INVESTING FOR GROWTH

2018 ANNUAL REPORT This Annual Report is signed for and on behalf of the Board of the Company by:

K.R. Ellis A.B. Ryan Chair Director CONTENTS

5 September 2018 5 September 2018

COMPANY OVERVIEW

What We Do 04

Our Year 06

Financial Highlights 08

Operating Highlights 09

The Year in Review 10

Strategic Priorities 14

Q&A with Chief Executive Glen Sowry 28

Our Sustainability Journey 30

Our Board of Directors 32

Our Executive Team 34

GROUP FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income 39

Consolidated Statement of Movements in Equity 40

Consolidated Balance Sheet 41

Consolidated Cash Flow Statement 42

Notes to the Financial Statements 43

Independent Auditor’s Report 74

STATUTORY INFORMATION

Corporate Governance Statement 80

At Metlifecare, our philosophy is Interests Register 90

to empower our residents - we Director Information 93

want them to experience the best Other Statutory Information 96 years of their lives with us. Shareholder Information 98 Kim Ellis, Chair Directory 100

2 METLIFECARE LIMITED ANNUAL REPORT 2018 3 The new Greenwich Gardens Tui Building METLIFECARE WHAT WE DO

We are in the business of developing, owning and operating high-quality retirement villages and providing rewarding lifestyles for New Zealand’s older people.

Our villages are in prime North Island locations. Since 1984, we have been an industry leader in providing vibrant social communities and an outstanding level of care for our residents.

AT A GLANCE 98% VILLAGE 24 5 OCCUPANCY VILLAGES NEW VILLAGE SITES 95% CARE MORE THAN CARED FOR BY OCCUPANCY* Development Land Bank 5500 1100 1370 Independent RESIDENTS STAFF living homes and care apartments 374 care beds and suites 3888 INDEPENDENT LIVING HOMES

492 CARE APARTMENTS 370 CARE BEDS & SUITES

* Excluding care homes opened during FY18

4 METLIFECARE LIMITED ANNUAL REPORT 2018 5 OUR YEAR 2017-2018

JULY 17 AUGUST OCTOBER NOVEMBER

NZ’s first retirement village shared car service introduced at Greenwich Gardens Greenwich Gardens Somervale Care Home opens Care Home opens * New directors appointed - New Orion Point (Hobsonsville) Papamoa Beach Village Mark Binns and Rod Snodgrass Site under contract Care Home and pavilion resource consent granted

Gulf Rise (Red Beach) Village* resource consent granted

FEBRUARY 18 MARCH APRIL M AY JUNE JULY

New Beachlands site under contract Earthworks commence at Construction begins on Gulf Rise* (Red Beach) * The Avenues Care Home Metlifecare Awarded “Highly Pinesong Manukau Orion Point site purchase Resident-directed Care Commended” in Reader’s Digest building opens completed Kim Workman announced in place at all care homes Three year leadership development New Zealand Trusted Brands survey as Metlifecare Senior New programme completed for 85 leaders Greenwich Gardens Tui Papamoa Beach Village* Zealander of the Year Construction begins on additional building opens Care Home and pavilion villas at Crestwood Village construction commences

*Artist impression

6 METLIFECARE LIMITED ANNUAL REPORT 2018 7 View from new Manukau Building, Pinesong Village

FINANCIAL OPERATING New homes and HIGHLIGHTS care beds delivered HIGHLIGHTS

Total homes sold*1 254 458 Net Profit After Tax $125.1m Development margin on new homes sold*

Hours of staff 1 Underlying Profit $87.5m training delivered 446 12,000 27% homes and

Underlying Operating Cash Flow1 10 $54.3m village community spaces refurbished new2 sites or upgraded acquired Total Assets $3.3b 2 new homestead-style Net Assets care homes opened per Share $6.93

Embedded Value 12% reduction 1 per Unit $281k in staff turnover 100% Total Dividend per of care homes audited for Year share achieved ‘gold standard’ 10cents four year certification2

1 These measures are non-GAAP measures. The definitions of these and other non-GAAP financial measures in this report can be found in the FY18 results presentation on page 42. A copy of the FY18 results presentation can be found on Metlifecare’s website: www.metlifecare.co.nz/investor-centre/investor-presentations. * Licence to occupy sales 1 Settlements completed by 30 June 2018 (including resales at Palmerston North) 2 Ministry of Health

8 METLIFECARE LIMITED ANNUAL REPORT 2018 9 Underlying Profit ($m)

Operational Performance village intensification, while also enhancing the village Realised Resale Gains Realised Development Margin community through thoughtful design. Underlying Profit before tax 82.1 87.5 Glen Sowry Kim Ellis 66.1 CEO Chair Overall, we have made excellent progress across our 19.0 16.4 52.4 10.1 three strategic pillars - Accelerated Growth, Customer 46.0 8.5 7.3 62.3 Experience and Commercial Intensity. Our core 46.5 55.3 26.0 31.3 “Our core capability has capability has been strengthened due to ongoing internal investment and this is driving real performance 12.7 12.7 9.6 7.8 8.8 been strengthened due to improvement and value creation across the business. FY14 FY15 FY16 FY17 FY18 We have finished the year in a strong position to ongoing internal investment generate further value for shareholders over the Underlying Operating and this is driving coming years. Cashflow ($m)

performance improvements FINANCIAL OVERVIEW 54.3 50.5 51.3 and value creation across Metlifecare’s financial year to 30 June 2018 finished the business.” with another strong financial performance. 34.5 Underlying profit increased by 7% to $87.5 million, 25.7 driven by higher realised margins from the settlement of occupation right agreement resales and solid development margins. Underlying operating cash flow FY14 FY15 FY16 FY17 FY18 increased by 6% to $54.3 million.

While the fair value of Metlifecare’s investment Total Assets ($m) properties grew by $134.9 million or 10%, this growth 3,291 rate was below last year due to more moderating

house price growth. As a result, reported net profit 2,961 THE YEAR after tax, which includes the non-realised fair value increase in the company’s assets, was $125.1 million, 2,586 compared to last year’s record $251.5 million. The IN REVIEW value of the company’s total assets increased 11% to 2,227 $3.3 billion and net assets per share increased 8% to 2,004 Welcome to Metlifecare’s Annual Report for the financial year to 30 June 2018. $6.93. FY14 FY15 FY16 FY17 FY18 It has been another successful year for Metlifecare, both financially and operationally. Further improvements in our Development margins increased to 27% from last underlying profit and underlying operating cash flow have resulted in the declaration of our highest-ever dividend. year’s 23%, the result of disciplined project and design We have delivered growth, while also strengthening our operating performance and lifting the customer experience Net Assets per Share management, and cost control. The company sold for our residents. occupation right agreements for 98 development At Metlifecare, our philosophy is to empower our Our development performance was also a highlight, homes during the year, which comprised most of the $6.93 residents - we want them to experience the best years with every target met or exceeded. The proven delivery available stock until 160 new development homes were $6.43 of their lives with us. We endeavour to provide a capability of Metlifecare’s development team was again delivered in June 2018. $5.32 supportive environment for them to achieve this, through demonstrated as it managed multiple new village and A strong second half resales performance drove a the quality of our homes and villages, and the lifestyle, regeneration projects: from site acquisition, planning $4.30 7% year-on-year improvement in resales settlement experiences and community relationships that we offer. and design through to construction and delivery. The $3.75 volumes, and a 13% lift in total realised resales gains to The consistently high levels of customer satisfaction, team delivered 254 new homes and care beds - the most $62.3 million. Resales pricing continued to outperform occupancy and referrals we are achieving indicate that ever delivered by Metlifecare - with improved margins. FY14 FY15 FY16 FY17 FY18 the market, with an average unit price uplift of 8%. this approach is resonating with our residents. We also celebrated the acquisition of two prime coastal village sites in Auckland locations which are notable for The company repurchased the occupation right Care has been a real success story for Metlifecare this Dividend History their high growth projections and potential to become agreements for 44 homes during the year for year, with our new resident-directed care approach Interim Dividend cps destination villages. regeneration activity and to rehouse residents in Final Dividend cps resetting standards and resident expectations. Resident- 10.00 villages undergoing betterment projects. While this Full Year Dividend cps directed care empowers residents to live how they want The recent opening of the new Manukau building at created a short-term financial impact, the company 8.05 to, rather than having a lifestyle and routine prescribed Pinesong provided a real milestone for the development Declared in: 6.75 believes it is imperative that residents can remain 5.75 for them, and this has been exceptionally well received team, being the first completed project in our village 5.80 in their own village community while these projects 4.50 by residents and their families. Our two new premium regeneration strategy. The Manukau building is a 3.75 4.00 are undertaken. These homes will be progressively homestead-style care homes at Greenwich Gardens and new six-storey, 48-apartment complex with expansive 3.00 released for resale when no longer needed as 2.50 Somervale are designed to fully support this approach Manukau Harbour views. It is selling exceptionally well rehousing stock. 1.25 1.50 1.75 2.25 3.25 and have taken our care offering to a new level. and demonstrates how value can be added through FY14 FY15 FY16 FY17 FY18

10 METLIFECARE LIMITED ANNUAL REPORT 2018 11 DIVIDEND Development Margin Consistent with Metlifecare’s commitment to pay out % $m 30-50% of underlying operating cash flows, the Board has declared a final dividend of 6.75 cents for the year to 30 26.6% FINANCIAL PERFORMANCE FY18 FY17 CHANGE 21.7% 23.0% June 2018, bringing the full year’s dividend to 10 cents, 17.3% which is 1.95 cents and 24% higher than last year. The 19.0 Net profit after tax ($m) 125.1 251.5 -50% 12.7% 16.4 dividend is unimputed and will be paid on 21 September 2018, with the record date of 14 September 2018. Underlying profit before tax ($m) 87.5 82.1 6.6% 10.1 7.3 8.5 Underlying operating cash flow ($m) 54.3 51.3 5.8% PEOPLE

FY14 FY15 FY16 FY17 FY18 On behalf of the Board and Executive we would like to Net operating cash flow ($m) 110.7 129.3 -14% thank the entire team at Metlifecare for their valuable Net assets per share ($) 6.93 6.43 7.8% contribution towards the year’s achievements. Our people Embedded Value ($m) truly personify the company’s values of respect, passion, Total assets ($b) 3.29 2.96 11% DMF teamwork and integrity, and this is obvious for all to see as Resale Gain 1129 1070 Fair value movement during period ($m) 134.9 258.8 -48% Total Embedded Value they go about enhancing the quality of our resident’s lives

805 on a daily basis. Total equity ($m) 1,476.3 1,370.2 7.7%

593 726 750 We have a simple philosophy that engaged, committed 485 Net debt ($m) 138.4 70.0 97% 497 staff are the key to great company performance, in terms 310 227 of our customer experience and commercial outcomes. Gearing (%)* 9.5 5.0 4.5 ppts 344 379 258 283 308 We are proud of our track record of investing in our Embedded value per unit ($000) 281.0 269.1 4.5% people - setting new pay benchmarks, aligning training FY14 FY15 FY16 FY17 FY18 Total dividend per share (cps) 10.00 8.05 24% and qualifications with remuneration, and our ongoing commitment to long-term staff training programmes. *Gearing: Net debt as a percentage of debt plus equity Cash DMF We are seeing the return on this investment through Gross Cash DMF Cash DMF per Settlement improved staff retention, increased capability and ultimately 35.0 90 through our resident satisfaction. These achievements 84 80 30.0 74 are highlighted on page 15 and we are proud of the 70 25.0 66 60 29.0 60 commitment of our people to making Metlifecare a great New village development will continue at pace in the year Our plans for 2019 continue to remain ambitious and we 55 20.0 23.9 place for our residents to live and for themselves to work. 27.5 50 ahead. We are excited about opening the first stage of look forward to updating you as we achieve the milestones $m 15.0 23.3 40 our Gulf Rise village at Red Beach, north of Auckland. we have set ourselves. 20.9 30 10.0 BOARD We believe the new residents we will welcome to these 20 5.0 $000 per Setttlement outstanding homes will love the social hubs and urban 10 After being appointed to the Board in August 2017, Mark community environments being created. We are also 0.0 0 Binns and Rod Snodgrass were elected as directors at FY14 FY15 FY16 FY17 FY18 looking forward to completing two new homestead-style the Annual Shareholders’ Meeting in October 2017. They care homes – at The Avenues in Tauranga and at Papamoa have brought fresh thinking to the Board, strengthening its Beach Village – to enable more residents to enjoy our new capability in the areas of development, construction and care approach. asset management while bringing new perspectives in CAPITAL MANAGEMENT customer experience and digital capability. Investment in the betterment and regeneration of our During the period under review, Metlifecare existing villages will increase, with significant improvement Chris Aiken and Dr. Noeline Whitehead invested $160 million in land purchases, works being carried out at five villages during the year. are standing for re-election at the village development, village These initiatives are all expected to be value-accretive, as “While we expect 2018 Annual Shareholders’ Meeting, reinvestment projects and care evidenced by the significant pricing uplift achieved from the and they have the unanimous facilities, funded by operating cash residential housing market price first two projects at Coastal Villas and Pinesong. Kim Ellis endorsement of the Board. and debt. Chair growth to continue at its current While we expect residential housing market growth to The company’s funding moderate levels over the next LOOKING AHEAD continue at its current moderate levels over the next year, arrangements were reviewed As always, Metlifecare’s we are confident that the quality of our village stock will during the period to year, we are confident that the highest priority is to provide continue to generate above-market pricing uplift. Longer accommodate future accelerated quality of our village stock will outstanding lifestyles for our term sector fundamentals remain solid, with the ongoing development activity. Accordingly, continue to generate above- existing and future residents. We undersupply of housing development and the escalating debt facilities were increased by are continuing to innovate with new growth of our likely demographic set to continue. $100m to $352m on favourable terms. market pricing uplift.” solutions and experiences which meet Accordingly we are targeting higher volumes for the year in As at balance date, net debt was the evolving needs of our residents and both development sales and resales. $138 million, up from $70 million last year. empower them to live the way they choose. We are looking forward to the year ahead as a further Glen Sowry Metlifecare’s gearing (net debt as a percentage To support this we will continue to invest in our opportunity to demonstrate the strength of our strategy, CEO of debt plus equity) was 9%, demonstrating the exceptional staff to ensure they are engaged, equipped and committed our team, and our village portfolio to deliver exceptional strength of the company’s balance sheet and its capacity to deliver the best outcomes for our residents and the lifestyles for our residents and create value for our for future growth. company. shareholders.

12 METLIFECARE LIMITED ANNUAL REPORT 2018 13 ACCELERATED GROWTH Our accelerated development programme in high-growth, strong-yield locations, as follows

A land acquisition strategy with clear investment parameters, targeting optimal locations and opportunities • Orion Point unconditional; settled July 2018 METLIFECARE • At least one high quality site acquired • Beachlands unconditional A robust and scalable development strategy matched by strong development capability STRATEGIC PRIORITIES • 254 new homes and beds planned • 254 delivered Optimised supply chain management and construction delivery • Minimum 15% margin on development homes sold • 27% achieved • Technical efficiency and standardised designs • Company design manual in place Metlifecare will leverage the strength of its portfolio and • Standard home design modules in place operating model to create future value, with particular focus on the following areas COMMERCIAL INTENSITY We will capture maximum value from our existing portfolio through

Superior sales capability and market knowledge • Portfolio outperformed REINZ regional • Prices achieved outperform list price growth benchmarks

Stong demand • Maintain high levels of occupancy • 98% village occupancy • 95% care occupancy

ACCELERATED A fit-for-purpose refurbishment programme • Reduced refurbishment turnaround times • Average refurbishment delivery under 70 days • Procurement review for improved cost-efficiencies • New procurement contracts in place GROWTH • Kitchen & bathroom standardisation complete

CUSTOMER EXPERIENCE Our diverse and unique villages are underpinned by a high level of care and service through

COMMERCIAL Villages designed to integrate with their local communities and enhance our residents’ experience • Homestead-style care homes which enable premium • 2 new care homes opened INTENSITY resident-directed care • Target occupancy exceeded • Modernisation of common areas in mature villages • 10 village communal areas modernised

Highly engaged and qualified employees • Investment in employee learning and development • Over 12,000 hours training provided; 36% of staff in long-term development programmes CUSTOMER • Average staff engagement increased or maintained • 80% engagement (stable) • Employee retention maintained or increased • 78% overall staff retention (increased 3ppts) • Company-wide health and safety frameworks and processes • AS/NZS 4801 certification maintained EXPERIENCE • Employee investment, including pay equity • Pay equity extended to home support staff Understanding and meeting the needs of existing and future residents • Overall resident satisfaction • 90% (stable) • Improved ORA terms (informed by resident input) • Introduced February 2018 • Resident-directed care provided at all villages with care services • Resident-directed care in place • Care cluster strategy for villages without care homes • 93% satisfaction with care services

A significantly enhanced food and dining experience • Simon Gault Chef training • Complete • New food range for care home residents requiring texture modified • Introduced in all care homes food • Increased satisfaction and use of café & dining facilities by residents • 4% increase in satisfaction and families • 9% increase in regular patronage

14 METLIFECARE LIMITED ANNUAL REPORT 2018 15 NEW SITES ACQUIRED IN 2018 ACCELERATED ORION POINT Clark Rd, Hobsonville Point GROWTH

QUALITY DEVELOPMENTS IN SUPERB LOCATIONS

Metlifecare’s accelerated growth programme focuses on providing quality villages that offer all the benefits of retirement living while integrating with the local community.

By combining standardised home typologies with unique aesthetics and intelligent master planning, each village can be constructed efficiently and cost-effectively, while still having its own distinctive look and feel.

Proven Development Execution Capability Metlifecare achieved all its delivery targets in the past year with

• 254 homes and care beds completed 250 homes 40-bed homestead • 505 new homes and care beds added to development land bank through two new sites including waterfront villas and apartments care home • 763 homes and care beds consented • 392 homes and care beds under construction • 1,744 total homes and care beds in the land bank, around six years’ development BEACHLANDS Beachlands “This is a special area, where Aucklanders can have When I started here I a fantastic lifestyle away from the city but with many recognised an opportunity to of the city benefits on their create a point of difference doorstep, through the ferry service, which is free to all for Metlifecare. I want people SuperGold cardholders.” to think that anyone would Hunua MP and local resident, Andrew Bayley be happy to buy a home in Greenwich Gardens and The Orchards our villages because it’s not are the first two retirement villages in the country to achieve a Homestar™ Built obvious it’s a retirement village. rating, which offers double the efficiency If we can achieve that, we’ve and sustainability of a standard New gone a long way towards our Zealand home. Papamoa Beach goal in shifting the paradigm. Village and Oakridge Villas have been designed to the Charlie Anderson, General Manager same standard. Property & Development 175 homes 40-bed homestead including waterfront villas and apartments care home

16 METLIFECARE LIMITED ANNUAL REPORT 2018 17 SOMERVALE ACCELERATED 33 Gloucester Rd, Mount Maunganui GROWTH

COMPLETED DURING FY18

GREENWICH GARDENS 5 Greenwich Way, Unsworth Heights, Auckland 69-bed homestead care home 16 care apartments

OAKRIDGE VILLAS 30 Oakridge Drive, Kerikeri

62 homes

29 homes PAPAMOA BEACH VILLAGE Corner of Parton Road and Te Okuroa Drive, Papamoa PINESONG MANUKAU BUILDING 66 Avonleigh Rd, Green Bay, Auckland

30 homes 48 homes

18 METLIFECARE LIMITED ANNUAL REPORT 2018 19 EDGEWATER VILLAGE (formerly Pakuranga Village) ACCELERATED 14 Edgewater Drive, Pakuranga, Auckland GROWTH

UNDER CONSTRUCTION FY19

GULF RISE Hibiscus Coast Highway, Red Beach 44 apartments 24-bed homestead care home

PAPAMOA BEACH VILLAGE Cnr Parton Road & Te Okuroa Drive, Papamoa Beach

35 homes 20 apartments 40-bed homestead care home

CRESTWOOD AVENUES GREENWICH GARDENS 38 Golf Road, New Lynn, Auckland 10th Avenue, Tauranga

30-bed homestead 13 homes 96 homes Not all projects will be completed in FY19. care home All images of buildings shown are artists’ impressions.

20 METLIFECARE LIMITED ANNUAL REPORT 2018 21 Refurbishment of villas and apartments

COMMERCIAL The quality of Metlifecare’s housing is maintained to a high standard through its refurbishment programme. With every villa and apartment refurbished before resale, the company ensures its portfolio remains modern, allowing maximum value to be captured on resale.

