Pacific Star Network Limited

Transcription

1 Corporate Directory Directors Company Secretary Registered Office Share Registry Auditor Solicitors Bankers Stock Exchange Listing Annual General Meeting PACIFIC STAR NETWORK LIMITED ABN Andrew Moffat (Chairman) Ronald Hall Gary Pert Colm O Brien Stephen Sweeney FCA, MBA 473 Swan Street RICHMOND VIC 3121 Telephone: (03) Facsimile: (03) info@pacificstarnetwork.com.au Internet: Computershare Investor Services Pty Ltd Yarra Falls, 452 Johnson Street ABBOTSFORD VIC 3067 Telephone: Facsimile: BDO East Coast Partnership Level 14, 140 William Street MELBOURNE VIC 3000 Minter Ellison Rialto Towers, 525 Collins Street MELBOURNE VIC 3000 Commonwealth Bank of Australia Level 20, Tower 1 Collins Street 727 Collins Street MELBOURNE VIC 3008 ordinary shares are quoted on the Australian Securities Exchange (ASX code: PNW). Annual General Meeting will be held on Thursday 24 November 2016 at 9.30am. The venue for the meeting is 473 Swan Street, Richmond Victoria

2 Chairman s Report Dear Shareholder, Welcome to the Pacific Star Network Annual Report for the financial year Highlights The radio advertising market for metropolitan stations continued to deliver strong growth with advertising revenues up 5.9% in the five capital cities during the financial year. The Melbourne metropolitan market was up 6.0% to $238 million demonstrating that radio continues to be a safe choice for advertisers. DAB+ digital radio continues to grow in popularity with digital radio being most popular in Melbourne with 28% of the population tuned in and the total number of vehicles sold to date in Australia with DAB+ radio has now reached over half a million vehicles. In the January June 2016 circulation survey by the Australian Bureau of Circulation (ABC), frankie magazine continued to be the third largest selling print media in the women s lifestyle with a 16% market share. Whilst the women s lifestyle category was down 6% year on year, frankie continues to maintain its position as a primary media brand for engagement in Australia. There was significant year on year growth in digital traffic for key brands. In publishing, solid gains were made by frankie magazine with Facebook likes up 9%, electronic newsletters up 13% and Instagram followers up 79%. In broadcasting, unique visitors to our sports based website SEN.com.au was up 41% (27% were first time users), Facebooks likes up 50% and Twitter was up by over 100%. frankie magazine was nominated as a finalist in the 2015 Australian Magazine Awards. Operating Result The Company reports a net profit after tax of $1.093 million compared to the corresponding period (2015: loss $78,732). The underlying net profit before tax (excluding the impact of restructuring costs of $610,941 is $2.040 million, up 18% on the corresponding period (2015: $1.732 million). EBITDA result was $2.840 million, up 100% on the comparative period (2015: $1.413 million). Underlying EBITDA (excluding restructuring costs of $610,941) was $3.451 million, up 26% on the same period last year (2015: $2.732 million). Revenue at $ million for the year was up 15% on the comparative period (2015: $ million) whilst operating costs at $ million were up 10% on the comparative period (2015: $ million). Operating cash flows at $1.985 million (excluding the cash impact of restructuring costs) were consistent with the comparative period (2015: $1.981 million). Taxable income for the full year is estimated at $2.048 million (2015: $1.813 million). Income tax expense for the period is estimated at $336,704 (2015: $491,593) equating to an effective tax rate of 16% (2015: 27%). This tax rate includes the effect of temporary timing differences. If these adjustments were excluded the effective tax rate would approximate to 30%. 2

3 Review of Operations Chairman s Report Financial Performance Change % 30 June 2016 $'000 s 30 June 2015 $'000 s Revenue Up 15% 23,983 20,868 Underlying EBITDA* Up 26% 3,451 2,732 Net profit / (loss) after tax attributed to members Up>100% 1,093 (79) Significant expense* Down>100% (611) (1,319) Earnings per share - basic cents (NPAT) Up>100% 1.5 (0.1) Earnings per share - basic cents (underlying EBITDA)* * = Non-AIFRS item Up 9% The publishing segment results included in note 24 reflect a full year of trading results for Morrison Media, a publishing company acquired in December The underlying EBITDA result of $1.674 million (2015: $1.333 million) takes account of lower than budget copy sales across all publications and a decision by the company to continue to sustain losses on titles whilst the company assessed their future market and viability. Following a trial re-launch in the second half of the financial year, a decision was made in June 2016 to cease publishing Surfing Life and White Horses titles and in August 2016 the company executed an agreement for the sale of these titles at a nominal consideration. During the year, the company initiated a review of its Gold Coast office and this resulted in a decision to scale down this office and make several redundancies. The costs savings to flow from this decision will be crystallized in the next financial year but we expect these savings to be offset against higher production costs being imposed on the business, however, over time we believe these changes will contribute to a leaner and more sustainable business. The underlying EBITDA result for broadcast was $2.489 million (2015: $2.073 million) for the year. Whilst our Melbourne agency revenue was strong and on target, advertising revenue in the direct market did not meet expectations and lagged the overall growth in the Melbourne radio advertising market in the financial year. Managing costs was a key focus for the senior management team during the year and operating costs were managed 2% below budget. We continued to review the efficiency of key functions and this led to making a number of redundancies in the earlier part of the financial year. The company repaid $1.250 million of debt during the financial year and was compliant with banking covenants in each quarterly reporting period. 3

