METLIfECARE LIMITED annUal RePoRT 2012
For the year ended 30 June 2012 The annual Meeting of shareholders of Metlifecare limited will be held at the Pakuranga Hunt Room, 2nd fl oor, ellerslie stand, ellerslie event Centre, 80-100 ascot avenue, greenlane east, auckland, on Tuesday 30 october 2012, commencing at 3.00pm.
METLIFECARE 2 LIMITED ANNUAL REPORT 2012 Table of ConTenTs
RePoRT To sHaReHolDeRs Chairman’s Managing Executive Directors’ Villages Report Director / Team Profiles and Care CEO’s Report Profiles Facilities 06 08 10 11 12
fInanCIal sTaTeMenTs Directors’ Statements of Statements of Balance Cash Flow Report Comprehensive Movements in Sheets Statements Income Equity 14 15 16 17 18 Notes to the Independent Financial Auditors’ Statements Report 19 59
sTaTUToRY InfoRMaTIon Corporate Interests’ Other Other Shareholder Governance Register Director Statutory Information Statement Information Information 62 70 77 78 79
Directory 81
METLIFECARE LIMITED 3 ANNUAL REPORT 2012 2012 sUMMaRY fInanCIal KeY evenTs CHanges In ResUlTs u Strategic review of capital THe boaRD of u Sales up 12% over the and ownership structure DIReCToRs previous year, with a total of undertaken by Goldman Sachs in October 2011. u CEO, Alan Edwards, 330 sales and resales over appointed as Managing the twelve month period u Successful capital raising in Director. providing $113.9m in gross November and December cashflows. 2011 through a Primary Offer u Peter Brown appointed as Chairman of the Board, u Occupancy levels, excluding of new shares, an additional Share Purchase Plan and a following the resignation of The Poynton, at 93%, Gregory Flood. with a significant increase Secondary Offer of existing in serviced apartment shares. u Resignation of Olaf Guy Eady occupancy year on year. u Raised $45.5m in new equity as director, in accordance with the terms of agreement u Operating cashflows showed which was used to offset debt. Retirement Villages between FKP and Macquarie good improvement, up 35% Capital Limited, in which FKP to $31.0m (FY11: $23.0m). New Zealand (RVNZ) shareholding reduced from took over sole management u Operating expenses on a 82% to 50% post-offer. rights of Metlifecare’s similar level to previous majority shareholder, years, with a rise in property u Acquired land site in Retirement Villages Group expenses offset by a Glenfield, on Auckland’s (RVG). reduction in finance costs. North Shore, for planned retirement village. u Announced intention Merger costs of $1.0m to appoint further two included in operating u Announced merger with independent directors to the expenses. Vision Senior Living and Board, with Alistair Ryan and u Reported profit result Private Life Care, which Chris Aiken welcomed to the impacted by two non-cash settled successfully post Board in August 2012. expenses - a decline in the year-end, in July 2012. fair value of investment u Presented offer to properties of $99.8m, shareholders to acquire and a deferred tax charge 22.5m shares being sold by of $38.0m. As a result, RVNZ as part of the merger Metlifecare reported a Total settlement. The offer Comprehensive Income of completed successfully post $(132.0m). year-end, in July 2012, with u Excluding non-cash RVNZ shareholding reduced expenses, trading to 43%. performance1 was $6.2m compared to $8.1m in FY11. u Bank debt was $69.2m as at 30 June 2012 (FY11: $125.2m).
1 Excludes changes in valuations, amortisation, depreciation and impairment, finance costs and deferred tax.
METLIFECARE 4 LIMITED ANNUAL REPORT 2012 IT’S MY
IT’S MY CHOICE
sales seTTleMenTs gRoss seTTleMenT 330 settlements CasHfloWs $113.9m
400 140 350 120 300 100 250 80 lIon of UnIT s of 200 Il 60 150 $M 100 40 esales esales nUMbe R
50 R sales 20 R sales 0 0 Jun 09 Jun 10 Jun 11 Jun 12 Jun 09 Jun 10 Jun 11 Jun 12 oCCUPanCY oPeRaTIng $ Total Occupancy 93% CasHfloWs 31.0m
100 40 35 80 30 age 60 25 lIon
Il 20 40 RCen T 15 $M
Pe 10 20
sa IlU 5 0 0 Jun 09 Jun 10 Jun 11 Jun 12 Jun 09 Jun 10 Jun 11 Jun 12
ToTal asseTs $1.2b
1,400 1,200 1,000 on 800 ll I 600 $MI 400 200 0 Jun 09 Jun 10 Jun 11 Jun 12
METLIFECARE LIMITED 5 ANNUAL REPORT 2012 CHaIRMan's RePoRT 2012 was a milestone year for our Company. In October 2011, a strategic review was undertaken to evaluate options for the Company’s capital and ownership structure. The review was comprehensive and ultimately led to a capital raising and share placement initiative as well as a sell down by Retirement Villages New Zealand (RVNZ), the majority shareholder in Metlifecare.
In May 2012, we announced plans to merge with Vision investment properties. This led to changes to various Senior Living and Private Life Care. Shareholder approval key assumptions including discount rates and property was obtained and, after year end, our companies price growth and resulted in a decline in the total fair merged on 23 July 2012. value of investment properties to $1.2b (FY11: $1.3b). These initiatives have created a Company with an The deferred tax adjustments relate to the impact of improved balance sheet, a strong portfolio of mature the potential changes in shareholder continuity on tax and developing villages, and a significant development losses carried forward and the impact of the recent pipeline with the management expertise to support this. changes to the depreciation rules on the depreciable tax base in the future. As part of the merger transaction, RVNZ sold down its majority shareholding from 50.1% to 43.2%, which As a result, Metlifecare reported a Total Comprehensive importantly gives us a more diverse shareholder base. Income of $(132.0m). Excluding non-cash expenses, The Board believes this will lead to greater liquidity and trading performance2 was $6.2m compared to $8.1m in trading volumes and will be of long term benefit to all FY11. shareholders. There was also a $9.6m uplift in the revaluation of care The strategic initiatives undertaken during the year facilities net of tax which was the result of a change have, at times, required substantial additional input in accounting policy adopted by the Company in the from many in our management team, above and beyond current year. their normal duties. I would like to acknowledge their Bank debt was $69.2m as at 30 June 2012 efforts and thank them for successfully completing (FY11: $125.2m). these initiatives and ensuring a strong growth platform for our Company for the future. Following the merger, bank debt was $197.0m as at 23 July 2012, resulting in a loan to value ratio below 25%. Metlifecare is now well positioned to take advantage of the significant potential available in the retirement living governance sector. There were several changes to the Board during FY12. financial Performance In August 2011, we were delighted to invite CEO, Alan Metlifecare reported a strong uplift in sales (12% Edwards, onto the Board as Managing Director. Alan has increase) and good improvements in operating been CEO of Metlifecare since August 2009. Along with cashflows (35% increase) for the financial year ended his team of experienced senior executives, many of 30 June 2012. The results were in line with market whom have been appointed in the past three years, Alan expectations and exclude the benefits of the merger is responsible for delivering on the Board’s strategy and which was finalised after the end of the financial year. vision for Metlifecare. The reported profit result was impacted by two I was appointed as Chairman of the Board, following the non-cash expenses - a decline in the fair value of resignation of Gregory Flood in December 2011, and in investment properties of $99.8m and a deferred tax January 2012, Olaf Guy Eady resigned as a director, in charge of $38.0m. accordance with the terms of the agreement between FKP and Macquarie Capital Limited, in which FKP took As previously announced, CBRE was appointed by over sole management rights of Metlifecare’s majority Metlifecare to perform a valuation of the Company’s shareholder, RVG.
2 Excludes changes in valuations, amortisation, depreciation and impairment, finance costs and deferred tax.
METLIFECARE 6 LIMITED ANNUAL REPORT 2012 We also stated our intention to appoint two further independent non- executive directors to the Board, and were pleased to welcome Alistair Ryan and Chris Aiken to the Board in August 2012. Both Alistair and Chris have signifi cant experience working within the corporate property market, and their expertise and knowledge will be valuable to Metlifecare as we Metlifecare is continue with our growth strategy. well positioned to outlook take advantage The ongoing and long term effects of the global economic downturn of the signifi cant are still being felt and the New Zealand economy is no exception. While potential available relatively fl at, the residential property market has shown some small increases, particularly in the Auckland area over the last eight months and in the retirement we hope to see this positive trend continue. living sector. Like most other developed countries, New Zealand has an ageing population. In 2012, approximately 14% of the population was aged over 65 years; this is projected to increase to 23% in 2036 and 26% in 2061. Within this group, the number of people aged over 85 years (those more likely to need higher care services) is expected to increase from 76,000 in 2012 to 195,000 in 2036 and 410,000 in 2061. Retirement village penetration rates are relatively low in New Zealand, compared to other OECD nations. We expect to see these rates improve as the sector continues to grow, with professional organisations such as Metlifecare offering desirable retirement lifestyle options. The New Zealand Government has recognised that more aged care beds will be needed to meet this projected growth in demand in the next 15 years. The ability to provide long-term continuum of care is becoming increasingly important and at Metlifecare we will be looking at opportunities to extend our professional and respected care offer across more of our properties. our future Following the merger with Vision Senior Living and Private Life Care, Metlifecare is now one of New Zealand’s largest retirement village and aged care providers. We have an exciting growth strategy in place, a proven business model and a highly qualifi ed and experienced senior management team. Strong and growing demand for high quality retirement living options are forecast for the future and our Company is well positioned to grow and take advantage of the potential this market sector offers.
Peter Brown cHairMan Metlifecare Limited
METLIFECARE LIMITED 7 ANNUAL REPORT 2012 ManagIng DIReCToR/ Ceo's RePoRT In a transformative year for the Company, our staff continued to focus and deliver on operating performance. The Company’s total sales and resales increased to 330 over the twelve month period, providing $113.9m in gross cashfl ows.
Sales at The Poynton, Metlifecare’s most recent Pleasingly, we reported a good improvement in development on the North Shore in Auckland, also operating cashfl ow for the year, up 35% to $31.0m improved, with 30 sales in the period. (FY11: $23.0m). This refl ected strong settlements leading up to year end, with improvements in serviced Occupancy increased in both independent living units apartment sales, sales’ settlements at The Poynton and (93% excluding development stock) as well as serviced revenue from village services. apartments (88%, up from 79% in the previous year). Increased serviced apartment occupancy also drove Operating expenses were on a similar level to previous strong additional village services revenues. Care facility years, with a rise in property expenses offset by a occupancy remained consistent with the previous year reduction in fi nance costs. Merger costs of $1.0m were at 96%. included in operating expenses. Occupancy at The Poynton increased to 65%, up from 44% in the previous year. Excluding stock with Developments contracts, there were nine serviced apartments and In FY12, Metlifecare had a pipeline of 247 new units and 31 apartments left to sell as at 30 June 2012. In our apartments at fi ve different villages. In addition, we most recent resident survey, satisfaction levels at The acquired a new site in Glenfi eld on Auckland’s North Poynton continued to be the highest overall. Shore, for the development of a new village offering approximately 92 apartments and a 38-bed care facility. We target premium locations for development, where there is an identifi ed demand for retirement living options and a suitable population demographic. We are experienced at developing and operating villages across numerous socio-economic segments and, following the merger (which occurred after year-end), we now have an enhanced and experienced in-house development team.
“Our vision is to be the leader in providing innovative and sustainable solutions for the lifestyle and care needs of older people. To achieve this, we have a carefully considered development and growth strategy in place.”
METLIFECARE 8 LIMITED ANNUAL REPORT 2012 Market Conditions The majority of our villages are located within the premium Auckland and Bay of Plenty markets, where The ability to enter a retirement village almost always there is strong demand for retirement living options. We requires the sale of the family home. Therefore, will be looking to maximise the potential of established Metlifecare’s performance is linked to residential and mature villages and will continue to focus on property sales, with low residential sales’ volumes increasing occupancy, with higher occupancy flowing negatively impacting the saleability of the intending through to an increased opportunity to sell village residents’ home. services. If prospective residents cannot sell their houses due The merger with Vision Senior Living and Private Life to insufficient buyers, they are generally deferring sale Care has significantly increased our development rather than discounting. This has a flow-on effect on pipeline, as well as introduced an experienced senior Metlifecare settlements. development team. Following planned portfolio While relatively flat overall, the New Zealand residential rationalisation, we will have in excess of 400 brownfield property market showed signs of improvement through and 350 greenfield units in our growth pipeline. We the end of the 2011 calendar year and into early 2012. In have funding arrangements in place to continue with particular, the Auckland market showed good, continuing these opportunities, as well as seek out additional improvement, with strong demand for limited levels of development prospects. stock. We will continue to develop new villages which present a full continuum of care for our residents and will our People seamlessly integrate independent living, ageing in place care services, home care services and aged residential Metlifecare is a people business and every day of the care services within our villages. year, our staff provide lifestyle and care services for more than 4,000 residents in our villages. We recognise We have generally seen a pleasing increase in sales that our success is due to their commitment, hard work and operating cashflows over the past three years and and enthusiasm, and wish to thank all our staff for the expect this trend to continue. The benefits of our larger high level of service they provide. organisation will start to be realised in the 2013 financial year and our focus is on integrating the businesses, our Residents realising synergies and delivering improved results. We are a service business and constantly strive to meet and exceed the expectations of our residents. In our 2012 Resident Survey, we were pleased to again record very high satisfaction levels from our residents, with 95% of residents very satisfied or satisfied with their Metlifecare village overall. In addition, nearly Alan Edwards 100% of residents are satisfied with the politeness and Managing Director/ceo friendliness of our staff. Metlifecare Limited outlook Following completion of the merger with Vision Senior Living and Private Life Care on 23 July 2012, Metlifecare is now one of New Zealand’s largest retirement village providers with a portfolio of 24 Villages including 3,902 units and 407 care beds. We offer quality facilities, in prime locations, and our size allows us to generate significant economies of scale.
METLIFECARE LIMITED 9 ANNUAL REPORT 2012 01 02 03
04 05 eXeCUTIve TeaM PRofIles as aT 30 JUne 2012
01. 02. 03. alan edwards Tristram lynne abercrombie MBL, BA, HED van der Meijden MBA, Dip. Occ Ther. Managing Director & CEO BSc, BCom, CA General Manager Operations Chief Financial Officer • Significant experience • Over 10 years’ experience as • Significant experience in both in senior executive, an accountant. the public and private health general management and • Has held senior finance services’ industry as both a organisational development and accounting roles in the clinician and manager. roles. property and financial services • Over 12 years’ experience at • 12 years’ experience in leading sectors. Metlifecare. companies in the retirement village industry.
04. 05. Jan Martin Colleen Tang BCom Dip. Bus (HR) General Manager Sales General Manager Human Resources
• Over 15 years’ experience • Over 20 years’ human in sales management and resource experience in the business development. manufacturing and service industry. • International experience in property and • Over 7 years’ experience at telecommunications sectors. Metlifecare.
METLIFECARE 10 LIMITED ANNUAL REPORT 2012 01 02 03
04 05 06 DIReCToRs' PRofIles as aT 30 JUne 2012
01. 02. 03. 04. Chairman Director Director Director Peter Ross brown Phillip brent David allan Hunt John James LLB (Hons), B.Com Harman1 B.Com, CPA, Grad. Dip. loughlin1 App. Fin. BCA, MBA, FCA, ACIS, FIINZ, FCASP, FNZIM, AFInst.D
• 20 years’ experience in • Vast experience in the • 20 years’ experience • Professional Director on property. media industry. in property and fi nance various boards. sectors. • Numerous senior Roles: Chairs the Nominations Roles: Member of the Audit, executive positions. & Corporate Governance Role: Chairs the Audit Remuneration, Nominations Committee. Member of Committee. & Corporate Governance and Roles: Chairs the Remuneration Audit and Remuneration and Acquisition & Development Acquisition & Development Committees. Committees. Committees.
05. 06. Former Director Former Director Managing Director Alternate Director gregory David olaf guy eady Wynton alan Michael Tucker flood BMS, CA edwards2 Alternate Director for Peter LLB (Hons) MBL, BA, HED Brown
• Signifi cant experience • Over 30 years’ experience Greg chaired the Guy was a member of the in senior executive, in the development and Remuneration and Finance Finance Committee up until general management construction industry. Committees up to his date the date of his resignation. and organisational of resignation. Mr Flood Mr Eady resigned from the development roles. resigned from the Board on Board on 12 January 2012. 21 December 2011. • 12 years’ experience in leading companies in the retirement village industry.