INTENSITY Significant efficiencies in the refurbishment programme over the past two years have resulted in the delivery of standardised, yet higher quality refurbishments at all villages, with reduced turnaround times and a lower cost per refurbishment. This includes new procurement arrangements in place for a standardised range of kitchens and bathrooms across all villages. ADDING VALUE THROUGH VILLAGE INVESTMENT New standardised kitchen refurbishment at Longford Park Villlage REGENERATION AND REMEDIATION “The village is working Since 2017, Metlifecare has been implementing a seven-year village regeneration and remediation plan, which will ensure its hard to update everything villages remain competitive and well-positioned to meet the future needs and expectations of residents. and what they have done The programme comprises investment projects aimed to modernise and future-proof our village housing. In the past year, we saw projects in various stages of implementation at five villages - Coastal Villas, Dannemora Gardens, Greenwood Park, is excellent both inside Pinesong and Waitakere Gardens. and in the garden.” With Pinesong’s regeneration project completed and Coastal Villas’ betterment project well under way, we are seeing the Hibiscus Coast Village value being added through this programme in sales and resales uplift. resident In 2018 Metlifecare • achieved an average pricing uplift of 29% on occupation right agreements for remediated homes • repurchased the occupation right agreements of 44 homes, enabling residents to stay in their own villages while 10 remediation and betterment projects are underway 446 village apartments communal and villas Coastal Villas spaces upgraded refurbished

Upgrading communal spaces

Recognising the changing social needs of our future residents such as enhanced interest in café culture and wellness, Metlifecare is implementing a plan to refresh and modernise communal amenities at existing villages. This programme includes upgrading bars and cafés, gardens, swimming pools, leisure facilities and social spaces. In FY18 we upgraded 10 village communal spaces.

“It’s extremely important Bayswater Café to look after our residents while work is being done in their village. Being able to remain in company-owned homes and enabling them to stay in their “The recent own village community has refurbishment made a big difference.” in the centre is a Richard Callander, joy - it has class General Manager Operations and style.” Bayswater resident

22 METLIFECARE LIMITED ANNUAL REPORT 2018 23 CUSTOMER Pipeline of 9 care homes in new and 20% EXPERIENCE existing villages 158% reduction increase in in care staff premium turnover SETTING A NEW revenue STANDARD IN CARE

Metlifecare has raised the bar with its new resident-directed care philosophy and homestead-style care homes. The success of this approach is already evidenced by strong demand, highly satisfied residents and family members, and outstanding Ministry of Health audit and certification results. 93% 95% With state-of-the-art homestead-style care homes planned for all new villages as well satisfaction, as a number of existing villages, Metlifecare will double the number of care homes in its “Care Services” - care occupancy portfolio in the next five years. The next two care homes at The Avenues (Tauranga) and residents and families (excluding new Papamoa Beach, will be completed during the first half of 2019. care homes) Through its care clusters of neighbouring villages, Metlifecare can ensure residents have ready access to care services, either in their own village or close by. All resident care is supported by Metlifecare’s integrated clinical care system, which enables residents’ information to be electronically and instantly available and allows staff to spend more quality time with residents. Growing our care offering

• Two new homestead-style care homes opened in FY18 at Greenwich Gardens and Somervale • New integrated care offering certified at Pinesong, providing nine hospital care suites and 11 resthome care apartments • Two new homestead-style care homes under construction at Papamoa Beach Village and The Avenues • Seven additional care homes planned for new and existing villages

Continued improvement in quality

• 100% of care homes audited in FY18 achieved ‘Gold Standard’ four-year certification “The caregivers are • All operating care homes have three or four-year certification excellent. Any requests • 158% increase in premium revenue are dealt with immediately. “The village is Nothing is a problem for beautifully presented them. They are very friendly and advise me of and my friends and Resident-directed care enables our residents to make any issues that come up.’’ choices about how they live in their care environment, as they family all enjoy the Family member of resident would in their own home. It gives residents greater control luxurious surroundings.” at The Orchards over their decisions and, importantly, helps residents maintain Greenwich Gardens connections within the village and in their community. care resident Tanya Bish, Clinical Nurse Director

24 METLIFECARE LIMITED ANNUAL REPORT 2018 25 CUSTOMER PEOPLE ARE OUR BUSINESS EXPERIENCE

PEOPLE ARE OUR BUSINESS

For a number of years, Metlifecare has led the sector in the way it engages and “Staff are develops its staff. unfailingly friendly With the need to attract and retain high calibre, skilled people being stronger than ever, the company is continuing to invest in its staff, with particular emphasis and professional.” on learning and development, health and safety, and providing a rewarding and enjoyable workplace. Pinesong resident

Investing in our People FY18 initiatives and achievements included • new pay equity rates were voluntarily extended to 75 home support workers • $700,000 was invested in learning and development • one in three staff is involved in a long-term development programme • more than 12,000 hours of learning and development provided, including 80% 96% • completion of the three-year Leadership Development programme (85 leaders) overall engagement satisfaction • completion of Customer Service Principles training by employees maintained in the • completion of resident-directed care training by care home staff with staff performance IBM ‘Best Places • commencement of a company-wide wellbeing programme in villages to Work’ survey Resident Satisfaction Embedding Health & Safety Survey 2018 Metlifecare has developed clear health and safety principles which are at the forefront of company operations. FY18 initiatives and Reduction achievements included in staff turnover • re-certification of AS/NZS 4801 – strong recognition of progress made over past 12 months • contractor pre-qualification and compliance requirements have changed contractor 12% profile and improved contractor performance • Health and Safety in forefront of tender process and contractor documentation • overall reduction in incidents, increase in hazardous observations and reporting of “Metlifecare cares for near misses “The staff by their it’s employees in terms • 96% of incidents investigated and closed out within 30 days of Health and Safety and pleasant, kind supports our professional approach, make for a development.’’ happy atmosphere.” One of the things that makes Metlifecare Engagement Survey 2018 Oakridge Villas resident a great place to work is development participant and training opportunities for staff. Engagement Survey 2018 participant

26 METLIFECARE LIMITED ANNUAL REPORT 2018 27 glazing, which adds considerable value on resale. At That doesn’t mean we won’t consider looking elsewhere Coastal Villas, where we’ve been doing this the longest, for quality opportunities - we’re doing that all the time. we are achieving an average price uplift of 29% on resale. As a long-term asset owner, we are happy to be sitting Q&A on a high-quality portfolio with steady long-term growth. Q: 44 homes were repurchased by Metlifecare The future cash generating value of our portfolio is clearly during FY18 - what’s behind this? demonstrated by its embedded value, which is the highest with Chief Executive in the sector. A: Our relationship with our residents is paramount, so the decision to repurchase the occupation right Glen Sowry Q: Metlifecare delivered 254 new homes and care agreements while undertaking remediation and beds during the financial year. How confident are you betterment work was a very easy one. Minimising resident that the team can deliver the 300+ promised from 2020? disruption was our key consideration, and when we realised some people would need to temporarily move A: We have invested heavily in our development out of their homes, we repurchased a number of homes capability over the past two years, and FY18’s within the villages to enable them to remain within their performance has demonstrated we can comfortably Metlifecare’s Chief village community. The repurchased homes will be deliver multiple projects with over 250 homes per year Executive Officer Glen progressively made available for resale. and with a strong development margin. Our development pipeline now takes us out six years, Sowry joined the Company Q: What criteria do you use in deciding whether or assuming a build rate of around 300 homes per year, not to purchase a site for a new village development? in April 2016. Under his and we have our planning in place to achieve that. And what in particular attracted you to the two sites We currently have 392 homes and care beds under leadership shareholder purchased in FY18? construction (not all will be delivered this financial year) equity has grown 31%. We to improve the quality and value of our existing assets. A: Our team has done great work to identify, and you’ll see us starting to go into consenting phase for ask Glen about this year’s We have recognised that, while still performing well, a evaluate and secure the two new sites at Hobsonville and our new sites at Botany, Hobsonville and Beachlands this achievements and what lies number of our villages offered potential for improvement. Beachlands. They have developed a powerful modelling year. For example, the average house prices in neighbourhoods tool that allows them to quickly evaluate opportunities ahead for Metlifecare. surrounding some of our villages have grown dramatically and identify the real gems. Once a target site is identified, Q: Two new care homes were opened during the as the local housing market has improved. That created the Board’s Development Committee becomes period and more are planned. What’s driving this an opportunity to invest in those villages, enabling us to increasingly involved. While negotiations can take time, increase and what do you see as being the right mix of keep pace with the communities we serve. This in turn will we’re a long-term business with a long-term investment care to independent living within the portfolio? allow us to capture the increase in value. horizon, and we won’t sign up for something if we’re not A: When I first came to Metlifecare I was surprised to 100% convinced it meets our strict criteria. As a result we’ve put a programme in place that will, learn that while having access to care is important, only a over seven years, see significant reinvestment into our small percentage of our residents actually need to transfer Q: You’ve been with the business for over two years Q: Are you concerned that the market is becoming villages. While some of this will be for remediation, we into a care home. We are well equipped to provide care now. What are you most proud of and what does this overcrowded? Is there still scope to increase the are also using the opportunity to upgrade those homes for our residents on their terms and if they need that extra year’s record result mean to you? footprint within Auckland beyond the current level? and communal spaces, and we are confident that this level of full-time care, almost all our villages can offer A: I’m really proud of this result - it’s a credit to investment will deliver an excellent return. A: Auckland is continuing to grow, and our that - either on site or within their local village cluster. We our team. It confirms that the direction we’ve set, and acquisitions in Beachlands and Hobsonville are examples also continue to have a strong focus on linking residents the investment we’ve made in our people, development Q: What kind of projects does this involve? of under-serviced areas that we are happy to expand into. to support that they can access while living in their villa or apartment. capability and customer experience, have come together A: For example, at our Pinesong village we identified As our occupancy rates show, demand for our existing well. We now have a very strong platform for ongoing, That said, we are recognising the future needs of the an opportunity with an existing 19-apartment building that villages remains strong and this is partly due to their great sustainable growth. locations in established communities. However we’re not increasingly older demographic and are planning to build would otherwise have required a reasonably significant complacent, and our village reinvestment programme nine new care homes in the next seven years, both in Over the past two years we’ve invested heavily in our upgrade. Instead we knocked it down and replaced it is one example of how we’re constantly finding ways to new villages and in existing villages. In many respects core operations and this investment is starting to pay with a fabulous 48-apartment building, with panoramic improve and offer superior value to the market. While we’re fortunate to be able to invest in state-of-the-art off. We’re not about to take our foot off the accelerator. harbour views, that anyone would be happy to call home. some areas of Auckland are potentially reaching a homestead settings that are more like a family home, and There’s still plenty of improvement and growth to come This has unlocked enormous value for the village and saturation point, we are still seeing opportunities. Having support our resident-directed care approach extremely created exceptional living for our residents. The project from Metlifecare, and we’re focused on continuing to said that, we can and do evaluate opportunities in other well. We have truly raised the bar on care and are raise the bar. That involves listening to our residents, was completed on time and on budget, and will deliver a parts of the country. continuing to innovate. constantly adapting to markets and looking to the future development margin in the region of $6 million, net of all The merits of this approach are reflected by the very of retirement living to ensure that we are well prepared to costs including buybacks. Q: With most of Metlifecare’s villages in Auckland high occupancy and satisfaction rates for residents, their meet the needs of the next generation of residents. and that market potentially under pressure are you still On a smaller scale we are recognising the baby boomer families and our staff, all of whom are telling us that we’re happy to be an Auckland-centric operator? interest in café culture and wellness by investing to on the right track. Q: Metlifecare invested significantly into its existing refurbish or upgrade common areas such as cafés and A: Auckland’s fundamentals are still very strong with villages during the year - what was behind this? recreational facilities, to ensure our villages have attractive continued undersupply of housing development and the A: Not all development opportunities in our sector spaces for residents and their families to use. Where escalating growth of our target demographic within the start with a bare piece of land, and it’s good practice to we’re upgrading residents’ homes, we will bring them region. As we know, markets operate in cycles and while the continually review the portfolio and look for opportunities up to modern specification with features such as double Auckland market has moderated recently, it is still positive.

28 METLIFECARE LIMITED ANNUAL REPORT 2018 29 G Communal gardens at Dannemora Gardens

• We install fixed-plumbed toilets at our construction sites • Metlifecare proudly supports the New Zealander of to reduce chemical use the Year Awards through sponsoring the Senior New Zealander category. We also support a number of • Our Homestar™ 6 Star Green rated buildings have the charities, with total sponsorship and donations of over environmental benefits of reduced energy usage, water $210,000 in the 2018 financial year capture, and waste management efficiencies. This also delivers social benefits for our residents through better health and wellbeing outcomes and reduced electricity Bayswater café renovation costs

• Energy efficiency is a key design consideration for development and refurbishment projects, driving the use of LED lighting, double glazing and 2.6 R-rated insulation which exceeds code requirements

SOCIAL • Our talent attraction and retention programmes are ensuring we find, develop and keep exceptional people who deliver on our promises for residents, their families and our shareholders L-R Bill Mann, Eileen Green, Graham Stratton, Peter Glassborow, Annie Hancock. Dogs Barney & Sam • Our workplace wellness strategy was created in consultation with staff. The first modules are due to be GOVERNANCE released and we’re excited to see the positive impact • Our commitment to strong corporate governance saw OUR SUSTAINABILITY JOURNEY • Improvements in our health and safety programmes and us incorporate the NZX Corporate Governance Code our training and development initiatives are contributing recommendations to high levels of staff engagement Metlifecare is committed to creating a better future for ALIGNMENT WITH OUR STRATEGY • Our Customer and Care principles are now well our residents and their families, our staff, our suppliers, • The design of our community facilities, including established with staff having completed customer service our shareholders and the communities we serve. It has also been pleasing to see the alignment of the key upgrades in a number of villages ensures our shared principles training material aspects with the three pillars of our business spaces offer life-enhancing social experiences for • Our homestead-model care homes have raised the bar in We operate a long-term business, in which we invest to strategy, and to see that many of the areas we have residents and visitors develop village assets that will stand the test of time. So, invested in will contribute to delivering a sustainable path design and functionality and we’ve received outstanding • Our flexible, resident-led approach encourages active it’s only natural that Metlifecare has begun to formalise an forward. results in our re-certification audits approach to environmental, social and governance (ESG) involvement in the design of village programmes that • In recognition of our resident-led philosophy, the Care matters as we continue to develop a sustainable business Next year Metlifecare will celebrate an important milestone residents are passionate about - the achievement of 35 years in business. We understand Committee framework was expanded to include total that will endure into the future. • Each of our villages has its own sponsorship budget, that to remain successful our growth depends on being resident experience with residents and staff working together to engage and a responsible corporate citizen. We are developing our • Our enhanced crisis management framework has been fundraise for their local community. The opportunities sustainability framework with a view to reporting progress implemented during the year THE PROCESS this creates, particularly for inter-generational community towards our goals over the coming year. Our first steps were to engage in a rigorous process which engagement, is a key tenet of Metlifecare and a valued • We committed to handling on-site development and identified the environmental, social and governance issues While it’s still early days in terms of our sustainability part of village life rejuvenation work sensitively so that residents are able to that are material to Metlifecare, and have the potential to journey and we recognise there are many opportunities remain within their village with minimal disruption impact our stakeholders. These issues were considered for improvement, the following provide a snapshot of and ranked to create our “Materiality Matrix”. We will some initiatives undertaken to date. validate these findings with our external stakeholders “These are just and from there, we will identify goals and initiatives that ENVIRONMENTAL a selection of the projects we will implement as we continue on our sustainability and activities already in place. journey. • The introduction of electric pool cars for residents at As we continue our stakeholder The Board and Executive Team are committed to this new developments is a responsible step that has been consultation we will identify process, and senior leaders will assume sponsorship well received further opportunities to improve roles to champion the initiatives that we will focus on. • Our communal gardens remain a very popular amenity our environmental, social and governance outcomes and at most villages, allowing sharing of produce and the Not surprisingly, the process so far has reinforced our ensure we remain a sustainable composting of resident and kitchen waste to replenish belief that people are at the heart of our business. It’s this and profitable business.” driving force that is also behind our desire to contribute the soil Glen Sowry, more positively to the wider community and environment • Where possible, construction waste such as plastic Chief Executive Officer that we share. shrink wrap and metal is being recycled Aims Games competitor Sam Kilduff presents his billet Greenwood Park resident Elizabeth Glas with a thank you gift - photo credit Andrew Warner

30 METLIFECARE LIMITED ANNUAL REPORT 2018 31 OUR BOARD OF DIRECTORS

KIM ELLIS BCA (Hons), BEng(Hons) CHAIR, INDEPENDENT DIRECTOR Appointed 25 August 2014 Kim is an experienced director and former Chief Executive Officer. He is currently the Chair of NZ Social Infrastructure Fund and the Sleepyhead Group, and a director of Freightways, Port of Tauranga, Fonterra Shareholders’ Fund and Ballance Agri-Nutrients. Kim was the Managing Director of Waste Management NZ Ltd for 13 years until 2006. Prior to that, he held a number of CEO positions. Kim chairs the Metlifecare Board and the Nominations & Corporate Governance Committee, and is a member of the Audit & Risk, Development and People & Remuneration Committees.

CHRISTOPHER AIKEN BA INDEPENDENT DIRECTOR Appointed 23 August 2012 Chris has over 26 years’ experience in the property sector, and is currently Chief Executive Officer of HLC, which is running the development of approximately 50,000 homes under master plan across New Zealand. He is a member of the Auckland Urban Design Panel and is an adviser to Government agencies on large scale property matters. Chris has also had an extensive technology career, and is a former director of Auckland City Council Property Board, and a former Chair of North Harbour Stadium, Telecom Retail Holdings and Origin Quarries Group. Chris chairs Metlifecare’s Development Committee and is a member of the Nominations & Corporate Governance Committee.

MARK BINNS LLB INDEPENDENT DIRECTOR Appointed 1 August 2017 Mark is a professional director and former Chief Executive Officer who brings substantial experience in construction, property development and asset management to the Board. Until 2017 Mark was Chief Executive Officer of Meridian Energy, where he led the company through the largest Initial Public Offering in New Zealand’s history. Prior to that, Mark spent 22 years at Fletcher Building and Fletcher Challenge, where he rose to the position of Chief Executive of Fletcher Building’s Infrastructure Division. Mark is currently a director of Auckland International Airport and Crown Infrastructure Partners, and a Trustee of the Auckland War Memorial Museum, where he Chairs the Future Museum Capital Programme Committee. Mark is a member of the Nominations & Corporate Governance and Development Committees, and chairs the People & Remuneration Committee.

ROD SNODGRASS BCA INDEPENDENT DIRECTOR Appointed 1 August 2017 PhD, MN(Hons), PG Dip Health Sciences, RN Rod has broad experience in corporate strategy, business and product innovation, digital growth, transformation and disruption in the DR. NOELINE WHITEHEAD INDEPENDENT DIRECTOR Appointed 19 June 2013 New Zealand communications and media sector. He became Chief Customer Officer at Vector in 2017, and previously held senior Noeline is an experienced senior nurse and senior manager with more than 30 years in residential aged care. Noeline’s previous roles executive roles at Spark. Rod brings a global strategic view of the technology industry having previously been on the Boards of the include an Honorary Teaching Fellow at the University of Auckland, Director of Nursing at Bethesda Care, and a Clinical Nurse Director Mobile World Capital Advisory Board, Telco Futures Forum, Southern Cross Cables, XtraMSN and Yahoo!Xtra in NZ and AAPT and with Counties Manukau District Health Board. 3 Mobile in Australia. Noeline has made a significant contribution to New Zealand’s residential aged care sector through her membership of national Rod is currently a director of JUCY Group and SMX, a Trustee of Springboard Trust and a member of AUT’s Auteur’s Influencers Panel. committees and her long association with the Eden Alternative organisation. Her passion for resident wellbeing brings expertise and Rod is a member of the Resident Experience & Care, Development and Nominations & Corporate Governance Committees. a strong focus on clinical practice and resident care to the Board. Noeline is a member of the Resident Experience & Care, Development and Nominations & Corporate Governance Committees.