4 Outlook Chairman s Report The company has been successful in its bid to secure AFL radio broadcast rights for with the AFL recently announcing that 1116 SEN has been granted the rights to broadcast live 6 games per week during the AFL season. The board believes that this development will provide the launching pad to grow revenues in the broadcast business and we recently recruited an experienced General Manager, Cathy Thomas to lead the business on that path. The company is well progressed in developing a digital strategy for each business and this will require a significant investment over the course of the next eighteen months. In developing the strategy, our aim is to use technology to get to better know our customers and create diversified but sustainable revenue streams over the next 2-3 years. Dividends Directors have declared a fully franked final dividend of 1.05 cents per share consistent with last year s final dividend. The combined interim and final dividend for the year is 2.4 cents (2015: 2.3 cents) up 4% on the comparative period. The record date for determining entitlements to the dividend is 19 September 2016 and payment date will be 18 October

5 Table of Contents Directors Report 6 Auditor s Independence Declaration 23 Independent Auditor s Report 24 Directors Declaration 26 Annual Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income 27 Consolidated Statement of Financial Position 28 Consolidated Statement of Changes in Equity 29 Consolidated Statement of Cash Flows Additional Securities Exchange Information 70 5

6 Directors Report The directors of, the consolidated entity, submit herewith the financial report. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: The names and particulars of the directors of the company at any time during or since the end of the financial year are: Name Particulars Ronald Hall Appointed Non-Executive Director on 13 February 2002 Andrew Moffat Appointed Non-Executive Director on 1 September 2004 Gary Pert Appointed Non-Executive Director on 1 July 2008 Michelle Guthrie Appointed Non-Executive Director on 1 May 2013 Resigned 24 March 2016 when taking up the Managing Director role at the Australian Broadcasting Corporation (ABC). Colm O Brien Appointed Executive Director on 8 September 2015 Current Directors The biographies for current directors and other staff are detailed below: Ronald Hall Non-Executive Director - Aged 75 Mr Hall is the founder and promoter of a number of successful Melbourne based retail businesses. Mr Hall has been a long-time supporter of radio for marketing his products. Andrew Moffat, B.Bus, Curtin University, Perth Non-Executive Director Chairman Aged 55 Mr Moffat has over 20 years of corporate and investment banking experience and is the sole principal of Cowoso Capital Pty Ltd, a company providing corporate advisory services. Prior to establishing Cowoso Capital Pty Ltd, Andrew was a Director of Equity Capital Markets & Advisory for BNP Paribas Equities Australia Limited where he was responsible for mergers and acquisition advisory services and a range of equity capital raising mandates including placements, IPO s, rights issues, dividend reinvestment plans and underwritings. Mr Moffat is a Non-Executive Director of 360 Capital Property Limited and Rubik Financial Limited. Gary Pert Non-Executive Director - Aged 51 Mr Pert has extensive media industry experience gained whilst serving in various senior executive roles including Managing Director of the Channel Nine Network and General Manager of Austereo Melbourne. After a successful AFL / VFL football career including 233 games with Fitzroy and Collingwood, Mr Pert took up a role with the AFL as promotions and development officer between 1989 and 1994, following which he became a sales executive in the Melbourne office of the Austereo radio network. 6

7 Current Directors Cont d Directors Report Cont d During his 12 years with Austereo, Mr Pert held various senior management roles culminating in 2006 when he held the joint role of General Manager of Austereo Melbourne and Austereo s National Sales Director. As Managing Director of Channel Nine Melbourne, Mr Pert held principal responsibility for one of Australia s largest media organisations with more than 450 staff. After one of the most profitable periods in Channel Nine s history, Mr Pert was recruited as Chief Executive Officer of the Collingwood Football Club, one of Australia s largest sporting brands. Michelle Guthrie, B.Law, B.A, University of Sydney, Sydney Non-Executive Director Aged 50 Ms Guthrie has over twenty years experience in the media and entertainment industry. Ms Guthrie was an executive at Google Asia International Pacific based in Singapore and was previously a Managing Director for the Hong Kong office of global private equity firm Providence Equity in , and was a Senior Advisor in Ms Guthrie was the Chief Executive Officer of STAR Group Limited, a wholly-owned subsidiary of News Corporation, which is Asia s leading media and entertainment company based in Hong Kong. Ms Guthrie has also worked in legal and business development roles for FOXTEL and News International and BSkyB in London. Ms Guthrie also served on the boards of a number of other companies including NASDAQlisted technology company VeriSign, Inc. and various STAR joint venture companies including Balaji, ESPN STAR Sports, Hathway, China Network Systems, ANTV and Tata Sky. Ms Guthrie resigned as a director on 24 March 2016 when taking up the Managing Director role at the Australian Broadcasting Corporation. Colm O Brien, BCL (Hons), AAICD Executive Director Aged 44 Mr O Brien has over 20 years experience at executive level, including nine years as CEO with ASX listed media company, Aspermont Limited. In addition to his media industry experience, Mr O Brien has worked in international financial services, tier one management consultancy and other industries. He recently created and managed the transformation of Aspermont Limited from a local SME to one of the largest global media businesses in the resources and other sectors, through transitioning a predominantly print based revenue stream into long-term brand extensions in Digital and Events. Stephen Sweeney Company Secretary Aged 52 The Company Secretary is Mr Stephen Sweeney. Mr Sweeney is a graduate of the Governance Institute, a Fellow of Chartered Accountants Australia and also holds an MBA from Heriot-Watt University (Edinburgh Business School), Scotland. Stephen was appointed to the position of Company Secretary on 24 January Stephen is also the Company s Chief Financial Officer and has twenty-five years experience in senior management positions with listed, financial services and government entities. 7

