short memorandum format

INTERMEDIATEFINANCIALACCOUNTING1 xGuidelinestoreportwriting AnnualReport2020_Comvita SummersetGroup2020Annual-Report-FY20

 short memorandum format 

INTERMEDIATE FINANCIAL ACCOUNTING

ASSIGNMENT 2: Compulsory Report

Section B

(Section B is marked out of 100 and contributes 7.5 marks to Assignment 2)

Scenario

You have been hired as a financial consultant by OZ Ltd. and Mr. Phil Coulson its CEO, intends OZ Ltd. to invest in the stock market. It is considering two listed companies i.e. Summerset Group Holdings Limited and Comvita Limited as potential investment opportunity. Further, Mr. Coulson plans to expand the business overseas by the end of 2025; therefore, he plans to raise additional fund (approximately $10,000,000) from capital market in 2024.

You have been provided with the 2020 annual reports of Summerset Group Holdings Limited and Comvita Limited to compare their basic and diluted EPS results for 2019 and 2020. Relevant annual reports of Summerset Group Holdings Limited and Comvita Limited are available in Assignment 2 folder.

Mr. Coulson has sought your advice and is keen on your views regarding the following:

i. Which company appears to have the better earnings per share results and why? Also, what are the implications of the EPS figures for OZ Ltd. investment decision plans?

ii. OZ Ltd. wants to issue a new class of ordinary shares to raise the additional capital for the business expansion; however, the CEO is uncertain whether to involve underwriter(s) and want to know your view.

iii. As an alternative mode of raising additional capital, OZ Ltd. is also thinking to issue 30,000 share options which will allow the holder to buy two ‘B’ ordinary shares. What effect(s) will the options have on the basic and diluted EPS of OZ Ltd?

Required:

Write a
short memorandum format report
to the CEO, Phil Coulson. In this report please discuss the above three questions/issues.
Note: Your discussion should include reference to relevant professional/academic authorities and accounting standards (where necessary).

Marking Guide/Schedule Marks

Totals

Report:

Presentation – Report format/neatness/abbreviations/readability 12.5
Structure – Introduction/Discussion/Conclusion 12.5
Logical communication of ideas irrespective of actual content 15.0

Content:
Reasonable and critical discussion of issue (i) 35.0

Reasonable discussion of issue (ii) 10.01

Reasonable discussion of issue (iii) 15.0

Total 100

WritingReports

The following structure can be used for report writing at university level or for report writing in a
professional business situation. The principles for research, drafting, editing and rewriting your report
are the same as those for essay writing. The only difference is the overall structure.

The core structure of a report has six sections which can be arranged either deductively or

inductively, depending on specific requirements. Employ the inductive style if you want to lead
readers through your argument and convince them of your position. For the purposes of 110.209 you

will need to use the inductive style.

Format for 110.209 Reports

Title page

 Title of report

 Name of person submitting the report

 Name of person to whom the report is being submitted(if the assignment gives instructions re

who the report is addressed to, this should be that person or group e.g. Board of Directors)
 Date of submission

 Subject of Report

Introduction

Briefly details the context and subject of the report

 Defines the objectives of the report

 Outlines the scope of the investigation
 Indicates the broad conclusion reached by the report

 Comments on any limitation of the report and assumptions made

Discussion
 Explains your conclusions

 Justifies your recommendations
 Presents evidence for your conclusions
 Shows effects of current situations and potential benefits from your recommendations

 Is divided into numbered sections with headings
 Cites any theoretical arguments which support your position

Conclusion

 Relates to the objectives detailed in the introduction
 Is a list of numbered points

 Shows major conclusions first

 Is short but identifies major issues

Recommendations
 Suggest an action

 Are related to discussion and conclusion

 Are numbered

Inductive (required for 110.209 report)

Title page
Introduction

Discussion
Conclusion

Recommendation(s) (If required)

References

 Are arranged in order of importance
 Are brief

References

If it is an internal Assignment, you will need to provide references in a consistent style for
the preferred method used by the School of Accountancy (APA for 110.209). References are not

expected in examinations.

FI N A NC I A L

S T A T E M E N T S

2 0 2 0

F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
C O M V I T A L I M I T E D

Comvita Financial Statements 2020 Comvita Financial Statements 2020 – P1

2

3

4

5

6

7

8

43

47

53

C O N T E N T S

DIRECTORS’ DECLARATION

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE FINANCIAL STATEMENTS

AUDIT REPORT

STATUTORY INFORMATION

COMPANY DIRECTORY

Comvita Financial Statements 2020 – P2 Comvita Financial Statements 2020- P3

D I R E C T O R S ’ D E C L A R A T I O N C O N S O L I D A T E D
I NC O M E S T A T E M E N T

Brett Hewlett Luke Bunt
24 August 2020 24 August 2020

For the year ended

In thousands of New Zealand dollars

30 June

2020

30 June 2019

Note

Revenue 6 195,912 171,104
Cost of sales (99,969) (107,343)
Gross profit 95,943 63,761

Other income 7 2,209 6,583
Selling and marketing expenses (60,403) (43,726)
Administrative expenses 10 (24,395) (19,739)
Distribution expenses (10,301) (8,394)
Research and development expenses (1,299) (1,689)
Operating profit/(loss) before financing costs 1,754 (3,204)

Finance income 8 307 524
Finance expenses 8 (6,217) (6,667)
Net finance costs (5,910) (6,143)

Share of (loss)/profit of equity accounted investees 17b (174) 448
Impairment of equity accounted investees 17c (5,928) (2,401)
Impairment of goodwill 14 – (19,825)
Loss before income tax (10,258) (31,125)

Income tax benefit 11 557 3,408

Loss for the year (9,701) (27,717)

Earnings per share
Basic earnings per share (NZ cents) 25 (19.10) (61.05)

Diluted earnings per share (NZ cents) 25 (19.10) (61.05)

The notes on pages 8 to 42 are an integral part of these financial statements

In the opinion of the directors of Comvita Limited, the financial statements and the notes, on pages 3 to 42:

• comply with New Zealand generally accepted accounting practice and fairly reflect the financial position of the
Group as at 30 June 2020 and the results of their operations and cash flows for the year ended on that date

• have been prepared using appropriate accounting policies, which unless otherwise stated have been consistently
applied, and supported by reasonable judgements and estimates

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

The directors consider that they have taken adequate steps to safeguard the assets of the Group, and to prevent
and detect fraud and other irregularities. Internal control procedures are also considered to be sufficient to provide
reasonable assurance as to the integrity and reliability of the financial statements.

The directors are pleased to present the financial report, incorporating the financial statements of Comvita Limited
for the year ended 30 June 2020.

For and on behalf of the Board of Directors:

Comvita Financial Statements 2020 – P4 Comvita Financial Statements 2020- P5

For the year ended 30 June 2020
In thousands of New Zealand dollars

Share
capital

Foreign
currency

translation
reserve

Hedging
reserve

Fair value
reserve

Retained
earnings

Total

Balance at 30 June 2018 137,744 (1,659) (2,348) – 55,955 189,692
Total comprehensive income for the year –
(Loss) for the year – – – – (27,717) (27,717)
Other comprehensive income (net of tax): –
Foreign investor tax credits received – – – – 10 10
Foreign currency translation differences for equity accounted
investees – (853) – – – (853)

Foreign currency translation differences for foreign operations – (1,955) – – – (1,955)
Effective portion of changes in fair value of cash flow hedges – – 625 – – 625
Total other comprehensive income – (2,808) 625 – 10 (2,173)
Total comprehensive income for the year – (2,808) 625 – (27,707) (29,890)

Transactions with owners, recorded directly in equity
Share based payment (Note 9) – – – – 678 678
Issue of ordinary shares
– investment in Comvita China 12,312 – – – – 12,312
– executive share scheme 530 – – – – 530
– employee share purchase scheme 77 – – – – 77
Issue of treasury stock – investment in Apiter 580 – – – 305 885
Issue of treasury stock – supplier share scheme 2 – – – (13) (11)
Dividend paid – – – – (918) (918)
Total transactions with owners 13,501 – – – 52 13,553
Balance at 30 June 2019 151,245 (4,467) (1,723) – 28,300 173,355

Total comprehensive income for the year
(Loss) for the year – – – – (9,701) (9,701)
Other comprehensive income (net of tax):
Foreign currency translation differences for equity accounted
investees (Note 17b) – (467) – – – (467)

Foreign currency translation differences for foreign operations – 1,125 – – – 1,125
Financial asset – fair value movement – – – (2,640) – (2,640)
Effective portion of changes in fair value of cash flow hedges – – 1,196 – – 1,196
Total other comprehensive income – 658 1,196 (2,640) – (786)
Total comprehensive income for the year – 658 1,196 (2,640) (9,701) (10,487)

Transactions with owners, recorded directly in equity
Capital Raising – rights offer 50,000 – – – – 50,000
Issue expenses related to capital raising (1,950) – – – – (1,950)
Share based payment (Note 9) – – – – 329 329
Issue of treasury stock –
– Supplier share scheme 502 – – – (43) 459
– Issued to CEO (Note 30) 915 – – – (265) 650
Acquisition of treasury stock (572) – – – – (572)
Redemption of ordinary shares related to share schemes (36) – – – – (36)
Total transactions with owners 48,859 – – – 21 48,880
Balance at 30 June 2020 200,104 (3,809) (527) (2,640) 18,620 211,748

The notes on pages 8 to 42 are an integral part of these financial statements

C O N S O L I D A T E D S T A T E M E N T
O F C O M P R E H E N S I V E I NC O M E

C O N S O L I D A T E D S T A T E M E N T
O F C H A NG E S I N E Q U I T Y

The notes on pages 8 to 42 are an integral part of these financial statements
For the year ended
In thousands of New Zealand dollars
30 June 2020

30 June 2019
Note
Loss for the year (9,701) (27,717)

Items that are or may be reclassified subsequently to the income statement
Foreign currency translation differences for foreign operations 1,431 (2,504)
Foreign currency translation differences for equity accounted investees (467) (853)
Effective portion of changes in fair value of cash flow hedges 1,658 868
Fair value movement – financial asset (2,640) –
Foreign investor tax credits received – 10
Income tax on these items 11 (768) 306
Income and expense recognised directly in other comprehensive income (786) (2,173)
Total comprehensive income for the year (10,487) (29,890)

Comvita Financial Statements 2020 – P6 Comvita Financial Statements 2020- P7

As at 30 June

2020 2019

In thousands of New Zealand dollars Note

Assets
Property, plant and equipment 13 56,829 56,921

Intangible assets and goodwill 14 39,467 41,082

Right of use assets 15 11,447 –

Biological assets 16 3,795 4,048

Investment in equity accounted investees 17 6,261 9,755

Other investments 17 8 2,648

Deferred tax asset 12 8,043 6,757

Total non-current assets 125,850 121,211

Inventory 19 112,679 132,192

Trade receivables 20 17,726 30,878

Sundry receivables 21 12,349 16,289

Cash and cash equivalents 16,680 10,314

Derivatives 18 – 192

Tax receivable 366 553

Assets held for sale 13 773 1,414

Total current assets 160,573 191,832
Total assets 286,423 313,043

Equity
Issued capital 200,104 151,245

Retained earnings 18,620 28,300

Reserves (6,976) (6,190)

Total equity 24 211,748 173,355

Liabilities
Loans and borrowings 26 32,200 99,250

Employee benefits 22 414 446

Lease liability 7,891 –

Deferred tax liability 12 2,194 3,321

Total non-current liabilities 42,699 103,017

Trade and other payables 23 22,707 29,471

Lease liability 3,744 –

Employee benefits 22 3,653 4,041

Tax payable 1,158 739

Derivatives 18 714 2,420

Total current liabilities 31,976 36,671
Total liabilities 74,675 139,688
Total equity and liabilities 286,423 313,043

For the year ended

30 June

In thousands of New Zealand dollars

2020 2019
Note

Receipts from customers 207,143 191,331

Payments to suppliers and employees (161,394) (163,963)

Interest received 34 4

Interest paid (4,421) (4,782)

Taxation paid (2,065) (1,504)

Net cash flows from operating activities 27 39,297 21,086

Investment in equity accounted investees – (6,512)

(Consideration paid)/cash acquired from business combination (4,505) 5,456

Prepayments and loans to equity accounted investees (1,621) (1,307)

Interest from equity accounted investees – 268

Receipt of dividend from equity accounted investee – 519

Interest from related parties 36 36

Payment for the purchase of property, plant and equipment (5,206) (16,125)

Receipt for the disposal of property, plant and equipment 2,336 336

Payment for the purchase of biological assets – 148

Receipt from sale of intangibles 26 22

Payment for the purchase of intangibles (496) (545)

Payment for derivative settlement (263) –

Net cash flows from investing activities (9,693) (17,704)

Proceeds from the issue of share capital 47,641 607

Repayment of lease liabilities (3,862) –

(Repayment)/proceeds from loans and borrowings (67,050) 2,550

Payment of dividends – (918)

Net cash flows from financing activities (23,271) 2,239

Net increase in cash and cash equivalents 6,333 5,621
Cash and cash equivalents at the beginning of the year 10,314 4,947

Effect of exchange rate fluctuations on cash held 33 (254)

Cash and cash equivalents at the end of the year 16,680 10,314

Represented as:
Cash and cash equivalents 26 16,680 10,314

Total 16,680 10,314

C O N S O L I D A T E D S T A T E M E N T
O F F I N A NC I A L P O S I T I O N

C O N S O L I D A T E D S T A T E M E N T
O F C A S H F L O W S

The notes on pages 8 to 42 are an integral part of these financial statements The notes on pages 8 to 42 are an integral part of these financial statements

Comvita Financial Statements 2020 – P8 Comvita Financial Statements 2020- P9

1. REPORTING ENTITY
Comvita Limited (the “Company”) is a Company domiciled in New
Zealand, and registered under the Companies Act 1993 and listed
on the New Zealand Stock Exchange (“NZX”). The Company is an
issuer in terms of the Financial Reporting Act 2013 and Financial
Markets Conduct Act 2013. The financial statements of the Group
for the year ended 30 June 2020 comprise the Company and its
subsidiaries (together referred to as the “Group”) and the Group’s
interest in equity accounted investees.

The principal activity of the Group is that of manufacturing and
marketing quality natural health products, apiary ownership and
management.

2. BASIS OF PREPARATION

(a) Statement of compliance

The Company is a FMC reporting entity for the purposes of the
Financial Reporting Act 2013 and under part 7 of the Financial
Markets Conduct Act 2013. These Financial Statements comply
with these Acts and have been prepared in accordance with the
New Zealand Equivalents to International Financial Reporting
Standards and International Financial Reporting Standards as
appropriate for profit-oriented entities.

The financial statements were approved by the Board of Directors
on 24 August 2020.

(b) Basis of measurement

The financial statements have been prepared on the historical
cost basis except for derivative financial instruments, financial
instruments designated as fair value through other comprehensive
income, biological assets and leases which are measured at fair
value.

The methods used to measure fair values are discussed further in
the respective notes.

(c) Functional and presentation currency

These financial statements are presented in New Zealand dollars
($), which is the Company’s functional currency. Amounts have
been rounded to the nearest thousand.

(d) Accounting estimates and judgements

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

Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected. In particular, information about significant areas
of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the
amount recognised in the financial statements are set out below:

(i) Measurement of recoverability of cash generating units

Impairment reviews are performed by management annually
to assess the carrying value of cash generating units containing
goodwill. The recoverable amounts of cash-generating units
have been determined based on value-in-use calculations. These
calculations require the use of estimates. Refer to Note 14.

(ii) Intangible assets

The estimation of useful lives of intangible assets such as
distribution networks have been based on historical experience.
The useful lives are reviewed at least once per year and
adjustments to useful lives are made when considered necessary.

(iii) Valuation of equity accounted investees

An assessment of the carrying value of investments in equity
accounted investees is performed at least annually and considers
objective evidence for impairment on each investment, taking into
account observable data on the investment, the status or context
of markets, its own view of fair value, and its long term investment
intentions. The assessment also requires judgements about the
expected future performance and cash flows of the investment.

(v) Deferred consideration on business combinations

The valuation of the deferred consideration on the Group’s
business combinations are based on the post-acquisition
performance of the business and the amounts payable shall be
remeasured at their fair value resulting from events or factors that
emerge after the acquisition date, with any resulting gain or loss
recognized in the income statement. Refer note 17.

(vi) Leases

Comvita assesses at lease commencement whether it is
reasonably certain to exercise extension options where included
in the contract, and where it is reasonably certain, the extension
period has been included in the lease liability calculation.

The Group calculates its incremental borrowing rate with reference
to the external borrowing facilities available to the Group. The
incremental borrowing rate is used to measure lease liabilities.

(vii) Recoverability of Deferred Tax Assets

The utilisation of tax loss carry-forwards is dependent on expected
future taxable profits in excess of the profits from the reversal
of existing taxable temporary differences. This recognition is
based on current budgets and financial forecasts completed by
management.

(viii) Valuation of biological assets

The fair value of biological assets is assessed on an annual basis
which involves reviewing the number of operational hives in use as
well as ensuring the value per hive is in line with guidance provided
by the Ministry of Primary Industries, refer note 16.

3. SIGNIFICANT ACCOUNTING
POLICIES

(a) Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group.

(ii) Subsidiaries

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

3. SIGNIFICANT ACCOUNTING
POLICIES
(iii) Investments in equity accounted investees

Associates and Joint Ventures are those entities in which
the Group has significant influence, but not control, over the
financial and operating policies. Associates and Joint Ventures
are accounted for using the equity method (equity accounted
investees). The consolidated financial statements include the
Group’s share of the income and expenses of equity accounted
investees, after adjustments to align the accounting policies with
those of the Group, from the date that significant influence or
joint control commences until the date that significant influence
or joint control ceases.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the exchange rate at
that date.

(ii) Foreign operations

The assets and liabilities of foreign operations with currencies
different to the Company including goodwill and fair value
adjustments arising on acquisition, are translated to New
Zealand dollars at exchange rates at the reporting date. The
income and expenses of such foreign operations are translated
to New Zealand dollars at exchange rates at the dates of the
transactions. Foreign currency differences are recognised in the
foreign currency translation reserve (FCTR).

(c) Financial assets and financial liabilities

(i) Classification

The Group classifies its financial assets in the following
measurement categories:

• those to be measured subsequently at fair value (either
through other comprehensive income, or through profit or
loss), and

• those to be measured at amortised cost.

(ii) Measurement

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

Financial assets with embedded derivatives are considered in
their entirety when determining whether their cash flows are
solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the
group’s business model for managing the asset and the cash
flow characteristics of the asset. There are three measurement
categories into which the group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets
is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other
gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as separate line
item in the income statement.

• FVOCI: Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal
and interest, are measured at FVOCI. Movements in the
carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest income
and foreign exchange gains and losses which are recognised
in profit or loss. When the financial asset is derecognised,
the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in
other gains/(losses). Interest income from these financial
assets is included in finance income using the effective
interest rate method. Foreign exchange gains and losses
are presented in other gains/(losses) and impairment
expenses are presented as a separate line item in the
income statement.

• Fair Value through Profit or Loss (FVPL): Assets that do
not meet the criteria for amortised cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that
is subsequently measured at FVPL is recognised in profit
or loss and presented net within other gains/(losses) in the
period in which it arises.

Equity instruments

The Group subsequently measures all equity investments at fair
value. Where the group’s management has elected to present
fair value gains and losses on equity investments in OCI, there
is no subsequent reclassification of fair value gains and losses
to profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in
profit or loss as other income when the group’s right to receive
payments is established.

Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the income statement as
applicable. Impairment losses (and reversal of impairment losses)
on equity investments measured at FVOCI are not reported
separately from other changes in fair value.

Accounting for finance income and expense is discussed in Note
3(m).

(d) Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in
equity securities, trade and other receivables, cash and cash
equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially
at fair value plus, for instruments not at FVPL, any directly
attributable transaction costs.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P10 Comvita Financial Statements 2020- P11

3. SIGNIFICANT ACCOUNTING
POLICIES
A financial instrument is recognised if the Group becomes a party
to the contractual provisions of the instrument. Financial assets
are derecognised if the Group’s contractual rights to the cash
flows from the financial assets expire or if the Group transfers
the financial asset to another party without retaining control
or substantially all risks and rewards of the asset. Regular way
purchases and sales of financial assets are accounted for at trade
date, i.e., the date that the Group commits itself to purchase or
sell the asset. Financial liabilities are derecognised if the Group’s
obligations specified in the contract expire or are discharged or
cancelled.

Cash and cash equivalents comprise cash balances and demand
deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as
a component of cash and cash equivalents for the purpose of the
statement of cash flows.

Accounting for finance income and expense is discussed in Note
3(m).

Instruments at fair value through the income statement
An instrument is classified as at FVPL if it is held for trading or is
designated as such upon initial recognition. Financial instruments
are designated at FVPL if the Group manages such investments
and makes purchase and sale decisions based on their fair value.
Upon initial recognition, attributable transaction costs are
recognised in the income statement when incurred. Subsequent to
initial recognition, financial instruments are measured at fair value,
and changes therein are recognised in the income statement.

(ii) Derivative financial instruments

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

Derivative financial instruments are recognised initially at fair
value and transaction costs are expensed immediately. Subsequent
to initial recognition, derivative financial instruments are stated
at fair value. The gain or loss on remeasurement to fair value
is recognised immediately in the income statement. However,
where derivatives qualify for hedge accounting, recognition of
any resultant gain or loss depends on the nature of the hedging
relationship .

Cash flow hedges
Changes in the fair value of the derivative hedging instrument
designated as a cash flow hedge are recognised in other
comprehensive income and presented in equity in the hedging
reserve to the extent that the hedge is effective. To the extent
that the hedge is ineffective, changes in fair value are recognised in
the income statement.

If the hedging instrument no longer meets the criteria for hedge
accounting, expires or is sold, terminated or exercised, then hedge
accounting is discontinued prospectively. The cumulative gain or
loss previously recognised in equity remains there until the forecast
transaction occurs. The amount recognised in equity is transferred
to the income statement in the same period that the hedged item
affects the income statement.

(e) Share capital

(i)

Ordinary shares

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

(ii) Repurchase of share capital

When share capital recognised as equity is repurchased, the
amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from equity. Repurchased
shares are classified as treasury shares and are presented as a
deduction from total equity.

(f) Property, plant and equipment

(i) Recognition and measurement

IItems of property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses.

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

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

(ii) Subsequent costs

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

(iii) Depreciation

Depreciation is recognised in the income statement on a straight-
line basis over the estimated useful lives of each part of an item of
property, plant and equipment. Land is not depreciated.

The estimated useful lives for the current and comparative periods
are as follows:

• Buildings up to 50 years

• Plant and machinery 2 – 20 years

• Vehicles 4 -10 years

• Office equipment, furniture and fittings 2 -10 years

• Bearer plants 100 years

Depreciation methods, useful lives and residual values are
reassessed at the reporting date.

3. SIGNIFICANT ACCOUNTING
POLICIES

(g) Biological assets

Biological assets are measured at fair value less point-of-sale costs,
with any change therein recognised in the income statement. Point-
of-sale costs include all costs that would be necessary to sell the
assets. Agricultural produce from biological assets is transferred to
inventory at fair value, by reference to market prices for honey, less
estimated point-of-sale costs at the date of harvest.

(h) Intangible assets and goodwill

(i) Goodwill

Goodwill that arises on the acquisition of subsidiaries and other
business combinations is presented within intangible assets.
Goodwill is measured at cost less accumulated impairment losses.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the income statement when incurred.

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

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in the income
statement when incurred.

(iv) Amortisation

Amortisation is recognised in the income statement on a straight-
line basis over the estimated useful lives of intangible assets, other
than goodwill, from the date that they are available for use. The
estimated useful lives for the current and comparative periods are
as follows:

• Intellectual property and other intangible assets 3 – 20 years

• Capitalised development costs 2 – 5 years

• Software 3 – 10 years

(i) Inventories

Inventories are measured at the lower of cost and net realisable
value. The cost of inventories is based on the weighted average
principle, and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and
condition. In the case of manufactured inventories and work
in progress, cost includes an appropriate share of production
overheads based on normal operating capacity. Net realisable value
is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses.

The cost of items transferred from biological assets is their fair
value less point-of-sale costs at the date of transfer.

(j) Impairment

The Group’s assets are reviewed at each reporting date to
determine whether there is any objective evidence of impairment.

An impairment loss is recognised whenever the carrying amount
of an asset exceeds its recoverable amount. Impairment losses
directly reduce the carrying amounts of assets and are recognised
in the income statement.

(i) Impairment of receivables

The group assesses on a forward-looking basis the expected credit
losses associated with its debt instruments carried at amortised
cost and FVOCI. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.

For trade receivables, the company applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.

The recoverable amount of the Group’s investments in receivables
carried at amortised cost is calculated as the present value of
estimated future cash flows. Impairment losses on an individual
basis are determined by an evaluation of the exposures on an
instrument by instrument basis. All individual instruments that are
considered significant are subject to this approach.

(ii) Non-financial assets

An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount.
A cash-generating unit is the smallest identifiable asset group
that generates cash flows that are largely independent from
other assets and groups. Impairment losses are recognised in the
income statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce
the carrying amount of the other assets in the unit (group of units)
on a pro rata basis. When an event occurring after the impairment
was recognised causes the amount of the impairment to decrease,
the decrease in impairment loss is reversed through the income
statement.

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

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P12 Comvita Financial Statements 2020- P13

3. SIGNIFICANT ACCOUNTING
POLICIES

(k) Employee benefits

Share-based payment transactions
The grant date fair value of entitlements granted to employees
is recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees
become unconditionally entitled to the entitlements. The amount
recognised as an expense is adjusted to reflect the actual number
of share entitlements that vest.

(l) Revenue

Revenue from the sale of goods is measured at the fair value of the
consideration received or receivable, net of returns and allowances,
trade discounts and volume rebates. Revenue is recognised at the
point of time performance obligations are satisfied by transferring
control of goods to the customer. For wholesale sales, control
passes to the customer in accordance with the individual terms
of the contract of sale – for domestic sales this is ordinarily
on delivery to the customer’s premises and acceptance by the
customer and for export sales, this is ordinarily on delivery to the
port of origin. For in-store sales, control passes to the customer
at point of sale. For online sales, the order along with delivery to
the customer are considered to comprise a single performance
obligation, therefore control is considered to pass to the customer
on delivery of the goods.

(m) Finance income and expenses

Finance income comprises interest income on funds invested,
foreign exchange gains, dividend income and gains on the disposal
of FVOCI financial assets that are recognised in the income
statement. Interest income is recognised as it accrues, using the
effective interest method. Dividend income is recognised on the
date that the Group’s right to receive payment is established,
which in the case of quoted securities is the ex-dividend date.

Finance expenses comprise interest expense on borrowings,
foreign exchange losses, unwinding of the discount on provisions,
impairment losses recognised on financial assets (except for trade
receivables) and losses on the disposal of FVOCI financial assets
that are recognised in the income statement. All borrowing costs
are recognised in the income statement using the effective interest
method.

(n) Income tax expense

Income tax expense comprises current and deferred tax. Income
tax expense is recognised in the income statement except to the
extent that it relates to items recognised in other comprehensive
income, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for
the period, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous periods.

Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for the following
temporary differences: the initial recognition of goodwill, the

initial recognition of assets or liabilities in a transaction that is
not a business combination and that affects neither accounting
nor taxable profit, and differences relating to investments in
subsidiaries to the extent that they probably will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates that
are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively
enacted by the reporting date. A deferred tax asset is recognised
to the extent that it is probable that future taxable profits will
be available against which temporary differences can be utilised.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related
tax benefit will be realised. Additional income taxes that arise
from the distribution of dividends are recognised at the same time
as the liability to pay the related dividend is recognised.

(o) Earnings per share

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

(p) Segments

Segment results that are reported to the CEO include costs
directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise
mainly head office expenses.

(q) New and amended standards adopted by the
group

Except as described below, the accounting policies applied in these
consolidated financial statements are the same as those applied
in the Group’s consolidated financial statements as at and for the
year ended 30 June 2019.

NZ IFRS 16 Leases

Effective for Group reporting period beginning on: 1 July 2019

NZ IFRS 16 replaces NZ IAS 17 Leases and removes the
classification of leases as either operating leases or finance leases
– for the lessee – effectively treating all leases as finance leases.
This has resulted in the Group recognising right of use assets and
related lease liabilities in the statement of financial position. Lease
payments previously recorded as operating lease expenses in’the
income statement are now split between interest expense and
repayment of financial lease liabilities. Amortisation of right of use
assets is recognised on a straight line basis over the lease term in
the income statement.

The Group transitioned to NZ IFRS 16 with a date of initial
application of 1 July using the modified retrospective approach and
has not restated comparative amounts for the period prior to first
adoption. The Group has utilised practical expedients permitted
by NZ IFRS 16 in respect of short-term and low value leases where
appropriate.

3. SIGNIFICANT ACCOUNTING
POLICIES
The Group has also elected not to reassess whether an existing
contract contains a lease at the date of initial application. The
lease liability was measured at the present value of the minimum
lease payments, discounted at the incremental borrowing rate
applicable to that lease (or portfolio of leases) at 1 July 2019. In
line with the modified retrospective approach, the associated right
of use assets were measured at the amount equal to the lease
liability relating to that lease at 1 July 2019, with no overall change
in net assets.

Consolidated statement of financial position effect
The impact of adoption of NZ IFRS 16 in the Statement of Financial
Position is summarised in the table below:

In thousands of New Zealand dollars 2020 2019

Right of use assets 11,447 12,300

Lease liabilities 11,635 12,300

Change in net assets (188) –

When compared to the accounting policies applied in the prior
comparative period, the adoption of NZ IFRS 16 on the Group’s
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2020 is summarised below.

Consolidated statement of
comprehensive income effect
In thousands of New Zealand dollars

2020

Other operating expenses (4,096)

Depreciation 3,675

Interest expense 421

(r) Covid-19 considerations

Comvita is classified as an ‘Essential’ business by the New Zealand
Government, therefore having no impact on the manufacturing
process of the Group. For the year ended 30 June 2020 the Group
has not been significantly impacted by COVID-19. There has been
a strong demand in sales, in particular in online channels across
all markets. An assessment over the carrying value of assets
and liabilities has been performed and the Group has recognised
provisions where necessary relating to the impact of COVID-19.
The Group continues to operate as a going concern and Senior
Management continue to closely monitor the situation.

4. SEGMENT REPORTING
A review of operating segments has been completed in the current
year and this has resulted in a change to reported segments.
Previously reported segment information has been restated in line
with the operating segments described below.

Segment information is presented in the financial statements
in respect of the Group’s contribution segments which are the
primary basis of decision making. The contribution segment
reporting format reflects the Group’s management and internal
reporting structure.

Performance is measured based on contribution which is a
measure of profitability that the segment contributes to
the Group. Contribution is used to measure performance as
management believes that such information is most relevant in
evaluating the results of certain segments. Inter-segment pricing is
determined on an arms-length basis.

Each segment sells Comvita’s range of products. Comvita’s range
of products primarily include products with apiary and other
natural ingredients.

The Company is organised primarily by geographic location of its
subsidiaries.

The Group has five reportable segments as described
below:

Greater China This segment reports both revenue and related
costs of the China and Hong Kong markets. This
includes sales to our China Joint Venture and our
share of the China Joint Venture’s profits up to
31 May 2019. From that date, Comvita China was
consolidated, refer note 5.

ANZ Australia and New Zealand (ANZ) segment
captures both revenue and related costs for the
ANZ market.

Rest of Asia This segment captures both revenue and related
costs of all of our Asian operations and customers
excluding Greater China.

North America This segment captures both revenue and related
costs for sales to customers in North America.

EMEA The Europe, Middle East and Africa (EMEA)
segment captures both revenue and related costs
for the EMEA markets.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P14 Comvita Financial Statements 2020- P15

5. BUSINESS COMBINATIONS – COMVITA CHINA
Effective 31 May 2019 the Company owned 100% of Comvita Food (China) Limited and Comvita China Limited, collectively referred
to as Comvita China. In the 30 June 2019 financial statements, it was noted that the identification of the fair value of assets and
liabilities acquired was incomplete. A Distribution Network intangible asset has now been recognised effective 31 May 2019 for NZD
$9,870,000 reducing goodwill on acquisition at 31 May 2019 to $17,794,000, comparatives have been updated to reflect this change.
The Comvita China Goodwill has been allocated to the Greater China CGU – refer to note 4 for details. The distribution network
created a deferred tax liability. 2019 deferred tax and intangible assets balances have been restated.

6. REVENUE

In thousands of New Zealand dollars 2020 2019
30 June 30 June

Sales 195,280 159,975

Equity accounted investee sales elimination movement – 9,328

Other 632 1,801

Total revenue 195,912 171,104

7. OTHER INCOME

In thousands of New Zealand dollars

2020

30 June
2019

30 June

Change in fair value of contingent consideration * 1,039 497

Government grants 535 1,023

Gain on disposal of PP&E 243 –

Gain on deemed sale of 51% of Comvita China – 4,055

Comvita China JV – 49% of earnings before consolidation – 587

Gain on discontinuing equity accounting – SeaDragon – 113

Other 392 308

Total other income 2,209 6,583

* On acquisition of the Apiter S.A. investment the Company recognised a potential liability of USD$1,115,000 (NZD $1,651,000) if
certain earnout conditions are met. At 30 June 2020 two earnouts have been reversed through the income statement as they have not
met the earnout conditions. It is still probable that the last earnout will be met, a liability of USD $115,000 (NZD: $179,000) continues
to be recognised at 30 June 2020, refer note 23.

4. SEGMENT REPORTING (CONTINUED)
For the year ended 30 June

In thousands of New Zealand dollars

Greater China ANZ Rest of Asia North America EMEA

Total
reportable
segments

Other
segments Total

2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

Contribution segments

Revenue 79,022 51,442 52,802 69,562 20,533 16,722 22,137 13,361 6,916 6,211 181,410 157,298 14,502 13,806 195,912 171,104

Contribution 11,154 5,083 16,265 23,151 4,199 2,234 4,392 1,484 (511) (463) 35,499 31,489 2,280 1,508 37,779 32,997

Non attributable
(other corporate expenses) (38,234) (42,784)

Other income (Note 7) – 587 2,209 6,583

Financial income and expenses
(Note 8) (5,910) (6,143)

Share of (loss)/profit of equity
accounted investees (Note 17) – 2,087 (174) (1,639) (174) 448

Impairment of goodwill (Note 14) – (15,607) – (2,027) – (2,191) – (19,825)

Impairment of equity accounted
investees (Note 17) (5,928) (2,401) (5,928) (2,401)

Net (loss) before tax (10,258) (31,125)

Geographical segments

30 June 2020 30 June 2019

In thousands of New Zealand dollars Revenue Non-current assets Revenue
Non-current

assets
Greater China 84,336 41,066 26,904 8,552
ANZ 44,274 83,483 67,931 10,207
Rest of Asia 25,510 643 46,230 25,425
North America 30,840 544 23,345 8
EMEA 6,781 86 6,177 16
Other Countries 4,171 28 517 –
Total 195,912 125,850 171,104 100,719

Total reportable segment assets
As at 30 June

In thousands of New Zealand dollars 2020 2019
Total assets for reportable segments 128,266 128,162
Other investments 8 2,648
Investment in equity accounted investees 6,261 9,755
Other unallocated assets 151,888 172,478
Consolidated total assets 286,423 313,043

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P16 Comvita Financial Statements 2020- P17

8. FINANCIAL INCOME AND EXPENSES

In thousands of New Zealand dollars

2020
30 June

2019
30 June

Interest income 298 522

Dividend income 9 2

Finance income 307 524

Interest expense on financial liabilities measured at amortised cost (4,421) (4,782)

Net foreign exchange loss (1,340) (894)

Net loss in fair value of derivatives designated at fair value through the income statement:

– Interest rate swaps (264) –

– SeaDragon options and convertible loan notes (192) (991)

Finance expense (6,217) (6,667)
Net finance costs (5,910) (6,143)

9. PERSONNEL EXPENSES

In thousands of New Zealand dollars 2020
30 June

2019
30 June

Wages and salaries 43,135 39,004

KiwiSaver – employer contribution 558 561

Movement in long-service leave provision (33) 58

Equity settled share based payment transactions 329 678

Total personnel expenses 43,989 40,301

10. EXPENSES

Administrative expenses
The following items of expenditure are included in administrative expenses:

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Auditors’ remuneration:

To KPMG for audit services (ii) 360 341

To KPMG for audit related service 7 –

To KPMG for tax services (iii) 112 59

To Mercer & Hole (UK auditors) 33 12

Personnel expenses (i) 6,347 7,244

Depreciation (i) 578 775

Depreciation-leased assets (i) 627 –

Amortisation (i) 1,831 1,185

Insurance (i) 284 280

Doubtful debts expense 984 219

Bad debts written off (iv) 1,852 23

Restructure costs 1,768 884

Change in fair value of biological assets 389 652

Directors’ fees (v) 550 514

Directors – other costs 17 36

Other legal & professional expenses 309 557

Loss on disposal of property, plant & equipment – 93

Loss on disposal of intangible assets 9 9

Donations 6 35

(i) Only the portion of this expense which is included in administrative expenses
(ii) Audit services include fee for annual audit of the financial statements of the group and its foreign subsidiaries based in China, Hong Kong and

Australia, and the review of the interim financial statements
(iii) Tax services is for tax compliance and advisory work
(iv) $1,673,000 of this balance relates to the wind-up of the Kaimanawa Joint Venture, see note 17c
(v) Refer to Statutory Information

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P18 Comvita Financial Statements 2020- P19

11. INCOME TAX EXPENSE IN THE INCOME STATEMENT

In thousands of New Zealand dollars Note 2020
30 June

2019
30 June

Current tax expense
Current period 2,382 435

Adjustment for prior periods (60) 325

Total current income tax expense 2,322 760

Deferred tax expense
Origination and reversal of temporary differences 12 (2,879) (4,168)

Total deferred income tax (benefit) (2,879) (4,168)

Total income tax (benefit) (557) (3,408)

Reconciliation of effective tax expense

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Loss for the period (9,701) (27,717)

Total income tax (benefit) (557) (3,408)

(Loss) excluding income tax (10,258) (31,125)

Income tax using the Company’s domestic tax rate of 28% (2019: 28%) (2,872) (8,715)

Effect of different tax rates in foreign jurisdictions (354) (115)

Non-deductible expenses 3,118 7,795

Non-assessable income (714) (1,698)

Income tax relating to equity accounted associates – (682)

Research and development tax credits – (59)

Under provided in prior periods 265 66

Total income tax (benefit) (557) (3,408)

11. INCOME TAX EXPENSE IN THE INCOME STATEMENT (CONTINUED)

Income tax recognised directly in other comprehensive income

In thousands of New Zealand dollars Note 2020
30 June
2019
30 June

Derivatives 12 465 243

Other items 303 (549)

Total income tax recognised directly in other comprehensive income 768 (306)

Imputation credit account

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Imputation credits available for use in subsequent reporting periods 8,767 8,900

12. DEFERRED TAX ASSETS AND LIABILITIES

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

In thousands of New Zealand
dollars

Assets Liabilities Net

2020 2019 2020 2019 2020 2019
Property, plant & equipment – – (831) (1,042) (831) (1,042)
Intangible assets – – (2,194) (2,405) (2,194) (2,405)

Biological assets – – (50) (397) (50) (397)

Inventories 2,973 3,519 – (916) 2,973 2,603

Derivatives 199 664 – – 199 664

Investments 105 94 – – 105 94

Other items 1,283 802 – – 1,283 802

Tax loss carry-forwards 4,364 2,868 – – 4,364 2,868

Non-refundable tax credits
carried forward

– 249 – – – 249

Tax assets/(liabilities) 8,924 8,196 (3,075) (4,760) 5,849 3,436

Set-off of tax (881) (1,439) 881 1,439 – –
Net tax assets/(liabilities) 8,043 6,757 (2,194) (3,321) 5,849 3,436

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P20 Comvita Financial Statements 2020- P21

13. PROPERTY, PLANT & EQUIPMENT

In thousands of New Zealand dollars Land Buildings Owned
plant &

machinery

Vehicles Bearer
plants

Office
equipment,
furniture &

fittings

Capital
WIP

Total

Cost
Balance at 30 June 2018 10,320 17,133 26,512 2,232 5,626 5,869 3,172 70,864

Additions/Transfers 2,225 10,401 2,299 259 414 677 (550) 15,725

Disposals – (121) (371) (121) – (636) – (1,249)

Business combinations – 27 251 – – 42 – 320

Reclassification to assets held for sale (731) (791) (32) – – (3) – (1,557)

Effect of movements in exchange rates (87) (48) (106) (6) (221) 13 (16) (471)

Balance at 30 June 2019 11,727 26,601 28,553 2,364 5,819 5,962 2,606 83,632

Additions/Transfers 220 804 1,034 159 – 1,276 2,132 5,625

Disposals (120) (447) (778) (173) – (843) – (2,361)

Reclassification to assets held for sale* (420) (328) (388) – – – – (1,136)

Effect of movements in exchange rates 48 28 60 3 131 136 1 407

Balance at 30 June 2020 11,455 26,658 28,481 2,353 5,950 6,531 4,739 86,167

Depreciation
Balance at 30 June 2018 – (5,687) (11,946) (1,548) (318) (3,857) – (23,356)

Depreciation – (1,044) (2,214) (204) (66) (1,028) – (4,556)

Disposals – 17 220 104 – 634 – 975

Reclassification to assets held for sale – 110 31 – – 2 – 143

Effect of movements in exchange rates – 18 51 6 13 (5) – 83

Balance at 30 June 2019 – (6,586) (13,858) (1,642) (371) (4,254) – (26,711)

Depreciation – (1,098) (2,123) (203) (67) (1,025) – (4,516)

Disposals – 254 682 162 – 584 – 1,682

Reclassification to assets held for sale* – 57 306 – – – – 363

Effect of movements in exchange rates – (11) (34) (3) (9) (99) – (156)

Balance at 30 June 2020 – (7,384) (15,027) (1,686) (447) (4,794) – (29,338)

Carrying amount
At 30 June 2018 10,320 11,446 14,566 684 5,308 2,012 3,172 47,508

At 30 June 2019 11,727 20,015 14,695 722 5,448 1,708 2,606 56,921

At 30 June 2020 11,455 19,274 13,454 667 5,503 1,737 4,739 56,829

Depreciation charge in the income statement

Depreciation is allocated to cost of sales, selling and marketing expenses, distribution expenses, research and development expenses and
administrative expenses.