Notes: 1 Messrs P.B. Harman and J.J. Loughlin were Independent Directors as at 30 June 2012. Messrs P.R. Brown, D.A. Hunt, METLIFECARE LIMITED 11 W.A. Edwards and M. Tucker (Alternate) were not Independent Directors as at 30 June 2012. ANNUAL 2 Wynton Alan Edwards, Chief Executive Offi cer of Metlifecare was appointed as Managing Director on 22 August 2011. REPORT 2012 vIllages anD CaRe faCIlITIes as aT 30 JUne 2012
METLIFECARE CRESTWOOD 38 Golf Road, New Lynn, Waitakere METLIFECARE BAYSWATER METLIFECARE HIGHLANDS 60 Maranui Street, Mt Maunganui 49 Aberfeldy Avenue, Highland Park, Manukau METLIFECARE GREENWOOD PARK 10 Welcome Bay Road, METLIFECARE PAKURANGA Welcome Bay, Tauranga 14 Edgewater Drive, Pakuranga, Manukau METLIFECARE THE AVENUES Cnr Tenth Avenue & METLIFECARE PINESONG Devonport Road, Tauranga 66 Avonleigh Road, Green Bay, Waitakere METLIFECARE SOMERVALE 33 Gloucester Road, Mt Maunganui METLIFECARE POWLEY 135 Connell Street, Blockhouse Bay, Auckland METLIFECARE 7 SAINT VINCENT 7 St Vincent Avenue, Remuera, Auckland METLIFECARE THE POYNTON 142 Shakespeare Road, Takapuna, North Shore
METLIFECARE PALMERSTON NORTH (50% owned) Cnr Carroll & Fitchett Streets, Palmerston North
METLIFECARE WAIRARAPA 140 Chapel Street, Masterton
METLIFECARE KAPITI 1 Henley Way, off Guildford Drive, Paraparaumu METLIFECARE COASTAL VILLAS METLIFECARE OAKWOODS Spencer Russell Drive, off Rimu Road, 357 Lower Queen Street, Paraparaumu Richmond, Nelson
METLIFECARE 12 LIMITED ANNUAL REPORT 2012 Financial Statements foR THe YeaR enDeD 30 JUne 2012
Directors’ Statements of Statements of Balance Report Comprehensive Movements in Sheets Income Equity 14 15 16 17
Cash Flow Notes to the Independent Statements Financial Auditors’ Report Statements 18 19 59
METLIFECARE LIMITED 13 ANNUAL REPORT 2012 DIReCToRs' RePoRT
The Directors have pleasure in presenting the Financial Statements of Metlifecare Limited, for the year ended 30 June 2012. The Financial Statements presented are signed for and on behalf of the Board, and were authorised for issue on 22 August 2012.
P. R. Brown W.A. Edwards Chairman Managing Director 22 August 2012 22 August 2012
METLIFECARE 14 LIMITED ANNUAL REPORT 2012 Statements of Comprehensive Income For the Year Ended 30 June 2012
GROUP PARENT 30 June 2012 30 June 2011 30 June 2012 30 June 2011 nOTe $000 $000 $000 $000
InCoMe Operating revenue 6 63,364 65,007 3,218 2,429 Finance income 7 819 121 2,974 3,259
Total income 64,183 65,128 6,192 5,688
Change in fair value of investment properties 19 (99,808) 27,521 - - eXPenses Loss on revaluation of care facilities (124) - - - Employee costs (29,135) (29,045) (4,114) (3,738) Property costs 8 (15,313) (14,040) (178) (190) Depreciation 8, 15 (1,310) (1,445) (72) (90) Amortisation 8, 16 (246) (411) (201) (305) Finance costs 10 (8,416) (12,885) (6,079) (8,049) Other expenses 8 (13,514) (14,049) (3,655) (2,761)
Total expenses (68,058) (71,875) (14,299) (15,133)
(Loss)/profit for the year (103,683) 20,774 (8,107) (9,445) Income tax expense 11 (37,968) - - -
(Loss)/profit for the year (141,651) 20,774 (8,107) (9,445)
Other comprehensive income Gain on revaluation of care facilities 12,907 - - - Tax on revaluation (3,296) - - -
Other comprehensive income, net of tax 9,611 - - -
Total comprehensive income (132,040) 20,774 (8,107) (9,445)
Attributable to: Shareholders of the parent company (132,040) 20,774 (8,107) (9,445)
(132,040) 20,774 (8,107) (9,445)
30 JUNE 2012 30 JUne 2011
Profit/(loss) per share for profit/(loss) attributable to the equity holders of the Company during the year
- Basic (cents) 26 (104.1) 17.0 - Diluted (cents) 26 (104.1) 17.0
The above statements of comprehensive income should be read in conjunction with the accompanying notes.
METLIFECARE LIMITED 15 ANNUAL REPORT 2012 Statements of Movements in Equity For the Year Ended 30 June 2012
RETAINED CONTRIBUTED EARNINGS / REVALUATION TOTAL EQUITY (DEfICIT) RESERVE EQUITY noTe $000 $000 $000 $000 gRoUP Balance at 1 July 2010 81,958 423,434 - 505,392
Comprehensive income Profit for the year - 20,774 - 20,774 Other comprehensive income - - - - Total comprehensive income - 20,774 - 20,774
Transactions with owners - - - - Balance at 30 June 2011 81,958 444,208 - 526,166
Comprehensive Income Loss for the year - (141,651) - (141,651) Other comprehensive income - - 9,611 9,611 Total comprehensive income - (141,651) 9,611 (132,040)
Transactions with owners Proceeds from shares issued 24 44,759 - - 44,759 Balance at 30 June 2012 126,717 302,557 9,611 438,885
RETAINED CONTRIBUTED EARNINGS / REVALUATION TOTAL EQUITY (DEfICIT) RESERVE EQUITY noTe $000 $000 $000 $000
PaRenT Balance at 1 July 2010 81,958 (60,581) - 21,377
Comprehensive Income Loss for the year - (9,445) - (9,445) Other comprehensive income - - - - Total comprehensive income - (9,445) - (9,445)
Transactions with owners - - - - Balance at 30 June 2011 81,958 (70,026) - 11,932
Comprehensive Income Loss for the year - (8,107) - (8,107) Other comprehensive income - - - - Total comprehensive income - (8,107) - (8,107)
Transactions with owners Proceeds from shares issued 24 44,759 - - 44,759 Balance at 30 June 2012 126,717 (78,133) - 48,584
The above statements of movements in equity should be read in conjunction with the accompanying notes.
METLIFECARE 16 LIMITED ANNUAL REPORT 2012 Balance Sheets As at 30 June 2012
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 noTe $000 $000 $000 $000 asseTs Cash and cash equivalents 12 9,221 516 8,330 - Trade receivables and other assets 13 15,058 13,980 492 536 Amounts due from subsidiaries 29 - - 119,579 101,803 Amount due from jointly controlled entity 29 52 85 52 85 Property, plant and equipment 15 33,056 20,816 254 212 Intangible assets 16 358 391 356 345 Investments in controlled entities 17 - - 53,683 53,683 Investment properties 19 1,168,780 1,258,523 - -
Total assets 1,226,525 1,294,311 182,746 156,664 lIabIlITIes Bank overdraft 12, 22 - - - 332 Trade and other payables 21 15,035 13,106 2,693 2,026 Amounts due to subsidiaries 29 - - 81,105 60,970 Derivative financial instruments 14 1,160 1,812 1,160 1,812 Bank loans 22 68,675 124,252 49,181 79,541 Finance leases 22 106 213 23 51 Deferred membership fees 19 42,586 39,076 - - Refundable occupation right agreements 23 618,814 589,686 - - Deferred tax liabilities 11 41,264 - - -
Total liabilities 787,640 768,145 134,162 144,732
Net assets 438,885 526,166 48,584 11,932 eQUITY Contributed equity 24 126,717 81,958 126,717 81,958 Revaluation reserve 9,611 - - - Retained earnings/(deficits) 302,557 444,208 (78,133) (70,026)
Total equity 438,885 526,166 48,584 11,932
The above balance sheets should be read in conjunction with the accompanying notes.
METLIFECARE LIMITED 17 ANNUAL REPORT 2012 Cash Flow Statements For the Year Ended 30 June 2012
GROUP PARENT 30 June 2012 30 June 2011 30 June 2012 30 June 2011 nOTe $000 $000 $000 $000
CasH floWs fRoM oPeRaTIng aCTIvITIes Receipts from residents for village fees, care fees and other income 56,376 53,850 156 90 Receipts from residents for refundable occupation right agreements 113,921 113,733 - - Payments to suppliers and employees (55,892) (52,416) (7,966) (6,562) Payments to residents for refundable occupation right agreements (74,098) (78,550) - - Net GST (paid)/received (1,782) (1,973) 668 561 Management fees and other income received - - 2,302 1,912 Interest received 104 42 6 8 Interest paid (7,629) (11,682) (3,519) (7,340) Dividend received - - 800 400
Net cash inflow/(outflow) from operating activities 9 31,000 23,004 (7,553) (10,931)
CasH floWs fRoM InvesTIng aCTIvITIes Disposal of business 20 - 24,428 - - Payments for property, plant and equipment (943) (202) (166) (74) Payments for intangibles (213) (416) (212) (416) Net repayments from advances to subsidiaries - - 2,324 14,568 Net repayments from advances to jointly controlled entity 34 110 67 220 Payments for investment properties (9,552) (3,110) - - Capitalised interest paid (513) (560) - -
Net cash (outflow)/inflow from investing activities (11,187) 20,250 2,013 14,298
CasH floWs fRoM fInanCIng aCTIvITIes Proceeds from issuance of ordinary shares 24 44,759 - 44,759 - Net repayments from borrowings (55,867) (44,510) (30,557) (5,000)
Net cash (outflow)/inflow from financing activities (11,108) (44,510) 14,202 (5,000)
Net increase/(decrease) in cash and cash equivalents 8,705 (1,256) 8,662 (1,633)
Cash and cash equivalents at the beginning of the financial year 516 1,772 (332) 1,301
Cash and cash equivalents at end of year 12 9,221 516 8,330 (332)
The above cash flow statements should be read in conjunction with the accompanying notes. Refer to note 2(k) for more detail.
METLIFECARE 18 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements For the Year Ended 30 June 2012
1. geneRal InfoRMaTIon Metlifecare Limited (“the Company” or “the Parent”), its subsidiaries and its jointly controlled entities (together "the Group") own and operate retirement villages in New Zealand. Metlifecare Limited is a limited liability company, incorporated and domiciled in New Zealand. The address of its registered office is Level 2, Metlifecare House, 302 Great South Road, Greenlane, Auckland. These financial statements have been approved for issue by the Board of Directors on 22 August 2012. The Group’s owners do not have the power to amend these financial statements once issued. In approving these financial statements for issue the Directors have considered and concluded that the Group will continue to meet all funding requirements. The Directors, in concluding, considered the following: • the Group’s forecast to 30 June 2013 focuses on improving resales and sales of occupation right agreements and cost saving initiatives including those associated with the completed acquisitions subsequent to balance date. The Group's forecast also incorporates proceeds being received from the sale of properties and the acquisition of another property which went unconditional subsequent to balance date • recent past performance, in light of the underlying economic environment • consensus opinion on the expected economic environment for the forecast period • forecast covenant compliance • amendments to bank funding facilities including the reduction in the ICR ratio for the September 2012 quarter and the inclusion of a development facility sub-limit of $22.6m for the period to 31 December 2012 • available undrawn limits under the Core and Development Facilities. In the absence of an unanticipated deterioration in the Group’s operating performance, the Directors consider the business can meet its obligations under the funding facilities, including compliance with financial covenants and sufficient levels of liquidity. The forecast by its very nature is uncertain and based on best estimate assumptions of events and transactions that may or may not occur as expected. Having regard to all the matters noted above, the Directors believe it remains appropriate that the financial statements have been prepared under the going concern convention.
2. sUMMaRY of sIgnIfICanT aCCoUnTIng PolICIes (a) Basis of preparation The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Entities reporting The financial statements are for Metlifecare Limited (“the Company” or “the Parent”) and the consolidated group comprising Metlifecare Limited, its subsidiaries and its jointly controlled entities (together “the Group”) as at 30 June 2012. The merger of Metlifecare Limited, Private Life Care Holdings Limited (PLC) and Vision Senior Living Limited (VSL) was completed on 23 July 2012. These financial statements therefore exclude the impact of these companies and their subsidiaries, except where specifically disclosed in note 30. The Group is designated as a profit-oriented entity for financial reporting purposes. Statutory base Metlifecare Limited is a company registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The Company is also listed on the New Zealand Stock Exchange (NZX). The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. These financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable New Zealand Financial Reporting Standards, as appropriate for profit-oriented entities. They comply with International Financial Reporting Standards (IFRS).
METLIFECARE LIMITED 19 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
The consolidated balance sheet for the Group and Company is presented on the liquidity basis where the assets and liabilities are presented in the order of their liquidity. Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, derivative financial instruments and land & buildings. Critical accounting estimates and judgements The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates and judgements. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.
(b) foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’) which in all circumstances is New Zealand dollars. The financial statements are presented in New Zealand dollars, which is the presentation currency of the Group. Transactions and balances Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the statement of comprehensive income of each Group entity.
(c) Segment reporting An operating segment is a component of an entity that engages in business activities which earns revenue and incurs expenses and where the chief operating decision maker reviews the operating results on a regular basis and makes decisions on resource allocation.
(d) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Metlifecare Limited as at 30 June 2012 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to directly or indirectly govern the financial and operating policies of an entity so as to obtain benefits from its activities, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. (ii) Jointly controlled entities The interest in a jointly controlled entity is accounted for in the consolidated financial statements using proportionate consolidation. The Company and Group recognises its share of the assets that it controls jointly and its share of the liabilities for which it is jointly responsible. The statements of comprehensive income of the Company and Group includes its share of the income and expenses of jointly controlled entities. All balances and transactions establishing the jointly controlled entity and transactions with the joint venture and resulting unrealised profits or losses are eliminated to the extent of the Company’s and Group’s interest, unless losses are evidence of impairment. The acquisition method of accounting is used to account for the acquisition of subsidiaries and jointly controlled entities by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair
METLIFECARE 20 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
value of the net assets of the subsidiary or jointly controlled entity acquired, the difference is recognised directly in the statement of comprehensive income. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries and jointly controlled entities are consistent with the policies adopted by the Group.
(e) Revenue recognition Revenue comprises the fair value of services provided, net of goods and services tax. Revenue is recognised as follows: Membership fee A membership fee is payable by the residents of the Group’s independent living units and serviced apartments for the right to share in the use and enjoyment of common facilities. The membership fee is calculated as a percentage of the occupation right agreement amount and accrues monthly, for a set period, based on the terms of the individual contracts. The current disclosure document and occupation right agreement accrues membership fee at the rate of 10% per annum for a maximum of three years. The membership fee is recognised in the statement of comprehensive income over the average expected length of stay of residents, which is 8 years for independent living units and 4 years for serviced apartments. The membership fee is payable by the resident at the time of repayment (by the Group to the resident) of the refundable occupation right agreement amount. The Group has the right of set-off of the refundable occupation right agreement amount and the membership fee receivable. At year end the membership fee receivable that has yet to be recognised in the statement of comprehensive income as membership fee revenue is held on the balance sheet as a liability (deferred membership fee). Rest home, hospital and service fees and village fees Rest home, hospital and service fees and village fees are recognised on an accruals basis. Interest income Interest income is recognised on an accrual basis using the effective interest method.
(f) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and changes to available tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted at balance date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and available tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The associated current or deferred tax balances are recognised in these accounts as usual.
(g) Goods and Services Tax (GST) The statements of comprehensive income and cash flow statements have been prepared so that all components are stated exclusive of GST. All items in the balance sheets are stated net of GST, with the exception of receivables and payables, which include GST invoiced.
METLIFECARE LIMITED 21 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
(h) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.
(i) Impairment of non-financial assets Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment irrespective of whether any circumstances identifying a possible impairment have been identified. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).
(j) Cash and cash equivalents Cash and cash equivalents comprises cash at bank and call deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statements.
(k) Cash flow statements The following are definitions of the terms used in the cash flow statement: • cash comprises cash at bank, cash on hand, call deposits and overdraft facilities; • operating activities include all transactions and other events that are not investing or financing activities; • investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment, investment properties and other investments. Investments can include securities not falling within the definition of cash; and • financing activities are those activities which result in changes in the size and composition of the capital structure of the Company. (l) Trade receivables Trade receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for doubtful debts. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statements of comprehensive income within ‘other expenses’. When a trade receivable is uncollectible, it is written off against an allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘other expenses’ in the statements of comprehensive income.
METLIFECARE 22 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
(m) Occupation right agreement receivables Occupation right agreement receivables are recognised once an occupation right agreement becomes unconditional. The receivable is recorded at its nominal value and collection terms are based on the specific terms of individual occupation right agreements. Resident possession of either an independent living unit or serviced apartment occurs only after settlement.
(n) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value. Changes in the fair value of derivative instruments are recognised immediately in the statement of comprehensive income. The only derivatives the Company and Group are party to relate to interest rate swaps. 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 and using market interest rates for a similar instrument at the measurement date.
(o) Other financial assets The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets are stated at fair value through profit or loss and are held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statements of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and receivables comprise trade receivables and other assets, amounts due from subsidiaries, amounts due from jointly controlled entities and cash and cash equivalents in the balance sheet. Loans and receivables are initially recognised at fair value on trade date plus transaction costs. They are subsequently carried at amortised cost using the effective interest method. They are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(p) fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement for disclosure purposes. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The nominal value of other financial assets and liabilities approximate their fair values unless otherwise disclosed. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of loans and receivables and financial liabilities is determined using the discounted cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of investment properties is determined by an independent external valuer (refer note 2(s) for more detail).
(q) Property, plant and equipment All property, plant and equipment is initially recorded at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes material and direct labour, and any other costs directly attributable to bringing the asset to its working condition for its intended use.
METLIFECARE LIMITED 23 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Subsequent to initial recognition, land and buildings for care facilities are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation on buildings and accumulated impairment losses, if any, since the assets were last revalued. Plant and equipment is subsequently measured at cost less accumulated depreciation and impairment losses, if any. Where an item of plant and equipment is disposed of, the gain or loss recognised in the income statement is calculated as the difference between the net sales price and the carrying value of the asset. Fair value is determined by reference to market based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Any revaluation surplus is recognised in other comprehensive income unless it reverses a revaluation decrease of the same asset previously recognised in the income statement. Any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus in the same asset in other comprehensive income. Any accumulated depreciation at revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Independent valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the assets’ fair value at the balance sheet date. Depreciation is provided on a straight line basis on property, plant and equipment, other than freehold land, at rates calculated to allocate the assets’ cost or valuation, less estimated residual value, over their estimated useful lives, commencing from the time the assets are held ready for use, as follows: • Freehold buildings 25 - 50 years • Plant, furniture and equipment 3 - 10 years • Motor vehicles 5 - 7 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income.
