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1 Pact Group Holdings Ltd ABN PROSPECTUS Initial Public Offering of Ordinary Shares JOINT LEAD MANAGERS

2 IMPORTANT NOTICES Offer The Offer contained in this Prospectus is an invitation to acquire fully paid ordinary shares in Pact Group Holdings Ltd (ABN ) (Offer). The Offer in Australia and New Zealand is made through this Prospectus. References to Pact include the Acquisitions The Company is currently 100% owned by Geminder Holdings. In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire, subject to Shares being allotted to successful Applicants under the Offer, interests in certain entities in which Pact, Geminder Holdings or related entities of Geminder Holdings already have an interest (the Acquisitions, see Section 9.3). Unless otherwise specified, this Prospectus is prepared as if the Acquisitions have already occurred. For example, the Investment Overview in Section 1, the Business Overview in Section 3 and the Financial Information in Section 4 describe Pact after the Acquisitions and the Financial Information represents the combined business operations of Pact Group Holdings Ltd and related entities, including the Acquisitions, for the financial year ended 30 June 2013 and forecast year ending 30 June In this Prospectus: (a) references to PGH are references to the Company s business prior to both the Acquisitions and Listing (PGH); and (b) references to Pact are references to the Company s business after both the Acquisitions and Listing (Pact); and (c) references to the Company are references to Pact Group Holdings Ltd (the Company). Lodgement and listing This Prospectus is dated 27 November 2013, and was lodged with the Australian Securities and Investments Commission (ASIC) on that date. None of ASIC, the Australian Securities Exchange (ASX) or their respective officers take any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. The Company will apply to the ASX for listing and quotation of its Shares on the ASX within seven days of the date of this Prospectus. No securities will be issued on the basis of this Prospectus any later than 13 months after the date of this Prospectus. Note to Applicants The information contained in this Prospectus is not financial product advice and does not take into account the investment objectives, financial situation or particular needs of any prospective investor. It is important that you read this Prospectus carefully and in full before deciding to invest in the Company. In particular, in considering this Prospectus, you should consider the risk factors that could affect the financial performance of the Company in light of your personal circumstances (including financial and taxation issues) and seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding to invest. Some of the key risk factors that should be considered by prospective investors are set out in Section 5. There may be risk factors in addition to these that should be considered in light of your personal circumstances. No person named in this Prospectus, nor any other person, guarantees the performance of Pact, the repayment of capital or the payment of a return on the Shares. As set out in Section 7, it is expected that the Shares will be quoted on the ASX initially on a deferred settlement basis. The Company disclaims all liability, whether in negligence or otherwise, to persons who trade Shares before receiving their holding statement. No offering where offering would be illegal This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Shares or the Offer, or to otherwise permit a public offering of Shares, in any jurisdiction outside Australia and New Zealand. The distribution of this Prospectus outside Australia and New Zealand may be restricted by law and persons who come into possession of this Prospectus outside Australia and New Zealand should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the US Securities Act) or any state securities law in the United States and may not be offered, sold, pledged or transferred except: (i) outside the United States in offshore transactions in accordance with Regulation S under the US Securities Act (Regulation S); and (ii) in the United States to persons who are reasonably believed to be qualified institutional buyers as defined in Rule 144A under the US Securities Act (Rule 144A) in reliance on an exemption from registration under the US Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another available exemption from or in a transaction not subject to the registration requirements of the US Securities Act. Prospective investors are hereby notified that sellers of the Shares may be relying on the exemption from the provisions of Section 5 of the US Securities Act provided by Rule 144A or another available exemption under the US Securities Act. In addition, until 40 days after the commencement of the Offer, an offer or sale of any of the Shares within the United States by any dealer (whether or not participating in the Offer) may violate the registration requirements of the US Securities Act if the offer or sale is made otherwise than in accordance with Rule 144A or pursuant to another available exemption from registration under the US Securities Act. Information for New Zealanders New Zealand mutual recognition This Offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act and Regulations. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings Australia) Regulations This Offer and the content of this Prospectus are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act and Regulations (Australia) set out how the Offer must be made. There are differences in how securities are regulated under Australian law. For example, the disclosure of fees for collective investment schemes is different under the Australian regime. The rights, remedies, and compensation arrangements available to New Zealand investors in Australian securities may differ from the rights, remedies, and compensation arrangements for New Zealand securities. Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to this Offer. If you need to make a complaint about this Offer, please contact the Financial Markets Authority, Wellington, New Zealand. The Australian and New Zealand regulators will work together to settle your complaint. The taxation treatment of Australian securities is not the same as for New Zealand securities. See Section 9.10 for more information regarding New Zealand tax considerations. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser. Payments are not in New Zealand dollars The Offer may involve a currency exchange risk. The currency for the Shares is not New Zealand dollars. The value of the Shares will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the Shares to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars. Securities that are able to be traded on a financial market If the Shares are able to be traded on a securities market and you wish to trade the Shares through that market, you will have to make arrangements for a participant in that market to sell the Shares on your behalf. If the securities market does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the Shares and trading may differ from securities markets that operate in New Zealand. Obtaining a copy of this Prospectus A hard copy of this Prospectus is available free of charge to any Broker Firm Applicant in Australia or New Zealand by calling the Pact Share Offer Information Line on (within Australia) or (outside Australia) from 8:30am to 5:00pm (AEDST) during the Broker Firm Offer period. This Prospectus is also available to Broker Firm Applicants in Australia or New Zealand via the Company s website ( The website will only be available to Broker Firm Applicants in New Zealand after the expiry of the Exposure Period referred to below. This Prospectus is not available to persons in jurisdictions outside Australia or New Zealand (including the United States). Exposure period The Corporations Act prohibits the Company from processing applications to subscribe for Shares under this Prospectus (Applications) in the seven day period after the date of lodgement of this Prospectus (Exposure

3 Period). This period may be extended by ASIC by up to a further seven days. The Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. The examination may result in the identification of deficiencies in this Prospectus. Applications received during the Exposure Period will not be processed until after the expiry of that period. No preference will be conferred on Applications received during the Exposure Period. Photographs and diagrams Photographs and diagrams used in this Prospectus which do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses this Prospectus or its contents or that the assets shown in them are owned by the Company. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the date of this Prospectus. Disclaimer and forward-looking statements No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company or the Directors. This Prospectus contains forward-looking statements, including the Forecast Financial Information in Section 4, which may be identified by words such as may, could, believes, estimates, expects, plans, intends, will, projects, predicts, anticipates and other similar words. These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, at the date of this Prospectus, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the Directors and management. The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. The Company has no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law. These forward-looking statements are subject to various risk factors that could cause the Company s actual results to differ materially from the results expressed or anticipated in these statements. These risk factors are set out in Section 5. Statements of past performance This Prospectus includes information regarding the past performance of the Company. Given this, and the inherent uncertain nature of forecasts, investors should be aware that past performance should not be relied upon as being indicative of future performance. Financial information presentation The basis of preparation and presentation of the Financial Information in this Prospectus is set out in Section 4. The Financial Information should be read in conjunction with, and is qualified by reference to, the information contained in Section 4 including, in the case of the Forecast Financial Information, the general assumptions and specific assumptions, the sensitivity analysis, the risk factors in Section 5 and the Additional Financial Information in Section 10. Financial amounts Money as expressed in this Prospectus is in Australian dollars unless otherwise indicated. Glossary Certain terms and abbreviations used in this Prospectus have defined meanings which are explained in the Glossary. Privacy By filling out the Application Form to apply for Shares, you are providing personal information to the Company through the Company s service provider, Computershare Investor Services Pty Limited (ABN ) (Share Registry), which is contracted by the Company to manage Applications. The Company, and the Share Registry on its behalf, may collect, hold and use that personal information in order to process your Application, service your needs as a Shareholder, provide facilities and services that you request and carry out appropriate administration. If you do not provide the information requested in the Application Form, the Company and the Share Registry may not be able to process or accept your Application. Your personal information may also be used from time to time to inform you about other products and services offered by the Company, which it considers may be of interest to you. Your personal information may also be provided to the Company s members, agents and service providers on the basis that they deal with such information in accordance with the Company s privacy policy. The members, agents and service providers of the Company may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law. The types of agents and service providers that may be provided with your personal information and the circumstances in which your personal information may be shared are: the Share Registry for ongoing administration of the register of members; printers and other companies for the purpose of preparation and distribution of statements and for handling mail; market research companies for the purpose of analysing the Shareholder base and for product development and planning; and legal and accounting firms, auditors, contractors, consultants and other advisers for the purpose of administering, and advising on, the Shares and for associated actions. If an Applicant becomes a Shareholder, the Corporations Act requires the Company to include information about the Shareholder (including name, address and details of the Shares held) in its public register of members. If you do not provide all the information requested, your Application Form may not be able to be processed. The information contained in the Company s register of members must remain there even if that person ceases to be a Shareholder. Information contained in the Company s register of members is also used to facilitate dividend payments and corporate communications (including financial results, annual reports and other information that the Company may wish to communicate to its Shareholders) and compliance by the Company with legal and regulatory requirements. An Applicant has a right to gain access to the information that the Company and the Share Registry hold about that person, subject to certain exemptions under law. A fee may be charged for access. Access requests must be made in writing or by telephone call to the Company s registered office or the Share Registry s office, details of which are disclosed in the Corporate Directory on the inside back cover of this Prospectus. Applicants can obtain a copy of the Company s privacy policy by visiting the Company s website ( You may request access to your personal information held by or on behalf of the Company. You may be required to pay a reasonable charge to the Share Registry in order to access your personal information. You can request access to your personal information in writing to the Share Registry as follows: privacy@computershare.com.au. Address: Yarra Falls, 452 Johnston Street, Abbotsford, VIC, Questions If you have any questions about how to apply for Shares, call the Pact Share Offer Information Line on (within Australia) or (outside Australia) from 8:30am to 5:00pm (AEDST) Monday to Friday during the Broker Firm Offer period. If you have any questions about whether to invest in the Company you should seek professional advice from your accountant, financial adviser, stockbroker, lawyer or other professional adviser. PACT GROUP PROSPECTUS 01

4 CONTENTS CHAIRMAN S LETTER 03 KEY OFFER INFORMATION 04 1 INVESTMENT OVERVIEW 05 2 INDUSTRY OVERVIEW 22 3 BUSINESS OVERVIEW 32 4 FINANCIAL INFORMATION 46 5 KEY RISKS 76 6 KEY PEOPLE, INTERESTS, BENEFITS 89 7 DETAILS OF THE OFFER INVESTIGATING ACCOUNTANT S REPORT ADDITIONAL INFORMATION ADDITIONAL FINANCIAL INFORMATION GLOSSARY CORPORATE DIRECTORY

5 CHAIRMAN S LETTER November 2013 Dear investor, On behalf of the Directors, it gives me great pleasure to invite you to join me as a shareholder of Pact Group Holdings Ltd, a dynamic and robust manufacturer of a wide range of packaging products with exciting growth prospects. Pact began its journey in 2002 with 15 manufacturing plants, generating sales revenue of $223 million and EBITDA of $31 million in FY2002. On Listing, Pact will operate 62 manufacturing plants with forecast FY2014 pro forma sales revenue of $1,197 million and pro forma EBITDA of $202 million. Pact has achieved this growth through a relentless focus on operational efficiency, innovation and environmental sustainability combined with strategic and disciplined acquisitions. The business has strengthened its manufacturing capability, broadened its geographic presence and diversified its customer base through the integration of 34 acquisitions over the past 11 years. Ongoing investment in innovation and partnerships with technology leaders will ensure we continue to meet customer demands for more advanced, differentiated packaging solutions that satisfy high environmental standards. Pact expects that these investments, combined with an attractive outlook for the global rigid plastics packaging market, will support its continued growth. Pact is the largest supplier and market leader in rigid plastics packaging in Australia and New Zealand. Pact also has an emerging presence in Asia, which is expected to contribute a growing proportion of sales revenue and earnings as the Company seeks to capitalise from this high growth region. The Offer will enable Pact s skilled and experienced senior management, the same team that founded the business with me, to further the Asian growth strategy by replicating Pact s proven history of success through organic growth, acquisitions and business integration. The past and future success of Pact is driven by the collective efforts of all members of the Pact team, and I would like to acknowledge their ongoing dedication and commitment. I would also like to acknowledge and thank all of Pact s customers, for their ongoing support and personal friendship over many years. Pact remains deeply committed to the success of its customers and will continue to drive Pact s first and most important value, namely to walk in our customers shoes to serve them better. The Offer will raise approximately $650 million. The proceeds received in connection with the Offer will be used to repay debt, repay a promissory note owed to Geminder Holdings and part fund business acquisitions which will occur in connection with the Offer. On completion, the Geminder family will retain an approximate 40% shareholding in Pact. A dividend payout ratio target of 66.9% of pro forma forecast FY2014 NPAT will provide an indicative annual pro forma FY2014 dividend yield of 5.0% supported by Pact s strong cash flow profile. Pact is subject to a range of risks which include the loss of key customers, material contracts or revenue; a delay or inability to enter new material contracts; and, a decrease in demand from the industries to which we supply product. These risks, and others, are further discussed in Section 5 of this Prospectus. This Prospectus contains detailed information on Pact. I encourage you to read it carefully, and in its entirety, before making your investment decision. On behalf of the Directors, I commend the Offer to you and look forward to welcoming you as a shareholder. Yours sincerely, Raphael Geminder Non-Executive Chairman PACT GROUP PROSPECTUS 03