* Assets held for sale

As at 30 June 2020, management committed to a plan to sell a site in Nelson, New Zealand. The site had a net book value of $773,000
immediately before the initial classification to being held for sale. There were no impairment losses incurred as part of this initial classification.
The site and plant and equipment are being actively marketed for sale.

12. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)

Movement in temporary differences during the year

2020
In thousands of New Zealand dollars Balance

1 July 2019
Recognised in the 

income statement
Recognised in other

comprehensive income
Balance

30 June 2020
Property, plant & equipment (1,042) 211 – (831)
Intangible assets (2,405) 211 – (2,194)
Biological assets (397) 347 – (50)
Inventories 2,603 370 – 2,973
Derivatives 664 – (466) 198
Investments 94 11 – 105
Other items 802 482 – 1,284
Tax loss carry-forwards 2,868 1,496 – 4,364
Tax credit carry-forwards 249 (249) – –
Total 3,436 2,879 (466) 5,849

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

In thousands of New Zealand dollars 2020 2019
Tax loss carry-forwards 1,453 1,445

Intangible assets 914 893

Total 2,367 2,338

The tax loss carry-forwards do not expire under current tax legislation.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P22 Comvita Financial Statements 2020- P23

14. INTANGIBLE ASSETS AND GOODWILL

In thousands of New Zealand dollars Note Goodwill Brands, patents,
trademarks and

other

Software Total

Cost
Balance at 30 June 2018 28,476 6,158 9,928 44,562

Additions – 201 341 542
Additions – Business combinations 5 19,748 9,619 37 29,404
Impairment (19,825) – – (19,825)
Disposals – (50) (272) (322)
Effect of movements in exchange rates (559) (22) (7) (588)
Balance at 30 June 2019 27,840 15,906 10,027 53,773

Additions – 205 285 490
Disposals – – (538) (538)
Effect of movements in exchange rates (104) 145 19 60
Balance at 30 June 2020 27,736 16,256 9,793 53,785

Amortisation
Balance at 30 June 2018 – (4,044) (7,121) (11,165)

Amortisation – (189) (1,676) (1,865)
Disposals – 40 269 309
Effect of movements in exchange rates – 23 7 30
Balance at 30 June 2019 – (4,170) (8,521) (12,691)

Amortisation – (1,286) (836) (2,122)
Disposals – – 502 502
Effect of movements in exchange rates – 4 (11) (7)
Balance at 30 June 2020 – (5,452) (8,866) (14,318)

Carrying Amount
At 30 June 2018 28,476 2,114 2,807 33,397

At 30 June 2019 27,840 11,736 1,506 41,082

At 30 June 2020 27,736 10,804 927 39,467

Amortisation charge in the income statement

Amortisation is allocated to cost of sales, selling and marketing expenses, distribution expenses, research and development expenses
and administrative expenses.

14. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Impairment testing for cash-generating units containing goodwill (CGU)

For the purpose of impairment testing, goodwill is allocated to the Group’s CGUs which represent the lowest level within the Group at
which the goodwill is monitored for internal management purposes.

The aggregate carrying amounts of goodwill allocated to each CGU are as follows:

In thousands of New Zealand dollars Segment
(Note 4)

2020
30 June

2019
30 June

Greater China Greater China 25,902 26,006

Apiaries 1,766 1,766

Other 68 68

Total goodwill 27,736 27,840

During the year the operating segments of the business were reviewed and Hong Kong and China have been combined into a new segment
called ‘Greater China’. Refer to Note 4 for details.

Greater China CGU:

Value in use was determined by discounting the future cash flows generated from the continuing use of the unit and were based on the
following key assumptions:

2020
30 June

Anticipated annual revenue growth included in the cash flow projections for the combined CGU’s
(normalised) for the years 2021 to 2025

1.5% to 8%

Post tax discount rate 12.5%

Discount rate based on the average weighted cost of capital which was based on debt leveraging of: 20%

-at a cost of debt rate of: 12.3%

Terminal growth rate applied beyond June 2025 2.0%

Cash flows were projected on actual operating results, the 30 June 2021 budget and business plan.

Sensitivity to changes in assumptions

In thousands of New Zealand dollars 2020
30 June

The recoverable amount of the CGU exceeds its carrying amount by 53,100

If projected Earnings before Interest and Tax (EBIT) is reduced by 10% year on year, it changes the
amount the recoverable amount exceeds its carrying amount to

41,900

The post tax discount rate for the recoverable amount to equal carrying amount is calculated at 22.1%

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P24 Comvita Financial Statements 2020- P25

14. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Apiaries:

Value in use was determined by discounting the future cash flows generated from the continuing use of the unit and
were based on the following key assumptions:

2020
30 June

Anticipated annual revenue growth included in the cash flow projections for the combined CGU’s (normalised) for
the years 2021 to 2030

(16.6)% to 24.7%

Post tax discount rate 10.0%
Discount rate based on the average weighted cost of capital which was based on debt leveraging of:: 20%

-at a cost of debt rate of: 4.4%
Terminal growth rate applied beyond June 2030 1.5%

Cash flows were projected on actual operating results, the 30 June 2021 budget and business plan.

Sensitivity to changes in assumptions:

In thousands of New Zealand dollars 2020
30 June

The recoverable amount of the CGU exceeds its carrying amount by 13,300

If projected Earnings before Interest and Tax (EBIT) is reduced by 10% year on year, it changes the amount the
recoverable amount exceeds its carrying amount to

9,000

The post tax discount rate for the recoverable amount to equal carrying amount is calculated at 13%

The percentage movement in yields for each Manuka Honey grade range (with the resulting difference being added
to non-manuka) for the recoverable amount to equal the carrying amount

9%

The increase in forecast hive costs required for the recoverable amount to equal the carrying amount 1.6%

15. LEASES

The Group leases warehouses, retail stores, administration premises, vehicles and land used for hive placements.

Right of use assets

2020 Buildings Vehicles Plantations Total
In thousands of New Zealand dollars

Adoption of NZ IFRS 16 7,136 1,681 3,483 12,300

Additions 3,301 82 – 3,383

Disposals (149) – – (149)

Depreciation (2,971) (670) (178) (3,819)

Remeasurements (413) – – (413)

Effect of movement in exchange rates 140 5 – 145

Balance at the end of the year 7,044 1,098 3,305 11,447

Amounts recognised in the statement of comprehensive income
Total

Interest on lease liabilities 421

Variable lease payments not included in the measurement of lease liabilities 4,101

Expenses relating to short-term leases 33

Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets 38

Lease liabilities

The weighted average incremental borrowing cost applied to lease liabilities at 1 July 2019 was 5.3%. Total cash outflow
for leases for the year ended 30 June 2020 was $4.1 million.

Maturity analysis – contractual undiscounted cash flow

Non-cancellable lease rentals ae payable as follows:

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Less than 1 year 4,820 5,515

Between one and five years 4,605 5,055
Greater than five years 1,817 19

Total 11,242 10,589

Capital commitments

The total capital commitment is $3.1 million (2019: $4.5 million over 3 years) and will be paid over the next 2 years.
The capital commitment relates to plantation costs.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P26 Comvita Financial Statements 2020- P27

16. BIOLOGICAL ASSETS

Total
In thousands of New Zealand dollars 2020

30 June
2019
30 June

Bees 3,370 3,542

Olive Leaf 425 506

Total biological assets 3,795 4,048

Bees

In thousands of New Zealand dollars
2020
30 June
2019
30 June

Balance at beginning of the year 3,542 3,641

Acquisition 665 532

Sales – (142)

Fair value increase 161 –

Net movement in operational hives (998) (489)

Balance at the end of the year 3,370 3,542

Number of operational hives

Balance at beginning of the year 22,628 27,379

Acquisition 5,000 (1,070)

Net movement in operational hives (7,503) (3,681)

Balance at the end of the year 20,125 22,628

The Group is exposed to a number of risks related to owning bees, primarily the risk of damage from climatic changes and diseases.
The Group has processes in place aimed at monitoring and mitigating those risks, through hiring of experienced bee keepers, the intensive
maintenance of bee hives and disease prevention programmes.

Fair value hierarchy

The Group’s bees are level 3 on the fair value hierarchy, being calculations for which inputs are not based on observable market data
(unobservable inputs).

As the bee hives are continually regenerating the fair value assigned to a hive is on a $ per kg basis, plus queen and brood. The value
attributed to these quantities has been sourced from the Ministry of Primary Industries. The value per hive is $141 (2019: $133).

17. INVESTMENTS

In thousands of New Zealand dollars Note 2020
30 June
2019
30 June

Equity accounted investees 17a 6,261 9,755

Investment in listed shares – 822

Convertible loan note – 1,818

Investment in unlisted shares 8 8

Total investments 6,269 12,403

Equity Accounted Investees (EAI)

(a) Investments in Equity Accounted Investees comprises:

Country of
Incorporation

Ownership
Interest Held

Balance
Date

Principal
Activity

Makino Station Limited New Zealand 50% 30 June Apiary and land ownership

Gan Supply JV Limited * New Zealand 33% 30 June Apiary

Putake Group Holdings Limited New Zealand 50% 30 June Apiary

Manuka Research Partnership Limited New Zealand 31.77% 30 June Research and development

Medibee Pty Limited ** Australia 50% 30 June Apiary

Apiter S.A Uruguay 20% 31 July Manufacturing, selling and distribution
Kaimanawa Honey Limited Partnership

New Zealand 50% 30 June Ceased operating 10 November 2019

* On 30 September 2019 Nga Pi Honey Limited changed its name to Gan Supply JV Limited and Gan Enterprises Limited changed its
name to Nga Pi Honey Limited.

** Medibee Apiaries has a funding arrangement with HSBC and Comvita has signed a several guarantee for its share of the facility,
which is AUD $5,500,000.

(b) Carrying value of Investments in Equity Accounted Investees

In thousands of New Zealand dollars Note 2020 2019

Balance at 1 July 9,755 30,621
Acquisitions – Apiter S.A. – 9,048
Dividend – (519)
Impairment 17c (2,543) (2,401)
Share of (loss)/profit (174) 448
Profit elimination – 1,623
Transfer share of (profit)/loss to receivable (310) 62
Foreign exchange movements recognised in
other income (467) (1,707)

Derecognition of EAI – China – (26,711)
Derecognition of EAI – SeaDragon – (709)
Balance at 30 June 6,261 9,755

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P28 Comvita Financial Statements 2020- P29

17. INVESTMENTS (CONTINUED)

(c) Impairment of Investments in Equity Accounted investees

An impairment Expense of $5,928,000 has been recognised as an expense in profit and loss as at 30 June 2020 (2019: $2,401,000).
The impairment expense is made of the following amounts:

Apiter S.A.

The impairment expense of $1,300,000 (2019: nil) has been recognised against the the Apiter S.A investment due to a delay in
projected sales growth.

Putake Group

An impairment expense of $1,243,000 (2019: $2,300,000) has been recognised against the Putake Group investment and $1,075,000
against the shareholder loan, refer to note 17d.

This investment has been impaired as it is in the process of winding up.

A provision of $675,000 has also been recognised at 30 June 2020 against the related loan to Casa Base Trustees, refer to note 17e.

Medibee

The loan to Medibee has been impaired, refer note 17d, with an impairment expense of $2,310,000 recognised in the income statement
due to the impact of the Australian bush fires on the honey crop.

Kaimanawa

The Kaimanawa shareholder loan of $1,673,000 was written off when the Joint Venture ceased. Refer note 17d.

(d) Loans to Equity Accounted Investees

In thousands of New Zealand dollars Note 2020
30 June

Loan receivable

2019
30 June
Loan receivable

2020
12 months

Interest income

2020
30 June

Interest Receivable

Makino 4,007 3,815 192 192
Medibee 17c – 2,469 – –
Kaimanawa 17c – 1,133 – –
Putake 17c – 875 – –
Apiter S.A 600 575 21 23
Gan Supply JV 212 252 – –
Total 4,819 9,119 213 215

All loans to equity accounted investees are repayable on demand.

Makino

Interest is accrued on the balance of loan at the a rate of 6.36% p.a. (2019: 6.36%).

Apiter S.A.

The loan is denominated in USD. Interest is accrued on the balance of the loan at a rate of 3.5% p.a. (2019: 3.5%).

Gan Supply JV

The loan is non-interest bearing.

17. INVESTMENTS (CONTINUED)

(e) Loans to Related Parties

In thousands of New Zealand dollars Note 2020
30 June
Loan receivable
2019
30 June
Loan receivable
2020
12 months
Interest income
2020
30 June

Interest receivable

Nga Pi Honey Ltd (Gan Supply JV) 567 567 36 –
Casa Base Trustees (Putake) 17c – 639 36 –
Total 567 1,206 72 –

Nga Pi Honey Ltd

Interest is accrued on the balance of the loan at a rate of 6.36% p.a. (2019: 6.36%), the loan is repayable on demand.

(f) Transactions with Equity Accounted Investees

In thousands of New Zealand dollars Sale of goods and services Purchases of goods and services
(including prepayments)

Transaction value Balance due from Transaction value Balance owing to

2020
Kaimanawa 616 – 19 –
Makino 92 – 174 –
Gan Supply JV 80 3 1,870 –
Putake 60 – 18 –
Medibee – – – –
Apiter S.A 19 23 2,598 418

2019
Comvita China* 12,560 – – –
Kaimanawa 2,013 443 2,551 –
Makino 210 – 674 338
Gan Supply JV 28 16 572 –
Putake 27 – 351 34
Medibee – – 553 –
SeaDragon 39 – – –
Apiter S.A 13 – 3,464 –

* Transactions included for the period while the investment was still recognised as an EAI.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P30 Comvita Financial Statements 2020- P31

18. DERIVATIVES
The table below analyses financial instruments carried at fair value, by valuation method. They are all level 2 on the fair value hierarchy, as
they include inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e. derived from prices). There have been no transfers between levels in either direction during the period.

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Derivatives – SeaDragon – 192

Total assets – 192

Derivatives – liabilities (hedging instrument) (714) (2,420)

Total liabilities (714) (2,420)

Derivatives – assets and liabilities (hedged) and designated at fair value through the income statement

The Group’s Level 2 fair values for simple over-the-counter derivative financial instruments are based on broker quotes. Those quotes
are tested for reasonableness by discounting expected future cash flows using market interest rate for a similar instrument at the
measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the
Group entity and counterparty when appropriate.

19. INVENTORY

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Raw materials 79,925 83,996
Work in progress 842 1,854
Finished goods 36,699 48,202
Provision (3,787) (1,860)
Total inventory 112,679 132,192

Inventory disposed of during the year ended 30 June 2020 has been recognised within cost of goods sold – $827,000 (2019: $1,716,000).

20. TRADE RECEIVABLES

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Trade receivables 17,726 30,878
Total trade receivables 17,726 30,878

The status of trade receivables at the reporting date is as follows:

In thousands of New Zealand dollars Gross receivable
2020

Impairment
2020

Gross receivable
2019

Impairment
2019

Not past due 11,388 (162) 23,521 –
Past due 0-30 days 2,296 (69) 5,279 –
Past due 31-60 days 3,269 (254) 807 (4)
Past due 61-365 days 1,319 (87) 1,460 (237)
Past due > 365 days 59 (33) 105 (53)
Total 18,331 (605) 31,172 (294)

The Company has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or
avoid a possible past due status.

20. TRADE RECEIVABLES (CONTINUED)

Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk for trade
receivables at the reporting date by geographic region was:

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Australia 2,085 5,073
China 7,288 6,002
New Zealand 5,322 10,361
United States 392 6,269
United Kingdom 529 1,262
Hong Kong 733 991
Other regions 1,377 920
Total 17,726 30,878

21. SUNDRY RECEIVABLES

In thousands of New Zealand dollars Note 2020
30 June
2019
30 June

Loans to equity accounted investees 17d 4,819 9,119
Loan receivable – related parties 1,017 1,206
Prepayments 5,307 3,393
Other receivables 1,206 2,571
Total sundry receivables 12,349 16,289

22. EMPLOYEE BENEFITS

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Annual leave 1,598 1,693
Performance accrual 1,796 1,976
Accrued wages and salaries 259 372
Total current employee benefits 3,653 4,041

Long service leave (non-current) 414 446
Total employee benefits 4,067 4,487

23. TRADE AND OTHER PAYABLES

In thousands of New Zealand dollars Note 2020
30 June

2019
30 June

Trade creditors 10,449 14,113

Accruals 12,020 9,597

Business combination consideration payable – 4,506

Contingent consideration – equity accounted investees 7 179 1,167

Due to directors 59 88

Total trade and other payables 22,707 29,471

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P32 Comvita Financial Statements 2020- P33

24. CAPITAL AND RESERVES

Ordinary and partly paid redeemable share capital

In thousands of shares 2020
30 June

2019
30 June
Note

On issue at beginning of the year 49,555 45,163

Capital raise – Placement and Rights offer 20,000 –

Share issue – CEO 308 –

Supplier Partnership Group Share Scheme 134 26

Acquisition of treasury stock (217) –

Share issue – Comvita China acquisition – 4,050

Share issue – Apiter acquisition – 155
Issued to members of executive share scheme – 144

Issued to employee share purchase scheme – 17

Ordinary shares on issue at end of the year 69,780 49,555
Closing partly paid shares 28 1,228 2,028

Total shares including part paid at end of the year 71,008 51,583

Treasury Stock

In thousands of shares 2020
30 June
2019
30 June

Treasury stock at beginning of the year 227 408

Acquired on market 217 –

Issued – CEO (308) (155)

Supplier Partnership Group Share Scheme (134) (26)

Total treasury stock at end of the year 2 227

Ordinary shares

All ordinary shares issued are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s
residual assets.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations.

Hedging reserve

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

Fair value reserve

The fair value reserve comprises the cumulative change in the fair value of Financial Assets designated as Fair Value through Other
Comprehensive Income.

24. CAPITAL AND RESERVES (CONTINUED)

Capital management

The Group’s capital includes share capital, reserves and retained earnings. The Board’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the
geographic spread of shareholders, as well as the return on capital.

Public share offerings and private offerings are made, where applicable. This and acquisitions are key to ensuring the future development
of the business.

The Board has an employee share purchase scheme and an executive employee share scheme to ensure the employees hold an investment
in the Group. The Board has also implemented a Supplier Group Share Scheme to assist in security of raw material honey supply.

Other than the banking requirements, neither the Company nor any of its subsidiaries are subject to externally imposed capital
requirements.

25 . EARNINGS PER SHARE

Basic earnings per share – weighted average number of ordinary shares
In thousands of shares

2020
30 June
2019
30 June

Issued ordinary shares at beginning of year 49,555 45,164

Effect of shares issued during the year 1,231 1,138

Weighted average number of ordinary shares at the end of the year 50,786 46,302

Basic earnings per share (NZ cents) (19.10) (61.05)

Diluted earnings per share – weighted average number of ordinary shares
(diluted)
In thousands of shares

Weighted average number of ordinary shares (basic) 50,786 46,302

Effect of share entitlements issued – 30

Weighted average number of diluted shares at end of the year 50,786 46,332

Diluted earnings per share (NZ cents) (19.10) (61.05)

26. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings.

Terms and debt repayment schedule

In thousands of New Zealand dollars Facility
Local

Currency

Currency Nominal
Interest rate

Maturity

Carrying
Amount

Carrying
Amount

2020 2019
Secured bank loan – Westpac NZ 20,000 NZD 3.25% July 2022 20,000 44,000

Multi option credit line – Westpac NZ 60,000 NZD 2.05% & 2.25% July 2022 12,200 55,250

Total borrowings 80,000 32,200 99,250
Less current portion of borrowings – –

Borrowings – Non current 32,200 99,250

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P34 Comvita Financial Statements 2020- P35

26. LOANS AND BORROWINGS (CONTINUED)

Covenants and security

The Group was in compliance with all banking covenants during the year and as at 30 June 2020. All debt with Westpac New Zealand
Limited is secured by way of registered first and exclusive Composite Debentures and a General Security Agreement, cross collateralised,
over all the assets, undertakings and uncalled capital of all Charging Group companies and an interlocking supported guarantee between
all Charging Group companies.

“Charging Group” – Comvita Limited, Comvita New Zealand Limited, Comvita Holdings Pty Limited, Comvita Australia Pty Limited,
Comvita Holdings UK Limited and Comvita UK Limited.

Net debt
In thousands of New Zealand dollars 2020

30 June
2019
30 June

Cash 16,680 10,314

Less Debt – Non-Current (32,200) (99,250)

Net Debt (15,520) (88,936)

Interest rate risk

At reporting date the interest rate profile of the Group’s interest-bearing financial instruments is the balances of the loans above. The
Group has a policy of ensuring that its exposure to interest rates for borrowings is managed. Interest rate swaps have been entered into to
achieve an appropriate mix of fixed and floating rate exposure with the Group’s policy.

Sensitivity analysis

In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-
term, however, permanent changes in interest rates will have an impact on profit. At 30 June 2020 it is estimated that a general increase
of one percentage point in interest rates would decrease the Group’s profit before income tax by approximately $598,000
(30 June 2019: $718,000).

Other Facilities

Overdraft schedule

In thousands of New Zealand dollars Facility Local
Currency

Currency Interest rate
2020

Interest rate
2019

Overdraft facility NZD – Westpac NZ 750 NZD 7.25% 8.35%

Overdraft facility GBP – Westpac NZ 1,650 GBP 7.25% 8.35%

Overdraft facility YEN – Westpac NZ 500 JPY 7.25% 8.35%

The balance drawn on each of these at 30 June 2020 is nil (2019: nil).

27. RECONCILIATION OF THE PROFIT FOR THE PERIOD WITH THE NET CASH FROM
OPERATING ACTIVITIES

In thousands of New Zealand dollars
Note
2020
30 June
2019
30 June

(Loss)/Profit for the period (9,701) (27,717)

Adjustments for:

Depreciation 13/15 8,748 4,556

Amortisation 14 2,122 1,865

(Gain) on disposal of property, plant & equipment (233) (62)

Share based payments 9 329 678

Supplier share scheme – inventory purchase 459 –

Fair value loss in biological assets 10 389 652

Net loss on fair value of derivatives 8 456 991

Wind-up of equity accounted investee 1,070 –

Interest income from investing activities (264) (518)

Gain on deemed sale of 51% of Comvita China 7 – (4,055)

Equity accounted investees – profit elimination movement 17b – (1,623)

Share of loss/(profit) equity accounted investees 17b 174 (448)

Impairment – goodwill 14 – 19,825

Impairment – equity accounted associates 17c 5,928 2,401

Change in fair value of contingent consideration – (484)

Other – (123)

Profit adjusted for non-cash items 9,477 (4,062)

Change in trade payables relating to investing activities (209) (5,243)

Changes in sundry receivables related to shares – (11)

Movement in working capital items:
Change in inventories 19,513 (15,700)

Change in trade receivables 13,152 24,935

Change in sundry debtors and prepayments 128 3,926

Change in trade and other payables (2,258) 6,533

Change in employee benefits (420) 33

Change in tax payable 606 (806)

Change in deferred tax (2,413) (2,850)

Change in working capital items from foreign currency translation reserve 1,084 (1,156)

Other movements:
Change related to business combination – 15,086

Movement of deferred tax in equity (768) 306

Prepayment to equity accounted investee 1,435 –

Foreign investor tax credits – 10

Foreign currency reserve (30) 85

Net cash from operating activities 39,297 21,086

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P36 Comvita Financial Statements 2020- P37

28. EMPLOYEE SHARE SCHEMES

(a) Executive share scheme

Comvita Limited has an Executive Employee Share Scheme called the Comvita Limited Partly Paid Share Scheme (“The Scheme”). The
Scheme is designed to provide key employees with an opportunity to benefit from share price growth. A summary of the key points of the
Scheme are as follows:

• Comvita will periodically offer the rights to acquire a certain number of ordinary shares to key employees. The issue price of the shares
will be at fair value.

• When the offer is accepted Comvita will issue the shares to the Scheme Trustee (Comvita Share Scheme Trustee Limited, which is a
subsidiary Company) who will hold the shares on the employees behalf.

• The employee will pay 1 cent for each share at issue date. The partly paid shares will carry entitlements to voting rights, dividend
rights and rights to share in surplus assets of Comvita to the extent that they are paid up.

• The release of shares are subject to a share price hurdle threshold being met as described in the Scheme and certain vesting
conditions, primarily ongoing service to the Group, and insider trading legislation and other applicable laws.

• On transfer the employee has to pay up the balance of the released shares. If the share price hurdle applicable to any shares is not
met on or before each of their respective anniversary dates, the employee will not be able to pay up the balance of the released shares
and they will receive back the initial payment for those shares not released and the associated shares are forfeited.

Entitlements on issue at

In thousands 30 June 2020 30 June 2019

Number of

entitlements

Weighted
average

exercise price

Number of

entitlements
Weighted
average
exercise price

Entitlements outstanding at beginning of year 2,028 7.59 2,057 7.67

Entitlements granted during the year – – 578 6.33

Entitlements forfeited during the year (800) 8.52 (463) 7.44

Entitlements converted to ordinary shares
(Note 24)

– – (144) 3.67

Entitlements outstanding at end of year 1,228 7.05 2,028 7.59

There are 40 (2019: 53) employees in the scheme. The number of entitlements at 30 June 2020 is 1.7% (30 June 2019: 3.9%) of total
shares.

Fair Value of Share rights granted

The Group’s share based payments are level 2 on the fair value hierarchy, involving a combination of quoted (the Company’s share price)
and unquoted prices. The fair value of services received in return for share entitlements granted to employees is measured by reference to
the fair value of shares. The estimate of the fair value of the services received is measured based on a Monte Carlo simulation model.

Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted
average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the
instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate
(based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in
determining fair value.

28. EMPLOYEE SHARE SCHEMES (CONTINUED)

(a) Executive share scheme (continued)

Fair value of share entitlements and assumptions

Issue Date 30-Sep-16 30-Jun-17 8-Oct-18

Entitlements issued (number) 801,250 582,500 577,500

Entitlements on hand (at 30 June 2020) 255,625 447,500 525,000

Fair value at measurement date $1.26 $1.59 $1.08

Share price at grant date $11.30 $5.80 $6.00

Grant date 30-Sep-16 30-Jun-17 8-Oct-18

Exercise price $11.08 $5.60 $6.33

Expected price volatility 23.7% 52.6% 34.2%

Share life (weighted average life of each
tranche)

2-4 years 2-4 years 2-4 years

Expected dividend yield 2.73% 3.26% 1.02%

Risk-free interest rate 1.87% 1.81% 1.88%

Forecast share hurdles at 30 June 2020* $14.74 – $16.16 $7.34 – $7.98 $7.60 – $8.71

The expected volatility is based on analysing the historic volatility (calculated based on the weighted average remaining life of the share
entitlements), adjusted for any expected changes to future volatility due to publicly available information. Share entitlements are granted
under a service condition. Such conditions are not taken into account in the grant date fair value measurement of the services received. The
grants in relation to key management personnel also contain a market condition relating to a share price hurdle. This condition has been
taken into account in the grant date fair value measurement of the services received.

* The forecast share price hurdle calculation can change based on the WACC percentage used and future dividends paid.

There are no entitlements exercisable at the end of the year.

(b) Staff share scheme

Employees who have served continuously with the Company for a period of at least 12 months, are given the opportunity to subscribe for
ordinary shares in the Company from time to time. An interest free loan is advanced by the Company not exceeding $2,340, repayable over
three years.

2020 2019
Employees in the scheme 44 75

Number of shares held 25,184 30,911

% of share capital 0.03% 0.06%

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P38 Comvita Financial Statements 2020- P39

29. FINANCIAL INSTRUMENTS

Overview

Exposure to credit, liquidity and market risks arises in the normal course of the Company’s business.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for
measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these
financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Audit and Risk Committee is designated to develop and monitor the Group’s risk management policies. The committee reports
regularly to the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect
changes in market conditions and the Group’s activities. The Group through its training and management standards and processes
aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers. As the counterparty of financial instruments is
Westpac New Zealand Limited, it is considered there is minimal credit risk.

The majority of revenue is generated from retailers and consumers and there is no geographical concentration of credit risk. In order to
determine which customers are classified as having payment difficulties, the Group applies a mix of duration and frequency of default.
Trade receivables aging are monitored on a monthly basis and the Company does not require collateral in respect of trade and other
receivables, however Personal Guarantees are obtained where the Company considers it is appropriate.

The Board has approved a credit policy under which new customers are analysed individually for credit worthiness before the Group’s
standard payment terms and conditions are offered. The Group’s review includes reviewing references. Customers that fail to meet
the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

Where possible, our interest in goods sold are subject to retention of title clauses and a security interest is registered on the Personal
Property Securities Register (PPSR), so that in the event of non-payment the Group may have a secured claim.

The Group’s policy is to provide financial guarantees only to subsidiaries and equity accounted investees.

Liquidity risk

Liquidity risk represents the Group’s ability to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation.

Due to the seasonal nature of raw materials supply the Group has credit lines in place to cover timing differences to offset the
mismatch of receipts and payments. The borrowings are by way of overdraft and committed credit facilities.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters while optimising return on risk. The Group buys and sells derivatives, and
also incurs financial liabilities in order to manage market risks. All transactions are carried out within the Treasury Policy guidelines set
by the Board of Directors. Generally the Group seeks to apply hedge accounting in order to manage volatility in the income statement..

Currency risk

The Group is exposed to currency risk on sales that are denominated in a currency other than its functional currency, the New Zealand
Dollar. The currencies in which transactions are primarily denominated are United States Dollars, Japanese Yen, Australian Dollars,
Hong Kong Dollars, British Pounds and Chinese Yuan.

The Group hedges are based on net foreign currency receipts. At any point in time the Group hedges between 40% to 100% of its
estimated foreign currency exposure in respect of net cash receipts expected to be received over the following 12 months. The Group
uses a mixture of forward exchange contracts, collars and options to hedge its currency risk, most with a maturity of less than one year
from the reporting date. When necessary, forward exchange contracts are rolled over at maturity.

29. FINANCIAL INSTRUMENTS (CONTINUED)

Liquidity risk

The following table sets out the contractual maturities of financial liabilities including interest payments and derivatives:

In thousands of New Zealand dollars Stmt of
financial
position

Contractual
cash flows

6 months
or less

6-12
months

1-2 years 2-5 years 5-10 years

2020

Non-derivative financial liabilities
Secured bank loans (32,200) (33,206) (14,502) (8,379) (10,325) – –

Trade and other payables (22,707) (22,707) (22,707) – – – –

Total non-derivative liabilities (54,907) (55,913) (37,209) (8,379) (10,325) – –

Derivatives
Inflow – 32,757 19,194 13,486 43 34 –

Outflow (714) (33,465) (18,949) (13,375) (616) (525) –

Total (714) (708) 245 111 (573) (491) –

2019
Secured bank loans (99,250) (105,227) (1,695) (1,695) (101,837) – –

Trade and other payables (29,471) (29,471) (29,471) – – – –

Total non-derivative liabilities (128,721) (134,698) (31,166) (1,695) (101,837) – –

Derivatives
Inflow – 27,029 17,681 8,547 367 433 –

Outflow (2,420) (29,329) (18,336) (8,914) (939) (1,141) –

Total (2,420) (2,300) (655) (367) (572) (708) –

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P40 Comvita Financial Statements 2020- P41

29. FINANCIAL INSTRUMENTS (CONTINUED)
Currency risk
In thousands of New Zealand dollars

Group

2020
RMB AUD GBP HKD USD Other

Trade receivables 7,288 1,860 383 733 1,586 1,589

Trade and other payables (1,293) (2,602) (438) (1,024) (1,993) (1,006)

Gross statement of financial position exposure 5,995 (742) (55) (291) (407) 583

Forward exchange contracts (local currency) 40,000 6,750 750 12,000 6,500 126,000

2019
RMB AUD GBP HKD USD Other

Trade receivables 6,002 5,073 1,262 991 6,269 920

Trade and other payables (2,050) (1,530) (570) (815) (1,630) (513)

Gross statement of financial position exposure 3,952 3,543 692 176 4,639 407

Forward exchange contracts (local currency) – 2,820 1,317 29,250 7,359 –

Sensitivity analysis

A 20 percent strengthening and 20% weakening of the NZD against the following currencies at 30 June would have changed the asset
or liability values in the statement of financial position at 30 June through a change in equity and the income statement by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis for 2020 assumes a
20 percent (30 June 2019: 20 percent) strengthening and weakening of the NZD.

2020 2020 2019 2019
Equity Income statement Equity Income statement

+20% -20% +20% -20% +20% -20% +20% -20%

AUD 1,204 (1,807) – – 491 (737) – –

GBP 241 (361) – – 461 (692) – –

USD 1,679 (2,519) – – 1,806 (2,706) – –

HKD 399 (598) – – 921 (1,380) – –

CNH 1,436 (2,146) – – – – – –

JPY 303 (456) – – 581 (874) – –

Classification and Fair Values

The carrying amount of all assets and liabilities reflects the fair value. They are classified as follows:

Classification Asset or liability
Amortised cost Trade and other receivables, cash and cash equivalents, trade and other

payables, loans and borrowings

Fair value through profit and or loss Derivatives

Fair value through OCI Other investments

30. RELATED PARTIES

Transactions with key management personnel

The key management personnel consists of the Leadership team of Comvita.

Key management and director compensation comprised:

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Director fees 550 514

Short term employee benefits 2,227 2,663

KiwiSaver employer contribution 69 48

Share based payments 84 349

Total 2,930 3,574

On the 13 March 2020, the Company issued 307,488 ordinary shares from treasury stock to CEO David Banfield. The subscription price
for the shares was satisfied partly through the provision of a $450,000 interest free loan, with the remainder settled by David Banfield in
cash. The acquisition of shares by David Banfield was at market value, calculated as the volume weighted average of prices at which CVT
shares traded over the prior 10 trading days.

At 30 June 2020 Directors and other key management personnel of the Company control 3.72% (2019: 4.84%) of the voting shares of the
Company.

Other transactions with key management personnel

Other related party transactions

In thousands of New Zealand dollars 2020
30 June
2019
30 June

Consulting fees

– Brett Hewlett 82 12

– Luke Bunt 31 –

– Neil Craig 5 –

Craigs Investments

– Custodial and secretarial fees 22 48

– Capital raise underwriting fee 800 –

Total 940 60

No amounts are payable as at 30 June 2020 for the transactions listed in the table above (2019: nil).