(r) Intangible assets Computer Software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over their estimated useful lives (3 to 5 years). Costs associated with maintaining computer software programs are recognised as an expense when incurred.
(s) Investment properties Investment properties include freehold land and buildings, and freehold land and buildings under development comprising of independent living units, serviced apartments and common facilities, provided for use by residents under the terms of the occupation right agreement. Investment properties are held for long-term yields, and are not occupied by the Group. The fair value of investment properties is determined by a qualified independent external valuer using a discounted cash flow model. As required by NZ IAS 40 Investment Property, in order to avoid double counting of assets and liabilities, the fair value as determined by the independent valuer is adjusted for assets and liabilities already recognised in the balance sheet which are also reflected in the discounted cash flow model. These adjustments to derive the carrying value of investment properties are disclosed in note 19. The movement in the carrying value of investment properties and investment properties under development, net of additions to investment properties are recognised as a fair value movement in the statement of comprehensive income.
(t) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade payables are recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest method.
METLIFECARE 24 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
(u) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed as incurred.
(v) Assets held for sale Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
(w) Refundable occupation right agreements Occupation right agreements confer the right of occupancy of the unit or serviced apartment until such time as the Group repurchases the occupation right. Amounts payable under occupation right agreement repurchase arrangements, which are firm monetary obligations, are shown in the balance sheet as liabilities. At Metlifecare Greenwood Park, Metlifecare The Avenues, Metlifecare Powley and Metlifecare Kapiti certain occupation right agreements include the right to a proportion of the capital gain arising on resale. The amount of the capital gain relating to these agreements is recognised by way of a liability on the balance sheet.
(x) Employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
(y) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are included in the cost of the acquisition as part of the purchase consideration.
(z) Earnings per share Basic and diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the period, adjusted for bonus elements in ordinary shares issued during the period.
(aa) Dividends Provision is made for the amount of any dividend declared on or before the balance date but not distributed at balance date.
(ab) Investments in subsidiaries and jointly controlled entities Investments in subsidiaries and jointly controlled entities in Parent financial statements are stated at cost less impairment.
(ac) Restated balances Where necessary, certain comparative information has been reclassified in order to conform to changes in presentation in the current year.
METLIFECARE LIMITED 25 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
In preparing the financial statements for the year ended 30 June 2012, cashflows derived from sales, resales and repurchase of refundable occupation right agreements (ORAs) have been reclassified from cash flows from financing activities to cash flows from operating activities. As a result, the following comparative amounts have been reclassified in the Consolidated Cash Flow Statement: Cash flows from operating activities now includes receipts from residents for refundable occupation right agreements $113,733,000 (previously $nil); payments to residents for refundable occupation right agreements $78,550,000 (previously $nil). Cash flows from financing activities now includes receipts from residents for refundable occupation right agreements $nil (previously $113,733,000); and payments to residents for refundable occupation right agreements $nil (previously $78,550,000). The reason for the reclassification is the Group considers cashflows derived from sales, resales and repurchase of ORAs as operating activities since they relate to the main revenue-producing activity of the Group.
(ad) Changes in accounting policy The Group has changed its accounting policy for the measurement of land and buildings for care facilities, effective from 30 June 2012. The Group now measures land and buildings for care facilities at their revalued amount, which is the fair value at the date of revaluation. Further details can be found in note 2(q). Previously, land and buildings for care facilities were measured at cost less accumulated depreciation. As land and buildings for care facilities are now carried at fair value, less subsequent accumulated depreciation, the Directors consider this provides reliable and more relevant information to the readers of the financial statements. All other accounting policies have been applied on a consistent basis with the prior year. There are no NZ IFRS’s or IFRS’s that are effective for the first time for the year ended 30 June 2012 that would be expected to have a material impact on the Group.
(ae) Standards, interpretations and amendments to published standards that are not yet effective NZ IFRS 9 ‘Financial Instruments’ (effective for annual periods beginning on or after 1 January 2015). NZ IFRS 9 replaces the multiple classification and measurement models for financial assets in NZ IAS 39 with a model that has only two classification categories: amortised cost and fair value. There is no separation of embedded derivatives. The classification model is driven by the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The recognition and measurement guidance relating to financial liabilities is unchanged from NZ IAS 39. An additional presentational requirement has been added for liabilities designated at fair value through profit or loss. The Group will apply this standard from 1 July 2015 and the Group is currently evaluating the impact of the amendment. Amendment to NZ IAS 12, ‘Income taxes’ – deferred tax accounting for investment properties (effective for annual periods beginning on or after 1 January 2012). In December 2010, the ASRB amended NZ IAS 12 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. NZ IAS 12 requires the measurement of deferred tax assets or liabilities for investment property measured at fair value to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The Group will apply the amendment from 1 July 2012. The Group is currently evaluating the impact of the amendment, however further details are included in note 4. NZ IFRS 10 Consolidated Financial Statements, NZ IFRS 11 Joint Arrangements, NZ IFRS 12 Disclosure of Interests in other Entities and revised NZ IAS 27 Separate Financial Statements and NZ IAS 28 Investments in Associates and Joint Ventures (effective 1 January 2013). – NZ IFRS 10 introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. – NZ IFRS 11 introduces a principles based approach to accounting for joint arrangements. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate is no longer permitted. Parties to a joint operation will continue to account their share of revenues, expenses, assets and liabilities. The Group is yet to determine the impact of NZ IFRS 11 on the accounting treatment for Metlifecare Palmerston North Limited.
METLIFECARE 26 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
– NZ IFRS 12 sets out the required disclosures for entities reporting under NZ IFRS 10 and NZ IFRS 11, and replaces the disclosure requirements currently found in IAS 28. – NZ IAS 27 is renamed Separate financial statements and is a standard dealing solely with separate financial statements. – Amendments to NZ IAS 28 provide clarification that an entity continues to apply the equity method and does not re-measure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. When the Group applies the new standards from 1 July 2013, they are not expected to have a material impact. NZ IFRS 13 Fair value measurement (effective 1 January 2013). NZ IFRS 13 was released in May 2011. NZ IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. The Group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The Group does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014. Revised IAS 1 Presentation of Financial Statements (effective 1 July 2012). In June 2011, the IASB made an amendment to IAS 1 Presentation of Financial Statements. The ASRB is expected to make equivalent changes to NZ IAS 1 shortly. The amendment requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to profit or loss in the future. It will not affect the measurement of any of the items recognised in the balance sheet or the profit or loss in the current period. The Group intends to adopt the new standard from 1 July 2012.
METLIFECARE LIMITED 27 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
3. fInanCIal RIsK ManageMenT The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as interest rate swap contracts to economically manage certain interest rate risk exposures. Derivatives are exclusively used for economic hedging purposes (while hedge accounting is not applied as the Group does not meet the hedge accounting criteria), and not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange to determine market risk and aging analysis for credit risk. Risk management is carried out centrally by the head office under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments. The Group and the Parent entity hold the following financial instrument categories:
GROUP PARENT
LOANS ASSETS TOTAL LOANS ASSETS TOTAL AND AT fAIR AND AT fAIR RECEIVABLES VALUE RECEIVABLES VALUE THROUGH THROUGH PROfIT PROfIT OR LOSS OR LOSS $000 $000 $000 $000 $000 $000 as aT 30 JUne 2012 fInanCIal asseTs Cash and cash equivalents 9,221 - 9,221 8,330 - 8,330 Trade and other receivables * 14,486 - 14,486 21 - 21 Amounts due from subsidiaries - - - 119,579 - 119,579 Amount due from jointly controlled entity 52 - 52 52 - 52
23,759 - 23,759 127,982 - 127,982
OTHER LIABILITIES TOTAL OTHER LIABILITIES TOTAL fINANCIAL AT fAIR VALUE fINANCIAL AT fAIR VALUE LIABILITIES THROUGH LIABILITIES THROUGH AT AMORTISED PROfIT OR AT AMORTISED PROfIT OR COSTS LOSS COSTS LOSS $000 $000 $000 $000 $000 $000 fInanCIal lIabIlITIes Trade and other payables * 12,241 - 12,241 2,373 - 2,373 Amounts due to subsidiaries - - - 81,105 - 81,105 Derivative financial instruments - 1,160 1,160 - 1,160 1,160 Bank loans 68,675 - 68,675 49,181 - 49,181 Finance leases 106 - 106 23 - 23 Refundable occupation right agreements 618,814 - 618,814 - - -
699,836 1,160 700,996 132,682 1,160 133,842
METLIFECARE 28 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
GROUP PARENT
LOANS ASSETS TOTAL LOANS ASSETS TOTAL AND AT fAIR AND AT fAIR RECEIVABLES VALUE RECEIVABLES VALUE THROUGH THROUGH PROfIT PROfIT OR LOSS OR LOSS $000 $000 $000 $000 $000 $000 as aT 30 JUne 2011 fInanCIal asseTs Cash and cash equivalents 516 - 516 - - - Trade and other receivables * 13,336 - 13,336 61 - 61 Amounts due from subsidiaries - - - 101,803 - 101,803 Amount due from jointly controlled entity 85 - 85 85 - 85
13,937 - 13,937 101,949 - 101,949
OTHER LIABILITIES TOTAL OTHER LIABILITIES TOTAL fINANCIAL AT fAIR VALUE fINANCIAL AT fAIR VALUE LIABILITIES THROUGH LIABILITIES THROUGH AT AMORTISED PROfIT OR AT AMORTISED PROfIT OR COSTS LOSS COSTS LOSS $000 $000 $000 $000 $000 $000 fInanCIal lIabIlITIes Bank overdraft - - - 332 - 332 Trade and other payables * 10,602 - 10,602 1,705 - 1,705 Amounts due to subsidiaries - - - 60,970 - 60,970 Derivative financial instruments - 1,812 1,812 - 1,812 1,812 Bank loans 124,252 - 124,252 79,541 - 79,541 Finance leases 213 - 213 51 - 51 Refundable occupation right agreements 589,686 - 589,686 - - -
724,753 1,812 726,565 142,599 1,812 144,411
* Trade and other receivables above excludes prepayments, Trade and other payables excludes employee entitlements.
(a) Market risk (i) Foreign exchange risk The Group’s operating activities are solely in New Zealand therefore, its exposure to foreign exchange risk arising from currency exposures is limited. From time to time when foreign currency denominated receivables or payables arise they are paid using spot rates of the foreign currency and no derivative instruments are used to limit the exposure. The Board considers this position to be reasonable given the limited foreign currency exposure. (ii) Cash flow and fair value interest rate risk As the Group has no significant interest bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. It is the Group’s policy to economically manage the cash flow interest rate risk through the use of interest rate swaps. The use of interest rate swaps exposes the Group to fair value interest rate risk. The objective of the interest rate swaps is to protect the company from the impact to cashflows which arises out of movement in interest rates. The cashflow and fair value interest rate risks are managed by the Board on a monthly basis. Management monitors the existing interest rate profile and presents an interest rate hedging strategy to the Board for consideration and approval prior entering into any interest rate swaps.
METLIFECARE LIMITED 29 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
The position is managed depending on the timeframe, underlying interest rate exposure and the economic conditions. The interest rate applicable to the bank overdraft is variable. The interest rates applicable to the bank loans are variable and are reviewed at each rollover. The Group seeks to obtain the most competitive market rate of interest at all times. Metlifecare Limited has entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate long term debt. The following tables show the sensitivity of the Group and Company’s after tax profit and equity to a movement in the year end interest rates of +2% / +1% (2011: +2% / +1%). The sensitivity is based on reasonably possible changes over a financial year based on current announcements and market expectations.
+2% +1% CARRYING LOSS AfTER LOSS AfTER AMOUNT TAX AND TAX AND EQUITY EQUITY $000 $000 $000 gRoUP
30 JUne 2012 fInanCIal asseTs Cash and cash equivalents 9,221 7 4 Trade and other receivables 14,486 - - Amount due from jointly controlled entity 52 - - fInanCIal lIabIlITIes Trade and other payables 12,241 - - Derivative financial instruments 1,160 987 449 Bank loans * 68,675 (1,383) (692) Finance leases 106 - - Refundable occupation right agreements 618,814 - -
(389) (239)
+2% +1% CARRYING LOSS AfTER LOSS AfTER AMOUNT TAX AND TAX AND EQUITY EQUITY $000 $000 $000
30 JUne 2011 fInanCIal asseTs Cash and cash equivalents 516 6 3 Trade and other receivables 13,336 - - Amount due from jointly controlled entity 85 - - fInanCIal lIabIlITIes Trade and other payables 10,602 - - Derivative financial instruments 1,812 1,946 991 Bank loans * 124,252 (2,500) (1,250) Finance leases 213 - - Refundable occupation right agreements 589,686 - - (548) (256)
* A portion of these loans are drawn down for specific developments and therefore a portion of interest on these loans is capitalised.
METLIFECARE 30 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
+2% +1% CARRYING LOSS AfTER LOSS AfTER AMOUNT TAX AND TAX AND EQUITY EQUITY $000 $000 $000
PaRenT
30 JUne 2012 fInanCIal asseTs
Cash and cash equivalents 8,330 - - Trade and other receivables 21 - - Amounts due from subsidiaries 119,579 2,392 1,196 Amount due from jointly controlled entity 52 - - fInanCIal lIabIlITIes Trade and other payables 2,373 - - Amounts due to subsidiaries 81,105 (1,622) (811) Derivative financial instruments 1,160 987 449 Bank loans 49,181 (990) (495) Finance leases 23 - -
767 339
+2% +1% CARRYING LOSS AfTER LOSS AfTER AMOUNT TAX AND TAX AND EQUITY EQUITY $000 $000 $000
30 JUne 2011 fInanCIal asseTs Trade and other receivables 61 - - Amounts due from subsidiaries 101,803 2,036 1,018 Amount due from jointly controlled entity 85 - - fInanCIal lIabIlITIes Bank Overdraft 332 7 3 Trade and other payables 1,705 - - Amounts due to subsidiaries 60,970 (1,219) (610) Derivative financial instruments 1,812 1,946 991 Bank loans 79,541 (1,600) (800) Finance leases 51 - - 1,170 602
(b) Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure from trade debtors with outstanding receivables. The Group has no significant concentrations of credit risk. The Group policy is to require a security deposit from new residents before they are granted the right to occupy a unit. Therefore, the Group does not face significant credit risk. The values attached to each financial asset in the balance sheet represent the maximum credit risk. Except as disclosed in the financial statements, no collateral is held with respect to any financial assets. The Group enters into financial instruments with various counterparties in accordance with established limits as to credit rating and dollar limits and does not require collateral or other security to support the financial instruments. Refer to the trade and other receivables note (note 13) for more information on impairment of trade receivables.
METLIFECARE LIMITED 31 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Cash and cash equivalents of the Company and Group are deposited with one of the major trading banks. Non performance of obligations by the bank is not expected due to the credit rating of the counter party considered. The Group receivables represent distinct trading relationships with each of the residents. There are no concentrations of credit risk with residents. The only large receivables relate to the residential care subsidies which are received in aggregate via the various District Health Boards and Work and Income New Zealand. Neither of these entities has demonstrated, or is considered, a credit risk.
(c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Cash flow forecasting is performed in the operating entities of the Group in and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans and covenant compliance. Surplus cash held by the operating entities is used to repay debt in the Working Capital Facility. The tables below analyse the Group’s and the Parent entity’s financial liabilities into relevant maturity groupings. The Group’s derivative interest rate swaps are net settled. These derivatives are categorised into relevant maturity groupings based on contractual maturity dates. The amounts disclosed in the tables below are the contractual undiscounted cash flows inclusive of interest payments.
LESS THAN LESS THAN BETWEEN BETWEEN OVER 5 3 MONTHS 1 YEAR 1 AND 2 2 AND 5 YEARS YEARS YEARS $000 $000 $000 $000 $000 gRoUP
30 JUne 2012 Trade and other payables 12,241 - - - - Derivative financial instruments - 1,160 - - - Bank loans* 68,906 - - - - Finance leases 32 65 6 13 - Refundable occupation right agreements** 618,814 - - - -
30 JUne 2011 Trade and other payables 10,602 - - - - Derivative financial instruments - - 1,812 - - Bank loans* 124,535 - - - - Finance leases 32 94 96 20 - Refundable occupation right agreements** 589,686 - - - -
METLIFECARE 32 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
LESS THAN LESS THAN BETWEEN BETWEEN OVER 5 3 MONTHS 1 YEAR 1 AND 2 2 AND 5 YEARS YEARS YEARS $000 $000 $000 $000 $000
PaRenT
30 JUne 2012 Trade and other payables 2,373 - - - - Amounts due to subsidiaries 1,622 4,866 81,105 - - Derivative financial instruments - 1,160 - - - Bank loans* 49,400 - - - - Finance leases 8 16 - - -
30 JUne 2011 Trade and other payables 1,705 - - - - Amounts due to subsidiaries 1,219 3,658 60,970 - - Derivative financial instruments - - 1,812 - - Bank loans* 79,716 - - - - Finance leases 8 24 24 - -
* The bank loans are drawn down from the committed bank facilities for fixed periods (typically 1 to 3 months). At the conclusion of the draw down period the loans are rolled over for a further fixed period. The maturity of the committed bank facilities are shown in note 22. The balance above includes unaccrued interest.