CAROLYN STEELE BMS (Hons) NON-EXECUTIVE DIRECTOR Appointed 13 December 2013 ALISTAIR RYAN MCom (Hons) Carolyn has substantial experience in capital markets, mergers and acquisitions and investment management. Until 2016 Carolyn was INDEPENDENT DIRECTOR Appointed 23 August 2012 a Portfolio Manager at Guardians of New Zealand Superannuation, the Crown entity which manages the New Zealand Superannuation Fund. Alistair is an experienced director with wide corporate and financial experience in listed companies and his background includes Prior to joining the Guardians in 2010, Carolyn spent more than ten years in investment banking at Forsyth Barr and Credit Suisse First Boston/ a 16-year career at SKYCITY Entertainment Group where he held senior management roles, including Chief Financial Officer. Prior First NZ Capital. to SKYCITY, Alistair was a Corporate Services Partner with Ernst & Young, based in Auckland. He is currently a director of Evolve Education Carolyn is currently a director of WEL Networks, Ultrafast Fibre, Green Cross Health, the Halberg Disability Sport Foundation and is a Group, Kingfish, Barramundi, Marlin Global, Kiwibank and Christchurch Casino. He is also a member of the FMA’s Audit Oversight Committee. Trustee of the New Zealand Football Foundation. Alistair chairs Metlifecare’s Audit & Risk Committee and is a member of the Nominations & Corporate Governance and People Carolyn chairs the Resident Experience & Care Committee and is a member of the Audit & Risk and Nominations & Corporate Governance & Remuneration Committees. Committees.

32 METLIFECARE LIMITED ANNUAL REPORT 2018 33 1 OUR EXECUTIVE TEAM

TANYA ANDREW HUMA RICHARD GLEN JULIE RICHARD JAN CHARLIE BISH PESKETT HOUGHTON THOMSON SOWRY GARLICK CALLANDER MARTIN ANDERSON BCom, FCIM MN (Hon), BCom, NZRCompN BA (Hons) LLB BA (Hons), CIPD, CFHRINZ, BCom, LLB (Hons), PGDip INSEAD AMP BCom BCM GENERAL MANAGER CLINICAL NURSE PGDip CHIEF EXECUTIVE GENERAL MANAGER GENERAL MANAGER GENERAL COUNSEL CHIEF FINANCIAL OPERATIONS GENERAL MANAGER DIRECTOR & COMPANY GENERAL MANAGER OFFICER OFFICER MARKETING SALES PROPERTY & Richard was appointed Tanya joined the SECRETARY HUMAN RESOURCES Glen has led Metlifecare Julie is an experienced Jan was appointed General DEVELOPMENT Richard joined the General Manager Operations Metlifecare team as Andrew brings over 20 Huma was appointed to since April 2016 and prior senior marketing executive Manager Sales in August Charlie was appointed Metlifecare team in in January 2015 after 16 years Clinical Nurse Director years’ legal experience the Metlifecare Executive to his appointment, was who brings a wealth of 2009 and has brought General Manager Property September 2017 from with SKYCITY Entertainment in July 2015 after eight to Metlifecare, having team in January 2017 to Chief Executive Officer experience in reshaping extensive commercial, sales & Development in July Air New Zealand where Group both in Australia and years at Waitemata worked in leading law lead the organisation’s of Housing New Zealand organisations. She joined management and business 2015. He has 24 years’ he was Group General in New Zealand, where he District Health Board firms in London and was strategic people with 67,000 properties Metlifecare in October development experience to property development and Manager Commercial, was most recently the General (WDHB). She is a in-house Legal Counsel management. Huma across the country. Under 2017 after four years as Metlifecare. Prior to that Jan management experience, leading commercial Manager of its Queenstown Registered Nurse with at Beca, prior to joining joined the company Glen’s leadership, Housing General Manager Marketing worked in both the United with a strong track record strategies, including casinos. Richard has extensive over 20 years’ experience the company in June from JMW Consultants New Zealand substantially at SKYCITY Entertainment Kingdom and New Zealand, in managing large scale revenue management executive experience in working in teams caring 2007. He heads the where she specialised lifted its property Group, where she oversaw primarily in the property and development projects across and pricing. Richard has customer service management for and supporting older legal and settlements in executive coaching, development capability. its transformation into an telecommunications sectors. all property sectors in New also brought a strong and a proven track record adults. teams and has dual designing and delivering entertainment, dining and Zealand and Australia during blend of technical Glen has held a number delivering sustainable Jan leads a team of highly responsibility for leading transformational accommodation leader. Prior his career. Charlie has Tanya and her team corporate finance skills of senior roles at Air New growth for shareholders and trained and skilled sales staff legal compliance and leadership development to that, she had a similar role managed projects with a are responsible for all and investment banking Zealand, Television New positive outcomes for key who drive the sales of new corporate governance, programmes. at The Warehouse Group. combined value of over $3 aspects of resident experience from previous Zealand and Telecom. stakeholders. village units and apartments as well as leading the billion. care and the customer Previously, Huma was roles at PwC and He spent ten years at Air Julie and her team are and the resale of existing company’s acquisitions, JPMorgan. Richard and his team are experience provided in the Executive General New Zealand, initially responsible for connecting units to new residents. Charlie and his team are disposals and corporate responsible for all aspects our care homes. Manager Capability Richard and his team as Head of Corporate with future and existing They are responsible for responsible for achieving transactions. of village operations and & Organisation Affairs and Government customers, and bringing maximising the company’s Metlifecare’s growth “I’m passionate about are responsible for delivering a high quality “I’m passionate Development for Z Relations, then leading Metlifecare’s brand and commercial outcomes and objectives through the ensuring we assist Metlifecare’s financial customer experience to about supporting the Energy, winning multiple the domestic and short customer proposition to life. driving sustainable growth. acquisition and development our residents to live management as the Metlifecare’s residents every company’s operational awards for her work. She haul international airlines of new sites to the delivery of the way they choose, company focuses on its “I’m passionate about day. “I’m passionate about teams to deliver has also worked for large where he oversaw a major well-designed villages. having control over growth, innovation and ensuring Metlifecare remains helping future residents first-class service to organisations including commercial performance financial and competitive “I’m passionate about giving their decisions and relevant in an increasingly make informed choices “I’m passionate about customers in innovative Deloitte, Vero and Spark. agenda. turnaround of the Tasman our residents an outstanding maintaining connections demanding and competitive about entering into a creating villages with a ways, leadership of a network. village experience, through both within the village “I’m passionate about “I’m passionate about landscape by listening and retirement village lifestyle, real point of difference, high-performing team committed teams, operational and in their community.” enabling the ongoing building a modern, “I’m passionate about responding to customers’ and am privileged to lead through design innovation, and driving value to our excellence and service growth and develop- progressive, intelligent leading Metlifecare ever-changing needs, dreams a sales team who share building quality and strong shareholders.” innovation across all of our ment of our people, to business that is towards a successful and wants.” my passions. All too often connections with local villages.” build a high performing successful, thoughtful future where we create we hear from our residents communities. We endeavour organisation with and engages positively environments that that “I wished I’d moved to create places that anyone unrelenting focus on with all those who are residents are proud to sooner”.” would want to live in, not just exceptional service touched by it.” call home, where our staff our residents.” delivery.” love working and which create ever increasing value for our investors”.

34 METLIFECARE LIMITED ANNUAL REPORT 2018 35 Artist impression: Greenwich Gardens Kowhai building

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018

36 METLIFECARE LIMITED ANNUAL REPORT 2018 37 Metlifecare Limited Group Financial Statements 2018

Consolidated Statement of Comprehensive Income ForConsolidated the year ended Statement 30 June of 2018Comprehensive Income For the year ended 30 June 2018

30 June 30 June $000 Note 2018 2017 Income Operating revenue 2.1 115,089 107,737 Other income 2.3 - 1,112 Interest income 184 244 Total income 115,273 109,093 Change in fair value of investment properties 3.1 134,926 258,757

Share of profit arising from joint venture, net of tax 1,953 2,561

Expenses Employee costs (48,610) (43,260) Property costs 2.2 (24,689) (23,135) Other expenses 2.2 (26,638) (23,800) Residents’ share of capital gains (4,663) (9,286) Depreciation and impairment 3.3 (7,005) (8,632) Amortisation (631) (550) Finance costs 4.6 (67) (226) Total expenses (112,303) (108,889) Profit before income tax 139,849 261,522 Income tax expense 5.1 (14,764) (9,979) Profit for the year 125,085 251,543

Other comprehensive income Items that may be reclassified subsequently to profit or loss: Fair value movement of interest rate swaps, net of tax (313) - Items that will not be reclassified to profit or loss: Share of other comprehensive income arising from joint venture, net of tax 22 40 Net gain / (loss) on revaluation of care homes, net of tax 4.5 364 (1,316) Other comprehensive income / (loss), net of tax 73 (1,276) Total comprehensive income 125,158 250,267

Profit attributable to shareholders of the parent company 125,085 251,543

Total comprehensive income attributable to shareholders of the 125,158 250,267 parent company

Profit per share for profit attributable to the equity holders of the company during the year Basic (cents) 4.2 58.8 118.3 Diluted (cents) 4.2 58.7 118.1

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

38 METLIFECARE LIMITED ANNUAL REPORT 2018 3 39 Metlifecare Limited Group Financial Statements 2018

Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018 Consolidated Balance Sheet s at ne ConsolidatedConsolidated StatementStatement of of Movements Movements in in Equity Equity ConsolidatedConsolidated BalanceBalance Sheet Foror thethe earyear ended ended 30 ne June 2018 ass at 30 neJune 2018 Metlifecare Limited Group Financial Statements 2018 30 June ne ote 2018 30 June ne ploee Assets ote 2018 Consolidated Statement of Movements in Equity hare ash and cash eialents 16,298 or the ear ended ne ontrited Retained edging Realation chee otal Assetsrade receiales and other assets 20,870 ote it arnings Resere Resere Resere it ashropert and cash plant eialents and eipent 16,29852,727 Balance at 1 July 2016 radentangile receiales assets and other assets 20,8701,206 ropertnestent plant properties and eipent 3,188,94052,727 ploee Comprehensive income ntangilenestent assets in oint entre 1,20610,929 hare rofit for the ear nestentTotal assets properties 3,188,9403,290,970 ther coprehensie loss ontrited Retained edging Realation chee otal nestent in oint entre 10,929 otal coprehensie incoe ote it arnings Resere Resere Resere it TotalLiabilities assets 3,290,970 Balanceploee at share1 July schee 2016 rade and other paales 72,034 ransfer fro eploee share Liabilitieseriatie financial instrents 434 Comprehensive income nterest earing liailities rofit schee for theresere ear on esting rade and other paales 72,034154,360 theriidends coprehensie paid to shareholders loss eriatieeferred anageent financial instrents fees 115,053434 otalBalance coprehensie at 30 June 2017 incoe nterestRefndale earing occpation liailities right agreeents 1,355,108154,360 eferred anageentta liailit fees 115,053117,706 ploeeBalance at share 1 July schee 2017 306,895 1,055,906 - 7,009 378 1,370,188 RefndaleTotal liabilities occpation right agreeents 1,355,1081,814,695 ransfer fro eploee share eferred ta liailit 117,706 Comprehensive schee resere income on esting TotalNet assets liabilities 1,814,6951,476,275 rofit for the ear - 125,085 - - - 125,085 iidends paid to shareholders ther coprehensie incoe NetEquity assets 1,476,275 Balance at 30 June 2017 - - (313) 386 - 73 loss ontrited eit 307,024 Balanceotal coprehensie at 1 July 2017 incoe 306,895 1,055,906 - 7,009 378 1,370,188 Equity - 125,085 (313) 386 - 125,158 Reseres 7,196 loss ontritedRetained earnings eit 1,162,055307,024 Comprehensive income ploee share schee ReseresTotal equity 1,476,2757,196 rofit for the ear -- 125,085- -- -- 210 - 125,085210 Retained earnings 1,162,055 therransfer coprehensie fro eploee incoe share 129- -- (313)- 386- (129)- 73- Total equity 1,476,275 loss schee resere on esting ransfer fro realation otal coprehensie incoe - 345 - (345) - resere - 125,085 (313) 386 - 125,157 loss he inancial tateents presented are signed for and on ehalf of etlifecare iited and ere athorised iidends paid to shareholders - (19,281) - - - (19,281) the oard for isse on gst ploeeBalance at share 30 June schee 2018 307,024- 1,162,055- (313)- 7,050- 459210 1,476,275210 he inancial tateents presented are signed for and on ehalf of etlifecare iited and ere athorised ransfer fro eploee share 129 - - - (129) - the oard for isse on gst schee resere on esting ransfer fro realation - 345 - (345) - resere iidends paid to shareholders - (19,281) - - - (19,281) Balance at 30 June 2018 307,024 1,162,055 (313) 7,050 459 1,476,275 R llis Ran hair irector he aoe consolidated stateent of oeents in eit shold e read in connction ith the accopaning notes R llis Ran hair gst irector gst gst gst

he aoe consolidated alance sheet shold e read in connction ith the accopaning notes

he aoe consolidated stateent of oeents in eit shold e read in connction ith the accopaning notes he aoe consolidated alance sheet shold e read in connction ith the accopaning notes

40 METLIFECARE LIMITED ANNUAL REPORT 2018 41

Metlifecare Limited Group Financial Statements 2018

Metlifecare Limited Group Financial Statements 2018

Consolidated CashCash Flow Statement Foror thethe year year ended ended 30 une June 2018 Notes to thethe FinancialFinancial StatementsStatements

30 June une 1 GENERAL INFORMATION (continued) 2018 Cash flows from operating activities 1.3 Basis of preparation (continued) eceipts from residents for management fees village and care fees 88,065 eceipts from residents for sale of new refundale occupation right agreements 61,836 Historical cost convention eceipts from residents for resale of refundale occupation right agreements 183,599 hese financial stateents hae een prepared nder the historical cost conention as odified the ayments to residents for refundale occupation right agreements (111,009) realation of inestent properties care hoes and deriatie financial instrents ayments to suppliers and employees (99,779) et received 882 1.4 Goods and Services Tax (GST) nterest received 114 nterest paid (59) ll aonts are shon eclsie of goods and serices ta other than trade receiales and trade uyac costs for off-maret units associated with regeneration and paales ecept here the aont of incrred is not recoerale fro the taation athorit hen this (12,975) remediation occrs the is recognised as part of the cost of the asset or as an epense as applicale Net cash inflow from operating activities 110,674 Cash flows from investing activities 1.5 Standards, interpretations and amendments to published standards that are not yet effective et repayments from advances to oint venture 197 ividends received from oint venture 875 R Financial Instruments replaces the gidance for the classification and easreent of financial roceeds from disposal of investment property - instrents in R siplifies the ied easreent odel nder and estalishes ayments for property plant and euipment (11,463) three priar easreent categories for financial assets aortised cost fair ale throgh other ayments for intangiles (381) coprehensie incoe and fair ale throgh profit or loss he asis of classification depends on the entity’s ayments for investment properties (143,570) siness odel and the contractal cash flo characteristics of the financial asset here are no aterial apitalised interest paid (5,453) changes to the classification and easreent of financial liailities nder R ecept for the Net cash outflow from investing activities (159,795) recognition of changes in on credit ris in other coprehensie incoe for liailities designated at fair ale Cash flows from financing activities throgh profit and loss ividends paid (19,281) et proceeds from repayment of orrowings 81,767 he rop has copleted its initial assessent of the ipact of adopting this standard and has conclded Net cash inflow / (outflow) from financing activities 62,486 that there are liel no aterial adstents to the easreent of financial instrents held the rop here ill liel e no change in the classification of financial assets and adoption of the ipairent odel is Net increase / (decrease) in cash and cash equivalents 13,365 not liel to hae a aterial ipact isting deriatie financial instrents in designated hedging ash and cash euivalents at the eginning of the financial year 2,933 relationships ill contine to e acconted for nder here ill e soe enhanced disclosres Cash and cash equivalents at the end of the financial year 16,298 relating to ipairent proisions and hedging arrangeents reired he rop ill appl this standard Reconciliation of Profit after Tax with Cash Inflow from Operating Activities fro l R Revenue fro contracts ith cstoers replaces the crrent reene recognition gidance in Profit after tax 125,085 Revenue and Construction Contracts and is applicale to all entities ith reene R dustments for reires reene recognition that depicts the transfer of proised goods or serices to cstoers in an hange in fair value of investment properties (134,926) aont that reflects the consideration to hich the entit epects to e entitled to in echange for those hange in the fair value of residents share of capital gains 4,663 goods or serices he rop has copleted its initial assessent of the ipact of adopting this standard and mployee share scheme 210 there are liel to e no aterial adstents to the recognition or easreent of reene here ill e epreciation and impairment 7,005 increased disclosres reired mortisation 631 eferred ta epense he folloing is noted in relation to the ain reene streas 14,745 Rest hoe hospital and serice fee charges are goerned care adission agreeents eteen oss on disposal of property plant and euipment 471 indiidal care residents and etlifecare ees are charged ased on a dail rate hich reflects the point hare of profit arising from oint venture net of ta (1,953) in tie the goods or serices are proided to the care resident Changes in working capital relating to operating activities: rade receivales and other assets (6,191) - Village fees are detailed within each village resident’s occupation right agreement and relate to rade and other payales 910 the operating costs of the illage ees are charged on a eel asis reflecting the period a resident has eferred management fees 10,440 occpied a nit or sericed apartent efundale occupation right agreements 89,584 Rest hoe hospital and serice fees and illage fees ill contine to e recognised on an accral asis at the Net cash inflow from operating activities 110,674 point in tie the goods or serices are proided he rop ill appl this standard fro l

he aove consolidated cash flow statement should e read in conunction with the accompanying notes

42 METLIFECARE LIMITED ANNUAL REPORT 2018 43 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes toto thethe Financial Financial Statements Statements Notes to thethe FinancialFinancial StatementsStatements

1 GENERAL INFORMATION (continued) 1 GENERAL INFORMATION (continued)

1.3 Basis of preparation (continued) 1.5 Standards, interpretations and amendments to published standards that are not yet effective (continued) Historical cost convention hese financial statements have een prepared under the historical cost convention as modified y the Leases replaces the current guidance in reuires a lessee to recognise a revaluation of investment properties care homes and derivative financial instruments lease liaility reflecting future lease payments and a right-of-use asset for virtually all lease contracts he roup has completed its evaluation of the impact of adopting this standard and the following is noted 1.4 Goods and Services Tax (GST) - perating leases will e recognised on the alance sheet as a right-of-use asset and a corresponding lease ll amounts are shown eclusive of goods and services ta other than trade receivales and trade liaility ased on the discounted value of the operating lease commitments of approimately m payales ecept where the amount of incurred is not recoverale from the taation authority hen this disclosed in note he recognition eemption under for short-term or low-value assets of occurs the is recognised as part of the cost of the asset or as an epense as applicale less than m will e applied and these costs will continue to e recognised on a straight-line asis in the statement of comprehensive income 1.5 Standards, interpretations and amendments to published standards that are not yet effective - ental and operating lease epenses previously recognised on a straight-line asis within other epenses will e recognised as amortisation for right-of-use assets and finance costs for lease liailities in the Financial Instruments replaces the guidance for the classification and measurement of financial statement of comprehensive income he roup is still uantifying the impact on the statement of instruments in simplifies the mied measurement model under and estalishes comprehensive income three primary measurement categories for financial assets amortised cost fair value through other - perating lease payments previously recognised within operating cash flows will e presented within comprehensive income and fair value through profit or loss he asis of classification depends on the entity’s financing cash flows for principal repayments of the lease liaility here will e no impact to cash usiness model and the contractual cash flow characteristics of the financial asset here are no material payments changes to the classification and measurement of financial liailities under ecept for the recognition of changes in own credit ris in other comprehensive income for liailities designated at fair value ccupation right agreements confer the right to occupancy of a unit or serviced apartment and are through profit and loss considered leases under here is no change to the recognition or measurement of occupation right agreements and the associated management fee revenue anagement fee revenue will continue to e he roup has completed its initial assessment of the impact of adopting this standard and has concluded recognised on a straight-line asis in the statement of comprehensive income over the average epected that there are liely no material adustments to the measurement of financial instruments held y the roup length of stay of residents here will e amendments to disclosures and presentation reuired he roup here will liely e no change in the classification of financial assets and adoption of the impairment model is has elected to early adopt and will apply this standard from uly using the full-retrospective not liely to have a material impact isting derivative financial instruments in designated hedging approach relationships will continue to e accounted for under here will e some enhanced disclosures relating to impairment provisions and hedging arrangements reuired he roup will apply this standard 1.6 Comparative information from uly here necessary certain comparative information has een reclassified to conform to changes in Revenue from contracts with customers replaces the current revenue recognition guidance in presentation in the current year uyac costs for off-maret units associated with regeneration and Revenue and Construction Contracts and is applicale to all entities with revenue remediation reflect the settlement of eisting occupation right agreements and have een determined to e reuires revenue recognition that depicts the transfer of promised goods or services to customers in an operating cash flows in nature m of uyac costs have een reclassified in the prior period from amount that reflects the consideration to which the entity epects to e entitled to in echange for those investing activities to operating activities in the consolidated cash flow statement mployee costs in the goods or services he roup has completed its initial assessment of the impact of adopting this standard and current year are stated net of capitalised laour costs he comparatives have een presented on a asis there are liely to e no material adustments to the recognition or measurement of revenue here will e consistent with the current year increased disclosures reuired he following is noted in relation to the main revenue streams - est home hospital and service fee charges are governed y care admission agreements etween individual care residents and etlifecare ees are charged ased on a daily rate which reflects the point in time the goods or services are provided to the care resident - Villages fees are detailed within each village resident’s occupation right agreement and relate to the operating costs of the village ees are charged on a weely asis reflecting the period a resident has occupied a unit or serviced apartment est home hospital and service fees and village fees will continue to e recognised on an accrual asis at the point in time the goods or services are provided he roup will apply this standard from uly