Consulting fees were paid to Directors acting in an Executive Director capacity in respect of the Strategic Review and in relation to Due
Diligence Committee duties for the Capital Raise

Craigs Investment Partners Limited are considered to be a related party as Neil Craig was Chairman of both entities for a portion of the
financial year. Craigs Investment Partners Limited manage the Comvita share purchase program (START Scheme), provided secretarial
services and underwriting services related to Comvita’s capital raise.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Comvita Financial Statements 2020 – P42 Comvita Financial Statements 2020- P43

30. RELATED PARTIES (CONTINUED)

Subsidiaries

Country of
Incorporation
Ownership
Interest Held
Balance
Date

Principal Activity

Comvita New Zealand Limited New Zealand 100% 30 June Manufacturing and marketing
Medibee Limited New Zealand 100% 30 June Not trading

Comvita Taiwan Limited New Zealand 100% 30 June Not trading

Bee & Herbal New Zealand Limited New Zealand 100% 30 June IP ownership

Apimed Medical Honey Limited New Zealand 100% 30 June IP ownership

Comvita Landowner Share Scheme Trustee
Limited

New Zealand 100% 30 June Apicultural land owner share
scheme

Kiwi Bee Medical Limited * New Zealand 100% 30 June Apiary and medical honey
extraction

Jonno Developments Limited * New Zealand 100% 30 June Research and development

Kyoto Forests of New Zealand Limited New Zealand 100% 30 June Not trading

Comvita Share Scheme Trustee Limited New Zealand Management
control

30 June Executive employee share
scheme

Comvita USA, Inc USA 100% 30 June Selling and distribution

Comvita Japan Company Limited Japan 100% 30 June Selling and distribution

Comvita Korea Co Limited Korea 100% 30 June Selling and distribution

Comvita Food (China) Limited China 100% 31 December Selling and distribution

Comvita China Limited Hong Kong 100% 30 June Selling and distribution

Comvita Holdings HK Limited Hong Kong 100% 30 June Holding Company

Greenlife (New Zealand) Product Limited Hong Kong 100% 30 June Not trading

Comvita HK Limited Hong Kong 100% 30 June Selling and distribution

Comvita Holdings Pty Limited Australia 100% 30 June Holding Company

Comvita Australia Pty Limited Australia 100% 30 June Manufacturing, selling &
distribution

Olive Leaf Australia Pty Limited Australia 100% 30 June Not trading

Olive Products Australia Pty Limited Australia 100% 30 June Property ownership

Comvita IP Pty Limited Australia 100% 30 June IP ownership

Comvita Health Pty Limited Australia 100% 30 June Not trading

Medihoney Pty Limited Australia 100% 30 June Not trading

Medihoney (Europe) Limited United Kingdom 100% 30 June Not trading

Comvita Holdings UK Limited United Kingdom 100% 30 June Holding Company

Comvita UK Limited United Kingdom 100% 30 June Selling and distribution

New Zealand Natural Foods Limited United Kingdom 100% 30 June Not trading

* Kiwibee Medical Limited and Jonno Developments Limited amalgamated into Comvita New Zealand Limited effective 1 July 2020.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

Independent Auditor’s
Report
To the Shareholders of Comvita Limited

Report on the audit of the consolidated financial statements

Opinion
In our opinion, the accompanying consolidated financial
statements of Comvita Limited (the ’Company’) and its
subsidiaries (the ‘Group’) on pages 3 to 42:

i. Present fairly in all material respects the Group’s
financial position as at 30 June 2020 and its financial
performance and cash flows for the year ended on
that date; and

ii. Comply with New Zealand Equivalents to
International Financial Reporting Standards and
International Financial Reporting Standards.

We have audited the accompanying consolidated
financial statements which comprise:

— The consolidated statement of financial position as
at 30 June 2020;

— The consolidated income statement, statements of
comprehensive income, changes in equity and cash
flows for the year then ended; and

— Notes, including a summary of significant
accounting policies and other explanatory
information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA Code’), and we have fulfilled our
other ethical responsibilities in accordance with these requirements and the IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated
financial statements section of our report.

Our firm has also provided other services to the Group in relation to taxation services. Subject to certain restrictions,
partners and employees of our firm may also deal with the Group on normal terms within the ordinary course of trading
activities of the business of the Group. These matters have not impaired our independence as auditor of the Group. The
firm has no other relationship with, or interest in, the Group.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements in the current period. We summarise below those matters and our key audit procedures
to address those matters in order that the Shareholders as a body may better understand the process by which we arrived
at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit
opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements
of the consolidated financial statements.

Comvita Financial Statements 2020 – P44 Comvita Financial Statements 2020- P45

The key audit matter How the matter was addressed in our audit

Business Combination – Comvita China

Refer to Note 5 to the Financial Statements.

During the prior year the Group acquired Comvita
Food (China) Limited and Comvita China Limited
(collectively referred to as “Comvita China”). The
finalisation of the purchase price allocation
component of the business combination was
completed during the current financial year.

Accounting for business combinations requires
management to make judgements in order to:

— Identify all assets acquired and liabilities
assumed; and

— Estimate the fair value of the identified
assets and liabilities.

Determining the fair value of identifiable assets
and liabilities assumed may require management
to estimate cash flow forecasts, discount rates
and other unobservable assumptions.

Our audit procedures included the following, amongst others:

— We reviewed the sale and purchase agreements underpinning
the acquisition;

— We reviewed and challenged management’s assessment of the
identifiable assets acquired and liabilities assumed, including
exploring the possibility that further unidentified assets or
liabilities could exist;

— We obtained an understanding of the approach to the valuation
of each identifiable asset and liability, employed by
managements external expert;

— We utilised KPMG specialists to review management’s valuation
of identifiable assets and liabilities; and

— We assessed disclosures of the transactions in the financial
statements against applicable accounting standards.

There were no material findings in respect of the purchase price
allocation or the related disclosure.

Other information

The Directors, on behalf of the Group, are responsible for the other information included in the entity’s financial
statements and Annual Report. Other information includes the Directors’ Declaration, Statutory Information and Company
Directory and the other information included in the Annual Report. Our opinion on the consolidated financial statements
does not cover any other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have received the Directors’ Declaration, Statutory Information and Company Directory and have nothing to
report in regards to it. The Annual Report is expected to be made available to us after the date of this Independent
Auditor’s Report and we will report the matters identified, if any, to those charged with governance.

Use of this independent auditor’s report

This independent auditor’s report is made solely to the Shareholders as a body. Our audit work has been undertaken so
that we might state to the Shareholders those matters we are required to state to them in the independent auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions
we have formed.

The key audit matter How the matter was addressed in our audit

Impairment of Non-Current Assets

Refer to the impairment expense recognised in
the Income Statement on Page 3, the Statement
of Financial Position on Page 5 and Note 3(j).

The Group has $125m of non-current assets. In
light of performance in the current year and the
Group’s net assets exceeding market
capitalisation at 30 June 2020, the consideration
of impairment of non-current assets is considered
to be a key audit matter. This is due to the
significance of the assets and the range of
judgemental assumptions about future
performance.

In the current year the Group has identified the
following cash generating units (CGU’s):

— Greater China;

— Apiaries; and

— Other.
The Group utilises value in use models to
determine the recoverable amount of the Group’s
CGU’s, which is then compared to the CGU’s net
assets. In relation to these models, particular
attention was required of:

— The strategic direction of the Group;

— The future cash flows, including the impacts
of Covid-19 (if any);

— UMF Honey quality and annual yield (KGs)
per Hives;

— Terminal growth rates; and

— The discount rate applied to those cash
flows.

Our audit procedures included the following, amongst others:

— We assessed the Group’s determination of CGU’s based on our
understanding of the nature of the Group, their operations and
the internal reporting of the business;

— We assessed the value in use models (VIU) for each CGU
considering the methodology adopted in the discounted cash
flow valuation models against the requirements of the
applicable financial reporting standards;

— We considered the consistency of assumptions in individual VIU
models with the overall Group 5 year strategic plan to ensure
appropriate and consistent cash flows reported. We analysed
the future cash flow forecasts used and determined whether
they are reasonable based on the implementation of the
strategic plan and historical achievements;

— We utilised valuation specialists to challenge key judgements,
which included the weighted average cost of capital applied and
terminal growth rates, through comparison to market data and
industry research;

— We performed sensitivity analysis on key cash flow forecast
assumptions, UMF quality, annual honey yields, WACC and
terminal growth, to understand the impact of reasonable
possible changes in key assumptions in various scenarios;

— We performed testing to compare the calculated recoverable
values to the associated carrying amounts, and assessed
whether any impairment expense is to be recognised;

— We examined conceptually and in detail why net assets
exceeded market capitalisation as at 30 June 2020; and

— We considered and reviewed appropriateness, sufficiency and
clarity of required disclosures included in the Group financial
statements.

The procedures performed did not identify any material adjustments
to the impairment expense recognised or the related disclosure.

Comvita Financial Statements 2020 – P46 Comvita Financial Statements 2020- P47

Principal activity

The principal activity of the Company is that of manufacturing and marketing quality natural health products.

Dividend

No dividends have been declared or paid for the year ended 30 June 2020.

Directors’ remuneration for the year ended 30 June 2020

In thousands of New Zealand dollars Fee Other Total
B Hewlett 101 82 183
N. J Craig (ceased 30 June 2020) 93 5 98
L.N.E Bunt 82 31 113
S.J Kennedy 77 – 77
P Reid 63 – 63
B Major (appointed 1 September 2019) 52 – 52
C Dayong (appointed 17 October 2019) 46 – 46
Z Guangping (appointed 17 October 2019)* 22 – 22
M.J Denyer (Retired 16 August 2019) 14 – 14
Total 550 118 668

*Z Guangping was granted a leave of absence in accordance with the constitution for the period 1 February to 30 June 2020.

INTERESTS REGISTER
Directors have disclosed the following directorships held by them excluding family companies and companies with no association to their
appointment as director of the Company or any companies in the Group:

N.J Craig
Chairman – Craigs Investment Partners
Director – Comvita Limited
Chairman – Pohutukawa Private Equity Limited
Director – Comvita New Zealand Limited
Director – New Zealand Cricket
Director – Hendry Nominees Limited
Director – AGInvest Holdings Limited
Director – Deutsche Craigs Limited
Member – Oriens Capital Investment Committee

B. Major
Chairman – Gibb Holdings (Nelson) Ltd
Chairman – High Value Nutrition National Science Challenge
Chairman – Go Global Avocado Primary Growth Partnership
Deputy Chairman – Hautupua General Partner Ltd
Deputy Chairman – Miro Trading General Partner Ltd
Managing Director – Sinotearoa Ltd
Director – Comvita Limited
Director – BioVittoria Ltd
Director – BioVittoria Investments Ltd
Member – Oriens Capital Investment Committee

P.R.T Reid
Chairman – Figured Limited
Chairman – Volpara Health Technologies Limited
Director – Comvita Limited
Director – The Equanut Company Limited
Director – Christchurch International Airport Limited
Director – Pukeko Pictures GP Limited (ceased 31 March 2020)

S.J Kennedy
Director – Comvita Limited
Director – SJK Consulting Limited
Director – Lifestream International Limited
Director – Lanaco Limited
Director – Middlemore Foundation Limited
Director – Calocurb Ltd
Director – New Zealand Rural Land Co

L.N.E Bunt
Director – Comvita Limited
Chairman – Heat Treatments Ltd

B.D Hewlett
Chairman – Priority One Inc.
Chairman – Bluelab Corporation Limited
Chairman – Comvita Limited
Director – Quayside Holdings Limited

Z. Guangping
Director – Comvita Limited

C. Dayong
Director – Comvita Limited
Director – China Resources Ng Fung Limited
Director – China Resources Retail (Group) Company Limited
Director – Pacific Coffee (Holdings) Limited
Director – China Resources Snow Breweries Limited
Director – CRE Alliance Fund Management Company Limited

S T A T U T O R Y I N F O R M A T I O N

Responsibilities of the Directors for the consolidated financial statements

The Directors, on behalf of the Group, are responsible for:

— The preparation and fair presentation of the consolidated financial statements in accordance with generally accepted
accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards)
and International Financial Reporting Standards;

— Implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is
fairly presented and free from material misstatement, whether due to fraud or error; and

— Assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations,
or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objective is:

— To obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error; and

— To issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.

A further description of our responsibilities for the audit of these consolidated financial statements is located at the
External Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/

This description forms part of our independent auditor’s report.

The engagement partner on the audit resulting in this independent auditor’s report is Trevor Newland.

For and on behalf of

KPMG
Tauranga

24 August 2020

Comvita Financial Statements 2020 – P48 Comvita Financial Statements 2020- P49

DIRECTORS OF GROUP COMPANIES OTHER THAN SHOWN ABOVE

Companies Directors
Apimed Medical Honey Limited D Banfield*

Bee & Herbal New Zealand Limited D Banfield *

Comvita Australia Pty Limited B Hewlett M Tobin

Comvita China Limited M Sadd G Zhu

Comvita Food (China) Limited D Banfield* A Chen G Zhu

Comvita Health Pty Limited B Hewlett M Tobin

Comvita HK Limited D Banfield*

Comvita Holdings HK Limited D Banfield*

Comvita Holdings Pty Limited B Hewlett M Tobin

Comvita Holdings UK Limited B Hewlett

Comvita IP Pty Limited B Hewlett M Tobin

Comvita Japan K. K. D Banfield* R Shida*

Comvita Korea Co Limited J Keast J Park*

Comvita Landowner Share Scheme Trustee Limited D Banfield*

Comvita New Zealand Limited N J Craig B D Hewlett

Comvita Share Scheme Trustee Limited S Kennedy L Bunt

Comvita Taiwan Limited D Banfield*

Comvita UK Limited B Hewlett

Comvita USA, Inc D Banfield* A Barr*

Green Life (New Zealand) Product Limited D Banfield*

Jonno Developments Limited D Banfield*

Kiwi Bee Medical Limited A J Bougen C T Baskin*

Kyoto Forests of New Zealand Limited D Banfield*

Medibee Limited D Banfield*

Medihoney Europe Ltd B Hewlett

Medihoney Pty Ltd B Hewlett M Tobin

New Zealand Natural Foods Limited B Hewlett

Olive Leaf Australia Pty Limited B Hewlett M Tobin

Olive Products Australia Pty Limited B Hewlett M Tobin

* denotes an executive of a Group Company
** Kiwibee Medical Limited and Jonno Developments Limited amalgamated into Comvita New Zealand Limited effective 1 July 2020

DIRECTORS OF GROUP COMPANIES (CONTINUED)

Share Dealings of Directors – beneficial

Director
Number of

Shares Sold
Value of

Shares Sold
Number of Shares

Purchased
Value of Shares

Purchased
N.J Craig – – 395,940 997,197
S.J Kennedy (61) (181) 7,090 18,778
L.N.E Bunt – – 20,000 47,027
P.R.T Reid – – 11,517 28,793
B. Major – – 24,402 68,071
B.D Hewlett (152) (440) 13,300 32,900

Directors Shareholding

Directors, or entities associated with directors, held the following shareholding in Comvita Limited at 30 June 2020:

Director Opening Balance Shares Sold/
Transferred

Shares Purchased/
Transferred

Closing Balance

N.J Craig
Beneficial
Custodial Services Limited (A/C 4) 500,000 – 171,875 671,875
Eaglesham Trust 420,000 – 171,250 591,250
Sheryl Denise Tebbutt 75,000 – 25,780 100,780
Anna Beth Craig 25,000 – 8,593 33,593
Custodial Start Scheme 11,098 – 18,383 29,481
Craigs KiwiSaver Scheme Account 177 – 59 236

Non-beneficial 170,000 – 78,078 248,078

Total 1,201,275 – 474,018 1,675,293

S.J Kennedy
Beneficial
S.J Kennedy 8,865 – 4,000 12,865
Custodial start scheme 7,088 (61) 3,090 10,117
Total 15,953 (61) 7,090 22,982

L.N.E Bunt
L.N.E Bunt and G.E Bunt 15,000 – 11,510 26,510
The Bunt Family Trust 35,000 – 8,490 43,490
Total 50,000 – 20,000 70,000

P.R.T Reid
Beneficial
Craigs KiwiSaver Scheme Account 47,797 – 11,517 59,314
Total 47,797 – 11,517 59,314

B. Major
Beneficial
Ms S A Parkinson & Mr R M Major 3,550 – 24,402 27,952
Total 3,550 – 24,402 27,952

S T A T U T O R Y I N F O R M A T I O NS T A T U T O R Y I N F O R M A T I O N

Comvita Financial Statements 2020 – P50 Comvita Financial Statements 2020- P51

Directors Indemnity and Insurance

The Company has insured all its Directors and the Directors of its wholly owned subsidiaries against liabilities to other parties (except
the Company or a related party of the Company) that may arise from their positions as Directors. The insurance does not cover liabilities
arising from criminal actions. The Company has not been required to indemnify its Directors for any liabilities during the year.

Director Opening Balance Shares Sold/
Transferred
Shares Purchased/
Transferred
Closing Balance

B.D Hewlett
Beneficial

Brett Donald Hewlett 60,490 – 4,800 65,290

YRW Trustees 2005 Limited 310,889 – 8,500 319,389

Brett Donald Hewlett – Start
Scheme

13,439 (152) – 13,287

Total 384,818 (152) 13,300 397,966

Beneficial 1,533,393 (213) 472,429 2,005,429

Non-beneficial 170,000 – 78,078 248,078

Total 1,703,393 (213) 550,327 2,253,507

DIRECTORS OF GROUP COMPANIES (CONTINUED) Employees’ remuneration
During the 12-month period to 30 June 2020 the following numbers of employees received remuneration of at least $100,000.

Number of employees
$100,000 to $110,000 13
$110,000 to $120,000 10
$120,000 to $130,000 13
$130,000 to $140,000 4
$140,000 to $150,000 5
$150,000 to $160,000 6
$160,000 to $170,000 6
$170,000 to $180,000 5
$180,000 to $190,000 2
$190,000 to $200,000 3
$230,000 to $240,000 3
$250,000 to $260,000 1
$260,000 to $270,000 1
$290,000 to $300,000 1
$310,000 to $320,000 1
$320,000 to $330,000 1
$330,000 to $340,000 1
$340,000 to $350,000 1
$350,000 to $360,000 1
$370,000 to $380,000 1
$380,000 to $390,000 1
$410,000 to $420,000 1

Note: these bands are New Zealand dollar equivalents and reflect the impact of fluctuations in the foreign exchange rates for remuneration
of overseas based employees. The figures include bonus provisions made during the year which may have not been paid at period end. It
does not include any remuneration or benefit relating to the Executive Share Scheme.

Donations

During the period the Group made cash donations of $6,000 (2019: $22,000). The Company also made donations of products to
charitable organisations.

S T A T U T O R Y I N F O R M A T I O NS T A T U T O R Y I N F O R M A T I O N

Comvita Financial Statements 2020 – P52

DIRECTORS
C o m v i t a B o a r d O f D i r e c t o r s

Neil John Craig
(ceased 30 June 2020)

Lucas (Luke) Nicholas Elias Bunt

Sarah Jane Kennedy

Paul Robert Thomas Reid

Brett Donald Hewlett

Robert Malcolm Major
(appointed 1 September 2019)

Guangping Zhu
(appointed 17 October 2019)

Dayong Cheng
(appointed 17 October 2019)

REGISTERED OFFICE
C o m v i t a L i m i t e d

23 Wilson Road South, Paengaroa
Private Bag 1, Te Puke 3153
Bay of Plenty, New Zealand
Phone +64 7 533 1426
Fax +64 7 533 1118
Freephone 0800 504 959
Email investor-relations@comvita.com
www.comvita.com

BANKERS
W e s t p a c B a n k i n g C o r p o r a t i o n

Level 8
16 Takutai Square
PO Box 934
Auckland 1140

AUDITORS
K P M G T a u r a n g a

Level 2
247 Cameron Road
PO Box 110
Tauranga 3140

SOLICITORS
S h a r p T u d h o p e

Level 4
152 Devonport Road
Private Bag TG12020
Tauranga 3110

SHARE REGISTRY
L i n k M a r k e t S e r v i c e s L i m i t e d

PO Box 91976
Auckland 1142

Analysis of shareholder by size as at 1 August 2020

Category
No of shareholders Shares held Percentage of

shareholders
Percentage of

shares
Up to 1,000 shares 1,228 607,541 35.63% 0.87%

1,001 – 5,000 shares 1,407 3,509,152 40.82% 5.03%

5,001 – 10,000 shares 383 2,751,754 11.11% 3.94%

10,001 – 100,000 shares 382 9,635,633 11.08% 13.81%

100,001 shares or more 47 53,275,872 1.36% 76.35%

Total 3,447* 69,779,952 100.0% 100.0%

*This number does not include a number of shareholders within Custodial and Nominee companies

Top 20 shareholders as at 1 August 2020

Shareholder Shares held Percentage of
shares

Li Wang 8,552,736 12.26%

National Nominees New Zealand Limited 4,585,428 6.57%

China Resources Ng Fung Limited 4,582,000 6.57%

Kauri NZ Investments Limited 3,558,077 5.10%

Alan John Bougen & Lynda Ann Bougen & Graeme William Elvin 2,397,550 3.44%

Custodial Services Limited – Account 3 2,266,850 3.25%

Accident Compensation Corporation 1,907,641 2.73%

Custodial Services Limited – Account 4 1,804,256 2.59%

Junxian Li 1,738,657 2.49%

Bnp Paribas Nominees NZ Limited 1,532,117 2.20%

Forsyth Barr Custodians Limited 1,421,934 2.04%

Li Sun 1,410,000 2.02%

Robert Bertram Tait & Jane Gibbons Tait & Ian James Craig 1,327,053 1.90%

Pt Booster Investments Nominees Limited 1,007,255 1.44%

Maori Investments Limited 1,000,000 1.43%

JBWERE (Nz) Nominees Limited 986,506 1.41%

FNZ Custodians Limited 899,978 1.29%

Citibank Nominees (Nz) Ltd 787,876 1.13%

Kevin Glen Douglas & Michelle Mckenney Douglas 753,655 1.08%

Masfen Securities Limited 734,010 1.05%
Other 26,526,373 38.01%
Total Ordinary Shares** 69,779,952 100.00%

** does not include 1,228,125 partly paid redeemable share entitlements as detailed in Note 28 to the annual accounts

Substantial security holders as at 1 August 2020

Shareholder Shares held Percentage of
shares
Li Wang 8,552,736 12.26%
China Resources Ng Fung Limited 4,582,000 6.57%

Milford Asset Management Limited 4,448,042 6.37%

Kauri NZ Investments Limited 3,558,077 5.10%

D I R E C T O R YS H A R E H O L D E R A N A LY S I S

NORTH AMERICA
C o m v i t a U S A I n c .

Comvita USA Inc.,
506 Chapala Street
Santa Barbara, CA 93101 | USA

Phone +1 855 449 2201
usacustomerservice@comvita.com

UNITED KINGDOM
C o m v i t a U K L i m i t e d

2nd Floor, 47a High Street
Maidenhead, SL61JT
United Kingdom

Phone +44 1628 779 460
info@comvita.co.uk

JAPAN
C o m v i t a J a p a n C o m p a n y L i m i t e d

Sangenjaya Horisho Bld 4F
1-12-39 Taishido, Setagaya-Ku
Tokyo 154-0004 | Japan

Phone +81 3 6805 4780
info@comvita-jpn.com

KOREA
C o m v i t a K o r e a C o L i m i t e d

18F Gwanghwamun Building,
149 Sejong-daero, Jongno-gu,
Seoul(03186), Korea

Phone +82 2 2631 0041
service.korea@comvita.com

AUSTRALIA
C o m v i t a A u s t r a l i a P t y L i m i t e d

10 Edmondstone Street
South Brisbane
Queensland 4101 | Australia

Phone +61 7 3845 1400
Freephone 1800 466 392
Customer Service 1300 653 436
info@comvita.com.au

CHINA
C o m v i t a F o o d ( C h i n a ) L i m i t e d

2501 – 2502 No. 7018 Sunhope E-Metro
Caitan Road
Futian District
Shenzhen | China

Phone +86 755 8366 1958
comvita@comvita.com.cn

HONG KONG
C o m v i t a H o n g K o n g L i m i t e d

Room 1320 – 1322 Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong

Phone +852 2562 2335
cs@comvita.com.hk

Comvita Financial Statements 2020- P54

Annual

Report
2020

Artist’s impression of Cranbourne North, Melbourne

Summerset is one of New Zealand’s

leading and fastest growing

retirement village operators.
Our business spans development, design and construction,

through to running retirement villages and care centres.

We aim to develop our villages on both sides of the Tasman
responsibly and help create a more sustainable future for all.

OUR RESIDENTS

Bringing the best of life to
our residents every day —
resulting in high levels of

resident satisfaction

OUR PEOPLE

People are the heart of
Summerset. Our values are:

Strong enough to care
One team

Strive to be the best

OUR ENVIRONMENT

Everyday we focus on:
Minimising was

te

Increasing energy efficiency
Being more sustainable

0 2

OUR RESIDENTS
Bringing the best of life to
our residents every day —
resulting in high levels of
resident satisfaction
OUR PEOPLE
People are the heart of
Summerset. Our values are:
Strong enough to care
One team
Strive to be the best
OUR ENVIRONMENT
Everyday we focus on:
Minimising waste
Increasing energy efficiency
Being more sustainable

Contents

Chair and CEO’s Report

0

6

Highlights

1

2

Who we are and what we deliver

12

2020 highlights 1

4

Portfolio growth

16

Our people and community

1

8

Our villages

24

Our commitment to sustainability

3

0

Our performance

34

Financial statements

40

Governance

7

9

Board of Directors

90

Executive leadership team

92

Remuneration

94

Disclosures

10

3

Directory

1

10

Company information

113

0 3

Strategy

This Annual Report of Summerset
Group Holdings Limited
(Summerset) is prepared in
accordance with New Zealand
equivalents to International
Financial Reporting Standards
(NZ IFRS), the NZX Listing Rules
and Corporate Governance Code,
the Companies Act 1993 and
aligned with the International
Integrated Reporting Council’s
(IIRC) International Integrated
Reporting Framework.

This Annual Report covers all
business operations for the year
ended 31 December 2020. We have
started to align our reporting to the

International Integrated Reporting
Framework to improve the way
we communicate and improve
transparency, we will continue to
build on this approach over the
coming years.

‘Bringing the best of life’ to our
residents is at the core of what
we do. The strategic pillars that
underpin this are Growth, Our
People and Our Customers.

Themes of wellness, innovation,
and sustainability run through our
work. This includes the wellbeing of
our people, being innovative in our
approach to ideas and technology,
and being more sustainable.

ABOUT THIS REPORT

Summerset Heritage Park, Ellerslie

0 4

Our strategy

Bringing the best of life

Our strategic goals are underpinned by our desire
to bring increased wellbeing to our customers

and sta�, by harnessing the power of innovation
and weaving sustainability into our work

Growth
We look for expansion

opportunities and
returns for our
shareholders

Our people

We want to create a great

place to work, where
our people can thrive

Our customers
We continually improve

and enhance our
o�ering to residents

Innovation SustainabilityWellbeing

0 5

Chair and CEO’s
report

Rob Campbell
Chair

Julian Cook
Chief Executive Officer

Welcome to Summerset’s annual
report for the 12 months ended
31 December 2020. This report
covers an unprecedented year in
which the COVID-19 pandemic had
a major impact on our business,
as it did throughout the world.
Our priority has been keeping our
residents and staff safe, and we
currently maintain our record of no
COVID-19 cases at Summerset.

This year we take our first
step toward integrated reporting.
This provides a fuller picture of
Summerset’s entire business, with
financial and sustainability elements
in one report.

Business performance
Reported underlying profit for the
full year is $98.3 million, a decrease
of 7% on 2019. Our IFRS net profit
after tax is $230.8 million, up 32

%

on 2019. Overall, the value of
investment property is $3.6 billion,
up 17% on 2019.

The financial performance of the
business for 2020 has been pleasing.
This is despite the impact of the
COVID-19 lockdown. During this
period prospects were unable to visit
our villages or sell their properties
and we have spent an additional
$9.2 million to date on COVID-19
related costs including preventative
measures to keep residents and
staff safe.

Our COVID-19 response
2020 was dominated by COVID-19
but we are pleased and grateful not
to have had any cases among staff
or residents to date. We activated
our pandemic plan in early March,
and moved quickly to protect our
residents and support them through
the subsequent lockdowns.

A range of protections were put in
place to keep our residents and staff
safe. The measures we took included
mandatory temperature checks and
face masks for staff, security on
village gates to screen visitors, a
negative COVID-19 test prior to
admission for new care residents,
and additional cleaning protocols. At
the outset of the crisis we also took
on extra staff in our care centres and
villages to provide additional care
for residents.

We stepped up physically distanced
activities in the villages to
provide connection and comfort
for residents, operated a grocery
delivery service for residents, and
set up an online wellness centre
to keep residents entertained. We
also provided iPads so residents
could video-call families and
friends during the higher alert
levels. The response from both
residents and their families on our
handling of the pandemic has been
overwhelmingly positive. We would
like to thank our dedicated staff
for their professionalism, resilience
and hard work throughout the
lockdown periods.

Annual Report 20

20

0 6

$98.3m
Underlying profit

In April 2020, we received
$8.6 million from the Government’s
initial wage subsidy scheme. This
was a period of great uncertainty for
the business.

At that time, sales of occupation
rights — a major source of
revenue — had ceased. We also
introduced several cost-saving
measures, including moving more
than 230 corporate staff to a four-
day week. The Executive Team and
Board of Directors also took a 20%
pay cut for the same 10-week period.
We repaid the wage subsidy in full
in December 2020 as trading for the
business has been strong over the
second half of 2020.

August’s lockdown in

Auckland

was a reminder that COVID-19 will
continue to impact our residents and
staff for the foreseeable future.

Villages and care
Village life has been affected
by the COVID-19 pandemic and
we look forward to the rollout
of the COVID-19 immunisation
programme, due this year.

We have been pleased to see
heightened enquiries and sales
from the third quarter of

2020

onwards. Performance in our care
business continued to track well,
with occupancy for the year at 96%
in our developed villages, versus
90% for the aged care sector overall.

Protections were put
in place to keep our
residents and staff safe
during lockdowns

2020 in review
Adapting to COVID-19
Summerset worked hard to ensure that
its residents and staff were kept safe
throughout 2020. We are pleased that
we have had no cases of COVID-19 in
our villages to date.

Expanding into

Australia

Our first village in the Melbourne suburb
of Cranbourne North is expected to
receive development approval shortly.
Summerset also holds eight hectares
in Torquay on the Bellarine Peninsula
in Victoria.

Chair Rob Campbell retires
Rob Campbell announced his
retirement from the Board in

December

2020, ending a decade as Chair.
Mr Campbell oversaw Summerset’s
listing on the NZX in 2011, and under
his leadership Summerset has grown
to become one of the NZX’s top
20 companies.

The Board thanks Mr Campbell for
his outstanding leadership which
covered a wide range of initiatives
and achievements, including the
introduction of memory care centres
for people living with dementia, an
improved staff offering, becoming
New Zealand’s first carbonzeroTM

retirement operator, and more
recently, Summerset’s expansion
across the Tasman.

His depth of experience and genuine
passion for the people at Summerset
will be missed.

The Board commenced the search for a
new Board member in December 2020
and once this search is complete, will
appoint a director as the new Chair.

C H A I R A N D C E O ‘ S R E P O R T

0 7

Growth and development
Despite the closure of our
construction sites during the first
COVID-19 lockdown, we completed
next-generation main buildings at
our Casebrook and Rototuna villages
in 2020.

These new buildings reflect the
evolution of our village centre
designs. They include our new state-
of-the-art memory care centre for
people living with dementia, as
well as serviced apartments and a
care centre.

Earthworks have progressed well
at our St Johns site in Auckland
and construction work will start
there in 2021. Building also starts in
2021 at our Lower Hutt site, where
final resource consent was granted
in November. We also lodged
resource consent for our villages in
Prebbleton and Rangiora. Our land
bank continues to expand, with the
acquisition of our ninth property in
Auckland in October 2020.

Our latest land acquisition in
Auckland is in Half Moon Bay. It
will be our first retirement village in
East Auckland.

We completed
next-generation
main buildings at
our Casebrook and
Rototuna villages

Our people
We were pleased to see our staff
engagement results increase in
2020, which at the time of survey
completion were at or above the
Australia/New Zealand and global
benchmarks of companies using the
same engagement tool.

We started 2020 with a plan to
prioritise pay and training for our
teams. In January we increased the
pay for care staff to equal the top
pay rates in the sector and increased
weekend allowances for care staff
in April.

We introduced an online
learning system and new training
programmes in 2020, enhancing
our onboarding and professional
development programmes.

We also invested in our
clinical leaders through the
implementation of a leadership
development programme.

Summerset was accredited with
tertiary status in the Accident
Compensation Corporation (ACC)’s
Accredited Employers Programme
for the third year running. During
2020, we launched three-year
strategies for health and safety,
learning and development, and
diversity and inclusion. These
strategies cover all parts of the
business, with tailored plans created
to meet the varying requirements of
individual business groups.

Sustainability
We have continued to make positive
progress on our carbon reduction
targets this year. Notably, we have
set a new science-aligned carbon
reduction target that commits us to
a 62% reduction in carbon emissions
per square metre of building area by
2032 (from 2017 levels).

The Board has oversight of climate-
related risks and opportunities
through our current reporting
framework. The forthcoming Task
Force for Climate-related Financial
Disclosures (TCFD) requirements will
add further disclosure in this area
and Summerset is well placed to
meet these.

Looking ahead
Despite COVID-19, we have gained
good ground since the end of New
Zealand’s nationwide lockdown in
May 2020. Our third and fourth
quarter sales were at record highs
and our business continues to
perform well.

We are optimistic about growth in
2021 and beyond. Our expansion
into Australia will take a major
step forward with the launch
of our first retirement village in
Victoria in late 2021/early 2022,
and we anticipate an increased
build rate across our New Zealand
sites. We will make further
progress toward sustainability
across Summerset, particularly in
design and construction.

We hold the largest land bank of
units in New Zealand’s retirement
village sector, providing a strong
outlook for our construction and
sales teams. This provides us
with a good spread of sites
across the country, allowing us
to change tempo depending on
market conditions.

Thank you to everyone who has
worked so hard throughout 2020. A
special thank you to our Summerset
staff, as well as their families and
support networks, for helping to
keep all our residents safe this year.

Rob Campbell
Chair
Julian Cook
Chief Executive Officer

Annual Report 2020

0 8

Delivering value

Buy land in desirable
places where people

want to retire

Build high quality,
modern villages

Hire skilled sta�
and help them thrive

Look after our
residents and provide

excellent care

Create sustainable
value for stakeholders Bringing

the best
of life

O

N
E

TE
A

M

S
T

R
O

N
G

EN
O

U
G

H
TO CARE

STRI
VE TO BE THE BEST

C H A I R A N D C E O ‘ S R E P O R T

0 9

A decade
at the top

Farewell from Julian Cook
It has been a privilege for me to lead
this company and to be part of an
organisation and industry that has
changed so many people’s lives for
the better.

I am retiring as Chief Executive
on 29 March after 10 years at
Summerset, seven of them as Chief
Executive. Summerset has grown
both in terms of size and maturity
over the last decade, and now is the
right time to hand it over for the next
phase of growth in New Zealand
and Australia.

I am enormously proud of what we
deliver to residents, staff and our
communities. Summerset started
out over 23 years ago as a small
family business founded by John
and Rose O’Sullivan. Their goal was
to create a retirement village that
was good enough for their nana.
This philosophy guides us still and
we always ask ourselves, ‘Is it good
enough for Mum?’

In 2014, my first year as Chief
Executive, we had 20 villages,

3,000

residents and 700 staff.

We now have 32 retirement villages
and another 10 in the pipeline. We
will open our first retirement village
in Australia in late 2021/early 2022,
and have another piece of land in
Victoria for a second village. We are
now the second largest retirement
village operator in New Zealand, with
over 6,200 residents and more than
1,800 staff.

We have grown sustainably over the
years, and despite 2020’s COVID-19
pandemic and lockdown, we are in
a strong position to continue into
the future.

Annual Report 2020

1 0

I am enormously proud
of what we deliver to
residents, staff and
our communities

Looking back, there are many
highlights, three in particular will stay
with me. The first of these is the 2011
stock exchange listing. This gave us
the capital to accelerate our growth.

The introduction of comprehensive
staff benefits, including health
insurance and the all staff share
scheme, was another step toward
rewarding our staff for their hard
work and loyalty. More recently,
starting up Summerset’s Australian
arm has given us the chance to use
all we have learnt in New Zealand to
build a brand-new offering for
Australian retirees.

In 2011, I knew Summerset had great
potential for growth, but most
importantly, I saw that there was
scope to improve our offering to
residents and staff.

My regular visits to our villages
assure me we are bringing the best
of life to our residents. I see a lot of
joy and companionship in our
villages, with people taking up new
hobbies, sharing old ones with new
friends, and creating a unique and
vibrant community.

Over time, we have gradually refined
and enhanced the homes, facilities
and activities we offer our residents.
New Zealand has a growing
population of older people, and it
makes me proud to see the lifestyle
and comfort we provide those who
choose to live in our villages.

I leave the company knowing we
have fulfilled the potential I saw 10
years ago. I have loved my time at
Summerset, and I will greatly miss all
its people.

Julian

Introducing
Scott Scoullar
I have had the pleasure
of being Summerset’s Chief
Financial Officer for almost seven
years now and the Deputy
Chief Executive for three years.
During this time, I have worked
alongside Julian and our Board
developing and implementing
Summerset’s strategy.

It’s a great honour as well as
a great opportunity to lead
one of New Zealand’s largest
retirement providers into its
next phase of development.

The possibilities as we embark on
our growth strategy into Australia
are exciting, and many of our
new sites in New Zealand are
truly ground-breaking.

At Summerset we are fortunate
to play such an important part in
people’s lives.

Our residents look to us to provide
a home and living environment
that is fulfilling, and they trust us
every day to look after them. The
way I think about it, every resident
living in our villages could be our
mum, dad, nana or poppa – and
therefore we will continue to make
their lives as special as we can.

I’m looking forward to starting
as Chief Executive and meeting
as many residents and staff as
possible. I’d like to thank Julian for
everything he has achieved over
the last 10 years.

Thank you to all our residents who
have chosen to live with us, to
our staff and to our shareholders.
I look forward to working with you
all over the coming years.