8 Directors Report Cont d Directorship of other Listed Companies Directorships of other listed companies held by directors in the three years preceding the end of the financial year are as follows: Andrew Moffat: Michelle Guthrie: Colm O Brien: Principal Activities Rubik Financial Limited - Non-Executive Director 360 Capital Property Limited - Non-Executive Director Keybridge Capital Limited - Non-Executive Director CCK Financial Solutions Limited - Non-Executive Director Auckland International Airport Limited - Non-Executive Director Modern Times Group Mtg AB (Sweden) - Non-Executive Director Maygar Mining PLC - Non-Executive Director Aspermont Limited - Non-Executive Director Kabuni Limited - Non-Executive Director is a media company with interests in broadcasting (1116 SEN, MP, Rythmos, Aussie and KOOOL) and publishing (frankie, Smith Journal, Slow and Inside Football magazine) and digital assets ( and The company s business strategy is to create and distribute diverse content for niche target communities. Review of Operations The company reports a net profit after tax of $1.093 million compared to the corresponding period (2015: loss $78,732). The underlying EBITDA (excluding restructuring costs of $610,941) was $3.451 million, up 26% on the same period last year (2015: $2.732 million). Refer to the Chairman s report for for Highlights, Operating Results and Review of Operations. Significant Changes in the State of Affairs There were no significant changes in the state of affairs of the consolidated entity. Profit per Share The basic earnings per share was 1.5 cents (2015: loss cents) and diluted earnings per share was 1.5 cents (2015: loss cents). The weighted average number of ordinary shares on issue during the financial year used in the calculation of basic profit per share was 70,869,389 shares (2015: 62,346,413 shares). Events since the end of the Financial Year No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect the state of affairs of the consolidated entity in subsequent financial years. 8

9 ANNUAL REPORT 2016 Directors Report Cont d Likely Developments and Expected Results of Operations Refer to the Chairman s report for details of developments and business strategies. This Directors Report should be read in conjunction with the Chairman s Report in satisfying the required disclosures under the Corporations Act. Dividends Dividends paid during the year were as follows: Interim dividend paid during half year ended 31 December Final dividend paid during prior year ended 30 June ,681 1,350 On 31 August 2016, the directors declared a final fully franked dividend for the year ended 30 June 2016 of 1.05 cents per ordinary share to be paid on 18 October 2016, a total estimated distribution of $744,129 based on the number of ordinary shares on issue as at 30 June Auditors BDO East Coast Partnership continues in office in accordance with section 327 of the Corporations Act Compliance with National Greenhouse & Energy Reporting (NGER) Act The consolidated entity is not subject to any significant and / or particular NGER framework. Shares and Options granted to Executives and Employees The company operates two plans for granting shares and options, the EEIP and the EESP. During the year, the company renamed its Executive Share Option Plan (ESOP) to be the Employee and Executive Incentive Plan (EEIP) and the second plan is the Exempt Employee Share Option Plan (EESP). When exercisable, each option is convertible into one ordinary share of Pacific Star Network Limited (ASX Code: PNW). Obligations under the existing plans are shown in note 7. Key Management Personnel (KMP) have been granted options over ordinary shares that can be exercised at future dates. If all performance conditions were met during the term, up to 1,627,096 options could be exercised as Long Term Incentives (LTI) for nil consideration. Information on the relevant performance / vesting criteria of these options is located in the Remuneration Report. Options not yet vested lapse if KMP resign their position. (i) (ii) (iii) Options issued only vest when performance and vesting conditions are achieved. The vesting period is deemed to commence when contracts are agreed by both parties and it is only then that the company is conditionally obliged to issue options. Nil options vested during the year. In accordance with the terms for the grant of options where applicable, ordinary shares issued are held in escrow until the end of the contract period. In accordance with AASB 2: Share-based payment options have been valued and are or will be accounted for as an expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in this or future periods. 9