** The refundable occupation right agreement is repayable to the resident on vacation of the unit or serviced apartment or on termination of the occupation right agreement (subject to a new occupation right agreement for the unit or serviced apartment being issued to an incoming resident). The expected maturity of the refundable occupation right agreement liability is shown in note 23.
(d) Capital risk management The Group monitors capital on the basis of the gearing ratio. Group capital consists of share capital and retained earnings. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total external borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The bank loans are subject to bank covenants. The covenants require the Group to maintain agreed ratios of cash flow to debt, and debt to valuation (see note 22). There have been no financial covenant breaches during the year (2011: nil).
(e) fair value estimation The fair value of financial instruments traded in active markets (such as trading securities) is based on quoted market prices at the balance sheet date. The Group has no such financial instruments. The fair value of derivatives that are not traded in active markets (for example, over-the-counter derivatives) is determined using appropriate valuation techniques. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. The fair value of the interest rate swaps is calculated as the present value of the estimated future cash flows. The only financial instruments measured at fair value in the balance sheet are derivatives. The fair value estimation of derivatives is determined to be within level 2 of the fair value hierarchy as all significant inputs required to ascertain the fair value of these derivatives are observable. There have been no transfers in hierarchy categories during the year.
METLIFECARE LIMITED 33 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
4. CRITICal aCCoUnTIng esTIMaTes anD JUDgeMenTs Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. Fair value of investment properties and care facilities The fair value of investment properties and care facilities land and buildings have been determined by an independent qualified valuer using assumptions relating to future cash flows arising from the investment properties and assumptions relating to future growth rates of retirement village occupation right agreement amounts, the average duration of residency of occupants and appropriate discount rates. Refer to note 19 for key assumptions made and impact on sensitivity analysis. The fair value of investment properties is subjective and changes to the assumptions have a significant impact on profit and the fair value. Revenue recognition Membership fees are recognised as revenue on a straight-line basis. This requires management to estimate the period of occupancy for units and serviced apartments. Management estimates are based on experience of occupancy periods and are detailed in note 2 (e).
(b) Critical judgements in applying the entity’s accounting policies Income taxes Deferred tax assets and liabilities have been offset in accordance with NZ IAS 12 Income Taxes. The deferred tax has been calculated on the assumption that there will be no change in tax law or circumstances. The Group has previously recognised tax losses in the Balance Sheet to the extent that tax losses offset deferred income tax liabilities arising from temporary differences and the requirements of income tax legislation can be satisfied. Significant judgement is required in determining whether shareholder continuity and other income tax legislation requirements will continue to be met in the future in order for tax losses to be recognised to absorb any deferred income tax liabilities. Following the partial divestment by Retirement Village Group’s shareholding in the Company during the current year, and subsequent to balance date, the Directors have significant uncertainty that the Company will probably maintain sufficient shareholder continuity levels over the foreseeable future in accordance with income tax requirements to continue to recognise tax losses in the financial statements of the Group and Parent. As a result, tax losses totalling $87.0m and $24.4m in the Group and Parent respectively have not been recognised in the deferred tax calculation in the year ended 30 June 2012. NZ IAS 12 requires deferred tax to be recognised in respect of taxable temporary differences. The carrying value of the Group’s investment properties is determined on a discounted cash flow basis and includes cash flows that are both taxable and non taxable in the future. Only those cash flows with a future tax consequence, primarily in respect of membership fees, result in a taxable temporary difference. In determining the taxable temporary difference, the Directors have used the contractual cash flows on the basis that the contractual arrangements for an occupation right agreement comprise two gross cash flows (being an occupation right agreement deposit upon entering the unit and the refund of this deposit upon exit) that are non-taxable and need to be excluded to determine the taxable temporary differences arising on investment properties. Contractually, membership fees are received upon refund of the occupation right agreement deposit by way of set off on exit of a unit by a resident. In determining the position, the Directors considered the timing of the membership receipt and whether it is received at the time of the receipt of the occupation right agreement deposit due to the right of set off of the fees. If this timing was used, an additional deferred tax liability of $21.5m (2011: $36.8m) would be recognised on the balance sheet. An additional current year tax expense of $21.5m (2011: $36.8m) and a corresponding reduction in net profit after tax $21.5m (2011: $36.8m) would also be recognised. The Directors, in determining the appropriate treatment, have carefully evaluated all the available information and consider the adopted policy to be appropriate.
METLIFECARE 34 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Deferred tax in respect of investment properties has been assessed on the basis of the asset value being realised through use. If the asset value was realised by sale, the sale would trigger a $77.0m (2011: $76.8m) tax liability in relation to tax depreciation recovered prior to the utilisation of any available tax losses at the time. This compares to the “in use” deferred tax net liability of $46.9m (2011: $28.3m) included in the adopted treatment prior to the utilisation of any available tax losses at the time.
5. segMenT InfoRMaTIon The Group operates in one operating segment. The chief operating decision maker (“The Board”) reviews the operating results on a regular basis and makes decisions on resource allocation based on the review of Group results. The Board makes resource allocation decisions on the basis of expected cash flows and the results of the Group as a whole. The Group derives care fee revenue in respect of eligible Government subsidised aged care residents who receive Resthome or Hospital level care. Government aged care subsidies received from the Ministry of Health included in rest home, hospital and service fees and villages fees amounted to $16.1m (2011: $16.1m). The nature of the products and services provided and the type and class of customers have similar characteristics within the operating segment.
6. oPeRaTIng RevenUe
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Membership fees 19,714 21,412 - - Rest home, hospital and service fees and village fees 42,877 42,812 - - Dividends received from jointly controlled entity - - 800 400 Other 773 783 2,418 2,029
63,364 65,007 3,218 2,429
7. fInanCe InCoMe
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Interest on advances to subsidiaries and jointly controlled entities (note 29) - - 2,316 3,251 Change in the fair value of derivatives 652 - 652 - Other interest income 167 121 6 8
819 121 2,974 3,259
Interest on advances to subsidiaries and jointly controlled entities of $2.3m (2011: $3.3m) is net of $5.5m (2011: $5.3m) of interest on advances from Parent and $3.2m (2011: $2.0m) of interest on advances to Parent.
METLIFECARE LIMITED 35 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
8. eXPenses
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
(Loss)/profit before income tax includes the following specific expenses: Property Costs - Utilities and other property costs 7,309 6,525 177 187 - Repairs and maintenance on investment properties 7,504 7,412 - - - Repairs and maintenance on plant, furniture and equipment 500 103 1 3
Total property costs 15,313 14,040 178 190 Depreciation - Plant, furniture and equipment 776 862 72 90 - Motor vehicles 67 76 - - - Freehold buildings 467 507 - -
Total depreciation 1,310 1,445 72 90
Amortisation of software 246 411 201 305
Other Expenses Resident costs 4,537 4,482 - - Marketing and promotion 2,906 2,960 158 139 Other employment costs 1,380 1,181 449 286 Communication costs 1,592 1,554 743 633 Rental and operating lease expenses 214 221 214 221 Loss on disposal of property, plant and equipment 70 8 25 1 Donations 34 29 28 12 Residents’ share of capital gain (1,439) (208) - - Loss on business disposal (note 20) - 985 - - Provision for investment in controlled entity (note 17) - - - 7,755 Release of provision for advance to controlled entity (note 29) * - - - (7,139) Merger expenses 975 - 975 - Other (no items of individual significance) 2,584 2,374 632 570
Fees paid to PricewaterhouseCoopers New Zealand - Audit 235 208 17 28 - Taxation 108 93 108 93 - Other non-assurance services 144 - 144 - - Other assurance services 5 5 5 5
Total fees paid to PricewaterhouseCoopers New Zealand 492 306 274 126
Directors’ fees - Parent 157 157 157 157 - Jointly controlled entity 12 - - -
Total other expenses 13,514 14,049 3,655 2,761
METLIFECARE 36 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Fees paid to PricewaterhouseCoopers New Zealand by the Group for other assurance services totalled $5,000 (2011: $5,000). This related to work performed on interim financial statements. Fees paid to PricewaterhouseCoopers New Zealand for other non-assurance services comprise benchmarking and advisory services on executive remuneration and, due diligence services in connection with the acquisitions detailed in note 30.
* The release of the provision for advance to controlled entity at 30 June 2011 relates to a previously impaired receivable which has been recovered upon the sale of the Merivale Retirement Village which was disposed of on 14 February 2011 (note 20).
9. ReConCIlIaTIon of (loss)/PRofIT afTeR TaXaTIon WITH CasH oUTfloW fRoM oPeRaTIng aCTIvITIes
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
(Loss)/profit after tax (141,651) 20,774 (8,107) (9,445) Adjustments for: Change in fair value of investment properties 99,808 (27,521) - - Loss on revaluation of care facilities 124 - - - Impairment of property, plant and equipment - - - - Change in fair value of residents’ share of capital gains (1,439) (208) - - Change in fair value of derivative financial instruments (652) 926 (652) 926 Depreciation 1,310 1,445 72 90 Amortisation 246 411 201 305 Movement in deferred tax expense 37,968 - - - Provision for investment in controlled entity - - - 7,755 Release of provision for advance to controlled entity - - - (7,139) Loss on disposal of property, plant and equipment 70 8 25 1 Loss on business disposal - 985 - -
Changes in working capital relating to operating activities: Trade receivables and other assets (832) 9,704 197 (3,352) Trade and other payables 1,971 1,728 711 (72) Deferred membership fees 3,510 626 - - Refundable occupation right agreements 30,567 14,126 - -
Net cash inflow/(outflow) from operating activities 31,000 23,004 (7,553) (10,931)
METLIFECARE LIMITED 37 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
10. fInanCe CosTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Change in the fair value of derivatives - 926 - 926 Interest expense 6,630 9,306 4,630 5,365 Facility costs 2,299 3,213 1,449 1,758 Less: Interest expense capitalised (513) (560) - -
8,416 12,885 6,079 8,049
11. InCoMe TaX eXPense
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
(a) Income tax expense Current tax - - - - Deferred tax 37,968 - - -
37,968 - - -
(b) Numerical reconciliation of income tax expense to prima facie tax payable (Loss)/profit before income tax expense (103,683) 20,774 (8,107) (9,445) Tax at the New Zealand tax rate of 28% (2011: 30%) (29,032) 6,232 (2,270) (2,834) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Temporary differences not previously brought to account (4,275) (2,998) (4,516) (7) Non taxable impact of investment property revaluation 27,069 (8,257) - - Other (106) 93 1 186 Tax impact of change in depreciable tax base 19,997 - - - Repurchase obligation deductible - (662) - - Tax losses generated during the year - 5,592 - 2,655 Write off of previously recognised tax losses 22,684 - 4,495 - Tax losses not recognised 1,673 - 2,351 - Prior period adjustment (42) - (61) -
Income tax expense 37,968 - - -
The weighted average applicable tax rate was 29% (2011: 30%).
METLIFECARE 38 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
groUP PROVISIONS UNUSED INVESTMENT TOTAL AND DEfERRED TAX LOSSES PROPERTIES MEMBERSHIP AND CARE fEES fACILITIES $000 $000 $000 $000
(c) Recognised deferred tax liability As at 30 June 2010 - - - - Credit/(charged) to income statement - - - - Credit/(charged) to other comprehensive income - - - -
As at 30 June 2011 - - - -
As at 30 June 2011 - - - - Credit/(charged) to income statement 12,352 - (50,320) (37,968) Credit/(charged) to other comprehensive income - - (3,296) (3,296)
As at 30 June 2012 12,352 - (53,616) (41,264)
groUP 30 JUNE 2012 30 JUne 2011 $000 $000
Expected maturity of deferred tax liability Deferred tax liability to be recovered within 12 months 470 - Deferred tax liability to be recovered after more than 12 months (41,734) -
(41,264) -
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
(d) Unrecognised deferred tax asset: Temporary differences arising from normal operations - 42,963 365 318 Unused tax losses 86,986 79,746 24,452 15,811 Investment properties and care facilities - (107,442) - -
Unrecognised deferred tax balances 86,986 15,267 24,817 16,129
Unrecognised deferred tax balance @ 28% (2011: 28%) 24,356 4,275 6,949 4,516
No income tax was paid or payable during the year. Unrecognised tax losses for the Group at 30 June 2012 were $86.9m (2011: $79.7m). The availability of the unrecognised tax losses is dependent on the Company meeting the requirements of the income tax legislation, including maintaining sufficient shareholder continuity levels. In the prior year, the Company and Group did not recognise a deferred tax asset where it exceeded the deferred tax liability. Critical accounting judgements in respect of deferred tax are set out in note 4.
(e) Imputation Credits The imputation credit balance for the Company and Parent at 30 June 2012 is nil (2011: nil). No tax payments were made during the year and any dividends paid were unimputed.
METLIFECARE LIMITED 39 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
12. CasH anD CasH eQUIvalenTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Cash at bank and in hand 9,221 516 8,330 -
Cash and cash equivalents per balance sheet 9,221 516 8,330 - Less bank overdraft - - - (332) Cash and cash equivalents per cash flow statement 9,221 516 8,330 (332)
The carrying value of cash and cash equivalents reflects their fair value.
13. TRaDe ReCeIvables anD oTHeR asseTs
groUP Parent
30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Trade receivables 3,133 3,627 16 31 Provision for doubtful receivables - - - - 3,133 3,627 16 31 Occupation right agreement receivables 10,310 8,609 - - Prepayments 572 644 471 475 Other receivables 1,043 1,100 5 30 Total receivables and other assets 15,058 13,980 492 536
IMPaIRMenT PRovIsIon Provision for doubtful debts at 1 July - (26) - - Increase in provision - (17) - - Reversal of provision not required - 7 - - Bad debts written off - 36 - - Provision for doubtful debts at 30 June - - - -
PasT DUe anD IMPaIReD ReCeIvables Impaired receivables - 1 to 3 months - - - - - Over 3 months ------
Past due but not impaired receivables - 1 to 3 months 124 139 - 17 - Over 3 months 90 77 - - 214 216 - 17
All trade and other receivables are expected to mature within 12 months of balance date. The carrying value of trade and other receivables reflects their fair value. There is no collateral held and maximum credit exposure equals carrying value.
METLIFECARE 40 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
14. DeRIvaTIve fInanCIal InsTRUMenTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
InTeResT RaTe sWaPs Assets - - - - Liabilities (1,160) (1,812) (1,160) (1,812) eXPeCTeD MaTURITY Within 12 months (1,160) - (1,160) - Later than 12 months - (1,812) - (1,812)
(1,160) (1,812) (1,160) (1,812)
At balance date the Group held 4 (2011: 4) interest rate swap agreements, for a total notional amount of $64m (2011: $64m). The effective interest rate of the swaps range from 4.71% - 4.82% (2011: 4.71% - 4.82%) and mature between March 2013 – April 2013 (2011: March 2013 – April 2013).