6 KEY OFFER INFORMATION IMPORTANT DATES Prospectus lodgement date Wednesday, 27 November 2013 Broker Firm Offer opens Thursday, 5 December 2013 Broker Firm Offer closes Friday, 13 December 2013 Allotment of Shares under the Offer and completion of the Acquisitions Tuesday, 17 December 2013 Expected commencement of trading of Shares on the ASX on a deferred settlement basis Tuesday, 17 December 2013 Expected despatch of holding statements Wednesday, 18 December 2013 Expected commencement of trading of Shares on the ASX on a normal settlement basis Thursday, 19 December 2013 These dates are indicative only and may change. The Company and the Joint Lead Managers reserve the right to amend any and all of the above dates without notice subject to the ASX Listing Rules and the Corporations Act (including to close the Offer early, to extend the closing date, to accept late Applications or to cancel the Offer before settlement). If the Offer is cancelled before the issue of Shares, then all Application Monies will be refunded in full (without interest) as soon as practicable in accordance with the requirements of the Corporations Act. Investors are encouraged to submit their Applications as soon as possible after the Offer opens. KEY OFFER STATISTICS Offer Price per Share Total number of Shares offered under the Offer Total cash proceeds received under the Offer Number of Shares held by Geminder Holdings at Listing 1 Total number of Shares on issue on Listing Market capitalisation at the Offer Price 2 Pro forma Net Debt 3 Enterprise value at the Offer Price 4 $3.80 per Share million $648.8 million million million $1,117.6 million $603.0 million $1,720.6 million Enterprise value/pro forma consolidated FY2014 forecast EBITDA 5 (times) 8.5x Enterprise value/pro forma consolidated FY2014 forecast EBIT 5 (times) 11.5x Offer Price/pro forma consolidated FY2014 forecast NPAT per Share 5, 6 (times) 13.4x Annualised pro forma forecast FY2014 dividend yield at the Offer Price 5, 7 5.0% 1 This consists of 113,764,210 Shares held by Geminder Holdings and 3,272,336 Shares to be held by Salvage (an entity associated with Geminder Holdings). These Shares will be subject to voluntary escrow arrangements. Please refer to Section for further details. 2 Market capitalisation at the Offer Price is defined as the Offer Price multiplied by the total number of Shares at Listing. 3 Net Debt is calculated as current and non-current interest bearing liabilities including finance leases less cash and cash equivalents. 4 Enterprise value at the Offer Price is defined as market capitalisation at the Offer Price of $1,117.6 million, plus pro forma Net Debt of $603.0 million as at 30 June 2013, adjusted to reflect the impact of the Offer and the Acquisitions as set out in Section The Forecast Financial Information is based on assumptions and accounting policies set out in Section 4 and Section 10, and is subject to the key risks set out in Section 5. There is no guarantee that forecasts will be achieved. Certain financial information included in this Prospectus is described as pro forma for the reasons described in Section 4. Forecasts have been included in this document for FY2014 (being Pact s current financial year). 6 This ratio is commonly referred to as a price to earnings, or PE, ratio. A PE ratio is a company s share price divided by its earnings per share. 7 For the period from Listing until 30 June Indicative dividend yield is calculated as the implied dividend per Share based on the target dividend payout ratio of 66.9% and pro forma forecast 12 months FY2014 NPAT, divided by the Offer Price. It is the Board s current intention to pay a final dividend for FY2014 in respect of the 6 months ending June However, the payment of a dividend by the Company is at the discretion of the Directors and will be a function of a number of factors the Directors may consider relevant. No assurances can be given by any person, including the Directors, about the payment of any dividend and the level of franking on any such dividend. For more information on the Company s dividend policy, see Section

7 1. INVESTMENT OVERVIEW

8 1. INVESTMENT OVERVIEW 1.1 INTRODUCTION 1 Topic What is Pact? Summary Pact is a dynamic and robust manufacturer of a wide range of packaging products with operations in Australia, New Zealand and Asia. Pact primarily converts plastic resin and steel into rigid plastics and metals packaging and related products for customers in the food, dairy, beverage, personal care, other household consumables, chemicals, agricultural, industrial and other sectors. Since its inception in 2002, Pact has been transformed from a business with 15 manufacturing plants and $223 million of sales revenue in FY2002 to a leader in the packaging industry with 62 manufacturing plants and pro forma forecast sales revenue of $1,197 million in FY2014. This transformation has been led by the founding and existing management team, who continue to execute a proven growth strategy. For more information Section 3.1 What is the Offer? The Offer is an initial public offering of million Shares in the Company. The Shares being offered will represent 58.1% of the total shares in the Company on issue following Listing. Section 7.1 Why is the Offer being conducted? The purpose of the Offer is to: achieve a listing on the ASX to broaden the Company s shareholder base and provide a liquid market for its Shares; provide the Company with an appropriate capital structure with financial flexibility to pursue future growth opportunities; consolidate certain interests in other packaging assets currently held by Pact, Geminder Holdings or related entities of Geminder Holdings on Listing 2 ; improve the Company s future access to capital markets; and provide an opportunity for Geminder Holdings to realise a portion of its investment whilst maintaining a significant ongoing interest in Pact. Section In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire interests in certain entities in which Pact, Geminder Holdings, or related entities of Geminder Holdings, already hold an interest (referred to as the Acquisitions, see Section 9.3). The purpose of the Acquisitions is to consolidate an existing investment in Cinqplast to 100%, expand Pact s geographic reach in Asia as part of its growth strategy and consolidate certain interests in packaging assets held by entities controlled by Raphael Geminder into Pact as part of the Offer. The Acquisitions are subject to Shares being allotted to successful Applicants under the Offer. This Investment Overview has been prepared as if these Acquisitions have already occurred. 2 Refer to Section 9.3 for further details in relation to the Acquisitions. 06

9 1.2 KEY FEATURES OF PACT Topic What sectors does Pact compete in? Summary Pact s long established businesses primarily focus on the rigid plastics and industrial metals packaging sectors. Pact is the largest supplier of rigid plastics packaging in Australia and New Zealand with an emerging presence in the rigid plastics packaging market in Asia (presently in China, the Philippines and Thailand). Sales of rigid plastics products represents approximately 84% of Pact s pro forma forecast FY2014 sales revenue. Pact is also a leader in industrial metals packaging in Australia and New Zealand. The majority of Pact s sales revenue is generated through the sale of rigid plastics packaging and related products to the consumer sector with the balance derived from the industrial packaging and non-packaging sectors. Rigid plastics is forecast to be the fastest growing segment of the global packaging market, with a demand CAGR of 5.3% from In Australia and New Zealand, rigid plastics demand is expected to grow at 4.0% CAGR 4 over the same period. Key products within the rigid plastics segment include containers, tubes, trays, bottles and bottle/jar closures. The metals packaging sector supplies a range of packaging solutions made from steel, tinplate and aluminium. Pact competes only in the Australia and New Zealand metals (non aluminium) packaging sector for industrial products which accounts for approximately 9% of Pact s pro forma forecast FY2014 sales revenue. For more information Section 2 How does Pact generate income and what are Pact s key costs? Pact manufactures a wide range of packaging products for sale to customers in the food, dairy, beverage, personal care, other household consumables, chemicals, agricultural, industrial and other sectors. These products include yoghurt, cream and ice-cream containers, milk and beverage bottles, margarine tubs, food jars, meat and bakery trays, plastic cubes, tinplate and plastic pails, plastic tubes and plastic cartridges, plastic bottle caps and closures, steel drums, reusable materials handling products, plastic crates and customised products for the consumer and industrial sectors. Pact also provides a range of sustainability, recycling and environmental services to assist customers in reducing the environmental impact of their product packaging and related processes. Pact s key costs include: operating costs of plastic resin and steel, labour, energy and freight; and fixed capital costs such as investment in machines, moulds and other manufacturing equipment in order to manufacture the finished product. Section 3 Section 4 Section 10 3 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. Note: All percentage figures quoted from Smithers Pira are in real terms. 4 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. PACT GROUP PROSPECTUS 07

10 1. INVESTMENT OVERVIEW (continued) Topic Who are Pact s customers? Summary Pact has established long-term relationships with a wide range of blue chip customers across defensive end markets such as food, dairy, beverages and other household consumables. The majority of Pact s customers are well known household brands that are used in everyday life. Some of Pact s long-term blue chip customers include BP, Bulla, Caltex, Coles, Dulux, Fonterra, Foodstuffs, Goodman Fielder, Goulburn Valley, Heinz, Lion, Murray Goulburn, Nufarm, PPG Industries, Royal Dutch Shell, Schweppes, Unilever, Wattyl and Woolworths. For more information Section PACT S GROWTH STRATEGY Pact s growth strategy centres on the following key initiatives: Strategy Summary For more information Innovation and technology Increasing sales to new and existing customers Lower cost production Further acquisitions Strong product and process innovation focus: Allows for increased customer substitution of other packaging substrates into rigid plastics. Enhances Pact s existing product designs and manufacturing processes. Increased focus on coordinated customer sales management and cross selling initiatives designed to maximise the breadth of Pact s product and service offering available to new and existing customers. Diverse product range, scale and sophisticated technologies allowing Pact to partner with new and existing customers to deliver packaging solutions across multiple products and substrates in rigid plastics and metals forms. Relentless pursuit of lower cost manufacturing. Scale of operations in the Australian and New Zealand markets enables procurement and manufacturing efficiencies. Proven history of improving its performance by lowering costs, primarily achieved by driving efficiencies across the business. Continued strengthening of Pact s low cost position through: an efficient corporate structure; leveraging economies of scale; maximising efficiencies and minimising raw materials costs from centralised procurement in Singapore; investing in technologies to improve efficiency; and optimising the manufacturing footprint and locating Pact s manufacturing plants strategically close to customers. Continued value-adding acquisitions allow Pact to expand its scale, product diversity and geographic reach in select Asian markets. Including the exclusive opportunity to negotiate in respect of the acquisition of Dynapack 5, the leading supplier of rigid plastics packaging and related products and services in Indonesia. Pact also continues to focus on identifying and executing new acquisition opportunities in Australia and New Zealand in rigid plastics and other packaging substrates. Section Section 3.7 Section Section 3.4 Section Section Section Pact has entered into a memorandum of understanding with the shareholders of Dynapack which gives Pact the exclusive opportunity to negotiate in respect of the acquisition of Dynapack at any time up to 12 months after Listing. 08

11 Strategy Summary For more information Further acquisitions Continued New acquisitions provide the opportunity for further growth through realisation of integration benefits, including: applying Pact s procurement scale strategy and high quality business process improvement initiatives; applying Pact s sophisticated product design capabilities; complementing Pact s existing business reorganisation program; and broadening Pact s strong relationships with existing global customers across new products, technologies and markets. Section Section KEY STRENGTHS Pact believes that it has the following key strengths: Topic Summary For more information #1 market position in rigid plastics packaging in Australia and New Zealand with a growing presence in Asia Pact is the largest supplier of rigid plastics packaging in Australia and New Zealand, driven by the successful integration of 34 acquisitions over the past 11 years. Pact has 62 manufacturing plants across Australia, New Zealand and Asia, supported by a regional procurement office in Singapore. 39 plants located in Australia and 18 plants located in New Zealand. 5 plants located in the higher growth markets of Asia. Pact produces more than 8 billion product units, across 22,000 Stock Keeping Units (SKUs), supplied to approximately 4,200 customers annually. Approximately 84% of Pact s pro forma forecast FY2014 sales revenue is expected to be generated from sales of rigid plastics packaging products. Section Emerging presence in higher growth Asian nations leveraging an established footprint Pact has an emerging presence in Asia which is expected to contribute a growing proportion of Pact s sales revenue and earnings as it seeks to capitalise on the high growth and rapidly rising consumer demand in this region. In addition to high underlying GDP growth rates, Pact expects strong growth in Asia from a rapidly expanding middle class resulting in increasing Mass Grocery Retailing (MGR) 6 penetration and demand for consumer products. Forecast growth in MGR and real GDP in the Asian markets in which Pact currently operates are as follows: Country MGR CAGR 7 ( F) GDP CAGR 8 ( F) China 8.2% 8.4% The Philippines 9.1% 5.4% Thailand 8.0% 4.4% Section Mass Grocery Retailing is defined by Business Monitor International Limited as organised retail, performed by companies with a network of modern grocery retail stores and modern distribution networks (such as supermarkets, hypermarkets and convenience stores). 7 Business Monitor International, China Food & Drink Report, Q4 2013, Philippines Food & Drink Report 2013, Thailand Food & Drink Report, Q Note: All MGR figures quoted in nominal terms. 8 International Monetary Fund, World Economic Outlook Database. Note: All GDP figures are quoted in real terms. PACT GROUP PROSPECTUS 09

12 1. INVESTMENT OVERVIEW (continued) Topic Summary For more information Strong track record in value adding acquisitions Pact has successfully integrated 34 acquisitions over the past 11 years. These acquisitions have enabled Pact to broaden its product range, customer base, geographical reach and manufacturing footprint. These past acquisitions have delivered substantial synergies through realisation of rationalisation benefits and implementing Pact s best practice operating standards, for example; In 2010 Pact acquired a substantial milk and beverage packaging manufacturer. Pact s assessment suggested that the acquisition had significant opportunities for improvement when integrated with Pact s international platform. Pact achieved its initial acquisition targets within a short period of time by undertaking back office changes, implementing its standardised SAP approach, undertaking head office restructuring and site consolidation. Pact is now utilising its Inpact innovation team to assist in delivering the medium term growth strategy for the business focused on product innovation. Significant scope exists for Pact to continue to execute its acquisitive growth strategy, assisted by the substantial size of the packaging market not currently addressed by Pact in its present geographies: Region Australia and New Zealand Packaging market size (revenue) 9 Rigid plastics market size (revenue) 10 Pact pro forma forecast sales revenue FY2014 US$14.1bn US$3.0bn $1,126.5m Asia US$279.3bn US$57.6bn $70.8m Pact has a strong pipeline of identified acquisition opportunities in existing and new packaging products, services and geographies. Pact is presently in active engagement with a number of potential targets, including Dynapack 11. In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire interests in certain entities in which Pact, Geminder Holdings, or related entities of Geminder Holdings, already hold an interest (see Section 9.3). Section Section 3.8 Section 9.3 Highly defensive end markets resulting in a robust earnings profile Approximately 68% of Pact s FY2013 pro forma sales revenue was derived from the food, dairy and beverage, health and personal care and other household consumables sectors which have low volatility in annual customer demand. Product and sector diversity supports earnings stability across Pact s other end markets including chemical, agricultural and construction, many of which have a strong emphasis on consumer end uses. Section Section packaging market size by revenue. Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov rigid plastics market size by revenue. Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 11 Pact has entered into a memorandum of understanding with the shareholders of Dynapack which gives Pact the exclusive opportunity to negotiate in respect of the acquisition of Dynapack at any time up to 12 months after Listing. 10