10 Directors Report Cont d Shares and Options granted to Executives and Employees cont d The following KMP have pre-existing entitlements relating to the grant of options in previous financial years: Key Management Personnel Number of unvested options granted in previous years Exercise Price Value per option at grant date Vesting Date D Hung 129,032 Nil cents 31 cents 50% - 30/09/16 50% - 30/09/17 G Murray 129,032 Nil cents 31 cents 50% - 30/09/16 50% - 30/09/17 S Sweeney 129,032 Nil cents 31 cents 50% - 30/09/16 50% - 30/09/17 Total 387,096 Nil cents 31 cents Directors Shareholdings Expiry Date 30/09/17 30/09/17 30/09/17 The relevant interests of current directors shares in the Company or a related body corporate as at the date of this report are as follows: Directors No. of Fully Paid Ordinary Shares Ronald Hall 1 19,635,146 Andrew Moffat 2 2,871,296 Gary Pert - Colm O Brien 50,000 Total 22,556,442 At the company s Annual General Meeting held on 27 November 2015, shareholders voted in favour of a resolution to grant a director, Colm O Brien 1,000,000 share options exercisable at 30 cents with a vesting date of 1 March 2016 and an expiry date of 1 September Meetings of Directors The table below sets out the number of board meetings held during the year and the number of meetings attended by each director. During the financial year, 12 board meetings were held. Directors Eligible to attend Attended Ronald Hall Andrew Moffat Gary Pert Michelle Guthrie 8 7 Colm O Brien R Hall holds a beneficial interest through Tosca Boxer Pty Ltd atf Hall Family Trust. 2 A Moffat holds a direct interest in 2,700 shares and a beneficial interest in shares through the Cowoso Superannuation Fund. 10

11 Directors Report Cont d Indemnification of Officers and Auditors During the financial year, premiums were paid to insure Directors and Officers against liabilities and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as an officer, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium is not disclosed under the terms and conditions of the policy. As at the date of this report, no amounts have been claimed or paid in respect of this indemnity, other than the premium referred to above. During or since the financial period, the company has not indemnified or made a relevant agreement to indemnify the auditor against a liability incurred as auditor. Remuneration Report (Audited) This Remuneration Report which has been audited outlines director and executive remuneration arrangements in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, Key Management Personnel (KMP) are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the business, directly or indirectly, as an executive. Key Management Personnel disclosed in this report Non-executive/ executive directors Position Period Ronald Hall Non-executive director Full year Andrew Moffat Non-executive director Full year Gary Pert Non-executive director Full year Michelle Guthrie Non-executive director 01/07/15-24/03/16 Colm O Brien Non-executive director 10/09/15-30/06/16 Other Key Management Personnel Executive director 01/09/15-29/02/16 Barrie Quick Chief Executive Officer 01/07/15-16/10/15 George Papadopoulos Chief Executive Officer 18/01/16-11/05/16 Stephen Sweeney Company Secretary / Chief Financial Officer Full year David Hung Group Sales Director - Broadcast Full year Mark Johnson Group Program Director - Broadcast Full year Gaye Murray General Manager - frankie press Full year Craig Sims General Manager - Fresh Air and Shared Services Full year Cathy Thomas General Manager - Broadcasting 13/05/16-30/06/16 11

12 Directors Report Cont d Remuneration Report (Audited) cont d Principles used to determine the nature and amount of remuneration The principal objective is to ensure that rewards paid for performance are competitive and commensurate with the results achieved. The guiding principles for developing executive remuneration are: Remuneration should include an appropriate mix of fixed and performance based variable pay components; The various components of remuneration should be understandable, transparent and easy to communicate; and Remuneration practices should be acceptable to internal and external stakeholders. In developing budgets, the board sets out to link remuneration policies with financial performance. Use of remuneration consultants Directors have not engaged the services of remuneration consultants during the reporting period. Relationship between remuneration and the company s financial performance Financial Performance Profit for year before tax attributable to owners 1, ,453 1,063 1,157 Profit for year after tax attributable to owners 1,093 (79) Basic earnings per share (cents) 1.5 (0.1) Dividends per share (cents) Dividend payments ($000 s) 1,681 1, Dividend payout ratio underlying earnings (%) 83% 109% 96% 83% 92% Share price at year end (A$) KMP incentives as % of profit after tax for the year 3 15% 344% 18% 32% 18% Components of Key Management Personnel Total Remuneration In accordance with best practice corporate governance, the structure of non-executive Director and other KMP remuneration is separate and distinct. Non-executive Directors are remunerated with fees within the aggregate limit approved by shareholders. Each non-executive director receives a fixed fee for being a director. Directors remuneration for the period ending 30 June 2016 is detailed on page KMP incentives are short / long term incentives per the Remuneration Report but excluding negative share based payments. 12