44 METLIFECARE LIMITED ANNUAL REPORT 2018 45 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes toto thethe Financial Financial Statements Statements NotesNotes toto thethe FinancialFinancial StatementsStatements

1 GENERAL INFORMATION (continued) 1 GENERAL INFORMATION (continued)

1.7 Critical judgements, estimates and assumptions 1.10 Notes to the Financial Statements he notes include information which is reuired to understand the inancial tatements and is material and he preparation of financial statements in accordance with reuires the use of certain critical relevant to the operations financial position and performance of the roup he notes to the inancial accounting estimates and udgements t also reuires management to eercise its udgement ased on tatements are organised into the following sections historical eperience and other factors including epectations of future events that are elieved to e reasonale under the circumstances in the process of applying the roups accounting policies 2 Operating performance perating revenue age he areas involving a higher degree of udgement or compleity or areas where assumptions and estimates penses age are significant to the financial statements are as follows nderlying rofit efore taation age - evenue recognition - management fees note - air value of investment properties note care homes note and interest rate swaps note 3 Investment property and other assets - eferred ta note nvestment properties age efundale occupation right agreements age 1.8 Fair value hierarchy roperty plant and euipment age

he roup measures investment property care homes and interest rate swaps at fair value he roup 4 Shareholders' equity and funding classifies its fair value measurements using a fair value hierarchy that reflects the significance of the inputs ontriuted euity age used in maing the measurements he fair value hierarchy has the following levels arnings per share age ividends age - uoted prices unadusted in active marets for identical assets or liailities evel hare-ased payments age - nputs other than uoted prices included within evel that are oservale for the asset or eserves age liaility either directly ie as prices or indirectly ie derived from prices evel nterest earing liailities age - nputs for the asset or liaility that are not ased on oservale maret data ie 5 Other disclosures unoservale inputs evel ncome ta epense age he level in the fair value hierarchy within which the fair value measurement is categorised is determined on rade receivales and other assets age the asis of the lowest input to the fair value measurement f a fair value measurement uses oservale rade and other payales age inputs that reuire significant adustment ased on unoservale inputs the measurement is a evel inancial instruments age inancial ris management age measurement elated party transactions age egment information age 1.9 Foreign currency translation ommitments age Functional and presentation currency ontingencies age useuent events age oth the functional and presentation currency of etlifecare imited and its susidiaries is ew ealand usidiaries of the roup and oint Venture nvestment age dollars

Transactions and balances oreign currency transactions are translated into ew ealand dollars using the echange rates prevailing at the transaction date oreign echange gains and losses resulting from the settlement of such transactions are recognised in the statement of comprehensive income of each roup entity

46 METLIFECARE LIMITED ANNUAL REPORT 2018 47 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notesotes to thethe Financialinancial Statementstatements Notesotes toto thethe Financial inancial Statementstatements

2 OPERATING PERFORMANCE 2 OPERATING PERFORMANCE (continued) his section provides additional information aout individual line items in the inancial tatements that the 2.1 Operating Revenue (continued) directors consider most relevant in the contet of the operating performance of the roup including revenue property corporate and administration epenses Rest home, hospital and service fees, and village fees est home hospital and service fees and village fees are recognised on an accrual asis his section also includes nderlying rofit efore taation a non- financial measure etirement village Other operating revenue operators may present nderlying rofit as an alternative profit measure to assist with measuring operating ther revenue for the roup includes resident refurishment recoveries and administration fees collected on and development performance s this is a non- financial measure there are liely to e inconsistencies occupation right agreement contracts issued prior to in the calculation of this alternative performance measure with other retirement village operators Information about major customers 2.1 Operating Revenue evenues from the roups largest customer the ew ealand overnment is included in total revenue his includes care fee revenue from eligile overnment susidised aged care residents who receive rest home or 30 June une hospital level care evenue received from the inistry of ealth included in rest home hospital and service 2018 fees and villages fees amounted to m m anagement fees 52,371 est home hospital and service fees and village fees 59,937 ther operating revenue 2,781 2.2 Expenses 115,089 30 June une Revenue recognition evenue comprises the fair value of services provided net of goods and services ta evenue is recognised as 2018 follows Profit before income tax includes the following expenses: Management fees Property costs management fee is payale y the residents of the roups independent living units and serviced tilities and other property costs 12,068 apartments for the right to share in the use and enoyment of common facilities he management fee is epairs and maintenance on investment properties 11,660 calculated as a percentage of the occupation right agreement amount and accrues monthly for a set period epairs and maintenance on property plant furniture and euipment 961 ased on the terms of the individual contracts he current disclosure statement and occupation right otal property costs 24,689 agreement accrues management fees at the rate of per annum for a maimum of three years Other expenses he timing of the recognition of management fees is a critical accounting estimate and udgement he esident costs 6,256 management fee is recognised on a straight-line asis in the statement of comprehensive income over the areting and promotion 5,592 average epected length of stay of residents which is years for independent living units and years for ther employment costs 3,314 serviced apartments in the years ended une and ommunication costs 2,920 ental and operating lease epenses 569 he management fee is payale in cash y the resident at the time of repayment to the resident of the oss on disposal of property plant and euipment 471 refundale occupation right agreement amount due he roup has the right of set-off of the refundale onations 48 occupation right agreement amount and the management fee receivale outful dets 7 t year end the management fee receivale that has yet to e recognised in the statement of comprehensive ther no items of individual significance 6,886 income as management fee revenue is recognised as a deferred management fee liaility on the alance Fees paid to PricewaterhouseCoopers New Zealand sheet udit and review of financial statements 477 a compliance services 16 dvisory services - eecutive remuneration enchmaring advice 59 dvisory services - strategic procurement advice 23 - otal fees paid to ricewaterhouseoopers ew ealand 575 otal other epenses 26,638 ther employment costs include staff related costs such as staff training uniforms and commissions on sales

48 METLIFECARE LIMITED ANNUAL REPORT 2018 49 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notesotes to thethe Financialinancial Statementstatements NotesNotes toto the the Financial Financial Statements Statements

2 OPERATING PERFORMANCE (continued) 3 INVESTMENT PROPERTY AND OTHER ASSETS 2.3 Underlying Profit before taxation his section shows the retirement village investment property assets related liailities for resident 30 June une occupation right agreements and other property assets which are considered to e the most relevant to the 2018 operations of the roup Profit for the year 125,085 Less non recurring items: 3.1 Investment Properties ther income - gain on sale - 30 June une rofit for the year ecluding non recurring items 125,085 2018 Less: hange in fair value of investment properties (134,926) pening alance 2,889,369 Add: apitalised suseuent ependiture 166,837 nvestment properties under development transferred to property mpairment of property plant and euipment 3,849 (1,353) ealised resale gains 62,309 plant and euipment nvestment property disposed of (839) ealised development margin 16,435 hange in fair value recognised during the year 134,926 a epense 14,764 losing alance Underlying Profit before taxation 87,516 3,188,940 nderlying rofit efore taation calculated consistently year-on-year is determined from the net profit after nvestment properties are categorised as follows ta of the roup adusted for the impact of the following (a) Non recurring items: those items that do not relate to the ordinary activities and are not epected to recur 30 June une with regularity 2018 - Other income - gain on sale: a portion of land acuired for development was disposed of during the year evelopment land measured at fair value 122,987 ended une he resulting gain does not form part of the recurring operating performance of the etirement villages under development measured at cost 36,551 usiness refer note etirement villages measured at fair value 3,029,402 (b) Change in fair value of investment properties: unrealised non-cash valuation changes refer to note otal investment properties 3,188,940 (c) Impairment of property, plant & equipment: impairments and suseuent reversals of impairment losses associated with care home valuation changes as the roup is in the usiness of owning and operating Investment properties care homes not constructing the asset for resale refer to note nvestment properties include completed freehold land and uildings freehold development land and (d) Realised resale gains: the realised increase in value from the resale of occupation right agreements during uildings under development comprising independent living units serviced apartments and common the period ealised resale gains are a measure of the cash generated from increases in selling prices of facilities provided for use y residents under the terms of the occupation right agreement nvestment occupation right agreements to incoming residents less cash amounts paid or payale to vacated residents properties are held for long-term yields for repayment of refundale occupation right agreements from the pre-eisting portfolio recognised at the date of settlement he reported measure allows for amounts payale to the vacated resident at alance date Valuation processes on units that have een resettled in the year imited undertoo the valuation of investment property for all the reporting periods (e) Realised development margin: represents the development margins delivered from the first time sale of presented s principal valuer ichael unn is an independent registered valuer and associate of the occupation right agreements ealised development margin is the margin otained on cash settlement from ew ealand nstitute of Valuers and is appropriately ualified and eperienced in valuing retirement village the first time sale of an occupation right agreement following the development of the unit he margin properties in ew ealand he roup verifies all maor inputs to the independent valuation reports he fair calculation is ased on the actual selling price of individual units settled during the period and includes the value as determined y is adusted for assets and liailities already recognised in the alance sheet following costs which are also reflected in the discounted cash flow model - directly attriutale construction costs Disposals - a prorata apportionment of land on the asis of the historical cost or purchase price of the land n the year ended une the ew ealand ransport uthority reuisitioned small parcels of land - a prorata share of infrastructure costs specific to a stage owned y the roup located in lany and at the reenwich ardens village n the year ended une - non-recoverale and the roup disposed of a portion of the development land located in lany that was surplus to the proposed - capitalised interest to the date of completion on costs attriuted to the unit retirement village development for the site argins are calculated ased on when a stage is completed

onstruction costs land and infrastructure non-recoverale and capitalised interest associated with common areas including management offices amenities and any care facilities are ecluded from the costs aove when the development margin is calculated (f) Tax expense: the impact of current and deferred taation is removed refer to note

50 METLIFECARE LIMITED ANNUAL REPORT 2018 51 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes to the FinancialFinancial Statements NotesNotes toto the the Financial Financial Statements Statements

3 INVESTMENT PROPERTY AND OTHER ASSETS (continued) 3 INVESTMENT PROPERTY AND OTHER ASSETS (continued)

3.1 Investment Properties (continued) 3.1 Investment Properties (continued) Development land he occupancy period is a significant component of the valuation and is driven from a onte arlo evelopment land is comprised of a standalone title andor part of the principal site here the simulation he simulations are dependent on the demographic profile of the village age and gender of development land is a standalone title has ascried a value which can e captured independently if residents and the reason for departing a unit he resulting stailised departing occupancy period is an desired from the overall village here the development land is part of the principal site has identified estimate of the long run occupancy term for residents n increase in the stailised departing occupancy if there is potential e it planning or economic to epand the village and has assessed a value accordingly period will have a negative impact on the valuation and a decrease in the stailised departing occupancy will his latter value whilst identified as surplus land value cannot e independently captured have a positive impact on the valuation evelopment land is valued ased on recent comparale transactions he roups land values range he valuation calculates the epected cash flows for a year period years with stailised etween per suare metre psm and psm psm and psm departing occupancy assumptions set out elow n increase decrease in the psm rate would result in a higher lower fair value of development land tailised departing occupancy - years 2018 s a general rule has treated units in the early stages of construction land with approvals and other erviced apartments 4.0 - 4.9 - vacant land clearly identified for future development as land for development in its highest and est use ndependent living units and apartments 6.7 - 9.0 - Retirement villages under development measured at cost he valuation also includes within the forecast cash flows the roups epected costs relating to any here the staged development still reuires sustantial wor such that practical completion will not e nown or anticipated remediation wors he estimate of the gross cash flows included for remediation achieved at or close to alance date or the fair value of investment properties under development cannot e wors is m over a five year period m over a si year period he increase in the allowance relialy determined at this point in time it is carried at cost less any impairment mpairment is determined for remediation wors reflects further investigative wor conducted over the period across the portfolio and y considering the value of wor in progress and managements estimate of the asset value on completion updated estimates of the cost of the reuired wors he estimates are ased on currently availale Retirement villages measured at fair value information has also included within the forecast cash flows the roups epected costs associated with o assess the maret value of the roups interest in a retirement village has undertaen a cash flow seismic strengthening wors of m m analysis to derive a net present value s the fair value of investment property is determined using inputs that Other relevant information are significant and unoservale the roup has categorised investment property as evel under the fair he valuation of investment properties is adusted for cash flows relating to refundale occupation right value hierarchy in accordance with S Fair Value Measurement. he following significant agreements residents share of capital gains deferred management fees and management fee receivales assumptions have een used to determine the fair value which are already recognised separately on the alance sheet and also reflected in the cash flow model noservale nput 2018 reconciliation etween the valuation amount and the amount recognised on the alance sheet as investment properties is as follows ominal growth rate - anticipated annual property price growth over the 0% - 3.5% - 30 June une cash flow period - years 2018 ominal compound growth rate - anticipated annual property price 2.6% - 3.1% - growth over the cash flow period years evelopment land measured at fair value 122,987 re-ta discount rate 12.5% - 15.0% - etirement villages under development measured at cost 36,551 etirement villages measured at fair value per 1,556,450 he sensitivity of the fair value of investment property to changes in significant assumptions is set out in the nvestment properties at valuation 1,715,988 tale elow lus efundale occupation right agreements 1,713,214 dopted lus esidents share of capital gains 35,465 iscount rate iscount rate rowth rates rowth rates value lus eferred management fees 115,053 p – 50 bp p – 50 bp 30 June 2018 ess anagement fees receivale (381,408) ess ccupation right agreement receivales (9,372) Valuation 1,425,030 otal investment properties 3,188,940 ifference (51,370) 54,820 82,652 (82,652) ifference (4%) 4% 6% (6%) orrowing costs of m m arising from financing specifically entered into for the construction of investment properties and care homes under development were capitalised during the year verage dopted iscount rate iscount rate rowth rates rowth rates capitalisation rates of pa pa were used representing the orrowing costs of the loans value p – 50 bp p – 50 bp used to finance the proects une Valuation egistered mortgages or an encumrance in favour of the statutory supervisors of the village-owning ifference susidiary companies are recognised as first charges over the freehold land of those companies to protect the ifference interests of the residents in the event of failure y the susidiary companies as operators of the villages to oserve oligations under the deeds of supervision occupation right agreements and lifecare agreements ndependent iving nit erviced partment ndependent iving partment ecluding unsold stoc etirement villages measured at fair value on pages and includes unsold stoc etlifecare imited holds a second registered mortgage and second registered general security agreement over its wholly-owned operating susidiaries not currently engaged in the development of retirement villages to secure funding made availale to each of these susidiaries

52 METLIFECARE LIMITED ANNUAL REPORT 2018 53 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes toto thethe Financial Financial Statements Statements NotesNotes toto thethe FinancialFinancial StatementsStatements

3 INVESTMENT PROPERTY AND OTHER ASSETS (continued) 3 INVESTMENT PROPERTY AND OTHER ASSETS (continued)

3.2 Refundable Occupation Right Agreements 3.3 Property, Plant and Equipment Plant, 30 June 0 Construction Furniture & 000 2018 0 Freehold Land Work in Equipment and & Buildings Progress Total b p 1,713,214 505 000 Motor Vehicles Residents’ share of capital gains 35,465 5 At 30 June 2016 (12,163) 5 505 b (381,408) p b p 1,355,108 0 p 5 0 b 5 50 p p p b p b p p Year ended 30 June 2017 p b p b p 5 50 0 0 p b 5 5 p p p b pp p p b b p pb p 05 0 0 p b p p p b b b 5 00 p p 505 00 p pp p p b b 5 p b p At 30 June 2017 p p 0 5 5 5 p pp p p p b b p 5 00 5 b b 5 Expected maturity Year ended 30 June 2018 p pp b p b 27,618 12,333 8,295 48,246 b 0 p 0 p 414 - - 414 p 0 0 p 0 5 pp 173 - - 173 p b - 7,497 3,469 10,966 p b b p 12,351 (13,318) 967 - p - - (13) (13) 30 June 0 (54) - - (54) 000 2018 0 p p (4,135) (209) (2,661) (7,005) 142,712 0 b 36,367 6,303 10,057 52,727 1,212,396 55 At 30 June 2018 1,355,108 0 50,125 6,512 29,956 86,593 p p (13,758) (209) (19,899) (33,866) b 36,367 6,303 10,057 52,727

54 METLIFECARE LIMITED ANNUAL REPORT 2018 55

Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes toto thethe Financial Financial Statements Statements Notesotes toto thethe Financial inancial Statementstateents

3 INVESTMENT PROPERTY AND OTHER ASSETS (continued) 3 INVESTMENT PROPERTY AND OTHER ASSETS (continued)

3.3 Property, Plant and Equipment (continued) 3.3 Property, Plant and Equipment (continued) f freehold land and ildings ere stated on a historical cost asis the aonts old e as follos ll propert plant and eipent is initiall recorded at cost ost incldes ependitre that is directl 30 June ne attritale to the acisition of the asset he cost of selfconstrcted assets incldes aterial and direct 2018 laor and an other costs directl attritale to ringing the asset to its oring condition for its intended se lant and eipent is sseentl easred at cost less acclated depreciation and ipairent ost 37,700 losses if an cclated depreciation (4,071) et oo ale 33,629 seent to initial recognition freehold land and ildings for care hoes are carried at a realed epreciation is proided on a straight line asis on propert plant and eipent other than freehold land aont hich is the fair ale at the date of the realation less an sseent acclated depreciation at rates calclated to allocate the assets cost or alation less estiated residal ale oer their estiated on ildings and acclated ipairent losses if an since the assets ere last realed air ale is sefl lies coencing fro the tie the assets are held read for se as follos deterined reference to aret ased eidence hich is the aont for hich the assets cold e ears echanged eteen a noledgeale illing er and a noledgeale illing seller in an ars length reehold ildings transaction as at the alation date lant frnitre and eipent ears otor ehicles ears n realation srpls is recognised in other coprehensie incoe nless it reerses a realation decrease he residal ales and sefl lies of assets are reieed and adsted if appropriate at each alance sheet of the sae asset preiosl recognised in the stateent of coprehensie incoe n realation deficit is date recognised in the stateent of coprehensie incoe nless it directl offsets a preios srpls in the sae Impairment of non-financial assets asset in other coprehensie incoe n acclated depreciation at realation date is eliinated against ssets that are sect to depreciation or aortisation are reieed for ipairent heneer eents or the gross carring aont of the asset and the net aont is restated to the realed aont of the asset changes in circstances indicate that the carring aont a not e recoerale n ipairent loss is pon disposal an realation resere relating to the particlar asset eing sold is transferred to retained recognised for the aont hich the assets carring aont eceeds its recoerale aont after earnings ndependent alations are perfored annall at the alance sheet date redcing the carring aont an aont that the asset has een realed he recoerale aont is the higher of an assets fair ale less costs to sell and ale in se or the prposes of assessing he rops care hoes encopassing freehold land and ildings ere aled the independent ipairent assets are groped at the loest leels for hich there are separatel identifiale cash flos registered aler R for all reporting periods presented cash generating nits ains and losses on disposals are deterined coparing proceeds ith the carring aont hese are R deterined the fair ale of all care hoe assets sing an earningsased ltiple approach here the inclded in the stateent of coprehensie incoe ithin other epenses loer of actal or proected earnings efore interest ta depreciation aortisation and rent is capitalised at n ipairent loss after redcing the carring ale of the assets an associated realation as rates of eteen to to he alation prepared has een split eteen land recognised in the stateent of coprehensie incoe in the depreciation and ipairent line in respect to iproeents chattels plant and goodill to deterine the fair ale of the assets he realation net of the folloing care hoes applicale deferred incoe taes as recognised in other coprehensie incoe and is shon in the 30 June ne Realation Resere in shareholders eit 2018 s the fair ale of freehold land and ildings is deterined sing inpts that are noserale the rop Redction in the ale of land related to the ne care has categorised propert plant and eipent as eel nder the fair ale hierarch in accordance ith he enes hoe eing constrcted 209 - R Fair Value Measurement. he final constrction costs for the ne care hoe oerale opened in oeer eceeded the initial he significant noserale inpts sed in the fair ale easreent of the rops portfolio of land and alation perfored R ildings are the capitalisation rates applied to indiidal nit earnings significant decrease increase in the 3,919 he eisting care hoe as decoissioned reslting capitalisation rate old reslt in a significantl higher loer fair ale easreent oerale in an ipairent loss inal costs attrited to the constrction of the care reenich ardens hoe eceeded the initial alation perfored R - ecoissioned in arch in preparation for the aranga constrction of a ne care hoe at the illage - Total 4,128 n the ear ended ne an ipairent loss of in respect to a preiosl recognised ipairent as reersed to reflect the increase in the alation of the care hoe