13 Topic Summary For more information Attractive end markets and industry fundamentals for Pact s key products Rigid plastics packaging is expected to be the fastest growing segment of the packaging market globally, with a demand CAGR of 5.3% over the period. Asia in particular is expected to experience high growth over this period with a demand CAGR of 8.4% 13. Substitution to rigid plastics packaging away from glass, flexible plastics and metals is expected to continue. Section Section Diversified, blue chip, customer base with long-term relationships Pact s top 20 customers represented approximately 42% of FY2013 pro forma sales revenue, with no one customer contributing more than 10%. Some of Pact s long-term blue chip customers include BP, Bulla, Caltex, Coles, Dulux, Fonterra, Foodstuffs, Goodman Fielder, Goulburn Valley, Heinz, Lion, Murray Goulburn, Nufarm, PPG Industries, Royal Dutch Shell, Schweppes, Unilever, Wattyl and Woolworths. Pact continues to successfully provide outstanding service to its customer base, demonstrated by the ability to maintain long-term relationships with its top 10 customers that span in excess of 10 years on average. Section 3.4 Focus on comprehensive customer solutions through innovation supported by investment in R&D Pact has an innovation focus, with a proven track record of creating new products using its in-house team to meet the specific product requirements of customers. Pact has also developed enviable technology alliances which allow it to offer its customers some of the latest global technologies. Extensive access to an intellectual property portfolio and manufacturing know-how, combined with global technology licences provide Pact with a competitive advantage and point of differentiation over its competitors. Currently maintains approximately 400 registered designs, 300 registered patents and patent applications and 300 registered trademarks. Enhances speed to market through providing Pact with proven R&D undertaken globally by licensors. Provides Pact with an extensive understanding of materials technology development. Section 3.7 Strong financial performance supported by solid growth Pact has experienced: strong growth in sales revenue from $223 million in FY2002 to pro forma forecast $1,197 million in FY2014 representing a CAGR of 16.5%; and growth in EBITDA from approximately $31 million in FY2002 to pro forma forecast $202 million in FY2014, representing a CAGR of 18.6%. This growth is attributable to acquisitions, organic growth, innovation, relentless initiatives in cost control, rationalisation of underperforming manufacturing plants and increased substitution into the rigid plastics market. Section 4 12 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 13 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. PACT GROUP PROSPECTUS 11

14 1. INVESTMENT OVERVIEW (continued) Topic Summary For more information Demonstrated track record of strong free cash flow generation Pact has a strong cash generating business converting 75-85% of pro forma forecast FY2014 EBITDA into cash flow (EBITDA less capital expenditure). Pact employs a disciplined capital expenditure and working capital focus supported by maintenance of a low cost production platform. Annual capital expenditure has historically been approximately 20% of EBITDA in Australia and New Zealand (FY2011 FY2013). Pact has a comparative procurement scale in the Australian and New Zealand markets with centralised Asian procurement enabling access to lower cost international raw materials suppliers. Section 4 Experienced management team and Board of Directors supported by a large workforce Non-Executive Chairman, CEO and CFO have been with Pact since inception in 2002 and have on average more than 25 years of industry experience. All of Pact s senior line managers have considerable experience within the industry and, in some cases, a strong history with Pact s long established constituent businesses. Board members bring more than 40 years combined directorship experience with some of Australia s leading ASX listed companies. Large workforce of approximately 3,100 employees in Australia and New Zealand and approximately 400 in Asia. Section 3.13 Section 6.1 Section KEY RISKS Topic Competitive position may deteriorate Summary The sectors in which Pact operates are subject to vigorous competition, based on factors including price, service, product selection, quality and innovation. Pact s competitive position may deteriorate as a result of factors including actions by existing competitors, inability to compete with associated interests, the entry of new competitors or imports, or a failure by Pact to continue to position itself successfully to meet changing market conditions, customer demands and technology. For more information Section Relationships with key customers may deteriorate or customer demand may reduce Pact s top 20 customers represented approximately 42% of pro forma sales revenue for FY2013. The risks associated with Pact s key customer relationships include: where no binding written contract exists, these arrangements can be terminated or varied by the customer without incurring significant penalties; in some arrangements, even where there is a binding written contract, the customer may be under no obligation to continue to purchase, or to purchase a particular volume of, Pact s products; and key customer relationships may be lost or impaired, contracts renewed on less favourable terms, or key customers may cease or reduce their operations either temporarily or permanently. Section

15 Topic Summary For more information Activity in key industry sectors may decline or consumer preferences may change Demand for Pact s products is impacted by factors including climatic conditions, seasonality of foods, increased focus on the sale of private label products, unpredictable changes in consumer preferences, the volume of products exported in drums and barrels by customers in the industrial sector, the level of activity in the housing and commercial building sectors and national and international economic conditions. Section Pact may be exposed to risks relating to strategic acquisitions and the Acquisitions In addition to the Acquisitions, in the future Pact intends to pursue strategic acquisitions of businesses that complement its existing business. The risks associated with strategic acquisitions (including the Acquisitions) by Pact include: legal restrictions or regulatory intervention may limit the ability of Pact to complete such acquisitions in a timely manner; the consideration payable may consist of new Shares, in which case Pact shareholders may be diluted; strategic acquisitions (including the Acquisitions) may result in Pact incurring loss, debt and unknown contingent liabilities, being or becoming liable for unforseen costs or incurring damage to its reputation or being unable to realise the anticipated benefits from the acquisition (for which it cannot recover from the seller); higher integration costs than anticipated or an inability to integrate the acquired business as anticipated; failure to achieve expected synergies and costs savings; customers of acquired companies may not be retained post acquisition completion; and Pact has entered into a call option and leaseback arrangement with Geminder Holdings under which, at any time prior to expiry of the option on 20 December 2016, Geminder Holdings may acquire the China Premises at 30 June 2013 book value (which may be less than market value) provided the China Premise is leased back to Pact on arm s length commercial terms (including as to rent). Pact will be liable for a portion of the taxes and duties assessed at market value. Geminder Holdings indemnifies Pact in respect of any taxes and duties assessed on an amount in excess of 30 June 2013 book value. Section Pact may face potential liability for compensation claims Pact s customers often seek to include compensation or indemnity regimes under which Pact is required to compensate the customer if Pact s products fail to comply with specified standards, warranties and delivery requirements. Pact is exposed to the risk of product liability and product recall claims if any of Pact s products are alleged to have resulted in personal injury or property damage based, for example, on alleged product defects. While Pact maintains product liability insurance, this may not be adequate to cover losses related to product liability claims brought against Pact. Section PACT GROUP PROSPECTUS 13

16 1. INVESTMENT OVERVIEW (continued) Topic Summary For more information Relationships with key suppliers may deteriorate and the cost and availability of raw materials may fluctuate Risks associated with Pact s key procurement relationships include: the availability of raw materials; the price of raw materials may be subject to material changes in worldwide pricing levels; input costs such as freight and electricity may be inconsistent or prices may increase; and while a number of customer contracts contain a price review mechanism allowing product cost to be adjusted for the cost of raw materials, there is a risk that customers will seek to renegotiate these provisions during the term of the existing contracts or on renewal. Key supplier relationships may be lost or impaired, contracts renewed on less favourable terms or key suppliers may cease or reduce their operations. Section Adverse incidents resulting in serious injury or damage to property or people may occur Pact s operations involve the use of heavy machinery and hazardous materials, with resulting risk to both property and personnel. An incident may occur that results in serious injury or death, damage to property, contamination of the environment or business interruption. Workplace injuries may result in operational or industrial stoppages, workers compensation claims and potential occupational health and safety prosecutions. Failure by Pact to safely conduct its operations could result in fines, penalties and compensation for damages as well as the associated reputational damage. Section Adverse movements in exchange rates may occur Pact s financial reports are prepared in Australian dollars. However, a substantial proportion of Pact s sales revenue, expenditures and cashflows are generated in, and assets and liabilities are denominated in, New Zealand dollars. Pact is also exposed to a range of other currencies. Any depreciation of the New Zealand dollar against the Australian dollar or other adverse exchange rate fluctuations or volatility would have an adverse effect on Pact s future financial performance and position. Pact also sources a significant proportion of raw materials internationally, particularly in US dollars. A material appreciation in the value of the US dollar against the Australian dollar would have an adverse effect on Pact s future financial performance. Section Loss of key personnel may occur Pact s success depends, to a significant extent, on the ability and performance of its key personnel, in particular the senior management team discussed in Section 6. Key individuals within Pact have extensive experience in the Australian and New Zealand packaging industry and in Pact s business. Loss of key personnel, sustained underperformance by key personnel or an inability to recruit or retain suitable replacement or additional personnel may adversely affect Pact s future financial performance. Section

17 Topic Summary For more information Reputational damage may occur or brand names may diminish in value The reputation of Pact could be adversely impacted by a number of factors including failure to provide customers with the quality of service they expect, product liability claims, disputes or litigation with third parties such as customers, landlords, employees or suppliers, or adverse media coverage. Pact operates its business under a number of brand names which could also decline in value as a result of these factors. Section Relationships with key intellectual property licensors and technology partners may deteriorate or may be subject to challenge The risks associated with the use of intellectual property and technology owned or licensed by Pact include: challenges by third parties of Pact s right to use its intellectual property or technology, or the right of a key intellectual property licensor or technology partner to use the license or technology; and key intellectual property licensor and technology partner relationships may be lost or impaired, Pact may fail to meet minimum usage requirements underlying licences, Pact may fail to renew key intellectual property and technology licences on terms which are no less favourable to Pact if at all or key intellectual property licensor and technology partners may cease or reduce their operations. Section EXPERIENCE AND BACKGROUND OF THE DIRECTORS AND MANAGEMENT Pact is supported by a leadership team with extensive industry experience and focus on driving operational excellence across all facets of the business. Founded by Raphael Geminder (Non-Executive Chairman) in 2002, Pact has been led by Brian Cridland (Chief Executive Officer) and Darren Brown (Chief Financial Officer) since its inception. Pact s Non-Executive Chairman, CEO and CFO have on average approximately 25 years of industry experience, including 17 years of experience with Pact s underlying businesses. The depth of industry experience within the management team has contributed towards Pact s ongoing success. Topic Name Experience For more information Who is on the Board of Pact? RAPHAEL GEMINDER (Non-Executive Chairman) Raphael founded Pact in 2002 and has been instrumental in transforming Pact into what it is today. Prior to founding Pact, Raphael was the co-founder and Chairman of Visy Recycling, growing it into the largest recycling company in Australia. Section 6.1 BRIAN CRIDLAND (Executive Director and CEO) Brian has been with Pact since inception in 2002 and has experience in the manufacturing industry spanning 41 years. He previously held senior roles including General Manager of Visypak, Managing Director of Rexel Australia, Managing Director of GEC Australia, General Manager of Rigid Packaging Southcorp. PACT GROUP PROSPECTUS 15

18 1. INVESTMENT OVERVIEW (continued) Topic Name Experience For more information Who is on the Board of Pact? Continued LYNDSEY CATTERMOLE AM (Independent Non-Executive Director) Lyndsey founded Aspect Computing Pty Limited, the largest Australian software and services company, going on to be a major force in Australian ICT with 1,300 employees. Lyndsey is currently a Non-Executive Director of Treasury Wine Estates Limited and Tatts Group Limited and holds several other directorships including the Victorian Major Events Company and Melbourne Rebels Rugby Union Limited. Section 6.1 ANTHONY (TONY) G. HODGSON AM (Independent Non-Executive Director) Tony was the co-founder and former Senior Partner of the chartered accounting firm Ferrier Hodgson, from which he retired in 2000 after 24 years. Tony is currently a Member of the Advisory Council of J.P. Morgan and Deputy Chairman and Chair of the Audit & Risk Committee at Racing NSW. PETER MARGIN (Independent Non-Executive Director) Peter has many years of leadership experience in major Australian and international food companies. His most recent role was Chief Executive Officer of ASX listed company Goodman Fielder Limited and before that was Chief Executive Officer and Chief Operating Officer of National Foods Limited. Peter is currently a Non-Executive Director of ASX listed companies Bega Cheese Limited, PMP Limited and Nufarm Limited and NSX listed Ricegrowers Limited. Who is the leadership team of Pact and what is their expertise? BRIAN CRIDLAND (Chief Executive Officer) DARREN BROWN (Chief Financial Officer) As above Section 6.2 Darren has been Pact s CFO since inception in 2002 and has worked in Pact s underlying businesses since Darren is responsible for Pact s financial management which includes treasury management, financial regulatory compliance and internal audit. 16

19 1.7 SIGNIFICANT INTERESTS OF KEY PEOPLE Topic Summary For more information Who is the Existing Shareholder? The Existing Shareholder is Geminder Holdings, an entity controlled by Raphael Geminder, the Non-Executive Chairman. Geminder Holdings is an investment vehicle ultimately owned by the Geminder family. Section What are the Existing Shareholder s interests in the Offer and what significant benefits are payable to them? On Listing, Geminder Holdings will hold 117,036,546 Shares 14, which will equate to 39.8% of the total issued capital of Pact. These Shares will comprise the Shares retained by Geminder Holdings and the Acquisition Shares received by Salvage, being an entity associated with Geminder Holdings. All Shares in which Geminder Holdings will have an interest on Listing, including the Acquisition Shares, will be subject to voluntary escrow arrangements. Geminder Holdings currently holds a Promissory Note issued by the Company at the time the Company became the holding company of Pact Group Industries (ANZ) Pty Ltd. Geminder Holdings will receive $564.9 million out of the proceeds of the Offer in full satisfaction of the Promissory Note. Section 6.3 Section 6.4 Section 9.2 Section On Listing, Geminder Holdings and its associated entities will be party to a number of related party arrangements with Pact, including supply agreements, property leases, property acquisition options and leaseback arrangements with Pact and support services arrangements. What significant benefits are payable to Directors and the other persons connected with the Offer and what significant interests do they hold? Key people Non-Executive Chairman (Raphael Geminder) Brian Cridland (Chief Executive Officer) Non-Executive Directors (excluding the Non-Executive Chairman) Interests or benefits In his personal capacity as Non-Executive Chairman, Raphael will not be paid any Director fees. In his capacity as the controller of Geminder Holdings and other associated entities, Raphael will receive the benefits as outlined in the topic above. Remuneration and customary performance incentives. Directors fees. Section 6.3 Advisers and other service providers Fees for services. 14 This consists of 113,764,210 Shares held by Geminder Holdings and 3,272,336 Shares to be held by Salvage (an entity associated with Geminder Holdings). PACT GROUP PROSPECTUS 17

