielder where he was MD of Goodman Fielders’ global Food Ingredients business; and was CEO of Wilmar’s Sugar business - previously known as CSR Sugar (Sucrogen) - in Australia and New Zealand. Ian also has extensive industry experience in other sectors, including a long career in the oil and gas industry with Esso Australia Ltd and its parent Exxon in the USA and has spent time in the building and construction sector with Kone Elevators. Ian is a non-executive director of SunRice (Ricegrowers), a positon he took up in March 2016.

Ian holds a Bachelor of Engineering Degree with Honours from Monash University and is a graduate of the Australian Institute of Company Directors.

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IAN GLASSON

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DAVID GREEN

JULIAN DALY

General Manager Strategy and Corporate Affairs

Julian is responsible for Group Strategy including Digital Strategy, Legal, Corporate Communications and Brand, and the Internal Audit and Risk functions for PGG Wrightson Limited. He is also Company Secretary and previously held the role of General Manager of PGG Wrightson Real Estate Limited. Julian has broad operational involvement across the business and is Chairman of the Credit Committee and Risk Committee, Director of a number of Group subsidiaries and a Director of the PGG Wrightson Employee Benefits Plan Trustee Limited. He is a former General Counsel of DB Breweries Limited and has previously worked for law firms in the Middle East and New Zealand.

GRANT EDWARDS

General Manager Wool

Grant took up the position as General Manager Wool in October 2017. He is responsible for all aspects of the Wool business including procurement, logistics, sales and wool export. Grant holds a Bachelor in Agriculture Science from Lincoln University majoring in Wool Science. He began his career in Livestock with Reid Farmers Ltd in the mid 1980’s and then joined their Wool Business. He has held positions as Reid Farmers and then Pyne Gould Guinness Limited Wool Manager. Grant recently has held roles with PGG Wrightson being General Manager Regions and Otago Regional Manager and latterly General Manager Insurance and Financial Services.

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JULIAN DALY

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STEPHEN GUERIN

DAVID GREEN

General Manager New Zealand Seeds

David is General Manager New Zealand Seeds, a position he has held since 2009. He is responsible for all facets of the New Zealand Seed business. David graduated from Lincoln University in 1990 with a B.Com (Ag) degree and since then has worked in many roles for PGG Wrightson Seeds Limited and its predecessor companies. David is a former executive member of the New Zealand Grain and Seed Trade Association and is a current executive member for the New Zealand Plant Breeding and Research Association (NZPBRA) and is the NZPBRA representative on the Seed Industry Research Centre Governance Board. He is a Director of research and development companies Grasslands Innovation Limited and Forage Innovations Limited.

STEPHEN GUERIN

Group General Manager Retail and Water

Stephen is responsible for all aspects of the Retail and Water group business which includes the Rural Supplies, Agritrade, Fruitfed Supplies and Water businesses. He has worked for PGG Wrightson Limited and its predecessor companies for 30 years. He holds a Bachelor in Business Studies (Accounting) from Massey University. Stephen is a Director of several Group subsidiaries and a Director of the PGG Wrightson Employee Benefits Plan Trustee Limited.

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JOHN MCKENZIE

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PETER SCOTT

JOHN MCKENZIE

Group General Manager Seed and Grain

John is responsible for all aspects of the Seed and Grain business both domestically and off-shore for PGG Wrightson Limited and its subsidiaries. He started his career as a Farm Consultant in Mid-Canterbury and was a founder of the specialist proprietary seed company Agricom Limited in 1985 which was purchased by Pyne Gould Guinness Limited in July 2005. At that time he led the merger of Agricom Limited, PGG Seeds Limited and Wrightson Seeds Limited. John is Chairman of research and development companies Grasslands Innovation Limited and Forage Innovations Limited. He also has farming interests in Canterbury in arable and dairy.

PETER MOORE

General Manager Livestock

Peter has been responsible for PGG Wrightson Limited’s Livestock division since August 2014. Prior to joining the business he headed up Fonterra’s international farming ventures business from 2008 until 2013, responsible for developing and implementing the strategy to selectively invest in milk pools outside of New Zealand and Australia. His major focus was the development of the scale farms in China plus dairy development in Latin America and Asia. Prior to this Peter worked in Fonterra’s risk management team and before joining Fonterra in 2005 he managed AgResearch farms across New Zealand. Peter grew up on the family hill country sheep and beef farm in the Waikato and spent a number of years managing this in partnership with his family.

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PETER MOORE

PETER NEWBOLD

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RACHEL SHEARER

BRENT SYCAMORE

PETER NEWBOLD

RACHEL SHEARER

General Manager Real Estate

General Manager Human Resources

Peter is the General Manager of PGG Rachel was appointed PGG Wrightson Wrightson Real Estate Limited, a role he Limited’s General Manager Human Resources has held since September 2013. Peter was in April 2016 to lead our Human Resources, previously General Manager of New Zealand Payroll and Health, Safety and Capability Sotheby’s International Realty. Peter was functions. In this role she holds ownership previously employed by Wrightson Limited of the PGW People Strategy with the from 1995-2005 during which time he held a foundations of this being performance, range of roles including Marketing Manager leadership and culture. Previously Rachel was and Business Development Manager. Prior GM Human Resources of Solid Energy New to this, he had an extensive career in retail Zealand Limited. She also has multinational ownership management and franchising. experience across a broad spectrum of industries having worked within human PETER SCOTT resources in Australia, England, the United States and her hometown of Christchurch.

Peter was appointed as PGG Wrightson Limited’s Chief Financial Officer in March 2015 BRENT SYCAMORE and leads the finance function. Peter started General Manager Grain his career at Fletcher Challenge and has Brent has held the position of General broad multinational experience spending five Manager Grain since 2006. He joined years in Scandinavia where he was the Vice Wrightson Limited in 2001 and held various President of Accounting and Tax for Norske management roles in New Zealand and Skog, a large global newsprint and magazine Australia prior to the formation of PGG paper producer. He relocated to Australia in Wrightson Limited. Prior to the Wrightson/ 2005 and was appointed to the lead finance PGG Wrightson roles Brent held positions with role for the Australasian region for Norske BP Limited, Pyne Gould Guinness Limited and Skog. In 2008 Peter joined Gloucester Coal Ernst & Young. Limited, an Australian Securities Exchange listed mining company as the Chief Financial MARK DEWDNEY Officer. In 2010 he joined the majority Chief Executive Officer shareholder Noble Group, a leader in Mark was Chief Executive Officer and resigned managing the supply chain of agriculture, from the Company effective 31 October 2017. energy, metals and mining resources, headquartered in Hong Kong and listed in CEDRIC BAYLY Singapore. He was the Chief Financial Officer General Manager Wool for Noble Group in Australia.

Cedric was General Manager Wool and resigned from the Company effective 31 October 2017.

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THE YEAR IN REVIEW

The Group has three operating segments; Agency group, Retail and Water group and Seed and Grain group.

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PGG Wrightson Livestock Agent Alex Horn at Wharetoa Ram Sale near Balcultha in South Otago in December 2017

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The year in review
AGENCY GROUP
2018 $M 2017 $M
Revenue 200.6 197.1
Operating EBITDA 20.1 18.0
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with resource added to further support the health, safety and wellbeing of the team. In addition, in August 2018 a new Livestock leadership team structure was confirmed with recruitment underway.

supply of good quality stock later in the year), increased number of dairy farms for sale and the significant impact of M bovis. Our dairy team are working closely with the Ministry for Primary Industries (MPI) both in stock valuations and as part of the industry-wide M bovis response team.

The Agency group comprises our Livestock, Wool, Real Estate and Insurance businesses and overall had an excellent year. Agency’s Operating EBITDA increased $2.1 million (or 12 percent) over 2018 to $20.1 million. Revenues were 2 percent up on last year.

The sale yards rationalisation project continues with further closures planned over the next two to three years. The rationalisation programme runs alongside our upgrade programme as we continue to invest in sale yards that have good throughput, with the goal of enhancing the welfare of animals and the safety of our people.

The Livestock team continues to invest in technology to future-proof the business, with a number of major projects under development which will come to fruition in the year ahead. Initiatives include; a purpose-built supply chain system, the development of www bidr.com, an online trading platform for livestock which we expect to deliver to the market in 2019, the upgrade of www.agonline.co.nz and the delivery of business intelligence reporting to Livestock Managers (with a planned roll out to the wider team in FY2019).

awareness and compliance costs, along with increased caution in the cattle trading market. Overall we are seeing farmers working more within the boundaries of their farms, and in case of corporate customers within their total operation, with reduced stock movements of both dairy and beef cattle. The Livestock team is working closely with farmers to support this change in approach including the development of an online livestock trading platform to reduce stock movements when trading cattle (see more detail below).

Livestock

December 2017 and January 2018. This positive result was further influenced by strong beef and lamb pricing throughout the year.

The Livestock business, which is the largest within Agency, matched last year’s record Operating EBITDA.

Our Go range of livestock products continues to be very well received. While this is a profitable product range for us, it is capital intensive. We are exploring off balance sheet options to reduce this constraint, so we can take advantage of growth opportunities in the future. The asset balance of Go products as at 30 June 2018 was $39.4 million, up $7.0 million on the previous year. Consequently the stock numbers increased with 288,417 sheep and 41,221 cattle entering the programme during FY2018.

Livestock is principally an agency business, with revenue predominantly reflecting commissions earned on the trading of livestock in New Zealand. Consequently, the key drivers of business performance are the volume and value of livestock traded.

Real Estate

Our Real Estate business was one of the few New Zealand businesses that was down on last year. The first six months were challenging for the team, with adverse weather conditions, a new government focus on overseas investment and the environmental and sustainability regulations, tighter bank lending conditions, and the emergence of M bovis all affecting buyer confidence.

Tallies for all stock sold by auction and private sales were higher than last year with reduced prime numbers. Prime sheep prices were impacted by strong pricing in the global sheep meat market. The store market was driven by low supply and high demand due to good feed conditions.

Livestock has continued its focus on its people during FY2018. This year brought the successful completion of the third Livestock Trainee programme and throughout FY2018 we recruited high-performing agents from outside of the business - both initiatives will assist us in our goal of achieving a solid succession planning framework. Keeping our people safe was another key focus

FY2018 brought challenges to the dairy sector. While the Global Dairy Trade price remained stable in the six months to December 2017 bringing some confidence into the market, many farmers continue to consolidate their operations with a focus on debt reduction. This was further offset by reduced dairy tallies (due to a lack of

The detection of Mycoplasma bovis (M bovis) in New Zealand had a significant impact on the dairy and beef industries. The M bovis issue resulted in reduced animal movements, a slowdown in dairy livestock trading, increased biosecurity

We saw a strong improvement in the second six months as the rural sector regained momentum. Our Lifestyle, Residential and Rural categories maintained their market share positions

Farmers received solid returns due to good feed conditions across most of the country at both ends of the season, despite dry weather conditions in

throughout the year with some regions showing signs of improvement.

The business continued to improve and develop its sales and marketing offerings, execute strategic recruitment, and raise awareness of health, safety and wellbeing within the field.

The team executed a number of significant sales during FY2018. For example, in March 2018 the team sold the highest price paid per canopy hectare of $1.12 million for a kiwifruit orchard in New Zealand, for a pure production block in Te Puke.

Wool

Our Wool business bounced back strongly from its disappointing year last year, achieving excellent results across both the brokering and export businesses.

The brokering business had a significant turnaround from FY2017 largely due to an increase in the number of bales transacted. Whilst we have seen some slight increase in crossbred wool prices, the increase in the number of bales being sold has come about due to crossbred wool growers being more prepared to meet the market with bales which had been stockpiled over the previous two seasons in both our stores and on farm.

The strong export result was driven from an increased throughput in improved trading conditions compared to last season.

We continue to grow our digital presence with the recent launch of our Wool Integrity™ website and increased social media activity. Our focus is not just on telling our story, but also the global wool story.

Insurance and Finance Commissions

Our Insurance and Finance businesses earn commissions from Aon Insurance and Heartland Bank. This business performed well and broadly in line with the corresponding period last year.

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ANNUAL REPORT 2018 | 17

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The year in review RETAIL AND WATER GROUP

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2018 $M 2017 $M Revenue 606.2 562.2 Operating EBITDA 23.8 18.3

focus on our technical training with the teams in the agronomy space. The specialised training is further supported by the continued development of digital tools, such as a decision data base solution, for the field sales team.

Our new point of sale system will allow us to better understand our customers and their needs. This technology will provide a base for an e-commerce offering for our customers. This, together with the continued development of our on farm decision management tools, will provide the platform for other digital developments for Retail. These are all aimed at enhancing customer experience and engagement, and reinforcing our leading market position.

Our horticulture business tracked well against last year with all sectors enjoying positive returns. The result for FY2018 was achieved by retaining a high market share in pipfruit, grapes, kiwifruit and other subtropical crops. This strong position led to Fruitfed capturing a significant share of the inputs required by this sector for expansion and largescale development projects.

Retail and Water Highlights

Retail and Water had another spectacular year with Operating EBITDA increasing by $5.5 million to $23.8 million – a 30 percent increase.

The Retail and Water business incorporates Rural Supplies, Fruitfed Supplies, Agritrade and Water.

Retail performed extremely well and contributed to half of the improvement. With activity high across the key dairy, meat and wool, and horticulture sectors, revenues were 9 percent up. The Rural Supplies categories of dairy support and agronomy all grew strongly.

A key contributor to this growth was our team providing the best product and technical advice, at the right time, to our customers. This sits alongside the science of the research that supports our product range and the technical expertise of our people understanding that science.

Our focus is on continuing to provide specialised product and service offerings supported by our own research and development.

For Fruitfed Supplies, the combination of a strong horticulture sector and a leading market position, continues to grow the bottom line.

The Water business continues to be challenged by the lack of on farm development, but despite this the business greatly improved its operating performance from FY2017.

This year we saw an increase in demand for calf rearing products as we saw more calves reared and farmers choosing to purchase calf milk replacer rather than sourcing from the vat. Bulk dairy meal sales also increased on last year as farmers filled the weather induced feed deficit. However, M bovis has been a challenge for our customers in the later part of the year.

Agritrade

Agritrade, our distribution business, continued to grow by both expanding its range of products and increasing sales of those products.

Agritrade continued its year-on-year growth with revenue up on the same period last year. This was achieved through the existing range as well as product acquisition and providing distribution services for manufacturers looking for other ways of getting product to market.

Rural Supplies

The Rural Supplies business continues to see great growth in the agronomy related categories, with all achieving an increase on FY2017 results. It is a key strategy of the business to own the agronomy inputs into the market, based on the technical advice and service we offer, and this is a major driver for the growth. We continue to have a strong

Over the last few years the business has been investing in both people and digital infrastructure. The Retail point of difference in the marketplace is our technical offering and the service we provide through our tech team, our infield team and key accounts team. During 2018 we started the rollout of our new Retail Management Systems.

Weather conditions around the North Island over summer led to lower spore counts which meant the risk of facial eczema in sheep and cows was lower than previous years. This led to lower

Fruitfed Supplies

The Fruitfed business continued to perform strongly with revenue up on last year.

PGG Wrightson Technical Field Representative Warren Johnson inspects pasture with Josh Buckman of Tiatane Farm near Hastings in Hawke’s Bay in January 2018

than budgeted sales of Time Capsule products.

Agritrade Hamilton moved sites during the year to a much bigger warehouse and office space, this included moving the Time Capsule factory as well. This move will help to future proof the business and give a solid base for expansion.

Water

The Water business continues to be challenged by the lack of on farm development. This has been driven by delays in approved schemes, as well as uncertainty around planned schemes. The new Government’s policy approach is impacting farmer sentiment and expenditure in this area.

Despite these challenges it is very pleasing to see Water improving its Operating EBITDA which accounts for half of the $5.5 million improvement in the overall Retail and Water result.

18 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 19

PGG Wrightson Seeds Arable Rep Lachie Boleyn inspects a crop of SovGold Kale at Perry Farms in Mid Canterbury in October 2017

The year in review SEED AND GRAIN GROUP

2018 $M 2017 $M Revenue 386.0 372.7 Operating EBITDA 35.6 37.0

Seed and Grain’s Operating EBITDA reduced by $1.4 million (or 4 percent) to $35.6 million. Revenues were 4 percent higher than last year.

Seed and Grain Highlights

In August 2018, we announced that we have entered into a conditional agreement with DLF Seeds to divest the Seed and Grain business. This is a major transaction and requires shareholder approval. Accordingly, shareholders will be invited to vote on a special resolution in due course.

Overall the Seed and Grain business fell just short of last year’s result with the increase in New Zealand Operating EBITDA largely offsetting the poorer trading in Australia and South America,

In contrast to the generally positive market conditions in New Zealand, climatic conditions were extremely challenging in both South America and Australia.

New Zealand

Our New Zealand business was the standout performer for Seed and Grain over 2018. We saw strong sales volumes across the board in nearly all product categories. Autumn 2018 saw a favourable sowing window and a significant catch-up of the two previous seasons, where poor climatic conditions had shortened the autumn planning season.

Seed and Grain have launched several exciting new products to market during FY2018 both in New Zealand and Australia. All products were well received by growers.

The focus on continuous improvements of our health and safety systems, across all three markets, is ongoing.

One of the exciting new products launched during FY2018 was Pallaton Raphno® a raphanobrassica. This product offers some unique attributes in water use efficiency and grazing flexibility. Demand was very strong for this product in 2018, which was its first fully-commercial year, and it quickly sold out.

In September 2018, we launched our environmentally functional programme. This programme includes plantain cultivars which are marketed under the brand Ecotain® environmental plantain. These products have been commercially available since early 2018 and their release has been met with strong demand.

This year also saw the release of Cleancrop™ Firefly Kale which was available in relatively small volumes and consequently sold out quickly.

Volumes traded by PGG Wrightson Grain recovered this season following wet weather severely impacting the North Island maize harvest during FY2017. In particular North Island volumes improved in FY2018 and the maize harvest was largely completed by the end of June 2018. Wheat cultivars Discovery, Starfire and Ignite performed strongly in commercial crops and Foundation for Arable Research trials and received good grower support during autumn planting.

The International business performed in line with last year following a good close to the financial year. Higher volumes of both proprietary and common products were shipped as dictated by customer demand.

We note the inadvertent substitution of Cleancrop™ Hawkestone swede seed with HT-S57swede seed. We have been

working closely with our customers and we will continue to provide support until this matter is resolved.

Australia

The Australian business was challenged by adverse weather conditions. Drought conditions in New South Wales and Southern Queensland reduced sales within these states significantly (with farmers in both states calling it the worst drought in living memory). Victoria, South Australia, Tasmania and the South of Western Australia did benefit from an autumn break to the drought and managed to achieve average sales.

Turf and revegetation sales continue to grow in Australia.

Two new products were launched during the year, Mainstar brassica and Ascend annual ryegrass. Both products exceeded expectations and will remain core products in our portfolio in the years ahead.

We continue to benefit from improvements to the supply chain with the Melbourne facility completing its first full year of operation, greater processing capability at Keith allowing for a record intake of Lucerne seed and the new Mareeba cleaning shed now well established near the warehouse and logistics centre.

South America

The key challenges for FY2018 were related to weather issues and the continuation of the very difficult financial situation facing our farming customers due to the low profitability and adverse climatic events of previous years.

A big proportion of the Argentinean pampas, most of Uruguay and the southern states of Brazil suffered one of the worst droughts in many years. Given that these areas were still suffering the effects of the 2016 floods, our South American business did well to achieve what they did in the face of adversity.

20 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 21

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Working with PGW

PGG Wrightson Senior Livestock Agent Ryan Dowling joined the company in 2001 and services the Maniototo Plains area in Central Otago. While the area is largely sheep and beef farming operations, about a third of Ryan’s customers are dairy farmers. Along with Ryan, the Lindsay family also work with the PGW Wool and Water teams.

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PGG Wrightson Senior Livestock Agent Ryan Dowling views Creekside Farms’ storage pond with Adam and Juls Lindsay, along with Sarge, in the Maniototo Plains in July 2018

AGENCY GROUP

Surety of water supply provides opportunities for Creekside Farms

pond which has a capacity of up to 1.5 million cubic metres and installed four additional pivots – with the six pivots now providing coverage of 520ha.

“Their farm development has provided them with flexibility. It means that they can buy and sell stock when it suits them and they are often able to sell stock at a premium rather than due to weather conditions.

A key contributor to running a profitable sheep and beef farming operation is surety of water supply. This is especially important in drought-prone areas of New Zealand such as Central Otago.

“We have water rights to draw from the Kyeburn River, which runs alongside the eastern boundary of the farm, and is pumped to the top of the hill to fill the pond over a six month period. The water is gravity fed to the irrigation system during the summer months.

“They are well respected in the farming community. It is great to work with a farmer who knows the sheep and beef market well. Adam and operators like him are the future of New Zealand farming,” said Ryan.

“We undertook the development so that we can make operational decisions on our terms and not be constrained due to adverse weather conditions.

Adam adds, “We have worked with Ryan for a while now and he knows our operation and is always looking out for opportunities for us. It works well.

“In March last year we bought in 2,000 trading cattle through the Go Beef scheme. Our Livestock Agent Ryan suggested the scheme, and it was a facility that met our needs at the time. This enabled us to hold the cattle through to spring (selling 1,000 through an on-farm sale in October 2017) and we finished the remaining cattle and sent them off in July 2018.” said Adam.