Scott

C H A I R A N D C E O ‘ S R E P O R T

1 1

Who we are and
what we deliver

Our people

6,200+
Residents

1,800+
Staff
members

95%
Village
resident satisfaction

Our care

97%
Care
resident satisfaction

972
57 care units1 and
915 care beds in portfo

lio

1,042
863 care units1 and
179 care beds in land bank

Our performace

$230.8m
Net profit after tax
FY19 $175.3m

$98.3m

Underlying profit

FY19 $106.2m

$266.8m
Operating cash flow
FY19 $237.9m

1 Care units include care suites and memory care apartments

Annual Report 2020

1 2

Our portfolio

4,442
Units
in portfolio

$3.9b
Total assets
FY19 $3.3b

5,992
Land bank
of units

32
Villages completed or
under development

↵

↵
↵
↵
↵
↵
↵
↵

↵

78

5

Sales of
occupation rights

10
Greenfield sites
↵
↵
↵
↵
↵
↵
↵
↵

Summerset

Rototuna, Hamilton

H I G H L I G H T S

1 3

2020 highlights

January

Construction sites fully
back up and running after
COVID-19 lockdown

May

Earthworks start
at St Johns site in Auckland

February

$20,000 raised by staff and
residents for Australian bush
fire victims

March
Our next-generation main
building at Casebrook,
Christchurch, opened

Start of COVID-19 lockdown

April

Dementia friendly
accreditation awarded

New Plymouth’s Bell Block
village launched

June

Annual Report 2020

1 4

September

First residents moved into our
new Papamoa Beach (Tauranga)
and Te Awa (Napier) villages

$150 million bond issue offered

October

Summerset enters NZ Aged
Care Association Awards,
winning staff training award

Half Moon Bay site
purchased in Auckland

July

Connect speaker series
restarts with our first
virtual event hosted by
Peta Mathias

August

University of Otago student
Riria Mohi-Dewhirst became the
first recipient of Summerset’s
new Waitaha Te Houhou
health scholarship

Lower Hutt resource
consent received

Resource consent notified for
proposed retirement village
in

Parnell

November

December

Melbourne’s Cranbourne
North tenders ready
to issue to builders

H I G H L I G H T S

1 5

Portfolio growth

23 years of consistent growth and delivery1

To
ta

l u
ni

ts
in

p
o

rt
fo

lio

129129
219219

40740

7

470470

5285

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921921
983983

1,1091,109

1,2721,272
1,3521,352

1,4861,486

1,6461,646

1,8551,855

2,1162,116

2,4192,419

2,8282,828

3,2783,278

3,7323,732

4,0864,086

4,4424,442

12912

9 2

1921

9 4

0740

7 4

70470 52852

8 6

5265

2 7

32732 79579

5 9

2192

1 9

8398

3 1

,1091,10

9 1

,2721,27

2 1

,3641,36

4 1

,4861,48

6 1

,6461,646 1,8551,85

5 2

,1162,11

6 2

,4192,419 2,8282,82

8 3

,2783,278 3,7323,73

2 4

,0864,086129129

9090
188188

63

58

124124

80

80

63

126126

6262
126126

163163

8080
122122

1601

60

209209

261261

303303

409409

450450

454454

354354

356356

Existing stock New units delivered

’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11* ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ‘

20
0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 Units include all units to be sold under occupation right agreement

Annual Report 2020

1 6

23 years of consistent growth and delivery1
To
ta
l u
ni
ts
in
p
o
rt
fo
lio
129129
219219
407407
470470
528528
652652
732732
795795
921921
983983
1,1091,109
1,2721,272
1,3521,352
1,4861,486
1,6461,646
1,8551,855
2,1162,116
2,4192,419
2,8282,828
3,2783,278
3,7323,732
4,0864,086
4,4424,442
129129 219219 407407 470470 528528 652652 732732 795795 921921 983983 1,1091,109 1,2721,272 1,3641,364 1,4861,486 1,6461,646 1,8551,855 2,1162,116 2,4192,419 2,8282,828 3,2783,278 3,7323,732 4,0864,086129129
9090
188188

6363
5858

124124

8080
6363

126126
6262
126126
163163
8080
122122
160160
209209
261261
303303
409409
450450
454454
354354
356356
Existing stock New units delivered
’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11* ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1 Units include all units to be sold under occupation right agreement

* 2011 existing stock included 12 units acquired as part of the Nelson site purchase

H I G H L I G H T S

1 7

Our people and
community

Summerset’s annual satisfaction survey shows continued
high satisfaction levels, with independent living

residents

at 95% and care centre residents at 97%.

Annual Report 2020

1 8

Our Summerset community is made
up of more than 6,200 residents in
over 4,400 units and over 900 care
beds. We employ over 1,800 staff
across 32 retirement villages.

COVID-19
Due to the global pandemic,
2020 was difficult and challenging.
However, New Zealand’s effective
public health response, and the
plans and procedures we put in
place, resulted in zero COVID-19
cases among our residents and staff
to date.

We engaged our pandemic plan
as soon as news of the virus
emerged and pulled together our
Crisis Response Team.

As events escalated, we worked
quickly to safeguard our residents
and staff through an evolving range
of measures, working with other
members of the aged care sector
at the forefront of the response.

During the nationwide COVID-19
lockdown period we:

• Procured more than $

750,000

of additional personal
protective equipment

• Required staff and approved
visitors to undergo temperature
checks and wear face masks

• Provided security at all village
gates to screen visitors

• Increased our cleaning regimes,
particularly in high-touch areas

• Established a safe food delivery
service direct to our residents’
front doors

• Provided regular updates via
a new email newsletter
for residents and their families

• Provided care packages and
arranged physically distanced
events for residents

• Developed an online wellness
centre promoting physical and
mental wellbeing for residents.

Throughout 2020, our staff have
worked hard to support residents
and their families to stay connected
despite travel restrictions.

7,000

care calls made
to prospective

residents

16,600
visitors to the

Wellness Centre,
our online entertainment

and education hub

10 days
to implement a
new nationwide
home grocery

delivery service

Over

2,000
third-party grocery
orders processed

and delivered

51,000
meals

delivered to
care centre
residents in
their rooms

41,000
meals

delivered to
village residents

131
residents tested

for COVID-19
– all test results

negative

76
sta� on paid

leave pending
a COVID-19 test
– all test results

negative

13
resident and next
of kin newsletters

sent in first 12 weeks
of lockdown

Extra

42
nurses

employed during
lockdown to maintain

care levels

Extra

80
care sta�

employed during
lockdown to maintain
care levels
Extra

39
village sta�

employed during
lockdown to maintain

care levels

O U R P E O P L E A N D C O M M U N I T Y

1 9

Resident wellbeing
During 2020 we continued the
rollout of our signature fitness
programme for residents. Designed
specifically for over-70s by an
experienced personal training
company, the programme has been
accredited as a falls-prevention class
by the Ministry of Health and ACC.

The new programme includes
mental and physical exercises to
improve and maintain coordination,
balance and cognitive health. To
ensure the effective delivery of the
programme, each class is run by a
fitness instructor. The programme is
now available in seven villages and
we will roll it out to a similar number
in 2021.

Although we had to postpone our
popular Connect speaker series
during the COVID-19 lockdowns,
we organised virtual events for our
residents. These included a wine-
tasting experience with Villa Maria
and a food-focused talk by chef and
author Peta Mathias.

We reintroduced face-to-face
events in July 2020, with Connect
talks from Olympic boardsailor
Barbara Kendall and comedians
Ginette McDonald and Pinky Agnew.

We also held a second series of
‘Understanding dementia’ talks in
conjunction with Dementia New
Zealand from September 2020. We
plan to continue hosting virtual
events alongside our village-based
events into the future.

Resident wellbeing is
at the centre of what
we do and Summerset
continues to plan for
a variety of virtual and
village based events

Dementia-friendly accreditation
In April 2020 we achieved
dementia-friendly accreditation
from Alzheimers New Zealand. This
means we are nationally recognised
as a safe, accepting and supportive
place for people with dementia.

Alzheimers New Zealand’s Chief
Executive, Catherine Hall, said, “the
Committee was impressed with the
work Summerset has initiated to
challenge stigma and create kinder,
more accepting communities for
people living with dementia,

and the wide range of
creative dementia friendly initiatives
observed during the audit.”

To achieve this, we carried
out intensive work across our
villages, from training each staff
member, to creatively meeting the
individual needs of residents living
with dementia.

More than 195 corporate staff
have also completed an online
training module to increase their
understanding of dementia.

Summerset has a three-year
partnership with Dementia New
Zealand and has been working
alongside the organisation to
provide public talks at our villages to
reduce stigma around the disease.

Summerset has been
recognised as a safe
and accepting place
for people living
with dementia

Summerset by the Park,

Manukau

Annual Report 2020

2 0

People are the heart of Summerset
In 2020 we prioritised the training
and development of our staff, and
this will continue into 2021 and
beyond. We introduced a new online
learning system that provides staff
with easy access to user-friendly
training modules.

Online training enables a consistent
learning experience for all our staff,
wherever they work. Our first online
training programme was a six-
module self-paced learning
programme for our sales team.

We also launched our Care Centre
Manager and Clinical Nurse Lead
leadership development
programmes to build capability in
these key frontline roles. They began
with a series of face-to-face
workshops and will continue to roll
out over the next two to three years.

Online learning was invaluable
during the nationwide lockdown,
when we recruited more than

120

nurses and caregivers during the
first six weeks. It allowed us to induct
new staff into our processes,
procedures, and health and safety
protocols before they had even set
foot on Summerset premises.

Our recruitment campaign for extra
staff included contacting over 80
companies that were making
redundancies due to COVID-19.

Online training enables
a consistent learning
experience for staff and
was invaluable during
the lockdown period

Employee attrition

%

34%34%

29%29%
27%27% 28%28%

20%20%

2016 2017

201

8 2

019 2020
0

10
20

30

40

Employee retention

%

74%74%
79%79%

82%82%

2018 2019 2020
0
30
60
90

Workplace injury rates 1

Fr
eq

ue
nc

y
ra

te

3.683.68

2.522.52
2.152.

15

2.732.

73

4.254.25

8.418.41

5.625.62

4.614.61
5.055.05

6.226.22

Lost time injury frequency rate
Recordable injury frequency rate

2016 201

7 2

018 2019 2020
0

2.5

5

7.5

10

1 The prior year (LTIFR) lost time injury frequency rate numbers have been updated due to Summerset changing

to the benchmark methodology used by the Business Leaders’ Health and Safety Forum.

O U R P E O P L E A N D C O M M U N I T Y
2 1

60% 6

50% 4

Sta� engagement1

2015

53%

2020

7.8

2017

67%

Previous survey provider Peakon

2019

7.7

20

18

40% 2

70% 8

2019

67%
69%

% Peako
n

1. Peakon was provided the 2019 raw data to ensure year on year consistency — noting di�erent scoring scales (67% = 7.7).

Attracting and retaining staff
Staff retention and turnover
improved significantly over 2020,
with turnover now below the
industry average. This was partly due
to the border closures and greater
economic uncertainty brought
about by COVID-19. However, it
was also the result of ongoing
improvements in our employee
offering and culture.

During the year we changed our
survey provider for measuring
staff engagement. We now use
the Peakon survey, whose much-
improved technology assisted us in
achieving 86% staff participation.

Our overall staff engagement score
increased from 7.7 to 7.8 out of
10 in 2020, putting us at or above
the top quartile of companies using
Peakon globally.

Diversity and inclusion
During 2020 we also progressed our
diversity and inclusion strategy. The
specialist consultancy, Diversitas,
thoroughly examined our policies
and processes through a diversity
and inclusion lens, and interviewed
staff across the organisation. As
a result of the review, we have
now identified opportunities for
continued improvement and a
three-year plan has been developed
with work starting in early 2021.

Continuing improvement in health
and safety
We were pleased to be reaccredited
with tertiary status in ACC’s
Accredited Employers Programme
in 2020, which we have held since
June 2017. The annual renewal audit
provides an important snapshot of
safety and injury management in
our workplace. We are committed to
the core values of this programme,
creating safe work environments for
our people and ensuring that we
continue to be leaders in health
and safety.

7.8
Staff engagement score
(out of 10)

2020 highlights
• Strategy updated and three-

year plan developed for
implementation in 2021

• Increased visibility and training of
senior leaders

• Improved risk reporting across
the organisation

• Safety in design implemented
and matured

• Improved incident reporting,
data and analysis

• Improved third-party
contractor management

• SiteWise pre-qualification
programme well embedded

• Improved onboarding
processes.

Annual Report 2020

2 2

Strong wave
of growth

The New Zealand population aged 75 and over is forecast to more than triple in the next 50 years.

NZ population 75+

%

NZ population 75+ (left-hand axis) % population 75+ (right-hand axis)

20
0
2
20
0
7

20
12

20
16

20
20

20

23

20
28

20

33

20

38

20
4

3
20
4
8

20

53

20
58

20
6

3
20
6
8

20
73

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

0
3
6
9
12
15
18

Per annum New Zealand population growth 75+

NZ population 75+ per annum growth

19
9

7-
20

0
2

20
0

2-
20

0
7

20
0
7-
20
12
20
12

-2
0

16
20
16
-2
0
20
20
20
-2
0
23

20
23

-2
0
28
20
28
-2
0
33

20
33

-2
0
38

20
38

-2
0

4
3

20
4

3-
20

4
8

20
4

8-
20

53

20
53

-2
0
58
20
58
-2
0

6
3

20
6
3-
20

6
8

20
6
8-
20
73
0

5,000

10,000

15,000

20,000

25,000

30,000

Source: Statistics New Zealand – National Population Projections

O U R P E O P L E A N D C O M M U N I T Y

2 3

Our
villages

Summerset continues to grow its portfolio of
high-quality retirement villages with amenities

and facilities designed for Kiwi and Australian retirees.

Summerset at Monterey Park, Hobsonville

Annual Report 2020
2 4

Summerset has 32 villages in
operation or in development across
New Zealand, and a further eight
sites in New Zealand held for future
development. In 2020 we purchased
2.8 hectares of land in Auckland in
Half Moon Bay.

Our land bank for future
development is the largest in the
New Zealand retirement sector,
allowing us to double our current
resident population. We have
retirement villages in the main
urban centres, including Auckland,
New Zealand’s most populous
city, with five villages and four
more in the pipeline. We also
have villages in major provincial
cities, including Nelson and New
Plymouth, and popular retirement
destinations such as Tauranga and
the Kapiti Coast.

2020 successes
In 2020 we started earthworks at two
sites and our first residents moved
into three newly opened villages.

We also completed construction on
two next-generation main buildings,
at Casebrook in March and Rototuna
in November.

Our main buildings form the heart
of our villages, providing a vibrant
community hub for residents, staff,
families and friends.

At 9,000m2, our new main buildings
are almost double the size of those in
our earlier villages.

Village highlights
New residents
We were pleased to welcome our
first residents to our new villages at
Papamoa Beach (Tauranga),
Te Awa (Napier) and

Bell Block

(New Plymouth). We now have two
villages in the Bay of Plenty, four in the
Hawke’s Bay and two in Taranaki.

New earthworks
We started earthworks on two sites
in 2020, at St Johns and Whangarei.
Members of Ngāti Hau, a hapū
of Ngāpuhi in the area of the
new Whangarei village site, gathered
for a morning blessing, alongside
contractors, local kaumātua Mike
Kake and Dave Coyne, and Group
Construction Manager Jason Rahui.

New technology
We imported New Zealand’s first
Tovertafel — an interactive lightshow
providing stimulation for people
with cognitive impairments. The new
technology is from the Netherlands for
use in our newer memory care centres.

O U R V I L L A G E S

2 5

Memory care centres
Summerset is a New Zealand leader
in next-generation memory care.
Since the 2017 opening of our award-
winning memory care centre in
Levin, we have refined the design
and features for our newest centres
in Casebrook and Rototuna.

Our in-house design and operations
teams have used research from
international dementia design
specialists to create apartment-
style living for residents with
dementia. The modern design
offers clear wayfinding, dementia-
friendly signage, large communal
areas and a secure outdoor
courtyard for freedom of movement
and independence.

Priorities for 2021
In 2021 we will complete our
Ellerslie village by finishing the last
independent apartment building. In
addition, we will deliver our first
units as part of the Hobsonville
village extension.

We expect to see good progress
in 2021 at our St Johns site. Bulk
earthworks will finish in March
2021, and construction will start on
the 8,500m2 basement which will
contain carparking for residents.

We also received final resource
consent from the Environment
Court for our Boulcott site in
Lower Hutt in November 2020.
Construction has started on the
village, which will ultimately be home
to more than 300 residents.

Regional main buildings will be
delivered in both our Richmond and
Avonhead villages in 2021. These
will provide further well-appointed
amenities for our residents.

6
Building
resource consents
lodged

RESOURCE CONSENTS

SITE

DETAILS PROGRESS

Prebbleton Resource consent lodged Q

3 2

020

In progress

Rangiora Plan change approved.

Resource consent lodged Q

4 2

020

In progress

Blenheim

Resource consent lodged Q4 2020

In progress

Cambridge Resource consent lodged Q4 2020 In progress

Waikanae

Resource consent lodged Q4 2020

In progress

Lower Hutt

Environment Court
decision granted

Resource consent received Q4 2020

Parnell

Resource consent lodged Q3 2020

Public notification closed
Hearing expected Q2 2021

Annual Report 2020

2 6

Expanding the model
into Australia
It is important that we have a strong
local base as we expand into
Australia. We are gradually
developing our Australian team and
appointed the heads of the design,
sales and operations teams for
Victoria in 2020.

Two of these roles were filled by
existing Summerset staff, who will
move to Melbourne early in 2021. We
are looking forward to providing the
Australian market with our
continuum of care offering and
the backing of a trusted brand
with 23 years’ experience in
retirement living.

Providing a home for life
in Australia
Summerset will offer a full
continuum of care in Australia.
This sets us apart from many
competitors in Australia, where it is
common for independent living and
care to operate separately and
across different locations.

We will be building Cranbourne
North in carefully planned stages.
We expect to deliver approximately
40 villas in the first stage of the
development, from late 2021/
early 2022.

Planning for our specialist care
centre and care services at
Cranbourne North is already well
under way. The care centre will
offer a unique household model,
with no more than 18 residents
in a household.

Each resident will have a private
room and access to shared lounge
and dining areas. This will provide
them with the comfort, intimacy and
closeness of a family unit, and will
allow our care staff to focus on each
individual resident.

Half Moon Bay

In October 2020 we announced the purchase of a 2.8-hectare site in
Half Moon Bay.

Once consented, it will be our ninth village in Auckland and our very
first in East Auckland.

It will include independent living and serviced apartments, care suites
and a memory care centre. It is near the Half Moon Bay Marina with ferry
services to the CBD and Waiheke Island.

Upper floors will have west-facing views across Half Moon Bay, towards
the city and out to the Waitakeres.

The number of people in the 75+ age group in East Auckland is forecast
to increase by over 50% in the next eight years.

O U R V I L L A G E S
2 7

Completed villages

In development

Proposed villages

Dunedin

Casebrook

Paraparaumu

Levin
Palmerston North

Wanganui

New Plymouth

Richmond
Nelson

Lower Hutt

Papamoa Beach

Havelock North
Hastings
Te Awa

Napier

Taupo

Katikati

Manukau

Warkworth
Milldale

Hobsonville
Ellerslie

Karaka

Parnell

Hamilton
Rototuna

Aotea
Kenepuru

Wigram
Avonhead

Bell Block
Waikanae

St Johns

Trentham

Whangarei

Cambridge

Rangiora

Prebbleton

Blenheim

Torquay

Cranbourne North

MELBOURNE

Half Moon Bay

Our
villages

Annual Report 2020

2 8

* New site purchased

Our land bank
New Zealand land bank Design Consenting Construction Village open Final stages

Hobsonville, Auckland

Ellerslie, Auckland

Rototuna, Hamilton

Casebrook, Christchurch

Avonhead, Christchurch

Richmond, Tasman

Kenepuru,

Wellington

Te Awa, Napier

Papamoa Beach, Tauranga

Bell Block, New Plymouth

St Johns, Auckland

Whangarei,

Northland

Lower Hutt, Wellington

Rangiora,

Canterbury

Parnell, Auckland

Waikanae, Kapiti

Cambridge, Waikato

Blenheim,

Marlborough

Prebbleton, Canterbury

Milldale, Auckland

Half Moon Bay, Auckland*

Australian land bank

Cranbourne North, Melbourne

Torquay,

Victoria

O U R V I L L A G E S

2 9

Our commitment
to sustainability

Summerset was certified as New Zealand’s
first carbonzeroTM retirement village operator in 2018,
and we have continued to build on our commitment

to sustainability each year.

Annual Report 2020

3 0

In 2020, Summerset committed to
a science-aligned carbon reduction
target, that commits us to a 62%
reduction per square metre of
building area by 2032 (from 2017
levels). We are the only New Zealand
retirement village operator to have
done this. Summerset is also working
closely with its supply chains to
reduce carbon emissions. We have
also expanded our emissions
reduction programme into our
villages and started preparing for
innovation in future village builds.

Summerset has a large construction
business, giving us scope to reduce
our carbon emissions and future-
proof our villages against climate-
related risks. We can reduce
emissions by adopting new
technologies in our building designs,
using greener building materials and
creating landscapes that are more
water efficient.

As part of its goal of reaching net
zero carbon emissions by 2050, the
Government is expected to
introduce regulation on the Building
for Climate Change Programme in
2021. Summerset has made a
submission on this as part of the
consultation process.

Summerset has
expanded its emissions
reduction programme
across its villages

Emissions reduction programme
Summerset is Toitū carbonzeroTM

certified. We have been measuring,
managing and reporting on our
carbon footprint since 2017. From
2018, our carbon emissions have
been independently audited by
Toitū Envirocare to the ISO14064-1
standard. We are on track to meet
our target of a 5% reduction in all
operational emissions intensity by
the end of 2022.

Our internal tracking shows we
have reduced our carbon emissions
intensity by 31% since 2017.

Given our significant property
development activities, we calculate
our total gross carbon emissions
per square metre of build. This has
decreased by 22% since 2017.

Decrease in absolute
carbon emissions
Summerset’s total emissions in 2020
were 6,414 tCO2e, which is 1% lower
than the previous year’s total of
6,466 tCO2e and 8% higher than
the base year total of 5,939 tCO2e.
Energy use accounts for 80% of our
carbon emissions.

Absolute emissions progress

tC
O

2e

5,9395,939

6,6716,671
6,4666,46

6 6

,4146,414

2017
(Base year)

2018 2019 2020
0

800

1,600

2,400

3,200

4,000

4,800

5,600

6,400

7,200

O U R C O M M I T M E N T T O S U S T A I N A B I L I T Y

3 1

Progress in 2020
In 2020 we monitored
our performance across two
environmental, social and
governance (ESG) indices. We
achieved an AA rating from Morgan
Stanley and submitted a non-scored
survey to the Carbon Disclosure
Project (CDP) for the first time.

In addition, Summerset joined New
Zealand’s main body for sustainable
building knowledge in August.
The New Zealand Green Building
Council membership will provide
our staff with access to technical
knowledge on best environmental
building practices.

Along with over 100 of New
Zealand’s leading companies, we
are a signatory to the Climate
Leaders Coalition and have set a
science-aligned carbon reduction
target for our business in 2021.
This demonstrates our commitment
to the Paris Agreement on global
climate change.

Summerset’s five areas of focus as
part of our emissions management
reduction are energy, waste, travel,
paper and fertilisers.

ENERGY

Reducing electricity and
gas usage
We fine-tuned, maintained and
upgraded equipment throughout
2020 to ensure energy efficiency.
This included upgrading the gas
boiler at our Manukau village
and continuing our LED upgrade
programme. In addition, we joined
the New Zealand Green Building
Council to ensure optimal energy
performance for new builds.

Emissions intensity – CO2e tonnes per $ million revenue

tC
O
2e

5454

4949

4242

3737

2017
(Base year)
2018 2019 2020
0
15
30

45

60

2020 key impact areas by tCO2e

Energy 80%

Travel 9%

Waste 11%

Paper 0.3%

Fertiliser 0.1%

Annual Report 2020
3 2

WASTE

Minimising our waste to landfill
Reducing the amount of waste
we send to landfill is an ongoing
focus for our offices, operations and
construction activities. In operations
we achieved a 35% diversion
from landfill, and in construction
the figure was 30%.The Ellerslie
construction site achieved a 75%
avoidance. As a result of this focus
on recycling, our facilities now send
25% less waste to landfill per resident
compared to our 2017 base year.

TRAVEL

Being more efficient in the way
we travel
Travel emissions are calculated for
car hire and air travel. Compared to
2019 we achieved a 50% decrease
in emissions from domestic, short-
haul and international flights in 2020.
This was due to COVID-19 travel
restrictions and the increased use of
communications technology.

PAPER

Reducing our paper consumption
Our paper use went up due to the
increase in printed communications
during the COVID-19 lockdowns.
However, invoices are now sent via
email to 51% of residents, up from
17% at the beginning of 2020.

FERTILISERS

Selecting environmentally
friendly fertilisers
Fertilisers are a small but visible part
of our emissions profile. We continue
to reduce our fertiliser emissions by
working with our landscaping teams,
gardeners and suppliers to ensure
we use products that have a low
carbon footprint.

Governance

Roles and responsibilities

Board Oversees climate-related issues and responsibility for
sustainability. Reviews and approves direction and
monitors progress against targets

CEO Assesses and manages climate-related risks and
opportunities. Reports programme performance and
progress at Board meetings

Sustainability
Forum

Includes senior managers from across the business.
Shapes and monitors our sustainability strategy

Key functional
workstreams

Covers operational impact areas related to the new
build environment

Green Team Implements specific actions and initiatives identified in the
emissions reduction plan

Further details on our climate-related targets,
measurements and results
Summerset is aware of work under way on making climate-related financial
disclosures mandatory for listed companies by 2023. Climate-related risks
are currently managed through our risk management framework and across
our governance and reporting processes.

• Governance – for a statement on the Board’s oversight of climate-related
risks and opportunities see our governance section on page 79

• Strategy – details of our overall business strategy is on page 5 and our plan
is to better understand climate-related material risks and opportunities for
Summerset in the future

• Risk management – see our risk management framework presented on
pages 86 to 88

• Metrics and targets – carbon performance metrics can be found
above; operational performance metrics are on pages 18 to 27, financial
performance metrics are on pages 34 to 38

O U R C O M M I T M E N T T O S U S T A I N A B I L I T Y

3 3

Our
performance

Summerset has maintained strong profitability and
balance sheet resilience throughout 2020 and is well

positioned for future sustained growth.

Summerset Heritage Park, Ellerslie
Annual Report 2020

3 4

Financial performance overview
Underlying profit for the year
ended

31 December 2020

decreased by 7% on the prior
year to $98.3 million (2019:
$106.2 million), driven principally
by significant additional operational
costs associated with COVID-19
to ensure our residents remained
safe, increased investment in care,
employee wages and penal rates,
and cost drag from opening new
villages and main buildings.

Our sales of new and existing units
were strong, with increased volumes
for both. We also saw increased
sale prices on our resale units,
reflecting the strong residential
property market. The margin on new
units reduced due to changes in
the mix of units sold, with more
needs-based products and more
regional sales.

Revenue for the year grew 12% to
$172.4 million (2019: $153.9 million),
reflecting the opening of three new
villages and two main buildings,
and strong financial performance
across village operations. Our care
occupancy rates in established
villages remained high despite a
small reduction following the two
COVID-19 lockdowns.

Underlying profit is a non-GAAP
measure. A detailed explanation is
included in Note 2 to the Financial
Statements (see page 49). In
general terms, underlying profit
removes the fair value movement of
investment property and reinstates
the realised gains associated with
our resales and the development
margin associated with our new
sales. Underlying profit is used to
determine the dividend pay-out
to shareholders.

COVID-19 impact
COVID-19 had a significant impact
on 2020 underlying profit. Increased
operational costs of over $9 million
were predominantly from additional

staff resources, pandemic kits and
personal protective equipment.

This included additional care and
housekeeping staff, a $2 per hour
wage increase during level four
lockdown, security at our sites, and
extra sick leave as a precaution for
staff either because of their health or
that of their close contacts.

The costs outlined above are some
of the direct costs related to our
response, but we also incurred a
number of indirect costs. These
include the cost of paying the
construction staff during lockdown
while they were unable to be on
site and significant investment in
marketing and sales post lockdown
to support our sales teams to
ensure our sales were successful.
There were also no sales during the
national lockdown.

In May we received $0.7 million as
part of the Government’s support
to aged care providers for the
additional costs incurred. We note
that this is considerably less than our
actual costs to date. We qualified
for the COVID-19 wage subsidy as
revenue fell by more than 30% in
April, when retirement unit sales fell
to zero, and received $8.6 million.
However, we repaid this in full once
it became clear the business was in
a stable financial position and the
outlook was positive.

Sales were significantly better
than expected once the country
came out of lockdown, with the
third and fourth quarters bringing
record sales and the business
continuing to perform well. While
we have not yet experienced the
economic downturn predicted by
many economists, we are wary
that COVID-19 will be with us for
some time. We will continue to
plan and prepare to ensure we are
well positioned to deal with any
future outbreaks.

Underlying profit has
seen a compound
annual growth rate of
32% since the company
was listed on the NZX
in 2011

Long-term growth
A key component of underlying
profit is the realised development
margin on new sales which was
$48.2 million in 2020 (2019:
$61.0 million). The development
margin was 19.6%, down from
27.9% in the previous year. The
decrease was due to increased
construction costs across our main
centres, an increase in needs-
based products and fewer Auckland
settlements. The long-term returns
remain strong on needs-based
products. Summerset’s medium-
term expectation of development
margins is in the 20–25% range.
This will continue to be an area
of significant focus for the Board
and management.

Good margins reflect the
advantage of having strong
in-house capabilities for each
stage of village development,
including land purchase,
planning, consenting, design and
construction management. We
can achieve cost advantages
through scale and standardisation
of development programmes, while
also being able to adapt each project
to local needs and preferences.

Summerset continues to maintain
the largest land bank for a retirement
village operator in New Zealand, and
acquired a new site at Half Moon Bay
in Auckland during 2020. This brings
our total land bank of units to 5,992.

O U R P E R F O R M A N C E

3 5

Summary of sales and
developments
New Zealand’s residential property
market is continuing to hold strong
despite early predictions from
market analysts that the global
pandemic could result in significant
decreases in house prices
nationwide. Prices continued to rise
across most regions, partly fuelled
by low interest rates and strong
buyer demand.

Summerset had a record sales year,
with 785 unit sales of occupation
rights (2019: 652), 404 of them new
unit sales and 381 resales. Average
gross proceeds per new sale
settlement of $607,000 were down
from $665,000 in 2019 due to the
change in mix of unit type and region
of sales. Realised resale gain
increased by 25% to $46.1 million in
2020. Average gross proceeds per
resale settlement were $464,000,
up 4% from 2019. This reflects the
growth in the residential property
market in some regions, as well as
the length of time taken between
sale of units.

Key development milestones
included the opening of three new
villages: Papamoa Beach (Tauranga),
Te Awa (Napier) and Bell Block (New
Plymouth). For developing villages
still under construction, new unit
sales were strong at Casebrook
(Christchurch), Rototuna (Hamilton)
and Avonhead (Christchurch).

In addition, our Australian sites
acquired to date illustrate
Summerset’s commitment to
diversifying into an attractive
overseas growth market.

Underlying profit

$
m

37.837.

8 5

6.656.

6 8

1.781.

7 9

8.698.6 106.2106.2 98.398.3

FY15 FY16 FY17 FY18 FY19 FY20
0

40
80
120

Land bank over time (units)1

2,4142,414
2,6092,609

2,8412,841

3,9103,910

5,3805,380

5,9925,992

1,8811,881 2,4142,414 2,6092,609 2,8412,841 3,9103,910 5,3805,380

533533

195195
232232

1,0691,069

1,4701,470

612612

Existing land bank Net land bank growth

FY15 FY16 FY17 FY18 FY19 FY20
0
1,000
2,000
3,000
4,000
5,000

6,000

7,000
1 Units include all units to be sold under occupation right agreement
Annual Report 2020

3 6

Net profit after tax
Summerset recorded a net profit
after tax of $230.8 million for the year
ended 31 December 2020, up from
$175.3 million in 2019.

This increase is largely due to the
fair value movement on investment
property (2020: $221.1 million; 2019:
$165.3 million).

Fair value movement in 2020 of
$221.1 million reflects the delivery
of 356 units in the financial
year, the completion of two main
buildings, strong sales rates across
our villages reducing our vacant
stock levels and changes to the
key assumptions applied by the
valuer. Assumption changes in the
period were predominately to short
term growth rates and recycle
frequencies, reflecting the tailwinds
seen in the residential property
market across the second half
of 2020.

Business growth and expenses
Summerset derives its revenue from
selling units (deferred management
fees) and providing village and care
services. The company’s revenue
increased as a result of higher
volumes, reflective of the scale and
growth of our operations.

Deferred management fees on
Summerset’s investment property
were $60.8 million in 2020
(2019: $52.5 million). The growth
reflects the increase in the
number, occupancy and value of
Summerset’s portfolio of units.

Expense breakdown

Employee expenses

Employee
expenses 57%

Property-related
expenses 10%

Repairs and
maintenance
expenses 4%

Depreciation,
amortisation
and impairments 7%

Other operating
expenses 22%

Revenue breakdown

Revenue breakdown

Deferred
management fees 35%

Care fees and
village services 65%

Dividend cents per share

1.41.4 1.91.9 2.62.

6 3

.93.

9 6

.06.0 6.46.

4 6

.06.02.52.

5 3

.33.3

2.12.1
3.43.4

5.15.1

7.17.1

7.27.2
7.77.7

7.07.0

Interim Final

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
0

4
8
12
16
O U R P E R F O R M A N C E

3 7

96%
Occupancy in our mature
care centres

At 31 December 2020, Summerset’s
total unit portfolio reached 4,442
(2019: 4,086) and at year end there
were only 179 new sales units and 73
resale units available for sale.

The final apartment building in
Summerset’s Ellerslie village is due
for delivery in early 2021, and
comprises a further 74 apartments.
Strong progress has also been made
on two main buildings in Avonhead
and Richmond, both due to open
in 2021.

Occupancy in our mature care
centres was 96% which is above the
industry average of 90%.

Total expenses increased in 2020
by 22% to $158.3 million (2019:
$130.2 million), largely due to
COVID-19 costs and cost drag
of new care centres and villages
opening in line with Summerset’s
ongoing business growth. We also
invested in our employee offering
and culture to ensure we remain
a top employer, we had increased
uncontrollable expenditure items
such as rates and power, and
spent more on additional sales and
marketing expenses.

Operating activities
Summerset’s net cash from
operating activities was
$266.8 million for the year, up 12%
from 2019 (2019: $237.9 million).
This was principally driven by
gross receipts from new occupation
right agreement sales, amounting
to $237.0 million, up from
$209.4 million in 2019.

Summerset is a growth company
and reinvests operating cash flows
back into the business to finance
future growth. In 2020 Summerset
invested $318.8 million, primarily
in new and existing retirement
villages and care centres (2019:
$327.4 million).

Investment activities are principally
the purchase of land and the
development and refurbishment of
new and existing retirement villages
and care centres.

Assets rose to $3.9 billion
Total assets rose 17% to $3.9 billion
at 31 December 2020 (2019:
$3.3 billion), mainly due to growth
in the size and value of Summerset’s
investment property, which reached
$3.6 billion (2019: $3.1 billion).
At balance date, Summerset also
had other property, plant and
equipment valued at $181.1 million
(2019: $154.0 million), most of
this being care centres (these
are operated to provide services
and are therefore not included as
investment property).

An increased embedded value of
$883.6 million (2019: $752.7 million)
demonstrates future cash that can
be generated when units are resold.

Interest-bearing debt of
$687.1 million was 18% of total assets
at year end (2019: $587.1 million).
Summerset raised $150.0 million
from a new retail bond in September
2020 which brings the year end debt
at face value to $297.6 million of
bank borrowings and $375.0 million
of retail bonds.

Summerset also has residents’ loans
of $1.5 billion (2019: $1.3 billion).
This in the form of licences paid
by residents under occupation right
agreements, these are repayable
when residents vacate units and
the associated occupation rights
are resold.

Consistent strong
growth performance
Summerset continued to pay
dividends to shareholders during
COVID-19 despite unprecedented
circumstances. We will pay a final
dividend of 7.0 cents per share (cps)
on 22 March 2021, making a full pay-
out for the 2020 year of 13.0 cps
(2019: 14.1 cps).

Board policy remains for shareholder
distributions in the range of 30–50%
of each year’s underlying profit. The
2020 distribution of $29.7 million
represents 30% of underlying profit
($98.3 million), which is consistent
with the last five years.

Summerset continues to
offer shareholders a dividend
reinvestment option, including a 2%
discount to market share price.

Annual Report 2020

3 8

Five year
summary

Key operational and financial statistics for the
five year period up to and including FY20 are

as follows:

Results highlights – operational

Unit FY20 FY19 FY18 FY17 FY16

FY19 to
FY20 %
Change

New sales of occupation rights No. 40

4 3

2

9 3

39 382 414 23%

Resales of occupation rights No. 381 323 301 300 244 18%

Total sales of occupation rights No. 78

5 6

52 640 682 658 20%

Development margin % 19.6% 27.9% 33.2% 27.3% 22.2% -30%

New units delivered No. 356 35

4 4

54 450 409 1%

Units in portfolio No. 4,442 4,086 3,732 3,278 2,82

8 9

%

Care beds in portfolio No. 91

5 8

5

8 8

58 80

6 7

4

8 7

%

Results highlights – financial

Unit FY20 FY19 FY18 FY17 FY16
FY19 to
FY20 %
Change

Net operating cash flow $m 266.8 237.9 217.8 207.

7 1

92.6 12%

Total assets $m 3,893.2 3,337.9 2,766.4 2,232.

8 1

,706.8 17%

Net assets $m 1,354.8 1,131.

9 9

78.8 785.8 545.6 20%

Underlying profit $m 98.3 106.2 98.6 81.

7 5

6.6 -7%

Profit before income tax (IFRS) $m 221.7 173.6 216.2 240.2 145.6 28%

Profit for the period (IFRS) $m 230.8 175.3 214.5 239.9 145.5 32%

Dividend per share cents 13.0 14.1 13.2 11.0 7.7 -8%

Basic earnings per share cents 102.3 78.

6 9

7.1 109.8 66.9 30%

O U R P E R F O R M A N C E

3 9

Financial
statements

Annual Report 2020

4 0

Income Statement
For the year ended 31 December 2020

2020 2019

NOTE $000

$000

Care fees and village services 4 111,619 101,259

Deferred management fees 4 60,752 52,470

Interest received

4 5

1 217

Total revenue 172,422 153,946

Fair value movement of investment property 11 221,142 165,252

Total income 393,564 319,198

Operating expenses 5 (146,805) (122,399)

Depreciation and amortisation expense 9, 10 (8,097) (7,833)

Impairment of property, plant and equipment 9 (3,431) –

Total expenses (158,333) (130,232)

Operating profit before financing costs 235,231 188,966

Net finance costs 6 (13,496) (15,405)

Profit before income tax 221,73

5 1

73,561

Income tax credit 7 9,041 1,701

Profit for the period 230,776 175,262

Basic earnings per share (cents) 20 102.30 78.59

Diluted earnings per share (cents) 20 101.23 77.52

The accompanying notes form part of these financial statements.