56 METLIFECARE LIMITED ANNUAL REPORT 2018 57 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

NotesNotes toto thethe Financial Financial Statements Statements Notesotes toto thethe Financial inancial Statementstateents

4 SHAREHOLDERS' EQUITY AND FUNDING 4 SHAREHOLDERS' EQUITY AND FUNDING (continued)

his section incldes disclosres related to the rops capital strctre and eternal fnding arrangeents 4.2 Earnings Per Share

4.1 Contributed Equity Basic 30 June ne 30 June ne asic earnings per share is calclated diiding the profit attritale to eit holders the eighted 2018 2018 aerage ner of ordinar shares eclding treasr shares on isse dring the ear Shares hares $000 30 June ne Total Issued and fully paid up capital 2018 (including treasury shares) rofit attritale to eit holders 125,085 alance at eginning of the ear 213,005,909 306,895 hares issed net of transaction costs 126,381 129 eighted aerage ner of ordinar shares on isse s 212,704 hares cancelled - - asic earnings per share cents 58.8 alance at end of the ear 213,132,290 307,024 Diluted 30 June ne ilted earnings per share is calclated diiding the profit attritale to eit holders the eighted 2018 aerage ner of ordinar shares adsted for an shares to e issed nder the share right schee for Shares hares hich perforance hrdles old hae een et ased pon the opans perforance p to the reporting date and to the etent to hich the are diltie Treasury shares alance at eginning of the ear 320,319 30 June ne hares issed nder the senior 2018 eectie share plan 126,381 hares esting nder the senior rofit attritale to eit holders 125,085 eectie share plan (49,672) hares cancelled nder the senior ilted eighted aerage ner of ordinar shares on isse s 213,096 eectie share plan - ilted earnings per share cents 58.7 alance at end of the ear 397,028 4.3 Dividends 30 June ne 2018 30 June ne ents per 2018 et tangile assets per share asic $6.92 share $000 et tangile assets represents total assets less total liailities less intangile assets he shares on isse at the end of the ear is sed to calclate the net tangile assets per share Recognised amounts inal diidend for - oeents in the opans issed share capital are set ot elo nteri diidend for - Shares issued inal diidend for 12,354 nteri diidend for 6,927 alance as at ne otal diidends paid 19,281 ctoer shares cancelled nder the senior eectie share plan n gst the directors approed a diidend of cents per share aonting to he oeer treasr shares nder the senior eectie share plan diidend record date is epteer and paent ill occr on epteer alance as at ne 213,005,909 ctoer shares issed nder the senior eectie share plan 126,381 roision is ade for the aont of an diidend declared on or efore the alance date t not distrited alance as at ne 213,132,290 at alance date ll ordinar shares are athorised and ran eall ith one ote attached to each fll paid ordinar share Imputation credits he shares hae no par ale rdinar shares are classified as eit and are recognised net of increental he iptation credit alance for the rop at ne is nil nil o ta paents ere ade costs directl attritale to the isse of ne shares he opan incrred no transaction costs issing dring the ear and diidends paid ere nipted shares dring the ear nil reasr shares relate to shares issed nder the senior eectie share plan that are held on trst the rop hese shares are acconted for as treasr shares the rop ntil sch tie as the are cancelled or est to eers of the senior eectie tea he esting of these shares is sect to achieeent of perforance hrdles

58 METLIFECARE LIMITED ANNUAL REPORT 2018 59 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notesotes toto thethe Financial inancial Statementstateents Notesotes to the Financialinancial tateentsStatements

4 SHAREHOLDERS' EQUITY AND FUNDING (continued) 4 SHAREHOLDERS' EQUITY AND FUNDING (continued)

4.4 Share-based Payments 4.5 Reserves

Share Scheme Revaluation Reserve he opan operates a enior anageent hare chee the chee hich is intended to align the 30 June ne interests of eecties and other senior anageent ith the interests of shareholders and proide a 2018 contining incentie to these eploees oer the long ter alance at eginning of the ear ards of shares depend on satisfaction of perforance hrdles and an assessent of otal hareholder 7,009 hare of gain on realation of care hoe arising fro oint entre net Retrn coparison ith the peer grop eing eers of the nde at the date of grant and in of ta 22 the ftre other listed retireent illage operators hares issed nder the chee are entitled to ain on realation of care hoes 414 diidends a on realation of care hoes 4 Share rights issued Redction in the realation of care hoes refer note (54) a on reersal of realation of care hoes - he chee is acconted for as an insstance share rights schee reconciliation of the share rights on ransfer on reclassification of deelopent land (345) isse is proided elo alance at end of the ear 7,050 30 June ne he realation resere records changes in the ale of propert plant and eipent 2018 Hedging Reserve hare rights otstanding at l 320,319 he hedging resere records the effectie portion of acclated changes in the fair ale of interest rate ranted dring the ear 126,381 saps sed in cash flo hedges his is recognised in the profit or loss hen the hedged ite affects the profit ested dring the ear (49,672) or loss refer note ancelled dring the ear - hare rights otstanding at ne 397,028 4.6 Interest Bearing Liabilities 30 June ne he tale elo sets ot aonts recognised in respect to share ased paents 2018 30 June ne 2018 an loans 154,668 apitalised det costs (308) hare ased paent epense recognised in the consolidated 154,360 210 stateent of coprehensie incoe ithin eploee epenses inance leases - cclated eploee share ased paent epense recognised otal interest earing liailities 154,360 459 in the eploee share schee resere Borrowings ring the ear ended ne shares ested of the preiosl orroings are initiall recognised at fair ale net of transaction costs incrred and are sseentl recognised share ased paent epense as transferred to share capital easred at aortised cost he fair ale of the insstance share rights granted is recognised as an eploee epense in the profit or n difference eteen the proceeds net of transaction costs and the redeption aont is recognised in loss coponent of the stateent of coprehensie incoe ith a corresponding entr in the eploee share the stateent of coprehensie incoe oer the period of the orroings sing the effectie interest schee resere he total aont to e epensed oer the esting period is deterined reference to the ethod fair ale of the insstance share rights granted eclding the ipact of an nonaret esting conditions orroing costs incrred for the constrction of an alifing asset are capitalised dring the period of tie onaret esting conditions are inclded in assptions aot the ner of insstance share rights that is reired to coplete and prepare the asset for its intended se ther orroing costs are epensed that are epected to ecoe eercisale as incrred

t each alance sheet date the rop reises its estiates of the ner of insstance share rights that Bank loans are epected to ecoe eercisale t recognises the ipact of the reision of original estiates if an in the profit or loss coponent of the stateent of coprehensie incoe and a corresponding adstent to he an loans coprise the ore Reoling redit acilit eelopent acilit and oring apital acilit eit oer a three ear period effectie arch as aended fro tie to tie as detailed elo n eceer the an facilities ere renegotiated and etended he atrities of the ore s part of this chee interestfree loans are proided to the eecties and senior anageent at grant Reoling redit acilit of the eelopent acilit of and the dates hich ill e settled for insstance share rights that est a cash ons forfeited insstance oring apital acilit of as detailed on page share rights offset the reaining loan alance he eleent of this ons ill e treated as a cash roceeds fro the sale of nits that are fnded fro the eelopent acilit are reired to e repaid settled shareased paent transaction ith a liailit for accring oer the esting period fter against the eelopent acilit esting to the date of eercise this liailit is adsted reference to the aret ale of the shares hanges in the fair ale of this liailit ill e recognised in profit or loss

60 METLIFECARE LIMITED ANNUAL REPORT 2018 61 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes to the Financial Statements Notes to the FinancialFinancial StatementsStatements Notes to the Financial Statements

4 SHAREHOLDERS' EQUITY AND FUNDING (continued) 5 OTHER DISCLOSURES

4.6 Interest Bearing Liabilities (continued) his section incldes additional inforation that is considered less significant in nderstanding the financial perforance and position of the rop t st e disclosed to copl ith e ealand eialents to Drawn Balances nternational inancial Reporting tandards 30 June 30 June $000 Facility Limit 2018 2017 5.1 Income Tax Expense

Core Facility 175,000 15,000 8,400 30 June ne Development Facility 175,000 139,668 64,502 2018 Working Capital Facility 2,000 - - Total 352,000 154,668 72,902 (a) Income tax expense Investment property valuation (refer note 3.1) 1,715,988 1,520,283 rrent ta 19 eferred ta 14,745 Loan to Valuation Ratio 9.0% 4.8% ncoe ta epense 14,764 Maturities (b) Numerical reconciliation of income tax expense to prima facie tax 30 June 30 June payable $000 Facility Limit 2018 2017 rofit efore incoe ta epense 139,849 a at the e ealand ta rate of 39,158 On demand - 2,000 - a effect of aonts hich are not dedctile taale in calclating Between one and two years 83,333 70,333 66,734 taale incoe Between two and three years 83,333 61,333 6,168 on taale incoe and non dedctile ependitre 1,113 More than three years 183,334 23,002 - apitalised interest (1,527) Total 352,000 154,668 72,902 on taale ipact of inestent propert realation (37,779) Security oeent in propert alations for deferred ta 13,462 a ipact of change in depreciale ta ase (989) A Negative Pledge Deed has been entered into by the operating subsidiaries in favour of the banks in which hare of profit arising fro oint entre (547) the subsidiaries have undertaken not to create or permit to exist any mortgage or other charge over their ther adstents (173) assets or revenues without obtaining the prior written consent of the Group's Lenders. rior period adstent 2,046 Metlifecare Limited has issued a letter of support for the bank borrowings of the 50% joint venture entity ncoe ta epense 14,764 Metlifecare Palmerston North Limited. he applicale ta rate as Financial covenants (c) Recognised deferred tax liability The financial covenants that the Group must comply with include Interest Cover Ratios and a Loan to Value he oeent in the deferred ta alance coprises Ratio. During the year ended 30 June 2018, the Group was in compliance with its financial covenants (2017: in compliance). Balance 1 July Recognised in Recognised in Balance 30 June 2017 income Reserves 2018 Finance Costs ropert plant and eipent 30 June 30 June (29) (5,808) (4) (5,841) nestent propert (132,185) (10,342) - (142,527) $000 2018 2017 eferred anageent fees 4,322 (2,501) - 1,821 Interest expense 3,708 2,419 Recognised ta losses 21,050 4,205 - 25,255 Facility costs 1,812 1,434 ther ites 3,763 (299) 122 3,586 Less: interest expense and facility costs capitalised (5,453) (3,627) et deferred ta liailit (103,079) (14,745) 118 (117,706) Total finance costs 67 226 alance l Recognised in Recognised in alance ne Interest on borrowings are charged using the BKBM Bill Rate plus a margin and line fees. Interest rates incoe Reseres applicable in the year to 30 June 2018 ranged from 3.46% to 3.66% per annum (2017: 3.17% to 3.98% per ropert plant and eipent annum). Derivative financial instruments used to manage interest rate risk are set out in note 5.5. nestent propert eferred anageent fees Recognised ta losses ther ites et deferred ta liailit

62 METLIFECARE LIMITED ANNUAL REPORT 2018 26 63 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

NotesNotes toto thethe Financial Financial Statements Statements NotesNotes toto the the Financial Financial Statements Statements

5 OTHER DISCLOSURES (continued) 5 OTHER DISCLOSURES (continued)

5.1 Income Tax Expense (continued) 5.1 Income Tax Expense (continued) o o s p or p ur r r r o uros osss or Group u Deferred tax - recognition based on contractual cash flows n calclating deferred ta nder the held for se ethodolog the rop has ade significant dgeents to o ps or pro s p o urr pros o s o deterine taale teporar differences he carring ale of the Group’s inestent propert is pp o r us s rr sss s ru o porr deterined on a disconted cash flo asis and incldes cash flos that are oth taale and nontaale in rs ss o sss s r rr ous the ftre nl those cash flos ith a ftre ta conseence priaril in respect of anageent fees ss s o osss reslt in a taale teporar difference n deterining the taale teporar difference the directors hae rr sss s r ros or porr rs rs p o pp sed the contractal cash flos on the asis that the contractal arrangeents for an occpation right sss r ror or s r s s o os rs r or agreeent coprise to gross cash flos eing an occpation right agreeent deposit pon entering the sus r rs r pp o uu ous o nit and the refnd of this deposit pon eit that are nontaale and need to e eclded to deterine the u porr rs o sur rr ss or po s taale teporar differences arising on inestent properties or r porr rs rs ro roo o ss or o he rop has recognised deferred ta against the present ale of cash flos ith a ftre ta conseence rr ss or s ros ro o s porr rs ros as proided R iited that arise fro the depreciale coponents ie ildings of the inestent rso or usss oo o rso o r propert nclded ithin the R alation is also the present ale of the capital gains associated ith the ou pro or pro or oss inestent propert hich are nontaale and priaril attritale to the capital groth of the non rr sss r ros o s pro uur ous o us depreciale coponents ie land o deferred ta has een recognised against these aonts os porr rs osss Group ross osss s o osss os rr o s rs ro porr rs rurs he rop considered hether deferred ta shold e recognised on the asis that anageent fees are o o so ss receied at the end of the R period ie pon refnd of the R deposit a of set off on eit a urr rr s ru o ous ros r u r so ros resident or at the eginning of the R period ie at tie of the receipt of the R deposit he rop r u sso urr or rr s r ros s ous s usu considers it appropriate to recognise and easre deferred ta ased on the anageent fee eing receiale at the end of the R period as the eliee it est represents the Group’s contractal entitleent Key assumptions related to deferred tax hold the anageent fee e treated as receied at the eginning of the R period an additional deferred ta liailit of old e recognised in the alance sheet n additional crrent ear ta Deferred tax - recognition based on 'value-in-use' epense of and a corresponding redction in net profit after ta of Income Taxes pros r s ru prsupo s propr sur old also e recognised r u ur s ror r rou s s prsupo s ru s propr s pr s propr s usss o os o s o osu sus o oo s o s propr or rr rou s Group rus prsupo osrs or us ooo or ppropr rprss Group’s usss o Group s or opror o poroo o r r s s osus sus o oo s o s s propr rou opr s or rop s s or urror o o usss o s o o s s propr ss rr rsp o s proprs s ssss o ss o ss u rs rou us ss u s rs s s ou rr ro o pro ror pror o uso o osss s oprs o us rr o u op r pror o uso o osss

64 METLIFECARE LIMITED ANNUAL REPORT 2018 65 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

Notes to the Financial Statements NotesNotes toto thethe Financial Financial Statements Statements Notes to the Financial Statements

5 OTHER DISCLOSURES (continued) 5 OTHER DISCLOSURES (continued) 5.2 Trade Receivables and Other Assets 5.4 Financial Instruments u 30 June sss s r ss or purpos or r ur 2018 roo r rs 5,290 Group os oo ors o srus upo r r rs 9,372 Loans and receivables sss oprs s s us r s rps 720 r sss u prps os rs r ros r u o r pus ous u ro r prs 15 rso oss ros r o r s os s sr poss p or usos 2,790 r rs 2,683 Financial liabilities at amortised cost s oprs r r s u o rs or sss 20,870 po s rs r s u upo rs s u u o pr rs Financial liabilities at fair value through profit and loss s oprs rs ps o os 83 rs ps r ros r u o or s r o r susu r os 305 sur r u o rpor 388 5.5 Financial Risk Management r rs or sss r p o ur os o Group s pos o r o rss r rs u rs r rs r rs r rs r ros r u pus rso oss u rs Groups or rs pror osrs o o rs proso or pr o r rs s ss r s o Group ss o s po rs s o pror o Group s o o o ous u or o or r o r ou o s rr ou ur pos ppro or o rors or or rs proso s r sss rr ou prs u o s uur rsur rs rss s os sou or rs r ou o oss s ros Group uss r os o sur r ps o rs o s pos u ss s o oprs o or pss r r s uo s ss s o rs rs o r r rs ss or r rs ro o r o s r r usu rors o ous prous r o r r Group uss r srus su s rs r sp ors o r s or pss s o oprs o rs r rs posurs rs r us us or oo purposs o s r or or spu srus 5.3 Trade and Other Payables (a) Market risk 30 June u 2018 (i) Foreign exchange risk Group os o r posur o or rs r rors 7,249 ur rors rus 58,692 (ii) Cash flow and fair value interest rate risk po s 6,093 Groups rs r rs rss ro o r orros orros ssu r rs pos o r or ps 72,034 Group o s o rs r rs os sur rors rus u s o purs pr or ro s o r u rs r rss r oor or o o ss o oso o s oors s rs r pro s ppropr prss rs r ss r or ps r p o ur os o srs o or or osro ppro pror o r o rs r sps Creditors and other accruals poso s p o r ur rs r posur oo pss r rou o ou o rus ss o p o rpor pro r oos r oso s p s ous rprs s or ous Derivative financial instruments o o rpor pro ous r usur r usu p s o Group s r o rs r sps o ru s posur o r o r rs roo ps or o r orros Employee entitlements rs r sps r ros r u o or s r o r susu s or s srs u oor s u uu s sur r u o rpor r u o rs r sps s u s prs r ros rsp o pos srs up o rpor r sur ous u o s uur s os sou us r rs Group s p o p s r s s or ouu s r ros ors rs r sps s ur r u rr s sur ous p or p

66 METLIFECARE LIMITED ANNUAL REPORT 2018 67 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018 Notes to the Financial Statements NotesNotes toto thethe Financial Financial Statements Statements Notes to the Financial Statements

5 OTHER DISCLOSURES (continued) 5 OTHER DISCLOSURES (continued) 5.5 Financial Risk Management (continued) 5.5 Financial Risk Management (continued) (c) Liquidity risk Cash flow hedges ru u rs ps su s o u rou rs r sps r s s o rosps rs r sp s u ou o o r s rr or ou poro o s r u o rs r sp s s o ors s rur pror Group Group oors ro orss o u ros or oprs o uu rsr poro o rurs o sur su s o opro s roo o ur s r u o rs r sp s ros pro oss ou uu o orro s s so os o r orro s or os o o u s p o rss o oss s s rs ps or o r s orro s u ors s o osro Groups ps orros r o op urpus s opr s s us o rp or p u Group s rs r sp rs p o oo prp ou o r us o or ppro o ous prp s pr o Groups rsur s u susrs r rou o os s rs Groups rs posur o prp or rop ous r o ss ou rsro s opsss rs r sps ro or poso o r poso r or rps ro rss ps o supprs rps ps o rss ur oupo r rs r o rs

oo us o rs r sps ous u r urs r s oos Maturity profile of financial liabilities 30 June u o sos ur ss o Groups oru usou s os r o 2018 s Less than Later than o o rs 20,000 o rs 35,000 1 year 1 year o rs r sps 55,000 30 June 2018 r u osss o r o poro o s o s r ros or r or ps 72,034 - oprs o orrspo ou ros s oso os 350 154,668 s u u o ous rss ro rsr o pro r srus 347 694 u oupo r rs oss s 1,355,108 - 1,427,839 155,362 u s s r rs o o pr po rs rs ou ru Groups pros r ppro ou rs u 30 June 2017 r or ps (b) Credit risk os ss r rs rss ro s s us r srus poss s u oupo r rs suos s s r posur ro r rs Group s o s oros o r rs Groups po rurs sur pos ro rss or r r r o oup u ror Group os o os r ur o s r p r o or pros o o s r rs us o ss s rprs u os r ouso o pro r rs o or s rsp o sss Group rs o upo r rs r rp o rs o o o u or sr pr srus rous ourprs or ss s s o r r or s o p ous rp o oupo r rs s os o rur or or or sur o suppor srus p ur o ru oupo r r s so o rs Groups s s us r pos o o or r s o pror sor uror uos o oos s o p u o r oors r r o ourpr osr Group rs rprs s r rosps o rss r r o oros o r rs rss o r rs r o rs r suss r r r rous sr ors or o o o s s r osr r rs