13 Directors Report Cont d Remuneration Report (Audited) cont d Components of Key Management Personnel Total Remuneration cont d Executive Directors are remunerated based on the market value of the position and the range of skills and skills and experience they bring to the company. The company rewards executives with a mix of remuneration commensurate with their position and responsibilities and remuneration structures are reviewed regularly to ensure that: remuneration is competitive by market standards; rewards are linked to strategic goals and performance; and Accountabilities and deliverables are clearly defined to minimise potential conflicts of interest and promote effective decision making. Total remuneration is made up of the following elements: fixed remuneration; short term incentives (STI); and long term incentives (LTI). Fixed remuneration is determined to provide a base level of remuneration appropriate to the position that is competitive and takes account of each individual s experience, qualifications, capabilities and responsibilities. It is benchmarked to ensure that remuneration is competitive with the market. KMP receive fixed remuneration in cash. This remuneration is detailed on page 15. STI s are based on achieving Key Performance Measures (KPI s) that focus participants on achieving personal / business goals that creates sustainable shareholder value. STI payments primarily relate to sales based commissions linked to actual performance in a financial year. STI arrangements are such that there are no maximum or forfeited commission amounts. STI s are dependent on achieving KPI s linked to key business drivers. STI s include financial incentives to employees for achieving / exceeding monthly, quarterly and annual targets. The senior management team is responsible for assessing the performance of individuals against KPI s on a periodic basis and they have the discretion to recommend other STI s over and above target amounts. The senior management team present recommendations to the full board for approval. A total of 443,548 options lapsed during the year due to a combination of the exit of employees and management not achieving KPI s in the prior financial year. Options are exercisable into an equivalent number of escrowed ordinary shares. A condition of exercising options is that the recipient is restricted from dealing in those shares during the escrow period. Details of options granted are disclosed on page 17. The table on the next page summarises the performance and vesting conditions for options that may be issued under the LTI plan, as at the date of this report. 13

14 ANNUAL REPORT 2016 Directors Report Cont d Remuneration Report (Audited) Cont d Components of Key Management Personnel Total Remuneration cont d The performance conditions required to be achieved by KMP vary depending on the responsibilities and accountabilities of each individual KMP. Series Issued Vesting Timing Vesting Conditions Issue 9 12/05/2015 Subject to achieving KPI s, options may vest over a three-year period. Issue 10 07/09/2015 Subject to achieving KPI s, options may vest over a three-year period. Issue 11 04/12/2015 Subject to vesting six months from date of issue. (i) Manage annual budget and business plans; (ii) Identify, manage and mitigate material risks of the business; (iii) Meet key deliverables of role on a consistent basis and contribute to group objectives. (iv) Achieve annual EBITDA targets at business unit and group level; (v) Continuing to be employed at vesting date. (i) Manage annual budget and business plans; (ii) Identify, manage and mitigate material risks of the business; (iii) Meet key deliverables of role on a consistent basis and contribute to group objectives. (iv) Achieve annual KPI s at business unit and group level; (v) Continuing to be employed at vesting date. (i) No escrow or vesting conditions and exercisable at 30 cents per share. Options exercised and shares issued are subject to escrow and bad leaver provisions. The practical impact of this provision is that ordinary shares do not vest until the last day of the escrow period. With Long Term Incentives (LTI), the primary objective is to reward staff and KMP in a way that aligns payment of remuneration with generating long term shareholder value. LTI option grants are made using a premium or an at market price of the shares under option as a component of the performance hurdle and in addition KMP and staff are required to meet certain length-of-service obligations. As the fixed or variable component of remuneration is not dependent on share price or dividends, there is no discussion of the relationship between the board s remuneration policy and financial performance, included in this report. Directors invite individuals to participate in the EEIP whereby they are granted options that can only be exercised subject to achieving service and vesting conditions at the end of specific periods. There is no intention to provide loans, interest free or otherwise to fund participation in such transactions, however, this is reviewed on an as needs basis. Voting and comments at the Company s 2015 Annual General Meeting (AGM) At the last AGM, the company received a yes vote of 91% on its remuneration report for the 2015 financial year. The company did not receive any specific feedback from shareholders at the last meeting relating to the nature of its remuneration practices. 14