4 1

Statement of Comprehensive Income
For the year ended 31 December 2020

2020 2019

NOTE

$000 $000

Profit for the period 230,776 175,262

Fair value loss on interest rate swaps 14 (7,075) (7,015)

Tax on items of other comprehensive income 7 1,981 1,964

(Loss)/gain on translation of foreign currency operations (491) 266

Other comprehensive income that will be reclassified subsequently to
profit or loss for the period net of tax

(5,585) (4,785)

Net revaluation of property, plant and equipment 9 12,712 –

Tax on items of other comprehensive income 7 (3,145) –

Other comprehensive income which will not be reclassified
subsequently to profit or loss for the period net of tax

9,567 –

Total comprehensive income for the period 234,758 170,477

The accompanying notes form part of these financial statements.
Annual Report 2020
4 2

Statement of Changes in

Equity

For the year ended 31 December 2020

SHARE
CAPITAL

$000

HEDGING
RESERVE

$000

REVALUATION
RESERVE

$000

RETAINE

D

EARNINGS

$000

FOREIGN
CURRENCY

TRANSLATION
RESERVE

$000

TOTAL
EQUITY

$000

As at 1 January 2019 269,467 (10,122) 24,941 694,508 5 978,799

Adjustment on adoption
of IFRS 16

– – – (1,413) – (1,413)

Adjusted balance at
1 January 2019

269,467 (10,122) 24,941 693,09

5 5

977,386

Profit for the period – – – 175,262 – 175,262

Other comprehensive
income for the period

– (5,051) – – 266 (4,785)

Total comprehensive
income for the period

– (5,051) – 175,262 266 170,477

Dividends paid – – – (30,586) – (30,586)

Shares issued 13,351 – – – – 13,351

Employee share plan
option cost

1,256 – – – – 1,256

As at 31 December 2019 284,074 (15,173) 24,941 837,771 271 1,131,884

As at 1 January 2020 284,074 (15,173) 24,941 837,771 271 1,131,884

Profit for the period – – – 230,776 – 230,776

Other comprehensive
income for the period

– (5,094) 9,567 – (491) 3,982

Total comprehensive
income for the period

– (5,094) 9,567 230,776 (491) 234,758

Dividends paid – – – (31,222) – (31,222)

Shares issued 16,395 – – – – 16,395

Employee share plan
option cost

3,030 – – – – 3,030

As at 31 December 2020 303,499 (20,267) 34,508 1,037,325 (220) 1,354,845

The accompanying notes form part of these financial statements.
4 3

Statement of Financial Position
As at 31 December 2020

2020 2019
NOTE $000 $000

Assets

Cash and cash equivalents 15,817 21,462

Trade and other receivables 8 33,395 36,662

Interest rate swaps 14 18,412 12,617

Property, plant and equipment 9 181,098 154,004

Intangible assets 10 5,709 6,123

Investment property 11 3,638,760 3,107,014

Total assets 3,893,191 3,337,882

Liabilities

Trade and other payables 12 158,610 134,680

Employee benefits 13 15,438 11,434

Revenue received in advance 4 114,737 91,142

Interest rate swaps 14 28,150 21,075

Residents’ loans 15 1,520,298 1,327,607

Interest-bearing loans and borrowings 1

7 6

87,09

9 5

97,081

Lease liability 16 11,184 10,460

Deferred tax liability 7 2,830 12,519

Total liabilities 2,538,346 2,205,998

Net assets 1,354,845 1,131,884

Equity

Share capital 19 303,499 284,074

Reserves 19 14,021 10,039

Retained earnings 1,037,325 837,771

Total equity attributable to shareholders 1,354,845 1,131,884

The accompanying notes form part of these financial statements.

On behalf of the Board

Rob Campbell
Director and Chair of
the Board

James Ogden
Director and Chair of the
Audit

Committee

Authorised for issue on 22 February 2021

Annual Report 2020
4 4

Statement of Cash Flows
For the year ended 31 December 2020

2020 2019
$000 $000

Cash flows from operating activities

Receipts from residents for care fees and village services 110,719 101,116

Interest received 51 217

Payments to suppliers and employees (142,205) (116,811)

Receipts for residents’ loans – new occupation right agreements 237,000 209,364

Net receipts for residents’ loans – resales of occupation right agreements 61,282 44,010

Net cash flow from operating activities 266,847 237,896

Cash flows to investing activities

Sale of investment property 1,154 –

Payments for investment property:

– land (44,386) (57,344)

– construction of villages (229,205) (232,768)

– refurbishment of villages (8,244) (7,201)

Payments for property, plant and equipment:

– construction of care centres (16,651) (15,413)

– refurbishment of care centres (1,107) (146)

– other (7,760) (3,172)

Payments for intangible assets (668) (567)

Capitalised interest paid (11,910) (10,800)

Net cash flow to investing activities (318,777) (327,410)

Cash flows from financing activities

Net (repayments of)/proceeds from bank borrowings (71,542) 135,636

Proceeds from issue of retail bonds 150,000 –

Proceeds from issue of shares 4,201 2,215

Interest paid on borrowings (15,436) (13,549)

Payments in relation to lease liabilities (1,549) (1,264)

Dividends paid (19,389) (19,544)

Net cash flow from financing activities 46,285 103,494

Net (decrease)/increase in cash and cash equivalents (5,645) 13,980

Cash and cash equivalents at beginning of period 21,462 7,482

Cash and cash equivalents at end of period 15,817 21,462

The accompanying notes form part of these financial statements.
4 5

Reconciliation of Operating Results and Operating Cash Flows
For the year ended 31 December 2020

2020 2019
$000 $000
Profit for the period 230,776 175,262

Adjustments for:

Depreciation and amortisation expense 8,09

7 7

,833

Impairment on property, plant and equipment 3,431 –

Fair value movement of investment property (221,142) (165,252)

Net finance costs paid 13,496 15,405

Income tax credit (9,041) (1,701)

Deferred management fee amortisation (60,752) (52,470)

Employee share plan option cost 1,576 1,256

Other non-cash items 90 271

(264,245) (194,658)

Movements in working capital

Decrease/(increase) in trade and other receivables 1,632 (10,724)

Increase in employee benefits 4,004 1,980

Increase in trade and other payables 903 624

Increase in residents’ loans net of non-cash amortisation 293,777 265,412

300,316 257,292

Net cash flow from operating activities 266,847 237,896
The accompanying notes form part of these financial statements.
Annual Report 2020
4 6

Notes to the
financial

statements
For the year ended 31 December 2020

1. Summary of accounting policies

Reporting entity
The consolidated financial statements presented for the year ended 31 December 2020 are for Summerset Group Holdings Limited
(the “Company”) and its subsidiaries (collectively referred to as the “Group”). The Group develops, owns and operates integrated
retirement villages in New Zealand, including independent living, care centres with rest home and hospital-level care and memory
care centres. The Group also owns land for development of retirement villages in Australia.

Summerset Group Holdings Limited is registered in New Zealand under the Companies Act 1993 and is a FMC Reporting Entity for
the purposes of the Financial Markets Conduct Act 2013. The reporting entity is listed on the New Zealand Stock Exchange (NZX),
being the Company’s primary exchange, and is listed on the Australian Securities Exchange (ASX) as a foreign exempt listing.

Basis of preparation
These consolidated financial statements have been prepared in accordance with generally accepted accounting practice in New
Zealand (NZ GAAP), except for Note 2: Non-GAAP underlying profit, which is presented in addition to NZ GAAP compliant information.
NZ GAAP in this instance refers to New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) as appropriate
for profit-oriented entities. These financial statements also comply with International Financial Reporting Standards.

These financial statements are expressed in New Zealand dollars, which is the Company’s and New Zealand subsidiaries’ functional
currency. The functional currency of the Company’s Australian subsidiaries is Australian dollars. All financial information has been
rounded to the nearest thousand, unless otherwise stated.

All amounts are shown exclusive of goods and services tax (GST), except for trade receivables and trade payables, and except where
the amount of GST incurred is not recoverable. When this occurs, GST is recognised as part of the cost of the asset or as an expense
as applicable.

The measurement basis adopted in the preparation of these financial statements is historical cost, with the exception of the items
noted below.

• Interest rate swaps – Note 14

• Investment property – Note 11

• Land and buildings – Note 9

• Retail bonds – Note 17

Basis of consolidation
Subsidiaries are fully consolidated at the date on which the Group obtains control, and continue to be consolidated until the date
when such control ceases. The financial statements are prepared for the same reporting period as the Company, using consistent
accounting policies. All intra-group transactions and balances arising within the Group are eliminated in full.

All subsidiary companies are 100% owned and incorporated in New Zealand or Australia with a balance date of 31 December.

4 7

The New Zealand subsidiaries are:

Summer Land Developments Limited
Summerset Care Limited
Summerset Holdings Limited
Summerset LTI Trustee Limited
Summerset Management Group Limited
Summerset Properties Limited
Summerset Retention Trustee Limited
Summerset Villages (Aotea) Limited
Summerset Villages (Avonhead) Limited
Summerset Villages (Bell Block) Limited
Summerset Villages (Blenheim) Limited
Summerset Villages (Cambridge) Limited
Summerset Villages (Casebrook) Limited
Summerset Villages (Dunedin) Limited
Summerset Villages (Ellerslie) Limited
Summerset Villages (Half Moon Bay) Limited
Summerset Villages (Hamilton) Limited
Summerset Villages (Hastings) Limited
Summerset Villages (Havelock North) Limited
Summerset Villages (Hobsonville) Limited
Summerset Villages (Karaka) Limited
Summerset Villages (Katikati) Limited
Summerset Villages (Kenepuru) Limited
Summerset Villages (Levin) Limited
Summerset Villages (Lower Hutt) Limited
Summerset Villages (Manukau) Limited

Summerset Villages (Milldale) Limited
Summerset Villages (Napier) Limited
Summerset Villages (Nelson) Limited
Summerset Villages (New Plymouth) Limited
Summerset Villages (Number 42) Limited
Summerset Villages (Number 43) Limited
Summerset Villages (Number 44) Limited
Summerset Villages (Number 45) Limited
Summerset Villages (Palmerston North) Limited
Summerset Villages (Papamoa) Limited
Summerset Villages (Paraparaumu) Limited
Summerset Villages (Parnell) Limited
Summerset Villages (Prebbleton) Limited
Summerset Villages (Rangiora) Limited
Summerset Villages (Richmond) Limited
Summerset Villages (Rototuna) Limited
Summerset Villages (St Johns) Limited
Summerset Villages (Taupo) Limited
Summerset Villages (Te Awa) Limited
Summerset Villages (Trentham) Limited
Summerset Villages (Waikanae) Limited
Summerset Villages (Wanganui) Limited
Summerset Villages (Warkworth) Limited
Summerset Villages (Whangarei) Limited
Summerset Villages (Wigram) Limited
Welhom Developments Limited

The Australian subsidiaries are:

Summerset Care (Australia) Pty Limited
Summerset Holdings (Australia) Pty Limited
Summerset Management Group (Australia) Pty Limited
Summerset Villages (Cranbourne North) Pty Limited
Summerset Villages (Number 2) Pty Limited

Summerset Villages (Number 3) Pty Limited
Summerset Villages (Number 4) Pty Limited
Summerset Villages (Number 5) Pty Limited
Summerset Villages (Number 6) Pty Limited
Welhom Developments (Australia) Pty Limited

Accounting policies
Accounting policies that summarise the measurement basis used and that are relevant to the understanding of the financial
statements are provided throughout the accompanying notes.

The accounting policies adopted have been applied consistently throughout the periods presented in these financial statements.

The Group adopted all mandatory new and amended NZ IFRS Standards and Interpretations. and there has been no material impact
on the Group’s financial statements.

There are no new standards, amendments or interpretations that have been issued and are not yet effective, that are expected to
have a significant impact on the Group.

Critical accounting estimates and judgements
In preparing the financial statements, management has made estimates and assumptions about the future that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during
the period. Actual results may differ from those estimates.

Estimates and assumptions are regularly evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The principal areas of judgement in preparing these
financial statements are described in the following notes:

• Deferred management fees – Note 4

• Deferred taxation – Note 7

• Interest rate swaps – Note 14
Annual Report 2020

Notes to the financial statements (continued)

4 8

• Leases – Note 16

• Revenue in advance – Note 4

• Valuation of investment property – Note 11

• Valuation of land and buildings – Note 9

• Valuation of retail bonds – Note 17

Comparative information
No comparatives have been restated in the current year.

2. Non-GAAP underlying profit

2020 2019

Ref $000 $000

Profit for the period 230,776 175,262

Less fair value movement of investment property a) (221,142) (165,252)

Add impairment of assets b) 3,431 –

Add realised gain on resales c) 46,072 36,901

Add realised development margin d) 48,208 60,973

Less deferred tax credit e) (9,041) (1,701)

Underlying profit 98,304 106,182

Underlying profit is a non-GAAP measure and differs from NZ IFRS profit for the period. Underlying profit does not have a standardised
meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities.
The Directors have provided an underlying profit measure in addition to IFRS profit to assist readers in determining the realised
and unrealised components of fair value movement of investment property, impairment and tax expense in the Group’s income
statement. The measure is used internally in conjunction with other measures to monitor performance and make investment
decisions. Underlying profit is a measure that the Group uses consistently across reporting periods. Underlying profit is used to
determine the dividend pay-out to shareholders.

This statement presented is for the Group, prepared in accordance with the Basis of preparation: underlying profit described below.

Basis of preparation: underlying profit
Underlying profit is determined by taking profit for the period determined under NZ IFRS, adjusted for the impact of the following:

a) Less fair value movement of investment property: reversal of investment property valuation changes recorded in NZ IFRS
profit for the period, which comprise both realised and non-realised valuation movements. This is reversed and replaced with
realised development margin and realised resale gains during the period, effectively removing the unrealised component of
the fair value movement of investment property.

b) Add impairment of assets: remove the impact of non-cash care centre valuation changes recorded in NZ IFRS profit for the
period. Care centres are valued at least every three years (last valued as at 31 December 2020), with fair value gains flowing
through to the revaluation reserve unless the gain offsets a previous impairment to fair value that was recorded in NZ IFRS profit
for the period. Where there is any impairment of a care centre, or reversal of a previous impairment that impacts NZ IFRS profit
for the period, this is eliminated for the purposes of determining underlying profit.

c) Add realised gain on resales: add the realised gains across all resales of occupation rights during the period. The realised
gain for each resale is determined to be the difference between the licence price for the previous occupation right for a
retirement unit and the occupation right resold for that same retirement unit during the period. Realised resale gains are a
measure of the cash generated from increases in selling prices of occupation rights to incoming residents, less cash amounts
repaid to vacated residents for the repayment of the price of their refundable occupation right purchased in an earlier
period, with the recognition point being the cash settlement. Realised resale gains exclude deferred management fees and
refurbishment costs.

d) Add realised development margin: add realised development margin across all new sales of occupation rights during the
period, with the recognition point being the cash settlement. Realised development margin is the margin earned on the first
time sale of an occupation right following the development of a retirement unit. The margin for each new sale is determined
to be the licence price for the occupation right, less the cost of developing that retirement unit.

4 9

Components of the cost of developing units include directly attributable construction costs and a proportionate share of the
following costs:

• Infrastructure costs

• Land cost on the basis of the purchase price of the land

• Interest during the build period

• Head office costs directly related to the construction of units

All costs above include non-recoverable GST.

Development margin excludes the costs of developing common areas within the retirement village (including a share of the
proportionate costs listed above). This is because these areas are assets that support the sale of occupation rights for not just
the new sale but for all subsequent resales. It also excludes the costs of developing care centres, which are treated as property,
plant and equipment for accounting purposes.

Where costs are apportioned across more than one asset, the apportionment methodology is determined by considering the
nature of the cost.

e) Add/(less) deferred tax expense/(credit): reversal of the impact of deferred taxation.

Underlying profit does not include any adjustments for abnormal items or fair value movements on financial instruments that
are included in NZ IFRS profit for the period.

3. Segment reporting
The Group operates in one industry, being the provision of integrated retirement villages. The services provided across all of the
Group’s villages are similar, as are the type of customer and the regulatory environment. The chief operating decision makers, the
Chief Executive Officer and the Board of Directors, review the operating results of the Group as a whole on a regular basis. On
this basis, the Group has one reportable segment, and the Group results are the same as the results of the reportable segment. All
resource allocation decisions across the Group are made to optimise the consolidated Group’s result.

The Group continues to proceed with its expansion into Australia. Two Australian sites were purchased in 2019. It is intended that
these sites will be developed into retirement villages. To date the expenditure incurred and assets acquired in Australia have been
immaterial to the Group and so are not reported as a separate operating segment as at 31 December 2020.

The Ministry of Health is a significant customer of the Group, as the Group derives care fee revenue in respect of eligible government
subsidised aged care residents. Fees earned from the Ministry of Health for the year ended 31 December 2020 amounted to
$36.2 million (2019: $32.2 million). No other customers individually contribute a significant proportion of the Group revenue. All
revenue is earned in New Zealand.

4. Revenue
Care fees and village services income are recognised over the period in which the service is rendered.

Deferred management fees, which entitle residents to accommodation and the use of the community facilities within the village,
are recognised over the period of service, being the greater of the expected period of tenure or the contractual right to revenue.
The expected periods of tenure, being based on historical Group averages, are estimated to be seven to eight years for villas,
five years for apartments, three years for serviced apartments and memory care apartments and two years for care suites. Where
the deferred management fees over the contractual period exceed the amortisation of the deferred management fee based on
estimated tenure, the amount is recorded as a liability (revenue in advance). At balance date, the majority of the revenue in advance
balance is non-current. Deferred management fees are recognised on a gross basis in the receipts for residents’ loans section of the
statement of cash flows.

Interest income is recognised in the income statement as it accrues, using the effective interest method.

Annual Report 2020
Notes to the financial statements (continued)

5 0

5. Operating expenses

2020 2019
$000 $000

Employee expenses 90,691 72,921

Property-related expenses 16,187 13,589

Repairs and maintenance expenses 5,824 5,185

Other operating expenses 34,103 30,703

Total operating expenses 146,805 122,399

Other operating expenses include:

2020 2019
$000 $000

Remuneration paid to auditors:

– Audit and other assurance related services review of
financial statements

205 194

Donations 34 58

Rent1 158 217

1 Outgoings and short term and low value amounts exempt under NZ IFRS 16 – Leases.

Employee expenses include post-employment benefits (KiwiSaver/Superannuation) of $2.3 million (2019: $2.0 million).

During the year the Group received a $8.6 million one-off Government wage subsidy in relation to COVID-19. The subsidy related
to a 12-week period between March and June 2020. Although the Group was entitled to receive the wage subsidy, the Directors
subsequently determined that it was appropriate to return the subsidy back to the Government and the full $8.6 million was repaid
on 23 December 2020. This resulted in a net nil impact to other operating expenses for the year ended 31 December 2020.

The Group also received an additional $0.7 million of funding as part of the Government’s package to support residential aged care
providers to keep COVID-19 at bay. This funding has been recorded as a deduction to other operating expenses.

Included in the above operating expenses is $9.2 million of additional costs incurred as a result of COVID-19.

6. Net finance costs

2020 2019
$000 $000

Interest on bank loans, retail bonds and related fees 22,156 22,664

Interest on interest rate swaps 3,193 2,623

Interest on lease liability 46

6 4

42

Capitalised finance costs (12,323) (10,481)

Fair value movement of interest rate swaps through profit or loss (5,795) (7,991)

Fair value movement of retail bonds designated as fair value through profit
or loss

5,782 8,082

Other 17 66

Net finance costs 13,496 15,405

Interest expense comprises interest payable on borrowings and is calculated using the effective interest rate method.

5 1

Borrowing costs are capitalised for property, plant and equipment (Note 9), and investment property (Note 11), if they are directly
attributable to the construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities
to prepare the asset commence and expenditure and borrowing costs are incurred. Capitalisation of borrowing costs continues until
the assets are substantially ready for their intended use.

Borrowing costs of $12.3 million (2019: $10.5 million) have been capitalised during the period of construction in the current year. The
weighted average capitalisation rate on funds borrowed representing the borrowing costs of the loans used to finance projects is
3.15% per annum (2019: 3.87% per annum).

Two of the Group’s retail bonds are designated in a fair value hedging relationship. Details of fair value hedging are included in Note 14.

7. Income tax
Tax expense comprises current and deferred tax, calculated using the tax rate enacted or substantively enacted at balance date and
any adjustment to tax payable in respect of prior years. Tax expense is recognised in the income statement, except when it relates to
items recognised directly in the statement of comprehensive income, in which case the tax expense is recognised in the statement
of comprehensive income.

Deferred tax expense is recognised in respect of temporary differences between the carrying amounts of assets and liabilities in
the financial statements and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is
probable it will be utilised. Temporary differences for the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit, unless they arise from business combination, are not provided for.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.

(a) Income tax recognised in the income statement

2020 2019
$000 $000

Tax expense comprises:

Deferred tax relating to the origination and reversal of temporary differences (9,041) (1,701)

Total tax credit reported in income statement (9,041) (1,701)

The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the
financial statements as follows:

2020 2019

$000 % $000 %

Profit before income tax 221,735 173,561

Income tax using the corporate tax rate 62,086 28.0% 48,597 28.0%

Capitalised interest (3,450) (1.6%) (2,935) (1.7%)

Other non-deductible expenses 20

8 0

.1% 39

9 0

.2%

Non-assessable investment property revaluations (62,501) (28.2%) (46,271) (26.7%)

Reinstatement of tax depreciation on non-
residential buildings

(6,008) (2.7%) – 0.0%

Other 180 0.1% (1,681) (1.0%)

Prior period adjustments 444 0.2% 190 0.1%

Total income tax credit (9,041) (4.1%) (1,701) (1.0%)

Total Group tax losses available amounted to $250.5 million (2019: $184.0 million). There are no unrecognised tax losses for the Group
at 31 December 2020 (2019: nil).

Annual Report 2020
Notes to the financial statements (continued)
5 2

(b) Amounts charged or credited to other comprehensive income

2020 2019
$000 $000
Tax expense comprises:

Net gain on revaluation of land and buildings 3,145 –

Fair value movement of interest rate swaps (1,981) (1,964)

Total tax expense/(credit) reported in statement of comprehensive income 1,164 (1,964)

(c) Amounts charged or credited directly to equity

2020 2019
$000 $000
Tax expense comprises:

Deferred tax relating to employee share option plans (1,812) –

Total tax credit reported directly in equity (1,812) –

(d) Imputation credit account
There were no imputation credits received or paid during the year and the balance at 31 December 2020 is nil (2019: nil).

(e) Deferred tax
Movement in the deferred tax balance comprises:

BALANCE
1 JAN 2020

$000

RECOGNISED
IN INCOME

$000

RECOGNISED
DIRECTLY IN

EQUITY
$000

RECOGNISED
IN OCI*

$000

BALANCE
31 DEC 2020

$000

Property, plant and equipment 17,607 (6,581) – 3,145 14,171

Investment property 29,188 6,043 – – 35,231

Revenue in advance 23,479 11,680 – – 35,159

Interest rate swaps (5,901) – – (1,981) (7,882)

Income tax losses not yet utilised (51,631) (18,678) – – (70,309)

Other items (223) (1,505) (1,812) – (3,540)

Net deferred tax liability 12,519 (9,041) (1,812) 1,164 2,830

BALANCE
1 JAN 2019

$000
RECOGNISED
IN INCOME
$000
RECOGNISED
IN OCI*
$000

BALANCE
31 DEC 2019

$000

Property, plant and equipment 17,062 545 – 17,607

Investment property 24,111 5,077 – 29,188

Revenue in advance 11,650 11,829 – 23,479

Interest rate swaps (3,937) – (1,964) (5,901)

Income tax losses not yet utilised (31,802) (19,829) – (51,631)

Other items (900) 677 – (223)

Net deferred tax liability 16,184 (1,701) (1,964) 12,519

* Other comprehensive income

5 3

(f) Income tax legislation amendments during the period
During the period, the Income Tax Act 2007 in New Zealand was amended to restore tax depreciation deductions for non-residential
buildings. This amendment resulted in a $6.0 million credit to tax expense during the period and a corresponding reduction in the
deferred tax liability related to property, plant and equipment.

8. Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses. Trade receivables are not significant on an individual
basis and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate, less
an allowance for impairment. The allowance for doubtful debts is made up of expected credit losses based on assessment of trade
receivables debt at the individual level for impairment, plus an additional allowance on the remaining balance for potential credit
losses not yet identified. The expected credit losses allowance requirement on the remaining balance has been set at 2%.

2020 2019
$000 $000

Trade receivables 3,357 2,912

Allowance for doubtful debts (237) (169)

Net trade receivables 3,120 2,743

Prepayments 12,215 8,331

Accrued income 1,092 923

Sundry debtors 16,968 24,665

Total trade and other receivables 33,395 36,662

9. Property, plant and equipment
Property, plant and equipment includes care centres, both complete and under development, and corporate assets held.

All property, plant and equipment is initially recorded at cost. Cost includes expenditure that is directly attributable to the acquisition
of the asset. The cost of self-constructed care centres includes directly attributable construction costs and other costs necessary to
bring the care centres to working condition for their intended use. These other costs include professional fees and consents, interest
during the build period and head office costs directly related to the construction of the care centres. Where costs are apportioned
across more than one asset, the apportionment methodology is determined by considering the nature of the cost.

Subsequent to initial recognition, completed care centres are carried at a revalued amount, which is the fair value at the date of the
revaluation less any subsequent accumulated depreciation on care centres and accumulated impairment losses, if any, since the
assets were last revalued. Other corporate assets are subsequently measured at cost less accumulated depreciation and impairment
losses, if any. Where an item of plant and equipment is disposed of, the gain or loss recognised in the income statement is calculated
as the difference between the net sales price and the carrying amount of the asset.

Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged
between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date.

Any revaluation surplus is recognised in other comprehensive income unless it reverses a revaluation decrease of the same asset
previously recognised in the income statement. Any revaluation deficit is recognised in the income statement unless it directly offsets
a previous surplus in the same asset in other comprehensive income. Any accumulated depreciation at revaluation date is eliminated
against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal,
any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Independent valuations are
performed with sufficient regularity to ensure that the carrying amount does not differ materially from the asset’s fair value at the
balance sheet date.

Note 6 provides details on capitalised borrowing costs.

Depreciation is charged to the income statement on a straight-line (SL) basis over the estimated useful life of each item of property,
plant and equipment, with the exception of land, which is not depreciated. Depreciation methods, useful lives and residual values
are reassessed at each reporting date.

Major depreciation rates are as follows:

• Buildings (2% to 13% SL) • Furniture and fittings (7% to 20% SL)
• Motor vehicles (10% SL) • Plant and equipment (2% to 50% SL)

Annual Report 2020
Notes to the financial statements (continued)

5 4

Also included in the buildings category is building fit-out.

Right of use assets are depreciated on a SL basis over the term of their lease. Refer to Note 16.

LAND AND
BUILDINGS

$000

MOTOR
VEHICLES

$000

PLANT AND
EQUIPMENT

$000

FURNITURE
AND

FITTINGS
$000

RIGHT OF USE
ASSETS

$000

TOTAL
$000

Cost

Balance at 1 January 2019 123,104 1,545 12,603 7,303 – 144,555

Additions 15,394 354 2,866 202 9,203 28,019

Disposals – (66) – – – (66)

Balance at

31 December 2019

138,498 1,833 15,46

9 7

,505 9,203 172,508

Additions 17,511 617 6,326 1,285 1,806 27,545

Transfer (2,885) – – – – (2,885)

Impairment through profit
or loss

(3,634) – – – – (3,634)

Net revaluations through
other comprehensive income

5,882 – – – – 5,882

Balance at
31 December 2020

155,372 2,450 21,795 8,790 11,009 199,416

Accumulated depreciation

Balance at 1 January 2019 2,30

7 8

57 5,661 2,984 – 11,809

Depreciation charge for
the year

2,357 161 2,189 1,144 910 6,761

Disposals – (66) – – – (66)
Balance at
31 December 2019

4,664 952 7,850 4,128 910 18,504

Depreciation charge for
the year

2,537 186 2,078 1,070 1,144 7,015

Transfer (168) – – – – (168)

Impairment through profit
or loss

(203) – – – – (203)

Net revaluations through
other comprehensive income

(6,830) – – – – (6,830)

Balance at
31 December 2020

– 1,138 9,928 5,198 2,054 18,318

Carrying amounts

As at 31 December 2019 133,834 881 7,619 3,377 8,293 154,004

As at 31 December 2020 155,372 1,312 11,86

7 3

,592 8,955 181,098

Buildings include $16.9 million of care centres under development carried at cost at 31 December 2020 (2019: $20.4 million). Right
of use assets relate to the Group’s leased office premises and car park spaces; refer to Note 16 for further information.

5 5

Transfer
As at 31 December 2020, a number of care rooms have been decommissioned as they are to be converted to serviced apartments
and accordingly have been transferred from property, plant and equipment to investment property. The care rooms were transferred
to investment property at their fair value which totalled $2.5 million. An impairment loss of $0.2 million was recognised on transfer
via the revaluation reserve.

Revaluations
An independent valuation to determine the fair value of all completed care centres that are classified as land and buildings was
carried out as at 31 December 2020 by CBRE Limited (“CBRE NZ”), an independent registered valuer. Valuations are carried out every
three years unless there are indicators of a significant change in fair value. CBRE NZ determines the fair value of all care centre
assets using an earnings-based multiple approach and the amount apportioned to goodwill of $18.9 million is not recognised (2017:
$16.8 million). Significant assumptions used in the most recent valuation include market value per care bed of between $71,300 and
$231,600, and individual unit earning capitalisation rate of between 11.0% and 13.5%.

As the fair value of land and buildings is determined using inputs that are unobservable, the Group has categorised property, plant
and equipment as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.

Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of
the entity’s portfolios of land and buildings are the capitalisation rates applied to individual unit earnings and the market value
per care bed. A significant decrease (increase) in the capitalisation rate would result in a significantly higher (lower) fair value
measurement, and a significant increase (decrease) in the market value per care bed would result in a significantly higher (lower) fair
value measurement.

Cost model
If land and buildings were measured using the cost model, the carrying amounts would be as follows:

2020 2019
LAND AND
BUILDINGS
$000
LAND AND
BUILDINGS
$000

Cost 126,225 111,599

Accumulated depreciation and impairment losses (18,971) (16,602)

Net carrying amount 107,254 94,997

Security
At 31 December 2020, all care centres held by retirement villages registered under the Retirement Villages Act 2003 are subject to
a registered first mortgage in favour of the Statutory Supervisor.

Annual Report 2020
Notes to the financial statements (continued)
5 6

10. Intangible assets
Intangible assets acquired by the Group are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is recognised in the income statement on a SL basis over the estimated useful lives of intangible assets from the date
that they are available for use. The intangible assets are software and the amortisation rates at 31 December 2020 are between 10-20%
SL basis.

TOTAL
$000
Cost

Balance at 1 January 2019 9,804

Additions 567

As at 31 December 2019 10,371

Additions 668

As at 31 December 2020 11,039

Accumulated amortisation

Balance at 1 January 2019 3,176

Amortisation charge for the year 1,072

As at 31 December 2019 4,248

Amortisation charge for the year 1,082

As at 31 December 2020 5,330

Carrying amounts

As at 31 December 2019 6,123

As at 31 December 2020 5,709

5 7

11. Investment property
Investment property is held to earn current and future rental income (deferred management fees). It comprises land and buildings,
and associated equipment and furnishings, relating to retirement villages and common facilities in the retirement village. Investment
property includes buildings under development, excluding care centres under development, which are included in property, plant
and equipment. Initial recognition of investment property is at cost and it is subsequently measured at fair value, with any change
in fair value recognised in the income statement.

The cost of retirement villages includes directly attributable construction costs and other costs necessary to bring the retirement
villages to working condition for their intended use. These other costs include professional fees and consents, interest during the
build period and head office costs directly related to the construction of the retirement villages. Where costs are apportioned across
more than one asset, the apportionment methodology is determined by considering the nature of the cost.

Land acquired with the intention of constructing investment property on it is classified as investment property from the date
of acquisition.

Rental income from investment property, being deferred management fees, is accounted for as described in Note 4.

Depreciation is not charged on investment property.

Note 6 provides details on capitalised borrowing costs.
2020 2019
$000 $000

Balance at beginning of period 3,107,014 2,585,049

Additions 309,024 356,713

Disposals (920) –

Transfer from property, plant and equipment 2,500 –

Fair value movement 221,142 165,252

Total investment property 3,638,760 3,107,014

2020 2019
$000 $000

Development land measured at fair value1 335,694 305,148

Retirement villages measured at fair value 2,973,040 2,580,855

Retirement villages under development measured at cost 330,026 221,011

Total investment property 3,638,760 3,107,014

1 Included in development land are pieces of land that were acquired close to balance date and as such were excluded from the valuation of investment property. These pieces

of land have been accounted for at cost, which has been determined to be fair value due to the proximity of the transaction to balance date. At 31 December 2020 the land

at cost was $9.9 million (2019: $74.9 million).

2020 2019
$000 $000

Manager’s net interest 2,003,725 1,688,265

Plus: revenue received in advance 114,737 91,142

Plus: liability for residents’ loans 1,520,298 1,327,607

Total investment property 3,638,760 3,107,014

The Group is unable to reliably determine the fair value of non-land retirement villages under development at 31 December 2020 and
therefore these are carried at cost. This equates to $330.0 million of investment property (2019: $221.0 million).

Annual Report 2020
Notes to the financial statements (continued)
5 8

The fair value of investment property as at 31 December 2020 was determined by independent registered valuers CBRE Limited
(“CBRE NZ”) and Jones Lang LaSalle Limited (“JLL”) for villages including land in New Zealand and CBRE Valuations Pty Limited
(“CBRE AU”) for land in Australia. The fair value of the Group’s investment property is determined on a semi-annual basis, based on
market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion.

As required by NZ IAS 40 – Investment Property, the fair value as determined by the independent registered valuer is adjusted for
assets and liabilities already recognised on the balance sheet which are also reflected in the cash flow analysis.

To assess the fair value of the Group’s interest in each New Zealand village, CBRE NZ and JLL have undertaken a cash flow analysis
to derive a net present value. The Group’s development land has been valued by CBRE NZ using the direct comparison approach.

Each valuer continues to review market conditions in relation to the COVID-19 global pandemic. Since 30 June 2020 the level
of uncertainty and unknown impact has decreased with markets becoming more used to operating under COVID-19 conditions.
Because of this, the valuers have reversed their COVID-19 specific adjustments relating to near term growth rates and recycle
frequencies when determining value at 31 December 2020.

The valuers’ view is that the longer-term economic impact as a result of COVID-19 on the New Zealand aged care sector still remains
largely unknown with comparable transactions and market evidence since the outbreak limited. Therefore they advise that a higher
degree of caution should be exercised when relying upon the valuation.

Significant assumptions used by CBRE NZ and JLL in relation to the New Zealand investment property include a discount rate of
between 13.5% and 16.5% (2019: 13.5% to 16.5%), and a long-term nominal house price inflation rate (growth rate) of between 0% and
3.5% (2019: 0% to 3.5%). Other assumptions used include the average entry age of residents of between 72 years and 90 years (2019:
72 years and 91 years), and the stabilised departing occupancy periods of units of between 3.7 years and 9.0 years (2019: 3.6 years
and 8.8 years).

Two sites under development in Australia have been valued separately by CBRE AU. The Cranbourne North land was valued under
the same methodology as development land in New Zealand. The Torquay land was valued under a modified direct comparison
approach which takes into account the gross realisation of the proposed units ‘as if complete’.

As the fair value of investment property is determined using inputs that are unobservable, the Group has categorised investment
property as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.

Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
To assess the market value of the Group’s interest in a retirement village, CBRE and JLL have undertaken a cash flow analysis to
derive a net present value. As the fair value of investment property is determined using inputs that are significant and unobservable,
the Group has categorised investment property as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair
Value Measurement.

The sensitivities of the significant assumptions are shown in the table below:

Adopted
value1

Discount rate
+50 bp

Discount rate
-50 bp

Growth rates
+50bp

Growth rates
-50bp

31 December 2020

Valuation ($000) 1,142,825

Difference ($000) (40,635) 43,395 53,550 (70,865)

Difference (%) (3.6%) 3.8% 4.7% (6.2%)

31 December 2019

Valuation ($000) 963,530

Difference ($000) (34,320) 36,610 57,812 (52,994)

Difference (%) (3.6%) 3.8% 6.0% (5.5%)

1 Completed units excluding unsold stock.

5 9

Other key components in determining the fair value of investment property are the average entry age of residents and the average
occupancy of units. A significant decrease (increase) in the occupancy period of units would result in a significantly higher (lower) fair
value measurement, and a significant increase (decrease) in the average entry age of residents would result in a significantly higher
(lower) fair value measurement.

Operating expenses
Direct operating expenses arising from investment property during the period amounted to $41.1 million (2019: $34.3 million).

Security
At 31 December 2020, all investment property relating to registered retirement villages under the Retirement Villages Act 2003 are
subject to a registered first mortgage in favour of the Statutory Supervisor to secure the Group’s obligations to the occupation right
agreement holders.

12. Trade and other payables
Trade and other payables are carried at amortised cost. Due to their short-term nature they are not discounted.

2020 2019
$000 $000

Trade payables 3,687 2,071

Accruals – development of retirement units and care centres 118,185 114,735

Accruals – other 14,275 13,480

Short-term advance 15,750 –

Sundry payables 6,713 4,394

Total trade and other payables 158,610 134,680

13. Employee benefits
A provision is made for benefits accruing to employees in respect of wages, salaries, annual leave and short-term incentives when
it is probable that settlement will be required and the amount can be estimated reliably.

2020 2019
$000 $000

Leave liabilities 8,284 5,755

Other employee benefits 7,154 5,679

Total employee benefits 15,438 11,434

14. Interest rate swaps
The Group uses interest rate swaps to manage its risk associated with interest rate fluctuations. Interest rate swaps are initially
recognised at fair value on the date a contract is entered into and are subsequently measured at fair value on each reporting date.
The fair values of the interest rate swaps are determined based on cash flows discounted to present value using current market
interest rates.