Adam and Juls Lindsay own Creekside Farms on the Maniototo Plains near Ranfurly. They undertook a significant farm development, which includes irrigation, to ensure their 2,000 hectare sheep and beef operation is drought resistant.

“Our aim is to run a business that is profitable and sustainable. We fine tune how we do things, for example, lifting the lamb and beef weights year-on-year. There is always something we can do better.

“We try and do everything to our best ability and be proactive. We plan well ahead and work backwards. Our approach is we can control what happens on farm, but we can’t control external factors such as the lamb schedule and the weather.

The farm primarily runs Perendale sheep including 10,500 breeding ewes, 2,000 ewe hoggets and 120 rams. In addition they run 1,000 Merino wethers, winter 1,000 cattle and graze 800 dairy cows.

PGG Wrightson Senior Livestock Agent Ryan Dowling has worked with Adam and Juls since they moved to the Maniototo Plains in 2011.

Adam Lindsay said, “When we took over the property in 2011 it had an irrigation system but it only covered 65 hectares (ha). The Maniototo Plains is prone to dry, hot summers and we needed to be more drought tolerant. We manage our farm inputs carefully, with one of those being water supply.

Ryan said, “Adam is a progressive farmer and is always looking ahead to make productivity gains. Signing up to Go Beef was the right option for their farming operation last year and it worked well for them, but next year it might be procuring trading lambs to hold over the winter months. We work closely to ensure that every livestock trading opportunity is considered so they can make the most of any opportunities that arise.

“We farm for a drought. When we have favourable weather conditions, we have a good year. Last year for example, because of the irrigation, we were able to get through the drought and hold stock through until it rained. This meant we didn’t have to store stock. We have good access to water now, so we will continue to build up capital stock numbers and seek improvements across our business,” said Adam.

“We took advantage of the natural contours of the farm when planning the development which took five years to complete. We put in place a storage

22 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 23

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Indevin
Indevin was founded in
Marlborough in 2003. It is one
of New Zealand’s largest wine
producers which owns and
operates winery infrastructure.
Indevin owns (and manages
on behalf of their customers)
vineyards in Marlborough,
Gisborne, the Hawke’s Bay and
Central Otago. Along with their
contract winemaking customers,
Indevin produces over 50,000
tonnes of grapes annually. This
production footprint continues
to grow with the acquisition and
lease of several new vineyards or
plantable sites each year.
Indevin’s Hawke’s Bay Viticulture
Manager Bryce MacKenzie inspects
grapes with Fruitfed Crop Monitoring
Manager Jimmy Bowden and Co-
ordinator Rena Mehrtens in Hawke’s
Bay in March 2018 prior to harvesting
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RETAIL AND WATER GROUP

Our crop monitoring team specialises in early detection

teams at key vegetable, fruit and wine growing areas around the country.

A specialised team within Fruitfed was established in Hawke’s Bay in 1998 to provide crop monitoring services to horticulturists in the region.

Jimmy said, “Since we established the crop monitoring team 20 years ago it has gone from strength to strength. Coordinators are now based in key growing areas around the country with the focus of the monitoring work specialised in each area, for example vegetables in Pukehoke and grapes in Marlborough.

“The Crop Monitoring Co-ordinators work with customers to plan their requirements, then recruit Crop Monitoring Scouts from the region as

This well-respected business unit, led by Hawke’s Bay based Fruitfed Crop Monitoring Manager Jimmy Bowden, has grown to a team of eight who co-ordinate crop monitoring

needed. The Scouts often return year after year, so they build a relationship and knowledge of a customer’s operation which is highly valued by both parties.

“Our Scouts play a key role in assisting in the early detection of pest and disease, in fact many customers contract us to take care of this for them. The Scout provides the customer with a verbal briefing at the time of their visit which is followed up with a report of their findings. The report is distributed to key team members at Fruitfed, including the assigned Technical Field Representative. This builds up the wider Fruitfed team’s knowledge of what is happening around the country during key growing times which we can share with other customers on an anonymised basis.

“New Zealand is recognised internationally as an innovative producer of high-quality wine, vegetables and fruit. Our team prides itself on assisting

customers in maintaining their highquality production which in turn protects their brand and reputation,” said Jimmy.

One member of the crop monitoring team who has been working alongside customers for over ten years is Crop Monitoring Co-ordinator Rena Mehrtens. Rena, who joined Fruitfed in 2008, manages the Scouts in Hawke’s Bay, Manawatu, Nelson and Marlborough.

Rena said, “I have seen the focus on traceability and quality assurance increase significantly in the horticulture industry over the last decade. One aspect of this is a move toward early detection to reduce the requirement for application of spray on crops. Our crop monitoring services support our customers with this approach.

“Indevin have utilised our crop monitoring services for seven years at their Gisborne and Hawke’s Bay vineyards (and more recently in Marlborough).

"Each year in September I meet with Bryce MacKenzie of Indevin to plan for the season ahead and the monitoring programme runs from October through to April. They have a great team and over the years we have learned a lot about how they operate. It works well,” said Rena.

Indevin’s Hawke’s Bay Viticulture Manager Bryce MacKenzie said, “We used to do the crop monitoring ourselves, but in 2011 we decided to hand the job over to Fruitfed. We run a pretty lean operation here and it is great to have that aspect of our business taken care of. Early detection of pest and disease in our grapes is critical to our production programme – the earlier we catch it the better. Rena and her team of Scouts take this worry away from us. They are a great team to work with and they know their stuff. Rena lets us know if there are issues elsewhere in the region so our team can look out for them between monitoring visits.”

24 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 25

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Ecotain®

Marketed under the brand Ecotain® environmental plantain specific cultivars of plantain reduce nitrogen leaching from the urine patch in four ways:

I. it increases the volume of cows’ urine which dilutes the concentration of nitrogen,

II. it reduces the total amount of nitrogen in animals’ urine,

III. it delays the process of turning ammonium into nitrate in the urine patch, and

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IV. it restricts the accumulation of nitrate.

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Science Lead for the Greener Pastures Project
within Agricom, Dr Glenn Judson inspects
Ecotain® pasture on a farm in Lincoln,
Canterbury in November 2017
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SEED AND GRAIN GROUP

Research team discovers ‘weed’ has valuable nitrogen mitigation properties

with the DairyNZ-led Forages for Reduced Nitrate Leaching programme, the GPP has a series of peer-reviewed scientific papers that support the use of Ecotain® environmental plantain.

“The plants and soil surrounding the urine patch can’t absorb all that nitrogen, so it’s easily leached away below the root zone and also into the water table. Research is showing us that controlling the nitrogen in the urine patch is the most practical way of reducing nitrogen leaching on farm.

Agricom (a trading division of PGG Wrightson Seeds Limited) researches, develops and markets a wide range of proprietary pasture and forage crop seeds to the agricultural industry.

Agricom’s Science Lead Dr Glenn Judson said, “The development of Ecotain® has been a team effort over a long period of time so everyone involved is delighted with how well it has been received by industry stakeholders and farmers alike.

Glenn concluded, “We are not done yet. The research will continue to evolve, and we are now looking at systemwide studies to see how we can further reduce nitrogen leaching on farm. With the assistance of farmers and industry stakeholders I am confident we can improve the strong results we are achieving now.”

“New Zealand farmers have been using plantain as a forage product for many years. The first of the plantain cultivars we launched to the market 22 years ago. However, more recently we discovered their role in reducing the environmental impact of livestock.

The proprietary seed company takes a team approach to research involving employees, customers and key industry stakeholders. This collaborative approach has recently discovered that a plant, once considered a weed, has valuable nitrogen mitigation properties.

“Depending on the factors at play on farm and the extent to which Ecotain® is used, the reduction in nitrogen leaching can be significant. In one of the research programmes there was a reduction in leaching of as much as 89 percent from the urine patch. The ability to do this is increasingly important now that New Zealand’s national dairy herd has reached over 4.8 million and there is a real focus on environmentally sustainable farming practices.

Agricom team recognised

Agricom’s Ecotain® was recognised at the Fieldays Innovation Award event in June 2018. The Agricom team were presented with the Fieldays Launch New Zealand Award which recognised agribusiness products being launched to the New Zealand market that will shape farming practices and the future of New Zealand primary industries.

The research team discovered that specific cultivars of plantain have the ability to significantly reduce nitrogen leaching from the urine patch. The plantain which began life as a common flat weed (Plantago lanceloata) has been bred and commercialised into a successful forage cultivar by the Agricom team.

“A cow grazes across a large area of pasture, about 140 square metres per day. When they urinate, they’re depositing a high concentration of nitrogen into a very small area compared to the size they were grazing, and that small area is the urine patch.

Commencing in 2015, with Callaghan Innovation funding, Agricom developed the Greener Pastures Project (GPP), which combines research and expertise from Massey and Lincoln Universities and Plant & Food Research. In parallel

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ANNUAL REPORT 2018 | 27

Sale of PGW SEEDS

Quartz White Clover flowering at Wexford Farming Co. near Rakaia in December 2017

“ [It is important to remember that PGW has the strongest ] nationwide rural services offering in New Zealand, covering the length of the country. A sale of the PGW Seeds business will not change that – in fact, it remains business as usual for PGW and its customers. ”

On 4 August 2018 PGW entered into a conditional agreement to sell the PGG Wrightson Seeds Holdings Limited (PGW Seeds) business for NZ$421 million to DLF Seeds A/S (DLF Seeds), a leading global seeds group based in Denmark.

This transaction would deliver significant value to PGW while also enabling the PGW Seeds business to benefit significantly from being part of a global seeds operation.

The agreement provides for an ongoing close working relationship between PGW and PGW Seeds.

About DLF Seeds

DLF Seeds is a Denmark based global seeds group which was established in 1872.

Key facts:

“ [The agreement arose from ] the strategic review conducted by PGW in recent months. The agreement represents a transaction that would deliver significant value to PGW while also enabling the PGW Seeds business to benefit immensely from being part of an impressive global seeds operation. ”

Trevor Burt, Deputy Chairman

Significant commercial opportunities

This transaction follows the continuing trend of consolidation in the international seeds industry and there are clear benefits that arise for both PGW and PGW Seeds.

Ownership of PGW Seeds by DLF Seeds would expand the opportunities to commercialise the intellectual property of the collective businesses.

DLF Seeds has a strong northern hemisphere presence and PGW Seeds has a strong southern hemisphere market presence. The opportunities arising from the synergy of market coverage, intellectual property and operations are significant.

DLF Seeds’ global presence would open up new markets and geographies, increasing royalties coming into New Zealand, and also demonstrate the benefits of the research and development focus of PGW Seeds’ business.

The agreement provides for an ongoing close working relationship between PGW and PGW Seeds. A distribution agreement allows for ‘business as usual’ for PGW operational staff across all parts of the Group. Our customers would see no change in the way we work together to support their farming operations. In addition, the PGW Seeds brand will remain.

Intellectual property

PGW Seeds has joint ventures with a range of research and development partners who share or licence intellectual property with PGW Seeds. PGW Seeds joint venture partners include: Grasslands Innovation, Endophyte Innovation and Forage Innovations.

Should the sale of PGW Seeds be approved, the royalties from these joint ventures will continue to flow back to New Zealand. An example of this is Pallaton Raphno®, a raphanobrassica developed in New Zealand by PGW Seeds, now sold in Australia. This cultivar has sales attracting royalties which are returned to New Zealand by PGW Seeds and our joint venture partner Forage Innovations.

Next steps

The transaction remains subject to a number of conditions precedent and both PGW and DLF Seeds are diligently working towards satisfying these conditions.

Assuming the conditions are satisfied and the transaction is completed, the significant cash contribution creates options for the PGW Board to consider as part of its ongoing strategic review. These include growth options as well as the optimal structure for what already is a strong rural services business.

The PGW Board will continue to work with Credit Suisse (Australia) Ltd and First NZ Capital Ltd on the strategic review to explore options for PGW’s business, growth opportunities, capital and balance sheet requirements and potentially shareholding structure.

Meanwhile it is business as usual for PGW and its customers.

“ [The PGW Retail business sees the PGW Seeds ] business as a significant partner with us in our focus on the technical agronomy offering we have with our customers. The relationship is strong between the businesses and in considering the transaction with DLF we believe that a different ownership structure will not materially change the relationship that works well and adds value to both businesses. ”

Stephen Guerin, Group General Manager Retail and Water

Owned by DLF Seeds AmbA, a cooperative owned by approximately 3,000 Danish seed growers.

Operates within forage and turf seed, sugar and fodder beet seed, seed potatoes and multiplication of vegetable seed, and is active in more than 80 countries.

It is vertically integrated operations (in research, production and sales) have 1,200 employees, 14 percent of which are involved in research and development.

A major player in the Northern Hemisphere market but currently has a smaller presence in the New Zealand, Australian and South American markets.

Key figures as of 2016/2017

in Danish Krone DKK) (1 DKK = $0.23NZ):

Revenue: 3,527 DKK Million (NZ$814 million)

Profit before net financials: 225 DKK Million (NZ$52 million)

Profit after tax: 161 DKK Million (NZ$37 million)

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ANNUAL REPORT 2018 | 29

PGG Wrightson IN THE COMMUNITY

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Fairlie Primary School pupils receive their
Cash for Communities gift in March 2018
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PGW has over 175 years of being part of and supporting rural communities – with our employees living and working alongside our customers. Through that rural community spirit, PGW supports a range of community and industry events throughout New Zealand.

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IHC Calves waiting for the sale to begin at Frankton Salesyards in November 2017

Wool handler Joel Henare at the Golden Shears in March 2018

IHC calf day sales, and instead asked farmers to either donate a ‘virtual calf’ or organise to get their IHC calf to sale themselves.

organisation of their choice. Last season saw over $27,000 raised for community organisations.

IHC Calf and Rural Scheme

PGW Livestock have been working alongside IHC for over 30 years to deliver the IHC Calf and Rural Scheme. The Scheme provides funds which allow IHC to deliver services to people with intellectual disabilities and their families by facilitating donations from farmers throughout New Zealand. During calf season last year 2,574 farmers donated 3,222 calves (along with virtual and cash donations) and raised $1.45 million. Due to the risk of the program spreading Mycoplasma bovis, and following discussions with the Ministry for Primary Industries, in early July 2018 IHC made the difficult decision that their 2019 fundraising program would no longer pick up calves and hold

One of the recipients of this year’s programme was Fairlie Primary School in the Mackenzie Country (pictured) which also won three iPads for being the school with the most nominations in the South Island.

Cash for Communities

The ‘Cash for Communities’ programme is run by PGW and Ballance Agri-Nutrients and to date has raised over $482,000 for rural communities throughout New Zealand. For every tonne of qualifying Ballance Agri-Nutrients fertiliser purchased by PGW customers who have registered for the programme, PGW donated $1 to the customers' choice of community programmes.

Supporting the

Horticulture Sector

Fruitfed Supplies has a long who have registered for the association with programmes programme, PGW donated $1 to the customers' choice of that recognise innovation, emerging leaders and community programmes. excellence in the industry – The eighth season of the including Young Horticulturalist programme ran in spring of the Year, Young Grower of 2017 and over 500 farmers the Year, Young Viticulturist of throughout New Zealand the Year and the New Zealand registered a community Wine of the Year™ Awards.

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PGW marquee at New Zealand Agricultural Fieldays in June 2018
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PGW Livestock National Video Sale in May 2018
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has a prestigious history Steak of Origin dating back to 1932. The PGW Livestock is proud to competition is held annually, support this prestigious alternating between dairy, annual event, which and sheep and beef. Onuku celebrates the best of New Māori Lands Trust in Rotorua Zealand beef producers, offers was the winner of the 2018 people an insight into how Ahuwhenua Trophy for dairy. genetics can improve eating quality, increase retail beef National Livestock Video Sale yield, or improve maternal traits. PGW Livestock supports the The 2018 Steak of Origin National Video Sale which competition saw PGW show was held in Feilding in May their support as the naming 2018. This annual event rights sponsor, with the (formerly known as the Beef grand final judging held in Expo) which features the best the PGW tent at New Zealand of a number of breeds from Agricultural Fieldays. A panel throughout New Zealand of four chef judges and one updated its format this year. steak connoisseur, judged the The move to a video-based final steaks to determine the sale format resulted in a 2018 Grand Champion and standing room only event at 2018 Brand Champion. a Palmerston North venue as about 60 Angus, Hereford and Shorthorn bulls were sold.

A&P Shows, regional field days and New Zealand Agricultural Fieldays

PGG Wrightson Wool National Shearing Circuit

PGG Wrightson Wool is proud to support our country’s Agricultural and pastoral shearers through the PGG shows (A&P), regional field Wrightson Wool National days and New Zealand Shearing Circuit sponsorship. Agricultural Fieldays are well-attended events in the The PGG Wrightson Wool rural calendar. PGW is very National Shearing Circuit is proud to be involved in these a prestigious competition events, which bring the local celebrating excellence in the rural community together skill of shearing. It gives upand provide PGW with the and-comers the opportunity opportunity to acknowledge to mix with professionals, and the ongoing support of our provides rural New Zealand customers and to showcase the chance to see the sport the latest in farming in action. The competition technology and product is made up of five heats innovation. held across New Zealand between October and March, Supporting Māori with the final held at Golden Excellence in Farming Shears in Masterton in March The Ahuwhenua Trophy Te each year. Puni Kōkiri Excellence in Māori Farming Award, which PGW is proud to support,

Agricultural and pastoral shows (A&P), regional field days and New Zealand Agricultural Fieldays are well-attended events in the rural calendar. PGW is very proud to be involved in these events, which bring the local rural community together and provide PGW with the opportunity to acknowledge the ongoing support of our customers and to showcase the latest in farming technology and product innovation.

Sustainability

PGW is committed to protecting our natural environment for future generations.

This means balancing issues of environmental, social, cultural and economic sustainability to make a valuable contribution to the future of our country, our communities and the rural business sectors we operate in.

In recent years PGW has implemented a recycling process for cardboard and paper in all 97 PGG Wrightson and Fruitfed Supplies stores, as well as a number of sites offering drop-off points for empty triple rinsed plastic containers.

Many of our activities are designed to meet the demand for more sustainable farming practices. One example is our focus on assisting customers manage their use of plastic and other recyclables at the farm gate.

As part of the initiative to help our customers clear more waste, we also provide logistical support to leading product stewardship programme Agrecovery, which collects and recycles more than 300 tonnes of plastic from farmers and growers every year.

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for the year ended 30 June 2018

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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DIRECTORS’ RESPONSIBILITY STATEMENT

STATEMENT OF PROFIT OR LOSS

For the year ended 30 June 2018

FOR THE YEAR ENDED 30 JUNE 2018

The Directors are responsible for ensuring that the financial statements give a true and fair view of the financial position of the Group as at 30 June 2018 and the financial performance and cash flows for the year ended on that date.

The Directors consider that the financial statements of the Group have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgements and estimates and that all of the relevant financial reporting and accounting standards have been followed.

The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Group and facilitate compliance of the financial statements with the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.

The Directors are pleased to present the financial statements for PGG Wrightson Limited and its controlled entities (together the “Group” ) set out on pages 35 to 80 for the year ended 30 June 2018.

The financial statements contained on pages 35 to 80 have been authorised for issue on 13 August 2018.

For and on behalf of the Board.

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Alan Lai Chairman

Bruce Irvine Director and Audit Committee Chairman

NOTE	2018 2017 $000 $000
Continuing operations Operating revenue 2 Cost of sales 3 Gross proft Other income Employee benefts expense Research and development Other operating expenses 4 Equity accounted earnings of investees 5 Operating EBITDA Non-operating items Holidays Act 2003 remediation costs 20 Fair value adjustments 6 Depreciation and amortisation expense EBIT Net interest and fnance costs 7 Proft from continuing operations before income taxes Income tax expense 8 Proft from continuing operations Discontinued operations Proft from discontinued operations (net of income taxes) 9 Net proft after tax Proft attributable to: Shareholders of the Company Non-controlling interest Net proft after tax Earnings per share Basic earnings per share (New Zealand Dollars) 10 Continuing operations Basic earnings per share (New Zealand Dollars)	1,193,462 1,132,963 (847,328) (804,317)
	346,134 328,646 221 388 (165,809) (160,851) (4,778) (4,542) (103,709) (99,268) (1,885) 126
	70,174 64,499 (80) 7,148 (8,226) – (3,877) 1,953 (12,974) (10,733)
	45,017 62,867 (14,162) (6,158)
	30,855 56,709 (12,460) (10,428)
	18,395 46,281 492 30
	18,887 46,311
	17,964 45,607 923 704
	18,887 46,311
	0.025 0.061 0.024 0.061

The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2018

NOTE	2018 2017 $000 $000
Net proft after tax Other comprehensive income/(loss) for the period Items that will never be reclassifed to proft or loss Changes in fair value of equity instruments Remeasurements of defned beneft liability 21 Deferred tax on remeasurements of defned beneft liability 8 Items that are or may be reclassifed to proft or loss Foreign currency translation diferences for foreign operations Efective portion of changes in fair value of cash fow hedges Income/deferred tax on changes in fair value of cash fow hedges 8 Other comprehensive income/(loss) for the period, net of income tax Total comprehensive income for the period Total comprehensive income/(loss) attributable to: Shareholders of the Company Non-controlling interest Total comprehensive income for the period	18,887 46,311
	– 240 2,746 3,121 (961) (2,389)
	1,785 972 6,408 (1,169) – (2,039) – 571
	6,408 (2,637)
	8,193 (1,665)
	27,080 44,646
	26,307 43,579 773 1,067
	27,080 44,646

The accompanying notes form an integral part of these financial statements.