68 METLIFECARE LIMITED ANNUAL REPORT 2018 69 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

NotesNotes toto thethe Financial Financial Statements Statements NotesNotes toto the the Financial Financial Statements Statements

5 OTHER DISCLOSURES (continued) 5 OTHER DISCLOSURES (continued)

5.5 Financial Risk Management (continued) 5.7 Segment information (d) Capital risk management Group oprs o opr s o rr s opr so Group s s p rs rr o s r ros o o p s u o r or o rors rs opr rsus o rur ss s sos o p u orro ros su s rs or o o u ros posur o u rsour oo s o r o Group rsus s os s o r rs posurs o rs o ur o prous srs pro p ss o usors sr Groups os p r o sur Groups o ou s o rrss opr s or orr o pro rurs or srors s or or sors o op p sruur o ru os o p 5.8 Commitments (e) Fair value estimation r u o sss s us s or roo sur 30 June u or sosur purposs rr u o sss s r ssu o 2018 ppro r r us uss ors sos Capital commitments s os or or u o urr 81,732 5.6 Related Party Transactions 81,732 oo rsos r rr ou r prs 30 June u (a) Key management personnel compensation 2018 prso r us uor or sr ro Operating lease commitments o Group r opso p or p s s ou o rors r os or u s ps ro o o rur rou rors s pss opr ss r p s oos 30 June u o r 647 2018 r o r u o r rs 2,301 r rs 184 rs or sorr po s 3,809 3,132 or u o r sr p 477 o 4,286 Group ss suppor o prss rous propr p up ur o opr s rs ss r or or rrs r rs (b) Transactions and balances so uss r rs ur r u Group r rp o ro o ur ss s poro o rss rrs o orsp r r ssor r op r rso or Group o o ur ss s opr ss s ur opr ss o s r ro op ssor r r o s o oprs o o sr ss or pro o s u o ur op o o op s (c) Terms and conditions ss o propr p up r Group s sus rss rrs o orsp r ss s ss ss r ps ss o Joint venture company advances or o r u o s propr prs u o u s ps s u ro o ur op r sur o Gr ur r r rp u o os o o o ro o s s rs rs r u o s o Group rsur r os o us rs rs pp o pro o u r ro o pr u o pr u

(d) Directors' fees ur r u o rors s r p s us ou o uror G rors s r u r pss o

70 METLIFECARE LIMITED ANNUAL REPORT 2018 71 Metlifecare Limited Group Financial Statements 2018 Metlifecare Limited Group Financial Statements 2018

NotesNotes toto thethe Financial Financial Statements Statements NotesNotes to to the the Financial Financial Statements Statements

5 OTHER DISCLOSURES (continued) 5 OTHER DISCLOSURES (continued)

5.9 Contingencies 5.11 Subsidiaries of the Group and Joint Venture Investment (continued) r r o r o s s u Principles of consolidation 5.10 Subsequent Events Subsidiaries u Group s purs ro o oso or usrs r os s u sp purpos s oro op oro uus rors ppro o s pr sr ou o ss op s pos o or s rs o r rurs ro s o ror s pr p our o pr s o os rurs rou s por or ssss oro r r o urr susu s u ss po o rs r sus r o ou r uors rors rsus o susrs u oso ss ro o oro os u oro ss 5.11 Subsidiaries of the Group and Joint Venture Investment susr ops r o orpor o u Intercompany rop rsos s urs s o rsos Group ops r rs osss r so uss rso pros o Operating entities pr o ss rsrr ou pos o susrs r oss pos op Group ors Grs r r sus os os r r prous r Joint venture entities sorou s os ur o ur s r ou or us u o rss o ur s r oor r os r po r r so ros os us rr o ros Groups sr o posuso r sr r o pros or osss os or oprs o r os s r or r rsoo r us rs s o rsos Group s o ur s r o r or Grs r rrs o Groups rs o ur s rs osss r so uss r Gr Grs r oo rso pros o pr o ss rsrr r Groo r r r os r Gu s prous r so or ss so or r s r Group r p Dormant and non operating entities o r r rrp oor r ror r r r so rsur r oos susrs p or o opr s o rr s Investment in Joint Venture - Palmerston North Group s rs o ur op r rso or o ur op r rso or s orpor s o u prp o r rso or s orsp o rr

72 METLIFECARE LIMITED ANNUAL REPORT 2018 73

Independent auditor’s report Our audit approach To the shareholders of Metlifecare Limited Overview An audit is designed to obtain reasonable assurance whether the financial The group financial statements comprise: statements are free from material misstatement.  the consolidated balance sheet as at 30 June 2018; For the purpose of our audit, we used a threshold for overall Group materiality  the consolidated statement of comprehensive income for the year then ended; of $2.3 million which represents approximately 2% of operating revenue. We  the consolidated statement of movements in equity for the year then ended; applied this benchmark because, in our view, it is a key financial metric used  the consolidated cash flow statement for the year then ended; and in assessing the performance of the Group and is not as volatile as other profit or loss measures.  the notes to the financial statements, which include significant accounting policies. We agreed with the Audit and Risk Committee that we would report to them Our opinion misstatements identified during our audit above $230,000 as well as In our opinion, the group financial statements of Metlifecare Limited (the Company), including its misstatements below that amount that, in our view, warranted reporting for subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as qualitative reasons. at 30 June 2018, its financial performance and its cash flows for the year then ended in accordance We have determined that there is one key audit matter: with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and  valuation of investment properties and care homes. International Financial Reporting Standards (IFRS). Materiality Basis for opinion The scope of our audit was influenced by our application of materiality. We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are Based on our professional judgement, we determined certain quantitative thresholds for materiality, further described in the Auditor’s responsibilities for the audit of the group financial statements including the overall Group materiality for the group financial statements as a whole as set out above. section of our report. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for individually and in aggregate on the group financial statements as a whole. our opinion. Audit scope We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) We designed our audit by assessing the risks of material misstatement in the group financial Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance statements and our application of materiality. As in all of our audits, we also addressed the risk of Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for management override of internal controls including among other matters, consideration of whether Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in there was evidence of bias that represented a risk of material misstatement due to fraud. accordance with these requirements. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an Our firm carries out other services for the Group in the areas of tax compliance, strategic procurement opinion on the group financial statements as a whole, taking into account the structure of the Group, advice and executive remuneration benchmarking advice. The provision of these other services has not the accounting processes and controls, and the industry in which the Group operates. impaired our independence as auditor of the Group. Key audit matter Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the group financial statements of the current year. These matters were addressed in the context of our audit of the group financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there is one key audit matter: valuation of investment properties and care homes.

PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand 74 T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz 75

38 PwC 39 Key audit matter How our audit addressed the key audit matter Information other than the group financial statements and auditor’s report The Directors are responsible for the annual report. Our opinion on the group financial statements Valuation of investment properties and care Our audit procedures included the following: does not cover the other information included in the annual report and we do not, and will not express homes External valuations any form of assurance conclusion on the other information. At the time of our audit, there was no The Group's investment properties (refer to note We received and discussed the external valuation report with other information available to us. 3.1 of the group financial statements) and care the Valuer. We confirmed that the valuation approach for In connection with our audit of the group financial statements, our responsibility is to read the other homes (refer to note 3.3 of the group financial each village was in accordance with the accounting standards statements) comprise a portfolio of retirement information and, in doing so, consider whether the other information is materially inconsistent with and suitable for use in determining the carrying value of the group financial statements or our knowledge obtained in the audit, or otherwise appears to be villages in the North Island of New Zealand and investment properties and care homes at 30 June 2018. We materially misstated. If, based on the work we have performed on the other information that we at $3.2 billion represent the majority of the also assessed the Valuer's qualifications, expertise and their obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of Group's assets as at 30 June 2018. objectivity. this other information, we are required to report that fact. Investment properties and care homes are From our discussions with management and the Valuer, and carried at fair value. Investment properties from our review of the valuation report, assumptions Responsibilities of the Directors for the group financial statements under development that are not sufficiently (including the discount rate, property price growth rate, The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of progressed to enable fair value to be reliably stabilised occupancy periods, care home proforma earnings the group financial statements in accordance with NZ IFRS and IFRS, and for such internal control as determined are carried at cost spent on the and capitalisation rates) were made to reflect each village's the Directors determine is necessary to enable the preparation of group financial statements that are development to date, less any impairment. individual characteristics and its overall quality, geographic free from material misstatement, whether due to fraud or error. The valuation of the Group's retirement village location and desirability as a whole. In preparing the group financial statements, the Directors are responsible for assessing the Group’s portfolio is inherently subjective due to inputs On a sample basis, we agreed village specific information ability to continue as a going concern, disclosing, as applicable, matters related to going concern and into the valuation that are unobservable through supplied to the Valuer by the Group against underlying using the going concern basis of accounting unless the Directors either intend to liquidate the Group available market information and also considers records held by the Group. or to cease operations, or have no realistic alternative but to do so. the individual characteristics of each village, its Assumptions resident profile and the expected future cash Auditor’s responsibilities for the audit of the group financial statements Our work over assumptions referenced above focused on flows for that particular village. Our objectives are to obtain reasonable assurance about whether the group financial statements, as a villages where those assumptions used and/or year-on-year whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s The valuations were carried out by an fair value movement suggested a possible outlier versus the report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a independent third party valuer, CBRE Limited rest of the portfolio and the wider retirement village sector. (the Valuer). guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect a material We have assessed the estimated cost of remediation works misstatement when it exists. Misstatements can arise from fraud or error and are considered material The valuation processes and related based on the reasonableness of calculations and assumptions if, individually or in the aggregate, they could reasonably be expected to influence the economic assumptions for investment properties and care used and corroborating the relevant information with third decisions of users taken on the basis of these group financial statements. homes are described in notes 3.1 and 3.3 of the party assessments commissioned by management. We also group financial statements, respectively. assessed the reasonableness of management estimates of A further description of our responsibilities for the audit of the group financial statements is located at Investment properties are recorded in the group costs to complete developments that are practically complete the External Reporting Board’s website at: financial statements at the value determined by and valued by the Valuer at 30 June 2018. https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/ the Valuer, adjusted for refundable occupation We engaged our own in-house valuation expert to challenge This description forms part of our auditor’s report. right agreements, residents' share of capital the work performed by the Valuer and assess the gains, deferred management fees, management reasonableness of the assumptions used based on his Who we report to fee receivables and occupation right agreement knowledge gained from reviewing valuations of similar This report is made solely to the Company’s shareholders, as a body. Our audit work has been receivables, which are recognised separately on properties, known transactions and market data. undertaken so that we might state those matters which we are required to state to them in an auditor’s the balance sheet but reflected in CBRE's cash Overall valuation estimates report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume flow model valuation. Because of the subjectivity involved in determining valuations responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our The existence of significant estimation for individual properties and the existence of alternative audit work, for this report or for the opinions we have formed. uncertainty, coupled with the fact that only a assumptions and valuation methods, we determined a small percentage difference in assumptions on tolerable allowance when considering the valuation of an individual properties, when aggregated, could individual investment property and care home's value to The engagement partner on the audit resulting in this independent auditor’s report is Richard Day. For result in material differences, is why we have evaluate the valuations used by management. and on behalf of: given specific audit focus and attention to this We also considered whether or not there was bias in area. determining individual valuations. Our audit procedures did not identify any issues that would Auckland indicate that the valuations adopted by the Group were Chartered Accountants 27 August 2018 outside an acceptable range.

76 METLIFECARE LIMITED ANNUAL REPORT 2018 PwC 7741 PwC 40 View from new Manukau Building, Pinesong Village

STATUTORY INFORMATION

78 METLIFECARE LIMITED ANNUAL REPORT 2018 79 FRAMEWORK CORPORATE Metlifecare shares are listed on the NZX Main Board (NZX) and on the Australian Securities Exchange (ASX). Metlifecare has been listed on the NZX Main Board since July 1994, and the ASX since 2013, and has, to the best of its senior managers’ knowledge and belief, at all GOVERNANCE times complied with its continuous disclosure obligations under the NZX Listing Rules, the ASX Listing Rules and the Financial Markets Conduct Act 2013 (as applicable). Metlifecare is STATEMENT an ASX Foreign Exempt company. Metlifecare’s website www.metlifecare.co.nz/investor-centre contains copies of the following corporate governance policies, practices and charters, adopted or followed by the Company and referred to in this Corporate Governance Statement. The policies and Approved by the Board of Metlifecare Limited (referred to as Metlifecare or the charters have been reviewed, and updated where appropriate, in the last twelve months: Company) on 5 September 2018. All references to year are to the financial year ended 30 June 2018. Policies & Statement OUR APPROACH TO CORPORATE GOVERNANCE • Corporate Governance Statement • Code of Ethics The Board believes that strong principles of corporate governance protect and enhance the assets of the Company for the benefit of all shareholders. • Shareholder Communications Policy • Residents’ Policy The Board is committed to ensuring that strong principles of corporate • Risk Management Policy governance are adopted and implemented by the Company in accordance • Trading Policy with best practice and while observing applicable laws and the NZX Corporate • Conflicts of Interest Policy Governance Code 2017 (NZX Code). • Diversity Policy • Market Disclosure Policy • Dividend Policy • External Auditor Independence Policy • Whistleblowing Policy

Charters • Board Charter • Audit & Risk Committee Charter • People & Remuneration Committee Charter • Nominations & Corporate Governance Committee Charter • Development Committee Charter • Resident Experience & Care Committee Charter

Constitution • Metlifecare Constitution

The following section of this Corporate Governance Statement sets out each principle of the NZX Code with an explanation of how Metlifecare complies with each principle. Metlifecare considers that, as at 30 June 2018, it was in full compliance with the NZX Code.

80 METLIFECARE LIMITED ANNUAL REPORT 2018 81 Chief Executive Officer, to request relevant information • approving senior executive appointments and its annual work programme set out in the Board Charter. PRINCIPLE 1 or explanations remuneration (via Chief Executive Officer’s Attendance at Board and committee meetings is set out in recommendations) the table on page 86. Code of Ethical Behaviour • have access to internal and external auditors without management present, to seek explanations or • overseeing succession and development plans for the Skills of the Board Directors should set high standards of ethical behaviour, additional information Chief Executive Officer and senior executive team model this behaviour and hold management accountable • with prior notification to the Chair, seek professional • establishing and reviewing employment and When considering the appointment of a new director, for these standards being followed throughout the advice (at the Company’s expense) to assist the remuneration practices to ensure that talented and the Company’s Nominations & Corporate Governance organisation. director in carrying out his or her duties motivated staff are recruited and retained across the Committee considers the skills of the existing Board and any gaps. The Board undertook this process when The Company is committed to maintaining high ethical Metlifecare Group The Conflicts of Interest Policy details the process to appointing Mark Binns and Rod Snodgrass in the year to standards through ongoing attention to values and be adopted in relation to potential conflicts of interest. • approving and monitoring financial reporting and 30 June 2018. The Board currently comprises directors behaviour, particularly in respect of its responsibilities to Directors are required to disclose any actual or potential capital and other management systems with a range of backgrounds and skills, including those those who reside in its retirement villages. conflict of interest to the Board. A list of any such • ensuring that adequate risk management procedures with particular financial, aged care and property sector The Board has adopted a formal Code of Ethics, disclosures is included in the Board papers/minutes for exist to identify and manage business risks, protect expertise as set out in the Director Profiles on pages 32 Whistleblowing Policy, Board Charter, Conflicts of Interest each Board meeting. Metlifecare’s assets and to minimise the possibility of and 33. Policy and Trading Policy, all of which are available on the the Company operating beyond legal or regulatory Company’s website. The Board policies are supported Trading Policy requirements or beyond acceptable risk parameters Nominations & Corporate Governance Committee by other Company policies and standards that address The Trading Policy addresses the Company’s as determined by the Board issues such as privacy, delegated authority mandates, gifts The Nominations & Corporate Governance Committee’s requirements for all employees and representatives and other similar matters. • leading health and safety in the organisation including responsibilities include identifying and recommending of the Company in relation to trading Metlifecare’s governance, delivery, monitoring and review of to the Board individuals for appointment (and removal) shares. The policy applies to directors and employees as members of the Board. In doing so, the Committee Code of Ethics Metlifecare’s Health and Safety policies and their and incorporates all trading restraints. Directors and implementation takes into account Board policies and such necessary The Code of Ethics describes the practices that all employees are restricted from trading in Company shares and desirable competencies as it deems appropriate, • governing and overseeing the well-being of employees are expected to follow to help maintain during “black-out” periods from the balance date and including experience, qualifications, current Board Metlifecare’s residents and staff confidence in the Company’s integrity. It governs the the half-year balance date and, in any event, if they are composition, independence, judgment and the ability to conduct of the Company and includes details on the in possession of non-publicly available price sensitive • governing and overseeing Metlifecare’s provision of work with other directors. responsibility of employees to report concerns. All information. care services to residents and of clinical risk The Nominations & Corporate Governance Committee directors, executives, managers, staff and contractors • reporting to shareholders has a formal and transparent procedure for selecting new acting on behalf of the Company are required to maintain directors for Board appointments, including selection high standards of ethical behaviour in all decision making • setting Metlifecare’s capital structure and capital criteria that aims to meet the Board’s needs in respect of and in their conduct. A copy of the Code of Ethics and PRINCIPLE 2 management policies including dividend policy composition and structure. The Board has a board skills training on this document is provided, particularly to new • ensuring that the Metlifecare Group has appropriate matrix, which sets out the mix of skills and diversity that staff on induction. Board Composition & corporate governance structures in place including the Board currently has and is looking to achieve in its The Company’s Whistleblowing Policy provides a Performance standards of ethical behaviour future membership. The current directors provide the mechanism by which serious wrongdoings can be Board with a well-balanced, capable and effective mix of • appointing directors to the Board, as recommended reported and investigated. skills. To ensure an effective Board, there should be a balance by the Nominations & Corporate Governance Pursuant to the Board Charter, the directors are expected of independence, skills, knowledge, experience and Committee, and filling vacancies on the Board to comply with their legal duties and obligations when perspectives. between annual meetings of shareholders Independent Directors discharging their responsibilities as directors, including: • ensuring that the Board is and remains appropriately The Board currently has seven non-executive directors, six Board Charter • acting in good faith and in the best interests of the skilled to meet the changing needs of Metlifecare of whom are independent directors per the definition set Company The Board has adopted a formal Board Charter that out in Section 1 of the NZX Listing Rules. The independent The Board Charter is available on the Company’s website. details the Board’s roles and responsibilities, as set out directors of the Company are Kim Ellis (Chair), Chris • acting with care and diligence and for proper below: Aiken, Mark Binns, Alistair Ryan, Rod Snodgrass and purposes Board Operations Noeline Whitehead. As at the date of this Annual Report • supervising and directing the management of the • avoiding conflicts of interest or managing them the directors of the Board are: business and affairs of the Metlifecare Group The Board, elected by the shareholders, is responsible for appropriately, including filing declarations of interest supervising and directing the management of the business • Kim Ellis with the Company Secretary and keeping them • setting the objectives and strategic direction of the of the Company, including the performance of the Chief • Chris Aiken current Metlifecare Group and monitoring management’s Executive Officer, so that it acts in the best interests of its performance against those benchmarks within that • Mark Binns • refraining from making improper use of information shareholders. It is responsible for guiding the corporate framework • Alistair Ryan gained as a director and from taking improper strategy of the Company. • Rod Snodgrass advantage of their appointment as a director • ensuring there are adequate resources available The Board schedules a minimum of six meetings each to meet Metlifecare Group’s objectives and • Carolyn Steele Directors are encouraged to undertake appropriate year. An annual work programme and a standing agenda, responsibilities training in order to ensure they best perform their duties together with written reports and presentations from the • Noeline Whitehead Chief Executive Officer and senior management, address as directors of the Company. As set out in the Board • appointing and removing the Chief Executive The Board does not have a tenure policy, however the and update directors on strategy and operational matters. Charter, directors may: Officer, determining conditions of employment and current directors have served periods of time between monitoring performance against established objectives • have access to the senior management team, via the The Board generally addresses the matters contained in one and six years (approximately) which is considered