Cash flow hedges
The Group has entered into interest rate swaps to manage its interest rate risk in relation to its floating rate debt. These interest
rate swaps qualify for cash flow hedge accounting. When interest rate swaps meet the criteria for cash flow hedge accounting, the
effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income, while the ineffective
portion is recognised in the income statement. Amounts taken to reserves are transferred out of reserves and included in the
measurement of the hedged transaction when the forecast transaction occurs. When interest rate swaps do not meet the criteria
for cash flow hedge accounting, all movements in fair value of the hedging instrument are recognised in the income statement.

Annual Report 2020
Notes to the financial statements (continued)

6 0

Under the interest rate swap agreements that qualify for cash flow hedge accounting, the Group has a right to receive interest at
variable rates and to pay interest at fixed rates. At 31 December 2020, the Group had interest rate swap agreements in place with a
total notional principal amount of $337.0 million (2019: $377.0 million). Of the swaps in place, at 31 December 2020 $312.0 million
(2019: $292.0 million) are being used to cover approximately 45% (2019: 49%) of the floating rate debt principal outstanding. These
agreements effectively change the Group’s interest exposure on the principal covered by the interest rate swaps from a floating rate
to fixed rates, which range between 1.22% and 3.87% (2019: 1.22% and 4.43%).

The fair value of these agreements at 31 December 2020 is a $28.2 million liability, comprised of $29.2 million of swap liabilities and
$1.0 million of swap assets (2019: liability of $21.1 million, comprised of $22.6 million of swap liabilities and $1.5 million of swap assets).
Of this, a liability of $274,000 is estimated to be current (2019: $515,000). The agreements cover notional amounts for terms of up
to eight years.

The notional principal amounts and the period of expiry of the cash flow hedge interest rate swap contracts are as follows:

2020 2019
$000 $000

Less than 1 year 25,000 40,000

Between 1 and 2 years 70,000 25,000

Between 2 and 3 years – 70,000

Between 3 and 4 years 105,000 45,000

Between 4 and 5 years – 60,000

Between 5 and 6 years 77,000 25,000

Between 6 and 7 years 50,000 52,000

Between 7 and 8 years 10,000 50,000

Between 8 and 9 years – 10,000

Total 337,000 377,000

Current 312,000 292,000

Forward starting 25,000 85,000

Total 337,000 377,000

Fair value hedges
The Group has entered into interest rate swaps to manage its interest rate risk in relation to its fixed rate debt arising from the retail
bonds. The hedge is for the future fair value movements in the retail bonds as a result of market interest rate movements. The Group
has designated $225.0 million of its retail bonds in fair value hedge relationships.

Both the hedging instrument (interest rate swap) and the hedged risk are recognised at fair value. The change in the fair value of both
items offset in the statement of comprehensive income to the extent the hedging relationship is effective. The increase in fair value
of the interest rate swaps of $5.8 million (2019: $8.0 million) has been recognised in finance costs and has been offset with a similar
fair value loss on the retail bonds to leave an ineffective amount in finance costs of $13,000 (2019: $92,000).

Under the interest rate swap agreements that qualify for fair value hedge accounting, the Group has a right to receive interest at
fixed rates and to pay interest at floating rates. At 31 December 2020, the Group had interest rate swap agreements in place with
a total notional principal amount of $225.0 million (2019: $225.0 million). Of the interest rate swaps in place, at 31 December 2020
$225.0 million (2019: $225.0 million) are being used to cover 60% (2019: 100%) of the fixed interest rate retail bonds outstanding.

6 1

The notional principal amounts and the period of expiry of the fair value hedge interest rate swap contracts are as follows:

2020 2019
$000 $000

Between 3 and 4 years 100,000 100,000

Between 4 and 5 years – –

Between 5 and 6 years 125,000 125,000

Total 225,000 225,000

Current 225,000 225,000

Total 225,000 225,000

15. Residents’ loans
Residents’ loans are amounts payable under occupation right agreements. An occupation right agreement confers a right of
occupancy to a villa, apartment, serviced apartment, care suite or memory care apartment. The consideration received on the grant
of an occupation right agreement is allocated to the resident’s loan in full. These loans are non-interest-bearing and are payable when
both an occupation right agreement is terminated and there has been settlement of a new occupation right agreement for the same
retirement unit and the proceeds from the new settlement have been received by the Group. Residents’ loans are initially recognised
at fair value and subsequently measured at amortised cost.

The Group holds a contractual right to set-off the deferred management fee receivable on termination of an agreement against the
resident’s loan to be repaid. Residents’ loans are therefore recognised net of the deferred management fee receivable on the balance
sheet. Deferred management fees are payable by residents in consideration for the supply of accommodation and the right to share
in the use of community facilities. Deferred management fees are paid in arrears, with the amount payable calculated as a percentage
of the resident’s loan amount as per the resident’s occupation right agreement. Deferred management fee receivable is calculated
and recorded based on the current tenure of the resident and the contractual right to deferred management fee earned at balance
date. Refer to Note 4 for further detail on recognition of deferred management fee revenue.

2020 2019
$000 $000

Balance at beginning of period 1,599,854 1,355,535

Net receipts for residents’ loans – resales of occupation right agreements 27,830 26,294

Receipts for residents’ loans – new occupation right agreements 245,052 218,025

Total gross residents’ loans 1,872,736 1,599,854

Deferred management fees and other receivables (352,438) (272,247)

Total residents’ loans 1,520,298 1,327,607

Note 18 provides a split between current and non-current residents’ loans.

16. Leases
The leases to which NZ IFRS 16 applies are the leases of office premises and car parks occupied by the Group in New Zealand and
Australia. In respect of these leases, a right of use asset is disclosed along with a corresponding lease liability. The right of use assets
are depreciated on a SL basis, while the lease liability is measured at the present value of the lease payments that are not yet paid,
discounted using the Group’s incremental borrowing rate.

The Group has elected not to recognise right of use assets and lease liabilities for short-term leases of office spaces, car parks and
information technology equipment that have a lease term of 12 months or less, or as a transitional expedient, have less than 12 months
left on the lease term as at the date of application of NZ IFRS 16. The Group recognises the lease payments associated with these
leases as incurred as a rental expense over the lease term.

Annual Report 2020
Notes to the financial statements (continued)
6 2

Right of use assets are classified as property, plant and equipment and lease liabilities are disclosed as such in the Group’s statement
of financial position.

The following practical expedients have been utilised in relation to the Group’s operating leases as lessee:

• A single discount rate has been applied to a portfolio of leases with reasonably similar characteristics

• Leases with a term ending within 12 months of the date of application have been treated as short term leases

• Initial direct costs have been excluded from the measurement of the right of use asset at the date of initial application

• Exclusion of leases for which the underlying asset is of low value

The weighted average incremental borrowing rates used to measure lease liabilities at the date of application are between 3.80%
and 4.67% (2019: 4.17% and 4.67%).

When the Group has the option to extend a lease, management uses its judgement to determine whether or not an option would be
reasonably certain to be exercised. Management considers all facts and circumstances, including their past practice and any cost
that will be incurred to change the asset if an option to extend is not taken, to help determine the lease term. Other assumptions and
judgements used by management include calculating the appropriate discount rate.

As a direct result of the COVID-19 pandemic the Group, as a lessee, received $60,000 in rent concessions over a three-month
period from April to June 2020. Management has applied the COVID-19 practical expedient, issued by the IASB in May 2020, and has
accounted for the rent concessions as if they were not lease modifications. The rent concessions have instead been accounted for
as a reduction to operating expenses.

As a lessee
Right of use assets disclosed:

2020 2019

Buildings
$000

Buildings
$000

Balance at beginning of period 8,293 8,557

Additions 1,806 646

Depreciation charge for the year (1,144) (910)

Balance at end of period 8,955 8,293

Lease liabilities disclosed:

2020 2019
$000 $000

Less than 1 year 1,123 919

Between 1 and 5 years 4,994 4,106

More than 5 years 5,067 5,435

Total lease liabilities at end of period 11,184 10,460

Amounts recognised in the profit and loss:

2020 2019
$000 $000

Interest on lease liabilities 466 442

Expenses relating to short-term and low-value asset leases 4 125

Depreciation on right of use assets 1,144 910

Total amounts recognised in profit or loss 1,614 1,477

6 3

As a lessor
The Group acts as a lessor under occupation right agreements with village residents, along with a small amount of residential
rental properties. The assets leased by the group as a lessor are disclosed as investment property and lease income on occupation
right agreements is generated in the form of deferred management fees. The lease term is determined to be the greater of the
expected period of tenure or the contractual right to revenue. The Group uses the portfolio approach to account for leases of units
to village residents and allocates individual leases to different portfolios depending on the type of unit. The Group does not have
any sub-leases.

17. Interest-bearing loans and borrowings
Interest-bearing loans and borrowings include secured bank loans and unsubordinated fixed-rate retail bonds.

Interest-bearing loans and borrowings are recognised initially at fair value net of directly attributable transaction costs. Subsequent
to initial recognition, the borrowings are measured at amortised cost, with any difference between the initial recognised amount and
the redemption value being recognised in profit or loss over the period of the borrowing using the effective interest rate. The retail
bonds SUM010 and SUM020 are designated in fair value hedge relationships, which means that any change in market interest rates
result in a change in the fair value adjustment on that debt. Retail bond issue expenses, fees and other costs incurred in arranging
retail bond finance are capitalised and amortised over the term of the relevant debt instrument.

2020 2019

Coupon $000 $000

Repayable after 12 months

Secured bank loans Floating 297,576 362,139

Retail bond – SUM010 4.78% 100,000 100,000

Retail bond – SUM020 4.20% 125,000 125,000

Retail bond – SUM030 2.30% 150,000 –

Total loans and borrowings at face value 672,57

6 5

87,139

Issue costs for retail bonds capitalised:

Opening balance (2,688) (3,290)

Capitalised during the period (1,876) –

Amortised during the period 676 602

Closing balance (3,888) (2,688)

Total loans and borrowings at amortised cost 668,688 584,452

Fair value adjustment on hedged borrowings 18,411 12,629

Carrying value of interest-bearing loans and borrowings 687,099 597,081

The non-cash movements included in the table above are the issue costs for retail bonds amortised during the period and the fair
value adjustment on hedged borrowings.

A summary of the changes in the Group’s borrowings is provided below:

2020 2019
$000 $000

Borrowings at the start of the year 597,081 452,760

Net cash borrowed 85,436 135,637

Cash change in deferred financing costs (1,876) –

Non-cash change in deferred financing costs 676 602

Non-cash change in fair value adjustment 5,782 8,082

Borrowings at the end of the year 687,099 597,081

Annual Report 2020
Notes to the financial statements (continued)
6 4

The weighted average interest rate for the year to 31 December 2020 was 3.15% (2019: 3.87%). This includes the impact of interest
rate swaps (see Note 14).

The secured bank loan facility at 31 December 2020 has a limit of approximately NZD$750.0 million (2019: $500.0 million). Lending of
NZ$315.0 million expires in March 2022, AU$120.0 million expires in November 2023 and NZ$310.0 million expires in November 2024.

The Group has issued three retail bonds. The first retail bond was issued for $100.0 million in July 2017 and has a maturity date of
11 July 2023. This retail bond is listed on the NZX Debt Market (NZDX) with the ID SUM010. The second retail bond was issued for
$125.0 million in September 2018 and has a maturity date of 24 September 2025. This retail bond is listed on the NZDX with the ID
SUM020. The third retail bond was issued for $150.0 million in September 2020 and has a maturity date of 21 September 2027. This
retail bond is listed on the NZDX with the ID SUM030.

Security
The banks loans and retail bonds rank equally with the Group’s other unsubordinated obligations and are secured by the following
securities held by a security trustee:

• a first-ranking registered mortgage over all land and permanent buildings owned (or leased under a registered lease) by each
New Zealand-incorporated guaranteeing Group member that is not a registered retirement village under the Retirement Villages
Act 2003;

• a second-ranking registered mortgage over the land and permanent buildings owned (or leased under a registered lease) by each
New Zealand-incorporated guaranteeing Group member that is a registered retirement village under the Retirement Villages Act
2003 (behind a first-ranking registered mortgage in favour of the Statutory Supervisor);

• a first-ranking registered mortgage over all land and permanent buildings owned (or leased under a registered lease) by each
Australian-incorporated guaranteeing Group member;

• a General Security Deed, which secures all assets of the New Zealand- incorporated guaranteeing Group members, but in respect
of which the Statutory Supervisor has first rights to the proceeds of security enforcement against all assets of the registered
retirement villages to which the security trustee is entitled;

• a General Security Deed, which secures all assets of the Australian-incorporated guaranteeing Group members; and

• a Specific Security Deed in respect of each marketable security of Summerset Holdings (Australia) Pty Limited, held by
Summerset Holdings Limited.

18. Financial instruments
Exposure to credit, market and liquidity risk arises in the normal course of the Group’s business. The Board reviews and agrees on
policies for managing each of these risks as summarised below.

The Group has seen no material change in its exposure to credit, market and liquidity risk as a result of the COVID-19 pandemic, but it
will continue to monitor the situation. Further to this, given the Group’s status as an ‘essential service’ during the COVID-19 pandemic,
operations have been allowed to continue largely uninterrupted.

Categories of financial instruments
Financial assets
All financial assets of the Group are classified at amortised cost except for interest rate swaps, which are classified as fair value
through profit and loss, and those assets that are designated in a hedge relationship.

Financial liabilities

All financial liabilities except interest rate swaps and retail bonds are classified as liabilities at amortised cost. Refer to Note 17 for detail
on the retail bonds.

Credit risk
Credit risk is the risk of financial loss to the Group if a resident or counterparty to a financial instrument fails to meet their contractual
obligations. The Group’s exposure to credit risk relates to receivables from residents and bank balances. The Group manages
its exposure to credit risk. The Group’s cash is held with its principal banker; with the level of exposure to credit risk considered
minimal, with low levels of cash generally held. Receivables balances are monitored on an ongoing basis and funds are placed
with high-credit-quality financial institutions. The level of risk associated with sundry debtors is considered minimal due to the
recoverability of this balance being assessed as high. The Group does not require collateral from its debtors and the Directors
consider the Group’s exposure to any concentration of credit risk to be minimal.

There has been no instances of residents or counterparties failing to meet their contractual obligations as a direct result of COVID-19.
There has been no change to credit terms and aging of receivables remains consistent with the prior years.

6 5

The carrying amount of financial assets represents the Group’s maximum credit exposure. The status of trade receivables is
as follows:

2020 2019

GROSS
RECEIVABLE

$000
IMPAIRMENT

$000
GROSS
RECEIVABLE
$000
IMPAIRMENT
$000

Not past due 2,894 (44) 2,624 (31)

Past due 31 to 60 days 236 (55) 90 (33)

Past due 61 to 90 days 118 (54) 31 (26)

Past due more than 90 days 109 (84) 167 (79)

Total 3,357 (237) 2,912 (169)

In summary, trade receivables are determined to be impaired as follows:

2020 2019
$000 $000

Gross trade receivables 3,357 2,912

Impairment (237) (169)

Net trade receivables 3,120 2,743

Market risk
Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Interest rate risk
The Group’s exposure to interest rate risk is managed by seeking to obtain the most competitive rate of interest at all times. The Group
has entered into interest rate swap agreements in order to provide an effective cash flow hedge against the variability in floating
interest rates. The Group has also entered into other interest swap agreements to reduce interest rate repricing risk in relation to retail
bonds. See Note 14 for details of interest rate swap agreements.

To comply with the Group’s risk management policy, the hedge ratio is based on the interest rate swap notional amount to hedge
the same notional amount of bank loans or retail bonds. This results in a hedge ratio of 1:1. This is the same as used for actual risk
management purposes, and such a ratio is appropriate for the purposes of hedge accounting as it does not result in an imbalance
that would create hedge ineffectiveness.

In these hedge relationships the main sources of ineffectiveness are:

• a significant change in the credit risk of either party to the hedging relationship;

• where the hedge instrument has been transacted on a date different to the rate set date of the bank loan or retail bonds, interest
rates could differ; and

• differences in repricing dates between the swaps and the borrowings.

Other than these sources, due to the alignment of the hedged risk in the hedged item and hedged instrument, hedge ineffectiveness
is not expected to arise.

At 31 December 2020 it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s
profit by approximately $2.8 million (2019: decrease by $3.5 million) and increase total comprehensive income by approximately
$8.7 million (2019: increase by $8.0 million).

Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity
by maintaining adequate reserves and undrawn banking facilities, by continuously monitoring forecast and actual cash flows, and
matching the maturity profiles of financial assets and liabilities. The Group manages liquidity risk on residents’ loans and related
sundry debtors through the contractual requirements of occupation rights agreements, whereby a resident’s loan is repaid only on
receipt of the loan monies from the incoming resident.

Annual Report 2020
Notes to the financial statements (continued)
6 6

The following table sets out the contractual cash flows for all financial liabilities for the Group (including contractual interest
obligations on bank loans):

2020 2019

LESS THAN
1 YEAR

$000

GREATER
THAN

1 YEAR
$000

LESS THAN
1 YEAR
$000
GREATER
THAN
1 YEAR
$000
Financial liabilities

Trade and other payables 158,610 – 134,680 –

Residents’ loans 118,724 1,401,574 113,278 1,214,329

Interest-bearing loans and borrowings 20,562 706,908 22,524 491,228

Interest rate swaps 8,315 32,882 6,774 30,292

Lease liability 1,123 10,061 919 9,541

Total 307,334 2,151,425 278,175 1,745,390

Residents’ loans are non-interest bearing and are not required to be repaid following termination of an occupation right agreement
until receipt of cash for the new resident loan from the incoming resident. The figures above have been calculated using best
estimates of resident loan repayments based on historical information. To date, cash for new residents’ loans received has always
exceeded cash to repay residents’ loans, net of deferred management fees.

Foreign currency risk
Foreign currency risk is the risk that the value of the Group’s assets, liabilities and financial performance will fluctuate due to changes
in foreign currency rates.

The Group is primarily exposed to currency risk through its subsidiaries in Australia.

The risk to the Group is that the value of the overseas subsidiaries’ financial position and financial performance will fluctuate in
economic terms and as recorded in the Group financial statements due to changes in foreign exchange rates. Due to limited activity
in the Australian subsidiaries in 2020, the Group did not have a material exposure to foreign exchange risk.

Fair values
The carrying amounts shown in the balance sheet approximate the fair value of the financial instruments, with the exception of
residents’ loans and retail bonds, shown below:

2020 2019

CARRYING
AMOUNT

$000

FAIR VALUE
$000

CARRYING
AMOUNT
$000
FAIR VALUE
$000

Residents’ loans (1,520,298) (1,082,943) (1,327,607) (932,932)

Retail bonds (389,523) (394,303) (234,942) (239,817)

Total (1,909,821) (1,477,246) (1,562,548) (1,172,749)

The fair value of residents’ loans is based on the present value of projected cash flows. Future cash flows are based on the assumption
that the average tenure periods are those disclosed above and have been discounted at 14% (2019: 14%). The fair value of residents’
loans is categorised as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.

The fair value of retail bonds is based on the price traded at on the NZX market as at 31 December 2020. The fair value of the retail
bonds is categorised as Level 1 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.

The fair value of interest rate swaps is determined using inputs from third parties that are observable, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). Based on this, the Company and Group have categorised these financial instruments as Level 2
under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.

6 7

Capital management
The Group’s capital includes share capital, reserves and retained earnings. The objective of the Group’s capital management is
to ensure a strong credit position to support business growth and maximise shareholder value. The Group is subject to capital
requirements imposed by the bank lenders (through covenants in the Syndicated Facility Agreement) and bond holders (through
covenants in the Master Trust Deed). The Group has met all of these externally imposed capital requirements for the year ended
31 December 2020 (2019: all requirements met). The Group capital structure is managed, and adjustments are made, with Board
approval. There were no changes to objectives, policies or processes during the year ended 31 December 2020 (2019: none).

19. Share capital and reserves
At 31 December 2020, there were 228,785,314 ordinary shares on issue (2019: 226,827,675). All ordinary shares are fully paid and have
no par value. All shares carry one vote per share and carry the right to dividends.

2020 2019
$000 $000

Share capital

On issue at beginning of year 284,074 269,467

Shares issued under the dividend reinvestment plan 11,833 11,100

Shares paid under employee share plans 4,562 2,214

Other – 37

Employee share plan option cost 3,030 1,256

On issue at end of year 303,499 284,074

2020 2019

Share capital (in thousands of shares)

On issue at beginning of year 224,250 221,734

Shares issued under the dividend reinvestment plan 1,820 1,795

Shares issued under employee share plans 1,003 721

On issue at end of year 227,073 224,250

The total shares on issue at 31 December 2020 of 228,785,314 for the Company differs from the share capital for the Group due
to shares held in 100% owned subsidiary, Summerset LTI Trustee Limited. As at 31 December 2020, 1,712,181 shares are held by
Summerset LTI Trustee Limited for employee share plans, which are eliminated on consolidation. Refer to Note 21 for further details
on employee share plans.

Revaluation reserve
The revaluation reserve is used to record the revaluation of care centre land and buildings.

Hedging reserve
The hedging reserve is used to record gains or losses on instruments used as cash flow hedges. The amounts are recognised in profit
and loss when the hedged transaction affects profit and loss.

Foreign currency translation reserve
The foreign currency translation reserve is used to record the gain on translation of foreign currency subsidiaries to the Group’s
reporting currency.

Annual Report 2020
Notes to the financial statements (continued)
6 8

Dividends
On 23 March 2020 a dividend of 7.7 cents per ordinary share was paid to shareholders and on 11 September 2020 a dividend of 6.0
cents per ordinary share was paid to shareholders (2019: on 21 March 2019 a dividend of 7.2 cents per ordinary share was paid to
shareholders and on 9 September 2019 a dividend of 6.4 cents per ordinary share was paid to shareholders).

A dividend reinvestment plan applied to the dividends paid. 1,155,370 ordinary shares were issued in relation to the plan for the March
2020 dividend and 665,095 ordinary shares were issued in relation to the plan for the September 2020 dividend. (2019: 866,704
ordinary shares were issued in March 2019 and 928,017 ordinary shares were issued in September 2019).

20. Earnings per share and net tangible assets

Basic earnings per share

2020 2019

Earnings ($000) 230,776 175,262

Weighted average number of ordinary shares for the
purpose of earnings per share (in thousands)

225,591 223,006

Basic earnings per share (cents per share) 102.30 78.59

Diluted earnings per share

2020 2019
Earnings ($000) 230,776 175,262

Weighted average number of ordinary shares for the
purpose of earnings per share (diluted) (in thousands)

227,979 226,087

Diluted earnings per share (cents per share) 101.23 77.52

Number of shares (in thousands)

2020 2019

Weighted average number of ordinary shares for the
purpose of earnings per share (basic)

225,591 223,006

Weighted average number of ordinary shares issued under
employee share plans

2,388 3,081

Weighted average number of ordinary shares for the
purpose of earnings per share (diluted)

227,979 226,087

At 31 December 2020, there were a total of 1,712,181 shares issued under employee share plans held by Summerset LTI Trustee Limited
(2019: 2,577,328 shares).

Net tangible assets per share

2020 2019

Net tangible assets ($000) 1,349,136 1,125,761

Shares on issue at end of period (basic and in thousands) 227,073 224,250

Net tangible assets per share (cents per share) 594.14 502.01

Net tangible assets are calculated as the total assets of the Group less intangible assets and less total liabilities. This measure is
provided as it is commonly used for comparison between entities.

6 9

21. Employee share plans

Senior employee share plan – share option scheme
Effective from 2018, the Group operates an employee share plan granting share options to selected senior employees (“Participants”).
The exercise price of the granted share options is determined from the volume weighted average price on the NZX during the 10
trading day period determined by the Board prior to the grant.

SHARE
OPTION

PLAN
(2018

grant)

SHARE
OPTION

PLAN
(2019
grant)

SHARE
OPTION

PLAN
(2020
grant)

Commencement date 10 Dec 2018 9 Dec 2019 18 Dec 2020

Exercise price at grant $6.34 $7.62 $10.85

Years the performance goals relate to 2019 to 2021 2020 to 2022 2021 to 2023

% of options vested 50%1 0% 0%

Vesting date of final tranche 31 Dec 2021 31 Dec 2022 31 Dec 2023

Final exercise date of final tranche 30 Jun 2023 30 Jun 2024 30 Jun 2025

1 The first tranche of the December 2018 grant had a vesting date of 31 December 2020.

The performance hurdles for the option grant made in 2020 are based on:

• 50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget)

• 20% relative earnings (earnings per share growth of the Group compared to a defined peer group)

• 10% clinical delivery

• 10% employee initiatives

• 10% customer initiatives

While there is a requirement to remain employed by Summerset up to vesting date, there are no performance hurdles for vesting
of share options to senior management team members, other than the members of the Executive Leadership Team, whose
performance hurdles are described above.

A total of 576,852 options vested at 31 December 2020 (2019: nil) and subsequently became exercisable.

The share option scheme is an equity-settled scheme and measured at fair value at the date of the grant. The fair value determined
at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Group’s estimate
that the share options will vest. These options were valued using the Black-Scholes valuation model, and the option cost for the year
ending 31 December 2020 of $980,000 has been recognised in the income statement of the Company and the Group for that period
(2019: $422,000). The Group has no legal or constructive obligation to repurchase or settle the share options in cash.

2020
SHARE
OPTION

PLAN
(2018 grant)

SHARE
OPTION

PLAN
(2019 grant)

SHARE
OPTION

PLAN
(2020 grant)

Options held at year end (in thousands) 1,058 1,004 549

Valuation assumptions

Discount to reflect options may not meet vesting criteria 15% 15% 15%

Risk free rate of return 2% 1% 0.5%

Volatility 23% 24% 26%

Annual Report 2020
Notes to the financial statements (continued)

7 0

2019
SHARE
OPTION
PLAN
(2018 grant)
SHARE
OPTION
PLAN
(2019 grant)

Options held at year end (in thousands) 1,084 1,064

Valuation assumptions

Discount to reflect options may not meet vesting criteria 15% 15%

Risk free rate of return 2% 1%

Volatility 23% 24%

2020 2019

WEIGHTED
AVERAGE
EXERCISE

PRICE

NUMBER OF
OPTIONS

000’s

WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
OPTIONS
000’s

Balance at beginning of period $6.97 2,148 $6.34 1,154

Granted during the year $10.85 549 $7.62 1,064

Forfeited during the year $7.23 (85) $6.34 (70)

Balance at end of period $7.78 2,612 $6.97 2,148

Senior employee share plan – share and loan scheme
Up to and including 2017, the Group operated employee share plans for selected senior employees (“Participants”) to purchase
shares in the Company (the “2013 share plan”). The shares for the plans are held by a nominee as share options on behalf of
Participants, until such time after the vesting of shares that the nominee is directed by the Participant that they wish to exercise the
share option, or the shares are sold or cancelled by the nominee if vesting criteria are not met. The shares carry the same rights as
all other ordinary shares.

The Group provided Participants with interest-free limited recourse loans to fund the acquisition of the shares for these plans. These
loans are held by Summerset LTI Trustee Limited and eliminate on consolidation.

The issue price of shares under the 2013 share plan was determined from the volume weighted average price on the NZX during the
ten trading days prior to issue.

2013
SHARE PLAN

(2016
issue)

2013
SHARE PLAN

(2017
issues)

Commencement date 16 Dec 2013 16 Dec 2013

Issue price $4.76 $5.19 & $5.24

Expiry date of interest-free limited recourse loans 30 Jun 2021 30 Jun 2022

Years the performance goals relate to 2017 to 2019 2018 to 2020

% of shares vested 83% 94%1

Vesting date of final tranche 31 Dec 2019 31 Dec 2020

1 The final tranche of the December 2017 issue had a vesting date of 31 December 2020 and a first release date of 25 February 2021.

The performance hurdles for the grant of shares under the 2013 share plan between 2016 and 2017 to Executive Leadership Team
members are based on:

• 50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget)

• 25% relative earnings (earnings per share growth of the Group compared to a defined peer group)

• 10% employee initiatives
• 10% customer initiatives
7 1

• 5% clinical strategy initiatives

While there is a requirement to remain employed by Summerset up to vesting date, there are no performance hurdles for grants
of shares to senior management team members, other than the members of the Executive Leadership Team, whose performance
hurdles are described above.

A total of 888,346 shares were vested and eligible for exercise at 31 December 2020 (2019: 866,717). The exercise prices range from
$4.76 to $5.24 (2019: $3.91 to $5.19). An additional 392,473 shares were vested on 31 December 2020 but are not eligible for exercise
until 25 February 2021.

The share and loan scheme is an equity-settled scheme and is measured at fair value at the date of the grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Group’s
estimate that the shares will vest. These options were valued using the Black-Scholes valuation model, and the option cost for the
year ending 31 December 2020 of $128,000 has been recognised in the income statement of the Company and the Group for that
period (2019: $471,000).

2020
2013
SHARE PLAN
(2016
issue)
2013
SHARE PLAN
(2017
issues)

Shares held at year end on behalf of participants (in thousands) 245 1,036

Shares held at year end as a percentage of shares on issue 0.1% 0.5%

Valuation assumptions

Discount to reflect that shares may not meet vesting criteria 0-15% 0-15%

Risk-free rate of return 2.5% 2-2.5%

Volatility 23% 23%

2019
2013
SHARE PLAN

(2015
issue)

2013
SHARE PLAN
(2016
issue)
2013
SHARE PLAN
(2017
issues)

Shares held at year end on behalf of
participants (in thousands)

341 706 1,170

Shares held at year end as a percentage of
shares on issue

0.2% 0.3% 0.5%

Valuation assumptions

Discount to reflect that shares may not
meet vesting criteria

0-30% 0-15% 0-15%

Risk-free rate of return 2.8% 2.5% 2-2.5%

Volatility 22% 23% 23%

The range of exercise prices at 31 December 2020 is $4.76 to $5.24 (2019: $3.91 to $5.24).

Annual Report 2020
Notes to the financial statements (continued)
7 2

2020 2019
WEIGHTED
AVERAGE
EXERCISE
PRICE

NUMBER OF
SHARES

000’s
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
SHARES
000’s

Balance at beginning of period $4.89 2,218 $4.54 2,936

Exercised during the year $4.51 (931) $3.34 (663)

Forfeited during the year $5.24 (6) $4.84 (55)

Balance at end of period $5.16 1,281 $4.89 2,218

All-staff employee share plan
The Group operates an all-staff employee share plan. A total of 1,282 employees participated in the share issue under the plan for
the year ended 31 December 2020 (2019: 1,060 employees). In 2020 the Group contributed $800 per participating employee (being
the total value of the shares issued). A total of 137,174 Company shares were issued under the scheme at $7.4712 per share (2019:
148,400 shares at $5.6938 per share). The shares are held by Summerset LTI Trustee Limited and vest to participating employees
after a three-year period.

The cost for the year ending 31 December 2020 of $370,000 has been recognised in the income statement of the Company and the
Group for that period (2019: $366,000).

22. Related party transactions
Refer to Note 21 for employee share plan details.

Transactions with companies associated with Directors
During the year ended 31 December 2020, Summerset Villages (Half Moon Bay) Limited purchased land at Half Moon Bay in Auckland
from BeGroup New Zealand Limited (“the vendor”). James Ogden is the Chair of the Investment Committee for Pencarrow IV
Investment Fund, which owns 48% of the vendor. Due to this conflict, James Ogden abstained from all aspects of the transaction in
both entities. As at 31 December 2020, there is an amount of $15.8 million outstanding in relation to this purchase, which is expected
to be paid to the vendor by 26 February 2021 in line with the agreement to purchase.

During the year ended 31 December 2020, Summerset Management Group Limited entered into a three year contract for the supply
of natural gas with Contact Energy. Venasio-Lorenzo Crawley is the Chief Customer Officer at Contact Energy. The procurement
process in relation to this contract was conducted on an arms-length basis with no involvement from Venasio-Lorenzo Crawley. The
agreement is in effect from 1 January 2021.

On 1 October 2020, Rob Campbell became a director of UFF Holdings Limited which provides services to Summerset villages. During
the period from 1 October to 31 December 2020, the Group paid $60,000 to Ultrafast Fibre Limited, a subsidiary of UFF Holdings
Limited, for fibre reticulation at villages.

There were no other related party transactions for the year ended 31 December 2020 (2019: nil).

23. Key management personnel compensation
The compensation of the key management personnel of the Group is set out below:

2020 2019
$000 $000

Directors’ fees 786 684

Short-term employee benefits 3,861 3,799

Share-based payments 729 686

Total 5,376 5,169

There were seven Directors from 1 February 2020 (2019: six Directors).

Refer to Note 21 for employee share plan details for key management personnel and for loans advanced to key management
personnel under the terms of employee share plans.

7 3

24. Commitments and contingencies

Guarantees
As at 31 December 2020, NZX Limited held a guarantee in respect of the Group, as required by the NZX Listing Rules, for $75,000
(2019: $75,000).

Summerset Retention Trustee Limited holds guarantees in relation to retentions on construction contracts on behalf of the Group.
As at 31 December 2020, $10.0 million was held for the benefit of the retentions beneficiaries (2019: $8.0 million).

Capital commitments
At 31 December 2020, the Group had $139.7 million of capital commitments in relation to construction contracts (2019: $133.1 million).

Contingent liabilities
There were no known material contingent liabilities at 31 December 2020 (2019: nil).

25. Subsequent events
On 22 February 2021, the Directors approved a final dividend of $16.0 million, being 7.0 cents per share. The dividend record date is
9 March 2021 with a payment date of 22 March 2021.

There have been no other events subsequent to 31 December 2020 that materially impact on the results reported.

Annual Report 2020
Notes to the financial statements (continued)
7 4

Independent Auditor’s Report to the Shareholders of Summerset Group
Holdings Limited

Report on the audit of the financial statements

Opinion
We have audited the financial statements of Summerset Group Holdings Limited (“the company”) and its subsidiaries (together “the
Group”) on pages 41 to 74, which comprise the consolidated statement of financial position of the Group as at 31 December 2020,
and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year then ended of the Group, and the notes to the consolidated financial
statements including a summary of significant accounting policies.

In our opinion, the consolidated financial statements on pages 41 to 74 present fairly, in all material respects, the consolidated
financial position of the Group as at 31 December 2020 and its consolidated financial performance and cash flows for the year
then ended in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial
Reporting Standards.

This report is made solely to the company’s shareholders, as a body. Our audit has been undertaken so that we might state to the
company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

Ernst & Young provides other assurance related services to the Group. Partners and employees of our firm may deal with the Group
on normal terms within the ordinary course of trading activities of the business of the Group. We have no other relationship with, or
interest in, the Group.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
consolidated financial statements.

7 5

Valuation of investment property and freehold land and buildings

Why significant How our audit addressed the key audit matter

As disclosed in notes 9 and 11 to the consolidated
financial statements:

• the Group’s investment property portfolio was valued
at $3,639 million at 31 December 2020 and included
completed investment property and investment
property under development

• the Group’s freehold land and buildings were valued
at $155 million at 31 December 2020. This included
freehold land and buildings operated by the Group for
the provision of care services, and land and buildings
to be developed into care facilities in the future.

The Group’s accounting policy is to measure these assets
at fair value.

Independent valuations of all investment property and
freehold land and buildings were carried out by third
party valuers, CBRE Limited and Jones Lang LaSalle
Limited (the Valuers). The valuation of investment
property and freehold land and buildings is inherently
subjective given that there are alternative assumptions
and valuation methods that may result in a range of
values. As discussed in note 11 to the consolidated
financial statements, the Valuers have advised that a
degree of caution should be exercised when relying
on the valuations. This caution reflects the ongoing
uncertainty compared to prior years as a result of the
COVID-19 pandemic.

Completed investment property and care suites are
recorded in the consolidated financial statements based
on the value determined by the Valuers.

To address the key audit matter, we:

External valuations

• read the valuation reports and discussed them directly
with the Valuers. We assessed the valuation approach and
confirmed that this was in accordance with the relevant
accounting standards; and

• tested on a sample basis, whether property specific
information supplied to the Valuers by the Group
reflected the underlying property records held by
the Group.

Assumptions and estimates

• held discussions with the Valuers to gain an
understanding of the assumptions and estimates
used and the valuation methodology applied. This
included understanding the impact that ongoing market
uncertainty had on their assessment of significant inputs
and assumptions. We also sought to understand and
consider whether any restrictions had been imposed on
the valuation process;

• considered whether the valuation sought to make
appropriate assumptions for a sample of individual
properties to reflect their characteristics, overall quality,
geographic location and desirability as a whole; and

• engaged our in-house Real estate valuation experts to
challenge the work performed by the Valuers and assess
the reasonableness of the assumptions used based
on their knowledge gained from reviewing valuations
of similar properties, known transactions and available
market data.

Our work over the assumptions focused on the largest
properties within the portfolio and those properties where the
assumptions used and/or year-on-year fair value movement
suggested a possible outlier compared to the rest of the
portfolio and the market data for the sector.

Valuation estimates

As a result of the judgement involved in determining
valuations for individual properties and the existence of
alternative assumptions and valuation methods, there is a
range of values which can be considered reasonable when
evaluating the independent property valuations used by the
Group. If we identified an error in a property valuation or
determined that the valuation was outside of a reasonable
range, we evaluated the error or difference to determine
if there was a material misstatement in the consolidated
financial statements.

Disclosures

We considered the adequacy of the disclosures made in
notes 9 and 11 to the consolidated financial statements.
These notes explain the key judgements made in relation
to the valuation of investment property and freehold land
and buildings and the estimation uncertainty involved in the
valuation process.

Annual Report 2020
7 6

Deferred Management Fee Revenue Recognition

Why significant How our audit addressed the key audit matter

Deferred management fee (“DMF”) revenue is 35% of the
Group’s total revenue. The Group recognises deferred
management fee revenue from residents over the longer
of the expected period of tenure or the contractual right
to revenue in accordance with the terms of the resident’s
occupational right agreement.

The amount of revenue recognised in each year is
subject to the Group’s judgement of each resident’s
expected tenure in the village as well as the terms of
the occupational right agreement and the type of unit
occupied. A change in the assumed tenure may have a
material impact on revenue recognised in the year.

Disclosures in relation to DMF revenue and the
associated DMF receivable and revenue in advance
balances are included in note 4 to the consolidated
financial statements.

To address the key audit matter, we:

• for a sample of residents, assessed the accuracy of a
sample of the inputs to, and calculation of, the DMF
revenue recognised during 2020;

• agreed the contractual terms used in the revenue
recognition calculation for a sample of residents to the
occupational right agreement;

• assessed the movements year on year in revenue
recognised by each village based on an expectation
derived from underlying village data;

• compared the Group’s assessment of assumed tenure
against actual observed tenure; and

• assessed the adequacy of the related financial
statement disclosures.