20 1. INVESTMENT OVERVIEW (continued) 1.8 KEY FINANCIAL METRICS AND DIVIDENDS Topic Summary For more information What is the key financial information? (Year ended 30 June) Pro forma historical $ millions PGH FY2011 PGH FY2012 PGH FY2013 Pact FY2013 Pro forma Statutory forecast forecast Pact FY2014 Pact FY2014 Section 4.3 Sales revenue , , , ,151.6 EBITDA EBIT NPAT EPS (cents) A reconciliation of consolidated statutory and pro forma forecast FY2014 statement of income is provided in Section The financial information presented above is a summary only and should be read in conjunction with the more detailed discussion of the pro forma Historical Financial Information and the Forecast Financial Information in Sections 4.7 and 4.8, including the assumptions, management discussion and analysis and sensitivity analysis, as well as the risk factors set out in Section Before significant items. A summary of significant and pro forma items is contained in Section Represents NPAT attributable to shareholders. A reconciliation of pro forma forecast NPAT to statutory forecast NPAT is set out in Section What is the Company s dividend policy? The payment of a dividend by the Company is at the discretion of the Directors and will be a function of a number of factors such as the operating results, cash flows and the financial condition of Pact, and any other factors the Directors may consider relevant. The Directors intend to target a payout ratio of between 65% and 75% of NPAT, however the level of payout ratio is expected to vary between periods depending on the factors noted above. No assurances can be given by any person, including the Directors, about the payment of any dividend or the level of franking on any such dividend. It is the current intention of the Board to pay interim dividends in respect of half years ending 31 December and final dividends in respect of full years ending 30 June each year. It is anticipated that interim dividends will be paid in April and final dividends will be paid in October following the relevant financial period. It is intended that future dividends will be franked to the extent possible. While the Board intends to adopt a Dividend Reinvestment Plan, it will not be activated on Listing. Section 4.10 What will be the first dividend and when will it be paid? It is the Board s current intention to pay a final dividend of 9.5 cents per Share for FY2014 in October 2014 in respect of the six months ending 30 June The Board expects that the dividend for the six months ending 30 June 2014 will be 65% franked. Section

21 1.9 OVERVIEW OF THE OFFER Topic Who is the issuer of this Prospectus? Summary Pact Group Holdings Ltd (ABN ), a company incorporated in Victoria, Australia. For more information Section 9 What is the Offer? The Offer is an initial public offering of million Shares in the Company. The Shares being offered will represent 58.1% of the total Shares in the Company on issue following Listing. Section 7.1 What is the proposed use of proceeds received in connection with the Offer? Proceeds received in connection with the Offer will be used to repay debt, repay the Promissory Note to Geminder Holdings and partly pay for the Acquisitions. Section How is the Offer structured / who is eligible to participate? The Offer comprises: The Broker Firm Offer consisting of an invitation by a Syndicate Broker to investors in Australia and New Zealand to acquire Shares under this Prospectus; and The Institutional Offer which consisted of an offer to Institutional Investors in Australia and certain other jurisdictions around the world. Section 7.3 Section 7.4 Is the Offer underwritten? The Offer is fully underwritten by the Joint Lead Managers. Section 7.5 Will the Shares be quoted? The Company will apply to the ASX for its admission to the official list of the ASX and quotation of Shares on the ASX (which is expected to be under the code PGH ) within seven days of the date of this Prospectus. Listing is conditional on the ASX approving this application. If approval is not given within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act. Section 7.7 Will any Shares be subject to escrow arrangements? The following Shares held by the following Shareholders will be subject to voluntary escrow arrangements until the Company releases its audited financial accounts for FY2014. Geminder Holdings 113,764,210 Salvage 3,272,336 Gaja 3,272,336 S&J Capital 3,052,237 Salvage (an entity associated with Geminder Holdings), S&J Capital and Gaja are vendors under the Acquisitions and will acquire the Shares as part consideration under the Acquisitions. Section PACT GROUP PROSPECTUS 19

22 1. INVESTMENT OVERVIEW (continued) Topic Summary For more information What is the allocation policy? The allocation of Shares between the Broker Firm Offer and the Institutional Offer has been determined by the Joint Lead Managers and the Company. The Joint Lead Managers and the Company have determined the allocation of Shares among Institutional Investors. For Broker Firm Offer Applicants, Syndicate Brokers will determine how they allocate Shares among their clients. Section Section Is there any brokerage, commissions or stamp duty payable by Applicants? No brokerage, commission or stamp duty is payable by Applicants on an acquisition of Shares under the Offer. Section 7.2 Section Section What are the tax implications of investing in the Shares? Summaries of certain Australia and New Zealand tax consequences of participating in the Offer and investing in Shares are set out in Sections 9.9 and 9.10, respectively. The tax consequences of any investment in Shares will depend upon an investor s particular circumstances. Applicants should obtain their own tax advice prior to deciding whether to invest. Section 9.8 Section 9.9 Section 9.10 How can I apply? Broker Firm Applicants may apply for Shares by completing a valid Application Form attached to or accompanying this Prospectus, and lodging it with the Syndicate Broker who invited them to participate in the Offer. To the extent permitted by law, an Application by an Applicant under the Offer is irrevocable. Section Section When will I receive confirmation that my Application has been successful? It is expected that initial holding statements will be despatched by standard post on or around 18 December Section When can I sell my Shares on the ASX? It is expected that trading of Shares on the ASX will commence on or about 17 December 2013 on a deferred settlement basis. It is expected that despatch of holding statements will occur on or about 18 December 2013 and that Shares will commence trading on the ASX on a normal settlement basis on 19 December It is the responsibility of each Applicant to confirm their holding before trading its Shares. Applicants who sell Shares before they receive an initial holding statement do so at their own risk. Section

23 Topic Summary For more information Can the Offer be withdrawn? The Company reserves the right to not proceed with the Offer at any time before the issue of Shares to successful applicants. The Offer will be withdrawn if the Acquisitions do not complete. If this occurs, the Offer will not proceed. If the Offer does not proceed, Application Monies will be fully refunded. No interest will be paid on any Application Monies refunded as a result of the withdrawal of the Offer. Section 7.6 Where can I find out more information about this Prospectus or the Offer? The Company expects to announce the final allocation policy under the Broker Firm Offer on or about 17 December For more information, call the Pact Share Offer Information Line on (within Australia) or (outside Australia) from 8:30am to 5:00pm (AEDST) Monday to Friday during the Broker Firm Offer period. If you are unclear in relation to any matter in relation to this Prospectus or are uncertain as to whether the Company is a suitable investment for you, you should seek professional guidance from your accountant, financial adviser, stockbroker, lawyer or other professional adviser before deciding whether to invest. Section 7 PACT GROUP PROSPECTUS 21

24 2. INDUSTRY OVERVIEW For personal use only

25 2. INDUSTRY OVERVIEW 2.1 BACKGROUND Pact primarily competes in the rigid plastics and metals packaging segments of the packaging industry. The significant majority of Pact s sales revenue is generated from the supply of rigid plastics packaging products that service customers in the food, dairy, beverage, personal care, other household consumables, chemical, agricultural, industrial and other sectors. Pact also produces steel packaging solutions primarily servicing industrial end users and materials handling and infrastructure products for a wide variety of end use markets including transport, storage, telecommunication and gas and electrical. 2.2 GLOBAL PACKAGING INDUSTRY According to the market research firm Smithers Pira (Pira), the global packaging industry generated approximately US$800 billion of revenue in Pira forecasts this to increase to approximately US$1,002 billion by The packaging industry can be classified into six main product segments which are summarised in Table 2.1 below. Table 2.1: Global packaging industry product segments 15 Product segment Global market share Key products Examples Paper and board US$243bn (30%) Folding cartons, liquid cartons, corrugated products and composite containers. Rigid plastics US$173bn (22%) Bottles, jars, trays, containers, tubs and pots, pails, pallets, tubes and closures. Flexibles Metals US$172bn (22%) US$115bn (14%) Split into three sub segments: Plastics: bags and sacks, flat pouches, pillow pouches, stand-up pouches and wrapping films. Papers: bags and sacks, wraps and pouches. Foils: laminates, bags, sachets, pouches, lidding and blister packaging. Metal food and beverage cans, canisters, drums, trays and containers 16. Metal drum reconditioning activities. Glass US$58bn (7%) Glass bottles and jars and specialised glass containers. Other US$39bn (5%) Wooden cases, crates, boxes, pallets, drums and containers. Cork stoppers, textile bags and leather bags and cases. This Industry Overview relies on and refers to historical and forecast information and statistics which are derived from reports published by industry experts, including reports regarding the global, Australia, New Zealand and Asian packaging and rigid plastics industries published by Smithers Pira and Mass Grocery Retail data published by BMI International. Historical and forecast data is necessarily estimates of actual and forecast market activity and conditions and are inherently predictive. Such statistics are based on industry research, which itself is based on sampling and subjective judgments by both the researchers and the respondents, including judgments about what types of products and countries should be included in the relevant market. Although the Company believes that the data and statistics included in this Industry Overview are reliable, they have not been independently verified and do not guarantee the accuracy and completeness of this information. 15 Smithers Pira, The Future of Global Packaging Market Forecasts to 2016, Stephen Harrod, The Future of Global Packaging to 2018, Vlad Savinov. 16 Metal container manufacturing includes boiler, tank and other heavy gauge metal container manufacturing and other metal container manufacturing. PACT GROUP PROSPECTUS 23

26 2. INDUSTRY OVERVIEW (continued) The paper and board segment accounts for the largest share of the global packaging industry, representing approximately 30% of 2012 market revenue 17. Growth in global packaging industry revenues is driven by a number of trends including growing urbanisation, investment in housing and construction, a burgeoning healthcare sector and rapid development in emerging economies. Over the period, global packaging market revenues grew at 2.2% CAGR, impacted by the effects of the Global Financial Crisis in 2008/ Global revenues are forecast to grow at 3.8% CAGR from 2012 to Over the same period, rigid plastics packaging revenues are forecast to grow at 5.3% CAGR, faster than all other packaging segments 19. Pact operates in the rigid plastics and metals segments. Pact s primary focus is the rigid plastics segment in Australia, New Zealand and Asia, which represents the significant majority of Pact s earnings. Figure 1: 2012 Estimated total global packaging revenue by packaging type (US$bn) Pact s segments Paper and Board Rigid Plastics Flexible Plastics Metals Glass Flexible Paper Other Flexible Foil Figure 2: Global packaging revenue growth % 4.8% CAGR ( ) CAGR ( ) Pact s segments 3.7% 2.8% 3.0% 2.8% 0.9% 2.3% 3.2% 3.1% 1.2% 3.8% 0.4% 2.8% 1.4% 2.2% 3.8% (2.3%) Paper and Board Rigid Plastics Flexible Plastics Metals Glass Flexible Paper Other Flexible Foil Total Packaging Industry 17 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 18 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 19 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 20 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 21 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 24

27 2.3 RIGID PLASTICS PACKAGING INDUSTRY Overview Rigid plastics packaging is used in a wide variety of consumer products found in most supermarket aisles, including dairy, spreads, meats, deli, bakery, confectionery, beverages, cleaning products, pharmaceuticals, personal care products and many others. Rigid plastics are also used to produce a wide variety of industrial packaging products including pails and cylindrical and cubic drums. These products are used in a range of industrial end markets including building products, chemicals, surface coatings and agriculture. Food is the largest end-use sector for rigid plastics packaging, accounting for an estimated 37% 22 share of global rigid plastics packaging consumption in 2012, followed closely by drinks with an estimated 28% 23 share (refer to Figure 3). Rigid plastics packaging has also developed a strong market position in non-food consumer applications, including personal care, other household consumables and healthcare products. Examples of rigid plastics packaging applications are set out in Table 2.2 below. Figure 3: 2012 Global rigid plastics packaging consumption by end market (tonnes) 24 Industrial/ Other 8% Figure 4: 2012 Global rigid plastics packaging consumption by product (tonnes) 25 Others 9% Consumer non-food 27% Food 37% Tubs & pots 16% Bottles 59% Trays & containers 16% Drinks 28% 22 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 23 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 24 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 25 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. PACT GROUP PROSPECTUS 25

28 2. INDUSTRY OVERVIEW (continued) Table 2.2: Rigid plastics packaging applications by end market 26 Type Key products Examples Food Drinks Fresh food, frozen food, chilled food, dried food, ready meals, baked goods, savoury snacks, dairy products, confectionery, hot beverages, other human food and pet food. Carbonated soft drinks, milk, bottled water, fruit juices and juice drinks, other soft drinks and alcoholic drinks. Consumer non-food Healthcare products, cosmetics and toiletries, other household consumables and other consumer products. Industrial/ other Bulk foods and liquids packaging, bulk item packaging of agricultural products, chemicals and, oils and minerals Rigid plastics packaging demand drivers Rigid plastics packaging has increased its share of the overall packaging market by replacing traditional glass, metals and paper packaging. This substitution includes a notable trend away from the use of glass containers in preserved food and beverage products, and the increasing use of plastic as a viable alternative to metal cans and pails. Product substitution has been partly driven by customer demands for more attractive, modern packaging as well as improved technical performance. Numerous new product innovations have enhanced the performance characteristics of rigid plastics packaging solutions. Advances in technology and design facilitate lighter weight containers, more effective tamper-evidence in closure systems and new barrier and gas scavenging technologies for use in oxygen-sensitive food products. These new innovations, combined with rigid plastics recyclability, impact resistance and more economic transportation have driven the increasing market share of rigid plastics within the packaging industry. The demand for more sophisticated packaging has also been driven by producers of branded consumer products who are facing greater competition from private label and house branded supermarket products. To differentiate and maintain the appeal of their branded products, some producers are investing in more modern and attractive packaging. These packaging solutions include enhanced graphics and performance features which require more sophisticated design and production capabilities, and access to intellectual property, technology and manufacturing know-how. Similarly, supermarket house branded products are increasingly using rigid plastics packaging to enhance appearance to compete more effectively with branded products 27. In addition to more sophisticated products, customers are demanding greater levels of support and service from their packaging suppliers. Larger multi-national customers are increasingly centralising their procurement practices, ordering larger quantities from fewer suppliers who can provide a comprehensive range of services including product design, in-house tooling, product recycling and sustainability services Smithers Pira, The Future of Global Packaging Market Forecasts to 2016, Stephen Harrod. 27 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 28 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 26

29 2.3.3 Regional rigid plastics packaging As discussed in Section 2.2, rigid plastics packaging market revenue is forecast to be the fastest growing packaging revenue segment globally over the period at 5.3% CAGR, well above the global packaging industry average of 3.8% over the same period 29. The more mature regional markets of North America and Western Europe are expected to grow revenues at rates lower than the global average, however less developed markets, such as Africa, Asia, Eastern Europe, Middle East, and South and Central America are forecast to grow at higher rates than the global average 30 (see Figure 6). Figure 5: 2012 Global rigid plastics packaging revenue by region (US$bn) Pact s regions Asia North America Western Europe South & Central America Eastern Europe Middle East Africa Australasia Note: Australasia includes Australia, New Zealand and other smaller Pacific islands. Figure 6: Global rigid plastics packaging revenue growth by region % 8.4% CAGR ( ) CAGR ( ) Pact s regions 1.7% 3.4% 1.9% 1.5% 5.5% 5.9% 5.8% 6.2% 5.4% 0.3% 4.1% 4.0% 3.0% 5.3% (0.9%) (2.4%) Asia North America Western Europe South & Central America Eastern Europe Middle East Africa Australasia Global Note: Australasia includes Australia, New Zealand and other smaller Pacific islands. 29 Pira International Ltd. Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 30 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 31 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 32 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. PACT GROUP PROSPECTUS 27