15 Directors Report Cont d Remuneration Report (Audited) Cont d Details of Remuneration Key Management Personnel Remuneration arrangements are formalised in employment or consultancy agreements. Remuneration packages contain cash salary, commissions, other short term incentives, long service leave, superannuation and the cost of share based payments expensed for LTI s. Remuneration for each member of KMP is shown below Short Term Employee Benefits Cash Wage/fee $ Short Term Incentives Directors of Short Term Benefits Total Commissions $ / % $ Post Employment Benefits Superannuation $ Share Based Payment LTI Options $ / % Long Term Employee Benefits Termination Benefits Long service leave $ $ R Hall 45,662-45,662 4, ,000 A Moffat 68,493-68,493 6, ,000 G Pert 45,662-45,662 4, ,000 C O Brien 110, ,403-35,760 M Guthrie 37, % Total ,163-37, ,500 Sub-total 307, ,720 15,183 35, ,663 Other Key Management Personnel of the Group B Quick 241, ,693 14,885 (89,563) (30%) , ,767 G Papadopoulos 93,608-93,608 8, , ,107 S Sweeney 200, ,000 19,000 13,623 6% D Hung 187,215 66,983 23% M Johnson 165,000 1,000 1% 254,198 19,307 13,623 5% 166,000 15,770 9,123 G Murray 150, ,685 12,981 13,623 C Sims 127, ,854 12,146 9,123 5% 8% 6% ,623 3, ,420 3, , ,289 2, ,028 C Thomas 33,485-33,485 3, ,665 Sub-total 1,199,540 67, % 1,267, ,313 (30,448) 7 (2%) 9, ,628 1,519,948 $ Total 1,507,260 67,983 4% 1,575, ,496 5,312 0% 9, ,628 1,878,611 4 Includes fees paid to the directors entity in his capacity as non-executive ($45,625) and executive director ($64,778). 5 Employer was not required to make compulsory superannuation contributions as the director was resident overseas. 6 Includes monthly, quarterly and annual incentives that vested and were payable during the financial year. 7 The negative amount of share based payments represents a combination of reversal of share options and share based expense calculated under the Binomial model in respect of the value of share options issued. Refer note 7 of this report. 8 These Key Management Personnel became or were entitled to long service leave during the financial year. 15

16 Directors Report Cont d Remuneration Report (Audited) Cont d Details of Remuneration Key Management Personnel Cont d Short Term Employee Benefits Cash Wage/fee $ Short Term Incentives Short Term Benefits Total Commissions $ / % $ Post Employment Benefits Superannuation $ Share Based Payment LTI Options $ / % Long Term Employee Benefits Long service leave $ Total $ 2015 Directors of R Hall 45,662-45,662 4, ,000 A Moffat 68,493-68,493 6, ,000 G Pert 45,662-45,662 4, ,000 M Guthrie 50, , ,000 Sub-total 209, ,817 15, ,000 Other Key Management Personnel of the Group B Quick 370, ,195 35,169 19,674 M Johnson 165,000 5,500 3% 5% 8, , ,500 16,198-3, ,848 S Sweeney 96, ,250-1,165-97,415 1% S Sweeney 100, ,000 9, ,392 G Scealy 120,244 25,255 2% D Hung 182,648 61,337 23% L Cahill 109,748 78,763 38% Sub-total 1,144, , % Total 1,353, ,855 12% 145,499 13, , ,985 18,783 1,655 4, ,775 1% 188,511 17, ,995 1,314, ,848 22, , ,464,424 2% 1,524, ,031 22,494 16,142 1,689,424 2% 9 Employer not required to make compulsory superannuation contributions as director is an overseas resident. 10 Part time contractor up to 31 December 2014 and fees for his services were paid through a corporate entity during this time. 11 Became a full time employee effective from 1 Jan Includes monthly, quarterly and annual incentives that vested and were payable during the financial year. 13 Benefit calculated under the Binomial model in respect of the value of share options issued. Refer note 7 of this report. 14 These KMP became or were entitled to long service leave during the financial year. 16

17 Directors Report Cont d Remuneration Report (Audited) Cont d Details of Share Based Compensation Issued to / grant date B Quick Date Vested and Exercisable Expiry Date Exer cise Price Balance 1 July 2015 Number Granted during year Number Lapsed during the year Number Balance 30 June 2016 Number Share price at grant date Risk free interest rate % 28 Nov Oct 15 N/a Nil 250,000 - (250,000) - 29 cents 3.9% D Hung 12 May Sep 17 N/a Nil 193,548 - (64,516) 129, cents 2.3% S Sweeney 12 May Sep 17 N/a Nil 193,548 - (64,516) 129, cents 2.3% G Murray 12 May Sep 17 N/a Nil 193,548 - (64,516) 129, cents 2.3% M Johnson 7 Sep Sep 18 N/a Nil - 120, , cents 1.9% C Sims 7 Sep Sep 18 N/a Nil - 120, , cents 1.9% C O Brien 4 Dec 15 1 Mar 18 1 Sep cents - 1,000,000-1,000, cents 1.9% Total N/a Nil 830,644 1,240,000 (443,548) 15 1,627, cents 2.0% Share Based Payments 1,627,096 options can be exercised by KMP in the future subject to achieving KPI s. 1,240,000 options over ordinary shares were granted to KMP during the financial year. 443,548 options lapsed as KPI s were not fully achieved or employees left the company. When exercisable, each option is convertible into one ordinary share. Details of options over shares provided as remuneration from is set out below. Key Management Personnel Granted in this or prior periods Number Vested and Exercisable Date Exercised Number Lapsed during the term Number Forfeited during the term Number Balance at the end of the year Number Expiry Date Estimate of min / max grant value B Quick 1,000,000 - (100,000) (650,000) (250,000) - 1/10/15 162,895 D Hung 300,000 - (50,000) (250,000) - - 1/10/14 45, , (64,516) - 129,032 30/9/17 34,542 S Sweeney 240,000 - (80,000) (160,000) - - 1/10/14 32, , (64,516) - 129,032 30/9/17 34,542 G Murray 193, (64,516) - 129,032 30/9/17 34,542 M Johnson 120, ,000 30/9/18 17,565 C Sims 120, ,000 30/9/18 17,565 C O Brien 1,000,000 1 Mar ,000,000 1/3/18 35,760 Total 3,360,644 N/a (230,000) (1,253,548) (250,000) 1,627,096 N/a 415,369 $ 15 Market value of options that lapsed during the year was B Quick - $45,000, D Hung - $11,613, Sweeney - $11,613 and G Murray - $11,613, total $79,