Information other than the financial statements and auditor’s report
The directors of the company are responsible for the Annual Report, which includes information other than the consolidated financial
statements and auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained during the audit, or otherwise appears to be materially misstated.

If, based upon the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the consolidated financial
statements in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial
Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.

7 7

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing
(New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.

A further description of the auditor’s responsibilities for the audit of the financial statements is located at the External Reporting
Board’s website: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/. This
description forms part of our auditor’s report.

The engagement partner on the audit resulting in this independent auditor’s report is Grant Taylor.

Ernst & Young
Chartered Accountants
Wellington
22 February 2021

Annual Report 2020
7 8

Governance
Summerset is committed to following best-practice governance structures and principles and to having good
governance of the way in which the Company operates. It also takes account of the Company’s listings on both the
NZX and ASX.

Summerset has adopted the principles below as an appropriate way to demonstrate its commitment to these
fundamental principles and to illustrate the transparency of the Company’s approach to corporate governance for the
benefit of its Shareholders and other stakeholders. These principles are from the NZX Corporate Governance Code
issued in January 2019 (“NZX Code”). Each principle of the NZX Code is set out below with an explanation on how
Summerset meets each principle.

As at 31 December 2020, Summerset considers that it was in full compliance with NZX Listing Rules and the NZX Code.

Summerset’s Board and Committee Charters, and a number of the policies and guidelines referred to in this section,
are available to view at https://www.summerset.co.nz/investor-centre/governance-documents/.

Principle 1: Code of ethical behaviour

“Directors should set high standards of ethical
behaviour, model this behaviour and hold
management accountable for these standards being
followed throughout the organisation.”

Ethical standards
The Board maintains high standards of ethical conduct
and expects the Company’s employees to act legally and
with integrity in a manner consistent with the policies,
guiding principles and values that are in place. These
include the following:

• Code of Ethics – This guide sets out the basic
principles of legal and ethical conduct expected of all
employees and Directors. The Company encourages
open and honest communication by staff about any
current or potential problem, complaint, suggestion,
concern or question.

• Securities trading – In accordance with the
Company’s Securities Trading Policy, the NZX Listing
Rules, and the Financial Markets Conduct Act 2013,
Directors and employees of the Company are
subject to limitations on their ability to buy or sell
Company shares.

• Diversity and inclusion – This policy outlines
the Company’s guiding principles for diversity and
inclusion. Refer to Principle 2 for further details.

• Code of Conduct – This policy sets out the expected
behaviours while in employment with the Company.
Company employees are expected to act honestly,
conscientiously, reasonably and in good faith while
at all times having regard to their responsibilities,
the interests of Summerset, and the welfare of our
residents and staff.

• Whistle blowing – This policy encourages employees
to come forward if they have concerns regarding
serious wrongdoing, and ensures that employees
have access to a confidential process in which
they can report any issues in relation to serious
wrongdoing without fear of reprisal or victimisation.

• Conflicts of interest – Summerset’s Code of Ethics
outlines the standards of integrity, professionalism
and confidentiality to which all employees and
Directors of the Company must adhere with respect
to their work and behaviour. To maintain integrity
in decision-making, each Director must advise the
Board of any potential conflict of interest if such
arises. If a conflict of interest exists, the Director
concerned will have no involvement in the decision-
making process relating to the matter.

• Gifts, entertainment and inducements – This policy
governs the acceptance and reporting of benefits
given to staff by third parties.

• Interests Register – In accordance with the
Companies Act 1993 and the Financial Markets
Conduct Act 2013, the Company maintains an
Interests Register in which all relevant transactions
and matters involving the Directors are recorded.

The Code of Ethics Policy, Securities Trading Policy and
Guidlines and Whistle Blowing Policy can be found on the
Company’s website and internal intranet.

7 9

Principle 2: Board composition
and performance

“To ensure an effective board, there should be
a balance of independence, skills, knowledge,
experience and perspectives.”

Role of the Board of Directors
The Board of Directors is elected by Shareholders, and
has responsibility for taking appropriate steps to protect
and enhance the value of the assets of the Company
in the best interests of its Shareholders. The Board has
adopted a formal Board Charter detailing its authority,
responsibilities, membership and operation.

The key responsibilities of the Board include setting
the overall direction and strategy of the Company,
establishing appropriate policies and monitoring
performance of management. The Board appoints the
Chief Executive Officer and delegates the day-to-day
operating of the business to the Chief Executive Officer.
The Chief Executive Officer implements policies and
strategies set by the Board and is accountable to it. The
Board also has responsibility for ensuring the Company’s
financial position is sound, financial statements comply
with generally accepted accounting practice, and that
the Company adheres to high standards of ethical and
corporate behaviour.

A summary of the Board mandate is as follows:

• A majority of the Board should be Independent
Directors as defined in the NZX Listing Rules;

• The Chair of the Board should be independent;

• The Chair and the Chief Executive Officer should be
different people;

• Directors should possess a broad range of skills,
qualifications and experience, and remain current on
how best to perform their duties as Directors;

• Information of sufficient content, quality and
timeliness as the Board considers necessary shall
be provided by management to allow the Board to
discharge its duties effectively;

• The effectiveness and performance of the Board and
its individual members should be re-evaluated on an
annual basis.

Directors receive an induction upon appointment to the
Board to ensure their full knowledge of the Company
and the industry in which it operates. The Directors are
expected to keep themselves abreast of changes and
trends in the business and to keep themselves up to date
to ensure they best perform their duties as Directors of
the Company.

All Directors have been issued letters setting out the
terms and conditions of their appointment.

Delegation of authority
The Board delegates to the Chief Executive Officer
responsibility for implementing the Board’s strategy
and for managing the Company’s operations. The
Chief Executive Officer and management have Board-
approved levels of authority and, in turn, sub-delegate
authority in some cases to direct reports. This is
documented in the Delegated Authority Policy.

Before approving the Company and Group’s financial
statements, a management representation letter is
obtained from the Chief Executive Officer and the Deputy
Chief Executive Officer and Chief Financial Officer
declaring that, in their opinion, the financial records of
the Company and Group have been properly maintained
and the financial statements comply with the appropriate
accounting standards and give a true and fair view of
the financial position and performance of the Company
and Group.

Retirement and re-election
In accordance with the Company’s Constitution and
the NZX Listing Rules, Directors are required to
retire three years after their appointment or at the third
Annual Shareholder Meeting following their appointment
(whichever is later). Directors who have been appointed
by the Board must also retire at the next Annual
Shareholder Meeting following their appointment.
Directors may offer themselves for re-election by
Shareholders each year at the Annual Shareholder
Meeting. Procedures for the appointment and removal
of Directors are also governed by the Constitution.
The People and Culture Committee identifies and
nominates candidates to fill Director vacancies for Board
approval. Information about candidates for election or
re-election is included in the Notice of Meeting to assist
Shareholders in deciding whether or not to elect or re-
elect the candidate.

Annual Report 2020
8 0

Board composition
The Company’s Constitution prescribes that the Board
shall be comprised of a minimum of three Directors, with
at least two Directors ordinarily resident in New Zealand.
As at 31 December 2020, the Board was comprised
of seven non-executive Independent Directors. In
determining whether a Director is Independent, the
Board has regard to the NZX Listing Rules.

The Board considers all current Directors to be
Independent in that they are not executives of the
Company and do not have a direct or indirect interest or
relationship that could reasonably influence, in a material
way, their decisions in relation to the Company.

As at 31 December 2020, the non-executive Independent
Directors were Rob Campbell (Chair), Dr Andrew Wong,
Anne Urlwin, Gráinne Troute, James Ogden, Dr Marie
Bismark and Venasio-Lorenzo Crawley.

The Board is comprised of Directors who have a mix of
skills, knowledge, experience and diversity to adequately
meet and discharge its responsibilities and to add value to
the Company through efficient and effective governance
leadership. The current Directors have a varied and
balanced mix of skills relevant to the Group’s operations.
A summary of the key skills and experience held across
the Board as at 31 December 2020, is set out in the
table below.

Rob
Campbell

Dr
Andrew
Wong

Anne
Urlwin

Gráinne
Troute

James
Ogden

Dr Marie
Bismark

Venasio-
Lorenzo
Crawley

Governance
Listed company governance experience

Executive Leadership
NZ and international business leadership
and CEO experience

Finance & Accounting
Senior executive or board experience
in financial accounting and reporting,
corporate finance and internal controls

Customer & Operations
Deep understanding of business operations
and sales, marketing and brand strategies

Health & Clinical
Health and clinical industry
experience (in New Zealand and/or
Australian environments)

Property & Construction
Property, construction and development
management experience

Health & Safety
Experience and understanding of health
and safety and wellbeing requirements

Human Resources
People and performance strategy and
management experience

Digital & Technology
Experience overseeing IT and digital
innovation and an understanding of the
opportunity and risks associated with
technological development

Strategy
Experience in the development and
execution of growth strategies and the
ability to assess strategic options and
business plans

Australian

Experience

Australian property and
business experience

8 1

More information on the Directors, including their
interests, qualifications and security holdings, is provided
in the Board of Directors and Disclosures sections of
this report.

The Board holds regular scheduled meetings. The
Directors generally receive material for Board meetings
five working days in advance, except in the case of special
meetings, for which the time period may be shorter owing
to the urgency of the matter to be considered.

The Company Secretary attends all Board meetings, and
in this capacity is accountable directly to the Board,
through the Chair, on all matters to do with the proper
functioning of the Board.

All Directors have access to the Executive Leadership
Team to discuss issues or obtain information on specific
areas in relation to items to be considered at Board
meetings or other areas as considered appropriate. Key
Executives and managers are invited to attend and
participate in appropriate sessions at Board meetings.
Directors have unrestricted access to Company records
and information.

Directors are entitled to obtain independent professional
advice relating to the affairs of the Company or other
responsibilities. Prior approval of the Chair is required
before seeking such advice and Directors are expected to
ensure that the cost of such advice is reasonable.

Diversity and inclusion
The Company and its Board are committed to a
workplace culture that promotes and values diversity
and inclusiveness. This is outlined in the Company’s
Diversity and Inclusion Policy, which is available on the
Company’s website.

Diversity is defined as the characteristics that make one
individual different from another. Diversity encompasses
gender, race, ethnicity, disability, age, sexual orientation,
physical capability, family responsibilities, education,
cultural background and more.

Inclusion is defined as a sense of belonging, respecting
and valuing all individuals, providing fair access to
opportunity, and removing discrimination and other
barriers to involvement. The Board recognises that
inclusion leads to a better experience of work for
Summerset’s employees, makes teams stronger, leads
to greater creativity and performance, contributes to
a more meaningful relationship with residents, their
families and stakeholders, and ultimately increases value
to Shareholders.

The Board believes that diversity across the workforce
makes Summerset stronger and better able to connect
with, and bring the best of life to, residents on a day-to-
day basis. When there is a variety of thinking styles,
backgrounds, experiences, perspectives and abilities,
employees are more able to understand residents’ needs
and to respond effectively to them.

The Diversity and Inclusion Policy establishes the
following objectives for achieving diversity:

• Facilitate and promote equal employment
opportunities at all levels, and identify and remove
any barriers to equal opportunity;

• Facilitate and promote a merit-based environment in
which all employees have the opportunity to develop
and perform to their full potential; and

• Reward excellence and ensure all employees are
treated fairly, evaluated objectively, and have
equitable access to opportunities for progression and
promotion on the basis of performance.

Annual Report 2020
8 2

Each year the Board reviews and assesses performance
against these objectives. The Board considers that for
the year ended 31 December 2020, the objectives for
achieving diversity have been met.

As at 31 December 2020 (and 31 December 2019 for the
prior comparative period), the mix of gender of those
employed by the Company is set out in the table above.

Senior Managers of the Company are the Chief Executive
Officer and the Deputy Chief Executive Officer and
Chief Financial Officer. The Executive Leadership Team
comprises the Chief Executive Officer, the Deputy
Chief Executive Officer and Chief Financial Officer,
and all General Managers who report to the Chief
Executive Officer.

These figures include permanent full-time, permanent
part-time, fixed-term and casual employees, but not
independent contractors.

Board performance
The Board is committed to evaluating its performance on
a regular basis, generally with a formal, external review
bi-annually with an internal self-review each intervening
year. In 2020 the Board completed an externally-
facilitated review which provided the opportunity
for directors to independently evaluate board and
committee performance and processes as well as to give
individual feedback on and to each director. The process,
including evaluation criteria, is considered by the People
and Culture Committee and approved by the Board.

Executive Leadership Team performance
The Board evaluates annually the performance of the
Chief Executive Officer. The Chief Executive Officer
reviews the performance of direct reports and reports
to the Board on those reviews. The evaluation is
based on criteria that include the performance of
the business and the accomplishment of longer-term
strategic objectives. It may include quantitative and
qualitative measures. During the most recent financial
year, performance evaluations were conducted in
accordance with this process.

GENDER 2020 2019

Directors Male 4 3

Female 3 3

Total 7 6

Senior Managers Male 2 2

Female – –

Total 2 2

Executive Leadership Team Male 6 6

Female 2 2

Total 8 8

All staff Male 438 349

Female 1,382 1,199

Gender diverse 3 –

Total staff 1,823 1,548

8 3

Principle 3: Board committees

“The board should use committees where this will
enhance its effectiveness in key areas, while still
retaining board responsibility.”

Board committees
The Board has four standing committees: the Audit
Committee, the People and Culture Committee, the
Clinical Governance Committee, and the Development
and Construction Committee. Each committee operates
under a charter approved by the Board, and any
recommendations they make are recommendations
to the Board. The charter for each committee is
reviewed annually. All Directors are entitled to attend
committee meetings.

Audit Committee
While the ultimate responsibility to ensure the integrity
of the Company’s financial reporting rests with the
Board, the Company has in place processes to ensure
the accurate presentation of its financial position.
These include:

• An appropriately resourced Audit Committee
operating under a written charter with specific
responsibilities for financial reporting and
risk management;

• Review and consideration by the Audit Committee
of the financial information and preliminary releases
of results to the market, which then makes
recommendations to the Board;

• A process to ensure the independence and
competence of the Company’s external auditors
and a process to ensure their compliance with the
Company’s External Audit Independence Policy;

• Responsibility for appointment of the external
auditors residing with the Audit Committee;

• The Audit Committee monitors the strength of the
internal control environment by considering the
effectiveness and adequacy of Summerset’s internal
controls, reviewing the findings of the external
auditors’ review of internal control over financial
reporting, and being involved in setting the scope
for the internal audit programme.

One of the main purposes of the Audit Committee is
to ensure the quality and independence of the external
audit process. The Audit Committee make enquiries
of management and the external auditors so that it is
satisfied as to the validity and accuracy of all aspects
of the Company’s financial reporting. All aspects of the
external audit are reported back to the Audit Committee
and the external auditors are given the opportunity at
Audit Committee meetings to meet with Directors.

The Audit Committee must comprise a minimum of three
Directors, the majority of whom must be Independent.
The committee is chaired by an Independent Director
who is not the Chair of the Board. The Committee
currently comprises of James Ogden (Chair), Anne
Urlwin, Rob Campbell and Gráinne Troute.

The Audit Committee generally invites the Chief
Executive Officer, Deputy Chief Executive Officer and
Chief Financial Officer, Head of Finance, internal auditors
and external auditors to attend meetings. The Committee
also meets and receives regular reports from the external
auditors without management present, concerning any
matters that arise in connection with the performance of
their role.

People and Culture Committee
The role of the People and Culture Committee is to assist
the Board in establishing and reviewing remuneration
policies and practices for the Company and in reviewing
Board composition. Specific objectives include:

• Supporting the Board in ensuring the Company’s
vision and commitment to its people strategy is
aligned with and is an enabler of the Company’s
business strategy;

• Assisting the Board in planning the
Board’s composition;

• Evaluating the competencies required of prospective
Directors (both non-executive and executive);

• Identifying those prospective Directors and
establishing their degree of independence;

• Developing the succession plans for the Board, and
making recommendations to the Board accordingly;

• Overseeing the process of the Board’s annual
performance self-assessment and the performance
of the Directors;

• Establishing remuneration policies and practices,
and setting and reviewing the remuneration of
the Company’s Chief Executive Officer, Executive
Leadership Team and Directors.

The People and Culture Committee must comprise a
minimum of three Directors, the majority of whom must
be Independent. The Committee currently comprises
Gráinne Troute (Chair), Dr Marie Bismark, James Ogden,
Anne Urlwin and Venasio-Lorenzo Crawley.

The Board’s policy is that the Board needs to have an
appropriate mix of skills, experience and diversity to
ensure that it is well equipped. The Board reviews and
evaluates on a regular basis the skill mix required, and
identifies any existing gaps.

Annual Report 2020

8 4

Clinical Governance Committee
The role of the Clinical Governance Committee is to
assist the Board in ensuring a systematic approach to
maintaining and improving the quality of care provided
by the Company. Specific objectives include:

• Providing oversight that appropriate clinical
governance mechanisms are in place and are
effective throughout the organisation;

• Supporting the leadership role of the Chief Executive
Officer in relation to issues of quality, safety and
clinical risk;

• Working with management to identify priorities
for improvement;

• Ensuring that the principles and standards of clinical
governance are applied to the health improvement
and health protection activities of the Board;

• Ensuring that appropriate mechanisms are in place
for the effective engagement of representatives of
residents and clinical staff.

The Clinical Governance Committee must comprise a
minimum of three Directors. The Committee currently
comprises Dr Marie Bismark (Chair), Anne Urlwin, Gráinne
Troute and Dr Andrew Wong.

Development and Construction Committee
The role of the Development and Construction
Committee is to assist the Board in:

• Supporting management to establish and achieve
development and construction objectives within the
Company’s long-term plan;

• Supporting management to develop and implement
strategies to achieve the Company’s development
and construction objectives in line with best practice;

• Helping the Company maintain appropriate risk
management strategies to identify, mitigate and
manage development and construction risks;

• Maintaining a good understanding of, and confidence
in, the Company’s frameworks, systems, processes
and personnel required to manage the Company’s
development and construction activities effectively,
including the assessment and realisation of
opportunities and the application of appropriate
risk management;

• Working with management to identify areas for
improvement and innovation in construction and
development practices.

The Development and Construction Committee must
comprise a minimum of three Directors. The Committee
currently comprises Anne Urlwin (Chair), James Ogden
and Rob Campbell.

Attendance at Board and committee meetings
A total of six Board meetings, seven Audit Committee
meetings, five People and Culture Committee meetings,
three Clinical Governance Committee meetings and
three Development and Construction Committee
meetings were held in 2020. Director attendance at
Board meetings and committee member attendance at
committee meetings is shown below.

Board
Audit

Committee

People and
Culture

Committee

Clinical
Governance

Committee

Development
and Construction

Committee

Total number of meetings held 6 7 5 3 3

Rob Campbell 6
(Chair)

7 5* 3* 3

Anne Urlwin 6 7 5 3 3
(Chair)

Dr Andrew Wong 6 7* 5*

3 3*

Gráinne Troute 6 7 5
(Chair)

3 3*

James Ogden 6 7
(Chair)

5 3* 3

Dr Marie Bismark 6 7* 5 3
(Chair)

2*

Venasio-Lorenzo Crawley 6 5* 2** 2* 2*

* attended the meeting as a non-committee member
** appointed to the People and Culture Committee on
24 February 2020 (after the first two meetings had
been held)

8 5

Principle 4: Reporting and disclosure

“The board should demand integrity in financial and
non-financial reporting, and in the timeliness and
balance of corporate disclosures.”

Making timely and balanced disclosures
The Company is committed to promoting Shareholder
confidence through open, timely and accurate market
communication. The Company has in place procedures
designed to ensure compliance with its disclosure
obligations under the NZX and ASX Listing Rules. The
Company’s Market Disclosure and Communications
Policy sets out the responsibilities of the Board and
management in disclosure and communication, and
procedures for managing this obligation.

Copies of key governance documents, including
the Code of Ethics, Securities Trading Policy
and Guidelines, Board and Committee Charters,
Diversity and Inclusion Policy, Board and Executive
Remuneration Policy, and Market Disclosure and
Communications Policy are all available on the
Company’s website at https://www.summerset.co.nz/
investor-centre/governance-documents/.

Non-financial disclosures, such as the Company’s
approach to health and safety, our people, the
community and the environment are included within
this Annual Report. The Company recognises it is in the
early stages of reporting on non-financial information,
and intends to continue to enhance future disclosure in
this area.

Principle 5: Remuneration

“The remuneration of directors and executives should
be transparent, fair and reasonable.”

Remuneration of Directors and the Executive Leadership
Team is reviewed by the Board’s People and Culture
Committee. Its membership and role are set out under
Principle 3. The Committee makes recommendations
to the Board on remuneration packages, keeping in
mind the requirements of the Board and Executive
Remuneration Policy. The level of remuneration paid to
the Directors and the Executive Leadership Team will
be determined by the Board. However, Directors’ fees
must be within the limits approved by the Shareholders of
the Company.

Further details on remuneration are provided in the
Remuneration section of this Annual Report.

Principle 6: Risk management

“Directors should have a sound understanding of the
material risks faced by the issuer and how to manage
them. The Board should regularly verify that the issuer
has appropriate processes that identify and manage
potential and material risks.”

Summerset has robust risk management and reporting
frameworks in place whereby material business risks are
regularly identified, monitored and managed. The Board
reviews this risk management framework on an annual
basis to ensure it remains fit for purpose. A review was
undertaken by the Board during the 2020 financial year.

The members of Summerset’s Executive Leadership
Team are required to regularly identify the major
risks affecting the business, record them in the risk
register (which identifies the likelihood and consequence
of each risk to Summerset’s business), and develop
structures, practices and processes to manage and
monitor these risks.

Summerset has introduced a co-sourced model for
internal audit with an in-house Internal Audit Manager
appointed. As part of the co-sourced model, Summerset
has engaged KPMG as its partner to assist with carrying
out internal audit work on various parts of the Group’s
operations and all major risk and internal control issues
are reported on at each Board meeting.

Health and safety (including in relation to risks,
performance and management) is discussed regularly
at Board meetings and specific reviews are sought as
required. Monthly reporting is prepared and used to assist
in risk management, covering areas such as health and
safety incidents, injury and near miss frequency rates, and
actions undertaken. Further information is covered in the
health and safety section of this Annual Report.

Summerset has a Tax Governance Policy in place which
sets out its tax risk management objectives, tax reporting
requirements to the Audit Committee and policies and
processes to manage tax risk. This Tax Governance
Policy is reviewed by the Board every two years. It
is next due for review in December 2022. The Board
is satisfied that Summerset has effective policies and
processes in place to ensure the Company is meeting
its obligations. Summerset adopts a risk averse stance in
relation to tax issues and, where possible, seeks certainty
on tax positions through proactive engagement with
tax authorities.

Annual Report 2020
8 6

HIGHLY
LIKELY

Climate
Change

Property
Market

Sta� Retention
& Capability

Corporate
Governance

& Compliance
Strategy &
Innovation

Diversity &
Inclusion

Construction &
Development

Care
Occupational

H&S

Resident /
Customer

Experience

Australia
Market Entry

Data Privacy & Asset
Maintenance
& Upgrades

Sector
Penetration Rates

EXTREMELY
UNLIKELY

LOW CRITICAL

Summerset’s Current Key Strategic Residual Risks

LI
K

EL
IH

O
O

D

CONSEQUENCES

Reputational

Summerset has considered whether it has any
material exposure to economic, environmental and
social sustainability risks (as defined in the ASX
Corporate Governance Principles) and has determined
the following:

• Climate change risk: Over the longer term,
Summerset expects to operate in a climate that will
progressively depart from the weather conditions
and events currently experienced, to more acute
challenges and risks arising from increasing climate
variability. This is likely to have various impacts on
the longer-term plans and operation of the Group
– specifically in relation to the design, build and
construction of villages, as well as in the provision of
care services to frail residents and the overall lifestyle
satisfaction enjoyed in Summerset’s villages.

Summerset responds to these risks in the
following way:

• Summerset is a certified carbonzero organisation.
This requires us to measure our greenhouse
gas emissions, understand our carbon liabilities,
and put in place management plans to reduce
emissions within the organisation and more widely
through our supply chain.

• The Company is structured internally with two
key working groups in place. One which focuses

on future proofing our designs, understanding
emerging risks and improving our resilience, with
the other responsible for implementing specific
actions and initiatives identified in our emissions
reduction plan. Both of these working groups
report into the Sustainability Forum who report
through to the Board on sustainability strategy and
targets, including our key climate-related targets
and risks.

• Climate change considerations are integrated
into the due diligence process for potential
acquisitions to assess the climate change risks
inherent at each site.

• Climate related risks are included within our
corporate risk matrix.

• The Board has oversight of climate-related issues
and responsibility for sustainability.

These measures and our approach to sustainability
are discussed in more detail on page 31 of this report.

8 7

• Property market risk: Property market factors could
adversely affect sales, occupancy levels or revenue
streams. This may have a flow on impact to the value
of Summerset’s property assets and the associated
investment property valuation, which would in turn
impact Summerset’s financial performance.

• Staff retention and capability risk: In a tight
and highly competitive labour market, Summerset
is at risk of staff shortages. Key areas within
our construction and nursing teams will continue
to be monitored closely. Given COVID-19, this is
currently not considered an extreme risk, but one
for consideration in the medium to long term.

• Corporate governance and compliance: Changes
in regulation could have a material impact on
Summerset’s business operations. Summerset’s
governance procedures are continually monitored.
Failure to comply with regulatory, societal and
investor expectations in relation to corporate
and environmental sustainability could impact
Summerset’s reputation and financial performance
over the longer term.

• Strategy and innovation: There is a moderate risk
with regard to Summerset’s strategic direction and
ability to continue to innovate. Summerset’s intention
is to stay at the forefront in all areas of its business
including technology, design, development and care.
However, there is a risk that a competitor may bring
something new to market.

• Diversity and inclusion: Developments in our
diversity and inclusion strategy mean there is some
level of risk in terms of fulfilling all our obligations
in this area, especially in a tight labour market. This
needs to be monitored closely and the staff survey will
bring out useful research and information in this area.

• COVID-19: The unknown factors surrounding the
COVID-19 pandemic mean this remains a high-risk
area at the time of writing this report. However,
global research and work on various vaccines, better
management of care overall and New Zealand’s
positive response to date all mean we are in a good
position. The risk of community transmission and
moving alert levels remains.

• Construction and development risk: Summerset
faces construction and property development risks
when developing new villages. These risks include
project delays, default risk, governance and design
risk and potential labour and materials shortages.

• Care: This is a high-risk area for Summerset,
which requires constant monitoring, management
and policy review. Good training and professional
development, retention of staff and investment into
health and safety all help mitigate risk in this area.

• Resident and customer experience: Providing top
level resident and customer experience at all times

is a challenge due to the nature of the organisation.
Summerset has various methods in which it manages
and monitors these issues closely, including move-in
surveys, on-going resident feedback surveys, close
one-on-one feedback sessions and close contact with
residents, families, next of kin and prospects.

• Occupational health and safety risk: This remains a
material risk. Its importance has increased further this
year for staff given the mental health risks associated
with the uncertainty of COVID-19. The physical and
mental wellbeing of all Summerset staff is one of our
top priorities.

• Australia market entry: Entering a new market
requires a measured and well researched approach.
Summerset is mitigating many new market entry
risks by setting up a new local team, entering a
well-researched market and developing product and
service offerings, procedures and processes tailored
for the new market. Progress in Australia will be
closely managed.

• Data privacy and confidentiality: Summerset
actively monitors and manages these risks through
the risk management and reporting frameworks.

• Asset maintenance and upgrades: Summerset has
a co-ordinated approach to asset management and
upgrades in all areas of the business. This is constantly
up for review and progress is managed accordingly.

• Sector penetration rates: Summerset is fortunate to
operate in the high growth New Zealand retirement
sector. The risk is a declining penetration (or
participation) in the market. Current forecasts show
this is unlikely to be the case in New Zealand but is a
risk to be monitored. Competitors making significant
changes to their revenue models or pricing strategy
could impact on the revenue earned by Summerset.

• Reputational risk: Summerset operates in a sensitive
market involving care of vulnerable members of
society. Summerset’s performance and reputation
could be adversely impacted should it suffer adverse
publicity, particularly in respect of care or health and
safety issues.

Annual Report 2020
8 8

Principle 7: Auditors

“The board should ensure the quality and
independence of the external audit process.”

The Board’s relationship with its auditors, both external
and internal, is governed by the Audit Committee Charter,
External Audit Independence Policy and the Internal
Audit Charter. These charters and policies set out the
types of engagements that can be performed by the
external and internal auditors.

The external auditor (Ernst & Young) attends the
Company’s Annual Shareholder Meeting, and is available
to answer questions from Shareholders in relation to the
external audit.

External audit work for the Group was tendered during
2017, with Ernst & Young remaining in this role.

KPMG was appointed in the role of internal auditor of the
Company in December 2016 and with the establishment
of a co-source model approach to internal audit in 2020,
they currently remain the Company’s co-source partner.
Their internal audit role is governed by the Internal
Audit Charter.

The primary objective of internal audit is to increase the
strength of the Company’s control environment. This is
guided by a philosophy of adding value to improve the
operations of the Company. It assists the Company in
accomplishing its objectives by bringing a systematic
and disciplined approach to evaluating and improving
the effectiveness of its governance, risk management
and internal controls.

The scope of the internal audit programme is set by the
Audit Committee.

Principle 8: Shareholder rights
and relations

“The board should respect the rights of
shareholders and foster constructive relationships
with shareholders that encourage them to engage
with the issuer.”

Respecting the rights of Shareholders
The Company seeks to ensure that its Shareholders
understand its activities by communicating effectively
with them and giving them ready access to clear and
balanced information about the Company.

To assist with this, the Company’s website is
maintained with relevant information, including copies of
presentations and reports. The Company’s key corporate
governance policies are also included on the website.

The Company’s major communications with
Shareholders during the financial year include its annual
and half-year reports and the Annual Shareholder
Meeting. The annual and half-year reports are available in
electronic and hard-copy format.

Communicating with Shareholders
The Company welcomes communication and feedback
from Shareholders. The Company’s investor centre (on
its website) provides a Company phone number and
email address for communications from Shareholders
and investor relations enquiries. All Shareholder
communications are responded to within a reasonable
time frame.

The Company provides options for Shareholders to
receive and send communications electronically, to and
from both the Company and its share and bond registrar.
The Company’s investor centre includes contact details
for Link Market Services, through which all Company
shares and bonds are managed.

Shareholder voting rights
Shareholders have the right to vote on major decisions as
required by the NZX Listing Rules. Further information
on Shareholder voting rights is set out in the
Company’s Constitution.

Notice of Annual and Special Shareholder Meetings
Notice of Annual and Special Shareholder Meetings
are sent to Shareholders and published on the
Company’s website at least 20 working days prior to
the relevant meeting.

8 9

Dr Marie Bismark (MBChB, LLB, MBHL, MPH, MD, MPsych, FAICD, FAFPHM)
Independent
Marie is the Chair of Summerset’s Clinical Governance Committee. She holds
degrees in law, medicine, bioethics and public health, and has completed a Harkness
Fellowship in Healthcare Policy at Harvard University.

Marie works as a psychiatry registrar with Melbourne Health, and as an Associate
Professor at Melbourne University.

Her research focuses on patients’ rights, quality of care, and medical regulation. Marie
is an experienced company director, serving on the board of GMHBA Health Insurance,
Royal Womens Hospital in Melbourne and on the Veterans’ Health Advisory Panel.

Marie has been a director of Summerset since 2013.

Board
of Directors

Rob Campbell (BA (Hons 1st), MPhil (Econ))
Chair, Independent
Rob is the Chair of the Board. He has over 40 years’ experience as a director and
an investor.

He is currently the Chair of SKYCITY Entertainment Group, WEL Group, Tourism
Holdings and a director of Precinct Properties NZ.

Rob is also an investor and director of a number of substantial private companies
and is a director of, or an advisor to, a number of private investment funds.

Rob has been Chair of Summerset since 2011, when he was appointed to
Summerset to lead its listing on the NZX.

Venasio-Lorenzo Crawley (MBA, BA)
Independent
Venasio-Lorenzo is the Chief Customer Officer at Contact Energy and an Advisory Board
Member at the Auckland University of Technology. He has also recently completed a term as a
Future Board Director for The Warehouse Group.

Venasio-Lorenzo’s previous directorships and trustee positions include the Electricity Retailers
Association of NZ Electricity, Gas Complaints Commission (now Utilities Disputes), Loyalty New
Zealand and Workbase.

He has held senior executive positions at ASB Group and at IAG in both New Zealand and the
United Kingdom and has worked across a wide variety of areas including strategy, finance, IT,
pricing, data analytics, digital technology, culture and brand.

Venasio-Lorenzo has been a director of Summerset since 2020.

Annual Report 2020
9 0

James Ogden (BCA (Hons 1st), FCA, CFinstD, INFINZ (Cert)
Independent
James is the Chair of Summerset’s Audit Committee. He is a director of Vista Group
International and Foundation Life (NZ). James is the Chair of the Investment Committee of
Pencarrow Private Equity.

James has had a career as an investment banker, including six years as Country Manager for
Macquarie Bank and five years as a director of Credit Suisse First Boston. He also worked in
the New Zealand dairy industry for eight years in chief executive and finance roles.

He holds a Bachelor of Commerce and Administration with First Class Honours, and is a
Chartered Fellow of the Institute of Directors and a Fellow of Chartered Accountants Australia
and New Zealand (CAANZ).

James has been a director of Summerset since 2011 when he was appointed to Summerset
prior to its listing on the NZX.

Gráinne Troute (GradDipBusStuds, CMInstD)
Independent
Gráinne is Chair of Summerset’s People and Culture Committee. She is a Chartered Member of
the Institute of Directors and is also Chair of Tourism Industry Aotearoa and a director of Tourism
Holdings and Investore Property.

Gráinne is a professional director with many years’ experience in senior executive roles. She was
General Manager, Corporate Services at SKYCITY Entertainment Group and Managing Director
of McDonald’s Restaurants (NZ). She also held senior management roles with Coopers and
Lybrand (now PwC) and HR Consultancy Right Management.

Gráinne has vast expertise in operating customer-focused businesses in highly competitive
sectors. She has also spent many years as a trustee and Chair in the not-for-profit sector, including
having been the Chair of Ronald McDonald House Charities New Zealand for five years.

Gráinne has been a director of Summerset since 2016.

Anne Urlwin (BCom, FCA, CFInstD, MAICD, ACIS, FNZIM)
Independent
Anne is the Chair of Summerset’s Development and Construction Committee. She is a
professional director with experience in a diverse range of sectors including construction,
health, infrastructure, telecommunications, regulation and financial services.

She is the Deputy Chair of Southern Response Earthquake Services, and a director of
Precinct Properties New Zealand, Tilt Renewables and Queenstown Airport Corporation.
Her other directorships include City Rail Link and Cigna Life New Zealand.

Anne is a former director of Chorus and a former Chair of national commercial construction
group Naylor Love Enterprises and of the New Zealand Blood Service.

Anne is a Chartered Accountant with experience in senior finance management roles in
addition to her governance roles.

Anne has been a director of Summerset since 2014.

Dr Andrew Wong (BHB, MbChB, MPH)
Independent
Andrew is the Managing Director of Mercy Ascot Hospitals and HealthCare Holdings, having
held these positions since 2009.

He holds a medical degree and has previously practised as a Public Health Medicine specialist.

Andrew is also a director of a number of medical organisations. These cover a diverse range of
areas such as surgical hospitals, day surgeries, diagnostic radiology and cancer care.

Andrew has been a director of Summerset since 2017.

9 1

Executive
Leadership Team

Julian Cook
(MAF, MSc, BSc, BA)

Chief Executive Officer

Julian has overall
responsibility for
Summerset and is
focused on developing
and operating vibrant
villages, and ensuring
that respect for our
customers is always at
the core of everything
we do.

Prior to becoming Chief
Executive Officer in 2014,
Julian was Summerset’s
Chief Financial Officer
after joining Summerset
in 2010. He oversaw
Summerset’s transition
to become a publicly
listed company on the
New Zealand Stock
Exchange and the
Australian Securities
Exchange.

Julian is a member of the
Executive Committee
for the New Zealand
Retirement Villages
Association.

Scott Scoullar
( CA, FCPA, BCA)

Deputy Chief Executive
Officer and Chief
Financial Officer

Scott has overall
responsibility for the
financial management
of the company and
corporate services
functions.

Before joining
Summerset in 2014,
Scott held CFO roles at
Housing New Zealand
and Inland Revenue.

Scott was named CFO
of the Year at the New
Zealand CFO Summit
Awards in 2019 and was
NZICA’s Public Sector
CFO of the Year in 2011.
Scott is also a Fellow of
CPA Australia, and a CPA
New Zealand Council
Board Member.

Dave Clegg
(MBA)

General Manager
Human Resources

Dave is responsible for
leading Summerset’s
Human Resources
and Health and Safety
teams to build and
grow Summerset’s
people capability and
engagement.

Before joining
Summerset in 2018,
Dave was the General
Manager of People and
Culture at Steel & Tube.
Dave has over 25 years’
experience in human
resources leadership
roles in New Zealand
and overseas.

Dave holds an MBA
from Southern Cross
University in Australia.

Fay French
(RNZcmpN)

General Manager Sales

Fay leads our national
sales team and can be
found at Summerset’s
Wellington office or at
one of our many New
Zealand villages.

Fay has a breadth of
experience across sales,
hospitality and the health
sector. Prior to joining
Summerset in 2015, she
held a sales leadership
role at a leading New
Zealand e-commerce
platform, where she was
responsible for leading
a team of business
development managers.

Trained as a registered
nurse, Fay has worked in
various nursing roles and
medical sales for Roche
Pharmaceuticals.

Annual Report 2020
9 2

Paul Morris
(Dip. BS)

General Manager
Development Australia

Paul leads Summerset’s
investigation of
development
opportunities in the
Australian market.

Paul has been with
Summerset since early
2000. He commenced
in the GM Development
Australia role in 2018,
having previously been
GM Development New
Zealand since 2003.

Aaron Smail
(BE (Civil), BBS)

General Manager
Development

Aaron leads Summerset’s
development team in
New Zealand, which
covers identifying and
purchasing new sites,
project feasibilities,
consents, design
concepts, master
planning and design
standards for villages.

Previous roles in his 25
plus years of property
and development
experience include
senior positions at Todd
Property Group and
Kiwi Property.