30 2. INDUSTRY OVERVIEW (continued) 2.4 RIGID PLASTICS PACKAGING IN AUSTRALIA AND NEW ZEALAND Overview Total annual rigid plastics packaging revenue in Australia and New Zealand was estimated to be US$3.0 billion ($2.9 billion 33 ) in 2012, representing 21% of total Australian and New Zealand packaging revenue 34. Over the period, rigid plastics packaging revenues grew at 4.1% CAGR 35. Pira forecasts this growth trend to continue at 4.0% CAGR from 2012 and 2018 driven by increased substitution of rigid plastics from other packaging forms 36. This is well in excess of each country s forecast GDP growth CAGR of 3.1% in Australia and 2.5% in New Zealand 37. Figure 7: 2012 Estimated total Australia and New Zealand packaging revenue by type (US$bn) Pact only competes in the industrial metals packaging segment which represents a small portion of the total metals segment. Pact s segments Paper and Board Rigid Plastics Metals Flexible Plastics Glass Flexible Paper Other Flexible Foil Outlook and key drivers Australia accounts for approximately 92% of total Australian and New Zealand rigid plastics industry revenue 39. Similar to global trends, rigid plastics packaging is forecast to be the fastest growing segment of the packaging industry in Australia and New Zealand over the period 40. Growth in the Australian and New Zealand rigid plastics packaging segment is driven by economic conditions, evolving customer demands and preferences, environmental awareness and advances in technology 41. Additional drivers of industry growth in Australia and New Zealand include: consumers having relatively high disposable incomes; Australia and New Zealand being some of the largest producers and exporters in the agribusiness sector; low average unemployment rates of 5.2% in Australia and 5.9% in New Zealand forecast over the period 42 ; increasing penetration of private label products in supermarkets driving branded consumer goods manufacturers to seek packaging innovation to improve product attractiveness and differentiation; and increasing penetration of house branded products in supermarkets using packaging innovation to improve perceived comparability to branded products. 33 Converted at a AUD/USD exchange rate of as per Smithers Pira s assumptions. 34 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 35 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 36 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 37 GDP CAGR, International Monetary Fund, World Economic Outlook Database. 38 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. Note: Metal container manufacturing includes boiler, tank and other heavy gauge metal container manufacturing and other metal container manufacturing. 39 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 40 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 41 Smithers Pira, The Future of Global Rigid Plastic Packaging to 2018, David Platt. 42 International Monetary Fund, World Economic Outlook Database. 28

31 2.5 RIGID PLASTICS PACKAGING IN PACT S PRIMARY ASIAN MARKETS Overview Rigid plastics is one of the most widely used packaging substrates in Asia, accounting for approximately 21% of 2012 packaging revenues in Asia, second only to paper and board packaging 43. Additionally, Asia represents the largest regional market for rigid plastics packaging revenue, estimated to be US$58bn, or 33%, of global rigid plastics packaging revenue in 2012 (see Figure 5). Asia was the fastest growing region over the period at 10.1% CAGR, significantly above the global rigid plastics packaging industry average of 3.0% over the same period 44 (see Figure 6). Figure 8: 2012 Estimated total Asian packaging revenue by packaging type (US$bn) Pact s segments Paper and board Rigid plastics Flexible plastics Metals Glass Flexible paper Other Flexible foil Outlook and Drivers Over the period, rigid plastics packaging revenue in Asia is forecast to grow at 8.4% CAGR, driven by the following key factors 46 : traditional retail formats such as neighbourhood outdoor markets being replaced by MGR formats including convenience stores, mini-marts and supermarkets; growing middle class with time constraints favouring packaged convenience food and beverage goods; rising demand for consumer discretionary items including non-essential food, beverage and personal care items; rising disposable incomes and consumption generally; growing urbanisation; and developing packaging production and retail infrastructure. The high growth in MGR penetration and underlying GDP in this region relative to other more developed countries, such as the United States, is expected to support Pact s growth strategy and expansion into this region. In each of the countries that Pact currently operates in Asia (China, the Philippines and Thailand), MGR penetration is less than 50% Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 44 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 45 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 46 Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 47 Business Monitor International, China Food & Drink Report, Q4 2013, Philippines Food & Drink Report 2013, Thailand Food & Drink Report, Q PACT GROUP PROSPECTUS 29

32 2. INDUSTRY OVERVIEW (continued) Figure 9: Key statistics for select markets 48 Country Population (m) Mass Grocery Retail Penetration Real GDP CAGR ( F) Mass Grocery Retail CAGR ( F) Modern Traditional 48% China 1,360 52% 8.4% 8.2% 21% Philippines 97 79% 5.4% 9.1% Thailand 65 54% 46% 4.4% 8.0% 24% Indonesia % 6.5% 15.1% Malaysia 30 55% 45% 5.2% 11.8% 15% Vietnam 91 85% 5.4% 13.7% United States % 65% 3.3% 2.6% Note: Highlighted countries denote Pact s operating markets, other countries included for reference only. China China is a key driver of overall Asian regional packaging growth. China is the second largest packaging market in the world behind the United States. Rigid plastics packaging in China is forecast to grow at 12.1% revenue CAGR over In addition to the Asia-wide key drivers noted previously, growth is expected to be driven by China s increasing focus on personal health, continued economic development, growing presence of leading multinational retailers/brands and new Government regimes (such as introducing the provision of broader basic medical care). Other Asian countries Rigid plastics packaging in developing Asian countries such as the Philippines, Thailand, Indonesia, Malaysia and Vietnam are expected to experience high growth in the short to medium term. Similar to most emerging economies, key drivers of growth include increasing levels of disposable income as a result of increased exports, economic development and modern urbanisation. These factors ultimately contribute to an increase in MGR penetration. 48 International Monetary Fund, World Economic Outlook Database, Business Monitor International, Indonesia Food & Drink Report Q3 2013, China Food & Drink Report, Q4 2013, Vietnam Food & Drink Report, Q4 2013, Malaysia Food & Drink Report Q4 2013, Philippines Food & Drink Report 2013, Thailand Food & Drink Report, Q3 2013, Australia Food & Drink Report, Q and Industry Forecast Mass Grocery Retail United States Q Smithers Pira, The Future of Global Packaging to 2018, Vlad Savinov. 30

33 2.6 OTHER MARKETS RELEVANT TO PACT Metals packaging industry in Australia and New Zealand The metals packaging industry manufactures a range of packaging solutions from steel, tinplate and aluminium. These include: industrial products: drums, pails and small containers; and consumer products: aerosol cans, food containers and beverage cans. Pact competes only in the metals packaging segment for industrial products. Demand for industrial metals packaging products is driven by a number of factors, including: industrial output and economic activity; activity in the housing and commercial building sectors including demand for surface coatings and paint; and volume and cyclicality of agricultural production. Industrial metals packaging represents approximately 9% of Pact s pro forma forecast FY2014 sales revenue Materials handling & infrastructure Pact s materials handling solutions are focused on the transport and storage of products using pallets, crates and other containers. Through this service, Pact assists customers in reducing their supply chain costs through improved storage efficiency, handling savings and freight cost reduction. Pact also focuses on the product life cycle, with the objective of providing a complete and re-usable packaging solution reducing environmental impact and generating efficiencies for its customers. Pact s infrastructure solutions are focused on the telecommunications, gas and electrical industries as well as major road and rail infrastructure projects providing products including communication pits, hazard prevention products, noise walls, industrial tanks and more. PACT GROUP PROSPECTUS 31

34 3. BUSINESS OVERVIEW

35 3. BUSINESS OVERVIEW 3.1 OVERVIEW 50 Pact is a dynamic and robust manufacturer of a wide range of packaging products with operations in Australia, New Zealand and Asia. Pact converts primarily plastic resin and steel into packaging and related products for customers in the food, dairy, beverage, personal care, other household consumables, chemical, agricultural, industrial and other sectors. These products include yoghurt, cream and ice-cream containers, milk and beverage bottles, margarine tubs, food jars, meat and bakery trays, plastic cubes, tinplate and plastic pails, plastic tubes and cartridges, plastic bottle caps and closures, steel drums, reusable materials handling products, plastic crates and other customised products for the consumer and industrial sectors. Pact is passionate about innovation and is constantly expanding its diverse product portfolio across a variety of substrates and expertise with the objective of delivering customers the best possible packaging solutions. Pact also provides a range of sustainability, recycling and environmental services to assist customers in reducing the environmental impact of their product packaging and related processes. The majority of Pact s sales revenue is generated through the sale of rigid plastics packaging and related products to the consumer sector with the balance derived from industrial packaging and other non-packaging sectors. Pact is the leading supplier of rigid plastics packaging and related products in Australia and New Zealand and has an emerging presence in Asia with 39 manufacturing plants across Australia, 18 in New Zealand, and five in the higher growth markets of China, the Philippines and Thailand. Pact is also a leading manufacturer of industrial metals packaging in Australia and New Zealand. Trading under a portfolio of established brands, Pact has developed long-term relationships with a diverse blue-chip customer base through leveraging its strong manufacturing capabilities and its focus on innovation. Figure 10: Pact key statistics Key geographies Australia, New Zealand, China, the Philippines and Thailand Key products Rigid plastics packaging, industrial metals packaging and sustainability services Employees 3,500 (Australia 2,200, New Zealand 900, Asia 400) Manufacturing plants 62 (Australia 39, New Zealand 18, Asia 5) Pro forma sales revenue FY2013 Forecast FY2014 Growth $1,159.9m $1,197.3m 3.2% Pro forma EBITDA FY2013 Forecast FY2014 Growth $196.1m $201.9m 3.0% 50 In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire interests in certain entities in which Pact, Geminder Holdings, or related entities of Geminder Holdings, already hold an interest (see Section 9.3). The purpose of the Acquisitions is to consolidate an existing investment in Cinqplast to 100%, expand Pact s geographic reach in Asia as part of its growth strategy and consolidate certain interests in packaging assets held by entities controlled by Raphael Geminder into Pact as part of the Offer. The Acquisitions are conditional on allotment of Shares to successful Applicants under the Offer. This Business Overview has been prepared as if these Acquisitions have already occurred. PACT GROUP PROSPECTUS 33

36 3. BUSINESS OVERVIEW (continued) History of Pact Pact was established by Raphael Geminder who acquired the business in Since inception, the current senior management team of Pact has led the financial, operational and cultural transformation of the business. Pact has grown significantly over the last 11 years as a result of organic growth, product innovation and its acquisition of packaging businesses throughout Australia, New Zealand and Asia. The success of these acquisitions has been driven by a continued focus on integration, investing in improving business and operating systems, automated manufacturing, people, and innovative products and processes. The integration of 34 acquisitions over this period has strengthened Pact s manufacturing capability, broadened its geographic presence and diversified its customer base. A selection of key acquisitions completed since 2002 are shown in Figure 11. Pact entered the high growth Asian market in 2007 through the establishment of a plastic consumer packaging operation in the Philippines. Since that time, it has grown its presence in the region through establishment of a Singapore procurement office in 2008, a plastic closures manufacturing plant in Thailand in 2008, and the acquisition of three rigid plastics packaging manufacturing plants in China in Figure 11: Key milestones in Pact s history 1 Acquisition of a plastic packaging company in Australia focused on the consumer packaging segment Acquisition of a plastic consumer packaging company in New Zealand Establishment of a procurement office in Singapore 2 Establishment of a Thailand Greenfields closures manufacturing plant Acquisition of a large rigid plastics packaging and material handling company operating in Australia, New Zealand and Asia Pact formed through the acquisition of a rigid plastics and steel packaging company predominantly focused on industrial markets Establishment of a plastic consumer packaging operation in the Philippines 2 Acquisition of a leading consumer goods plastic packaging company in Australia Acquisition of the largest private dairy bottle manufacturer in Australia Consolidation of operations through Acquisitions at Listing 1. References to Pact refer to the group that will exist after Listing. 2. Interest acquired or held by Geminder Holdings. In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire interests in certain entities with packaging operations located in China, the Philippines, Singapore and Australia, in which Pact, Geminder Holdings, or related entities of Geminder Holdings already hold an interest (see Section 9.3 for further information about the Acquisitions). The consolidation of these entities furthers Pact s strategy of acquisitive growth and builds a foundation for pursuing further growth opportunities in Asia. The Acquisitions comprise: Viscount China 100% acquisition of three manufacturing plants in China, held by Geminder Holdings since Ruffgar 100% acquisition of Ruffgar comprising: Plastop Asia one manufacturing plant in the Philippines which was established by a related entity of Geminder Holdings in 2007; and Weener Plastop 50% joint venture, integrated with Plastop Asia, which was also established by a related entity of Geminder Holdings in Cinqplast acquisition of the remaining 49% interest in Cinqplast to bring its ownership to 100%, comprising of two manufacturing plants in Australia in which Geminder Holdings initially acquired an interest in