18 ANNUAL REPORT 2016 Directors Report Cont d Remuneration Report (Audited) Cont d Details of Share Based Compensation cont d Assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date and amounts included in the remuneration tables above. Fair values at grant date is independently determined using the binomial approximation option pricing model and takes account of the exercise price, term of the option, impact of dilution share, price at grant date and expected price volatility of the underlying share, expected dividend yield and risk-free interest rate for term of the option. Model inputs for options granted up to and including the year ended 30 June 2016 included: (i) Options issued to employees were issued for nil consideration and on vesting are exercisable into an equivalent number of shares. The weighted average fair value of the options granted during the year was 29 cents. (ii) Options issued to the company s director were issued for nil consideration and on vesting are exercisable into an equivalent number of shares at a price of 30 cents per share. The weighted average fair value of the options granted was 26 cents. (iii) The theoretical exercise price of options granted in May cents, September cents and December cents. (iv) The price volatility of the company s ordinary shares used for the purposes of calculating the share based cost for the reporting period was in a range of 33-41%. (v) Risk free rate for options issued May %, September % and December %. Movement in Equity Instruments held by Key Management Personnel The number of ordinary shares and options held directly or beneficially during the financial year by each director and KMP including their personally related parties is set out below. Ordinary Shares Held at beginning of the year Number EESP Shares Issued Number Ordinary Shares Sold Number Ordinary Shares Purchased Number Held at reporting date Number R Hall 16 18,662, ,333 19,635,146 A Moffat 17 2,371, ,000 2,871,296 G Pert B Quick 446,257 - (112,923) - 333,334 S Sweeney ,000 3, ,984 D Hung 237,608 3, ,592 M Johnson 153,591 3, ,575 G Murray C Sims C Thomas C O Brien ,000 50,000 Sub total 22,351,565 11,952 (112,923) 1,522,333 23,772,927 Ordinary shares are issued as part of remuneration. 16 R Hall s interest in ordinary shares is held through Tosca Boxer Pty Ltd atf The Hall Family Trust. 17 A Moffatt s interest in ordinary shares is held individually and through the Cowoso Superannuation Fund. 18 S Sweeney s beneficial interest in ordinary shares is held through a corporate entity. 19 C O Brien s interest in ordinary shares is held through the Douglas Superannuation Fund. 18

19 Directors Report Cont d Remuneration Report (Audited) Cont d Movement in Equity Instruments held by Key Management Personnel cont d Share Options B Quick S Sweeney D Hung G Murray Held at beginning of the year Number 250, , , ,548 EEIP Options Lapsed Number (250,000) (64,516) (64,516) (64,516) EEIP Shares Issued Number Ordinary Shares Purchased Number Held at reporting date Number M Johnson C Sims C O Brien , ,000 1,000, , ,000 1,000,000 Sub total 830,644 (443,548) 1,240,000-1,627, , , ,032 Total 23,182,209 (431,596) 1,127,077 1,522,333 25,400,023 There are no other options on issue to employees or contractors. Transactions with Key Management Personnel (i) The company has a lease agreement with Infuture One Pty Ltd as trustee for Infuture One Trust for office and studio premises. The majority unit holder in the Trust is Ronald Hall, a director and major shareholder of the company. The terms and conditions of the lease are on an arms-length basis similar to those negotiable with non-related third parties. (ii) In September 2015, the company entered into a six-month agreement with a director, Colm O Brien for the supply of consulting services. The terms of the agreement were negotiated on an arms-length basis and the agreement concluded in February (iii) Profit before income tax includes the following expense resulting from transactions with directors or director related entities: Consolidated Lease payments Consulting services 65 - Total At the last Annual General Meeting, shareholders approved the grant of 1,000,000 options to a director, exercisable at 30 cents per share. 19