15. PRoPeRTY, PlanT anD eQUIPMenT
fREEHOLD fREEHOLD PLANT, MOTOR TOTAL LAND BUILDINGS fURNITURE VEHICLES AND EQUIPMENT $000 $000 $000 $000 $000 gRoUP aT 30 JUne 2010 Cost 7,266 22,159 19,452 1,298 50,175 Accumulated depreciation - (4,000) (15,494) (1,097) (20,591)
Net book value 7,266 18,159 3,958 201 29,584
YeaR enDeD 30 JUne 2011 Opening net book amount 7,266 18,159 3,958 201 29,584 Additions - 72 459 79 610 Depreciation - (507) (862) (76) (1,445) Business disposal (note 20) (3,580) (3,289) (337) - (7,206) Disposals - - (12) (31) (43) Impairment charge - - - - - Transfer to investment properties (note 19) - (71) (613) - (684)
Closing net book amount 3,686 14,364 2,593 173 20,816 aT 30 JUne 2011 Cost 3,686 18,668 18,089 1,315 41,758 Accumulated depreciation - (4,304) (15,496) (1,142) (20,942)
Net book value 3,686 14,364 2,593 173 20,816
METLIFECARE LIMITED 41 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
15. PRoPeRTY, PlanT anD eQUIPMenT ConTInUeD
fREEHOLD fREEHOLD PLANT, MOTOR TOTAL LAND BUILDINGS fURNITURE VEHICLES AND EQUIPMENT $000 $000 $000 $000 $000
YeaR enDeD 30 JUne 2012 Opening net book amount 3,686 14,364 2,593 173 20,816 Revaluation of care facilities 1,012 11,771 - - 12,783 Additions - 11 827 - 838 Depreciation - (467) (776) (67) (1,310) Disposals - - (71) - (71)
Closing net book amount 4,698 25,679 2,573 106 33,056
aT 30 JUne 2012 Cost or valuation 4,698 25,679 18,337 1,240 49,954 Accumulated depreciation - - (15,764) (1,134) (16,898)
Net book value 4,698 25,679 2,573 106 33,056
The Group’s care facilities encompassing freehold land and buildings were revalued on 30 June 2012 by CBRE. CBRE determined the fair value of all care facility assets using an earnings based multiple approach where the lower of actual or projected earnings before interest, tax, depreciation, amortisation and rent is capitalised at rates of between 13% to 15%. The valuation prepared has been split between land, improvements, chattels and plant and goodwill to determine the fair value of the assets. The revaluation surplus net of applicable deferred income taxes was credited to other comprehensive income and is shown in ‘revaluation reserve’ in shareholders’ equity. If freehold land and buildings were stated on a historical cost basis, the amounts would be as follows:
fREEHOLD fREEHOLD LAND BUILDINGS aT 30 JUne 2012 Cost 3,686 18,679 Accumulated depreciation - (4,771)
Net book value 3,686 13,908
METLIFECARE 42 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
PLANT, fURNITURE AND EQUIPMENT $000
PaRenT aT 30 JUne 2010 Cost 1,282 Accumulated depreciation (1,045)
Net book value 237
YeaR enDeD 30 JUne 2011 Opening net book amount 237 Additions 81 Depreciation (90) Disposals (16)
Closing net book amount 212 aT 30 JUne 2011 Cost 1,095 Accumulated depreciation (883)
Net book value 212
YeaR enDeD 30 JUne 2012 Opening net book amount 212 Additions 139 Depreciation (72) Disposals (25)
Closing net book amount 254 aT 30 JUne 2012 Cost 1,217 Accumulated depreciation (963)
Net book value 254
CaRRYIng valUe of asseTs HelD UnDeR fInanCe lease:
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Motor vehicles Cost 37 37 - - Accumulated depreciation (13) (6) - -
Net book value 24 31 - -
METLIFECARE LIMITED 43 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
16. InTangIble asseTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
CoMPUTeR sofTWaRe Opening net book amount 391 395 345 234 Additions 213 416 212 416 Amortisation charge (246) (411) (201) (305) Disposals - (9) - -
Closing net book amount 358 391 356 345
Total intangible assets 358 391 356 345
CoMPUTeR sofTWaRe Cost 2,092 1,921 1,750 1,579 Accumulated amortisation (1,734) (1,530) (1,394) (1,234)
Net book value 358 391 356 345
CaRRYIng valUe of InTangIble asseTs HelD UnDeR fInanCe lease:
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
CoMPUTeR sofTWaRe Cost 423 423 92 92 Accumulated amortisation (423) (353) (92) (79)
Net book value - 70 - 13
METLIFECARE 44 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
17. InvesTMenT In ConTRolleD enTITIes
cLa SS oF SHareS eQUitY HoLDing 30 JUNE 2012 30 JUne 2011
NAME Of ENTITY Metlifecare Bayswater Limited Ordinary 100% 100% Metlifecare Coastal Villas Limited Ordinary 100% 100% Metlifecare Crestwood Limited Ordinary 100% 100% Metlifecare Greenwood Park Limited Ordinary 100% 100% Metlifecare Highlands Limited Ordinary 100% 100% Metlifecare Kapiti Limited Ordinary 100% 100% Metlifecare Oakwoods Limited Ordinary 100% 100% Metlifecare Pakuranga Limited Ordinary 100% 100% Metlifecare Pinesong Limited Ordinary 100% 100% Metlifecare Powley Limited Ordinary 100% 100% Metlifecare 7 Saint Vincent Limited Ordinary 100% 100% Metlifecare Somervale Limited Ordinary 100% 100% Metlifecare Stanley Road Limited (previously Metlifecare Epsom Limited) Ordinary 100% 100% Metlifecare The Poynton Limited Ordinary 100% 100% Metlifecare The Avenues Limited Ordinary 100% 100% Metlifecare Wairarapa Limited Ordinary 100% 100%
DoRManT enTITIes Bay of Plenty Retirement Village Limited Ordinary 100% 100% Metlifecare Merivale Limited Ordinary 100% 100% Provider Care NZ Limited Ordinary 100% 100% Third Age Care Limited Ordinary 100% 100%
All subsidiaries, except Metlifecare Stanley Road Limited and the dormant entities, provide accommodation and care for the aged through the ownership and management of retirement villages. Metlifecare Merivale Limited ceased to provide accommodation and care for the aged on 14 February 2011 following the sale of the assets of the business (refer note 20). All subsidiaries are incorporated in New Zealand and have a balance date of 30 June. On 30 April 2012 Metlifecare Stanley Road Limited acquired land at 123 Stanley Road, Glenfield.
30 JUNE 2012 30 JUne 2011 $000 $000
Investment in controlled entities 61,438 61,438 Provision for impairment of investment (7,755) (7,755)
Investment in controlled entities at carrying value 53,683 53,683
A provision of $7.8m (2011: $7.8m) has been made against investments in subsidiaries as the book value of the investments in subsidiaries exceeds the recorded carrying value of the net assets.
METLIFECARE LIMITED 45 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
18. InvesTMenT In JoInTlY ConTRolleD enTITIes The Group holds a 50% shareholding in Metlifecare Palmerston North Limited, which owns and operates a retirement village in Palmerston North providing accommodation and care for the aged.
50% SHARE 50% sHaRe 30 JUNE 2012 30 JUne 2011 $000 $000 sTaTeMenT of CoMPReHensIve InCoMe The Group’s operating revenues and share of expenses, proportionately consolidated, was: Revenue 2,111 2,766 Expenses (3,933) (1,724) Income Tax Expense (883) -
Net contribution to Group operating profit (2,705) 1,042
Gain on revaluation of care facilities 619 - Tax on revaluation (173) -
Net contribution to Group total comprehensive income (2,259) 1,042 balanCe sHeeT The Group’s share of assets and liabilities, proportionately consolidated, was: Cash and cash equivalents 96 461 Trade and other receivables 401 329 Property, plant and equipment 1,795 1,245 Intangible assets - 2 Investment properties 15,667 17,501
Share of total assets included in Group 17,958 19,538
Trade and other payables (467) (319) Amount due to related party (52) (85) Finance leases (2) (5) Deferred membership fees (610) (537) Refundable occupation right agreements (8,826) (8,588)
Share of total liabilities included in Group (9,957) (9,534)
Net assets employed in the jointly controlled entity 8,001 10,004
Aggregate cash flows from operating, investing and financing activities (365) 439
There are no contingent liabilities or capital commitments relating to the Group’s interest in the jointly controlled entity, and no contingent liabilities or capital commitments of the entity itself (2011: nil).
METLIFECARE 46 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
ReConCIlIaTIon of neT asseTs eMPloYeD In THe JoInTlY ConTRolleD enTITY
30 JUNE 2012 30 JUne 2011 $000 $000
Opening balance 10,004 9,362 Net contribution to Group operating profit (2,705) 1,042 Net contribution to Group other comprehensive income 619 - Dividends paid (800) (400)
Closing balance 7,118 10,004
19. InvesTMenT PRoPeRTIes
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
InvesTMenT PRoPeRTIes UnDeR DeveloPMenT aT faIR valUe Opening balance 18,749 19,397 - - Investment Properties under Development transferred from Property, plant and equipment (note 15) - - - - Business disposal (note 20) - (1,120) - - Capitalised subsequent expenditure 9,849 2,951 - - Completed Developments transferred to Completed Investment Properties (3,192) (1,871) - - Change in fair value recognised during the year (2,109) (608) - -
Closing balance 23,297 18,749 - -
CoMPleTeD InvesTMenT PRoPeRTIes aT faIR valUe Opening balance 1,239,774 1,248,779 - - Business disposal (note 20) - (39,733) - - Capitalised subsequent expenditure 216 728 - - Completed Developments transferred from Completed Investment Properties under Development 3,192 1,871 - - Change in fair value during the year (97,699) 28,129 - -
Closing balance 1,145,483 1,239,774 - -
Total investment properties 1,168,780 1,258,523 - -
Investment properties were valued at 30 June 2012 by CBRE Limited (CBRE) (2011: Darroch Limited) who are independent registered valuers and associates of the New Zealand Institute of Valuers, at a total of $514.1m (2011: $635.0m). CBRE are appropriately qualified and experienced in valuing retirement village properties in New Zealand. The fair values are based on a discounted cash flow model applied to the expected future cash flows generated by the investment properties. The valuation calculates the expected cash flows for a 20 year period (2011: 40 years), based on occupancy turnover of 11.1% - 14.5% p.a. (2011: 12.5% - 14.3% p.a.) for units and 20.8% - 26.3% p.a. (2011: 25% - 28.6% p.a.) for serviced apartments which is extrapolated at a nominal growth rate of 2.7% - 3.2% (2011: 3.25% - 4%) and discounted to present value at pre-tax discount rates of 12.5% - 15.0% (2011: 12.5%). METLIFECARE LIMITED 47 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Borrowing costs of $0.5m (2011: $0.6m) arising on financing specifically entered into for the construction of investment properties under development were capitalised during the year. Capitalisation rates of 3.82% - 4.69% (2011: 4.44% - 5.14%) were used, representing the borrowing costs of the loans used to finance the projects. The valuation of investment properties is adjusted for cash flows relating to refundable occupation right agreements, residents’ share of capital gains, deferred management fees and membership fee receivables which are already recognised separately on the balance sheet and also reflected in the cash flow model. A reconciliation between the valuation amount and the amount recognised on the balance sheet as investment properties is as follows:
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Investment Properties under Development at fair value 23,297 18,749 - - Completed Investment Properties at fair value 490,785 616,261 - -
Total Valuation 514,082 635,010 - -
Plus: Refundable occupation right agreement amounts 733,893 689,345 - - Plus: Residents’ share of capital gains 29,044 33,176 - - Plus: Deferred membership fee 42,586 39,076 - - Less: Membership fee receivables (140,515) (129,475) - - Less: Occupation right agreement receivables (10,310) (8,609) - -
Total investment properties 1,168,780 1,258,523 - -
Registered mortgages in favour of the statutory supervisors of the village owning subsidiary companies are recognised as a first charge over the freehold land of those companies to protect the interests of the residents in the event of failure by the subsidiary companies as operators of the villages to observe obligations under the deeds of supervision, occupation right agreements and lifecare agreements. Metlifecare Limited holds a second registered mortgage and second registered general security agreement over all its wholly owned subsidiaries to secure funding made available by Metlifecare Limited to each of these subsidiaries.
iP SenSitivitY ($000)
30 JUNE 2012 ADOPTED VALUE DISCOUNT RATE DISCOUNT RATE GROWTH RATE GROWTH RATE (ILU, SA, ILA) * + 50 BP (14%) – 50 BP (13%) + 50 BP – 50 BP Valuation 464,180 Difference ($000) (18,060) 19,300 31,100 (20,424) Difference (%) (4%) 4% 7% (4%)
30 JUne 2011 ADOPTED VALUE DISCOUNT RATE DISCOUNT RATE GROWTH RATE GROWTH RATE (ILU, SA, ILA) * + 50 BP (13%) – 50 BP (12%) + 50 BP – 50 BP Valuation 555,771 Difference ($000) (30,300) 35,002 40,890 (35,821) Difference (%) (5%) 6% 7% (6%)
* ILU (Independent Living Unit), SA (Serviced Apartment), ILA (Independent Living Apartment) excluding unsold stock.
METLIFECARE 48 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
20. bUsIness DIsPosal (a) The assets and liabilities related to Metlifecare Merivale Limited, a subsidiary company, were disposed on 14 February 2011. The net assets were sold for $26.0m (less adjustments) to Merivale Retirement Village 2011 Limited. (b) Allocation of proceeds from sale:
30 JUne 2011 $000
Sale price 26,000 Less: ORA adjustments on disposal (594)
Net sale price prior to disposal costs 25,406
Less: Assets and liabilities disposed: Investment properties 40,853 Deferred membership fees (1,085) Refundable occupation right agreements (21,263) Property, plant and equipment 7,206
Total assets and liabilities disposed 25,711
Loss from business disposal (305) Costs associated with business disposal (680)
Total loss on business disposal (985)
21. TRaDe anD oTHeR PaYables
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Trade creditors 2,758 1,300 692 342 Sundry creditors and accruals 9,483 7,008 1,681 1,319 Remediation work accrual - 2,250 - - Related party payable (note 29) - 44 - 44 Employee entitlements 2,794 2,504 320 321
Total trade and other payables 15,035 13,106 2,693 2,026
In the prior year, the Group recognised an accrual of $2.25m to cover costs associated with the remediation of construction defects at its Metlifecare Bayswater and Metlifecare Pinesong villages. This remedial work has been substantially completed in the current year. All other trade and other payables are expected to mature within 12 months of balance date. The carrying value of trade and other payables reflects their fair value.
METLIFECARE LIMITED 49 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
22. InTeResT beaRIng lIabIlITIes
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Bank loan 69,167 124,990 49,487 80,000 Capitalised debt costs (492) (738) (306) (459)
68,675 124,252 49,181 79,541
Finance leases 106 213 23 51 Bank overdraft - - - 332
Total interest bearing liabilities 68,781 124,465 49,204 79,924 eXPeCTeD MaTURITY Within one year 89 45,107 23 20,360 Later than one year 69,184 80,096 49,487 60,023
Total interest bearing liabilities excluding capitalised debt costs 69,273 125,203 49,510 80,383
Bank loans The Bank loan comprises the Core Revolving Credit Facility and Development Facility, effective 8 March 2012 as follows: Core Revolving Credit facility – a term loan facility of NZD$80.0m, expiring 30 September 2015. On 23 July 2012, the group increased the limit of the Core Revolving Credit Facility to $140.0m with no change to the expiry date. Development facility – a term loan facility of NZD$80.0m, expiring 30 September 2016. On 23 July 2012, the Group increased the limit of the Development Facility to $100.0m with no change to the expiry date. In addition, there is a Working Capital Facility of $10m (the Overdraft). At 30 June 2012, the Group had $170.0m (2011: $136.0m) of committed bank facilities, including overdraft, of which $100.8m was undrawn (2011: $10.7m). The amount drawn under the facility at 30 June 2012 comprised $39.7m (2011: $80.0m) under the Core Revolving Credit Facility,$19.7m (2011: $45.0m) under the Development Facility, and $9.8m (2011: Nil) under the Working Capital Facility.
Interest Interest on the overdraft, loans and advances is charged using the BKBM Bill Rate plus a margin. Interest rates applicable in the year to 30 June 2012 ranged from 3.69% to 5.36% per annum (2011: 4.12% to 6.00%).
Security Bank loans are secured as set out in note 19. A Negative Pledge Deed has been entered into by the operating subsidiaries in favour of the Banks in which the subsidiaries have undertaken not to create or permit to exist any mortgage or other charge over their assets or revenues without obtaining the prior written consent of the Group’s bankers. The bank overdraft is secured in the same manner as the bank loans. Metlifecare Limited has issued a letter of support for the bank borrowings of the 50% owned jointly controlled entity Metlifecare Palmerston North Limited. At 30 June 2012, Metlifecare Palmerston North Limited had an overdraft facility of $650,000, of which $650,000 was undrawn. (2011: $350,000, $350,000).
METLIFECARE 50 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
financial covenants The financial covenants that the Group must comply with require a certificate to be provided on a quarterly basis and includes: Financial Covenant - Interest Cover Ratio of not less than 1.75:1 Financial Covenant - Loan to Value Ratio less than or equal to 45% The Interest Cover is based on the net cash flows available for debt servicing for the prior 12 month period as a multiple of the corresponding interest costs. The Loan to Value Ratio stipulates a minimum ratio of drawn debt to the most recent independent portfolio valuation. An un-remedied breach of the Interest Cover Ratio or the Loan to Value Ratio are events of default. Following an event of default the Banks may do any of the following: Negotiate new terms; and/or Cancel the facilities with immediate effect; and/or Declare all or any part of the outstanding moneys to be immediately due and payable; and/or Exercise all or any of their respective rights under the debt facility agreement and at law. During the year ended 30 June 2012 the Company did not breach any of its financial covenants. finance lease liabilities
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
CoMMITMenTs In RelaTIon To fInanCe leases aRe PaYable as folloWs: Within one year 96 126 24 32 Later than one year but not later than five years 20 116 - 24 Later than five years - - - -
Minimum lease payments 116 242 24 56
Future finance charges (10) (29) (1) (5)
Recognised as a liability 106 213 23 51
Finance leases are secured over the assets to which they relate (refer to note 15 and 16). The finance rate for the year to 30 June 2012 is 9.87% (2011: 10.73%).
METLIFECARE LIMITED 51 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
23. RefUnDable oCCUPaTIon RIgHT agReeMenTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Refundable security deposits 733,893 689,345 - - Residents’ share of capital gains 29,044 33,176 - - Loans to residents (3,608) (3,360) - - Membership fees receivable (140,515) (129,475) - -
Total refundable occupation right agreements 618,814 589,686 - -
A new resident is charged a refundable security deposit, in advance of being issued the right to occupy one of the Group’s units or serviced apartments, which is refunded to the resident on vacation, net of any amount owing to the Group. The Group has a legal right to set off any amounts owing to the Group by a resident against that resident’s security deposit. Such amounts include membership fees, rest home/hospital fees, loans receivable, service fees and village fees. As the refundable occupation right is repayable on demand to the resident, upon vacation, the fair value is equal to the face value, being the amount that can be demanded.
Expected maturity The security deposit is refundable to the resident on vacation of the unit, apartment or serviced apartment or on termination of the occupation right agreement (subject to a new occupation right agreement for the unit or serviced apartment being issued to an incoming resident). In determining the fair value of the Group’s investment properties CBRE Limited (2011: Darroch Limited) estimate the established length of stay to be 6.9 - 9.0 years for independent living units and apartments (2011: 7-8 years) and 3.8 - 4.8 years for serviced apartments (2011: 3.5 - 4 years). Therefore, it is not expected that the full obligation to residents will fall due within one year. Based on turnover calculations the expected maturity of the total refundable obligation to residents is as follows:
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
Within 12 months 62,500 59,558 - - Beyond 12 months 556,313 530,128 - -
618,814 589,686 - -
METLIFECARE 52 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
24. ConTRIbUTeD eQUITY
30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 SHARES sHaRes $000 $000
PaRenT anD gRoUP Issued and fully paid up capital 144,115,209 122,448,541 126,717 81,958
Balance at beginning of the year 122,448,541 122,448,541 81,958 81,958 Shares issued 21,666,668 - 45,500 - Issue costs - - (741) -
Balance at end of year 144,115,209 122,448,541 126,717 81,958
The Group issued 19,047,620 shares by private placement on 10 November 2011 and 2,619,048 shares by share purchase plan on 13 December 2011 (15.0% of the total ordinary share capital issued). The ordinary shares issued have the same rights as the other shares on issue. The fair value of the shares issued amounted to $45,500,000 ($2.10 per share). The related transaction costs amounting to $741,000 have been netted off with the deemed proceeds. All ordinary shares are authorised and rank equally with one vote attached to each fully paid ordinary share. The shares have no par value. Refer note 30 for details on events subsequent to balance date.