37 3.1.2 Pact s market positions Australia and New Zealand Pact is the leading supplier of rigid plastics packaging in Australia and New Zealand. Historically, the rigid plastics packaging industry in this region has been highly fragmented, predominantly made up of many small niche businesses. However, in recent years the industry has seen significant consolidation. Pact has established its market leading position through organic growth and the integration of 34 acquisitions over the past 11 years. The mature markets of Australia and New Zealand represented the majority of Pact s pro forma FY2013 sales revenue. In addition to rigid plastics, Pact also manufactures metals packaging for industrial products, which represents approximately 9% of Pact s pro forma forecast sales revenue in FY2014. Asia Pact has an emerging presence in Asia with five manufacturing plants located in the high growth markets of China, the Philippines and Thailand, supported by a regional procurement office in Singapore. This emerging footprint in Asia provides an opportunity for Pact to: benefit from high growth and rapidly rising consumer demand in the region which is expected to grow faster than regional GDP (see Section 2.5); seek out opportunities in a fragmented market where free trade is expanding; pursue regional growth organically, including utilising excess land and factory space available at existing sites; and leverage its existing position and in-market knowledge in Asia to identify and develop relationships with potential acquisition targets and investment partners (see Section 3.1.3) Growth strategy Pact s future growth strategy centres on the following key initiatives. Innovation and technology Pact has a strong focus on product innovation and seeks to ensure that the latest available packaging technologies and solutions are available to its customers, driving: increased customer substitution of other packaging substrates into rigid plastics; and upgrading of existing product designs (see Section 3.7). Increasing sales to existing and new customers Pact continues to focus on coordinated customer sales management and cross selling initiatives. This is designed to maximise the breadth of Pact s product and service offering available to its existing customers and enlarge its addressable market. Pact s diverse product range, scale and sophisticated technologies allow it to partner with existing customers to deliver packaging solutions across multiple products and substrates in the rigid plastics and metals segments. Lowest cost production Pact maintains a relentless pursuit of lower cost manufacturing and supply of its products which benefits from Pact s scale of operations in the Australian and New Zealand markets. Pact has a proven history of improving its performance by lowering costs, primarily achieved by driving efficiencies across the business. Pact seeks to focus on continued strengthening of its low cost position through: an efficient corporate structure, minimising surplus head office and back office costs; leveraging economies of scale; maximising efficiencies and minimising raw material costs from centralised procurement in Singapore; investing in technologies to further improve efficiency streamlining the manufacturing process to deliver products at lower cost and in shorter timeframes; and optimising the manufacturing footprint and locating manufacturing plants strategically close to its customers. PACT GROUP PROSPECTUS 35

38 3. BUSINESS OVERVIEW (continued) Further acquisitions Pact will continue to investigate potential value-adding acquisitions to drive growth and expand its scale, product diversity and geographic reach in selected Asian markets. Pact will also seek to identify and execute new acquisition opportunities in Australia and New Zealand in rigid plastics and other packaging substrates. Pact is currently actively engaged with a number of potential acquisition targets, including the exclusive opportunity to negotiate in respect of the acquisition of Dynapack, the leading supplier of rigid plastics packaging and related products and services in Indonesia. Pact has a proven track record of successfully integrating the businesses it has acquired and intends to continue to execute this strategy upon Listing. The Acquisitions being undertaken in connection with the Offer, as well as past and potential future acquisitions, provide the opportunity for further growth through realisation of integration benefits by: applying Pact s procurement scale strategy and high quality business process improvement initiatives; applying Pact s sophisticated innovation and product design capabilities to these operations; complementing Pact s existing business reorganisation program; and broadening Pact s strong relationships with existing global customers across new products, technologies and markets. 3.2 PRODUCT RANGE Product range overview Pact is highly focused on innovation and is constantly expanding its diverse product portfolio across a variety of substrates and expertise, with the objective of delivering to customers what Pact believes are the best possible packaging solutions. These products include yoghurt, cream and ice-cream containers, milk and beverage bottles, margarine tubs, food jars, meat and bakery trays, plastic cubes, tinplate and plastic pails, plastic tubes and plastic cartridges, plastic bottle caps and closures, steel drums, reusable materials handling products, plastic crates and other customised products for the consumer and industrial sectors. Pact also provides a range of sustainability, recycling and environmental services to assist customers in reducing the environmental impact of their product packaging and related processes. Pact believes its extensive product range delivers a significant and sustainable competitive advantage through a wide variety of substrates in both rigid plastics and industrial metals. Pact has more than 6,600 moulds across approximately 22,000 SKUs which has enabled it to deliver a wide range of bespoke customer products using advanced technology. Consumer packaging Within the consumer packaged goods sector, key products supplied by Pact include every day consumer staples such as milk, water, juice and detergent bottles, ice cream containers, butter and margarine tubs, meat trays, fruit packaging trays, bakery containers and a variety of closures. These products account for the majority of Pact s sales revenue, are relatively stable volume products with low volatility in annual customer demand, and provide robust growth. Industrial packaging Key industrial packaging goods supplied by Pact include lubricant bottles, plastic and steel drums, paint pails, shipping pallets and materials handling containers servicing the industrial, agricultural, construction and other similar end use markets. Innovation and intellectual property Pact has a strong innovation focus driven by Pact s own in-house team at Inpact Innovation (Inpact). Pact constantly aims to develop new products to meet its customers specific requirements. Pact has also developed strong technology alliances which allow Pact to offer its customers the latest global technologies. With access to an extensive intellectual property portfolio and manufacturing know-how, combined with access to global technology licences, Pact believes it has a clear point of differentiation providing it a competitive advantage (see Section 3.7). 36

39 Figure 12: Pact s broad product offering Figure 13: Illustrative depiction of the breadth of Pact s packaging solutions in the household PACT GROUP PROSPECTUS 37

40 3. BUSINESS OVERVIEW (continued) The benefits of product range diversity Pact benefits from the diversity of its product range and end use markets, which Pact believes provides it more stability and resilience in sales revenue and earnings. Approximately 68% of Pact s FY2013 pro forma sales revenue was derived from the food, dairy and beverage, health and personal care and other household consumables end markets, typically representing consumer staple products with low volatility in annual customer demand and providing robust growth. Additionally, within Pact s other end markets, the majority of demand for its products comes from defensive end markets including the chemical, industrial, agricultural, construction and other end use markets, many of which have a strong emphasis on consumer end uses. As a result, approximately three quarters of Pact s pro forma FY2013 sales revenue is generated from consumer end uses. Whilst Pact was not immune to the impacts of the economic downturn caused by the Global Financial Crisis in 2008/09, Pact believes the business showed strong resilience during this period due to Pact s exposure to consumer staples and non discretionary household spend items, coupled with management s ability to reduce its costs in order to maintain earnings. Figure 14: End uses by customer type (by % of pro forma FY2013 sales revenue) 1 Surface coatings & construction 7% Other 8% Food, dairy and beverage Agriculture, veterinary and other chemicals Oil and lubricants Oil & lubricants 8% Agricultural, veterinary & other chemicals 9% Surface coatings and construction Health and personal care Other household consumables 4% Health & personal care 6% Food, dairy & beverage 58% Other household consumables Other 1. Includes both industrial metals and rigid plastics packaging. 3.3 MANUFACTURING FOOTPRINT Pact has 62 manufacturing plants across Australia, New Zealand and Asia (China, the Philippines and Thailand). These manufacturing plants are all supported by Pact s regional procurement office in Singapore. A key driver of Pact s success has been its ability to locate the majority of its manufacturing plants in close proximity to its main customers sites and generally in densely populated areas. This enables Pact and its customers to benefit significantly from reduced freight costs. Further, a number of factories are co-located on the customer s site or near site factories. Such proximity ensures security of supply for customers, reduces freight costs and enhances customer connectivity. Pact s manufacturing footprint is diverse, with no single facility contributing more than 5% of Pact s FY2013 pro forma sales revenue. 38

41 Figure 15: Pact s manufacturing footprint CHINA 3 Manufacturing Plants c. 300 Employees THAILAND 1 Manufacturing Plant c. 60 Employees PHILIPPINES 1 Manufacturing Plant c. 50 Employees SINGAPORE 1 Office < 10 Employees QUEENSLAND 6 Manufacturing Plants c. 300 Employees NEW ZEALAND North Island Business Services 14 Manufacturing Plants c. 700 Employees WESTERN AUSTRALIA 3 Manufacturing Plants c. 80 Employees NEW SOUTH WALES 12 Manufacturing Plants c. 700 Employees VICTORIA Head Office & Innovation Centre 17 Manufacturing Plants c Employees TASMANIA 1 Manufacturing Plant c. 10 Employees NEW ZEALAND South Island 4 Manufacturing Plants c. 200 Employees LEGEND Manufacturing Plant Office PACT GROUP PROSPECTUS 39

42 3. BUSINESS OVERVIEW (continued) 3.4 CUSTOMERS Pact has established long-term relationships with a wide range of blue chip customers across defensive end markets, particularly in the consumer sector. The majority of Pact s customers are well known household brand names whose products are used in everyday life Large and diversified customer base Pact has a broad product offering with approximately 22,000 SKUs available to approximately 4,200 customers. Pact s scale, geographic and product diversity enables it to have a number of supply contracts for each customer for different products. Pact s customers include what it considers to be some of the best-known global and regional branded consumer products companies, and are diversified across a range of regions, sectors and end markets. Pact has maintained consistent relationships with its customer base which has supported the growth in the business over the past 11 years. Some of Pact s key customers include BP, Bulla, Caltex, Coles, Dulux, Fonterra, Foodstuffs, Goodman Fielder, Goulburn Valley, Heinz, Lion, Murray Goulburn, Nufarm, PPG Industries, Royal Dutch Shell, Schweppes, Unilever, Wattyl and Woolworths. Pact s top 20 customers represented approximately 42% of FY2013 pro forma sales revenue, with no single customer contributing greater than 10% Deep relationships with a broad range of long-term customers A key highlight of Pact s success has been its ability to build deep and enduring relationships with its long-term customer base. This is demonstrated by the fact that, on average, Pact s top 10 customers have had relationships with Pact s businesses for in excess of 10 years. Pact s key customer contracts will normally establish Pact as the supplier, but do not typically require that the customer purchases a set volume at a specific amount (i.e. the contracts are not take or pay in nature). Customer contracts may include a price review mechanism to enable some form of adjustment to costs and may also allow Pact to be reimbursed for any unrecovered process and product set up costs upon contract expiry or termination. Figure 16: An example of Pact s broad range of customers These customers have not authorised or caused the issue of this Prospectus nor have they made any statement in this Prospectus. Accordingly, these Customers make no representation regarding, and take no responsibility for, any statements or material in, or omissions from, this Prospectus. Foodstuffs provides consent to the use of its logo as a current customer of Pact subsidiary, Alto Packaging Limited. 40

43 3.5 SUPPLIERS Pact sources its raw materials and other product inputs from more than 5,200 suppliers globally (of which approximately 900 are classified as direct ). Pact considers its suppliers to be reputable, reliable and responsible. Pact benefits from comparative scale in the Australian and New Zealand markets enabling procurement and manufacturing efficiencies. Pact established its Singapore-based centralised procurement office to leverage Asian procurement and other raw material arbitrage opportunities. The procurement office provides direct visibility on the movements in input prices and enables informed purchasing and pricing decisions. To ensure that at any stage there is continuity of supply and that Pact can access relevant pricing benchmarks, there are multiple approved suppliers (typically two to three suppliers) for each type of raw material. Pact is committed to reducing costs wherever possible and has a disciplined approach and proven track record of working with customers to pass through certain movements in input costs from suppliers. 3.6 SALES AND MARKETING Pact operates a highly customer focused sales and marketing model. Sales, marketing and business development personnel are organised under each of Pact s separate operating brands and these employees are typically located across Pact s manufacturing plants reporting in most cases to the plant or business manager. This ensures that the sales and business development teams are in close proximity to their customers and in direct communication with the production site. Interaction with customers occurs at different levels, and the close proximity of manufacturing plants to the major customers allows for interaction of sales, technical, purchasing and logistics teams. Account managers provide further support and coordinate Pact s coverage of its most important customers. Pact s centralised Customer Relationship Management (CRM) system, Salesforce, is a cloud based sales database that provides senior management with information on sales force activity and market trends. The CRM system has assisted Pact to successfully assess its sales team s performance, new business opportunities and provides Pact with a significant advantage through access to end-user intelligence. In addition, the sales team is supported by Inpact, Pact s innovation arm which works closely with Pact s customers to design and develop innovative packaging solutions. This assists Pact to develop and maintain customer relationships as well as provide it with what it believes is a competitive advantage because of Pact s ability to provide a service of this scale. 3.7 INNOVATION AND TECHNOLOGY Overview Understanding consumer insights and ongoing innovation of existing and new products are core elements of Pact s strategy. Product innovation and design capability is an increasingly important factor in differentiating Pact s service offering to its customers. Pact has a continued focus on innovation, which has been a substantive driver of consumer product substitution from other conventional packaging substrate forms into innovative rigid plastics. Inpact is a separate division within Pact that is purely dedicated to driving product innovation and design through Pact s businesses. In addition to investing its own research and design into product innovation, Inpact also has access to an extensive intellectual property portfolio and manufacturing know-how which Pact has developed itself, or through partnerships, over the past 11 years. Inpact works with Pact s customers to explore new opportunities with its products, employing a team from diverse professional backgrounds including inventors, designers, engineers, technical and operations, marketing specialists, environmentalists and implementation specialists to deliver workable solutions. Pact has also established global alliances with technology leaders to obtain often exclusive local access to some of the latest advances in global packaging trends. PACT GROUP PROSPECTUS 41

44 3. BUSINESS OVERVIEW (continued) Table 3.1: Examples of Pact s history of new product innovation in-house or via its global alliances Example Before After Benefits Plastic fruit containers Metal food can Plastic food container Resealable packaging allows multi-use. Designed to fit fridge door and reduce logistics costs. Enables the consumer to see the product. In mould labelling for chilled dairy applications Traditionally printed plastic tub High resolution moulded label tub Enhanced graphics as compared to conventional offset printing which improves shelf presence. Lower total package costs. Improved functionality for better pouring. Plastic paint pail Tinplate pail Plastic pail Proprietary technology to minimise paint degradation ( skinning ). Improved lid functionality for opening. Innovative moulded side handles for improved carrying. Lower supply chain costs. LIGHT PROOF TM milk bottle Plastic milk bottle LIGHT PROOF TM plastic bottle Pact worked with its customer, Fonterra, to develop the world s first, LIGHT PROOF TM bottle that can boost the shelf life of milk. Glass to plastic alternative Glass bottle Plastic functional bottle Glass bottle extended to plastic. Re-usable, collapsible fruit and vegetable crates Single use cardboard container Reusable plastic crate Replaced single use waxed boxes. Improved sustainability and recycling outcomes. 42