20 Directors Report Cont d Remuneration Report (Audited) Cont d Service Agreements Key Management Personnel Remuneration and other terms of employment for the Chief Executive Officer and other executives are formalised in service agreements. None of the Directors are under contract. Barrie Quick, Chief Executive Officer (resigned 16/10/15) - Term of Agreement was 4 years renewable from 1 December Base salary, inclusive of superannuation, was $411,444 p.a. - An annual bonus was payable for achievement of the board approved EBITDA budget. - Payment of termination benefit on early termination, other than for gross misconduct, equal to six months base salary. Employee can terminate with six months notice. George Papadopoulos, Chief Executive Officer (resigned 11/05/16) - Term of Agreement was 3.5 years renewable from 19 July Base salary, inclusive of superannuation, was $325,000 p.a. - An annual bonus was payable for achievement of the board approved EBITDA budget. - Payment of termination benefit on early termination, other than for gross misconduct, equal to one month s base salary during the probation period. Stephen Sweeney, Company Secretary and Chief Financial Officer - Term of employment is ongoing. - Base fee was $219,000 p.a. - An annual bonus is payable for achievement of the board approved EBITDA budget. - Payment of termination benefit on early termination, other than for gross misconduct, equal to three months base salary. Employee can terminate with three months notice. David Hung, Sales Director - Term of employment is ongoing. - Base salary, inclusive of superannuation was $205,000 p.a. - An annual bonus is payable for achievement of the board approved sales budget. - Commissions are payable under the contract based on achieving monthly, quarterly and annual sales targets. - Payment of termination benefit on early termination, other than for gross misconduct, equal to three month s base salary. Employee can terminate with three months notice. Mark Johnson, Group Program Director - Term of employment is ongoing. - Base salary, inclusive of superannuation, was $180,675 p.a. - A monthly bonus is payable for achievement of broadcast ratings above benchmarks. - Payment of termination benefit for early termination, other than for gross misconduct, equal to three month s base salary. Employee can terminate with three months notice. 20

21 Directors Report Cont d Remuneration Report (Audited) Cont d Service Agreements Key Management Personnel cont d Gaye Murray, General Manager, frankie press - Term of employment is ongoing. - Base salary, inclusive of superannuation, was $165,000 p.a. - An annual bonus is payable for achievement of board approved EBITDA budget. - Payment of termination benefit for early termination, other than for gross misconduct, equal to three month s base salary. Employee can terminate with three months notice. Craig Sims, General Manager, Fresh Air and Shared Services - Term of employment is ongoing. - Base salary, inclusive of superannuation, was $140,000 p.a. - Payment of termination benefit for early termination, other than for gross misconduct, equal to eight weeks base salary. Employee can terminate with eight weeks notice. Cathy Thomas, General Manager, Broadcasting - Term of employment is ongoing. - Base salary, inclusive of superannuation, was $275,000 p.a. - An annual bonus is payable for achievement of board approved EBITDA budget. - Payment of termination benefit for early termination, other than for gross misconduct, equal to one month s base salary. Employee can terminate with one months notice. The 2015 remuneration report was approved at the AGM held on 27 November End of Audited Remuneration Report Non Audit Services The company may decide to employ the auditors on assignments additional to their statutory audit duties where the auditors expertise and experience is considered important. The value of non-audit services performed by the auditor during the year was $17,000 (2015: $77,427) and related to the provision of tax advice. The Board is satisfied that the provision of these non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001, for the following reasons: (i) all non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; and (ii) none of the services undermine the general principles relating to auditor independence as set out in the Corporations Act 2001 including reviewing or auditing the auditor s own work, acting in a management or a decision making capacity, or acting as advocate, or jointly sharing economic risk and rewards. Details of fees paid (including for non-audit services) to the auditor are disclosed in note 8. 21

22 Auditor s Independence Declaration Directors Report Cont d The auditor s independence declaration as required under Section 307(c) of the Corporations Act 2001 has been received and is located on page 23. Corporate Governance Statement The Company s 2016 Corporate Governance Statement has been released as a separate document and can be located on the Company s website at /investors_current reports. Proceedings on behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of, or to intervene in proceedings to which the Company is a party, for the purposes of taking responsibility on behalf of the Company for all or part of those proceedings. Directors Interests in Contracts Directors interests in contracts are disclosed on page 19 and in note 25(c) of this report. Rounding of Amounts In accordance with ASIC Legislative Instrument 2016/191, amounts shown in the Directors report and the financial report have been rounded off to the nearest thousand dollars. Signed in accordance with a resolution of the Board of Directors made pursuant to section 298(2) of the Corporations Act On behalf of the Directors, Andrew Moffat Chairman Melbourne, 26 September

23 Tel: Fax: Level 14, 140 William St Melbourne VIC 3000 GPO Box 5099 Melbourne VIC 3001 Australia DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF PACIFIC STAR NETWORK LIMITED As lead auditor of, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of and the entities it controlled during the period. David Garvey Partner BDO East Coast Partnership Melbourne, 26 September 2016 BDO East Coast Partnership ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. 23

24 Tel: Fax: Level 14, 140 William St Melbourne VIC 3000 GPO Box 5099 Melbourne VIC 3001 Australia INDEPENDENT AUDITOR S REPORT To the members of Report on the Financial Report We have audited the accompanying financial report of, which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO East Coast Partnership ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. 24