82 METLIFECARE LIMITED ANNUAL REPORT 2018 83 acceptable. Director profiles and committee memberships implemented across the business and recognises that • People & Remuneration Committee Charter (name meetings and provide appropriate information and are set out on pages 32 and 33. diversity across a wide range of areas is important. The changed from Remuneration Committee on 24 April explanations as required. measurement of diversity objectives will be an area of The roles of Chair and Chief Executive Officer are not held 2018) increased focus in future years. by the same person. Glen Sowry is currently the Chief • Nominations & Corporate Governance Committee People & Remuneration Committee Executive Officer of the Company, but is not a member of The gender breakdown of the Board and employees is as Charter The Committee’s responsibilities include: the Board. follows: • Development Committee Charter • reviewing and recommending to the Board the level Kim Ellis is the independent Chair of the Board and as at 30 June 2018 as at 30 June 2017 and type of remuneration for the Chief Executive was appointed Chair on 1 September 2014. Mr Ellis has • Resident Experience & Care Committee Charter (name Male Female Male Female Officer and senior executives extensive governance experience in New Zealand and changed from Care Committee on 24 April 2018) Board 5 2 3 2 meets the requirements of the Board Chair position for The Charters are available on the Company’s website. • reviewing and recommending to the shareholders the a publicly listed company of Metlifecare’s scale and level and type of remuneration for directors Officers* 5 4 5 4 Proceedings of all committee meetings are reported to complexity. the Board and minutes of all committee meetings are The current members of the People & Remuneration Employees 262 846 255 788 available to directors. Directors are welcome to, and Committee are Mark Binns (Chair), Kim Ellis and Alistair Director Development *Persons who report to the Board or CEO regularly do, attend committee meetings for which they Ryan. All members of the Committee are independent. are not a member. New directors are provided with a letter of appointment Performance of the Board and Senior Management The People & Remuneration Committee meets at least setting out the Board’s expectations of them, copies of four times a year and invites members of management to Audit & Risk Committee key Company documents, an introduction to the activities The Board, led by the Chair, reviews its performance attend meetings and provide appropriate information and of the group and the opportunity to meet with and ask and the performance of individual directors and its The Audit & Risk Committee, together with the external explanations as required. questions of management. An extensive programme Committees. The Board also engages an external auditor, has a pivotal role in ensuring the integrity of provider, Propero, to undertake a performance evaluation of village visits is now undertaken by new directors. financial reporting and other information provided in Nominations & Corporate Governance Committee Directors are encouraged to undertake continuing approximately every two years to assess director, Board public disclosure documents. education and development of further skills to remain and committee performance. The most recent review was The Nominations & Corporate Governance Committee’s The primary purpose of the Audit & Risk Committee is to current on how to best perform their duties as directors conducted from May 2018 and the resulting report has responsibilities are set out above under Principle 2. assist the Board in fulfilling its responsibilities relating to of an issuer. Training undertaken in the last twelve months been issued recently. The current members of the Nominations & Corporate accounting and reporting, external and internal audit, tax has included attendance at various Institute of Directors Governance Committee are all the members of the Board, The Company has a People & Remuneration Committee planning and compliance, treasury and liquidity, and risk courses. A separate annual budget has been set aside for a majority of whom (six) are independent. that makes recommendations to the Board regarding management. director education. remuneration of the Chief Executive Officer and members Development Committee of the Executive Team, as described below under the The Committee carries out this purpose by overseeing, Diversity heading Principle 3. reviewing and providing advice to the Board on matters The Development Committee is responsible for: including: The Board has a Diversity Policy which aims to ensure The People & Remuneration Committee establishes an • providing advice to the Board on proposals that the Company has a focus on diversity throughout the annual performance agreement with the Chief Executive • financial information prepared by management for relating to major acquisitions and construction organisation. This recognises that a diversified work force Officer and conducts an annual review of the Chief publication to shareholders, regulators and the general developments, remediation, refurbishment and (including at Board and management levels) contributes to Executive Officer’s performance. Such annual review takes public long-term maintenance works, design of new-build improved business performance, enables innovation and the form of an interview between the Chief Executive • policies and procedures adopted to ensure villas, apartments and care homes; and safety of the is fair to all. Officer and the Chair at which the performance of the compliance with legislative and regulatory products and services that are utilised by all relevant The Diversity Policy establishes the following measurable Chief Executive Officer is reviewed and assessed. requirements, codes of practice, NZX and ASX listing persons including employees, contractors, residents and others objectives for achieving gender and other diversity: The Chief Executive Officer reviews the performance of rules and governance requirements as they relate to financial and non-financial disclosure • facilitating and promoting equal employment Executive Team members annually by way of one-on-one • monitoring and reporting to the Board on information opportunities at all levels including assessment interviews and the People & Remuneration Committee • internal and external audit functions provided by management on health and safety in the of diversity of skills, experience, values, culture considers the Chief Executive Officer’s evaluations. development environment to ensure that Metlifecare • relationship and interaction with institutional investors and gender wherever possible from the available has, and implements, processes for complying with its and other shareholders candidates duties and obligations under the Health and Safety at • internal control and risk management policies and Work Act 2015 • facilitating and promoting a merit-based environment PRINCIPLE 3 processes in which employees have the opportunity to develop The Development Committee’s responsibilities include and perform to their full potential on an ongoing basis Board Committees The Audit & Risk Committee has adopted a formal Audit reviewing (and recommending to the Board): & Risk Committee Charter, which is available on the in alignment with the Company’s commitment to the • development plans and business cases prepared by ongoing training and wellbeing of its employees Company’s website. The Board should use committees where this will management The Audit & Risk Committee members are Alistair Ryan, • rewarding excellence and ensuring employees are enhance its effectiveness in key areas, while still • development feasibilities and programme(s) treated fairly, evaluated objectively and promoted on retaining Board responsibility. Carolyn Steele and Kim Ellis. All members are the basis of their performance non-executive directors, a majority (two) are independent, • development, land bank and design updates prepared at least one member is a qualified accountant and the monthly by management to assess whether the The Diversity Policy also sets out requirements for the Committee Charters Chair of the Audit & Risk Committee, Alistair Ryan, is an development outcomes targets and feasibilities Board to assess its progress in achieving the objectives The Board operates five standing committees which independent director who is not the Chair of the Board. are being achieved and are consistent with those and the objectives themselves. The Diversity Policy operate under the following Charters approved by the approved by the Board is published on the Company’s website. The Board Board: The Audit & Risk Committee meets at least four times considers that the Diversity Policy has been successfully a year and invites members of management to attend • any other development-related matters that may • Audit & Risk Committee Charter from time to time be raised with the Committee by a

84 METLIFECARE LIMITED ANNUAL REPORT 2018 85 member of the Board or the Chief Executive Officer • providing oversight of Metlifecare’s quality of • fluctuations in the costs of building and maintaining customer and care service delivery PRINCIPLE 4 the Company’s villages and care facilities • business cases for land acquisitions proposed by management, including price, terms and structure • assisting the Board to identify and manage key risks in Reporting and Disclosure • changing regulations in the industry relation to the provision of care services to residents • business cases for land divestments proposed by The Company manages these risks via the risk and the safe operation of the care and village The Board should demand integrity in financial and non- management, including price, terms and structure management framework set out below under Principle environments financial reporting, and in the timeliness and balance of 6 – Risk Management. • any other land acquisition or divestment related • in conjunction with the Development Committee, corporate disclosures. matters that may from time to time be raised with the Sustainability of the Company’s buildings is considered, considering proposals for new care facilities or Committee by a member of the Board or the Chief particularly for its new developments, by the Company’s upgrades of existing care facilities in relation to Market Disclosure Policy Executive Officer Development Committee and, ultimately, the Board. The appropriate fit with the Committee’s philosophies and All information received by the Company is considered Company carefully considers the selection of building financial viability Resident Experience & Care Committee in the context of the Company’s obligations as a listed materials and, where possible, considers sustainably- • requesting, receiving and reviewing the Company’s company with regard to continuous disclosure of material sourced options. Efforts to reduce the Company’s impact Through the execution of its responsibilities the clinical governance system, clinical risk and quality information relating to the market. The Company’s on the environment include measures to improve energy Committee provides governance and oversight of the plan annually processes are designed to ensure financial and other efficiency within the villages and an increasing use of Company’s provision of services to residents. The information is reliable and of high quality to allow renewable energy sources such as solar. Newer village Resident Experience & Care Committee’s responsibilities • reviewing serious complaints, reportable events and compliance with the Company’s continuous disclosure developments include features such as increased levels include: significant adverse events related to service delivery obligations. The Board examines and confirms by specific of insulation, double glazing and water efficient fittings. • supporting innovation and assisting management and resolution whether there is material information that is Greenwich Gardens and The Orchards, the Company’s Takeovers Board to set strategy in relation to enhancement of required to be disclosed to the market at each Board two newest villages, were the first retirement villages in the resident customer experience and care services The Board has established an internal Takeover Response meeting. New Zealand to have homes that are 6 Homestar™ Built models, environments and systems Manual that establishes protocols that set out the In addition to the Board’s final sign-off process, the certified. The Company is a member of the New Zealand procedure to be followed if there is a takeover offer for Green Building Council (NZGBC). The Homestar™ • setting targets and key performance indicators for Board receives a representation from the Chief Executive Metlifecare, and which include the option of establishing accreditation system was established by the NZGBC with improving customer insights, enhancement of the Officer, the Chief Financial Officer and the General an independent Board sub-committee comprised of non- the certification process administered by independent resident customer experience and the Company’s care Counsel/Company Secretary confirming the adequacy interested directors. The manual is reviewed and updated assessors. The Company is introducing electric cars into service delivery performance of the interim and full year financial statements and their annually/more often as required. compliance with the Financial Markets Conduct Act 2013. certain villages for use by residents.

Directors are responsible on behalf of the Company Metlifecare strives to be a responsible corporate citizen, for the preparation and fair presentation of the financial respecting the rights of all stakeholders including Attendance at Board and Committee Meetings statements. The Company has established written policies residents, staff, suppliers and the wider communities in in the Year Ended 30 June 2018 to ensure compliance with the NZX Main Board Listing which our villages are located. More recently, in July Rules and the ASX Listing Rules disclosure requirements 2018, the Company identified its material Environmental, Social and Governance “ESG” factors and formed a BOARD (as applicable) and to ensure accountability at a senior COMMITTEE ATTENDANCE materiality matrix. Further information regarding the ATTENDANCE executive level for that compliance. Metlifecare’s Market Disclosure Policy is available on the Company’s website. Company’s approach to “ESG” is set out on page 30. Total number of meetings held 6 2 7 6 1 11 5 Key Governance Documents Director People & Resident Remuneration Nominations Experience Board Audit & The Company’s Board and Committee Charters, all Board (formerly & Corporate Development & Care PRINCIPLE 5 Commencement of Other Risk Remuneration Policies and Charters detailed above, media releases, Name Governance (formerly Care original appointment Committee until Committee until annual and interim reports and other investor-focused April 2018) April 2018) Remuneration material are available on the Company’s website. K Ellis 25 August 2014 6 2 7 6 1 11 N/A The remuneration of directors and executives should be Non-Financial Disclosure transparent, fair and reasonable. C Aiken 23 August 2012 6 2 N/A N/A - 10 N/A The Company has similar exposure to economic, Metlifecare is committed to providing fair and M Binns 1 August 2017 6 2 N/A 5* N/A 7* N/A environmental and other risks as for other comparable reasonable remuneration for directors and executives businesses in New Zealand. Risks that could affect results and acknowledges the need to provide competitive A Ryan 23 August 2012 6 2 7 3* 1 1* N/A and performance include: remuneration to attract high calibre directors and • increased competition in the aged care market executives to serve the Company. R Snodgrass 1 August 2017 6 2 N/A N/A N/A 9* 5 • impacts arising from a wide range of indirect Director Remuneration C Steele 13 December 2013 6 2 7 3* - N/A 5 economic impacts on a broad range of stakeholders (for example contractors, employees, communities, Director remuneration is paid in the form of directors’ fees. The total monetary sum of fees approved for N Whitehead 19 June 2013 6 2 N/A N/A 1 11 5 customers and shareholders) and the New Zealand economy directors is currently $723,000 (plus GST (if any)) as resolved at the Company’s Annual Shareholders’ Meeting *These directors were only Committee members for part of the year to 30 June 2018. They did not miss any Committee meetings whilst they were members of their • industrial relations and health and safety issues respective committees. on 24 October 2017. A breakdown of the Chair’s and The Committee Attendance record above indicates attendance of Committee members only. Directors (including the Chair) are welcome to, and often do, attend Committee meetings for which they are not a member.

86 METLIFECARE LIMITED ANNUAL REPORT 2018 87 directors’ fees are set out on page 93. Directors do with the interests of shareholders and provide a continuing included and highlighted in monthly Board reports and • challenge the Executive’s and the Board’s assessment not currently receive any remuneration in the form incentive to key employees over the longer-term horizon. It are generally discussed at Board Meetings. of risk and the controls in place to manage the of Metlifecare shares. Metlifecare distinguishes the is intended that a new plan be adopted in 2019. identified risks An external health and safety review was concluded in structure of non-executive directors’ remuneration from 2017 which provided continuous improvements in this • evaluate and test the effectiveness of controls in place that of any executive directors and senior executives. area, particularly in line with the Health and Safety at to manage the identified risks The Company has a Remuneration Policy that includes Work Act 2015. provisions on director remuneration. The People & PRINCIPLE 6 Remuneration Committee is responsible for reviewing Key risks include serious incidents on construction sites, and recommending to shareholders, the level and type Risk Management traffic management and maintenance of a high standard of remuneration for directors. The director fee pool is of health and safety culture at the Company’s villages. PRINCIPLE 8 reviewed by the People & Remuneration Committee to Directors should have a sound understanding of the The Company has AS/NZS 4801 accreditation. Shareholder Rights and Relations ensure it is appropriate. When the Board considers a material risks faced by the issuer and how to manage change to the director fee pool is appropriate, the change them. The Board should regularly verify that appropriate The Board should respect the rights of shareholders and is recommended to shareholders in a transparent manner processes are in place to identify and manage potential foster constructive relationships with shareholders that in the Company’s Notice of Meeting. and material risks. PRINCIPLE 7 encourage them to engage with the issuer. The total monetary sum of fees approved for directors Risk Management Framework is allocated as decided by the Board, by way of fees Auditors Investor Information payable to all directors. The current allocation is set out The Board is ultimately responsible for the Company’s risk The Board fosters constructive relationships with on page 93. management and internal control. The Board monitors The Board should ensure the quality and independence shareholders and encourages them to engage with the policies and processes that identify significant business of the external audit process. Company. CEO and Executive Remuneration risks and implements procedures to monitor these risks. External Auditor The Company provides information about itself and its Chief Executive Officer remuneration is recommended by The Board also uses the following methods to monitor governance to shareholders on the Company’s website. the People & Remuneration Committee with reference to risks: outsourcing various functions to external providers, The Company, under its Audit & Risk Committee Charter, All material information released to the NZX and ASX, market surveys, job size and individual responsibilities, Audit & Risk Committee reviews and recommendations, has established policies relating to the appointment including reports to shareholders, may be found on the skills, knowledge, experience, competencies and financial and compliance reporting procedures and and independence of the external auditor. The Board, website. accountabilities. Executive remuneration is recommended ensuring that the Company has insurance policies in place via the Audit & Risk Committee’s recommendations, is by the Chief Executive Officer to the People & with a reputable insurer. responsible for ensuring the independence of the external The Company’s Shareholder Communications Policy Remuneration Committee and is structured to include auditor, for obtaining a confirmation of this from the sets out the manner of the Company’s communications The Audit & Risk Committee regularly reviews the a base salary and an ‘at risk’ Short Term Incentive (STI) external auditor and for monitoring the five-yearly rotation with shareholders. The aim of the communication Company’s risk management issues, policies and component paid upon achievement of Company and of the lead audit partner. strategy is to enable shareholders to engage with the procedures, including the Company’s Risk Management individual targets agreed from the commencement of Company in an informed manner and to be able to make Policy through which it manages its exposure to The external auditor does not provide any other each financial year. assessments of the Company’s prospects and value. The economic, environmental and other risks. The services unless specifically approved by the Chief Market Disclosure Policy sets out the procedures that Payment of the STI is linked to specific strategic goals Committee’s responsibilities are contained in the Audit & Executive Officer/Chief Financial Officer, the Audit & Risk are followed to ensure disclosure is evenly balanced and of the Company. There is also a gateway goal linked to Risk Committee’s Charter. Both of these documents are Committee, or the Board in accordance with the Auditor that all parties in the investment community have similar achievement of financial targets. The STI scheme has published on the Company’s website. Details of the Audit Independence Policy. access to information. recently been reviewed and re-written. The measures & Risk Committee are set out above under the heading The fee paid to the auditor in 2018 for audit services was now more closely align with rewarding adherence to “Audit & Risk Committee”. The Company’s Chair is responsible for ensuring that $477,000. Non-audit fees were $98,000. The provision company values and other more subjective measures as shareholders’ meetings are conducted efficiently and Management provides monthly reports to the Board that of non-audit services comprised: well as fewer, more meaningful, strategy-aligned goals. shareholders have adequate opportunity to air their views include summaries of specific high-level risk management · tax compliance services – $16,000 and to obtain answers to their queries. Chief Executive Officer remuneration is reviewed annually issues. Management is required to immediately report and is disclosed separately on page 96. urgent risk matters to both the Chair of the Board and · advisory services relating to executive remuneration Each shareholder in the Company has one vote per share benchmarking and strategic procurement advice – owned. NZX’s Listing Rules set out when shareholders Executive remuneration is reviewed annually and the the Chief Executive Officer. Through the Audit & Risk $82,000 have the right to vote on major decisions. Shareholders levels of remuneration are generally disclosed on Committee and the Company’s external and internal have the option of receiving their communications page 96. audits, the Company continually seeks ways to improve The Company’s external auditor for the 2018 Financial electronically, including by email or through the the effectiveness of its risk management and internal Statements, PricewaterhouseCoopers, will be available control processes. Company’s investor centre. The Company’s website Equity-Based Remuneration to answer questions on the audit and the auditor’s also contains a section for electronic shareholder The Company reviews its risk management framework independence at the Company’s Annual Shareholders’ The Company currently has a Long Term Incentive Plan communications. annually. Risk-reporting software is used to capture and Meeting on 18 October 2018. (LTIP). The final grant under the existing LTIP will take place report on risks and augment other risk management The Company issues its Notices of Meeting at least in 2018 and will have a three-year test period. Shares processes. Internal Audit Function 28 days prior to the Company’s annual meeting(s) of for this grant vest if the Total Shareholder Return (TSR) shareholders. is greater than or equal to the average of (a) the fiftieth The Audit & Risk Committee oversees an internal audit percentile of NZX Top 50 companies and (b) the fiftieth Health and Safety plan that is intended to: percentile of other NZX listed retirement village operators The Company takes its responsibility for the health and • support the development and maintenance of (provided that a positive absolute (per year) TSR hurdle safety of residents and staff seriously. The Board has governance and risk management processes is also met; this hurdle was previously 8% per year). The over-arching responsibility for providing oversight in LTIP is designed to align the interests of key employees this area. Key health and safety risks and outcomes are

88 METLIFECARE LIMITED ANNUAL REPORT 2018 89 INTERESTS Director Entity Nature of Interest Dr N.B. Whitehead * The University of Auckland Officer REGISTER * Bethesda Care Limited Officer * Simple Solutions Consultancy Limited Director/Shareholder (a) General Disclosures + PASS Consultants Director/Officer The following are particulars of general disclosures of interest by directors of Metlifecare Limited in the year to 30 June # M.J. Binns Auckland International Airport Limited Director 2018, pursuant to section 140(2) of the Companies Act 1993. Where applicable, the disclosure also includes directorships Auckland War Memorial Museum Trustee of subsidiaries of the relevant companies. Crown Infrastructure Partners Limited Director

Director Entity Nature of Interest * Meridian Energy Limited Officer (CEO)

K.R. Ellis Port of Tauranga Limited Director * Powershop New Zealand Limited Director

FSF Management Company Limited Director * Meridian Energy International Limited Director

Freightways Limited Director * Meridian Limited Director

Ballance Agri-Nutrients Limited Director * Three River Holdings No. 1 Limited Director

New Zealand Social Infrastructure Fund Limited Director * Three River Holdings No. 2 Limited Director

+ Sleepyhead Group Limited Director * Meridian Energy Captive Insurance Limited Director

C.G. Aiken Murray Aynsley Properties Limited Director * Dam Safety Intelligence Limited Director

Alumnus Properties Limited Shareholder * Ingenia Communities Limited Shareholder

HLC Officer # R.J. Snodgrass The Exponential Agency Limited Director/Shareholder

Cameron Trust Trustee Jucy Group Limited (NZ) Director

Hurstmere Property Trust Trustee SMX Limited (NZ) Director

+ Catalina Advisory Limited Director/Shareholder Genoapay Limited Director/Shareholder

* Sequoia Advisory Limited Director/Shareholder Springboard Trust Trustee

A.B. Ryan Barramundi Ltd Director Vector Officer

Christchurch Casinos Limited Director Notes: * Interest ceased during the year. Kingfish Limited Director + New. # Appointed to Board 1 August 2017, all interests new in the year to 30 June 2018. Marlin Global Limited Director * New Zealand Racing Board Board Member (b) Specific Disclosures Evolve Education Group Limited Director Chris Aiken identified that, in his capacity of the Chief Executive Officer of HLC, he has had other business dealings with FMA’s Audit Oversight Committee Member one of the vendors of the Beachlands property acquisition. As previously advised, Dr. Noeline Whitehead’s daughter, Tanya Bish is a member of the Executive Team. + Kiwibank Limited Director

* Lewis Road Creamery Limited Director

C.M. Steele Steele Family Trust Trustee (c) Indemnity and Insurance

Halberg Disability Sport Foundation Director The Company has effected insurance and given indemnities to its directors, including directors of subsidiary companies, in accordance with the Companies Act 1993. New Zealand Football Foundation Trustee

Green Cross Health Limited Director (d) Use of Company Information WEL Networks Limited Director During the year the Board did not receive any notices from directors of the Company requesting use of Company + Ultrafast Fibre Limited Director information. No subsidiary Board received any notice from its directors requesting use of the subsidiary’s information.