45 3.7.2 Intellectual property Pact has access to an extensive intellectual property portfolio and manufacturing know-how. In addition to the intellectual property developed via product innovation at Inpact and more broadly within Pact, Pact has also established global alliances with technology leaders to obtain often exclusive local access to some of the latest advances in global packaging trends. In doing so, Pact assists these suppliers to gain access to the markets in which it operates. Pact s extensive global technology licence alliances: enhance speed to market through providing Pact with proven R&D undertaken globally by licensors; and provide Pact with an extensive understanding of materials technology development. Key technology licences are generally exclusive in Australia and New Zealand. Pact currently maintains approximately 400 registered designs, 300 registered patents and patent applications, and 300 registered trademarks. No single patent is considered material to Pact financially, and Pact is not currently the subject of any material claims of patent or trademark infringement by third parties. 3.8 DYNAPACK OPTION Pact has entered into a memorandum of understanding with the shareholders of Dynapack which gives Pact the exclusive opportunity to negotiate in respect of the acquisition of all the shares in Dynapack by Pact (or its nominee) at any time up to 12 months from Listing. Dynapack is currently owned 50% by entities controlled by the Hambali family of Indonesia and 50% by an entity which continues to be controlled by Geminder Holdings but separate to Geminder Holdings investment in Pact. Geminder Holdings acquired its interest in Dynapack in Dynapack is the leading supplier of rigid plastics packaging and related products and services in Indonesia with operations throughout South East Asia. The business was founded in 1961, generated sales revenue of $235 million in the 12 months to 30 June 2013 and has 17 manufacturing plants located across Indonesia, Malaysia, Thailand, and Vietnam. Given Dynapack has a similar strategic focus on consumer oriented customers, Pact believes that, if acquired, Dynapack would be complementary to its existing rigid plastics packaging presence in Asia and its growth strategy in the region. In addition, an acquisition of Dynapack would facilitate the objective of Geminder Holdings to consolidate substantially all of its similar packaging interests within Pact, which was not possible prior to Listing. Any acquisition of Dynapack would require final commercial terms for the potential acquisition to be agreed and would be evaluated against Pact s strict return requirements for acquisitions. The proposed acquisition would be conditional on satisfaction of a number of conditions precedent including: the approval of Pact s Board including the unanimous approval of its Independent Directors; an independent expert s report on the acquisition; all necessary regulatory approvals, consents or waivers; and the approval of Pact Shareholders (without any votes cast by Geminder Holdings, any associates of Geminder Holdings or any other party to the acquisition), as required under the ASX Listing Rules, the Corporations Act or otherwise. PACT GROUP PROSPECTUS 43

46 3. BUSINESS OVERVIEW (continued) 3.9 COMPETITION All of the sectors in which Pact operates are highly competitive. Pact expects to continue to experience price competition in all product lines and sectors. Competitors include privately and publicly held entities, and range from local, regional to international companies. Pact believes it competes effectively in all the sectors in which it operates through the quality and breadth of its product range, low cost manufacturing position, competitive pricing, provision of value-adding and innovative packaging solutions and Pact s ability to meet customer requirements for delivery, performance and technical assistance. Additionally, Pact s business is capital intensive and its broad geographic footprint and strategic locations of its manufacturing plants in close proximity to customers enable Pact to maintain security of supply and deliver freight cost advantages REGULATORY MATTERS Pact operates its business in compliance with all regulatory and governmental requirements including environmental, health and safety and related regulations. Certain products are subject to Government regulations such as dangerous goods legislation. Pact carries out the required procedures to ensure compliance with all applicable safety and product performance regulations of its products, often in conjunction with its customers PROPERTIES Pact s head office is located at Como Towers, Level 16, 644 Chapel Street, South Yarra, Victoria 3141, Australia. Pact has 66 operating facilities (62 manufacturing plants and four offices) across Australia, New Zealand and Asia. The majority of these facilities are leased on arm s length commercial terms. Of the leased properties, 17 manufacturing plants and one office are leased from Geminder Holdings or an associated entity ENVIRONMENT AND SUSTAINABILITY Environmental awareness and sustainability are core to Pact s values. This is ingrained in the culture of Pact. Pact seeks to minimise the impact of its own operations on the environment and also assist its customers to minimise the impact of their own product packaging and related processes. Pact s manufacturing operations primarily involve plastic moulding including blow moulding, injection and compression moulding and automated assembly processes of plastic packaging and components. Historically, the environmental impact of these processes has been minimal and Pact believes it meets current environmental standards in all material respects. To date, Pact s manufacturing operations have not been significantly affected by environmental laws and regulations. In providing sustainability, environmental, reconditioning and recycling services, Pact also assists its customers through the lifecycle of nominated product packaging use. These services include: optimising freight efficiencies and other carbon footprint minimisation measures; intermediate bulk container and drum collection, cleaning, reconditioning and recycling services; and fleet management services for reusable industrial packaging. 44

47 3.13 EMPLOYEES AND COMMUNITY Pact s businesses have approximately 3,500 employees. Of these approximately 2,200 are located in Australia, 900 in New Zealand and 400 in Asia. This large workforce is managed by a group of senior line managers that have considerable experience within the industry and in some cases a strong history with Pact s long established businesses. Pact relies on the contribution of all employees to drive the progress of its business. Pact is committed to being an employer of choice and recognises the importance of attracting and retaining the highest quality personnel. Due to Pact s scale, Pact is fortunate to be able to provide opportunities to employees that Pact has gained through its previous acquisitions. As a result of this, Pact has been able to attract and retain what it considers to be some of the highest calibre people in the packaging industry in the primary sectors in which it operates. The workforce is managed by centralised human resources functions in Australia and New Zealand. The majority of Pact s sites operate under enterprise bargaining agreements. To date, Pact s businesses have not been subject to any material work stoppages and management considers its employee relations to be positive. Pact also actively participates in local communities and aims to support social issues and causes identified by employees. Community involvement occurs through corporate donations, sponsorship, fund raising and employee participation OCCUPATIONAL HEALTH AND SAFETY Pact is committed to maintaining a strong safety culture. Its vision is to minimise injuries and incidents and to reduce the costs associated with workers compensation and asset protection. This culture is supported by Pact s practice of providing extensive training to employees as well as increasing managers capability and competence. Pact s safety management system assists in the identification of potential issues and hazards. A specialist team ensures that the safety management system is aligned to business needs. As a result of these initiatives Pact has a strong history in reducing its Lost Time Injury Frequency Rate (LTIFR) 52. Pact s LTIFR was 5.8 as at 30 June While Pact is focused on continuing to reduce its LTIFR, it represents approximately an 80% reduction since Lost time injury frequency rate (LTIFR) is the number of lost-time injuries per 1,000,000 hours worked. PACT GROUP PROSPECTUS 45

48 4. FINANCIAL INFORMATION

49 4. FINANCIAL INFORMATION 4.1 INTRODUCTION The financial information contained in this Section 4 has been prepared by Pact in connection with the Offer and also consolidates Pact Group Holdings Ltd and the Acquisitions as if the Acquisitions have occurred. The Acquisitions comprise Viscount Plastics (China) Pty Ltd, Asia Peak Pte Ltd, the remaining 49% shareholding in Cinqplast Plastop Australia Pty Ltd (including its controlled entity Steri-Plas Pty Ltd) and Ruffgar Holdings Pty Ltd (including its controlled entity Plastop Asia Inc and its associate Weener Plastop Asia Inc). As the Acquisitions will not occur until Shares have been allotted to successful Applicants under the Offer (described in Section 3.1.1), there is no historical statutory consolidated group financial information for Pact, which includes the Acquisitions. The financial information included in this Prospectus is intended to present potential investors with information to assist them in understanding what the underlying historical financial performance and cash flows of Pact Group Holdings Ltd and the Acquisitions would have been had Pact operated as a standalone consolidated entity for the financial year ended 30 June 2013, together with forecast financial information for FY2014. The historical financial information for FY2011 and FY2012 does not include the Acquisitions. References to PGH are references to the Company s business prior to both the Acquisitions and Listing (PGH). References to Pact are references to the Company s business after both the Acquisitions and Listing (Pact). References to the Company are references to Pact Group Holdings Ltd (the Company). The financial information for Pact contained in this Section 4 has been prepared by Pact and includes: pro forma historical financial information for PGH (Pro forma PGH Historical Results), being the: consolidated pro forma historical statements of income for FY2011, FY2012 and FY2013; consolidated pro forma historical statements of cash flows for FY2011, FY2012 and FY2013; and consolidated pro forma historical statement of financial position as at 30 June 2013; pro forma historical financial information for Pact (Pro forma Pact Historical Results) for FY2013, being the: Pact consolidated pro forma historical statement of income for FY2013; Pact consolidated historical statement of cash flows for FY2013; and Pact consolidated pro forma historical statement of financial position as at 30 June 2013; (together the Pro forma Historical Financial Information); and forecast financial information for Pact, being the: consolidated statutory forecast statement of income for FY2014; consolidated statutory forecast statement of cash flows for FY2014; (Statutory Forecast Financial Information) consolidated pro forma forecast statement of income for FY2014; and consolidated pro forma forecast statement of cash flows for FY2014; (Pro forma Forecast Financial Information) (together the Forecast Financial Information), collectively the Financial Information. PACT GROUP PROSPECTUS 47

50 Table 4.1 provides an overview of the Financial Information contained in this Section 4. Table 4.1: Overview of Financial Information Section Heading Page 4.2 Basis of preparation and presentation of the Financial Information Consolidated historical and forecast statements of income Historical and pro forma statement of financial position Liquidity and capital resources Consolidated pro forma historical and forecast statements of cash flows Management s discussion and analysis of the Pro forma Historical Financial Information Management s discussion and analysis of and assumptions underlying the Forecast Financial Information Sensitivity analysis Dividend policy 75 The information in this Section 4 should also be read in conjunction with the risks set out in Section 5, the Additional Financial Information in Section 10 and other information contained in this Prospectus. All amounts disclosed in this Section 4 are presented in Australian dollars unless otherwise noted and are rounded to the nearest 100,000 dollars. 4.2 BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL INFORMATION The Financial Information presented in Section 4 assumes that on Listing, Pact will include the Acquisitions. The Pro forma Historical Financial Information included in this Prospectus is intended to present potential investors with information to assist them in understanding what the underlying historical financial performance and cash flows of Pact would have been had Pact operated as a standalone consolidated entity for FY2013, on a consistent basis with the Forecast Financial Information. The Pro forma Historical Financial Information does not include FY2011 and FY2012 financial information for the Acquisitions. The Pro forma PGH Historical Results have been derived from the statutory audited accounts of PGH which have been prepared in accordance with the recognition and measurement principles of Australian Accounting Standards, issued by the Australian Accounting Standards Board, which are consistent with International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board (IASB). The financial information described as pro forma has however been adjusted and presented in a manner consistent with the recognition and measurement principles (but not all of the presentation and disclosure requirements) of all Australian Accounting Standards and IFRS, in that it reflects (i) the recognition of certain items in periods different from the applicable period under Australian Accounting Standards and IFRS, (ii) the exclusion of certain transactions that occurred in the relevant periods and (iii) the impact of certain transactions as if they occurred on or for the financial year ended 30 June Pact believes that this presentation provides useful information as it permits investors to examine what it believes to be (i) the underlying financial performance of its business presented on a consistent basis with the Forecast Financial Information and (ii) the financial position adjusted to reflect Listing and the Acquisitions as if these 48

51 transactions had occurred on or for the financial year ended 30 June The accounting policies of Pact have been consistently applied throughout the periods presented. Significant accounting policies of Pact relevant to the Financial Information are noted in Section 10 and are also disclosed in Note 2 to the financial statements in PGH s 30 June 2013 general purpose financial report which has been lodged with ASIC on 27 November Investors should also be aware that certain of the financial measures included in this Prospectus may be considered non-gaap financial measures ; these measures include EBIT and EBITDA. EBITDA and EBIT are non-lfrs key financial performance measures used by Pact, the investment community and Pact s Australian peers with similar business portfolios. Pact also uses EBITDA and EBIT for its internal management reporting as it better reflects what Pact considers to be its underlying performance. EBITDA and EBIT are calculated by excluding some items which are included within the statutory net profit attributable to equity holders. They are not statutory financial measures and are not presented in accordance with Australian Accounting Standards nor audited or reviewed in accordance with Australian Auditing Standards. FY2013 EBITDA is reported before the following: Interest and finance costs expense; Depreciation, amortisation and impairment; Mark to market revaluation gains and losses on cross currency interest rate swaps; and Taxation expense. The Pro forma Historical Financial Information and the Forecast Financial Information have been subject to reviews carried out in accordance with the Australian Standard on Assurance Engagements ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information by Ernst & Young Transaction Advisory Services Limited (Ernst & Young Transaction Services) whose Independent Limited Assurance Report is contained in Section 8. Investors should note the scope and limitations of the report. The Independent Limited Assurance Report on the Forecast Financial Information has been prepared solely in connection with the Offer of Shares in Australia and New Zealand and has been intentionally omitted from the Institutional Offering Memorandum being distributed in the United States. The FY2011, FY2012 and FY2013 general purpose statutory consolidated financial statements of PGH have been audited by Ernst & Young, who have issued unqualified audit opinions in respect of these periods. The FY2013 financial information of Viscount Plastics (China) Pty Ltd, Asia Peak Pte Ltd, Cinqplast Plastop Australia Pty Ltd (including its controlled entity Steri-Plas Pty Ltd) and Ruffgar Holdings Pty Ltd (including its controlled entity Plastop Asia Inc and its associate Weener Plastop Asia Inc) has been reviewed by Ernst & Young, who have provided a limited review opinion in respect of this information. Segment reporting The two operating segments described in Section of this Prospectus, being Pact Australia, and Pact International reflect PGH s reporting structure to its Chief Operating Decision Maker (CODM). PGH considers that the two operating segments are appropriate for segment reporting purposes under AASB 8 Operating Segments. These segments comprise the following operations: Pact Australia: manufacturer of a wide range of packaging products with 39 manufacturing plants across Australia. Pact International: manufacturer of a wide range of packaging products with 23 manufacturing plants in New Zealand and the higher growth markets of China, the Philippines and Thailand Preparation of Pro forma Historical Financial Information The Pro forma Historical Financial Information for Pact has been derived from the following: the FY2011, FY2012 and FY2013 audited statutory consolidated general purpose financial reports of PGH; and the FY2013 reviewed financial information of Viscount Plastics (China) Pty Ltd, Asia Peak Pte Ltd, Cinqplast Plastop Australia Pty Ltd (including its controlled entity Steri-Plas Pty Ltd) and Ruffgar Holdings Pty Ltd (including its controlled entity Plastop Asia Inc and its associate Weener Plastop Asia Inc). PACT GROUP PROSPECTUS 49