SEGMENT REPORT

For the year ended / as at 30 June 2018

”Other” cost allocation

(a) Operating Segments

The Group applies an allocation methodology which allocates certain corporate costs where they can be directly attributed to an operating segment or attributed based on the use of the following methods:

The Group has three primary operating segments: Agency, Retail and Water and Seed and Grain which are the Group’s strategic divisions. Agency and Retail and Water operate within New Zealand. Seed and Grain primarily operates within New Zealand with additional operations in Australia and South America.

IT hardware, support, licence and other costs attributed based on a per user basis.
Property costs allocated, where not directly attributable, on a property space utilisation basis.

The three operating segments offer different products and services, and are managed separately because they require different skills, technology and marketing strategies. There is also a Group General – Manager for each segment. Within each segment, further business unit analysis may be provided to management where there are significant differences in the nature of activities. The Chief Executive Officer or Chairman of the Board reviews internal management reports on each strategic business unit on at least a monthly basis.

Business operations costs (Accounts Payable, Accounts Receivable, Credit Services, Call Centre) allocated based on FTE usage by each operating segment, transactional volumes. Credit services are allocated based on the operating segment to which overdue accounts relate to.

The Group Finance, Risk and Assurance, Treasury, HR, Credit and the Executive Team functions continue to be reported outside of the operating segments.

Agency. Includes rural Livestock trading activities, Export Livestock, Wool, Insurance, Real Estate and Finance Commission.
– Retail and Water. Includes the Rural Supplies and Fruitfed retail operations, PGG Wrightson Water, AgNZ (Consulting), Agritrade and ancillary sales support, supply chain and marketing functions.

Other costs including non-operating items, fair value adjustments, net interest and finance costs, income tax expense as well as the reporting of discontinued operations are not fully allocated by the Group. Accordingly, these items have not been fully allocated across the operating segments.

Seed and Grain. Includes Australasia Seed (New Zealand and Australian manufacturing and distribution of forage seed and turf), Grain (sale of cereal seed and grain trading), South America (various related activities in the developing seeds markets including the sale of pasture and crop seed and farm inputs, together with operations in the areas of livestock, real estate and irrigation), and other Seed and Grain (research and development, international, production and corporate seeds).

(b) Geographical Segment Information

The Group operates predominantly in New Zealand with some operations in Australia and South America.

Other. Other non-segmented amounts relate to certain Group Corporate activities including Finance, Treasury, HR and other support services including corporate property services, adjustments for discontinued operations (PGW Rural Capital Limited) and consolidation/elimination adjustments.

The Australian and South American business units facilitate the export sales and services of New Zealand operations in addition to their own seed trading operations. Inter-segment pricing is determined on an arm’s length basis.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of operations and segment assets are based on the geographical location of the assets.

Assets allocated to each business unit combine to form total assets for the Agency, Retail and Water and Seed and Grain business segments. Certain other assets are held at a Corporate level including those for the Corporate functions noted above.

	2018 2017 $000 $000
Revenue derived from outside the Group New Zealand Australia South America Total revenue derived from outside the Group Non-current assets excluding fnancial instruments and deferred tax New Zealand Australia South America Total non-current assets excluding fnancial instruments and deferred tax	1,005,402 954,330 76,024 79,161 112,036 99,472
	1,193,462 1,132,963
	90,512 85,756 15,317 14,638 45,731 47,131
	151,560 147,525

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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SEGMENT REPORT CONTINUED

For the year ended / as at 30 June 2018

(c) Operating Segment Information

(c) Operating Segment Information
	AGENCY RETAIL AND WATER SEED AND GRAIN OTHER TOTAL 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Total segment revenue Intrasegment revenue Total external operating revenues Operating EBITDA Non–operating items Holidays Act 2003 remediation costs Fair value adjustments Depreciation and amortisation expense EBIT Net interest and fnance costs Proft/(loss) from continuing operations before income taxes Income tax (expense) / income Proft/(loss) from continuing operations Discontinued operations Net proft after tax Segment assets Investment in equity accounted investees Assets held for sale Total segment assets Total segment liabilities Capital expenditure	200,574 197,098 606,176 562,162 449,495 428,711 749 1,040 1,256,994 1,189,012 – – – – (63,532) (56,049) – – (63,532) (56,049)
	200,574 197,098 606,176 562,162 385,963 372,662 749 1,040 1,193,462 1,132,963
	20,112 17,996 23,810 18,295 35,607 37,045 (9,355) (8,836) 70,174 64,499 688 3,275 590 (12) (217) 5,231 (1,141) (1,347) (80) 7,148 (2,441) - (3,422) - (1,066) – (1,297) – (8,226) – (1,087) 26 - - (2,790) 2,049 – (121) (3,877) 1,953 (1,086) (1,130) (3,097) (1,737) (6,056) (5,517) (2,735) (2,349) (12,974) (10,733)
	16,186 20,167 17,881 16,546 25,478 38,807 (14,528) (12,654) 45,017 62,866
	(1,388) 472 385 272 (7,261) (4,127) (5,898) (2,774) (14,162) (6,158)
	14,798 20,639 18,266 16,819 18,217 34,680 (20,426) (15,428) 30,855 56,709
	(4,366) (4,171) (4,680) (5,253) (8,878) (7,513) 5,464 6,509 (12,460) (10,428)
	10,432 16,468 13,586 11,566 9,339 27,166 (14,962) (8,918) 18,395 46,281
	– – – – – – 492 30 492 30
	10,432 16,468 13,586 11,566 9,339 27,166 (14,470) (8,888) 18,887 46,311
	161,378 145,410 149,107 137,081 412,673 367,754 18,529 27,704 741,687 677,949 – – – – 14,264 20,892 59 81 14,323 20,973 – 37 218 500 – – 2,398 2,690 2,616 3,227
	161,378 145,447 149,325 137,581 426,937 388,646 20,986 30,475 758,626 702,149
	(87,182) (71,296) (82,109) (72,117) (164,144) (187,209) (137,729) (81,816) (471,164) (412,437)
	3,212 1,743 9,689 5,238 13,204 11,901 3,326 1,901 29,431 20,783

The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF CASH FLOWS

For the year ended 30 June 2018

NOTE	2018 2017 $000 $000
Cash fows from operating activities Cash was provided from: Receipts from customers Dividends received Interest received Cash was applied to: Payments to suppliers and employees Lump sum contributions to defned beneft plans (ESCT inclusive) Interest paid Income tax paid Net cash fow from operating activities Cash fows from investing activities Cash was provided from: Proceeds from sale of property, plant and equipment and assets held for sale Net proceeds from sale of investments Cash was applied to: Purchase of property, plant and equipment Purchase of intangibles Net cash paid for purchase of investments Net cash fow from investing activities Cash fows from fnancing activities Cash was provided from: Increase in external borrowings and bank overdraft Repayment of loans by related parties Cash was applied to: Dividends paid to shareholders Dividends paid to minority interests Net cash fow from fnancing activities Net increase/(decrease) in cash held Opening cash Cash and cash equivalents 11	1,214,939 1,201,273 3 10 5,225 3,318
	1,220,167 1,204,601 (1,190,563) (1,159,853) (2,842) (7,551) (8,550) (6,321) (12,446) (10,408)
	(1,214,401) (1,184,133)
	5,766 20,468 3,407 22,352 111 4,424
	3,518 26,776 (15,183) (12,803) (7,974) (4,307) (1,215) (2,773)
	(24,372) (19,883)
	(20,854) 6,893 42,499 3,715 3,441 –
	45,940 3,715 (28,570) (28,588) (759) (646)
	(29,329) (29,234)
	16,611 (25,519)
	1,523 1,842 9,403 7,561
	10,926 9,403

RECONCILIATION OF PROFIT AFTER TAX WITH NET CASH FLOW FROM OPERATING ACTIVITIES

For the year ended 30 June 2018

	2018 2017 $000 $000
Net proft after tax Add/(deduct) non-cash/non operating items: Depreciation, amortisation and impairment Fair value adjustments Net (proft)/loss on sale of assets/investments Bad debts written of (net) Change in deferred taxation Earnings from equity accounted investees Discontinued operations Defned beneft expense Efect of foreign exchange movements Pension contributions (operating cash) not expensed through proft and loss Other non-cash/non-operating items Add/(deduct) movement in working capital items: Change in working capital due to sale/purchase of businesses Change in inventories and biological assets Change in accounts receivable and prepayments Change in trade creditors, provisions and accruals Change in income tax payable/receivable Change in other current assets/liabilities Net cash fow from operating activities	18,887 46,311 12,974 10,733 3,877 (1,953) (1,746) (9,630) 429 1,244 (1,114) (811) 1,885 (126) (492) (30) 142 649 3,618 (197) (2,842) (7,551) (1,999) 1,339
	33,619 39,978
	(2,683) (3,378) (7,374) (11,208) (45,081) (12,364) 19,360 5,856 3,326 2,156 4,599 (572)
	(27,853) (19,510)
	5,766 20,468

The accompanying notes form an integral part of these financial statements

The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF FINANCIAL POSITION

As at 30 June 2018

NOTE	2018 2017 $000 $000
ASSETS Current Cash and cash equivalents 11 Short-term derivative assets 12 Trade and other receivables 14 Finance receivables _Go_livestock receivables 13 Assets classifed as held for sale Biological assets Inventories 15 Other investments 17 Intangible assets 18 Total current assets Non-current Long-term derivative assets 12 Biological assets Deferred tax asset 8 Investments in equity accounted investees 5 Other investments 17 Intangible assets 18 Property, plant and equipment 19 Total non-current assets Total assets LIABILITIES Current Debt due within one year 11 Short-term derivative liabilities 12 Accounts payable and accruals 20 Income tax payable Defned beneft liability 21 Total current liabilities Non-current Long-term debt 11 Long-term derivative liabilities 12 Other long-term provisions 20 Defned beneft liability 21 Total non-current liabilities Total liabilities EQUITY Share capital 31 Reserves 31 Retained earnings 31 Total equity attributable to shareholders of the Company Non-controlling interest Total equity Total liabilities and equity	10,926 9,403 827 3,528 267,627 230,022 733 – 39,419 32,371 2,615 3,227 911 1,553 262,538 253,600 30 3,441 2,641 –
	588,267 537,145
	20 427 – 58 16,259 15,145 14,323 20,973 2,520 1,906 13,017 9,129 124,220 117,365
	170,359 165,003
	758,626 702,148
	30,806 26,719 3,645 991 267,096 248,290 6,751 4,115 905 942
	309,203 281,057
	149,205 110,925 966 661 2,121 4,909 9,669 14,885
	161,961 131,380
	471,164 412,437
	606,324 606,324 8,647 (2,956) (329,987) (316,121)
	284,984 287,247 2,478 2,464
	287,462 289,711
	758,626 702,148

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Additional Financial Disclosures including Notes to the Financial Statements for the year ended 30 June 2018

Winter lettuces being grown by Scotfresh near the Conway River, North Canterbury in May 2018

The accompanying notes form an integral part of these financial statements.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2018

1 EVENT SUBSEQUENT TO BALANCE DATE

Agreement for sale of PGG Wrightson Seeds Holdings Limited

The Group announced in October 2017 that it had appointed Credit Suisse (Australia) Ltd and First NZ Capital Ltd as financial advisors to assist with a strategic review of PGW’s business, its growth opportunities, capital and balance sheet requirements, and potentially shareholding structure. Further to this review, on 6 August 2018 the Group announced that it had signed a sale and purchase agreement for the sale of its subsidiary PGG Wrightson Seeds Holdings Limited (PGW Seeds). The agreement represents the sale of the Group’s Seed and Grain operating segment. The sale price is approximately $421 million subject to various adjustments until settlement. The sale is conditional on various approvals including:

PGW shareholder approval of a major transaction at a shareholders meeting.
New Zealand Overseas Investment Act approval.
New Zealand Commerce Commission clearance, Australian Competition and Consumer Commission approval and receipt of applicable regulatory approvals in South America.

2 OPERATING REVENUE

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CONTINUING OPERATIONS
2018 2017
$000 $000
Sales 1,048,007 994,024
Commissions 110,852 108,205
Construction contract revenue 29,627 27,627
Interest revenue on Go livestock product receivables 3,397 1,674
Debtor interest charges 1,579 1,433
Total operating revenue 1,193,462 1,132,963
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Change of control consents from several of PGW Seeds’ joint venture partners.
PGW banking syndicate consent.

Based on the initial sale price an estimated capital gain is expected to be recognised by the Group of approximately $136 million. This estimated capital gain is subject to any further adjustments to the sale price until settlement, less transaction/disposal costs, and is subject to any reversal of the Foreign Currency Translation Reserve.

As the transaction was not agreed until post balance date and is still subject to the required approvals noted above the Group has not recognised the subsidiary or the Seed and Grain segment as “Assets Held For Sale” or a “Discontinued Operation” as at 30 June 2018.

Dividend

On 13 August 2018 the Directors of PGG Wrightson Limited resolved to pay a final dividend of 1.25 cents per share on 3 October 2018 to shareholders on the Company’s share register as at 5.00pm on 4 September 2018. This dividend will be fully imputed.

Income Recognition Accounting Policies

Recognition of Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Sales Revenue

Sales revenue comprises the sale value of transactions where the Group acts as a principal. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

Commission Revenue

Commission revenue comprises commission for transactions where the Group acts as an agent.

For agency commissions the Group does not take inventory risk or title for inventories, or for the Group’s Livestock and Real Estate businesses biological assets and properties respectively. The Group also generates commissions from the successful referral of clients to unrelated lending and insurance partners.

Interest and Similar Income and Expense

For all financial instruments measured at amortised cost, interest income or expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original effective interest rate applied to the new carrying amount.

The Group recognises interest revenue, management fees, and establishment fees on an accruals basis when the services are rendered using the effective interest rate method.

Fee Income from Providing Transaction Services

Fees arising from negotiating or participating in the negotiation of a transaction for a third party are recognised on completion of the underlying transactions. Fees or components of the fees that are linked to certain performance are recognised after fulfilling the corresponding criteria.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

3 COST OF SALES

3 COST OF SALES
NOTE	2018 2017 $000 $000
Cost of Sales includes the following items by nature: Depreciation and amortisation Employee benefts including commissions Inventories, fnished goods, work in progress, raw materials and consumables 15 Other	1,068 1,068 33,620 37,097 783,988 755,142 28,652 11,010
	847,328 804,317

4 OTHER OPERATING EXPENSES


	2018 2017 $000 $000
Other operating expenses includes the following items: Audit of annual fnancial statements of the Company – KPMG Audit of annual fnancial statements of subsidiaries and associates – KPMG Other non-audit services provided by KPMG – Tax consulting – Trust account audit of PGG Wrightson Real Estate Limited – Review of charging group consolidation for bank syndicate – Quality assurance – IT project Directors’ fees Donations Doubtful debts – (decrease)/increase in provision for doubtful debts Net doubtful debts – bad debts written of/(recovered) Marketing Motor vehicle costs Rental and operating lease costs Other expenses	277 267 131 118 – 4 12 11 2 2 – 44 767 770 6 3 529 286 (100) 958 8,792 8,261 8,047 7,306 29,692 28,951 55,554 52,287
	103,709 99,268

5 EQUITY ACCOUNTED INVESTEES

Earnings from equity accounted investees

30 June 2018

30 June 2018
	CURRENT NON-CURRENT TOTAL CURRENT NON-CURRENT TOTAL ASSETS ASSETS ASSETS LIABILITIES LIABILITIES LIABILITIES $000 $000 $000 $000 $000 $000
51% Forage Innovations Limited 50% Agimol Corporation S.A. 33% Agri Optics New Zealand Limited 50% Canterbury Sale Yards (1996) Limited 50% Fertimas S.A.	1,232 – 1,232 (822) – (822) 59,974 15,178 75,152 (63,441) – (63,441) 339 103 442 (60) (450) (510) 153 42 195 (61) – (61) 18,175 – 18,175 (15,146) – (15,146)
	79,873 15,323 95,196 (79,530) (450) (79,980)

	PROFIT / (LOSS) REVENUES EXPENSES AFTER TAX PGW SHARE $000 $000 $000 $000
51% Forage Innovations Limited 50% Agimol Corporation S.A. 33% Agri Optics New Zealand Limited 50% Canterbury Sale Yards (1996) Limited 50% Fertimas S.A.	1,704 (1,622) 82 41 72,621 (76,899) (4,278) (2,139) 1,028 (1,067) (39) (51) 550 (592) (42) (21) 27,085 (26,515) 570 285
	102,988 (106,695) (3,707) (1,885)

30 June 2017

30 June 2017
	CURRENT NON-CURRENT ASSETS ASSETS $000 $000	TOTAL CURRENT NON-CURRENT TOTAL ASSETS LIABILITIES LIABILITIES LIABILITIES $000 $000 $000 $000
51% Forage Innovations Limited 50% Agimol Corporation S.A. 51% Agri Optics New Zealand Limited 50% Canterbury Sale Yards (1996) Limited 50% Fertimas S.A.	1,166 – 51,277 10,991 8 139 193 6 8,886 –	1,166 (837) – (837) 62,268 (53,519) – (53,519) 147 (93) (191) (284) 199 (37) – (37) 8,886 (6,649) – (6,649)
	61,530 11,136	72,666 (61,135) (191) (61,326)
		PROFIT / (LOSS) REVENUES EXPENSES AFTER TAX PGW SHARE $000 $000 $000 $000
51% Forage Innovations Limited 50% Agimol Corporation S.A. 51% Agri Optics New Zealand Limited 50% Canterbury Sale Yards (1996) Limited 50% Fertimas S.A.		1,504 (1,585) (81) (42) 85,575 (85,193) 382 190 177 (277) (100) (51) 530 (588) (58) (29) 20,722 (20,606) 116 58
		108,508 (108,249) 259 126

46 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 47

ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

5 EQUITY ACCOUNTED INVESTEES CONTINUED

Movement in carrying value of equity accounted investees

Movement in carrying value of equity accounted investees
	2018 2017 $000 $000
Opening balance Investment in Agri Optics New Zealand Limited Additional investment in Agimol Corporation S.A. (AgroCentro Uruguay) Currency translation Share of proft/(loss) Dividends received Impairment Investment disposal Closing balance	20,973 18,000 – 834 3,078 2,063 72 (50) (1,885) 126 – – (7,804) – (111) –
	14,323 20,973

Impairment of Agimol Corporation S.A.

The Group has conducted an impairment assessment based on forecasted future cash flows of Agimol Corporation S.A. which resulted in an impairment of $7.80 million (USD 5.28 million) recorded through the profit and loss in fair value adjustments. This impairment assessment has been calibrated by and is consistent with, a valuation of Agimol Corporation S.A. included as part of the proposed sale of PGG Wrightson Seeds Holdings Limited (see Note 1). Following the impairment, goodwill of $5.44 million is included in the carrying value of Agimol Corporation S.A. (30 June 2017: goodwill of $13.24 million included in the carrying value of Agimol Corporation S.A.). The carrying value of the Group’s investment in Agimol Corporation S.A. as at 30 June 2018 was $11.83 million (USD 7.59 million).

Agimol Corporation S.A. earn-out provision

The initial investment recorded for this equity accounted investee company in 2016 included a provision for expected future earn-out payments of $7.03 million (USD 4.51 million). This provision was previously included within accruals and other liabilities (see Note 20). Based on the above future cash flow forecasts, we have re-assessed the provision which has resulted in a reduction of the provision. The reduction of $5.13 million (USD 3.66 million) has been recorded through the profit and loss in fair value adjustments. This provision release offsets against the impairment of Agimol Corporation S.A. noted above.

Agri Optics New Zealand Limited

During the period the Group reduced its investment in Agri Optics New Zealand Ltd from 51% to 33.33% following the inclusion of a third JV partner. Proceeds of $0.11 million were received for the investment reduction.

6 FAIR VALUE ADJUSTMENTS

6 FAIR VALUE ADJUSTMENTS
	2018 2017 $000 $000
Property, plant and equipment impairment Assets held for sale Biological assets Investments	(1,070) – – (121) 39 28 (2,846) 2,046
	(3,877) 1,953

7 INTEREST  FINANCE INCOME AND EXPENSE

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2018 2017
$000 $000
Finance income contains the following items:
Other interest income 249 211
Finance income 249 211
Interest funding contains the following items:
Interest on loans and overdrafts (6,652) (5,747)
Net interest on interest rate derivatives (533) (367)
Fair value change on interest rate derivatives (42) 392
Effective interest on expected earn out payments (87) (27)
Effective interest on defined pension ESCT payments (401) (122)
Other interest expense (1,281) (108)
Bank facility fees (1,239) (772)
Interest funding expense (10,235) (6,751)
Foreign exchange contains the following items:
Net gain/(loss) on foreign denominated items 1,849 (924)
Fair value change on foreign exchange derivatives (6,025) 1,306
Foreign exchange income/(expense) (4,176) 382
Net interest and finance costs (14,162) (6,158)
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Basis of Consolidation Accounting Policies

Associates and Jointly Controlled Entities

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly controlled entities are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence starts. Where the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The carrying value of equity accounted investees is reviewed where any indicators of impairment are present.