90 METLIFECARE LIMITED ANNUAL REPORT 2018 91 (e) Directors’ Share Dealings and Relevant Interests During the year to 30 June 2018 three directors, Rod Snodgrass, Alistair Ryan and Noeline Whitehead, disclosed to the Board, under section 148 of the Companies Act 1993 and sections 297(2) and 298(2) of the Financial Markets Conduct Act DIRECTOR 2013, particulars of acquisitions or dispositions of relevant interests in ordinary shares in the Company.

• On 1 March 2018, Rod Snodgrass purchased 5,000 shares at $5.99 per share. INFORMATION

• Alistair Ryan made the following share purchases: Company Directors • on 28 March 2018, 390 shares at $5.91 per share; and The Company’s directors are set out in the directory on page 100. Mark Binns and Rod Snodgrass were appointed • on 29 March 2018, 1,610 shares at $5.93 per share, as independent directors from 1 August 2017, confirmed through formal election by shareholders at the Annual a total of 2,000 shares. Shareholders’ Meeting on 24 October 2017.

• On 1 June 2018 Noeline Whitehead purchased: Remuneration and other benefits received by directors during the year to 30 June 2018:

• 2,286 shares at $5.95 per share; and Director Director Fees $ • 1,714 shares at $6.02 per share, K.R. Ellis 165,000 a total of 4,000 shares. A.B. Ryan 96,250

Five directors (in italics below) had relevant interests in the ordinary shares in the Company as at 30 June 2018. C.M. Steele 96,250

Directors’ Interests Number of Shares C.G. Aiken 95,000

Ellis Trust (K.R. Ellis and MK Trustee 2015 Limited as Trustees) 165,000 Dr N.B. Whitehead 87,500

Annette Ellis Trust (A.M. Ellis* and MK Trustee 2015 Limited as Trustees) - M.J. Binns 82,292 15,000 interested director K.R. Ellis R.J. Snodgrass 80,000

A.B. Ryan 10,404 The above fees exclude GST and expenses.

Cameron Trust (C.G. Aiken and W.A. Aiken as Trustees) 9,051

R.J. Snodgrass 5,000 Allocated payments are set out below: N.B. Whitehead 4,000 Position Current Fee Allocation $ *(A.M. Ellis is the wife of K.R. Ellis) (Plus GST if any) Chair of Board (inclusive of Committee fees) – K.R. Ellis 165,000 Non-Executive Director Base Fee (Directors excluding Chair) – 82,500 C.G. Aiken, M.J. Binns (from 1 August 2017), A.B. Ryan, R.J. Snodgrass (total 495,000)* (from 1 August 2017), C.M. Steele and Dr N.B. Whitehead Chair Audit & Risk Committee – A.B. Ryan 12,500

Chair Development Committee – C.G. Aiken 12,500

Chair Resident Experience & Care Committee – C.M. Steele 7,500 Chair People & Remuneration Committee – C.M. Steele until 31 December 2017 7,500 then M.J. Binns Committee Member Fee (Committee Members excluding Nominations & 2,500 Corporate Governance Members and Chair of each Committee) (total 17,500)*

Total Allocated 717,500*

Unallocated 5,500*

Pool 723,000

* Based on seven directors for full year – during the period 1 July to 31 July 2017 there were only five directors.

92 METLIFECARE LIMITED ANNUAL REPORT 2018 93 Remuneration and other benefits received by directors of Metlifecare Palmerston North Limited (a jointly controlled entity) during the year to 30 June 2018. The fees set out below to G.R. Sowry, R.C.A. Thomson and J.R. Callander were Company Name Directors Resigned Directors paid to Metlifecare Limited. Metlifecare Wairarapa Limited G.R. Sowry, R.C.A. Thomson T.M. van der Meijden Private Life Care Holdings Limited (appointed 28 September (ceased 28 September 2017) Director Director Fees $ 2017) Provider Care NZ Limited J.R. Callander 5,000 Vision (Christchurch) Limited

K.T. Hindle 5,000 Vision Senior Living Investments Limited Vision Senior Living Limited J.E. Hughes 5,000 Waitakere Group Limited R.E. Mellish 5,000 Metlifecare LTIP Trustee Limited A.B. Ryan

G.R. Sowry 5,000 No director of any wholly owned subsidiary company received any director’s fees or other benefits as a director of a R.C.A. Thomson (appointed 28 September 2017) 5,000 subsidiary.

Subsidiary Company Directors Jointly Controlled Entity (50% Shareholding) as at 30 June 2018 The following persons held the office of director of all the Company’s wholly owned subsidiaries (listed below) during The following persons held the office of director of Metlifecare Palmerston North Limited, a jointly controlled entity, the year: during the year:

Company Name Directors Resigned Directors Company Name Directors Resigned Directors

Bay of Plenty Retirement Village Limited G.R. Sowry, R.C.A. Thomson T.M. van der Meijden Metlifecare Palmerston North Limited J.R. Callander T.M. van der Meijden Forest Lake Gardens Limited (appointed 28 September (ceased 28 September 2017) (ceased 28 September 2017) 2017) K.T. Hindle Hibiscus Coast Village Holdings Limited J.E. Hughes Hillsborough Heights Village Holdings Limited Longford Park Village Holdings Limited R.E. Mellish Longford Park Village Limited G.R. Sowry Metlifecare Bayswater Limited R.C.A. Thomson (appointed Metlifecare Coastal Villas Limited 28 September 2017) Metlifecare Crestwood Limited Metlifecare Dannemora Gardens Limited Artist impression: Edgewater Village new development Metlifecare Edgewater Limited (previously Metlifecare Pakuranga Limited – name change effective 23 August 2018) Metlifecare Greenwich Gardens Limited Metlifecare Greenwood Park Limited Metlifecare Gulf Rise Limited (previously Metlifecare Red Beach Limited – name change effective 7 April 2018) Metlifecare Highlands Limited Metlifecare Kapiti Limited Metlifecare Merivale Limited Metlifecare Oakridge Limited Metlifecare Oakwoods Limited Metlifecare Papamoa Beach Limited Metlifecare Pinesong Limited Metlifecare Powley Limited Metlifecare 7 Saint Vincent Limited Metlifecare Somervale Limited Metlifecare The Avenues Limited Metlifecare The Orchards Limited Metlifecare The Poynton Limited

94 METLIFECARE LIMITED ANNUAL REPORT 2018 95 OTHER Donations The Company paid a total of $48,171 in donations in the year to 30 June 2018. This included $34,520 to various STATUTORY INFORMATION Residents’ Committees to enable residents to pay for specific items and $5,000 to the Wellington Free Ambulance. NZX Waivers Chief Executive Officer Remuneration No waivers were granted by the NZX in favour of the Company, or relied on, in the 12 month period to 30 June 2018. Metlifecare has an employment agreement with Glen Sowry in relation to his employment as Chief Executive Officer. The total remuneration package for Mr Sowry for the period to 30 June 2018 comprised: • fixed remuneration, including base salary, matched KiwiSaver contributions up to a maximum of 3%, and other benefits Limitations on the Acquisition of Company Securities • Short Term Incentive (STI) offered and payable at the discretion of the Board. The STI paid in the financial year ended The Company is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act 2001 dealing with the 30 June 2018 was in relation to performance delivered for the year to 30 June 2017 and had a potential value of 30% of acquisition of shares (including substantial holdings and takeovers). base salary. In order to be eligible for the STI, a financial “gateway” target had to first be met following which the Board assessed the STI on the basis of 75% organisational KPIs and 25% individual KPIs. The STI for the period 1 July 2017 Limitations on the acquisition of securities imposed under New Zealand law are as follows: to 30 June 2018 will be paid in this current financial year. The scheme was reset to 40% of base salary and is based • in general, securities in the Company are freely transferable and the only significant restrictions or limitation in on the achievement of organisational (70%) and individual (30%) goals. These included asset delivery, sales and other profitability metrics as well as innovation in customer experience and long-term strategic asset management and were relation to the acquisition of securities are those imposed by New Zealand laws relating to takeovers, overseas set in order to ensure that the Chief Executive Officer was incentivised to meet and/or exceed the Company’s strategic investment and competition and operational targets • the New Zealand takeovers code creates a general rule under which the acquisition of 20% or more of the voting • participation in the Senior Executive Long Term Incentive Plan (LTIP) offered to the Chief Executive Officer at the rights in the Company or the increase of an existing holding of 20% or more of the voting rights of the Company discretion of the Board. This performance incentive is designed to align senior executive remuneration with financial can occur in certain permitted ways. These include a full takeover offer in accordance with the Takeovers Code, outcomes for shareholders for the longer term. Shares were purchased using an interest free loan equating to 33% of an acquisition approved by an ordinary resolution, an allotment approved by an ordinary resolution, a creeping base salary. The shares vest after three years if all performance hurdles are met. Additional details on the LTIP scheme acquisition (in certain circumstances), or compulsory acquisition of a shareholder holding 90% or more of the shares are set out on page 88 • the Overseas Investment Act 2005 and Overseas Investment Regulations 2005 regulate certain investments in New For the year ended 30 June 2018, Mr Sowry received: Zealand by overseas interests. In general terms, the consent of the New Zealand Overseas Investment Office is likely to be required where an ‘overseas person’ acquires shares in the Company that amount to 25% or more of the Base Salary STI LTIP Kiwisaver Total Remuneration shares issued by the Company, or if the overseas person already holds 25% or more, the acquisition increases that $595,074* $203,431** $193,050 (shares issued not vested) $23,973 $822,478 holding *FY18 actual salary paid including annual leave • the Commerce Act 1986 is likely to prevent a person from acquiring shares in the Company if the acquisition would **Actual STI paid for FY17 have, or would be likely to have, the effect of substantially lessening competition in the market Employees’ Remuneration over $100,000 Place of Incorporation 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 set out below. Remuneration includes The Company is incorporated in New Zealand with a Certificate of Incorporation number 237544. salary, employer KiwiSaver contributions, performance bonus payments, termination settlement payments, insurance premiums and the value of shares transferred to employees under the Metlifecare Long Term Incentive Plan during the year ended 30 June 2018. Credit Rating Number of Number of Remuneration Remuneration The Company has no credit rating. Employees Employees $100,000 - $110,000 11 $230,000 - $240,000 1

$110,000 - $120,000 10 $240,000 - $250,000 1

$120,000 - $130,000 7 $270,000 - $280,000 1

$130,000 - $140,000 8 $310,000 - $320,000 1

$140,000 - $150,000 5 $330,000 - $340,000 2

$150,000 - $160,000 3 $340,000 - $350,000 1

$160,000 - $170,000 2 $370,000 - $380,000 1

$170,000 - $180,000 4 $460,000 - $470,000 2

$180,000 - $190,000 1 $500,000 - $510,000 1

$190,000 - $200,000 3 $820,000 - $830,000 1

$220,000 - $230,000 1 Total Number of Employees Paid 67

96 METLIFECARE LIMITED ANNUAL REPORT 2018 97 As at 12 July 2018, the ten largest shareholdings in the Company held through NZCSD were: SHAREHOLDER REGISTERED SHAREHOLDER Number of Shares % Shares 1 HSBC Nominees A/C NZ Superannuation Fund Nominees Limited 42,363,688 19.88 INFORMATION 2 Citibank Nominees (New Zealand) Limited 15,036,893 7.06 3 BNP Paribas Nominees (NZ) Limited 13,703,127 6.43

Twenty Largest Shareholders 4 JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct 13,262,870 6.22

(as at 12 July 2018) 5 HSBC Nominees (New Zealand) Limited 11,480,705 5.39

6 Accident Compensation Corporation 9,853,814 4.62

REGISTERED SHAREHOLDER Number of Shares % Shares 7 HSBC Nominees (New Zealand) Limited A/C State Street 6,447,133 3.02 8 MFL Mutual Fund Limited 6,420,318 3.01 1 New Zealand Central Securities Depository Limited (NZCSD) 157,320,767 73.81 9 ANZ Wholesale Trans-Tasman Property Securities Fund 6,308,012 2.96 2 FNZ Custodians Limited 9,016,734 4.23 10 ANZ Wholesale Australasian Share Fund 6,069,229 2.85

3 JBWere (NZ) Nominees Limited 5,696,661 2.67

4 Forsyth Barr Custodians Limited 2,886,505 1.35 Spread of Holdings (as at 12 July 2018) 5 Custodial Services Limited 2,321,714 1.08 Size of holdings Number of % Number of % 6 New Zealand Depository Nominee Limited 1,478,471 0.69 shareholders shares held

7 Custodial Services Limited 1,347,777 0.63 1 – 1,000 1,252 27.83 699,850 0.33 1,001 – 5,000 2,099 46.65 5,412,431 2.54 8 Custodial Services Limited 1,208,729 0.56 5,001 – 10,000 601 13.36 4,394,585 2.06 9 PT (Booster Investments) Nominees Limited 1,131,555 0.53 10,001 - 100,000 486 10.8 11,223,507 5.27

10 Investment Custodial Services Limited 1,092,728 0.51 100,001 and over 61 1.36 191,401,917 89.8

11 FNZ Custodians Limited 896,932 0.42 TOTAL 4,499 100.00 213,132,290 100.00

12 Custodial Services Limited 786,193 0.36 Substantial Product Holders 13 Custodial Services Limited 578,110 0.27 The entities who, under section 293 of the Financial Markets Conduct Act 2013, were Substantial Product Holders in the 14 JBWere (NZ) Nominees Limited 470,373 0.22 Company as at 30 June 2018 were:

15 Craig John Thompson 452,046 0.21 Substantial Product Holders Shares %

16 Metlifecare LTIP Trustee Limited 397,028 0.18 New Zealand Superannuation Fund Nominees Limited 42,156,178 19.78

ANZ New Zealand Investments Limited, ANZ Bank New Zealand Limited 17 MA Janssen Limited 386,000 0.18 and OnePath Funds Management Limited (Australia) 23,008,382 10.80

18 FNZ Custodians Limited 380,152 0.17 Investment Services Group Limited 13,701,326 6.43

19 Forsyth Barr Custodians Limited 354,322 0.16 Notes: 1 The total number of voting securities of the Company on issue at 30 June 2018 was 213,132,290 ordinary fully paid shares. All shares carry one vote per share. 20 Custodial Services Limited 283,032 0.13 2 The percentage column in the table above reflects each product holder’s holding as a percentage of the current issued share capital of the Company. This percentage may have changed from the percentage that was disclosed by the product holder in the relevant disclosure notice, due to further shares being issued or traded after the disclosure was made. TOTAL 188,485,829 88.36

Net Tangible Assets Per Security

30 June 2018 30 June 2017

$6.92 $6.43

98 METLIFECARE LIMITED ANNUAL REPORT 2018 99 DIRECTORY

Directors Executive Team

Kim Ellis - Chair Glen Sowry Chief Executive Officer Chris Aiken Charlie Anderson Mark Binns (from 1 August 2017) General Manager Property & Development

Alistair Ryan Tanya Bish Clinical Nurse Director Rod Snodgrass (from 1 August 2017) Richard Callander Carolyn Steele General Manager Operations

Dr Noeline Whitehead Julie Garlick General Manager Marketing Huma Houghton General Manager Human Resources Jan Martin General Manager Sales Andrew Peskett General Counsel & Company Secretary Richard Thomson Chief Financial Officer

Registered Office (New Zealand) SHARE REGISTRAR NEW ZEALAND Computershare Investor Services Limited Level 4, 20 Kent Street Newmarket, Auckland 1023 Level 2, 159 Hurstmere Road, Postal Address: PO Box 37463 Takapuna, Auckland 0622 Parnell, Auckland 1151 Postal Address: Private Bag 92119 Telephone: 09 539 8000 Victoria Street West, Auckland 1142 Facsimile: 09 539 8001 Investor Enquiries: 09 488 8777 www.metlifecare.co.nz www.computershare.co.nz/investorcentre

Registered Office (Australia) SHARE REGISTRAR AUSTRALIA Computershare Investor Services Pty Limited Level 61, Governor Philip Tower 1 Farrer Place, Sydney NSW 2000 Australia Postal Address: GPO Box 2975 Telephone: +61 2 9296 2000 Melbourne, Victoria 3001, Australia Facsimile: +61 2 9296 3999 Investor Enquiries: Telephone: +61 3 9415 4062

[email protected]

Lawyers Auditor Chapman Tripp PricewaterhouseCoopers Level 35 PwC Tower 23 Albert Street 188 Quay Street, Auckland 1142 Auckland 1010

Bankers Stock Exchange Listings ANZ Bank New Zealand Limited NZX Main Board Bank of New Zealand ASX Official List – ASX Foreign Exempt Listing ASB Bank Limited Westpac New Zealand Limited Hillsborough Heights Village Petanque and Bowls area

100 METLIFECARE LIMITED ANNUAL REPORT 2018 101 The Avenues Cnr Tenth Avenue & Devonport Road, Tauranga. Ph 07 571 0400. Bayswater 60 Maranui Street, Mt Maunganui. Ph 07 547 4047. Coastal Villas Spencer Russell Drive, Paraparaumu. Ph 04 296 6333. Crestwood 38 Golf Road, New Lynn, Auckland. Ph 09 826 2000. Dannemora Gardens 30 Matarangi Road, Botany Downs, Auckland. Ph 09 272 2467. Edgewater Village 14 Edgewater Drive, Pakuranga, Auckland. Ph 09 577 1600. Forest Lake Gardens 2 Minogue Drive, Te Rapa, Hamilton. Ph 07 849 8243. Greenwich Gardens 5 Greenwich Way, Unsworth Heights, Auckland. Ph 09 440 6790. Greenwood Park 10 Welcome Bay Road, Welcome Bay, Tauranga. Ph 07 544 7500. Gulf Rise Hibiscus Coast Highway, Red Beach, Auckland. Ph 021 599 550. Hibiscus Coast Village 101 Red Beach Road, Red Beach. Ph 09 421 9718. Hillsborough Heights 1381 Dominion Road Extension, Mt Roskill, Auckland. Ph 09 626 8060. Highlands 49 Aberfeldy Avenue, Highland Park, Auckland. Ph 09 533 0600. Kapiti Village 1 Henley Way, Paraparaumu. Ph 04 296 1790. Longford Park Village 1 Longford Park Drive, Takanini, Auckland. Ph 09 295 0040. The Orchards 123 Stanley Road, Glenfield, Auckland. Ph 09 444 4010. Oakridge Villas 30 Oakridge Drive, Kerikeri. Ph 09 407 8549. Palmerston North Village Cnr Carroll & Fitchett Streets, Palmerston North. Ph 06 350 6400. Papamoa Beach Village Cnr Parton Road & Te Okuroa Drive, Papamoa. Ph 07 542 1933. Powley 135 Connell Street, Blockhouse Bay, Auckland. Ph 09 627 0700. The Poynton 142 Shakespeare Road, Takapuna, Auckland. Ph 09 488 5700. Pinesong 66 Avonleigh Road, Titirangi, Auckland. Ph 09 817 1800. Somervale 33 Gloucester Road, Mt Maunganui. Ph 07 572 9020. 7 Saint Vincent 7 St Vincent Avenue, Remuera, Auckland. Ph 09 524 1420. Waitakere Gardens 15 Sel Peacock Drive, Henderson, Auckland. Ph 09 837 0512.

102 METLIFECARE LIMITED ANNUAL REPORT 2018