25. DIvIDenDs There were no dividends paid or declared by the Group or Parent during the year to 30 June 2012 (2011: nil).
26. eaRnIngs/(loss) PeR sHaRe
Basic Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
Diluted Diluted earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year adjusted to assume conversion of dilutive potential of ordinary shares.
groUP 30 JUNE 2012 30 JUne 2011
(Loss)/profit attributable to equity holders ($000) (141,651) 20,774 basIC anD DIlUTeD Weighted average number of ordinary shares in issue (thousands) 136,011 122,449
(Loss)/earnings per share (cents) (104.1) 17.0
METLIFECARE LIMITED 53 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
27. ConTIngenCIes
Contingent liabilities There are no material contingent liabilities as at 30 June 2012 (2011: nil).
28. CoMMITMenTs
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
CaPITal CoMMITMenTs Estimated commitments contracted for at balance date but not provided for to purchase, construct or develop investment properties - - - -
- - - - oPeRaTIng lease CoMMITMenTs Non-cancellable Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 304 318 200 194 Later than one year but not later than five years 495 798 495 695 Later than five years - - - -
799 1,116 695 889
The Group leases head office premises and various property, plant and equipment under non-cancellable operating lease agreements. The leases reflect normal commercial arrangements with varying terms, escalation clauses and renewal rights.
METLIFECARE 54 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
29. RelaTeD PaRTY TRansaCTIons At 30 June 2012, Retirement Villages New Zealand Limited owns 50.07% (2011: 81.96%) of Metlifecare Limited. Retirement Villages New Zealand Limited is therefore a controlling shareholder. Subsequent to balance date, their shareholding reduced to 43.2%. Refer note 30 for further details. FKP Limited and Macquarie Group Limited are shareholders in RVNZ Investments Limited, which is the ultimate parent of Retirement Villages New Zealand Limited.
(a) Directors The names of persons who were Directors of the Company at any time during the financial year are as follows: P.R. Brown, O.G. Eady (resigned 12 January 2012), W.A. Edwards (appointed 22 August 2011), G.D. Flood (resigned 21 December 2011), P.B. Harman, D.A. Hunt, J.J. Loughlin, M.Tucker. The Directors of Metlifecare Limited and their immediate relatives do not hold shares in the Company, either directly or indirectly (30 June 2011: nil).
(b) Key management personnel compensation Key management personnel compensation for the year ended 30 June 2012 and the year ended 30 June 2011 is set out below. The key management personnel are all executives with the greatest authority for the strategic direction and management of the company. The directors are fully remunerated through directors’ fees and expenses.
groUP anD Parent groUP anD Parent 30 JUNE 2012 30 JUne 2011 $000 $000
Salaries and other short term employee benefits 1,979 1,751 Termination benefits - 120 Post employment benefits - - Other long term benefits - -
Total 1,979 1,871
(c) Transactions
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000
(i) Subsidiaries Net repayments from advances to subsidiaries - - 2,324 11,317 Interest received from subsidiaries - - 5,481 5,294 Interest charged to subsidiaries - - (3,165) (2,043) Management fees charged to subsidiaries - - 2,222 1,831
(ii) Jointly controlled entity Advance to/(from) jointly controlled entity (52) (85) (52) (85) Management fees charged to jointly controlled entity - - 80 80 Dividends received from jointly controlled entity - - 800 400
(iii) Other Recharges to other related parties 195 125 195 125
METLIFECARE LIMITED 55 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
(d) Outstanding balances
groUP Parent 30 JUNE 2012 30 JUne 2011 30 JUNE 2012 30 JUne 2011 $000 $000 $000 $000 (i) Entities with joint control or significant influence over the Group Amount owing to Retirement Villages New Zealand Limited - 44 - 44
(ii) Subsidiaries Advances owed to subsidiaries - - (81,105) (60,970) Advances owed from subsidiaries - - 119,579 101,803 Provision for impairment of advances owed to parent - - - -
(iii) Jointly controlled entity Advance owed from jointly controlled entity 52 85 52 85
(iv) Other Amounts owing from other related parties 16 31 16 31
(e) Terms and conditions Subsidiaries and jointly controlled entity advances Advances due to and from subsidiaries and jointly controlled entities are unsecured and repayable with a minimum of 12 months’ notice. At balance date notice had not been given in relation to these advances. Interest charges are calculated monthly based on the Group Treasury average cost of funds. Interest rates applicable in the twelve month period to 30 June 2012 ranged from 3.15% to 6.78% (2011: 5.88% to 6.35%).
30. sUbseQUenT evenTs Acquisition of Vision Senior Living Limited and Private Life Care Holdings Limited On 23 July 2012 (the date of acquisitions), Metlifecare Limited acquired 100% of the issued ordinary share capital in Vision Senior Living Limited (VSL) and Private Life Care Holdings Limited (PLC) (collectively referred to as the “Acquisitions”). In consideration for the Acquisitions, Metlifecare issued 29,730,000 ordinary shares to Retirement Village Investments Limited (the PLC Vendor), and 10,000,000 ordinary shares to the VSL Vendors. Retirement Village Investments Limited is a related party to the Company through common ownership. The issue price for the issued ordinary shares at the date of acquisitions was $2.31 resulting in a total consideration value of $91,776,300. The primary reasons for the merger were as follows: • Enhanced platform for Metlifecare to drive growth and shareholder value - the merger will see Metlifecare’s Total Assets increase to approximately $1.9 billion, with an improved portfolio balance between mature villages, developing villages and growth opportunities. • Complementary village portfolios in premium locations, as well as a strengthened presence in the important Auckland market - Metlifecare’s portfolio will expand from 16 to 24 villages (from seven to 12 villages in Auckland), with the number of units increasing from 2,460 to 3,902. • Access to strong development expertise and property suitable for development – Metlifecare’s development pipeline will expand to three greenfield village developments and a number of brownfield opportunities. The merger also brings on board an experienced, in-house development team from VSL. Metlifecare’s experience in providing a continuum of care will be extended to VSL and PLC villages.
METLIFECARE 56 LIMITED ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
Following the completion of the Acquisitions, the number of ordinary shares in the Company increased from 144,115,209 to 183,845,209, subject to the completion of the issue of 168,094 shares to be issued to Te Rapa Racing Limited. All shares issued are on the same terms, and will rank equally with; the existing ordinary shares in the Company, except that the PLC and the VSL Vendors have agreed to escrow periods as detailed below. The consideration paid, the fair value of assets acquired and liabilities assumed as a result of the Acquisitions, provisionally determined, are as follows: as aT 23 JUlY 2012
$000
ConsIDeRaTIon fair value of shares issued 91,776
Total consideration paid 91,776 asseTs - aCQUIReD Cash and cash equivalents 6,839 Other assets 641 Investment properties 660,910
Total assets 668,390 lIabIlITIes - assUMeD Other payables 3,093 Bank loans 128,291 Deferred membership fees 43,801 Refundable occupation right agreements 317,257 Deferred tax liabilities 19,508
Total liabilities 511,950 Net assets 156,440 Gain on Acquisitions 64,664 Total 91,776
The gain that will be recognised from the Acquisitions in the financial statements for the year ending 30 June 2013 of $64.7m is provisional pending completion of the work to finalise the fair value of the assets and liabilities acquired as part of the Acquisitions. The reason why the Acquisitions resulted in a gain is due to the differences between the fair value of the ordinary shares issued as consideration for the transaction relative to the fair value of the assets of PLC and VSL. The gain is the result of a bargain purchase negotiated by the Company. Any transaction costs incurred prior to 30 June 2012 in respect of the Acquisitions have been expensed to the Statement of Comprehensive Income. Following completion of the Acquisitions, RVNZ’s majority shareholding in the Company reduced to 43.2% through the disposal of 22.5 million shares on 23 July 2012. The Vision Forest Lake village is currently owned and operated by an unincorporated joint venture between VSL (Forest Lake Gardens No.2) Limited (a subsidiary of VSL) and Te Rapa Racing Limited (TRR). TRR has agreed to accept 168,094 ordinary Metlifecare shares in consideration for its share in the Vision Forest Lake village.
METLIFECARE LIMITED 57 ANNUAL REPORT 2012 Notes to the Financial Statements continued For the Year Ended 30 June 2012
The PLC and the VSL Vendors have agreed to certain restrictions on the sale of the Metlifecare ordinary shares issued to them as follows: • PLC Vendor and its related companies and nominees must not sell any ordinary shares in the Company at any time during the period beginning on 5 May 2012 and ending 16 months thereafter (this excludes shares sold on the sell- down completed on 23 July 2012); and • The VSL Vendors and its related companies and nominees must not sell any ordinary shares in the Company issued in consideration for the acquisition of VSL within 16 months from 23 July 2012, subject in each case to certain exceptions, as follows: (1) if a Metlifecare corporate reorganisation becomes unconditional, (2) to accept a full or partial takeover offer made under the Takeovers Code to the maximum extent permitted by the Code, or (3) for an acquisition or allotment of Metlifecare shares approved under rules 7(c) or 7(d) of the Takeovers Code. The Metlifecare Board has also agreed that they will endeavour to procure the appointment to the Board of Metlifecare two additional independent directors, with one of those additional independent directors to be appointed within 30 days of settlement, and the other by 31 December 2012, to ensure that by 31 December 2012 Metlifecare’s Board consists of two RVG representatives, four independent directors and the Company’s Managing Director/CEO, Alan Edwards. Appointment of Independent Directors On 22 August 2012 the Company appointed Alistair Ryan and Christopher Aiken to the Board, effective 23 August 2012.
METLIFECARE 58 LIMITED ANNUAL REPORT 2012 Independent Auditors’ Report to the shareholders of Metlifecare Limited
Report on the Financial Statements We have audited the financial statements of Metlifecare Limited on pages 15 to 58, which comprise the balance sheets as at 30 June 2012, the statements of comprehensive income, the statements of movements in equity and cash flow statements for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 30 June 2012 or from time to time during the financial year.
Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
We have no relationship with, or interests in, Metlifecare Limited or any of its subsidiaries other than in our capacities as auditors and providers of tax, advisory and other assurance services. These services have not impaired our independence as auditors of the Company and the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz Independent Auditors’ Report Metlifecare Limited
Opinion In our opinion, the financial statements on pages 15 to 58:
(i) comply with generally accepted accounting practice in New Zealand;
(ii) comply with International Financial Reporting Standards; and
(iii) give a true and fair view of the financial position of the Company and the Group as at 30 June 2012, and their financial performance and cash flows for the year then ended. Report on Other Legal and Regulatory Requirements We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 30 June 2012:
(i) we have obtained all the information and explanations that we have required; and
(ii) in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records. Restriction on Distribution or Use This report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants Auckland 22 August 2012 Notes to the Financial Statements continued ForStatutory the Year Ended 30 June 2012 Information
Corporate Interests’ Other Director Governance Register Information Statement 62 70 77
Other Statutory Shareholder Directory Information Information 78 79 81
METLIFECARE LIMITED 61 ANNUAL REPORT 2012 CoRPoRaTe goveRnanCe sTaTeMenT
The board is committed to ensuring that best practice principles of corporate governance are adopted by the Company. The board believes that such principles protect and enhance the assets of the Company for the benefit of all shareholders. The following policies, practices and processes have been adopted or followed by the Company.
1. ethical standards
Directors should observe and foster high ethical standards.
The Company is committed to maintaining high ethical standards through on-going attention to values and behaviour, particularly in respect of its responsibilities to those who reside in its retirement villages. That commitment requires all Directors, managers, staff and contractors acting on behalf of Metlifecare to maintain high standards of ethical behaviour in all decision making and in their conduct. That commitment extends to legal compliance, avoiding conflicts of interest, preserving confidentiality of information, upholding obligations to shareholders, respecting the rights of stakeholders, and the proper use of Metlifecare assets and property. The Board has formulated a Code of Ethics to govern the conduct of the Company. The Code of Ethics is available on the Company’s website. The Code of Ethics deals with: • conflicts of interest; • confidentiality; • gifts and corporate opportunities; • use of Company assets and information; • expected behaviours; and • reporting of breaches and disciplinary measures. In addition, the most significant policies and procedures that support the Company’s Code of Ethics are: • the Conflicts of Interest Protocol which appears on the website; • an Insider Trading Policy to address the insider trading requirements of the Securities Markets Act 1988; • a Legislative Compliance Policy, including regular management confirmation to the Board in the form of compliance certification; • protocols for compliance with the requirements of Ministry of Health, District Health Boards and Retirement Villages/Care Facility Regulations. Directors are required to disclose to the Board any actual or potential conflict of interest. Conflicts may arise: • where the Director is indirectly or directly involved in the matter; • where it may not be possible to give the Company undivided loyalty because of a Director’s relationship with others involved; or • where a Director’s views are inhibited under an arrangement that limits free exercise for the Company’s benefit. The Insider Trading Policy applies to Directors and employees and incorporates all insider trading restraints. Directors and employees are restricted from trading in Company shares in accordance with that policy during “black-out” periods from balance date and half-year balance date and, in any event, if they are in possession of non-publicly available price sensitive information.
METLIFECARE 62 LIMITED ANNUAL REPORT 2012 2. board Composition and Performance
There should be a balance of independence, skills, knowledge, experience and perspectives among Directors so the Board works effectively.
The Board of Directors elected by the shareholders is responsible for supervising and directing the management of the business and affairs of the Company. This includes identifying and managing business risks, monitoring management systems and reporting to shareholders. All Directors must act in the best interests of the Company. The Board is responsible for setting the objectives and strategic direction of the Company and monitoring performance against those bench marks. The Board is responsible for appointing and removing the Chief Executive. The Board has delegated certain of its powers to Committees of the Board and the day to day management of the Company to the Chief Executive. As part of the Board’s charter, the Board has written delegated authority mandates in place for management. The Board reserves responsibility for significant matters such as the approval of business plans and budgets, approving significant expenditure, the incurring of significant indebtedness, the entry into guarantees or indemnities and certain significant statutory matters. Shareholder approval is required prior to entering into certain transactions by virtue of the NZSX Listing Rules and the Companies Act 1993. The Board is responsible for appointing Directors to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders. The Board has established a Nominations and Corporate Governance Committee to recommend Director appointments to the Board. The Nominations and Corporate Governance Committee has its own charter. This requires the majority of members to be independent directors. The Company’s Constitution requires that the minimum number of Directors is three and the maximum number is twelve. Under the NZSX Listing Rules, the Board is required to have a minimum of two Independent Directors (as defined under the Listing Rules) or if there are eight or more Directors, three or one-third of the total number must be Independent Directors. The Board is required to identify which Directors are Independent Directors upon appointment and in this Annual Report. (See Directors’ Profiles on page 11.) The Board has adopted the definitions from the NZSX Listing Rules to determine the independence of Directors. An Independent Director is a Director who is not an executive of the Company and who has no Disqualifying Relationship. A “Disqualifying Relationship” means any direct or indirect interest or relationship that could reasonably influence, in a material way, the Director’s decisions in relation to the Company. Directors are deemed to have a Disqualifying Relationship in the circumstances set out in the NZSX Listing Rules. The Company’s Constitution and the NZSX Listing Rules contain the procedures for the appointment and removal of Directors. These provisions include a requirement for at least one third of the Directors to retire at an annual meeting but if eligible they may offer themselves for re-election at that meeting. The Chairman is appointed by the Board from among the non-executive Directors. The Board, having regard to the current composition of the shareholding of the Company, the skills, knowledge and experience of the current Chairman and that the Board currently includes two Independent Directors, is of the view that there is an appropriate balance in the relationship between management and the Board. The Chief Executive is not able to also hold the position of Chairman. The Chairman is responsible for managing and leading the Board, and for managing the Board’s interaction with the Chief Executive.
METLIFECARE LIMITED 63 ANNUAL REPORT 2012 Corporate Governance Statement continued
The Board regularly meets without management present for open discussion on any Company issue. The Board may also at its option take such an opportunity either on request, or prior to or at the end of meetings. Directors may with prior notification to the Chairman, seek professional advice at the Company’s expense to assist in carrying out their duties and responsibilities. Directors are encouraged to undertake appropriate training to remain current on how to best perform their duties as Directors of the Company. New Board appointees receive induction training. The Company has directors and officers’ liability insurance in place and has indemnified the Directors of the Company and its subsidiaries. The Board, led by the Chairman, formally reviews its performance and that of individual Directors and Committees annually. The Chairman is responsible for fostering a constructive governance culture and applying appropriate governance principles among Directors and with management. The Board schedules regular meetings during the year plus additional strategy meetings. Additional meetings are held at such other times as may be necessary to address particular matters. Agendas of meetings are prepared by the Chairman, with the assistance of the Chief Executive Officer and Company Secretary. Board papers are circulated in advance. Executives and the Company’s external auditors and other advisers are available upon request to provide input to Board discussions. Directors have opportunities for contact with a wider group of employees through visits to individual villages. The Company’s Annual Report is required to include information about each Director, identify which Directors are independent, and include information on the Board’s appointment, training and evaluation processes. (See Directors’ Profiles on page 11.)
3. board Committees
The Board should use Committees where this will enhance its effectiveness in key areas while retaining Board responsibility.