Aaron has been with
Summerset since 2015.

Dean Tallentire
(BSc (Hons), HND, RICS)

General Manager
Construction

Dean leads our design
management, building
consents, procurement,
cost management,
construction
management and
administration
support teams in the
construction team.

Dean has extensive
construction and
development experience
and has led teams in the
public and private
sectors within developer
and main contractor
environments.

Dean has been with
Summerset since 2015.

Eleanor Young
(BSc (Hons))

General Manager
Operations and Customer
Experience

Eleanor oversees the
operational performance
across all Summerset
villages. Her focus on
service experience
and delivery ensures
Summerset’s residents
receive the highest quality
facilities and care.

Before joining Summerset
in 2016, Eleanor held senior
roles at Inland Revenue.
This included four years
as the Group Manager
of Customer Services,
managing over 2,000
staff across New Zealand
to deliver services to
customers.

Eleanor has a background
in human resources within
both the public and private
sectors, having worked
in managerial roles for
the Ministry of Social
Development, Mighty
River Power and
Air New Zealand.

9 3

Remuneration
Director remuneration
The Company distinguishes the structure of non-executive Directors’ remuneration from that of executive Directors.

The total amount of remuneration and other benefits received by each Director during the year ended 31 December
2020 is provided below.

Director
Board
Fees

Audit
Committee

Clinical
Governance
Committee

People and
Culture
Committee

Development
and

Construction
Committee

Other
committees1

Total
remuneration

Rob Campbell $173,077
(Chair)

$9,372 $182,449

Dr Andrew
Wong

$86,538 $4,500 $91,038

Anne Urlwin $86,538 $7,212
(Chair)

$9,372 $103,122

Gráinne Troute $86,538 $7,212
(Chair)

$93,750

James Ogden $86,538 $17,308
(Chair)

$9,372 $113,218

Dr Marie
Bismark

$86,538 $14,423
(Chair)

$100,961

Venasio-
Lorenzo
Crawley2

$76,154 $76,154

Total $681,921 $17,308 $14,423 $7,212 $7,212 $32,616 $760,692

1 Fees for being on additional sub-committees of the Board throughout the period, including a Due Diligence Committee in relation to the issue of retail bonds in September

2020 and a sub-committee formed in relation to group strategy.

2 Venasio-Lorenzo Crawley was appointed as a Director on 1 February 2020.

The above amounts reflect the 20% pay reduction that Directors took for a period of 10 weeks in response to the
COVID-19 pandemic.

Directors’ fees were reviewed during 2020 and an increase to the Directors’ fees pool was approved by Shareholders,
in order to provide a surplus for payment of non-standard fees to Directors for assuming additional responsibilties
above and beyond the normal duties of the Board or any standard committee. Standard Directors’ fees remained
unchanged. However, the appointment of a seventh Director in February 2020 increased the total amount of Directors’
fees payable.

As at 31 December 2020, the maximum aggregate amount of remuneration payable by Summerset to Directors (in
their capacity as Directors) was $840,000 per annum (2019: $750,000) and annualised standard Directors’ fees were
$768,000, inclusive of additional remuneration for committee Chairs (2019: $678,000).

Annual Report 2020
9 4

As at 31 December 2020, the standard Director fees per annum are as follows:

Position
Fees

(per annum)

Board of Directors Chair $180,000

Member $90,000

Audit Committee Chair $18,000

Clinical Governance Committee Chair $15,000

People and Culture Committee Chair $7,500

Development and Construction Committee Chair $7,500

No additional fees are paid to committee members.

Directors’ fees exclude GST, where appropriate. Directors are entitled to be reimbursed for costs directly associated
with carrying out their duties, including travel costs.

Directors and Officers also have the benefit of Directors’ and Officers’ liability insurance. Cover is for damages,
judgements, fines, penalties, legal costs awarded and defence costs arising from wrongful acts committed while
acting for Summerset. There are some exclusions within the policy. The insurance cover is supplemented by the
provision of Director and Officer indemnities from the Company, but this does not extend to criminal acts.

Executive remuneration
The remuneration of members of the Executive Leadership Team (Chief Executive Officer and direct reports) is
designed to promote a high-performance culture and to align Executive reward to the development and achievement
of strategies and business objectives to create sustainable value for Shareholders.

The Board is assisted in delivering its responsibilities and objectives for Executive remuneration by the People and
Culture Committee. The role and membership of this Committee is set out in the Statement of Corporate Governance.

Summerset’s remuneration policy for members of the Executive Leadership Team provides the opportunity for
them to receive, where performance merits, a total remuneration package in the upper quartile for equivalent
market-matched roles. The People and Culture Committee reviews the annual performance appraisal outcomes for
all Executive Leadership Team members, including the Chief Executive Officer. The review takes into account external
benchmarking to ensure competitiveness with comparable market peers, along with consideration of an individual’s
performance, skills, expertise and experience.

Total remuneration is made up of three components: fixed remuneration, short-term performance-based cash
remuneration and long-term performance-based equity remuneration.

Fixed remuneration
Fixed remuneration consists of base salary and benefits. Summerset’s policy is to pay fixed remuneration with
reference to the fixed pay market median.

Short-term incentives
Short-term incentives (STIs) are at-risk payments designed to motivate and reward for performance, typically in that
financial year. The target value of an STI payment is set annually, as a percentage of the Executive Leadership Team
member’s fixed remuneration. For 2020, the relevant percentages were 25% to 50%.

9 5

A proportion (80% for the Chief Executive Officer, 30% to 40% for other Executive Leadership Team members) of
the STI is related to achievement of annual performance metrics which aim to align executives to a shared set of key
performance indicators (KPIs) based on business priorities for the next 12 months. Target areas for the shared KPIs for
2020 are outlined below:

Target Weighting

Underlying EBITDA 40%

Retirement unit delivery 20%

New sales development margin 10%

Resales net cash 10%

Customer satisfaction 5%

Customer clinical quality of care 5%

Health and safety 5%

Staff – HR 5%

There are three performance levels within each target area – gate-opener, on-target and maximum performance – with
100% of the amount allocated to that target area being payable when the on-target level is achieved. The maximum
performance levels allow employees to be rewarded for performance above target levels. The maximum amount of
an STI payment for an Executive Leadership Team member is 112% of the STI on-target amount for that Executive
Leadership Team member.

The balance of the STI is related to individual performance measures.

In the event that gate-opener underlying EBITDA performance against budget is not achieved, no STI payment will
be made.

Long-term incentives
Long-term incentives (LTIs) are at-risk payments through a share option plan, designed to align the reward of Executive
Leadership Team members with the enhancement of shareholder value over a multi-year period.

LTI Plan
The Executive Leadership Team members are participants of an LTI option plan. Under this plan, Executive Leadership
Team members are granted share options. These share options are exercisable in relation to shares in Summerset
Group Holdings Limited.

Option grants are made annually, with the value of each grant being set at the date of each grant and determined
as a percentage of the Executive Leadership Team member’s fixed remuneration. There have now been three option
grants under this plan. For 2020, the relevant percentages were 20% to 40% (2019: 20% to 40%). Vesting of the share
options is subject to achievement of performance hurdles, which are assessed over two and three-year periods.

The performance hurdles for the option grant made in 2020 are based on:

• 50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget);

• 20% relative earnings (earnings per share growth of the Group compared to a defined peer group);

• 10% clinical delivery;

• 5% staff engagement;

• 5% staff turnover;

• 5% customer satisfaction – village residents;

• 5% customer satisfaction – care centre residents

The performance hurdles above were consistent with those for 2019.

Performance hurdles are set by the Board with the objective of aligning Executive reward to the development and
achievement of strategies and business objectives to create sustainable value for Shareholders. The Board considers
that the performance hurdles reflect the drivers of sustainable value for Shareholders.

Annual Report 2020
9 6

In addition to the LTI share option plan in place for Executive Leadership Team members, Summerset also operates
an unhurdled LTI share option plan for other senior managers.

A total of 262,324 share options were granted to Executive Leadership Team members in December 2020. A total
of 1,618,274 share options have been granted to Executive Leadership Team members in the 2018, 2019 and 2020
grants. 386,528 of these share options vested as at 31 December 2020, (out of a total of 386,528 eligible to vest),
and subsequently became exercisable. The Executive Leadership Team includes the Chief Executive Officer. The
Chief Executive Officer section provides further details of share option movements under the LTI Plan for the Chief
Executive Officer.

LTI Plan prior to 2018
Prior to 2018, Executive Leadership Team members were able to purchase shares in Summerset Group Holdings
Limited under an LTI share purchase plan. The shares under this plan are held by a nominee on behalf of the Executive
Leadership Team members until such time after the vesting of shares that the nominee is directed by the Executive
Leadership Team member to transfer or sell the shares, or the shares are sold or cancelled by the nominee if vesting
criteria are not met. The shares carry the same rights as all other ordinary shares.

The Group has provided Executive Leadership Team members participating in the LTI share purchase plans with
interest-free limited recourse loans to fund the acquisition of the shares for these plans. These loans must be repaid
in full before shares are transferred to Executives from the nominee.

Grants under this plan were made annually, with performance measured over two and three-year periods. The value
of each grant was set at the date of the grant and determined as a percentage of the Executive Leadership Team
member’s fixed remuneration, ranging from 15% to 40%. Vesting of shares is subject to achievement of performance
hurdles, which were assessed over two and three-year periods.

The performance hurdles for each grant under the LTI plan made between 2013 and 2015 are based on Summerset’s
total shareholder return (TSR) relative to the performance of relevant peers and the NZX 50.

The performance hurdles for the grants made in 2016 and 2017 were based on:

• 50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget);

• 25% relative earnings (earnings per share growth of the Group compared to a defined peer group);

• 10% employee initiatives;

• 10% customer initiatives;

• 5% clinical strategy initiatives.

Performance hurdles were set by the Board with the objective of aligning Executive reward to the development and
achievement of strategies and business objectives to create sustainable value for Shareholders. The Board considers
that the performance hurdles reflect the drivers of sustainable value for Shareholders.

In addition to the LTI share purchase plan in place for Executive Leadership Team members, Summerset also operated
an unhurdled LTI share purchase plan for other senior managers.

A total of 1,169,450 shares are held by Summerset LTI Trustee Limited under the LTI share purchase plan on behalf
of the Executive Leadership Team as at 31 December 2020. As at 31 December 2020, 335,170 shares vested to
the Executive Leadership Team (out of a total 335,170 available to vest at this date). These shares have a first
exercise date of 25 February 2021. This is the final tranche of shares to vest under the LTI share purchase plan. The
Executive Leadership Team includes the Chief Executive Officer. The following section provides further details of
share movements under the LTI Plan for the Chief Executive Officer.

9 7

Chief Executive Officer remuneration

Remuneration for years ended 31 December 2018 to 2020

Fixed remuneration Pay for performance

Total
remunerationSalary

Other
benefits1 Subtotal2 STI LTI Subtotal

FY2020 $623,242 $1,758 $625,000 $261,6253 $04 $261,625 $886,625

FY2019 $623,405 $1,595 $625,000 $282,7345 $250,0006 $532,734 $1,157,734

FY2018 $547,720 $2,280 $550,000 $271,4007 $220,0008 $491,400 $1,041,400

1 Other benefits include medical insurance. The Chief Executive Officer chooses not to participate in KiwiSaver

2 Fixed remuneration reflects entitlement for the year, and therefore excludes the 20% pay reduction the Chief Executive Officer took for a period of 10 weeks in response to

the COVID-19 pandemic during FY2020

3 STI for FY2019 performance period (paid FY2020)

4 No LTI value granted in FY2020

5 STI for FY2018 performance period (paid FY2019)

6 LTI value granted in FY2019 period (which was to vest based on performance in FY2020 to FY2022)

7 STI for FY2017 performance period (paid FY2018)

8 LTI value granted in FY2018 period (which was to vest based on performance in FY2019 to FY2021)

Three-year summary

Total
remuneration

% STI awarded
against on-
plan performance

STI
performance
period

% LTI vested
against on-
plan performance

Span of LTI
performance
periods

FY2020 $886,625 83.7% FY2019 100%1 FY2017 – FY2019

FY2019 $1,157,734 102.8% FY2018 97.9%2 FY2016 – FY2018

FY2018 $1,041,400 98.7% FY2017 83.7%3 FY2015 – FY2017

1 Vesting date 31 December 2019, release date 27 February 2020

2 Vesting date 31 December 2018, release date 27 February 2019

3 Vesting date 31 December 2017, release date 26 February 2018

The STI in the table above is based on amounts paid in the financial period. The LTI vested in the table above refers to
shares eligible for vesting during the financial period.

Annual Report 2020

9 8

Components of CEO remuneration

Fixed Annual variable

Fixed On-plan Maximum
0

250,000

500,000

750,000
1,000,000

1,250,000

As at 31 December 2020, the Chief Executive Officer’s fixed remuneration comprised salary and taxable benefits set
at $625,000 per annum. The annual variable element pays out at 50% of fixed remuneration for on-plan performance
or 56% for maximum performance.

Description of Chief Executive Officer remuneration for performance for the year ended 31 December 2020

Plan Description Performance measures
Percentage awarded against
on-plan performance

STI Set at 50% of fixed remuneration
for FY2020 on-plan performance,
up to a maximum of 1.12
times (equal to 56% of fixed
remuneration), where the highest
levels of both company and
individual performance measures
are achieved.

80% based on the company target
areas (see table on page 123
for weightings)

20% based on individual measures

100.0%

100.0%

LTI In February 2020, vesting for
108,434 shares issued under the LTI
Scheme at $4.76 on 14 December
2016 was assessed per the Plan
Rules. The assessment period was
1 January 2017 to 31 December 2019.
The vesting criteria were met and all
shares vested.

In February 2020, vesting for
142,857 shares issued under the LTI
Scheme at $5.24 on 12 December
2017 was assessed per the Plan
Rules. The assessment period was
1 January 2018 to 31 December
2019. The vesting criteria were met
and all shares vested.

50% based on absolute earnings
25% based on relative earnings
10% based on employee initiatives
10% based on customer initiatives
5% based on clinical
strategy initiatives

50% based on absolute earnings
25% based on relative earnings
10% based on employee initiatives
10% based on customer initiatives
5% based on clinical
strategy initiatives
100.0%
100.0%

The above STI payment will be paid in FY2021.

9 9

Chief Executive Officer LTI share movements for the year ended 31 December 2020

Dec 2015
issue

Dec 2016
issue

Dec 2017
issue Total

Balance at 1 January 2020 139,355 237,005 263,736 640,096

Forfeited – – – –

Loan repaid and shares transferred
to CEO

(139,355) (128,571) – (267,926)

Balance at 31 December 2020 – 108,434 263,736 372,170

Vesting status Vested Vested Vested

Issue price $3.91 $4.76 $5.24

120,879 shares were vested on 31 December 2020 (out of a potential 120,879 shares eligible to vest on that date). These
vested shares are not eligible for exercise until 25 February 2021.

Chief Executive Officer LTI share option movements for the year ended 31 December 2020

Dec 2018 grant Dec 2019 grant

Balance at 1 January 2020 224,074 200,352

Forfeited – –

Granted – –

Exercised – –

Balance at 31 December 2020 224,074 200,352

Vesting status Partially vested Unvested

Exercise price at grant $6.34 $7.62

122,222 share options were vested on 31 December 2020 (out of a potential 122,222 share options eligible to vest on
that date).

Employee remuneration
The number of employees or former employees (including employees holding office as Directors of subsidiaries),
who received remuneration and other benefits valued at or exceeding $100,000 during the financial year ended
31 December 2020 is specified in the table below.

The remuneration figures shown in the “Remuneration” column include all monetary payments actually paid during
the course of the year ended 31 December 2020. The table also includes the grant value of shares issued to individual
employees under Summerset’s LTI Plan during the same period. The table does not include amounts paid after
31 December 2020 that relate to the year ended 31 December 2020.

The method of calculating remuneration is consistent with the method applied for the previous year.

Annual Report 2020

1 0 0

Remuneration No. of employees Remuneration No. of employees

$100,000 to $109,999 42 $250,000 to $259,999 1

$110,000 to $119,999 35 $260,000 to $269,999 2

$120,000 to $129,999 42 $270,000 to $279,999 3

$130,000 to $139,999 33 $310,000 to $319,999 2

$140,000 to $149,999 22 $340,000 to $349,999 1

$150,000 to $159,999 15 $350,000 to $359,999 1

$160,000 to $169,999 4 $370,000 to $379,999 1

$170,000 to $179,999 8 $390,000 to $399,999 1

$180,000 to $189,999 5 $480,000 to $489,999 1

$190,000 to $199,999 10 $500,000 to $509,999 1

$200,000 to $209,999 6 $510,000 to $519,999 1

$210,000 to $219,999 2 $540,000 to $549,999 1

$220,000 to $229,999 2 $810,000 to $819,999 1

$230,000 to $239,999 1 $910,000 to $919,999 1

$240,000 to $249,999 4

Pay gap
The pay gap represents the number of times greater the Chief Executive Officer remuneration is to the remuneration
of an employee paid at the median of all Summerset employees. For the purposes of determining the median paid to
all Summerset employees, all permanent full-time, permanent part-time and fixed-term employees are included, with
part-time employee remuneration adjusted to a full-time equivalent amount.

At 31 December 2020, the Chief Executive Officer’s base salary of $625,000 was 11.6 times (2019: 11.8 times) that of
the median employee at $53,830 per annum. The Chief Executive Officer’s total remuneration, including STI and LTI,
of $886,625, was 16.0 times (2019: 21.5 times) the total remuneration of the median employee at $55,445.

1 0 1

Annual Report 2020

1 0 2

Disclosures
Director changes during the year ended 31 December 2020
Venasio-Lorenzo Crawley was appointed to the Board on 1 February 2020.

Directors’ interests
Directors made the following entries in the Interests Register pursuant to Section 140 of the Companies Act 1993
during the year ended 31 December 2020:

Rob Campbell: Disclosed the following positions in respect of the following entities: New Zealand Rural Land
Company Limited (Chair), Paua Wealth Management Limited (Advisory Board Member), Ara Ake Limited (Chair), UFF
Holdings Limited (Director), He Toutou Mo Te Ahika Trust (Trustee). Disclosed he ceased to hold the following position
in respect of the following entity: King Tide Asset Management Limited (Chair).

Anne Urlwin: Disclosed the following positions in respect of the following entities: Cigna Life New Zealand Limited
(Director), Tilt Renewables Insurance Limited (Director), Queenstown Airport Corporation Limited (Director). Disclosed
she ceased to hold the following positions in respect of the following entities: Onepath Life (NZ) Limited (Director),
Steel and Tube Holdings Limited (Director).

James Ogden: No new disclosures were made.

Dr Marie Bismark: Disclosed the following positions in respect of the following entities: Royal Women’s Hospital,
Melbourne (Director), North Western Mental Health (Psychiatry Registrar). Disclosed she ceased to hold the following
positions in respect of the following entities: Royal Children’s Hospital Melbourne (Psychiatry Registrar).

Gráinne Troute: Disclosed the following position in respect of the following entity: Tourism Industry Aotearoa (Chair).

Dr Andrew Wong: Disclosed the following positions in respect of the following entities: Auckland University of
Technology (Adjunct Professor), MyACC (Director). Disclosed he ceased to hold the following positions in respect of
the following entities: Ninety Nine Investments Limited (Director), Mercy Angiography Limited (Director).

Venasio-Lorenzo Crawley: Disclosed the following positions in respect of the following entities: Contact Energy
Limited (Chief Customer Officer and Shareholder), Crawley Rowlands Family Trust (Trustee).

Information used by Directors
There were no notices from Directors of the Company requesting to disclose or use Company information received
in their capacity as Directors that would not otherwise have been available to them.

1 0 3

Directors’ security holdings
Securities in the Company in which each Director has a relevant interest as at 31 December 2020 are specified in
the table below:

Director Ordinary shares

SUM010

retail bonds

SUM020

retail bonds

SUM030

retail bonds

Rob Campbell 60,274 – – –

Anne Urlwin 31,413 30,000 – 30,000

James Ogden 239,504 15,000* 100,000* 150,000*

Dr Marie Bismark 23,828 – – –

Gráinne Troute 25,000 – – –

Dr Andrew Wong 10,500 – – –

Venasio-Lorenzo Crawley – – – –

Total 390,519 45,000 100,000 180,000

*James Ogden has a non-beneficial interest in 15,000 SUM010 retail bonds of which he is the registered holder in his capacity as
trustee of the Wakapua Trust. Clara Ogden has a legal and beneficial interest in 100,000 SUM020 retail bonds and 150,000 SUM030
retail bonds, of which James Ogden has the power to acquire or dispose.

Securities dealings of Directors
During the year, Directors disclosed the following transactions in respect of Section 148(2) of the Companies Act 1993.
These transactions took place in accordance with the Company’s Securities Trading Policy.

Director Date of transaction
Number of securities
acquired/(disposed) Consideration

Rob Campbell 23 March 2020 570
Issue of shares under dividend reinvestment

plan at $5.36 per share

11 September 2020 424
Issue of shares under dividend reinvestment

plan at $8.47 per share

Anne Urlwin 23 March 2020 250
Issue of shares under dividend reinvestment

plan at $5.36 per share

28 May 2020 5,000
On-market acquisition of ordinary shares

at an average price of $6.01 per share

11 September 2020 148
Issue of shares under dividend reinvestment

plan at $8.47 per share

21 September 2020 30,000
Issue of SUM030 retail bonds during
initial offer period at $1.00 per bond

James Ogden 21 September 2020 150,000
Issue of SUM030 retail bonds during
initial offer period at $1.00 per bond

10 November 2020 (150,000)
On-market disposal of ordinary shares

at average price of $10.85 per share

Dr Marie Bismark 23 March 2020 285
Issue of shares under dividend reinvestment

plan at $5.36 per share

11 September 2020 142
Issue of shares under dividend reinvestment

plan at $8.47 per share
Annual Report 2020

1 0 4

Director appointment dates
The date of each Director’s first appointment to the position of Director is provided below. Since the date of
appointment, Directors have been re-appointed at Annual Meetings when retiring by rotation as required.

Director Appointment date

Rob Campbell 2 September 2011

Anne Urlwin 1 March 2014

James Ogden* 2 September 2011

Dr Marie Bismark 1 September 2013

Gráinne Troute 1 September 2016

Dr Andrew Wong 1 March 2017

Venasio-Lorenzo Crawley 1 February 2020

*James Ogden was also a Director from 1 October 2007 to 26 March 2009.

Indemnity and insurance
In accordance with Section 162 of the Companies Act 1993 and the constitution of the Company, the Company
has arranged insurance for, and indemnities to, Directors and Officers of the Company, including Directors of
subsidiary companies, for losses from actions undertaken in the course of their legitimate duties or costs incurred in
any proceeding.

Directors of subsidiary companies
The remuneration of employees acting as Directors of subsidiaries is disclosed in the relevant banding of remuneration
set out under the heading ‘Employee remuneration’ in the Remuneration section of the Report. Employees did not
receive additional remuneration or benefits for acting as Directors during the year.

Julian Cook, Scott Scoullar, Aaron Smail and Robyn Heyman were Directors of all the Company’s New Zealand
incorporated subsidiaries as at 31 December 2020, with the exception of Summerset LTI Trustee Limited (the Directors
of which are Rob Campbell and Dr Marie Bismark). Julian Cook, Scott Scoullar, Paul Morris and Robyn Heyman were
Directors of all the Company’s Australian incorporated subsidiaries as at 31 December 2020. No extra remuneration
is payable to any Director of the Company for any Directorship of a subsidiary.

1 0 5

Top 20 Shareholders as at 31 December 2020

Rank Registered Shareholder Number of shares % of shares

1 New Zealand Central Securities Depository Limited 131,739,136 57.58%

2 FNZ Custodians Limited 6,270,443 2.74%

3 Forsyth Barr Custodians Limited 6,014,003 2.63%

4 Custodial Services Limited 6,004,756 2.62%

5 Hobson Wealth Custodian Limited 5,041,801 2.20%

6 Custodial Services Limited 4,884,744 2.14%

7 New Zealand Depository Nominee Limited 3,684,294 1.61%

8 Custodial Services Limited 2,676,051 1.17%

9 Custodial Services Limited 2,010,100 0.88%

10 Motutapu Investments Limited 1,894,283 0.83%

11 Summerset LTI Trustee Limited 1,678,240 0.73%

12 Paul Stanley Morris & Clive Stephen Morris 1,623,487 0.71%

13 Custodial Services Limited 1,191,680 0.52%

14 ASB Nominees Limited 1,049,913 0.46%

15 JBWere (NZ) Nominees Limited 980,793 0.43%

16 FNZ Custodians Limited 927,434 0.41%

17 PT Booster Investments Nominees Limited 925,139 0.40%

18 Custodial Services Limited 897,014 0.39%

19 Investment Custodial Services Limited 738,130 0.32%

20 Loto Jade Pty Limited 678,977 0.30%

Total 180,910,418 79.07%

Shareholders held through the NZCSD as at 31 December 2020
New Zealand Central Securities Depository Limited (NZCSD) provides a custodian depository service that allows
electronic trading of securities to its members and does not have a beneficial interest in these shares. As at
31 December 2020, the ten largest shareholdings in the Company held through NZCSD were:

Rank Registered Shareholder Number of shares % of shares

1 Citibank Nominees (NZ) Limited 20,230,475 8.84%

2 Tea Custodians Limited 17,914,549 7.83%

3 HSBC Nominees (New Zealand) Limited 16,986,945 7.42%

4 National Nominees New Zealand Limited 13,219,709 5.78%

5 Accident Compensation Corporation 10,754,926 4.70%

6 JPMorgan Chase Bank 10,385,719 4.54%

7 HSBC Nominees (New Zealand) Limited 9,127,270 3.99%

8 New Zealand Superannuation Fund Nominees Limited 6,630,837 2.90%

9 Cogent Nominees Limited 6,248,634 2.73%

10 BNP Paribas Nominees NZ Limited (BPSS40) 5,418,993 2.37%

Annual Report 2020

1 0 6

Spread of Shareholders as at 31 December 2020

Size of shareholding
Shareholders

Number
Shareholders

%
Shares

Number
Shares

%

1 to 1,000 3,152 33.74% 1,412,576 0.62%

1,001 to 5,000 4,029 43.13% 10,213,552 4.46%

5,001 to 10,000 1,214 13.00% 8,774,188 3.84%

10,001 to 50,000 829 8.87% 15,507,653 6.78%

50,001 to 100,000 58 0.62% 4,006,761 1.75%

100,001 and over 60 0.64% 188,870,584 82.55%

Total 9,342 100.00% 228,785,314 100.00%

Substantial product holder notices received as at 31 December 2020
According to the records kept by the Company and notices given under the Financial Market Conducts Act 2013 the
following were substantial holders in the Company as at 31 December 2020. The total number of voting products on
issue at 31 December 2020 was 228,785,314 ordinary shares.

Shareholder Relevant interest
% held at date

of notice Date of notice

Jarden Securities Limited* 18,981,594 8.296% 2 October 2020

Harbour Asset Management Limited** 18,981,594 8.296% 2 October 2020

Milford Funds Limited 12,006,954 5.267% 6 May 2020

Fisher Funds Management Limited 14,184,637 6.222% 28 April 2020

* As at the date of the notice, Jarden Securities Limited held 2,691,168 shares (1.176% of issued capital). The relevant
interest disclosed includes the interest of Harbour Asset Management Limited as related body corporate.

** As at the date of the notice, Harbour Asset Management Limited held 16,290,426 shares (7.120% of issued capital).
The relevant interest disclosed includes the interest of Jarden Securities Limited as related body corporate.

Spread of bondholders as at 31 December 2020

SUM010

Size of bondholding
Bondholders

Number
Bondholders

%
Bonds

Number
Bonds

%

1 to 5,000 79 9.26% 395,000 0.40%

5,001 to 10,000 217 25.44% 2,109,000 2.11%

10,001 to 50,000 466 54.63% 12,775,000 12.77%

50,001 to 100,000 54 6.33% 4,561,000 4.56%

100,001 and over 37 4.34% 80,160,000 80.16%

Total 853 100.00% 100,000,000 100.00%

1 0 7

SUM020
Size of bondholding
Bondholders
Number
Bondholders
%
Bonds
Number
Bonds
%

1 to 5,000 45 6.68% 225,000 0.18%

5,001 to 10,000 128 19.02% 1,220,000 0.97%

10,001 to 50,000 409 60.77% 11,234,000 8.99%

50,001 to 100,000 45 6.69% 3,937,000 3.15%

100,001 and over 46 6.84% 108,384,000 86.71%

Total 673 100.00% 125,000,000 100.00%

SUM030
Size of bondholding
Bondholders
Number
Bondholders
%
Bonds
Number
Bonds
%

1 to 5,000 48 6.40% 240,000 0.16%

5,001 to 10,000 173 23.06% 1,680,000 1.12%

10,001 to 50,000 428 57.07% 11,571,000 7.71%

50,001 to 100,000 53 7.07% 4,452,000 2.97%

100,001 and over 48 6.40% 132,057,000 88.04%

Total 750 100.00% 150,000,000 100.00%

Waivers from the NZX Listing Rules
No waivers from the application of NZX Listing Rules have been utilised by the Company during the year ended
31 December 2020.

Credit rating
The Company has no credit rating.

Auditor fees
Ernst & Young Wellington has continued to act as auditors of the company. The amount payable by Summerset and
its subsidiaries to Ernst & Young Wellington in respect of FY20 audit fees was $205,000. In addition, Ernst & Young
Wellington undertook assurance services in relation to Summerset’s long term incentive plan during the year, the fees
for this engagement were $4,000. No other non-audit work was undertaken by Ernst & Young during the year.

Donations
In accordance with section 211(1)(h) of the Companies Act 1993, Summerset records that it donated $34,000 during
the year ended 31 December 2020.

Dividend reinvestment plan
The last date of receipt for a participation election from a shareholder who wishes to participate in the dividend
reinvestment plan is 10 March 2021.

Annual Report 2020

1 0 8

This Annual Report is authorised for and on behalf of the Board by:

Rob Campbell
Director and Chair of
the Board

James Ogden
Director and Chair of the
Audit Committee

Authorised for issue on 22 February 2021

1 0 9

Directory
New Zealand

Northland

Summerset Mount Denby
7 Par Lane, Tikipunga,
Whangarei 0112
Phone (09) 470 0282

Auckland

Summerset Falls
31 Mansel Drive,
Warkworth 0910
Phone (09) 425 1200

Summerset Milldale1
Argent Lane, Milldale,
Wainui 0992
Phone (0800) 786 637

Summerset at Monterey Park
1 Squadron Drive, Hobsonville,
Auckland 0618
Phone (09) 951 8920

Summerset at Heritage Park
8 Harrison Road, Ellerslie,
Auckland 1060
Phone (09) 950 7960

Summerset by the Park
7 Flat Bush School Road,
Flat Bush 2019
Phone (09) 272 3950

Summerset at Karaka
49 Pararekau Road,
Karaka 2580
Phone (09) 951 8900

Summerset Parnell1
23 Cheshire Street, Parnell,
Auckland 1052
Phone (09) 950 8212

Summerset Half Moon Bay1
25 Thurston Place
Half Moon Bay,
Auckland 2012
Phone (09) 306 1422

Summerset St Johns
188 St Johns Road, St Johns,
Auckland 1072
Phone (09) 950 7982

Waikato – Taupo

Summerset down the Lane
206 Dixon Road,
Hamilton 3206
Phone (07) 843 0157

Summerset Rototuna
39 Kimbrae Drive,
Rototuna North 3281
Phone (07) 981 7822

Summerset by the Lake
2 Wharewaka Road, Wharewaka,
Taupo 3330
Phone (07) 376 9470

Summerset Cambridge1
80 Laurent Road,
Cambridge 3493
Phone (07) 839 9482

Bay of Plenty

Summerset by the Sea
181 Park Road,
Katikati 3129
Phone (07) 985 6890

Summerset by the Dunes
35 Manawa Road,
Papamoa Beach, Tauranga 3118
Phone (07) 542 9082

1 Proposed villages

Annual Report 2020

1 1 0

Hawke’s Bay

Summerset in the Bay
79 Merlot Drive, Greenmeadows,
Napier 4112
Phone (06) 845 2840

Summerset in the Orchard
1228 Ada Street, Parkvale,
Hastings 4122
Phone (06) 974 1310

Summerset Palms
136 Eriksen Road,
Te Awa, Napier 4110
Phone: (06) 833 5852

Summerset in the Vines
249 Te Mata Road,
Havelock North 4130
Phone (06) 877 1185

Taranaki

Summerset Mountain View
35 Fernbrook Drive, Vogeltown,
New Plymouth 4310
Phone (06) 824 8900

Summerset at Pohutukawa Place
Pohutukawa Place, Bell Block,
New Plymouth 4312
Phone (06) 824 8532

Manawatu – Wanganui

Summerset in the River City
40 Burton Avenue, Wanganui East,
Wanganui 4500
Phone (06) 343 3133

Summerset on Summerhill
180 Ruapehu Drive, Fitzherbert,
Palmerston North 4410
Phone (06) 354 4964

Summerset by the Ranges
104 Liverpool Street,
Levin 5510
Phone (06) 367 0337

Wellington

Summerset Waikanae1
Park Avenue,
Waikanae 5036
Phone (04) 293 0002

Summerset on the Coast
104 Realm Drive,
Paraparaumu 5032
Phone (04) 298 3540

Summerset on the Landing
1-3 Bluff Road, Kenepuru,
Porirua 5022
Phone (04) 230 6722

Summerset at Aotea
15 Aotea Drive, Aotea,
Porirua 5024
Phone (04) 235 0011

Summerset at the Course
20 Racecourse Road, Trentham,
Upper Hutt 5018
Phone (04) 527 2980

Summerset Lower Hutt
Boulcott’s Farm, Military Road,
Lower Hutt 5010
Phone (04) 568 1442

Nelson – Tasman

Summerset in the Sun
16 Sargeson Street, Stoke,
Nelson 7011
Phone (03) 538 0000

Summerset Richmond Ranges
1 Hill Street North, Richmond,
Tasman 7020
Phone (03) 744 3432

Marlborough

Summerset Blenheim1
183 Old Renwick Road, Springlands,
Blenheim 7272
Phone (03) 520 6042

1 Proposed villages

1 1 1

Canterbury

Summerset Rangiora1
141 South Belt, Waimakariri,
Rangiora 7400
Phone (03) 364 1312

Summerset at Wigram
135 Awatea Road, Wigram,
Christchurch 8025
Phone (03) 741 0870

Summerset at Avonhead
120 Hawthornden Road, Avonhead,
Christchurch 8042
Phone (03) 357 3202

Summerset on Cavendish
147 Cavendish Road, Casebrook,
Christchurch 8051
Phone (03) 741 3340

Summerset Prebbleton1
578 Springs Road,
Prebbleton 7604
Phone (03) 353 6312

Otago

Summerset at Bishopscourt
36 Shetland Street, Wakari,
Dunedin 9010
Phone (03) 950 3102

Australia
Victoria

Summerset Cranbourne North1
1435 Thompsons Road,
Cranbourne North,
Melbourne, Australia
Phone (1800) 321 700

Summerset Torquay1
Grossmans Road and Briody Drive,
Torquay,
Victoria, Australia
Phone (1800) 321 700

1 Proposed villages
Annual Report 2020

1 1 2

Company
information
Registered offices

New Zealand
Level 27, Majestic Centre,
100 Willis Street, Wellington 6011,
New Zealand

PO Box 5187,
Wellington 6140

Phone: +64 4 894 7320
Email: reception@summerset.co.nz
www.summerset.co.nz

Australia
Deutsche Bank Place,
Level 4, 126 Phillip Street,
Sydney, NSW, 2000
Australia

Auditor
Ernst & Young

Solicitor
Russell McVeagh

Bankers
ANZ Bank New Zealand Limited
Australia and New Zealand Banking Group Limited
Bank of New Zealand
National Australia Bank
Commonwealth Bank of Australia
Westpac New Zealand Limited
Westpac Banking Corporation
Industrial and Commercial Bank of China (New
Zealand) Limited

Statutory Supervisor
Public Trust

Bond Supervisor
The New Zealand Guardian Trust
Company Limited

Share Registrar
Link Market Services,
PO Box 91976, Auckland 1142,
New Zealand

Phone: +64 9 375 5998
Email: enquiries@linkmarketservices.co.nz

Directors
Rob Campbell
Dr Marie Bismark
Venasio-Lorenzo Crawley
James Ogden
Gráinne Troute
Anne Urlwin
Dr Andrew Wong

Company Secretary
Robyn Heyman

1 1 3

summerset.co.nz
summerset.com.au

Contents
Strategy
Strategy
Chair and CEO’s Report
Chair and CEO’s report
Value creation
A decade at the top
Highlights
Who we are and what we deliver
2020 highlights
Portfolio growth
Our people and community
Our people and community
Strong wave of growth
Our villages
Our Villages
NZ map
Our commitment to sustainability
Our commitment to sustainability
Our performance
Our performance
Five year summary
Financial statements
Income Statement
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Reconciliation of Operating Results and Operating Cash Flows
Notes to the financial statements
1. Summary of accounting policies
2. Non-GAAP underlying profit
3. Segment reporting
4. Revenue
5. Operating expenses
6. Net finance costs
7. Income tax
8. Trade and other receivables
9. Property, plant and equipment
10. Intangible assets
11. Investment property
12. Trade and other payables
13. Employee benefits
14. Interest rate swaps
15. Residents’ loans
16. Leases
17. Interest-bearing loans and borrowings
18. Financial instruments
19. Share capital and reserves
20. Earnings per share and net tangible assets
21. Employee share plans
22. Related party transactions
23. Key management personnel compensation
24. Commitments and contingencies
25. Subsequent events
Independent Auditors’ Report
Governance
Principle 1: Code of ethical behaviour
Principle 2: Board composition and performance
Principle 3: Board committees
Board of Directors
Executive leadership team
Remuneration
Director remuneration
Executive remuneration
Chief Executive Officer remuneration
Disclosures
Director changes during the year ended 31 December 2020
Directors’ interests
Information used by Directors
Directors’ security holdings
Securities dealings of Directors
Director appointment dates
Indemnity and insurance
Directors of subsidiary companies
Top 20 Shareholders as at 31 December 2020
Shareholders held through the NZCSD as at 31 December 2020
Spread of Shareholders as at 31 December 2020
Substantial product holder notices received as at 31 December 2020
Spread of bondholders as at 31 December 2020
Waivers from the NZX Listing Rules
Credit rating
Auditor fees
Donations
Dividend reinvestment plan
Directory
Company information
• Title