Fair Value Change on Foreign Exchange Derivatives Accounting Policies

The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. The Group uses forward, spot foreign exchange contracts and foreign exchange options to manage these exposures. These derivatives are recorded at their fair value with mark-to-market fair value movements flowing through fair value change on foreign exchange derivatives in the profit and loss. A portion of the underlying hedged future sale or purchase transactions have not yet been recognised by the Group. For this portion no corresponding offsetting net gain/(loss) on foreign denominated items has been recognised.

48 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 49

ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

8 INCOME TAXES

8 INCOME TAXES
	2018 2017 $000 $000
Current tax expense Current year Adjustments for prior years Deferred tax expense Origination and reversal of temporary diferences Derecognition of previously recognised tax losses Adjustments for prior years Income tax (expense)/income Proft/(loss) for the year Income tax (expense)/income Tax on discontinued operations Proft/(loss) excluding income tax	(14,843) (11,331) 308 (1,725)
	(14,535) (13,056)
	1,390 915 460 – 225 1,714
	2,075 2,629
	(12,460) (10,428)
	18,887 46,311 (12,460) (10,428) (199) (4)
	31,546 56,743

	2018 2018 2017 2017 % $000 % $000
Income tax using the Company’s domestic tax rate Efect of tax rates in foreign jurisdictions Non-deductible expenses Tax efect of discontinued operations Tax exempt income Under/(over) provided in prior years Derecognition of previously recognised tax losses Current year tax losses not recognised	28.0% (8,833) 28.0% (15,888) 2.3% (714) -0.3% 194 7.7% (2,441) -0.2% (91) 0.6% (199) 0.0% (4) -2.3% 726 -9.8% 5,583 -1.7% 533 0.0% (11) 1.5% (460) 0.0% – 3.4% (1,072) 0.4% (210)
	39.5% (12,460) 18.4% (10,428)

Income tax recognised directly in equity

Income tax recognised directly in equity
	2018 2017 $000 $000
Income/deferred tax on changes in fair value of cash fow hedges Deferred tax on movement of actuarial gains/losses on employee beneft plans Total income tax recognised directly in equity	– 571 (961) (2,389)
	(961) (1,818)

The Group has $3.58 million imputation credits as at 30 June 2018 (2017: $0.32 million). This balance includes the third provisional tax instalment made on 27 July 2018 in respect of the year ended 30 June 2018.

Refer to Accounting Policies – page 51.

8 INCOME TAXES CONTINUED

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

	ASSETS ASSETS LIABILITIES LIABILITIES NET NET 2018 2017 2018 2017 2018 2017 $000 $000 $000 $000 $000 $000
Group Property, plant and equipment Intangible assets Employee benefts Provisions Other items Tax asset/(liability)	– – (162) (518) (162) (518) – – (97) (455) (97) (455) 10,689 9,635 – – 10,689 9,635 5,596 4,676 (718) (97) 4,878 4,579 951 1,904 – – 951 1,904
	17,236 16,215 (977) (1,070) 16,259 15,145

Movement in deferred tax on temporary differences during the year

	RECOGNISED IN RECOGNISED IN RECOGNISED OTHER RECOGNISED OTHER BALANCE IN PROFIT COMPREHENSIVE BALANCE IN PROFIT COMPREHENSIVE BALANCE 1 JUL 2016 OR LOSS INCOME 30 JUN 2017 OR LOSS INCOME 30 JUN 2018 $000 $000 $000 $000 $000 $000 $000
Group Property, plant and equipment Intangible assets Employee benefts Provisions Other items	(2,335) 1,817 – (518) 356 – (162) (435) (20) – (455) 358 – (97) 12,356 (332) (2,389) 9,635 2,015 (961) 10,689 4,115 981 – 5,096 (218) – 4,878 633 183 571 1,387 (436) – 951
	14,334 2,629 (1,818) 15,145 2,075 (961) 16,259

Unrecognised tax losses / Unrecognised temporary differences

At 30 June 2018 the Group has $7.44 million of unrecognised deferred tax assets relating to unrecognised losses (2017: $6.37 million) and $2.64 million of unrecognised deferred tax assets relating to unrecognised temporary differences (2017: $2.39 million). These unrecognised deferred tax assets relate to the Australian and South American subsidiaries of the Group.

Income Tax Accounting Policies

Income tax expense comprises current and deferred taxation and is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised directly in other comprehensive income or equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable with respect to previous periods.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

the initial recognition of goodwill
differences relating to subsidiaries, associates and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantially enacted at the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be recognised.

50 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 51

ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

9 DISCONTINUED OPERATIONS

The discontinued operations pertain to the Group’s wholly owned subsidiary PGW Rural Capital Limited (PGWRC) which was established during 2012 to hold and recover certain excluded loans related to the sale of the Group’s finance subsidiary PGG Wrightson Finance Limited. As at 30 June 2018 one loan remained in PGWRC. During the period an unconditional sale and purchase agreement was signed in respect of a property used as security for the loan with proceeds subsequently being received by the Group on 13 July 2018. The provision for finance doubtful debts was reassessed at 30 June 2018 in respect of the amount recoverable.

10 EARNINGS PER SHARE AND NET TANGIBLE ASSETS

Basic earnings per share

The calculation of basic earnings per share at 30 June 2018 was based on the profit/(loss) attributable to ordinary shareholders of $18,887,000 (2017:$46,311,000) by the weighted average number of shares, 754,848,774 (2017: 754,848,774) on issue. There are no dilutive shares or options (2017: Nil).

	2018 2017 000 000
Number of shares Weighted average number of ordinary shares Number of ordinary shares	754,849 754,849
	754,849 754,849
	2018 2017 $000 $000
Net Tangible Assets Total assets Total liabilities _less_intangible assets _less_deferred tax	758,626 702,148 (471,164) (412,437) (13,017) (9,129) (16,259) (15,145)
	258,186 265,437
	2018 2017 $ $
Net tangible assets per share Earnings per share	0.342 0.352 0.025 0.061

11 CASH AND FINANCING FACILITIES

11 CASH AND FINANCING FACILITIES
	2018 2017 $000 $000
Cash and cash equivalents Current fnancing facilities Term fnancing facilities Net interest bearing debt _Go_range of livestock product receivables Net interest-bearing debt lessGo livestock receivables	10,926 9,403 (30,806) (26,719) (149,205) (110,925)
	(169,085) (128,241)
	39,419 32,371
	(129,666) (95,870)

Australia and New Zealand Facilities

The Company amended and extended its syndicated facility agreement on 15 December 2017. The facility agreement provides bank facilities of $210.00 million. The agreement contains various financial covenants and restrictions that are standard for facilities of this nature, including maximum permissible ratios for debt leverage and operating leverage. The Company has granted a general security deed and mortgage over all its wholly-owned New Zealand and Australian assets to a security trust. These assets include the shares held in South American subsidiaries and equity accounted investees. ANZ Bank New Zealand Limited acts as security trustee for the banking syndicate (ANZ Bank New Zealand Limited, Bank of China (New Zealand) Limited, Bank of New Zealand, MUFG Bank, Ltd and Westpac New Zealand Limited).

The Company’s bank syndicate facilities include:

A term debt facility of $150.00 million maturing on 31 July 2020.
A working capital facility of up to $60.00 million maturing on 31 July 2020.

The syndicated facility agreement also allows the Group, subject to certain conditions, to enter into additional facilities outside of the Company syndicated facility. The additional facilities are guaranteed by the security trust. These facilities amounted to $22.82 million as at 30 June 2018 including:

Overdraft facilities of $9.59 million.
Finance lease facilities of $2.83 million.

The syndicated facilities fund the general corporate activities of the Group, the seasonal fluctuations in working capital, and the Go range of livestock product receivables.

South American Facilities

Two of the Group’s wholly-owned Uruguayan subsidiaries (Wrightson Pas S.A. and Agrosan S.A.) are jointly and severally financed by a club structure. The club facilities contain various financial covenants and restrictions that are standard for facilities of this nature. The club facilities are denominated in USD, secured by a mortgage over the logistics centre in Uruguay and provide:

An amortising logistics centre facility of $12.00 million (USD 8.13 million) maturing on 17 September 2022.
A committed facility of $17.73 million (USD 12.00 million) maturing on 29 June 2021.

Earnings per Share Accounting Policies

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to shareholders by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the number of shares outstanding to include the effects of all potential dilutive shares.

Finance lease facilities of $0.23 million.

Separate to the club facility, the Group’s South American operations have various unsecured financing facilities that amounted to $19.99 million (USD 13.53 million) as at 30 June 2018.

52 | PGG WRIGHTSON LIMITED

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

12 DERIVATIVE FINANCIAL INSTRUMENTS

12 DERIVATIVE FINANCIAL INSTRUMENTS
	2018 2017 $000 $000
Derivative assets held for risk management Current Non-current Derivative liabilities held for risk management Current Non-current Net derivatives held for risk management	827 3,528 20 427
	847 3,955
	(3,645) (991) (966) (661)
	(4,611) (1,652)
	(3,764) 2,303

Derivatives held for risk management

The Group uses interest rate swaps and options to hedge its exposure to changes in the market rates of variable and fixed interest rates. The Group also uses forward foreign exchange contracts, spot foreign exchange contracts and foreign exchange options to manage its exposure to foreign currency fluctuations.

Derivative Financial Instruments Accounting Policies

The Group uses derivative financial instruments to manage its exposure to interest rate and foreign currency risks arising from operational, financing and investment activities. In accordance with Treasury policy, the Group does not hold or issue derivative instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss.

13 GO LIVESTOCK PRODUCT RECEIVABLES

The Group holds receivables in respect of its Go range of livestock products. Launched in November 2015, the Go range allow farmers to defer payment for the purchase of livestock. The counterparty to the Go product is fully exposed to the risks and rewards of ownership. To mitigate credit risk the Group retains title to the livestock until sale. Fee income received in respect of the Go range of livestock receivables are recognised by the Group as interest income over the respective contract period. Interest income on the Go range of livestock receivables is included within operating revenue (see Note 2 Operating Revenue) of the Agency operating segment.

by the Group as interest income over the respective contract period. Interest income on the_Go_range of livest operating revenue (see Note 2 Operating Revenue) of the Agency operating segment.	ock receivables is included within
	2018 2017 $000 $000
_Go_livestock receivables – less than one year _Go_livestock receivables – greater than one year _less_provision for doubtful debts –_Go_range of livestock receivables	39,419 32,371 – –
	– –
	39,419 32,371

The status of the Go range of livestock receivables at the reporting date is as follows:

14 TRADE AND OTHER RECEIVABLES

14 TRADE AND OTHER RECEIVABLES
	2018 2017 $000 $000
Accounts receivable Trade receivables due from related parties _less_provision for doubtful debts Net accounts receivable Other receivables and prepayments Analysis of movements in provision for doubtful debts Balance at beginning of year Movement in provision Balance at end of year	213,262 193,233 25,827 18,877
	239,089 212,110 (6,887) (6,358)
	232,202 205,752 35,425 24,270
	267,627 230,022
	(6,358) (6,072) (529) (286)
	(6,887) (6,358)

The Group has transacted with its related party Agimol Corporation S.A. and its subsidiaries during the period ended 30 June 2018. The aggregate value of transactions during the period between the Group and Agimol Corporation S.A. and its subsidiaries amounted to $23.16 million (2017: $28.03 million). The outstanding balance as at 30 June 2018 was $25.83 million (2017: $18.88 million). No provision is held in respect of the outstanding balance (2017: Nil).

The Group has also transacted with its related party Fertimas S.A. during the period ended 30 June 2018. The aggregate value of transactions during the period between the Group and Fertimas S.A. amounted to $16.52 million (2017: $12.78 million). The outstanding balance as at 30 June 2018 was Nil (2017: Nil).

The aging status of the accounts receivable at the reporting date is as follows:

		TOTAL		TOTAL
		DEBTORS	PROVISION	DEBTORS	PROVISION
		2018	2018	2017	2017
		$000	$000	$000	$000
Not past Past due Past due Past due Past due	due 1 – 30 days 31 – 60 days 61 – 90 days 90 plus days	192,533 18,702 12,391 1,070 14,393 239,089	(20) (95) (81) (32) (6,659) (6,887)	163,641 24,855 8,332 964 14,318 212,110	– (18) (17) (28) (6,295) (6,358)

Trade and Other Receivables Accounting Policies

Determination of Fair Values

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Impairment of Trade Receivables

Trade receivables are considered past due when they have been operated outside of the normal key trade terms. When forming a view management considers the counterparty’s ability to pay, the level of security and the risk of loss.

Accounts receivables include accrued interest. Specific provisions are maintained to cover identified doubtful debts.

	NOT IMPAIRED IMPAIRED NOT IMPAIRED IMPAIRED 2018 2018 2017 2017 $000 $000 $000 $000
Not past due –_Go_range of livestock receivables Past due 0 – 90 days Past due 91 – 365 days Impairment	39,419 – 32,371 – – – – – – – – – – – – –
	39,419 – 32,371 –

54 | PGG WRIGHTSON LIMITED

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

15 INVENTORY

15 INVENTORY
	2018 2017 $000 $000
Merchandise/fnished goods Work in progress Less provision for inventory write down	266,471 258,536 842 761 (4,775) (5,697)
	262,538 253,600

During the year ended 30 June 2018, finished goods, work in progress, raw materials and consumables included in cost of sales in the Statement of Profit or Loss amounted to $783.99 million (2017: $755.14 million) (see Note 3).

During the year ended 30 June 2018 inventories written down to net realisable value amounted to $2.34 million (2017: $1.94 million). The writedowns are included in cost of sales in the Statement of Profit or Loss. Consideration is given to factors such as age, germination levels and quality when assessing the net realisable value of seeds inventory.

Inventories Accounting Policies

Finished Goods

Raw materials and finished goods are stated at the lower of cost or net realisable value. Cost is determined on a weighted average cost basis, and, in the case of manufactured goods, includes direct materials, labour and production overheads.

Wholesale Seeds

Wholesale seeds inventory is stated at the lower of cost or net realisable value and comprises costs of purchase and other direct costs incurred to bring the inventory to its present location and condition.

16 GROUP ENTITIES

16 GROUP ENTITIES
	OWNERSHIP INTEREST
	COUNTRY OF		2018	2017
SIGNIFICANT SUBSIDIARIES	INCORPORATION	DIRECT PARENT	%	%
PGG Wrightson Seeds Holdings Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGW Rural Capital Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Employee Benefts Plan Trustee Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Real Estate Limited	New Zealand	PGG Wrightson Limited	100%	100%
Agriculture New Zealand Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Trustee Limited	New Zealand	PGG Wrightson Limited	100%	100%
AgriServices South America Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGW AgriServices Australia Pty Limited	Australia	PGG Wrightson Limited	100%	100%
PGG Wrightson Investments Limited	New Zealand	PGG Wrightson Limited	100%	100%
Bloch & Behrens Wool (NZ) Limited	New Zealand	PGG Wrightson Limited	100%	100%
NZ Agritrade Limited	New Zealand	PGG Wrightson Limited	100%	100%
Ag Property Holdings Limited	New Zealand	PGG Wrightson Investments Limited	100%	100%
PGG Wrightson Seeds New Zealand Limited	New Zealand	PGG Wrightson Seeds Holdings Limited	100%	100%
PGG Wrightson Seeds South America Holdings Limited	New Zealand	PGG Wrightson Seeds Holdings Limited	100%	100%
PGG Wrightson Seeds Australia Holdings Pty Limited	Australia	PGG Wrightson Seeds Holdings Limited	100%	100%
Grasslands Innovation Limited	New Zealand	PGG Wrightson Seeds Holdings Limited	70%	70%
PGG Wrightson Seeds Limited	New Zealand	PGG Wrightson Seeds New Zealand Limited	100%	100%
PGG Wrightson Consortia Research Limited	New Zealand	PGG Wrightson Seeds Limited	100%	100%
Agricom Limited	New Zealand	PGG Wrightson Seeds Limited	100%	100%
Wrightson Seeds Limited	New Zealand	PGG Wrightson Seeds Limited	100%	100%
PGG Wrightson Employee Benefts Plan Limited	New Zealand	PGG Wrightson Employee Benefts
		Plan Trustee Limited	100%	100%
PGG Wrightson Seeds (Australia) Pty Limited	Australia	PGG Wrightson Seeds Australia
		Holdings Pty Limited	100%	100%
PGW AgriTech South America S.A.	Uruguay	PGG Wrightson Seeds South America
		Holdings Limited	100%	100%
Wrightson Pas S.A.	Uruguay	PGG Wrightson Seeds South America
		Holdings Limited	100%	100%
Juzay S.A.	Uruguay	PGW AgriTech South America S.A.	100%	100%
Agrosan S.A.	Uruguay	PGW AgriTech South America S.A.	100%	100%
PGG Wrightson Seeds Argentina S.A.	Argentina	PGW AgriTech South America S.A.	100%	100%
PGW Sementes Ltda	Brazil	PGW AgriTech South America S.A.	100%	100%
Hunker S.A.	Uruguay	Juzay S.A.	100%	100%
Lanelle S.A.	Uruguay	Juzay S.A.	100%	100%
Afnlux S.A.	Uruguay	Juzay S.A.	51%	51%
Kroslyn S.A. Limited	Uruguay	Agrosan S.A.	100%	100%
Escritorio Romualdo Rodriguez Ltda	Uruguay	Afnlux S.A.	51%	51%

Acquisition of Business

On 31 August 2017 the Group acquired the assets and business of the Superior Seed Company (Superior) at Deniliquin in the Riverina Region of New South Wales. The purchase price was $1.06 million. The net assets acquired included plant and equipment, inventory and employee provisions. Superior is a seed production, cleaning and wholesale marketing business.

56 | PGG WRIGHTSON LIMITED

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

17 OTHER INVESTMENTS

17 OTHER INVESTMENTS
	2018 2017 $000 $000
Current investments BioPacifcVentures Advances to equity accounted investees Non-current investments Advances to equity accounted investees Sundry other investments	30 30 – 3,411
	30 3,441
	150 – 2,370 1,906
	2,520 1,906

In 2005 the Group committed $14.00 million to an international fund established for investment in food and agriculture life sciences. The investment in BioPacificVentures had a total lifespan of 12 years and matured in March 2017. The investors have agreed to continue with the fund manager in facilitating the wind down of the remaining investments held.

At 30 June 2018 $13.95 million has been drawn on the committed level of investment (30 June 2017: $13.95 million).

Advances to equity accounted investees

The non-current advance is a loan to the jointly controlled entity Agri Optics New Zealand Limited. No interest is payable on the balance and no provision for doubtful debts was recorded against the loan as at 30 June 2018.

During the period the advance, previously provided to the South American investee entity Fertimas S. A., was repaid and replaced with external bank funding. The Group supports this external bank funding by way of guarantee. See Note 26.

Sundry other investments including saleyards

Sundry other investments including saleyards, which do not have a market price in an active market and whose fair value cannot be reliably determined, are carried at cost.

Other Investments Accounting Policies

Determination of Fair Values

The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is determined by reference to the market price, unless other objective reliable evidence suggests a different value. Other investments where no active market exists are held at historical cost.

18 INTANGIBLE ASSETS

18 INTANGIBLE ASSETS
	TRADEMARKS, SOFTWARE PATENTS & RIGHTS TOTAL $000 $000 $000
Cost Balance at 1 July 2016 Additions Added as part of a business combination/amalgamation Disposals and reclassifcations Efect of movement in exchange rates Balance at 30 June 2017 Balance at 1 July 2017 Additions Efect of movement in exchange rates Balance at 30 June 2018 Amortisation and impairment losses Balance at 1 July 2016 Amortisation for the year Disposals and reclassifcations Efect of movement in exchange rates Balance at 30 June 2017 Balance at 1 July 2017 Amortisation for the year Efect of movement in exchange rates Balance at 30 June 2018 Carrying amounts At 1 July 2016 At 30 June 2017 At 1 July 2017 At 30 June 2018	22,151 2,088 24,239 4,154 160 4,314 – 682 682 (7,720) – (7,720) (5) – (5)
	18,580 2,930 21,510
	18,580 2,930 21,510 10,412 221 10,633 23 43 66
	29,015 3,194 32,209
	16,416 744 17,160 2,451 490 2,941 (7,720) – (7,720) (1) 1 –
	11,146 1,235 12,381
	11,146 1,235 12,381 3,600 527 4,127 22 21 43
	14,768 1,783 16,551
	5,735 1,344 7,079 7,434 1,695 9,129 7,434 1,695 9,129 14,247 1,411 15,658

The carrying amount includes software cost of $2.64 million included as a current asset (2017: Nil).