The Board has four formally constituted permanent committees, each with a charter setting out its role, delegated responsibilities, authorities and accountability. Each charter is published on the Company’s website. Committees are comprised of a minimum of three Director members. Each committee meets as required. Senior management attend Committee meetings only by invitation. Committees may appoint external advisers as they see fit. Each Committee undertakes an annual review of its objectives and activities. The Committees are not authorised to take action or make decisions on behalf of the Board unless specifically mandated by a prior Board approval. The Chairperson of each Committee reports to the Board after each meeting on its findings and recommendations and minutes are circulated to the Board. The Board also establishes special purpose Committees as required from time to time. The Board had established a Finance Committee to manage and monitor revenue, expenditure, cash flows and bank funding. This Committee is no longer required. All Directors receive agendas and reports of Committee Meetings.
METLIFECARE 64 LIMITED ANNUAL REPORT 2012 Corporate Governance Statement continued
Audit Committee The purpose of the Audit Committee is to assist the Board in discharging its responsibilities with respect to financial reporting, compliance and risk management practices. The Audit Committee has a separate written charter outlining its authority, duties, responsibilities and relationships with the Board. All members shall be non-executive Directors and a majority shall be Independent Directors. At least one member is required to have an accounting or financial background (as defined in the NZX Listing Rules). The Chairman of the Board must not also be the Chairman of the Audit Committee. Directors may only attend Audit Committee meetings if they are not a member by invitation of the Committee. The Audit Committee’s responsibilities are: • reviewing the financial statements and other financial information provided to shareholders and other external parties and advising all Directors whether they comply with the appropriate laws and regulations; • meeting regularly to monitor and review the external and internal audit processes; • ensuring that the external auditor or lead audit partner is rotated at least every 5 years; • ensuring that processes are in place and monitoring those processes so that the Board is properly and regularly informed and updated on corporate financial matters; • recommending the appointment and removal of external auditors; • overseeing all aspects of the Company – audit firm relationship, including having direct communication with and unrestricted access to the independent external auditors and Company accountants; and • promoting integrity in financial reporting. The Audit Committee also receives periodic presentations from management and considers wider issues such as asset valuations, legislative compliance, insurance and risk management, approval levels and discretionary expenditure. The Audit Committee is responsible for ensuring auditor independence. The Board regularly reviews the performance of the Audit Committee in accordance with its charter.
Remuneration Committee The Remuneration Committee reviews and recommends to the Board the level and type of remuneration for the Chief Executive and members of the Executive Management Team, and the level and type of remuneration for the Board (for approval by shareholders). The Remuneration Committee has a separate written charter outlining its authority, duties, responsibilities and relationship with the Board. The main responsibilities of the Remuneration Committee are: • to conduct an annual review of the Chief Executive’s performance; • to consider the Chief Executive’s review of senior executive performance; • to review succession planning and senior management development plans; and • to review compensation policy and recommend remuneration changes for Directors, the Chief Executive and senior executives. The Board regularly reviews the performance of the Remuneration Committee in accordance with its charter.
METLIFECARE LIMITED 65 ANNUAL REPORT 2012 Corporate Governance Statement continued
Nominations and Corporate Governance Committee The Nominations and Corporate Governance Committee is responsible for recommending Director appointments to the Board and developing and reviewing the Company’s corporate governance policies. The Nominations and Corporate Governance Committee has a separate written charter outlining its authority, duties, responsibilities and relationship with the Board. The members of the Nominations and Corporate Governance Committee comprise a majority of independent Directors. The Board regularly reviews the performance of the Nominations and Corporate Governance Committee in accordance with its charter.
Acquisition and Development Committee The Acquisition and Development Committee’s purpose is to consider and report to the Board on proposals for major acquisitions and property developments. The members of this Committee are determined by their knowledge and expertise and the majority is not required to be Independent Directors. The Acquisition and Development Committee has a separate written charter outlining its authority, duties, responsibilities and relationship with the Board. The Board regularly reviews the performance of the Acquisition and Development Committee in accordance with its charter.
4. Reporting and Disclosure
The Board should demand integrity in both financial reporting and in the timeliness and balance of disclosures on the Company’s affairs.
The Audit Committee together with the external auditors has a pivotal role in ensuring the integrity of financial reporting and other information provided in public disclosure documents. The Company also has in place a system of internal control for reliable financial reporting. All information received by the Company is considered in the context of the Company’s obligations as a listed company with regard to continuous disclosure of material information relating to the Company to the market. As a listed company, formal procedures are in place for the public release of information. The Board examines continuous disclosure issues at each Board meeting. The Company is committed to keeping the market (including in particular its shareholders) fully informed. The Company’s processes are designed to ensure compliance with the Company’s continuous disclosure obligations. Board and Committee Charters, policies of public relevance, media releases, annual reports and assessments and other investor focused material are available on the Company’s website. Public announcements about the Company’s activities are accessible on the Company’s website. This Annual Report is required to include sufficient meaningful information to enable investors and stakeholders to be well informed on the affairs of the Company. The Board shall disclose in the annual report whether and how the corporate governance principles adopted or followed by the Company materially differ from the NZX Corporate Governance Best Practice Code, and how the Company is implementing the principles of corporate governance of the Securities Commission and explain any significant departure.
METLIFECARE 66 LIMITED ANNUAL REPORT 2012 Corporate Governance Statement continued
5. Remuneration
The remuneration of Directors and executives should be transparent, fair and reasonable.
Metlifecare is committed to providing fair and reasonable remuneration for Directors and executives and acknowledges the need to provide competitive remuneration to attract high calibre Directors and executives to serve the Company. Director remuneration is currently paid in the form of Directors’ fees. The Company meets Directors’ reasonable travel and other costs associated with Metlifecare business. Procedures are in place to approve expenses. As required by the Company’s constitution, and by the NZX Listing Rules, no increase in overall Director’s remuneration can apply without shareholder approval, unless the number of directors is increased, in which case the total fees payable can increase by the average amount paid to non-executive directors. The total monetary sum of fees approved for Directors is allocated among Directors as decided by the Board by way of a fee payable to all Directors and additional fees payable to the Chairman. This allocation is disclosed in the annual report. The Board may approve the payment of additional fees for abnormal services, over and above services and attendances normally covered by Directors’ fees. Directors do not currently receive any remuneration in the form of Metlifecare shares. The Company does not currently have a formal performance-based share compensation plan for Directors. This differs from paragraph 2.7 of the NZX Corporate Governance Best Practice Code, which provides that Directors are encouraged to take a portion of their remuneration under a performance-based equity security (share) compensation plan, or alternatively, or in addition, are encouraged to invest a portion of their cash remuneration in purchasing the Company’s shares. At the time this policy was considered, the Board took the view that given the composition of the shareholding of the Company and the representation of the major shareholders on the Board, this was not appropriate, but that the policy would remain under review. From time to time, the Board will review the overall level of Directors’ remuneration, taking into account market trends, the competitiveness of the prevailing level of remuneration and changes in workloads. Directors are not entitled to any retirement benefits or allowances without shareholder approval. Chief Executive Officer and executive remuneration is recommended by the Remuneration Committee with reference to market surveys, job size and individual responsibilities, skills, knowledge, experience, competencies and accountabilities. Executive remuneration is structured to include a base salary and an ‘at risk’ component paid upon achievement of company and individual targets agreed at the commencement of each year. Executive remuneration is reviewed annually and the levels of remuneration are disclosed in this annual report on page 78 in accordance with the requirements of the Companies Act 1993.
6. Risk Management
The Board should regularly verify the Company has appropriate processes that identify and manage potential and relevant risks.
The Board has put in place a risk management policy. The Company operates a risk management system which incorporates identification of risks to assets and operations in terms of probability and financial impact, as well as the level to which such risks can be mitigated. The Company also has in place processes for internal control. Significant issues are required to be reported to the Board monthly. Urgent matters should be reported immediately to the Chairman and Chief Executive Officer.
METLIFECARE LIMITED 67 ANNUAL REPORT 2012 Corporate Governance Statement continued
The Board is required to report to investors and stakeholders in the Annual Report on risk identification and management and on internal controls. Formal six monthly compliance certificates are declared in writing by the Chief Executive Officer and the Chief Financial Officer that the financial reporting, risk management and associated compliance requirements and controls have been assessed and found to be operating efficiently. The Company has a Treasury Policy to manage interest rate risk. The Policy approves the use of certain instruments for risk management purposes, and it prohibits any activities that are purely speculative in nature. It also sets out exposure limits, delegated authorities and internal control measures. The Company has in place, in addition to the policies detailed above, a number of other specific policies which cover areas such as legal compliance and contractual authorities. The legal compliance obligations are monitored on an on- going basis through a system of six monthly compliance exception reports completed by senior managers. All corporate policies are approved by the Board.
7. auditors
The Board should ensure the quality and independence of the external audit process.
The Company under its Audit Committee charter has established policies relating to the appointment and the independence of the external auditor. The lead and engagement audit partners of the external auditor are required to be rotated every five years. The Board is responsible for ensuring the independence of the external auditor and for obtaining a confirmation of this from the external auditor. The Audit Committee charter requires the Board to facilitate full and frank dialogue among its Audit Committee, external auditors and management. To ensure there is no conflict with other services that may be provided by the external auditors, the Company has adopted a policy that external auditors will not provide any other services unless specifically approved by the Board in accordance with the policy on auditor independence. The fees paid to the auditors and any non-audit work and fees are disclosed on pages 36 - 37.
8. shareholder Relations
The Board should foster constructive relationships with shareholders and encourage them to engage with the Company.
The Company has a shareholder communications policy. This policy is reviewed annually by the Board. The policy is published on the Company’s website. The Company’s Chairman is responsible for ensuring that shareholders’ meetings are conducted efficiently and shareholders have adequate opportunity to air their views and to obtain answers to their queries. The Board requires the external auditor to attend annual meetings of the shareholders of the Company and be available to answer questions from shareholders. The Company maintains a website with a section for shareholder communications. All corporate governance policies are available on the website. All information released to NZSX, including reports to shareholders, may be found on the website.
METLIFECARE 68 LIMITED ANNUAL REPORT 2012 Corporate Governance Statement continued
9. stakeholder Interests
The Board should respect the interests of stakeholders within the context of the Company’s ownership type and its fundamental purpose.
The Board recognises that in addition to its shareholders, the residents of the Company’s retirement villages are stakeholders of the Company. The Company respects the rights and interests of its residents as they are set out in the relevant contractual documents. The Company is an accredited member of The Retirement Villages Association of New Zealand Incorporated. Retirement Villages Association members are required to comply with the Retirement Villages Code of Practice 2008 which identifies and protects the rights of residents and sets out the obligations of retirement village operators with regard to the operation of retirement villages and the care of residents. The Company actively seeks to fulfil its obligations to its residents through the provision of quality products and services that are delivered in a manner that: • respects and upholds residents’ rights as established by the Retirement Villages Code of Practice 2008; • delivers to residents the products and services purchased in a manner that enhances the quality of their experience; and • recognises and respects the residents’ right to be involved as members of a community within their village. aTTenDanCe aT boaRD anD CoMMITTee MeeTIngs In THe YeaR enDeD 30 JUne 2012:
BoarD coMMittee attenDance attenDance Total number of 6 9 3 1 8 1 meetings held
BOARD NOMINATIONS & BOARD AUDIT REMUNERATION fINANCE Director OTHER CORPORATE GOVERNANCE P.R. Brown 4 6
P.B. Harman 6 9 3 1 1
D.A. Hunt 5 7 3
J.J. Loughlin 6 9 3 1 7 1
W.A. Edwards 5 9 (Appointed 22/8/11)
Alternate Director
M. Tucker (Alternate for P.R. Brown)
former Director
O.G. Eady 3 3 6 (Resigned 12/1/12)
G.L. Flood 3 3 1 1 6 (Resigned 21/12/11)
METLIFECARE LIMITED 69 ANNUAL REPORT 2012 InTeResTs' RegIsTeR
(a) General Disclosures
The following Directors of Metlifecare Limited gave general notice of their commencement or cessation of interests in the following entities, pursuant to section 140(2) of the Companies Act 1993:
Director entitY natUre oF intereSt P.R. Brown + FKP Vault Pty Limited Director + FKPMN Pty Limited Director * Mountainview Strata Management Pty Limited Director + Port Bouvard Limited Director * Peregian Springs Golf Holdings Limited Director * Peregian Springs Golf Club Limited Director * Airlie Beach Lagoon Holdings Limited Director + Pan Hastings Pty Limited Director/Secretary + Pan Materials Pty Limited Director/Secretary + Pan Property Holdings Pty Limited Director/Secretary + Panconstructor Pty Limited Director/Secretary + Sebax Pty Limited Director/Secretary W.A. Edwards + Metlifecare Limited Director (Appointed 22/8/11) * Retirement Village Investments Limited Director * Retirement Villages New Zealand Limited Director * RVNZ Holdings Limited Director D.A. Hunt * Airlie Beach Lagoon Holdings Limited Director * Hunters Green Management Services Pty Limited Alternate Director * Hunters Green Retirement Living Pty Limited Alternate Director * Rose Grange Management Services Pty Limited Alternate Director * Rose Grange Retirement Village Pty Limited Alternate Director * Sackville Grange Management Services Pty Limited Alternate Director + Banora Point Retirement Village Pty Limited Director + Banora Point Village Management Services Pty Limited Director + Botanics Gardens Management Services Pty Limited Director + Camden Downs Management Services Pty Limited Director + Camden Downs Retirement Village Pty Limited Director + Candlestick Bidco Pty Limited Director + Candlestick Holdco Pty Limited Director + Cherry Tree Apartments (Holdings) Pty Limited Director + Cherry Tree Apartments (Management Services) Pty Limited Director + Cherry Tree Apartments Pty Limited Director + Cherry Tree Grove Retirement Village Pty Limited Director + Cherry Tree Grove Management Services Pty Limited Director
METLIFECARE 70 LIMITED ANNUAL REPORT 2012 Director entitY natUre oF intereSt + CP Development Pty Limited Director + Edrington Park Retirement Village Pty Limited Director + Edrington Park Village Management Services Pty Limited Director + Edrington Park Lifestyle Serviced Apartments Director (Management Services) Pty Limited + Edrington Park Lifestyle Serviced Apartments Pty Limited Director + Esperance Development Company Pty Limited Director + Fountain Court Lifestyle Serviced Apartments Pty Limited Director + Fountain Court Management Services Pty Limited Director + Fountain Court Retirement Village Pty Limited Director + Fountain Court Lifestyle Serviced Apartments Director (Management Services) Pty Limited + Fountain Court Lifestyle Serviced Apartments Director (Holdings) Pty Limited + Hananeel Nominees Pty Limited Director + Kingston Green Management Services Pty Limited Director + Kingston Green Retirement Village Pty Limited Director + Kingston Green Lifestyle Serviced Apartments Director (Management Services) Pty Limited + M.M.M. Developments Pty Limited Director + Midland Court Mortgage Finance (NSW) Pty Limited Director + Mulpha FKP Pty Limited Alternate Director + Oak Tree Apartments Pty Limited Director + Oak Tree Apartments Management Services Pty Limited Director + Oak Tree Hill Pty Limited Director + Oak Tree Lifestyle Serviced Apartments Pty Limited Director + Pinetree Management Services Pty Limited Director + Port Bouvard Funds Management Limited Director + Roseville Lifestyle Serviced Apartments (Holdings) Pty Limited Director + Roseville Lifestyle Serviced Apartments Director (Management Services) Pty Limited + Roseville Lifestyle Serviced Apartments Pty Limited Director + Roseville Management Services Pty Limited Director + RVG (Bethany) Pty Limited Director + RVG (Centennial) Pty Limited Director + RVG (Hollywood Stage 1) Pty Limited Director + RVG (Hollywood Stage 2) Pty Limited Director + RVG (Weeroona) Pty Limited Director + RVG (Wyvern) Pty Limited Director + RVG Capital Pty Limited Director + RVG Funding Co Pty Limited Director
METLIFECARE LIMITED 71 ANNUAL REPORT 2012 Interests’ Register continued
Director entitY natUre oF intereSt + RVG Victoria Catering Pty Limited Director + RVG Victoria Group Pty Limited Director + RVG Victoria Holdings Pty Limited Director + RVG Victoria Real Estate Pty Limited Director + RVG Victoria Retirement Villages Pty Limited Director + RVGM Holdings Pty Limited Director + Springthorpe Management Services Pty Limited Director + Springthorpe Village Pty Limited Director + Sunbury Village Management Services Pty Limited Director + Wannunup Pty Limited Director J.J. Loughlin * Prism Group Holdings Limited Shareholder * Allied Farmers Limited Chairman/Shareholder * Taupo Motorsport Park Limited Director/Shareholder * Loughlin Gibbs Limited Director/Shareholder Augusta Capital Limited Director/Shareholder (formerly Kermadec Property Fund Limited) M. Tucker (Alternate) * FKP Constructions Pty Limited Director
ForMer Director entitY natUre oF intereSt G.D. flood * Banool Road Pty Limited Director (Resigned 21/12/11) * Banora Point Retirement Village Pty Limited Director * Banora Point Village Management Services Pty Limited Director * Bay of Plenty Retirement Village Limited Director * Botanic Gardens Management Services Pty Limited Director * Botanic Gardens Retirement Village Pty Limited Director * Camden Downs Management Services Pty Limited Director * Camden Downs Retirement Village Pty Limited Director * Candlestick Bidco Pty Limited Director * Candlestick Holdco Pty Limited Director * Cherry Tree Apartments (Holdings) Pty Limited Director * Cherry Tree Apartments (Management Services) Pty Limited Director * Cherry Tree Apartments Pty Limited Director * Cherry Tree Grove Management Services Pty Limited Director * Cherry Tree Grove Retirement Village Pty Limited Director * Classey Pty Limited Director * Community Care Services Canberra Pty Limited Director * Community Care Services Victoria Pty Limited Director
METLIFECARE 72 LIMITED ANNUAL REPORT 2012 Interests’ Register continued
ForMer Director entitY natUre oF intereSt * Diamdale Investments Pty Limited Director * Edrington Park Lifestyle Serviced Apartments Director (Management Services) Pty Limited * Edrington Park Lifestyle Serviced Apartments Pty Limited Director * Edrington Park Retirement Village Pty Limited Director * Edrington Park Village Management Services Pty Limited Director * Farmcote Proprietary Limited Director * Fernbank Developments Pty Limited Director * Fernbank Management Pty Limited Director * Fountain Court Lifestyle Serviced Apartments Director (Holdings) Pty Limited * Fountain Court Lifestyle Serviced Apartments Director (Management Services) Pty Limited * Fountain Court Lifestyle Serviced Apartments Pty Limited Director * Fountain Court Management Services Pty Limited Director * Fountain Court Retirement Village Pty Limited Director * Greenleaves Management Services Pty Limited Director * Greenleaves Village Pty Limited Director * Hananeel Nominees Pty Limited Director * Hibiscus Coast Village Holdings Limited Director * Hibiscus Coast Village Management Limited Director * Hillsborough Heights Village Holdings Limited Director * Hillsborough Heights Village Management Limited Director * Hunters Green Management Services Pty Limited Director * Hunters Green Retirement Living Pty Limited Director * Kingston Green Lifestyle Serviced Apartments Director (Management Services) Pty Limited * Kingston Green Lifestyle Serviced Apartments Pty Limited Director * Kingston Green Management Services Pty Limited Director * Kingston Green Retirement Village Pty Limited Director * Longford Park Village Holdings Limited Director * Longford Park Village Limited Director * Longford Park Village Management Limited Director * Melba Foundation Limited Director * Metlifecare 7 Saint Vincent Limited Director * Metlifecare Bayswater Limited Director * Metlifecare Coastal Villas Limited Director * Metlifecare Crestwood Limited Director * Metlifecare Greenwood Park Limited Director * Metlifecare Highlands Limited Director * Metlifecare Kapiti Limited Director
METLIFECARE LIMITED 73 ANNUAL REPORT 2012 Interests’ Register continued
ForMer Director entitY natUre oF intereSt * Metlifecare Limited Director * Metlifecare Merivale Limited Director * Metlifecare Oakwoods Limited Director * Metlifecare Pakuranga Limited Director * Metlifecare Palmerston North Limited Director * Metlifecare Pinesong Limited Director * Metlifecare Powley Limited Director * Metlifecare Somervale Limited Director * Metlifecare The Avenues Limited Director * Metlifecare The Poynton Limited Director * Metlifecare Wairarapa Limited Director * Oak Tree Apartments Management Services Pty Limited Director * Oak Tree Apartments Pty Limited Director * Oak Tree Hill Management Services Pty Limited Director * Oak Tree Hill Pty Limited Director * Oak Tree Lifestyle Serviced Apartments Pty Limited Director * Pine Lake Management Services Pty Limited Director * Pine Lake Village Pty Limited Director * Pinetree Management Services Pty Limited Director * Pinetree Retirement Village Limited Director * Pittwater Palms Management Pty Limited Director * Pittwater Palms Pty Limited Director * Private Life Care Holdings Limited Director * Prospect Hill Village Management Services Pty Limited Director * Prospect Hill Village Pty Limited Director * Regency Services Pty Limited Director * Retirement Services Australia (R.S.A.) Pty Limited Director * Retirement Villages Australia Limited Officer * Retirement Villages Group Management Pty Limited Director * Retirement Villages Trust Officer * Ridgecrest Village Management Services Pty Limited Director * Ridgecrest Village Pty Limited Director * Rose Grange Management Services Pty Limited Director * Rose Grange Retirement Village Pty Limited Director * Roseville Lifestyle Serviced Apartments (Holdings) Pty Limited Director * Roseville Lifestyle Serviced Apartments Director (Management Services) Pty Limited * Roseville Lifestyle Serviced Apartments Pty Limited Director * Roseville Management Services Pty Limited Director * RSA Holdings Pty Limited Director
METLIFECARE 74 LIMITED ANNUAL REPORT 2012 Interests’ Register continued
ForMer Director entitY natUre oF intereSt * RSA Real Estate Pty Limited Director * RVG (Bethany) Pty Limited Director * RVG (Centennial) Pty Limited Director * RVG (Hollywood Stage 1) Pty Limited Director * RVG (Hollywood Stage 2) Pty Limited Director * RVG (Queensland) Pty Limited Director * RVG (Weeroona) Pty Limited Director * RVG (Wyvern) Pty Limited Director * RVG Capital Pty Limited Director * RVG Finance Pty Limited Director * RVG Funding Co Pty Limited Director * RVG Lifestyle Pty Limited Director * RVG Mosman Villages Pty Limited Director * RVG Pittwater Palms Pty Limited Director * RVG Residential Developments Pty Limited Director * RVG Residential Pty Limited Director * RVG Sydney Holdings Pty Limited Director * RVG Sydney Pty Limited Director * RVG Victoria Catering Pty Limited Director * RVG Victoria Group Pty Limited Director * RVG Victoria Holdings Pty Limited Director * RVG Victoria Real Estate Pty Limited Director * RVG Victoria Retirement Villages Pty Limited Director * RVNZ Investments Limited Officer * Sackville Grange Management Services Pty Limited Director * Springthorpe Management Services Pty Limited Director * Springthorpe Village Pty Limited Director * Sunbury Village Management Services Pty Limited Director * The Manors of Mosman Pty Limited Director * Third Age Care Limited Director
Notes: * Interest ceased or withdrawn during the year. + New. In prior years, the Company listed all interests in companies by its Directors. The above represents the changes to the relevant interests notified to the Company in respect of the year to 30 June 2012.
METLIFECARE LIMITED 75 ANNUAL REPORT 2012 Interests’ Register continued
(b) Specific Disclosures During the year the only specific disclosures by the Directors of the Company or any subsidiary of any interests in transactions entered into by the Company or any subsidiary were as follows: David Allan Hunt, Peter Ross Brown and Michael Tucker had their interests noted in relation to their interests in Private Life Care, a party to the merger agreement between Metlifecare, Vision and Private Life Care that completed after 30 June 2012.
(c) Indemnity & insurance In accordance with the Companies Act 1993, Metlifecare Limited has effected insurance and given indemnities to its Directors including Directors of subsidiary companies.
(d) Use of Company information During the year the Board received no notices from Directors of the Company requesting to use Company information.
(e) Directors’ share dealings & relevant interests During the year no Directors disclosed to the Board, under section 148 of the Companies Act 1993 and section 19T of the Securities Markets Act 1988, particulars of acquisitions or dispositions of relevant interests in ordinary shares in the Company. As at 30 June 2012, none of the Directors had a relevant interest in the ordinary shares in the Company.
(f) Remuneration of Directors Remuneration and other benefits paid to Directors during the year.
SALARY & BONUSES $
ManagIng DIReCToR W.A. Edwards 854,062
DIRECTORS’ fEES $
DIReCToR P.B. Harman 78,695 J.J. Loughlin 78,695
157,391
Remuneration and other benefits paid to Directors of Metlifecare Palmerston North Limited (a jointly controlled entity) during the year.
DIRECTORS’ fEES $
DIReCToR W.A. Edwards 5,0001² K.T. Hindle 5,000 Dr C.M.A. Love 5,000 Professor Sir R.H.N. Love 5,000 T.M. van der Meijden 5,0001² 25,000
Note: 1 Directors’ fees paid to Metlifecare Limited.
METLIFECARE 76 LIMITED ANNUAL REPORT 2012 oTHeR DIReCToR InfoRMaTIon
Company Directors The Directors as at 30 June 2012 are set out in the directory on page 81. During the year one Director was appointed: W.A. Edwards (22 August 2011) and two Directors resigned: G.D. Flood (21 December 2011) and O.G. Eady (12 January 2012). Subsequent event: C.G.D. Aiken and A.B. Ryan were appointed by the Board as independent directors on 23 August 2012.
Subsidiary Company Directors The following persons held the office of Director of the Company’s wholly owned subsidiaries during the year: W.A. Edwards and T.M. van der Meijden. No Director of any wholly owned subsidiary company received any Director’s fees or other benefits as a Director of a subsidiary. G.D. Flood held the office of Director of the Company’s wholly owned subsidiaries during the year (except Metlifecare Stanley Road Limited, formerly Metlifecare Epsom Limited, and Provider Care NZ Limited) until his resignation on 21 December 2011.
Subsidiaries (wholly owned) as at 30 June 2012 Bay of Plenty Retirement Village Limited Metlifecare Pakuranga Limited Metlifecare Bayswater Limited Metlifecare Pinesong Limited Metlifecare Coastal Villas Limited Metlifecare Powley Limited Metlifecare Crestwood Limited Metlifecare 7 Saint Vincent Limited Metlifecare Stanley Road Limited Metlifecare Somervale Limited Metlifecare Greenwood Park Limited Metlifecare The Avenues Limited Metlifecare Highlands Limited Metlifecare The Poynton Limited Metlifecare Kapiti Limited Metlifecare Wairarapa Limited Metlifecare Merivale Limited Provider Care NZ Limited Metlifecare Oakwoods Limited Third Age Care Limited
Jointly Controlled Entity (50% Shareholding) as at 30 June 2012 The following persons held the office of Director of Metlifecare Palmerston North Limited, a jointly controlled entity, during the year. G.D. Flood (resigned 21 December 2011), W.A. Edwards, T.M. van der Meijden, L.A. Abercrombie (appointed 11 May 2012), Professor Sir R.H.N. Love, Dr C.M.A. Love and K.T. Hindle.
METLIFECARE LIMITED 77 ANNUAL REPORT 2012 oTHeR sTaTUToRY InfoRMaTIon
Employees’ Remuneration over $100,000 The number of employees or former employees of the Company, or any subsidiary, not being Directors, who during the year, received remuneration and other benefits valued at or exceeding $100,000, are stated below.
reMUneration nUMBer oF eMPLoYeeS $100,000 - $110,000 7 $110,000 - $120,000 5 $120,000 - $130,000 5 $130,000 - $140,000 1 $140,000 - $150,000 1 $150,000 - $160,000 2 $160,000 - $170,000 3 $280,000 - $290,000 1 $310,000 - $320,000 1 $350,000 - $360,000 1
METLIFECARE 78 LIMITED ANNUAL REPORT 2012 sHaReHolDeR InfoRMaTIon (as at 22 August 2012)
Twenty Largest Shareholders
NUMBER Of PERCENTAGE fULLY PAID Of ISSUED ORDINARY AND PAID UP SHARES SHARE CAPITAL sHaReHolDeRs Retirement Villages New Zealand Limited 79,393,043 43.22 NZ Superannuation Fund Nominees Limited 10,439,582* 5.68 TEA Custodians Limited 7,577,025* 4.13 MFL Mutual Fund Limited 6,590,101* 3.59 AMP Investments Strategic Equity Growth Fund 5,430,660* 2.96 BNP Paribas Nominees (NZ) Limited 5,293,604* 2.88 Citibank Nominees (New Zealand) Limited 5,293,057* 2.88 Accident Compensation Corporation 3,585,396* 1.95 BT NZ Unit Trust Nominees Limited 3,343,260* 1.82 Premier Nominees Ltd 3,184,198* 1.73 Arrow International Group Limited 3,136,569 1.71 NZGT Nominees Limited – AIF Equity Fund 2,681,903* 1.46 Premier Nominees Ltd – OnePath Wholesale Australasian SHR Fund 2,574,524* 1.40 Westpac NZ Shares 2002 Wholesale Trust 2,452,743* 1.34 Perpetual Nominees Limited - GS Trans-Tasmn Pvte EQ Fund 07 2,378,188 1.29 Perpetual Nominees Limited - TTPE 07 No.2 Limited 2,346,671 1.28 JPMorgan Chase Bank NA 2,243,213* 1.22 JBWere (NZ) Nominees Limited 2,200,000 1.20 Special Managed Investment Company No 90 Limited 1,970,478 1.07 BNP Paribas Nominees (NZ) Limited 1,749,474* 0.95
TOTAL 153,863,689 83.77
* Shareholdings held in New Zealand Central Securities Depository Limited. Total holdings in New Zealand Central Securities Depository Limited were 62,438,740 (33.99%).
Net Tangible Assets Per Security
30 JUNE 2012 30 JUNE 2011
$3.04 $4.29
METLIFECARE LIMITED 79 ANNUAL REPORT 2012 Shareholder Information continued
Spread of Holdings (as at 22 August 2012)
NUMBER Of NUMBER Of SHAREHOLDERS % SHARES HELD % sIze of HolDIngs 1 – 999 111 9.12 50,628 0.03 1,000 - 4,999 372 30.57 998,610 0.54 5,000 - 9,999 259 21.28 1,792,638 0.98 10,000 - 99,999 413 33.94 10,094,363 5.5 100,000 - 999,999 39 3.2 12,407,263 6.75 1,000,000 + 23 1.89 158,333,613 86.2
TOTAL 1,217 100.00 183,677,115 100.00
Substantial Security Holders The following information is given pursuant to section 35F of the Securities Markets Act 1988. The persons who, according to the file kept by the Company pursuant to section 35C of the Securities Markets Act 1988, are substantial security holders in the Company as at 22 August 2012 are as follows:
NUMBER Of PERCENTAGE SHARES Of SHARES sUbsTanTIal seCURITY HolDeRs Metlifecare Limited 89,224,949 48.58 Retirement Villages New Zealand Limited 79,393,043 43.22 FKP Limited 79,393,043 43.22 Macquarie Capital International Holdings Pty Limited 79,393,043 43.22 Macquarie Group Limited 79,393,043 43.22 RVNZ Investments Limited 79,393,043 43.22 OnePath NZ Limited 16,581,948 9.03 AMP Capital Investors (New Zealand) Limited 14,287,578 7.78 New Zealand Superannuation Fund Nominees Limited 10,788,249 5.87 Trans-Tasman Private Equity 07 No.2 Limited 9,875,601 5.38 Goldman Sachs Australia Private Equity (A Units) Pty Ltd as Trustee for the Goldman Sachs Trans-Tasman Private Equity Fund 07 Trust D 9,875,601 5.38 TTPE 07 No.2 Limited 9,875,601 5.38 Special Managed Investment Company No. 90 Limited 9,875,601 5.38 Goldman Sachs New Zealand Limited 9,875,601 5.38 Arrow International Group Limited 9,831,906 5.35
Notes: Pursuant to the provisions of the Securities Markets Act 1988, more than one relevant interest can exist in the same voting securities. The Metlifecare Limited interest has arisen from undertakings given by Retirement Villages New Zealand Limited and vendors of Vision Senior Living Limited not to sell their shares in the Company until 23 November 2013 except in certain, specified, circumstances. The total number of voting securities of the Company on issue at 22 August 2012 was 183,677,115 ordinary fully paid shares.
Subsequent Event Merger with Vision Senior Living and Private Life Care completed on 23 July 2012.
METLIFECARE 80 LIMITED ANNUAL REPORT 2012 DIReCToRY
DIReCToRs aCQUIsITIon aUDIT As at 30 June 2012 anD CoMMITTee DeveloPMenT Peter Ross Brown CoMMITTee David Allan Hunt Chairman Chairman Phillip Brent Harman Peter Ross Brown Phillip Brent Harman Chairman David Allan Hunt John James Loughlin John James Loughlin John James Loughlin Michael Tucker (Alternate for P.R. Brown) Wynton Alan Edwards Managing Director
ReMUneRaTIon noMInaTIons CHIef eXeCUTIve CoMMITTee & CoRPoRaTe offICeR goveRnanCe Peter Ross Brown CoMMITTee Wynton Alan Edwards Chairman
Phillip Brent Harman Phillip Brent Harman John James Loughlin Chairman John James Loughlin
continued overleaf...
METLIFECARE LIMITED 81 ANNUAL REPORT 2012 DIReCToRY ConTInUeD aUDIToRs solICIToRs banKeRs PricewaterhouseCoopers Chapman Tripp anz national bank limited PricewaterhouseCoopers Level 35 Level 13 Tower ANZ Centre The National Bank Tower 188 Quay Street 23 - 29 Albert Street 209 Queen Street Auckland 1010 Auckland 1010 Auckland 1010
Minter ellison Rudd Watts bank of new zealand Level 20 Corporate & Institutional Banking Lumley Centre Level 4 88 Shortland St BNZ Tower Auckland 1010 80 Queen Street Auckland 1010
asb bank limited Level 14 ASB Bank Centre 135 Albert Street Auckland 1010
RegIsTeReD offICe sHaRe RegIsTRaR Level 2 Computershare Investor services limited Metlifecare House Level 2 302 Great South Road 159 Hurstmere Road Greenlane Takapuna Auckland 1051 North Shore City 0622
Postal Address: Postal Address: P O Box 37463 Private Bag 92119 Parnell Auckland 1142 Auckland 1151 Telephone: 09 488 8700 Telephone: 09 539 8000 Facsimile: 09 488 8787 Facsimile: 09 539 8001 Investor Enquiries: 09 488 8777 www.metlifecare.co.nz [email protected] www.computershare.co.nz/investorcentre
This Annual Report is signed for on behalf of the Board of the Company by:
P.R. Brown W.A. Edwards cHairMan Managing Director 22 August 2012 22 August 2012
METLIFECARE 82 LIMITED ANNUAL REPORT 2012 METLIFECARE LIMITED 83 ANNUAL REPORT 2012 www.metlifecare.co.nz