Intangible Assets Accounting Policies

Software

Software is a finite life intangible and is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated useful life between 1 and 10 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Rights

Manufacturing and production rights are finite life intangibles and are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated useful life between 2 and 10 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Determination of Fair Values

The fair value of intangible assets acquired in a business combination is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Impairment

The carrying amounts of the Group’s intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated. For intangible assets that have indefinite lives, the recoverable amount is estimated at each reporting date. An impairment loss is recognised in the profit or loss if the carrying amount of an asset exceeds the recoverable amount.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

19 PROPERTY, PLANT AND EQUIPMENT

19 PROPERTY, PLANT AND EQUIPMENT
	PLANT AND CAPITAL WORKS LAND BUILDINGS EQUIPMENT PROJECT* TOTAL $000 $000 $000 $000 $000
Cost Balance at 1 July 2016 Additions Added as part of a business combination/amalgamation Disposals and transfers to other asset classes Efect of movements in exchange rates Balance at 30 June 2017 Balance at 1 July 2017 Additions Added as part of a business combination/amalgamation Disposals and transfers to other asset classes Impairment Efect of movements in exchange rates Balance at 30 June 2018 Depreciation and impairment losses Balance at 1 July 2016 Depreciation for the year Depreciation recovered to COGS Disposals and transfers to other asset classes Efect of movements in exchange rates Balance at 30 June 2017 Balance at 1 July 2017 Depreciation for the year Depreciation recovered to COGS Disposals and transfers to other asset classes Efect of movements in exchange rates Balance at 30 June 2018 Carrying amounts At 1 July 2016 At 30 June 2017 At 1 July 2017 At 30 June 2018	21,835 52,686 109,412 4,345 188,278 125 2,100 10,966 (336) 12,855 – – – – – (1,504) (11,589) (3,261) (5) (16,359) (84) (637) (416) (1) (1,138)
	20,372 42,560 116,701 4,003 183,636
	20,372 42,560 116,701 4,003 183,636 551 3,162 11,652 (181) 15,184 – 12 801 – 813 (169) (122) (2,399) – (2,690) – (1,070) – – (1,070) 233 1,829 1,753 – 3,815
	20,987 46,371 128,508 3,822 199,688
	– 5,710 57,565 – 63,275 – 1,132 6,660 – 7,792 – – 1,068 – 1,068 – (1,188) (4,373) – (5,561) – (112) (191) – (303)
	– 5,542 60,729 – 66,271
	– 5,542 60,729 – 66,271 – 1,296 7,551 – 8,847 – – 1,068 – 1,068 – (82) (1,713) – (1,795) – 171 906 – 1,077
	– 6,927 68,541 – 75,468
	21,835 46,976 51,847 4,345 125,003 20,372 37,018 55,972 4,003 117,365 20,372 37,018 55,972 4,003 117,365 20,987 39,444 59,967 3,822 124,220

Capital works projects are recorded net of transfers to other asset classes.

Capital gains on the sale of property, plant and equipment of $1.69 million were recognised in non-operating items in the current period (2017: $8.74 million).

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Refer to
Accounting
Policies
– page 61.
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19 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Property, Plant & Equipment Accounting Policies

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of day-to-day servicing of property, plant and equipment is recognised in profit or loss as incurred.

Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are expensed as they are incurred.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, buildings, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are between 2 and 40 years for plant and equipment and 50 years for buildings. Depreciation methods, useful lives and residual values are reassessed at reporting date.

Determination of Fair Values

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.

Impairment

The carrying amounts of the Group’s property, plant & equipment assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated. An impairment loss is recognised in the profit or loss if the carrying amount of an asset exceeds the recoverable amount.

20 TRADE AND OTHER PAYABLES

20 TRADE AND OTHER PAYABLES
	2018 2017 $000 $000
Trade creditors Trade payables due to related parties Loyalty reward programme Deposits received in advance Accruals and other liabilities Employee entitlements Payable within 12 months Payable beyond 12 months	147,134 132,668 4,822 5,002 1,177 1,318 3,196 3,589 81,725 87,676 31,163 22,946
	269,217 253,199
	267,096 248,290 2,121 4,909
	269,217 253,199

Holidays Act 2003 - Remediation Costs

During the period the Group recognised an $8.06 million provision for remediation costs of historical liabilities under the Holidays Act 2003. The Group has engaged the services of an external advisor and a law firm to assist in determining the level of the provision. Work on determining the final liability is not yet complete. The provision is included within Employee entitlements above and represents the Management’s best estimate of the remediation costs.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

Refer to Accounting Policies – page 64.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

21 DEFINED BENEFIT ASSET / LIABILITY

21 DEFINED BENEFIT ASSET / LIABILITY
	2018 2017 $000 $000
Present value of funded obligations Fair value of plan assets Net defned beneft asset / (liability) ESCT on committed contributions – short-term ESCT on committed contributions – long-term Total defned beneft asset / (liability)	(66,814) (71,106) 59,092 58,835
	(7,722) (12,271)
	(905) (942) (1,947) (2,614)
	(10,574) (15,827)

The Group makes contributions to the PGG Wrightson Employee Benefits Plan, a defined benefit plan that provides a range of superannuation and insurance benefits for employees and former employees. The defined benefit plan is not open to new members. The plan’s retired employees are entitled to receive an annual pension payment payable on their life and in some cases on the life of a surviving spouse.

	2018 2017 % %
Group / Company Plan assets consist of: Equities Fixed interest Cash	59% 64% 31% 28% 10% 8%
	100% 100%

Plan assets included exposure to the Company’s ordinary shares of Nil (2017: Nil).

Plan assets included exposure to the Company’s ordinary shares of Nil (2017: Nil).
	2018	2017
	%	%
Actuarial Assumptions:
Principal actuarial assumptions at the reporting date
(expressed as weighted averages):
Discount rate used (10 year New Zealand Government Bond rate)	2.85%	2.97%
Infation	2.00%	2.00%
Future salary increases	3.00%	3.00%
Future pension increases	2.00%	2.00%

21 DEFINED BENEFIT ASSET / LIABILITY CONTINUED

Sensitivity analysis

The sensitivity of the defined benefit obligation (DBO) to changes in the weighted principal assumption is:

		2018	2018	2017	2017
		IMPACT ON DBO	IMPACT ON DBO	IMPACT ON DBO	IMPACT ON DBO
		WITH INCREASE IN	WITH DECREASE IN	WITH INCREASE IN	WITH DECREASE IN
		ASSUMPTION	ASSUMPTION	ASSUMPTION	ASSUMPTION
		$000	$000	$000	$000
Change in assumption
Discount rate (0.50% movement)		1,403	(1,537)	1,635	(1,778)
Salary growth rate (0.50% movement)		(200)	200	(284)	284
Pension growth rate (0.25% movement)		(601)	601	(711)	640
Life expectancy (1 year movement)		(1,470)	1,470	(1,493)	1,493
	2018	2017	2016	2015	2014
	$000	$000	$000	$000	$000
Historical information
Present value of the defned beneft obligation	(66,814)	(71,106)	(73,417)	(72,153)	(68,330)
Fair value of plan assets	59,092	58,835	52,702	57,498	54,802
(Defcit) / surplus in the plan	(7,722)	(12,271)	(20,715)	(14,655)	(13,528)

The Group expects to pay $2.94 million in contributions to the defined benefit plan in 2019 (2018: $3.02 million). Member contributions are expected to be $0.86 million (2018: $0.92 million).

Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows:

			2018	2017
			YEARS	YEARS
Longevity at age	65	for current pensioners
Males			21	21
Females			24	24
Longevity at age	65	for current members aged 45
Males			24	24
Females			28	28

As at 30 June 2018 the weighted average duration of the defined benefit obligation was 8.7 years for the PGG Wrightson Employment Benefits Plan (2017: 8.5 years).

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Refer to
Accounting
Policies
– page 64.
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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

21 DEFINED BENEFIT ASSET / LIABILITY CONTINUED

21 DEFINED BENEFIT ASSET / LIABILITYCONTINUED
	2018 2017 $000 $000
Movement in the liability for defned beneft obligations: Liability for defned beneft obligations at 1 July Benefts paid by the plan Current service costs Interest costs Member contributions Actuarial (gains)/losses recognised in other comprehensive income arising from: (Gains)/losses from change in fnancial assumptions Experience (gains)/losses Liability for defned beneft obligations at 30 June Movement in plan assets: Fair value of plan assets at 1 July Contributions paid into the plan Member contributions Benefts paid by the plan Current service costs Interest costs Other Actuarial items recognised in other comprehensive income: Expected return on plan assets Fair value of plan assets at 30 June Expense recognised in proft or loss: Current service costs Interest Recognised in non-operating items Recognised in Employee beneft expense Movements recognised in equity: Cumulative gains/(losses) at 1 July Net proft and loss impact from current period costs Gains/(losses) recognised during the year ESCT provision Cumulative gains/(losses) at 30 June	71,106 73,417 (8,914) (6,010) 858 989 2,010 1,579 1,170 1,199 510 (2,197) 74 2,129
	66,814 71,106
	58,835 52,702 3,011 5,920 1,170 1,199 (8,914) (6,010) – – 1,677 1,199 3,313 3,825
	59,092 58,835
	858 989 333 380
	1,191 1,369
	142 649 1,049 720
	1,191 1,369
	(34,645) (36,397) (1,191) (1,369) 2,729 3,893 17 (772)
	(33,090) (34,645)

*Employee Benefts Accounting Policies* The Group’s net obligation with respect to the defned beneft pension plan is calculated by estimating the future beneft that employees have earned in return for their service in the current and prior periods. That beneft is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualifed actuary using the projected unit credit method. When the calculation results in a beneft to the Group, the recognised asset is limited to the lower of the net assets of the plan or the current value of the contributions holiday that is expected to be generated. Actuarial gains and losses and the expected return on plan assets are recognised directly in other comprehensive income and the defned beneft plan reserve in equity. Short-term employee beneft obligations are measured on an undiscounted basis and expensed as the related service is provided. A provision is recognised for the amount of outstanding short-term benefts at each reporting date. Provisions made with respect to employee benefts which are not expected to be settled within twelve months are measured as the present value of the estimated future cash outfows to be made by the Group with respect to services provided by employees up to reporting date.

22 FINANCIAL INSTRUMENTS

The Group is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore, takes on controlled amounts of risk when considered appropriate.

The primary risks are those of liquidity, market (foreign currency, price and interest rate), funding and credit risk.

The Board of Directors are responsible for the review and ratification of the Group’s systems of risk management, internal compliance and control, code of conduct and legal compliance.

The Board maintains a formal set of delegated authorities (including policies for credit and treasury), that clearly define the responsibilities delegated to Management and those retained by the Board. The Board approves these delegated authorities and reviews them annually.

Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulties in raising funds at short notice to meet commitments associated with financial instruments. The Group monitors its liquidity daily, weekly and monthly and maintains appropriate liquid assets and committed bank funding facilities to meet all obligations in a timely and cost efficient manner. Management of liquidity risk is designed to ensure that the Group has the ability to meet financial obligations as they fall due.

The objectives of the Group’s funding and liquidity policy is to:

Ensure all financial obligations are met when due;
Provide adequate protection, even under crisis scenarios; and
Achieve competitive funding within the limitations of liquidity requirements.

The Group manages this risk by forecasting daily cash requirements, forecasting future funding requirements and maintaining an adequate liquidity buffer.

Market Risk

Market risk is the potential for change in the value of balance sheet positions caused by a change in the value, volatility or relationship between market risks and prices. Market risk arises from the mismatch between assets and liabilities, both on and off balance sheet. Market risk includes price, foreign currency and interest rate risk which are explained as follows:

Foreign Currency Risk

The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. It is the Group’s policy to hedge foreign currency risks as they arise. In some circumstances foreign exchange options are used to hedge potential foreign exchange risk. The Group uses forward, spot foreign exchange contracts and foreign exchange options to manage these exposures.

The translation of independent foreign operations into the Group financial statements is not hedged, apart from the seasonal working capital exposure to PGG Wrightson Seeds (Australia) Pty Limited which is hedged with foreign exchange contracts.

Interest Rate Risk

Interest rate risk is the risk that the value of financial instruments and the interest margin will fluctuate as a result of changes in market interest rates. The risk is that financial assets may be repriced at a different time and / or by a different amount than financial liabilities.

This risk is managed by operating within approved policy limits using an interest rate duration approach.

Employee Benefits Accounting Policies

The Group’s net obligation with respect to the defined benefit pension plan is calculated by estimating the future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the lower of the net assets of the plan or the current value of the contributions holiday that is expected to be generated. Actuarial gains and losses and the expected return on plan assets are recognised directly in other comprehensive income and the defined benefit plan reserve in equity. Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service is provided. A provision is recognised for the amount of outstanding short-term benefits at each reporting date.

Provisions made with respect to employee benefits which are not expected to be settled within twelve months are measured as the present value of the estimated future cash outflows to be made by the Group with respect to services provided by employees up to reporting date.

Floating rate borrowings are used for general funding activities. Interest rate swaps, interest rate options and forward rate agreements are used to hedge the floating rate exposure as deemed appropriate. The Group had $78.0 million of interest rate derivatives at balance date (2017: $93.0 million).

Funding Risk

Funding risk is the risk of over-reliance on a funding source to the extent that a change in that funding source could increase overall funding costs or cause difficulty in raising funds. The Group has a policy of funding diversification. The funding policy augments the Group’s liquidity policy with it’s aim to ensure the Group has a stable diversified funding base without over-reliance on any one market sector.

Refer to Accounting Policies – page 70.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

22 FINANCIAL INSTRUMENTS CONTINUED

Credit Risk

Credit risk is the potential for loss that could occur as a result of a counterparty failing to discharge its obligations. This may be due to drought, biosecurity issues or volatility in commodity prices. Management formally reports on all aspects of key risks to the Audit Committee at least two times each year. In addition, the following management committees review and manage key risks:

The Senior Management Team meets regularly to consider new and emerging risks, reviews actions required to manage and mitigate key risks, and monitors progress.
The Group has a Credit Committee, comprising of management appointees, which meets regularly as required to review credit risk, new loans and provisioning.

Capital Management

The capital of the Group consists of share capital, reserves, and retained earnings.

The policy of the Group is to maintain a strong capital base so as to maintain investor, creditor and market confidence while providing the ability to develop future business initiatives. In addition, external funding arrangements currently limit the Group’s ability to pay dividends due to debt ratio requirements. This policy is reviewed regularly by the Board and has not been changed during the period.

Sensitivity Analysis

The Treasury policy of the Group effectively insulates earnings from the effect of short-term fluctuations in either foreign exchange or interest rates. Over the longer term however, permanent changes in foreign exchange or interest rates will have an impact on profit.

The sensitivity of net profit after tax for the period to 30 June 2018, and shareholders equity at that date, to reasonably possible changes in conditions is as follows:

conditions is as follows:
	INTEREST RATES	INCREASE BY 1%	INTEREST RATES	DECREASE BY 1%
	2018	2017	2018	2017
	$000	$000	$000	$000
Impact on net proft after tax	(1,614)	(1,418)	1,610	1,421
Members’ equity	(1,614)	(1,418)	1,610	1,421

The stress test uses the existing balance sheet interest rate mismatch against the cumulative mismatch between repricing assets and liabilities out from one to five years. Other market risks such as pricing and foreign exchange are not considered likely to lead to material change over the next reporting period. For this reason sensitivity analysis of these market risks is not included.

Refer to Accounting Policies – page 70.

22 FINANCIAL INSTRUMENTS CONTINUED

Quantitative disclosures

(a) Liquidity Risk – Contractual Maturity Analysis

The following tables analyse the Group’s financial assets and financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date (reported on an undiscounted basis). History demonstrates that such accounts provide a stable source of long term funding for the Group.

	WITHIN CONTRACTUAL 12 MONTHS 1 TO 5 YEARS BEYOND 5 YEARS CASH FLOW BALANCE SHEET $000 $000 $000 $000 $000
2018 Liabilities Debt Derivative fnancial instruments Trade and other payables 2017 Liabilities Debt Derivative fnancial instruments Trade and other payables	41,041 163,231 – 204,272 180,011 3,645 966 – 4,611 4,611 151,956 – – 151,956 151,956
	196,642 164,197 – 360,839 336,578
	33,375 123,195 3,487 160,057 137,644 991 661 – 1,652 1,652 137,670 – – 137,670 137,670
	172,036 123,856 3,487 299,379 276,966

(b) Liquidity Risk – Expected Maturity Analysis

The expected cash flows of the Group’s finance receivables equal their contractual cash flows.

(c) Foreign Currency Exposure Risk

The Group’s exposure to foreign currency risk can be summarised as:

	GBP USD AUD EURO NZ$000 NZ$000 NZ$000 NZ$000
2018 Cash and cash equivalents Trade and other receivables Debt Trade and other payables Net balance sheet position Forward exchange contracts Notional forward exchange cover Net unhedged position 2017 Cash and cash equivalents Trade and other receivables Debt Trade and other payables Net balance sheet position Forward exchange contracts Notional forward exchange cover Net unhedged position	5 4,510 1,531 19 6,830 50,406 10,702 55,627 – (5,908) – – (119) (5,363) (2,704) (1,565)
	6,716 43,645 9,529 54,081
	6,711 45,043 7,998 54,062
	5 (1,398) 1,531 19
	2 4,819 1,378 17 7,683 39,114 23,040 44,837 – (41,871) – – (141) (9,582) (2,823) (7,285)
	7,544 (7,520) 21,595 37,569
	7,542 29,562 20,243 37,556
	2 (37,082) 1,352 13

The net balance sheet positions for the Group in AUD and USD include cash, trade and other receivables, and trade and other payables for the Australian and South American domiciled subsidiary companies and are therefore not hedged.

Refer to Accounting Policies – page 70.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

Refer to Accounting Policies – page 70.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

22 FINANCIAL INSTRUMENTS CONTINUED

(d) Interest Rate Repricing Schedule

The following tables include the Group’s liabilities at their carrying amounts, categorised by the earlier of contractual repricing or maturity dates.

	WITHIN 1 TO 2 OVER 2 NON INTEREST 12 MONTHS YEARS YEARS BEARING TOTAL $000 $000 $000 $000 $000
2018 Liabilities Debt Derivative fnancial instruments Trade and other payables 2017 Liabilities Debt Derivative fnancial instruments Trade and other payables	180,011 – – – 180,011 (63,000) 15,000 48,000 4,611 4,611 – – – 151,956 151,956
	117,011 15,000 48,000 156,567 336,578
	137,644 – – – 137,644 (78,000) 15,000 63,000 1,652 1,652 – – – 137,670 137,670
	59,644 15,000 63,000 139,322 276,966

e) Accounting classifications and fair values

The tables below set out the Group’s classification of each class of financial assets and liabilities, and their fair values.

A THR COMPREHEN	DESIGNATED DESIGNATED T FAIR VALUE AT FAIR VALUE OUGH OTHER THROUGH PROFIT OTHER TOTAL CARRYING FAIR SIVE INCOME AND LOSS AMORTISED COST AMOUNT VALUE $000 $000 $000 $000 $000
2018 Assets Cash and cash equivalents Derivative fnancial instruments Trade and other receivables Other investments _Go_livestock receivables Finance receivables Liabilities Derivative fnancial instruments Trade and other payables Debt 2017 Assets Cash and cash equivalents Derivative fnancial instruments Trade and other receivables Other investments _Go_livestock receivables Liabilities Derivative fnancial instruments Trade and other payables Debt	– – 10,926 10,926 10,926 – 847 – 847 847 – – 232,202 232,202 232,202 30 – 2,370 2,400 2,400 – – 39,419 39,419 39,419 733 733 733
	30 847 285,650 286,527 286,527
	– 4,611 – 4,611 4,611 – – 151,956 151,956 151,956 – – 180,011 180,011 180,011
	– 4,611 331,967 336,578 336,578
	– – 9,403 9,403 9,403 – 3,955 – 3,955 3,955 – – 205,752 205,752 205,752 30 – 5,317 5,347 5,347 – – 32,371 32,371 32,371
	30 3,955 252,843 256,828 256,828
	– 1,652 – 1,652 1,652 – – 137,670 137,670 137,670 – – 137,644 137,644 137,644
	– 1,652 275,314 276,966 276,966

22 FINANCIAL INSTRUMENTS CONTINUED

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: – Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

There have been no material movements between the fair value hierarchy during the year ended 30 June 2018.

NOTE	LEVEL 1 LEVEL 2 LEVEL 3 TOTAL $000 $000 $000 $000
2018 Assets Derivative fnancial instruments Other investments 17 Liabilities Derivative fnancial instruments 2017 Assets Derivative fnancial instruments Other investments 17 Liabilities Derivative fnancial instruments	– 847 – 847 – – 30 30
	– 847 30 877
	– 4,611 – 4,611
	– 4,611 – 4,611
	– 3,955 – 3,955 – – 30 30
	– 3,955 30 3,985
	– 1,652 – 1,652
	– 1,652 – 1,652

(f) Credit Risk

The carrying amount of financial assets represents the Group’s maximum credit exposure. The Group’s maximum credit exposure to credit risk for receivables by geographic regions is as follows:

	2018 2017 $000 $000
Total trade and other receivables and Go livestock receivables New Zealand Australia South America Ci f Cdi Rik	179,598 158,936 10,848 13,314 80,410 65,873
	270,856 238,123

Concentrations of Credit Risk

Financial instruments which potentially subject the Group to concentrations of credit risk principally consist of bank balances, advances, trade debtors, and forward foreign exchange contracts. The Group places its cash and short term investments with three major trading banks. Concentrations of credit risk with respect to advances are limited due to the large number of customers included in the Group’s farming customer base in New Zealand.

The Group’s banking facilities are based on floating interest rates therefore the fair value of the banking facilities equals the carrying value.

Refer to Accounting Policies – page 70.

68 | PGG WRIGHTSON LIMITED

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

22 FINANCIAL INSTRUMENTS CONTINUED

Financial Instruments Accounting Policies

(i) Non-derivative Financial Assets

Non-derivative financial assets comprise investments in equity and debt securities, finance receivables, trade and other receivables, cash and cash equivalents and intercompany advances. The Group early adopted NZ IFRS 9 (2009) Financial Instruments from 1 January 2012. NZ IFRS 9 (2009) requires that an entity classifies its financial assets at either amortised cost or fair value depending on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Group early adopted IFRS 9 (2013) Financial Instruments from 1 January 2015. IFRS 9 (2013) provides amended general hedge accounting requirements.

The Group initially recognises financial assets on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

Financial assets are initially measured at fair value. If the financial asset is not subsequently measured at fair value through profit and loss, the initial investment includes transaction costs that are directly attributable to the asset’s acquisition or origination. The Group subsequently measures financial assets at either fair value or amortised cost.

Financial assets measured at amortised cost

23 OPERATING LEASES

	2018 2017 $000 $000
Non-cancellable operating lease rentals are payable as follows: Within one year Between one and fve years Beyond fve years	26,869 25,376 68,281 56,981 42,976 33,332
	138,126 115,689

The Group leases a fleet of vehicles for use by employees, agents and representatives. Leases are typically for a period of between four and six years.

The Group leases office and computer equipment. Leases are typically for a period of four years.

The Group also leases and subleases land and buildings from which it conducts operations. These leases range in length from one to 15 years with various rights of renewal. Where surplus properties are unable to be exited, sublease revenue is obtained where possible on a short-term temporary basis. During the year ended 30 June 2018 sublease revenue totalling $1.18 million (2017: $1.20 million) was received.

A financial asset is subsequently measured at amortised cost using the effective interest method and net of any impairment loss, if:

the asset is held within a business model with an objective to hold assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest.

Financial assets measured at fair value

Financial assets other than those classified as financial assets measured at amortised cost are subsequently measured at fair value with all changes recognised in profit or loss.

However, for investments in equity instruments that are not held for trading, the Group may elect at initial recognition to present gains and losses through other comprehensive income. For instruments measured at fair value through other comprehensive income gains and losses are never reclassified to profit and loss and no impairments are recognised in profit and loss. Dividends earned from such investments are recognised in profit and loss unless the dividends clearly represent a repayment of part of the cost of investment.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.

Trade and Other Receivables

Trade and other receivables are stated at their amortised cost less impairment losses.

(ii) Non-derivative Financial Liabilities

Interest-bearing Borrowings

Interest-bearing borrowings are classified as other financial liabilities and are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest rate method.

Trade and Other Payables

Trade and other payables are stated at cost.

Determination of Fair Values

Determination of Fair Values for Derivatives

The fair value of forward exchange contracts is based on broker quotes, if available. If broker quotes are not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate based on government bonds.

The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract using market interest rates for a similar instrument at the reporting date.

24 SEASONALITY OF OPERATIONS

The Group is subject to significant seasonal fluctuations. The Retail business is weighted towards the first half of the financial year as demand for New Zealand farming inputs are generally weighted towards the Spring season. Livestock and Seed and Grain activities are significantly weighted to the second half of the financial year. Seed and Grain revenues reflect the fact the Group operates in geographical zones that suit Autumn harvesting and sowing. New Zealand generally has Spring calving and lambing and so Livestock trading is weighted towards the second half of the financial year in order for farmers to maximize their incomes. Other business units have similar but less material cycles. The Group recognises that this seasonality is the nature of the industry and plans and manages its business accordingly.

25 COMMITMENTS

NOTE	2018 2017 $000 $000
There are commitments with respect to: Capital expenditure not provided for Investment in BioPacifcVentures 17 Contributions to Primary Growth Partnership	2,463 1,432 51 51 277 867
	2,791 2,350

Primary Growth Partnership–Seed and Nutritional Technology Development

The Group announced on 18 February 2013 that it had completed the contracting process for the Primary Growth Partnership (PGP) programme with the Ministry of Primary Industries. The PGP programme is a Seed and Nutritional Technology Development Programme that aims to deliver innovative forages for New Zealand farms. As a result of entering into the partnership the Group is committed to contributions to the partnership over the six year life of the programme which ends on 31 December 2018. The total commitment in respect of the programme is $3.61 million (2017: total commitment of $3.61 million). As at 30 June 2018 total contributions of $3.33 million (2017: $2.74 million) have been made to the programme.

Forward purchase commitments

The Group as part of its ordinary course of business enters into forward purchase agreements with seed and wool growers. These commitments extend for periods of up to three years. These commitments are at varying stage of execution, therefore there remains uncertainty associated with yield, quality and market price. The Group is unable to sufficiently quantify the value of these commitments.

Determination of Fair Values for Non-derivative Financial Instruments

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

26 CONTINGENT LIABILITIES

There are contingent liabilities with respect to:

There are contingent liabilities with respect to:
	2018 2017 $000 $000
Guarantee PGG Wrightson Loyalty Reward Programme	3,693 – 102 140
	3,795 140

Guarantees

The guarantee is a standby letter of credit supporting external bank funding of the jointly controlled entity Fertimas S.A. Funding was previously provided by the respective joint venture partners. See Note 17.

PGG Wrightson Loyalty Reward Programme

A provision is retained for the expected level of points redemption from the PGG Wrightson Loyalty Reward Programme. A contingent liability of $0.10 million represents the balance of live points that do not form part of the provision (2017: $0.14 million).

Losses are not expected to arise from these contingent liabilities.

27 RELATED PARTIES

Parent and ultimate controlling party

The immediate parent of the Group is Agria (Singapore) Pte Ltd and the ultimate controlling party of the Group is Agria Corporation.

Transactions with Key Management Personnel

Transactions with Key Management Personnel
	2018 2017 $000 $000
Key Management Personnel compensation comprised: Short-term employee benefts Post-employment benefts Termination benefts	6,079 7,924 151 121 – –
	6,230 8,045

Directors fees incurred during the year are disclosed in Note 4 Other Operating Expenses.

27 RELATED PARTIES CONTINUED

Other Transactions with Key Management Personnel

Several Directors, Senior Executives or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Group during the reporting period. The terms and conditions of these transactions with Key Management Personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Key Management Personnel related entities on an arm’s length basis.

The aggregate value of transactions and outstanding balances relating to Directors, Senior Executives and entities over which they have control or significant influence were as follows:

		TRANSACTION	BALANCE	TRANSACTION	BALANCE
		VALUE	OUTSTANDING	VALUE	OUTSTANDING
		2018	2018	2017	2017
		$000	$000	$000	$000
Key Management
Personnel/Director	Transaction
John Nichol	Purchase of retail goods	2	–	4	–
Trevor Burt	Purchase of retail goods and livestock transactions	184	–	106	–
Mark Dewdney
(resigned 31 October 2017)	Purchase of retail goods and livestock transactions	416	–	543	20
David Green	Purchase of retail goods and rental receipts	87	–	104	–
Stephen Guerin	Purchase of retail goods and livestock transactions	9	–	16	–
John McKenzie	Purchase of retail goods, sale of seed under
	production contracts, sale of wool, water services
	and livestock transactions	3,345	(593)	5,351	(382)
Peter Newbold	Purchase of retail goods	35	3	25	–
Cedric Bayly
(retired 31 October 2017)	Purchase of retail goods	1	–	9	–

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

28 REPORTING ENTITY

PGG Wrightson Limited (the “Company”) is a company domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange. The Company is an FMC Entity in terms of the Financial Markets Conduct Act 2013.

The financial statements of PGG Wrightson Limited for the year ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The financial statements have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013.

The Group is primarily involved in the provision of goods and services within the agricultural sector.

29 BASIS OF PREPARATION

30 OTHER SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out in these financial statements have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of Consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Transactions Eliminated on Consolidation

Statement of Compliance

The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (“NZ GAAP”). They comply with the New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable Financial Reporting Standards as applicable for profit oriented entities. The financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board, as applicable for profit oriented entities.

These statements were approved by the Board of Directors on 13 August 2018.

Basis of Measurement

The financial statements have been prepared on the historical cost basis except for the following:

financial instruments at fair value through profit or loss are measured at fair value
investments are measured at fair value
biological assets are measured at fair value less point-of-sale costs
assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

Functional and Presentation Currency

These financial statements are presented in New Zealand dollars ($), which is the Group’s functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest thousand.

Use of Estimates and Judgements

The preparation of the consolidated financial statements in conformity with NZ IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and assumptions.

Estimates and assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

Note Judgement

5 Carrying value of equity accounted investees
5 Reassessment of earn-out provision
14 Carrying value of trade and other receivables
15 Valuation of seeds inventory
20 Assessment of Holidays Act 2003 remediation costs

Certain comparative amounts have been reclassified to conform with the current period’s presentation.

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign Currencies

Foreign Currency Transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

Foreign Operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New Zealand dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to New Zealand dollars at exchange rates at the date of the transactions.

Foreign currency differences are recognised in other comprehensive income and the Foreign Currency Translation Reserve (“FCTR”). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.

(c) Impairment

The carrying value of the Group’s assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment. An impairment loss is recognised whenever the carrying amount exceeds its recoverable amount. Impairment losses directly reduce the carrying value of assets and are recognised in profit or loss unless the asset is carried at a revalued amount in accordance with another standard.

Impairment of Equity Instruments

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of assets is impaired. In the case of equity instruments that are not held for trading, the Group may elect to present gains and losses through other comprehensive income. If no election is made fair value gains and losses are recognised in profit or loss.

The recoverable amount of the Group’s investments in held-to-maturity debt instruments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with short durations are not discounted.

Impairment losses on an individual basis are determined by an evaluation of the exposures on an instrument by instrument basis. All individual instruments that are considered significant are subject to this approach.

All known losses are expensed in the period in which it becomes apparent that the receivables are not collectable.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

30 OTHER SIGNIFICANT ACCOUNTING POLICIES CONTINUED

The carrying amounts of the Group’s non-financial assets, other than biological assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated.

An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it relates, exceeds the recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or unit.

30 OTHER SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(g) Disclosure of Non-GAAP Financial Information

Non-GAAP reporting measures have been presented in the Statement of Profit or Loss or referenced to in the notes to the financial statements. The following non-GAAP measures are relevant to the understanding of the Group financial performance:

EBITDA (a non-GAAP measure) represents earnings before net interest and finance costs, income tax, depreciation, amortisation and the results from discontinued operations.
Operating EBITDA (a non-GAAP measure) represents earnings before net interest and finance costs, income tax, depreciation, amortisation, results from discontinued operations, fair value adjustments and non-operating items.

The PGW Board and management consider the Operating EBITDA measure to promote a more meaningful communication of financial information. This measure is also the required information for certain stakeholders and for internal management reporting and review.

(h) Standards and Interpretations That Have Been Issued or Amended But Are Not Yet Effective

In determining the fair value using value in use, regard is given to external market evidence.

(d) Determination of Fair Values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the methods outlined in the respective notes for the assets and liabilities. Where applicable, further information about the assumptions made is disclosed in the notes specific to that asset or liability.

(e ) Intangible Assets

Research and Development

The principal research and development activities are in the development of systems, processes and new seed cultivars.

Research expenditure on the development of new systems and processes is recognised in profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred.

A number of new standards and interpretations are not yet effective for the year ended 30 June 2018 and have not been applied in preparing

IFRS 9 (2014) Financial Instruments has been issued. The final component of IFRS 9 (2014) introduces a new expected credit loss model for calculating impairment. IFRS 9 (2014) is effective for annual periods beginning on or after 1 January 2018. The Group does not plan to adopt IFRS 9 (2014) early. Initial review has determined that this new standard will not have a significant financial impact on the Group’s financial statements.
IFRS 15 Revenue from Contracts with Customers has been issued. This standard introduced a new revenue recognition model for contracts with customers. The standard is effective for annual periods beginning on or after 1 January 2018. Initial review has determined that this new standard will not have a significant financial impact on the Group’s financial statements.
IFRS 16 Leases has been issued. This standard eliminates the classification of leases as either operating leases or finance leases. The standard uses a single lessee model which requires a lessee to recognise on the Statement of Financial Position assets and liabilities for all leases with a term of more than 12 months. The standard is effective for annual periods beginning on or after 1 January 2019. The Group does not plan to adopt IFRS 16 early. Initial review has determined that this new standard will likely have a significant financial impact on both the balance sheet and profit and loss given the extent of operating leases the Group is exposed to.
A variety of minor improvements to standards have been made in order to clarify various treatments of specific transactions. These are not expected to have an impact on the Group’s financial results.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

Research and development expenditure on the development of new seed cultivars is recognised in profit or loss as incurred. Development costs of seed cultivars are substantially indistinguishable from the cultivar research costs.

(f) Statement of Cash Flows

The statement of cash flows has been prepared using the direct approach modified by the netting of certain items as disclosed below.

Deposits received less withdrawals are netted as the cash flows are received and disbursed on behalf of customers and reflect the activities of the customers rather than those of the Group.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2018

	FOREIGN CURRENCY REALISED CAPITAL SHARE TRANSLATION AND OTHER REVALUATION HEDGING DEFINED BENEFIT FAIR VALUE RETAINED NON-CONTROLLING TOTAL CAPITAL RESERVE RESERVES RESERVE RESERVE PLAN RESERVE RESERVE EARNINGS INTEREST EQUITY $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 1 July 2016 Total comprehensive income for the period Proft or loss Other comprehensive income Foreign currency translation diferences Changes in fair value of equity instruments, net of tax Efective portion of changes in fair value of cash fow hedges, net of tax Defned beneft plan actuarial gains and losses, net of tax Total other comprehensive income Total comprehensive income for the period Transactions with shareholders, recorded directly in equity Contributions by and distributions to shareholders Dividends to shareholders Total contributions by and distributions to shareholders Transfer to retained earnings Balance at 30 June 2017 Balance at 1 July 2017 Total comprehensive income for the period Proft or loss Other comprehensive income Foreign currency translation diferences Changes in fair value of equity instruments, net of tax Efective portion of changes in fair value of cash fow hedges, net of tax Defned beneft plan actuarial gains and losses, net of tax Total other comprehensive income Total comprehensive income for the period Transactions with shareholders, recorded directly in equity Contributions by and distributions to shareholders Dividends to shareholders Total contributions by and distributions to shareholders Transfer to retained earnings Balance at 30 June 2018	606,324 (8,749) 23,443 556 1,468 (17,170) 2,412 (336,028) 2,043 274,299 – – – – – – – 45,607 704 46,311 – (1,532) – – – – – – 363 (1,169) – – – – – – 240 – – 240 – – – – (1,468) – – – – (1,468) – – – – – 732 – – – 732
	– (1,532) – – (1,468) 732 240 – 363 (1,665)
	– (1,532) – – (1,468) 732 240 45,607 1,067 44,646
	– – – – – – – (28,588) (646) (29,234) – – – – – – – (28,588) (646) (29,234) – – – – – 2,351 (5,239) 2,888 – –
	606,324 (10,281) 23,443 556 – (14,087) (2,587) (316,121) 2,464 289,711
	606,324 (10,281) 23,443 556 – (14,087) (2,587) (316,121) 2,464 289,711 – – – – – – – 17,964 923 18,887 – 6,558 – – – – – – (150) 6,408 – – – – – – – – – – – – – – – – – – – – – – – – – 1,785 – – – 1,785
	– 6,558 – – – 1,785 – – (150) 8,193
	– 6,558 – – – 1,785 – 17,964 773 27,080
	– – – – – – (28,570) (759) (29,329)
	– – – – – – – (28,570) (759) (29,329)
	– – – – – 3,260 (3,260) – –
	606,324 (3,723) 23,443 556 – (9,042) (2,587) (329,987) 2,478 287,462

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2018

31 CAPITAL AND RESERVES

31 CAPITAL AND RESERVES
	No. OF SHARES No. OF SHARES 2018 2017 2018 2017 000 000 $000 $000
On issue at 1 July Share capital on issue at 30 June	754,849 754,849 606,324 606,324
	754,849 754,849 606,324 606,324

All shares are ordinary fully paid shares with no par value, carry equal voting rights and share equally in any profit on the winding up of the Group.

Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as well as from the translation of liabilities that hedge the Group’s net investment in a foreign subsidiary.

Realised capital reserve

The realised capital reserve comprises the cumulative net capital gains that have been realised.

Revaluation reserve

The revaluation reserve relates to historic revaluations of property, plant and equipment.

Hedging reserve

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

Defined benefit plan reserve

The defined benefit plan reserve contains actuarial gains and losses on plan assets and defined benefit obligations. During the year ended 30 June 2018 the amount of $3.26 million was transferred from the defined benefit reserve to retained earnings (30 June 2017: $2.35 million). This amount represents the tax impact of lump sum cash contributions made.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets and equity investments elected at fair value through other comprehensive income until the investments are derecognised or impaired.

Retained earnings

Retained earnings equals accumulated undistributed profit.

Dividends

The following dividends were paid by the Company for the year ended 30 June:

A fully imputed 2018 interim dividend of 1.75 cents per share was paid on 5 April 2018 and a fully imputed 2017 final dividend of 2.0 cents per share was paid on 4 October 2017 (2017: Fully imputed 2017 interim dividend of 1.75 cents per share was paid on 4 April 2017 and a fully imputed 2016 final dividend of 2.0 cents per share was paid on 4 October 2016).

Share Capital Accounting Policies

Ordinary Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Repurchase of Share Capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are cancelled. Treasury stock for which unrestricted ownership has not yet been transferred are not cancelled.

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i

$

' '

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Corporate GOVERNANCE and BOARD CHARTER

Incorporating Disclosure of Compliance with the NZX Corporate Governance Code

1. Introduction

1.1 The Board of PGG Wrightson Limited is committed to acting with integrity and expects high standards of behaviour and accountability from all of PGG Wrightson’s officers and staff. As part of this commitment, the Board has adopted this Corporate Governance Code which incorporates the Board Charter.

Governance section is current as at 30 June 2018 and has been approved by PGG Wrightson’s Board of Directors.

  - The Board’s primary objective is the creation of shareholder value through following appropriate strategies and ensuring effective and innovative use of PGG Wrightson’s resources in providing customer satisfaction. PGG Wrightson will be a good employer and a responsible corporate citizen.

1.3
1.2 This Code complies with the Recommendations in the NZX 2017 Corporate Governance Code (NZX Code) except where specifically disclosed in this annual report. This Corporate

2. Ethical Standards and Code of Conduct

2.1 Directors recognise that it is their role to set high standards of ethical behaviour, model this behaviour and hold management accountable for observing, fostering and delivering high ethical standards throughout the PGG Wrightson Group.

Smarter:

Find ways to be more effective and efficient. Think, decide and act quickly (without compromising quality).

Learn from mistakes and celebrate successes.

2.2 In compliance with NZX Code Recommendation 1.1, the Board has several documents that document minimum standards of ethical behaviour, being the Code of Conduct, Conflict of Interest Policy, Group Fraud Prevention Policy and Whistle-Blower Policy, and the Board Charter listed in section 3 below. In compliance with NZX Code Recommendation 4.2, these policies are all available to view on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance

Teamwork:

Share knowledge and information. Work together to create solutions. Think and act as ‘One-PGW’.

  - The Code of Conduct also requires members and staff of the PGG Wrightson Group to:

2.4
2.3 The Board has developed and adopted a written Code of Conduct which requires all members of the PGG Wrightson Group, including Directors and employees, to observe the highest of standards of ethics and conduct, in alignment with these PGG Wrightson Group Values:
Comply with standards including all applicable laws, regulations, codes, policies and procedures and lawful and reasonable directions;
Behave in a professional manner in a way that upholds the PGG Wrightson Group Values and maintains public confidence in our professionalism, honesty and integrity;

Accountability:

Stand by our word and meet commitments. Be accountable to our customers and each other.

Use PGG Wrightson Group resources, assets, time, funds and information only for their authorised/intended purpose;

Leadership:

Set standards and exceed expectations. Take action and strive to excel. Lead through innovation.

Treat customers, suppliers, other PGG Wrightson personnel and third parties with respect, courtesy and dignity:
Ensure their own and others’ health, safety and wellbeing in the workplace, and protect the environment;

Integrity:

Operate ethically and with integrity. Treat others with respect. Act professionally.

Avoid and/or disclose any Conflicts of Interest (real or apparent). The PGG Wrightson Group has a detailed Conflicts of Interest Policy which contains good practice guidelines surrounding the identification, disclosure and management of staff conflicts of interest;

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Corporate GOVERNANCE and BOARD CHARTER continued

  - disciplinary procedures in place for any breaches. It is the responsibility of the Board to review the Code of Conduct, to implement the Code and to monitor compliance. The Board receives reports on compliance with the Code of Conduct from its internal audit function. No instances of material breaches have been reported. PGG Wrightson has a Whistle-Blower policy that allows any reports of serious wrongdoing including material breaches of the Code of Conduct to be made on a protected disclosure basis, which contains a process for direct access to an independent director, to help encourage a culture of promoting ethical behaviour and being able to speak up.

Follow company policy on receiving and giving gifts and gratuities;
Protect PGG Wrightson Group Assets and comply with our Group Fraud Prevention Policy;
Give proper attention to all matters and create an open communication environment that results in all material items being brought to the attention of the appropriate management.;
Protect the confidentiality of and intellectual property rights in all non-public information about our customers, suppliers, PGG Wrightson personnel and business.
2.7 PGG Wrightson Limited maintains a Directors and Officers
2.5 The Code of Conduct is available to view on PGG Wrightson’s Interests Register which is regularly updated, documenting website at www.pggwrightson.co.nz under Our Company > interests disclosed by all Board members and senior Governance. The Code of Conduct is communicated to all staff management. The statutory disclosures section in the 2018 and is included in regular staff training and inductions. Annual Report is compiled from entries in the Directors Interests Register during the reporting period. Directors may not
2.6 The Code of Conduct provides mechanisms to report breaches participate in Board discussions nor vote on matters in which they
of the Code including unethical behaviour, and specifies the have a personal interest.

3. Board Charter including Board Composition and Performance

3.1 This section 3 outlines the Board’s Charter which is in compliance 3.3 In accordance with NZX requirements, no less than one third of with NZX Code Recommendation 2.1. The Board is committed the total number of Directors are required to be Independent to the principle that there should be a balance of independence, Directors. The Board meets this requirement as it currently has skills, knowledge and experience among Directors so that the three Independent Directors. The Board defines an Independent Board works effectively. Directors are, except where permitted Director as one who:– by law, required to act in the best interests of PGG Wrightson is not an executive of the Company; and
Limited and to give proper attention to the matters before them. The Board is satisfied that the Directors commit the time needed has no disqualifying relationship within the meaning of the to be fully effective in the role. Directors are entitled to seek NZX Listing Rules. independent professional advice to assist them in meeting their The Chairperson is not independent as Guanglin (Alan) Lai has an responsibilities.
The Chairperson is not independent as Guanglin (Alan) Lai has an association with substantial security holder, Agria (Singapore) Pte Limited.
3.2 In compliance with NZX Code Recommendation 2.4, information about each Director is disclosed in this annual report, including a profile of experience, length of service, independence and ownership interests. As at 30 June 2018 the Board had seven Directors. Their experience, qualifications and the value that they contribute to the Board are listed in the Board of Directors biographies set out in the 2018 Annual Report. In addition, John Fulton, Chief Financial Officer of Agria Corporation, is an alternate Director for Joo Hai Lee. In compliance with NZX Code Recommendation 2.8, the Chief Executive is different to the Chairperson, and is not a member of the Board of Directors.
3.4 The statutory disclosures section in the 2018 Annual Report lists the Company’s Directors’ independence status. The Board reviews any determination that it makes on a Director’s independence on becoming aware of any information that indicates that a Director may have a relevant material relationship. Directors are required to immediately advise of any new or changed relationships so the Board can consider and determine its materiality. Directors’ interests including other relevant directorships that they hold are listed on pages 93 to 94 of the 2018 Annual Report. None of the Directors sit on any PGG Wrightson Group companies apart from the parent PGG Wrightson Limited.
3.5 The Constitution contains no provisions for compulsory retirement or a fixed tenure for Directors, although Directors must periodically retire and seek re-election in accordance with the Constitution and NZX Listing Rules. One third of the Directors or, if their number is not a multiple of three, then the number nearest to one-third, retire from office at the Annual Meeting each year.
3.6 In compliance with NZX Code Recommendation 2.2 that every issuer should have a procedure for the nomination and appointment of directors to the Board, this is done as circumstances require. PGG Wrightson Limited has a formal and transparent method for the nomination and appointment of directors to the Board – nominations are publicly called for by notice on the NZX and considered at the Annual Meeting. Checks will be done and key information about a candidate provided to shareholders in the Notice of Annual Meeting, including any material adverse information disclosed in the checks where a candidate is standing for the first time or the term of office if seeking re-election. Directors may be appointed by the Board between Annual Meetings as permitted by the Constitution but are required to seek re-election at the next Annual Meeting. In relation to NZX Code Recommendation 3.4, the Board does not have a nomination Committee to recommend director appointments to the Board as that is carried out by the whole Board.
3.7 The Board has a template Director Letter of Appointment available for use which sets out the written expectations of Directors and which will be used for all new directors in compliance with NZX Code Recommendation 2.3 that an issuer should enter into written agreements with each newly appointed director establishing the terms of their appointment.
3.8 In compliance with NZX Code Recommendation 2.7, the Board has a process to formally review the performance of each

4. Board Committees

4.1 The Board has delegated some of its powers to Board Committees. The Committees are made up of a minimum of three non-Executive Director members and each Committee has a written Board-approved charter which outlines that Committee’s role, rights, responsibilities, membership requirements and relationship with the Board. In compliance with NZX Code Recommendation 2.7, the Board has a process to formally review the performance of each Committee from time

Director and the Board as a whole, not less than every two years. In compliance with NZX Code Recommendation 2.6, Directors are expected to undertake appropriate training to remain current on how best to perform their duties as a director of a listed company. Directors are regularly updated on relevant industry and company issues, undertake visits to PGG Wrightson and customer branches and operations, and receive briefings from Executive Managers from all Business Units. Directors are able to attend PGG Wrightson Business Unit conference sessions to further their training.

3.9 The full Board met in person seven times during the year ended 30 June 2018. Directors also meet on other occasions for strategic planning and held conference calls from time to time as required.
3.10 The Board is responsible for employing the Chief Executive and approving the business strategy. To ensure efficiency, the Board has delegated to the Chief Executive and subsidiary company boards the day to day management and leadership of the PGG Wrightson Group operations. The Company has a formal delegated authority framework and policy that sets out matters reserved for the Board and sub-delegates certain authorities to the Chief Executive and Managers within defined limits. There is a clear understanding of the division of responsibilities between the Board and management.
3.11 In relation to NZX Code Recommendation 3.6, if and when necessary the Board will establish appropriate protocols that set out the procedure to be followed if there is a takeover offer for the issuer including any communication between insiders and the bidder. The protocols will disclose the scope of independent advisory reports to shareholders, the option of establishing an independent takeover committee, and the likely composition and implementation of an independent takeover committee. The Board does not consider it necessary to establish such protocols in advance as standing protocols, but will do so if the need arises.

to time in accordance with the relevant Committee’s written charter. Proceedings of Committees are reported back to the full Board to allow other Directors to question Committee members.

In compliance with NZX Code Recommendation 3.2 and 4.3, senior management only attend Committee meetings at the invitation of the Committee as is considered appropriate. The Committees may appoint advisors as they see fit.
4.2

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Corporate GOVERNANCE and BOARD CHARTER continued

4.3 As at 30 June 2018 the Board had three standing Committees – the Audit Committee, the Remuneration and Appointments Committee and the Committee of Independent Directors. In compliance with NZX Code Recommendation 3.5, the Board has considered but does not think it is currently necessary to have any other Board committees as standing Board committees. Other committees are formed as and when required.
4.4 Audit Committee

In compliance with NZX Code Recommendation 3.1, as explained below the Audit Committee operates under a written charter, membership is majority independent and comprises solely of non-Executive Directors, and the Chair is not also the Chairperson of the Board.

In compliance with NZX Code Recommendation 4.2, the Audit Committee Charter is available on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance.

The majority of the members of the Audit Committee will be Independent Directors and at least one member will have an accounting or financial background. No member of the Audit Committee will be an Executive Director. The members of the Audit Committee are currently B R Irvine (Chairman), J E Nichol and Joo Hai Lee. The Chair of the Audit Committee is different to the Board Chair. The Audit Committee has appropriate financial expertise, with all members having an accounting or financial background. The Audit Committee met four times during the financial year.

The main responsibilities of the Audit Committee are:
Ensuring the effectiveness of the accounting and internal control systems;
Ensuring the Board is properly and regularly informed and updated on corporate financial matters;
Monitoring and reviewing the independent and internal auditing practices;
Recommending the appointment and removal of the external auditor and considering a change in the lead audit partner where the auditors continue in office for a period exceeding five years;
Ensuring that the ability and independence of the auditors to carry out their statutory audit role is not impaired, or could reasonably be perceived to be impaired;
To interface with management, internal auditors and external auditors and review the financial reports, as well as advising all Directors whether they comply with appropriate laws and regulations;
Overseeing matters relating to the values, ethics and financial integrity of the Group;
To report Audit Committee proceedings back to the Board.

The Audit Committee has the authority to appoint outside legal or other professional advisors if it considers necessary. The Audit Committee on occasions meets with the internal auditors and external auditors without the management present.

4.5 Remuneration and Appointments Committee

NZX Code Recommendation 3.3 is partially complied with in that the Remuneration and Appointments Committee operates under a written Charter, however the majority of members are not independent directors as the Committee is comprised of the full Board. In compliance with NZX Code Recommendation 4.2 the Charter is available on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance.

The Remuneration and Appointments Committee is chaired by Guanglin (Alan) Lai, and its members are the remainder of the Board. The Remuneration and Appointments Committee met once as part of a full Board meeting, during the financial year.

The main responsibilities of the Remuneration and Appointments Committee are:

To undertake an annual performance appraisal of the Chief Executive and review the appraisal of direct reports to the Chief Executive;
To review compensation policy and procedures, including employee benefits and superannuation, and recommend to the Board remuneration changes for the Chief Executive and direct reports to the Chief Executive;
To review succession planning and senior management development plans;
To report Committee proceedings back to the Board.

In addition a subcommittee of the Remuneration and Appointments Committee was established during the year, chaired by Trevor Burt, for the purpose of recruiting the new Chief Executive, culminating in the appointment of Ian Glasson,

The role of the Remuneration and Appointments Committee as set out in its Charter will be expanded to include the function of recommending remuneration packages for Directors to shareholders in future when such a recommendation to shareholders is put forward. NZX Code Recommendation 5.1 will continue to be complied with, being that director remuneration is put to shareholders for approval in a transparent manner.

5. Reporting and Disclosure

all Directors and staff which incorporates all insider trading restraints. The Securities Trading Policy is available at www.pggwrightson.co.nz under Our Company > Governance. The Securities Trading Policy specifies that no Director or employee may buy or sell PGG Wrightson shares while in possession of inside information. Inside information is information that is not generally available and, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of PGG Wrightson shares. The policy also states that Directors and staff in possession of inside information cannot directly or indirectly advise or encourage any person to deal in PGG Wrightson shares. Compliance with the Securities Trading Policy is monitored through the consent process and by education and notification by PGG Wrightson’s share registrar Computershare when any Director or Officer engages in trading activities. All trading in PGG Wrightson shares by Directors and Officers is disclosed to the NZX.

5.1 The Board endorses the principle that it should demand integrity both in financial reporting and in the provision by management of information of sufficient content, quality and timeliness to enable the Board to effectively discharge its duties. In compliance with NZX Code Recommendation 4.3, PGG Wrightson considers that its financial reporting is balanced, clear and objective.
5.2 The Company will provide timely and adequate disclosure of information on matters of material impact to shareholders and comply with the continuous disclosure and other listing requirements of the NZX relating to shareholder reporting. In compliance with NZX Code Recommendation 4.1, the Board has adopted a Continuous Disclosure Policy which is available on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance. In compliance with NZX Code Recommendation 4.3, PGG Wrightson provides non-financial disclosure in its Annual Report, including considering material exposure to environmental, economic and social sustainability risks and other key risks, risk management and relevant internal controls. The Company also communicates through the Interim and Annual Reports, releases to the NZX and media, and on its website at www.pggwrightson.co.nz.
- In compliance with NZX Code Recommendation 2.5, the Board has a Diversity Policy which is available at www.pggwrightson.co.nz under Our Company > Governance. Attributes that are particularly relevant to PGG Wrightson are culture, ethnicity/nationality, gender and skills. The Board has evaluated PGG Wrightson’s performance against its Diversity Policy objectives which relate to the working environment, employment and selection opportunities, Board appointment recommendations, leadership training and HR management support, and considers that these objectives have been met.
5.5
5.3 PGG Wrightson has established and will maintain processes for the provision of information to the Board by management of sufficient content, quality and timeliness, as the Board considers necessary to enable the Board to effectively discharge its duties. The Board receives assurances from the Chief Executive Officer and Chief Financial Officer that the Directors’ declaration provided in accordance with International Financial Reporting 5.6 Standards (IFRS) and NZ IFRS is founded on a sound system of risk management and internal control, and that the system is operating effectively in all material respects in relation to financial reporting risks.
The table below lists the numerical quantitative breakdown of the gender composition of PGG Wrightson’s Board of Directors and its Officers as at 30 June 2018 and comparative figures for 30 June 2017. An Officer means a person, however designated, who is concerned or takes part in the management of PGG Wrightson Limited’s business, but excludes a person who does not report directly to the Board or who does not report directly to a person who reports to the Board.
5.4 In compliance with NZX Code Recommendation 1.2, the Company has a detailed securities trading policy applying to

PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON GROUP	PGG WRIGHTSON GROUP
BOARD OF DIRECTORS AS AT	BOARD OF DIRECTORS AS	OFFICERS	OFFICERS	WORKFORCE*	WORKFORCE*
30 JUNE 2018	AT 30 JUNE 2017	AS AT 30 JUNE 2018	AS AT 30 JUNE 2017	AS AT 30 JUNE 2018	AS AT 30 JUNE 2017
Number of Males 7	7	11	12	1408	1327
Percentage of Males 100%	100%	91%	93%	65%	67%
Number of Females 0	0	1	1	753	657
Percentage of Females 0%	0%	9%	7%	35%	33%

Calculation methodology excludes casuals, fixed term employees and independent commission agents/independent contractors.

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Corporate GOVERNANCE and BOARD CHARTER continued

6. Director and Executive Remuneration

6.1 The Board is committed to the policy that remuneration of Directors and executives should be transparent, fair and reasonable.
6.2 The Board’s Remuneration Policy for Directors is that Directors’ fees in aggregate must be formally approved by shareholders. In compliance with NZX Code Recommendation 5.1, the statutory disclosures section in the 2018 Annual Report lists the Company’s Directors’ actual remuneration including any Board Committee fees paid. There are no performance incentives for any Directors. The Board has not elected to create a performance based Equity Security Compensation Plan. Further the Board supports Directors investing a portion of their Directors’ remuneration in purchasing shares in the Company but it does not consider this should be mandatory.

7. Risk Management

7.1 In compliance with NZX Code Recommendation 6.1, PGG Wrightson has in place a risk management framework for its business, the Board receives and reviews regular reports, and has in place a framework to manage any existing risks and to report the material risks facing the business and how these are being managed.
7.2 It is the responsibility of the Board to monitor the broader risk management processes in place to identify and manage potential and relevant risks. Directors have a sound understanding of the key risks faced by the business.
7.3 In discharging this obligation the Board has:
In conjunction with the Chief Executive, Audit Committee, internal and external audit, set up and monitored rigorous processes for risk management and internal controls to ensure that management prudently and efficiently manage resources, and the identification of the nature and magnitude of the Company’s material risks. PGG Wrightson has a comprehensive Risk Policy and Group Risk Management Framework.
6.3 The Board considers that it partially complies with NZX Code Recommendation 5.2, being that PGG Wrightson’s remuneration policy for remuneration of Officers outlines the relative weightings of remuneration components and relevant performance criteria. Directors’ remuneration does not have performance criteria attached to it.
6.4 All executive remuneration incentives align with financial and non-financial performance measures relating to PGG Wrightson’s objectives, and are compatible with PGG Wrightson’s risk management policies and systems.
Considered the nature and extent of risks the Board is willing to take to achieve its strategic objectives. The Company is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore takes on controlled amounts of risk when considered appropriate;
In conjunction with the Chief Executive and Audit Committee, reviewed the effectiveness and integrity of compliance and risk management systems within the business. The Board receives and reviews regular reports on the operation of the risk management framework that includes policies and internal control processes, as well as any developments in relation to key risks. Reports include oversight of the Company’s risk register and highlight the main risks to the Company’s performance and the steps being taken to manage these;
Established a separate management Risk and Compliance Committee that is responsible for the oversight of business risks and future risk strategy.
7.5 In compliance with NZX Code Recommendation 6.2, PGG Wrightson has on page 7 of this 2018 Annual Report disclosed how it manages its health and safety risks and has reported on our health and safety risks, performance and management. In August 2017, we revised our governance structure for managing health and safety and formed a Group Health & Safety Committee represented by Senior management, including the Chief Executive and Chief Financial Officer, and two Board members.
7.4 The Board maintains insurance coverage with reputable insurers for relevant insurable risks and recently renewed its insurance policies in accordance with the policy approach determined by the Board.

8. Independent Auditors

  - 8.3  To ensure there is no conflict with other services that may be provided by the external auditors, the Company has adopted a policy whereby the external auditors will not provide any other services unless specifically approved by the Audit Committee. The external auditors KPMG did provide some small value non-financial statement audit work in the year ended 30 June 2018 which was pre-approved by the Audit Committee. The nature of the types of work completed and the remuneration received is disclosed on page 46 of the financial statements. The external auditors confirmed in their audit report on pages 81– 84 of this Annual Report that those matters did not impair their independence as auditor of the Group.

8.1 In compliance with NZX Code Recommendation 7.1, the Board has established a framework as set out below for the Company’s relationship with its external auditors. This includes procedures:
(a) for sustaining communication with the external auditors;
(b) to ensure that the ability of the external auditors to carry out their statutory audit role is not impaired, or could reasonably be perceived to be impaired;
(c) to address what, if any, services (whether by type or level) other than their statutory audit roles may be provided by the auditors; and
(d) to provide for the monitoring and approval by the Audit Committee of any service provided by the external auditors other than in their statutory audit role.
- In compliance with NZX Code Recommendation 7.2, the external auditor attends the Annual Meeting to answer questions from shareholders in relation to the audit.
8.4
8.2 The Board subscribes to the principle that it has a key function to ensure the quality and independence of the external 8.5 audit process. The Board operates formal and transparent procedures for sustaining communication with PGG Wrightson’s independent and internal auditors. The Board seeks to ensure that the ability, objectivity and independence of the auditors to carry out their statutory audit role is not compromised or impaired or could reasonably be perceived to be compromised or impaired. The auditors are invited to attend all Audit Committee meetings (except where auditor remuneration is discussed). This attendance can include invitations for private sessions between the Audit Committee and the external auditor without management present. In addition the lead audit partner of the external auditor is rotated at least every five years.
In compliance with NZX Code Recommendation 7.3, PGG Wrightson’s internal audit functions are disclosed here. The internal audit function comprises a Team Leader and an Internal Audit Manager supported by a co-source partner. The internal audit function is responsible for carrying out audits in accordance with the internal audit plan approved by the Audit Committee. The function reviews and reports on the effectiveness of internal control systems and processes for the Company.

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Corporate GOVERNANCE and BOARD CHARTER continued

Statutory DISCLOSURES

The following particulars of notices were given by Directors of the Company pursuant to section 140(2) of the Companies Act 1993 for the year 1 July 2017 to 30 June 2018

9. Shareholder Relations and Stakeholders

9.1 While the Company does not have a formal shareholder or stakeholder relations policy, the Board actively fosters constructive relationships with its shareholders, as appropriate. The Board is at all times cognisant of the need to protect and act in the best interests of the Company’s shareholders.

it, including providing the option to receive communications electronically. The Company has continued to seek to improve shareholder participation, efficiency and cost effectiveness of communication with shareholders by again offering them its e-comms programme, where shareholders can elect to move all their security holder communication to full electronic communications for the future.

9.2 In compliance with NZX Code Recommendation 8.1, PGG Wrightson’s website www.pggwrightson.co.nz has an Investors Section where investors and interested stakeholders can access financial and operational information and key corporate governance information. This contains key governance documents and policies, contact details for investor matters, current and past Annual Reports, notices of meetings and other key dates in the investor schedule, a list of shareholders’ frequently asked questions, media releases, periodic financial information, dividend histories and other information. PGG Wrightson lists its Business Unit descriptions and key activities on its website, and its releases contain information on business goals and performance. The Company encourages shareholder participation at the Annual Meeting, by providing as an item of General Business, the conducting of a shareholder discussion, where a reasonable opportunity is given for shareholders to question, discuss or comment on the management of the Company.
9.4 The Company considers its significant stakeholders to be its shareholders (including institutional investors), its staff, its customers, suppliers and contractors. When undertaking its operations and activities, the Company respects the interests of its stakeholders within the context of its ownership type and the Company’s fundamental purpose. The Board considers that the Company’s conduct adheres to widely accepted ethical, social and environmental norms.
9.5 In compliance with NZX Code Recommendation 8.3, shareholders have the right to vote on major decisions which may change the nature of the Company.
9.6 In compliance with NZX Code Recommendation 8.4, each shareholder has one vote per share equally with other shareholders.
9.7 In compliance with NZX Code Recommendation 8.5, the
9.3 In compliance with NZX Code Recommendation 8.2, PGG shareholders’ Notice of Annual Meeting is posted on the website Wrightson allows investors the ability to easily communicate with as soon as possible and at least 28 days prior to the meeting.

10. Annual Review

10.1 A review of this Corporate Governance Code and associated processes and procedures is completed on an annual basis to ensure the Company adheres to best practice governance principles (as promulgated by the relevant authoritative bodies) and maintains high ethical standards.

DIRECTOR	INTEREST	ORGANISATION
G Lai
Chairman	Chairman	Softpower International Limited (HKSE:0380) (Interest ceased during the year)
		Agria Corporation
		Agria Corporation (New Zealand) Limited
		Brothers Capital Limited
	Director	Singapore Zhongxin Investments Co. Limited
	Vice Chairman	China Chamber of Commerce, New Zealand
		Shenzhen General Chamber of Commerce, China
T J Burt
Deputy Chairman	Chairman	Ngai Tahu Holdings Corporation Limited
		Ngai Tahu Capital Limited
		Lyttelton Port Company Limited
	Director	Agria Asia Investments Limited
		Agria (Singapore) Pte Limited
		Landpower Holdings Limited
		Market Gardeners Limited
		Silver Fern Farms Limited
	Director/Shareholder	Noblesse Oblige Limited_(previously known as Chambers at Hazeldean Limited)_
		Breakaway Investments Limited
		Eastern Dynasty Limited
		Hossack Station Limited
		Pile Bay Partners Limited
		Tai Tapu Partners Limited
	Trustee	Burt Family Trust
		Christs College
		Maia Health Foundation
B R Irvine
	Director	Godfrey Hirst NZ Limited and Subsidiaries (interest ceased during the year)

Godfrey Hirst NZ Limited and Subsidiaries (interest ceased during the year) Heartland Bank Limited and Subsidiaries House of Travel Holdings Limited Market Gardeners Limited and Subsidiaries Rakon Limited and Subsidiaries Scenic Hotels Limited Skope Industries Limited BR Irvine Limited

Director/Shareholder

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DIRECTOR

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Statutory DISCLOSURES continued

Directors’ Remuneration

J H Lee

J E Nichol

INTEREST ORGANISATION

Director Hayflux Limited Sinocloud Group Limited Agria Corporation Agria (Singapore) Pte Ltd Lung Kee (Bermuda) Holdings Limited Raffles United Holdings Limited

Director Watson & Son Limited Director/Shareholder Optica Life Accessories Limited

The following persons held office, or ceased to hold office, as a Director during the year to 30 June 2018 and received the following remuneration (including the value of any benefits). Fees are not paid for membership of the Remuneration & Appointments Committee. Figures are gross and exclude GST (if any):

					TOTAL
DIRECTOR		DIRECTOR’S FEES		AUDIT COMMITTEE	REMUNERATION
G Lai	Chairman	$210,000.00		–	$210,000.00
T J Burt	Deputy Chairman	$120,000.00		–	$120,000.00
B R Irvine		$80,000.00	Chairman	$20,000.00	$100,000.00
J H Lee(1)		$53,260.87		$6,657.61	$59,918.48
J E Nichol		$80,000.00		$10,000.00	$90,000.00
L S Seah		$80,000.00		–	$80,000.00
W K Tsang(2)		$23,478.26		$2,934.78	$26,413.04
Kean Seng U		$80,000.00		–	$80,000.00

(1) Appointed 31 October 2018

(2) Resigned 16 October 2017

L S Seah

Kean Seng U

Chairman Nucleus Connect Pte Limited Director M&C Reit Management Limited M&C Business Trust Management Limited Global Investments Limited Telechoice International Limited Yanlord Land Group Limited Sole Proprietor Soft Capital Sg

Head of Corporate Agria Corporation and Legal Affairs

Directors’ Shareholdings

No Directors of PGG Wrightson Limited hold shares in PGG Wrightson, however T J Burt, G Lai, J H Lee and Kean Seng U are associated persons of substantial security holders Agria (Singapore) Pte Ltd, Agria Asia Investments Limited, Agria Group Limited and Agria Corporation (together Agria Group), and Ngai Tahu Capital Limited, with Agria (Singapore) Pte Limited holding 379,068,619 shares as at 30 June 2018 (379,068,619 as at 30 June 2017).

Directors’ Share Transactions

No Directors of the Company have notified the Company of any share transactions between 1 July 2017 and 30 June 2018.

NZX Waivers

No waivers have been granted and published by the NZX during the 12 months ending 30 June 2018.

Directors’ Indemnity and Insurance

In accordance with section 162 of the Companies Act 1993 and the Constitution of the Company, the Company has insured Directors and Officers against liabilities to other parties that may arise from their positions as Directors and Officers of the Company, Subsidiaries and Associates. This insurance does not cover liabilities arising from criminal actions and deliberate and reckless acts or omissions.

Use of Company Information by Directors

In addition, T J Burt and J E Nichol advised that they hold interests in farming operations that transact business with PGG Wrightson Group companies on normal terms of trade.

Directors’ Independence

The Board has determined that as at 30 June 2018, as defined under the NZSX Listing Rules:

The following Directors are Independent Directors: B R Irvine, J E Nichol, and L S Seah.

The following Directors are not Independent Directors by virtue of their association with a substantial security holder: G Lai, T J Burt, J H Lee and Kean Seng U.

The Board has implemented a protocol governing the disclosure of Company information to its substantial security holders. In accordance with this protocol and section 145 of the Companies Act 1993, T J Burt, G Lai, J H Lee and Kean Seng U have given notice that they may disclose certain information to Agria Corporation in order to seek, and inform the Board of, its view as to the governance and operation of the Company and in order to enable Agria Corporation to comply with certain statutory obligations.

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Statutory DISCLOSURES continued

Employee Remuneration

Set out below are the numbers of employees of the Company and its subsidiaries who received remuneration and other benefits of $100,000 or more during the year, in their capacity as employees. The schedule includes:

The schedule excludes:

amounts paid post 30 June 2018 that related to services provided in the 2018 financial year;

telephone concessions to some employees that can include free telephone line rental, national and international phone calls and online services;
all monetary payments actually made during the year, including redundancies and the face value of any at-risk long-term incentives granted, where applicable;
independent real estate/livestock commission agents;
the employer’s contributions to superannuation funds, retiring entitlements, health insurance schemes and payments to terminating employees (e.g. long service leave);
any benefits received by employees that do not have an attributable value.

The remuneration details of employees paid outside of New Zealand have been converted into New Zealand dollars. No employees appointed as a director of a subsidiary company of PGG Wrightson Limited receives or retains any remuneration or other benefits from PGG Wrightson Limited for acting as such.

livestock employees who are remunerated on a commission basis and whose remuneration fluctuates materially from year to year. Livestock remuneration includes incentives paid in the current year that were earned in respect of the prior year’s performance.

$100,000 – 110,000
92
$110,001 – 120,000
64
$120,001 – 130,000
35
$130,001 – 140,000
47
$140,001 – 150,000
34
$150,001 – 160,000
32
$160,001 – 170,000
19
$170,001 – 180,000
17
$180,001 – 190,000
16
$190,001 – 200,000
14
$200,001 – 210,000
12
$210,001 – 220,000
5
$220,001 – 230,000
6
$230,001 – 240,000
9
$240,001 – 250,000
3
$250,001 – 260,000
5
$260,001 – 270,000
4
$270,001 – 280,000
3
$280,001 – 290,000
3
$290,001 – 300,000
2
REMUNERATION RANGE
NUMBER OF EMPLOYEES

REMUNERATION RANGE
NUMBER OF EMPLOYEES

$300,001 – 310,000
1
$310,001 – 320,000
2
$320,001 – 330,000
4
$330,001 – 340,000
4
$340,001 – 350,000
4
$350,001 – 360,000
1
$360,001 – 370,000
4
$370,001 – 380,000
1
$380,001 – 390,000
1
$410,001 – 420,000
2
$430,001 – 440,000
1
$440,001 – 450,000
1
$500,001 – 510,000
1
$540,001 – 550,000
1
$620,001 – 630,000
1
$680,001 – 690,000
1
$720,001 – 730,000
1
$750,001 – $760,000
1
$2,180,001 – $2,190,000
1

The Board’s Remuneration and Appointments Committee approves the Group’s remuneration policy. The Committee also reviews and recommends to the Board for approval the remuneration of the Chief Executive Officer and the remuneration of the executives who report directly

In compliance with the NZX Code Recommendation 5.3, the remuneration arrangements in place for PGG Wrightson’s Chief Executive’s over the relevant periods are:

In the year ended 30 June 2018 payments totalling $2,186,736 were made to Mark Dewdney as follows:

As at 30 June 2018 remuneration arrangements in place for Ian Glasson for the FY2019 year are as follows:

$600,423.50 – part year base salary (incl. annual leave entitlements on termination).
Base salary - $1,250,000 (gross).
Annual Short Term incentive - $375,000 (gross). Performance criteria being Financial Results, Strategic Objectives and Health and Safety performance and culture.
$1,443,352 – payment received upon completion of employment contract.
$142,961 – 50% achieved of the on-target short term incentive with the following performance criteria - Financial Results (50%), Strategic Objectives (40%) and Health & Safety performance and culture (10%).
Long Term incentive - $1,000,000 (gross) with an additional potential stretch payment up to a maximum of $250,000
(gross). Performance criteria being unlocking shareholder value.

General Disclosures

Subsidiary Company Directors

The following persons held the office of Director of the respective subsidiaries (as defined in the Companies Act 1993) during the year on behalf of the Group. Directors appointed (A) or who resigned (R) during the year are indicated. Staff appointments do not receive Director fees or other benefits as a Director. Unless otherwise indicated, Group ownership is 100%.

LEGAL COMPANY NAME	PGG WRIGHTSON DIRECTORS
New Zealand Companies
Agricom Limited	JS Daly, MB Dewdney (R), JD McKenzie, I Glasson (A)
Agriculture New Zealand Limited	JS Daly, MB Dewdney (R), I Glasson (A)
Ag Property Holdings Limited	JS Daly, MB Dewdney (R), I Glasson (A)
Agri Optics New Zealand Limited (33%)	JD McKenzie, DP Lynch (R), S Guerin (A)
AgriServices South America Limited	JS Daly, MB Dewdney (R), I Glasson (A)
Bloch & Behrens Wool (NZ) Limited(1)	JS Daly, CJ Bayly (R), MB Dewdney (R), I Glasson (A), G Edwards (A)
Forage Innovations Limited (51%)	DHF Green, JD McKenzie
Grasslands Innovation Limited (70%)	AW Elliott (R), DHF Green, JD McKenzie, JD Stewart (A)
NZ Agritrade Limited(1)	JS Daly, MB Dewdney (R), SJ Guerin, I Glasson (A)
PGG Wrightson Consortia Research Limited	JS Daly, MB Dewdney (R), JD McKenzie, I Glasson (A)
PGG Wrightson Employee Benefts Plan Limited	Sir Selwyn Cushing (R), CD Adam, BR Burrough (R), JS Daly, GR Davis, SJ Guerin
PGG Wrightson Employee Benefts Plan Trustee Limited(2)	Sir Selwyn Cushing (R), CD Adam, BR Burrough (R), PR Drury, GR Davis, SJ Guerin
PGG Wrightson Investments Limited	JS Daly, MB Dewdney (R), I Glasson (A)
PGG Wrightson Real Estate Limited(1)	JS Daly, MB Dewdney (R), I Glasson (A)
PGG Wrightson Seeds Limited(1)	JS Daly, MB Dewdney (R), JD McKenzie, I Glasson (A)
PGG Wrightson Seeds Holdings Limited	JD McKenzie, MB Dewdney (R), I Glasson (A)

(1) P Scott was appointed as an Alternate director for M Dewdney

(2) J Daly resigned as a director however was appointed as an Alternate director.

96 | PGG WRIGHTSON LIMITED

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Statutory DISCLOSURES continued

Shareholder INFORMATION

PGG Wrightson Limited is quoted on the New Zealand Stock Market of NZX Limited (code PGW). As at 31 July 2018, PGG Wrightson Limited had 754,848,774 ordinary shares on issue.

LEGAL COMPANY NAME

PGG WRIGHTSON DIRECTORS

New Zealand Companies – continued

PGG Wrightson Seeds New Zealand Limited

PGG Wrightson Seeds South America Holdings Limited PGG Wrightson Trustee Limited

PGW Corporate Trustee Limited (Voluntarily removed from the Companies Register) PGW Rural Capital Limited

Sheffield Saleyards Co Limited (53.5%) Wrightson Seeds Limited

JD McKenzie, MB Dewdney (R), I Glasson (A) JS Daly, MB Dewdney (R), I Glasson (A) Sir Selwyn Cushing (R), JS Daly, SJ Guerin JS Daly, MB Dewdney

JS Daly, MB Dewdney (R), I Glasson (A) FA Fowler (R), RG Nordstom (A) MB Dewdney (R), JD McKenzie, I Glasson (A)

Substantial Security Holders

At 31 July 2018, the following security holder had given notice in accordance with the then Securities Markets Act 1988 that it was a substantial security holder in the Company. The number of shares shown below are as advised in the substantial security holder notice to the Company.

SHAREHOLDER	NUMBER OF SHARES	DATE OF NOTICE
Agria Group, New Hope Group and Ngai Tahu Capital Ltd*	379,068,619	28 June 2011

Nature of connection between parties associated with substantial security holder: Agria Group, New Hope Group and Ngai Tahu Capital Limited are each party to a shareholders agreement dated 17 April 2011 together with Agria (Singapore) Pte Limited and Agria Asia Investments Limited.

Australian Companies

AGR Seeds Pty Limited (Voluntarily removed from the Companies Register) Agricom Australia Seeds Pty Limited

AW Seeds Pty Limited (Voluntarily removed from the Companies Register) PGW AgriServices Australia Pty Limited (Voluntarily removed from the Companies Register) PGG Wrightson Seeds Australia Holdings Pty Ltd PGG Wrightson Seeds (Australia) Pty Limited

SP Seeds Pty Limited (Voluntarily removed from the Companies Register)

South American Companies

Afinlux S.A. (51.2%) (Uruguay) Agrosan S.A. (Uruguay) PGG Wrightson Seeds Argentina S.A. APL San Jose S.A. (60%) (Uruguay) Escritorio Romualdo Rodriguez Ltda (99.6%) (Uruguay) Hunker S.A. (Uruguay) Juzay S.A. (Uruguay) Kroslyn S.A. (Uruguay) Lanelle S.A. (Uruguay)

PGW Sementes Ltda (97.22%) (Brazil) Patagonia Seeds Sociedad Anonima (75%) (Argentina) PGG Wrightson Uruguay Limited S.A. (Uruguay) PGW AgriTech South America S.A. (Uruguay) Wrightson Pas S.A. (Uruguay)

MB Dewdney, JD McKenzie, J Stewart

MB Dewdney (R), JD McKenzie, J Stewart, I Glasson (A) MB Dewdney, JD McKenzie, J Stewart

MB Dewdney, J Stewart

MB Dewdney (R), JD McKenzie, J Stewart, I Glasson (A) MB Dewdney (R), JD McKenzie, J Stewart, I Glasson (A) MB Dewdney, JD McKenzie, J Stewart

M Banchero, R Rodriguez, JD McKenzie M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, R Moyano, E Beccar Varela, MD Auro M Banchero, A Ponte, F Valverde

M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, H De Boni M Banchero, JM Allonca

M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A) M Banchero, JD McKenzie, MB Dewdney (R), I Glasson (A)

Twenty Largest Registered Shareholders

The 20 largest shareholders in PGG Wrightson Limited as at 31 July 2018 were:

SHAREHOLDER	SHAREHOLDER	NUMBER OF SHARES HELD	% OF SHARES HELD
1.	Agria (Singapore) Pte Limited	379,068,619	50.22
2.	HSBC Nominees (New Zealand) Limited*	30,723,836	4.09
3.	Forsyth Barr Custodians Limited	23,804,989	3.16
4.	FNZ Custodians Limited	14,112,616	1.87
5.	Masfen Securities Limited	11,401,353	1.51
6.	Accident Compensation Corporation*	7,057,511	0.94
7.	Citibank Nominees (New Zealand) Limited*	4,861,934	0.59
8.	BNP Paribas Nominees (NZ) Limited	4,484,611	0.92
9.	Custodial Services Limited	3,704,544	0.49
10.	Leveraged Equities Finance Limited	3,459,301	0.46
11.	JP Morgan Chase Bank NA*	3,383,803	0.45
12.	Philip Carter	3,358,702	0.44
13	H & G Limited	3,067,323	0.41
14.	Michael Benjamin	3,000,000	0.40
15	Arden Capital Limited	2,004,605	0.27
16.	Nicolas Kaptein	2,000,410	0.27
17.	Woolf Fisher Trust Incorporated	1,850,000	0.25
18.	Totara Grove Investments Limited	1,800,000	0.24
19.	Gamma Trustee Limited	1,614,475	0.21
20.	Robert and Lesley Cottrell	1,609,144	0.21

New Zealand Central Securities Depository Limited

98 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 99

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Shareholder INFORMATION continued

Corporate DIRECTORY

Company number 142962 NZBN 9429040323497

Analysis of Shareholdings

Distribution of ordinary shares and shareholdings at 31 July 2018 was:

	NUMBER OF	NUMBER OF	% OF
SIZE OF HOLDING	SHAREHOLDERS	SHARES	SHARES
1 - 99	30	1,716	0.00
100 - 199	84	12,632	0.00
200 - 499	531	172,115	0.02
500 – 999	1,651	1,137,907	0.15
1,000 – 1,999	1,783	2,529,403	0.34
2,000 - 4,999	2,193	7,030,027	0.93
5,000 – 9,999	1,607	10,836,905	1.44
10,000 – 49,999	3,131	66,567,375	8.82
50,000 – 99,999	604	39,386,094	5.22
100,000 – 499,999	444	76,977,520	10.20
500,000 – 999,999	39	25,848,531	3.42
1,000,000 and above	34	524,349,089	69.46
Total	12,131	754,848,774	100.00

Registered addresses of shareholders as at 31 July 2018 were:

	NUMBER OF	% OF	NUMBER OF	% OF
ADDRESS	SHAREHOLDERS	SHAREHOLDERS	SHARES	SHARES
Singapore	8	0.07	379,627,600	50.29
New Zealand	11,861	97.77	372,281,289	49.32
Australia	130	1.07	1,326,805	0.18
Other	132	1.09	1,613,080	0.21
Total	12,131	100.00	754,848,774	100.00

Board of Directors

for the Year Ending 30 June 2018 Guanglin (Alan) Lai Chairman

Ian Glasson Guanglin (Alan) Lai Chairman Chief Financial Officer Trevor Burt Deputy Chairman Peter Scott Bruce Irvine Joo Hai Lee General Manager, Strategy and John Fulton is an Alternate Director Corporate Affairs/Company for Joo Hai Lee Secretary John Nichol Julian Daly Lim Siang (Ronald) Seah Kean Seng U

Managing your shareholding online:

To change your address, update your payment instructions and to view your investment portfolio, including transactions, please visit:

www.investorcentre.com/nz

General enquiries can be directed to: Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna, Auckland 0622

Registered Office

PGG Wrightson Limited 57 Waterloo Road Hornby Christchurch 8042

PO Box 292 Christchurch 8140 Telephone: 0800 10 22 76 (NZ only) +64 3 372 0800 (International) Email: [email protected]

Auditors

KPMG Level 5 79 Cashel Street PO Box 1739 Christchurch 8140 Telephone +64 3 363 5600

8[ [email protected]]
Private Bag 92119, Auckland 1142, New Zealand
)[ Telephone +64 9 488 8777 ]
6[Facsimile +64 9 488 8787]
Please assist our registrar by quoting your CSN or shareholder number.

100 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2018 | 101

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Helping grow the country
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AI assistant

PGG Wrightson Limited — Annual Report 2018

66253_rns_2018-09-28_cd7d4574-1c8a-465a-9d4e-0290f125c5b7.pdf

CONTENTS

Introduction

Our Company

Financial information

Governance

CALENDAR DATES

Half-year earnings announcement

Deputy Chairman and Chief Executive Officer’s REPORT

MARKET CONDITIONS

OUR PEOPLE

OPERATING EBITDA

HEALTH, SAFETY AND WELLBEING

NET PROFIT AFTER TAX

CASH FLOW

DIVIDENDS

OUTLOOK

GOVERNANCE AND EXECUTIVE

TEAM CHANGES

ACKNOWLEDGEMENTS

BOARD OF DIRECTORS

GUANGLIN ALAN LAI

Bachelor of Business (Accounting), M.Fin, FCPA Chairman

TREVOR BURT

B.Sc

Deputy Chairman

BRUCE IRVINE

B.Com, LLB, FCA, AF Inst D Independent Director

JOO HAI LEE

ACA (ICAEW), CPA (Australia), FCCA (UK), CA (ISCA)

JOHN NICHOL

CA

Independent Director

LIM SIANG RONALD SEAH

B.Soc.Sc (Hons in Economics) Independent Director

JOHN FULTON

WAH KWONG WK TSANG

IAN GLASSON

JULIAN DALY

GRANT EDWARDS

General Manager Wool

DAVID GREEN

STEPHEN GUERIN

JOHN MCKENZIE

Group General Manager Seed and Grain

PETER MOORE

General Manager Livestock

PETER NEWBOLD

RACHEL SHEARER

General Manager Real Estate

General Manager Human Resources

THE YEAR IN REVIEW

Livestock

Real Estate

Wool

Insurance and Finance Commissions

The year in review RETAIL AND WATER GROUP

Retail and Water Highlights

Agritrade

Rural Supplies

Fruitfed Supplies

Water

The year in review SEED AND GRAIN GROUP

Seed and Grain’s Operating EBITDA reduced by $1.4 million (or 4 percent) to $35.6 million. Revenues were 4 percent higher than last year.

Seed and Grain Highlights

New Zealand

Australia

South America

Working with PGW

AGENCY GROUP

Surety of water supply provides opportunities for Creekside Farms

RETAIL AND WATER GROUP

Our crop monitoring team specialises in early detection

Ecotain®

SEED AND GRAIN GROUP

Research team discovers ‘weed’ has valuable nitrogen mitigation properties

Agricom team recognised

Sale of PGW SEEDS

PGG Wrightson Limited Annual Report 2018