52 4. FINANCIAL INFORMATION (continued) The pro forma historical results in Section 4.3 have been presented before interest expense and income tax because Pact s corporate and capital structure following Listing will be materially different from that in place during the period prior to Listing. Accordingly, the historical statutory interest expense and income tax expense are not a meaningful representation of Pact s future earnings profile. Similarly the pro forma historical statement of cash flows in Section 4.6 has been presented to net cash inflow before interest, tax and financing activities. Refer to Section 10.2 for the statutory statements of income, financial position and cash flows for PGH. The Pro forma Historical Financial Information for FY2013 has also been adjusted to eliminate significant and pro forma items as set out in Section Investors should note that past results do not guarantee future performance Preparation of Forecast Financial Information The Forecast Financial Information has been prepared by the Directors based on an assessment of present economic and operating conditions, and on a number of best estimate general and specific assumptions regarding future events and actions, as set out in Sections and This information is designed to assist investors in assessing the reasonableness and the likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur. The Forecast Financial Information has been reviewed by Ernst & Young Transaction Services but has not been audited. Investors should note the scope and limitations of the Independent Limited Assurance Report on the Forecast Financial Information (refer to Section 8). Pact believes the best estimate assumptions when taken as a whole to be reasonable at the time of preparing this Prospectus. However, this information is not fact and investors are cautioned not to place undue reliance on the Forecast Financial Information. Investors should be aware that the timing of actual events and the magnitude of their impact might differ from that assumed in preparing the Forecast Financial Information and that this may have a material positive or negative impact on Pact s actual financial performance or financial position. Accordingly, neither Pact nor any other person can give investors any assurance that the outcomes discussed in the Forecast Financial Information will arise. The information in this Section 4 should be read in conjunction with the general assumptions as set out in Section 4.8.1, the specific assumptions as set out in Section 4.8.2, the sensitivities as set out in Section 4.9, the risk factors as set out in Section 5, the Additional Financial Information as set out in Section 10 and other information contained in this Prospectus. Pact has no intention to update or revise the Forecast Financial Information or other forward looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law or the ASX continuous disclosure obligations. The consolidated forecast statement of income for FY2014 has been presented on both a pro forma and statutory basis. The consolidated pro forma forecast statement of income for FY2014 is based on the consolidated statutory forecast statement of income after adjusting for certain significant and pro forma items and the impact of a full year of the amended capital structure following the listing. The consolidated statutory forecast statement of income for FY2014 is the best estimate of the financial performance that the Directors expect to report in Pact s audited statutory consolidated general purpose financial report for FY2014. Refer to Section for a reconciliation between the consolidated pro forma forecast statement of income and the consolidated statutory forecast statement of income for FY2014. The basis of preparation and presentation of the Forecast Financial Information, to the extent relevant, is consistent with the basis of preparation and presentation of the Pro forma Historical Financial Information for FY

53 4.3 CONSOLIDATED HISTORICAL AND FORECAST STATEMENTS OF INCOME Table 4.2 presents the consolidated pro forma historical statements of income for FY2011, FY2012 and FY2013 and the consolidated pro forma and statutory forecast statements of income for FY2014. Table 4.2: Consolidated historical and forecast statements of income Pro forma Historical Pro forma Forecast Statutory Forecast (Year ended 30 June, $ in millions) Notes PGH FY2011 PGH FY2012 PGH FY2013 Acquisitions FY2013 Pact FY2013 Pact FY2014 Pact FY2014 Sales revenue , , , ,151.6 Other revenue Expenses (802.1) (793.9) (924.2) (49.7) (973.9) (1,005.7) (965.0) EBITDA (before significant items) Depreciation and Amortisation (50.9) (52.5) (57.1) (2.8) (59.9) (52.8) (50.6) EBIT (before significant items) Significant items (2.3) 11.7 (30.1) EBIT Net interest expense (31.2) (72.4) Net profit before tax Income tax expense (34.2) (18.2) NPAT Minority interests (0.2) (0.2) NPAT attributable to shareholders Earnings per share (EPS) Notes: 1 Details of certain significant and pro forma items are contained in Section A reconciliation of pro forma forecast FY2014 NPAT to statutory forecast FY2014 NPAT is set out in Section Refer to Section 10.2 for PGH s statutory consolidated historical statement of income. PACT GROUP PROSPECTUS 51

54 4. FINANCIAL INFORMATION (continued) Description of certain line items Sales revenue Sales revenue represents revenue from sale of packaging and other products and services to customers. Expenses Expenses includes all costs of manufacturing to bring a product to its sale condition including direct and indirect materials, energy and labour costs. A large proportion of this cost relates to cost of materials (including plastic resin and steel). Expenses also includes labour costs, the costs of selling products, research and development costs and other administrative expenses. Depreciation and amortisation Depreciation and amortisation includes the depreciation of Pact s property, plant and equipment over its useful life and also the amortisation of patents, trademarks and licences over a finite period of time. Net interest expense Represents the net interest expense (including amortisation of costs associated with establishment of loan facilities) and income associated with all of Pact s outstanding indebtedness and cash balances. The statutory forecast net interest expense includes $19.2m of interest expense relating to the Promissory Note (as discussed in Section 9.2) Summary of significant and pro forma items Table 4.3 sets out the adjustments made to the historical results to remove the impact of significant and pro forma items for FY2013. Table 4.3: Summary of significant and pro forma items (Year ended 30 June, $ in millions) Notes PGH FY2013 Acquisitions FY2013 Pact FY2013 EBIT Business reorganisation programs Gain on business acquisitions and disposals 2 (26.0) (26.0) Mark to market on swaps and Existing Term Loan Facility 3 (3.8) (3.8) Holding company recharges 4 (7.4) (7.4) Public company costs 5 (1.8) (1.8) Total significant and pro forma items (14.0) 2.3 (11.7) EBIT before significant items Depreciation and amortisation EBITDA before significant items Notes: 1 Business reorganisation programs Relates to expenditure to optimise manufacturing operations principally relating to restructuring, relocation of equipment and property lease restructuring costs. These activities have commenced or are expected to commence in FY2014 with the majority of benefits flowing in future financial years. 2 Gain on business acquisitions and disposals One off gain where the fair value of assets acquired exceeded the amount paid for an acquisition undertaken or payments received exceeded the book value of assets disposed of. 3 Mark to market on swaps and Existing Term Loan Facility Relates to mark to market revaluation gains/losses on existing USD denominated debt and associated cross currency interest rate swaps. The Existing Term Loan Facility will be refinanced on Listing. 4 Holding company recharges Reflect the recoupment of costs incurred by PGH in FY2013 relating to Geminder Holdings. Minor services will continue to be provided by Pact to Geminder Holdings for a fee, as described in Section Public company costs An adjustment has been made to the FY2013 PGH financials to include an estimate of incremental annual corporate costs that Pact expects to incur as a listed company. These costs include listing fees, share registry fees, annual general meeting and annual report costs. 52

55 4.3.3 Reconciliation of consolidated statutory and pro forma forecast FY2014 statement of income Table 4.4 sets out the pro forma adjustments made to the forecast net profit before tax, tax expense and NPAT of Pact to reflect the operating and capital structure that will be in place following Listing as if it was in place as at 1 July These also include the removal of certain one-off transaction costs incurred in respect of the Offer and the phasing of certain costs associated with being a listed entity. Table 4.4: Reconciliation of consolidated statutory and pro forma forecast FY2014 statement of income (Year ended 30 June, $ in millions) Notes Net profit before tax FY2014 Tax FY2014 NPAT FY2014 Statutory 43.6 (18.2) 25.4 Pro forma EBIT adjustments Phasing of public company and listing costs 1 (0.4) 0.1 (0.3) Phasing of holding company recharges 2 (0.2) 0.1 (0.1) Full year effect of the Acquisitions (1.1) 2.5 Subtotal 3.0 (0.9) 2.1 Significant items Write-off of capitalised borrowing costs (1.1) 20.4 Swap break costs (0.6) 9.0 IPO transaction costs (1.6) 3.6 Mark to market on swaps and Existing Term Loan Facility (1.1) 2.7 Gain on investment in associate 8 (10.0) (10.0) Subtotal 30.1 (4.4) 25.7 Debt structure (12.4) 28.8 Adjustment to deferred tax liability Pro forma (34.2) 83.7 Notes: 1 Phasing of public company and listing costs The listed entity costs are based on Pact s estimate of the incremental annual costs that Pact will incur as a public company. These costs include listing fees, share registry fees, annual general meeting and annual report costs. The adjustment reflects the fact that the statutory forecast includes only a part-year of such costs. 2 Phasing of holding company recharges Holding company recharges of $0.2 million ($0.1 million, net of tax) reflect the recoupment of costs incurred by Pact relating to Geminder Holdings. Minor services will continue to be provided by Pact to Geminder Holdings for a fee, as described in Section Full year effect of the Acquisitions An adjustment has been made of $3.6 million ($2.5 million, net of tax) to reflect a full year of earnings from the Acquisitions as if these transactions had taken place on 30 June Write-off of capitalised borrowing costs Unamortised capitalised upfront fees of $21.5 million ($20.4 million, net of tax) relating to the Existing Term Loan Facility are assumed to be written off to the statement of income on repayment of the Existing Term Loan Facility. 5 Swap break costs Costs of $9.6 million ($9.0 million, net of tax) are expected to be incurred on early termination of existing cross currency interest rate swap arrangements in relation to the Existing Term Loan Facility. This assumption is based on the forecast foreign exchange assumptions in Table This cost will increase by $1.0 million if the AUD appreciates one cent against USD and will increase by $0.3 million if the NZD appreciates one cent against the USD and vice versa. 6 IPO transaction costs Expenses of the Offer are estimated at $45.9 million, of which $5.2 million ($3.6 million, net of tax) will be expensed to the statement of income for statutory reporting purposes. This excludes the write-off of capitalised borrowing costs and mark to market on swaps and the Existing Term Loan Facility. 7 Mark to market on swaps and Existing Term Loan Facility Reflects a reversal of $3.8 million ($2.7 million, net of tax) of the mark to market net revaluation gain on the Existing Term Loan Facility and associated cross currency and interest rate swaps. The Existing Term Loan Facility will be refinanced on Listing. 8 Gain on investment in associate Upon acquisition of the 49% of Cinqplast not currently owned (and its controlled entity Steri-Plas), the 51% held as investment in associate is eliminated and 100% acquired at fair value. This gives rise to an increase in goodwill of $30.3 million and a fair value gain on investment in associate of $10 million as the fair value increase on Pact s investment in Cinqplast at book value. 9 Debt structure Forecast interest income and expense has been adjusted by $41.2 million ($28.8 million, net of tax) to reflect the anticipated capital structure of Pact pro forma for Listing. Pro forma forecast NPAT reflects a full year of the revised capital structure as though the Offer was completed as at 30 June PACT GROUP PROSPECTUS 53

56 4. FINANCIAL INFORMATION (continued) 4.4 HISTORICAL AND PRO FORMA STATEMENT OF FINANCIAL POSITION Table 4.5 sets out the adjustments that have been made to the consolidated statement of financial position of PGH as at 30 June 2013 to prepare the pro forma consolidated statement of financial position for Pact. The adjustments include the impact of the operating and capital structure that will be in place immediately following Listing as if it had occurred or were in place as at 30 June Table 4.5: Consolidated historical and pro forma consolidated statement of financial position (As at 30 June 2013, $ in millions) PGH Acqui sitions Total adjust ments Pro forma Pact Current assets Cash and cash equivalents (29.9) Trade and other receivables (127.6) Inventories Derivatives 4.2 (0.7) 3.5 Prepayments Total current assets (158.2) Non-current assets Trade and other receivables Property, plant & equipment Investments (11.9) 4.7 Intangible assets Derivatives 56.3 (56.3) Deferred tax assets Total non-current assets Total assets 1, (156.7) 1,185.3 Current liabilities Trade & other payables Interest bearing loans and borrowings 7.5 (7.2) 0.3 Provisions Derivatives Total current liabilities Non-current liabilities Provisions and other payables Interest bearing loans and borrowings (344.7) Non-current debt to related parties 1,069.4 (1,069.4) Derivatives 0.7 (0.7) Deferred tax liabilities Total non-current liabilities 2, (1,409.5) Total liabilities 2, (1,381.8) Net assets (1,076.7) , Equity Contributed equity , ,476.6 Reserves (932.3) (916.2) Retained profits (324.5) 16.5 (44.0) (352.0) Minority interest Total Equity (1,076.7) ,

57 The pro forma Pact statement of financial position reflects the following key steps: Funds raised from the Offer of $648.8 million from investors in respect of Offer Shares and the drawdown of the New Debt Facilities of $605.7 million, which have been applied to fund the repayment of the Promissory Note and part fund the repayment of the Existing Term Loan Facility. For accounting purposes, borrowing costs of $4.0 million incurred on the New Debt Facilities have been offset against the amounts of the New Debt Facilities. Total consideration for the Acquisitions comprising cash of $48.7 million and Acquisition Shares of $36.2 million to acquire net assets of $60.1 million, which after the accounting effect of the Acquisitions on either a fair value or common control basis gives rise to goodwill of $63.1 million. The Acquisitions have been consolidated for accounting purposes under the adjustments column. The issue of shares to Geminder Holdings prior to the Offer for cash of $255.0 million, and the issue of Shares to Geminder Holdings prior to the Offer by way of a new promissory note for $376.9 million. The new promissory note is applied to repay in part the existing interest bearing Promissory Note of $1,069.4 million. After assignment of a receivable amount owed by Geminder Holdings to PGH of $127.6 million, the balance of the existing interest bearing Promissory Note is to be repaid in full using proceeds of $564.9 million received under the Offer. Geminder Holdings cash subscription proceeds will be used together with the balance of funds from the Offer to fund cash consideration for the Acquisitions and repayment of the Existing Term Loan Facility. The Existing Term Loan Facility of $907.1 million is repaid with proceeds from the New Debt Facilities as described above, $290.2 million proceeds of the Offer, the Geminder Holdings cash subscription and net cash balances pro forma for the Acquisitions. The adjustments include the accounting effect of the above including the termination of associated derivatives. Total transaction costs of $71.2 million comprising $45.9 million cash and $25.3 million non-cash. The cash transaction costs have been recorded in trade and other payables as they are assumed to be paid in accordance with trading terms. The adjustments column includes the accounting for the non-cash component, which relates to the write-off of capitalised borrowings costs and the reversal of a net revaluation gain relating to the mark to market of the US dollar denominated loan under the Existing Term Loan Facility and associated cross currency interest rate swaps. These amounts have been tax effected to the extent they are considered tax deductible and a corresponding deferred tax asset recognised. The acquisitions of Viscount Plastics (China) Pty Ltd and Asia Peak Pte Ltd have been accounted for under the common control exemption of AASB 3 Business Combinations with the difference between the consideration paid and the net assets acquired of $15.8 million recorded in the Common Control Reserve. The acquisitions of Cinqplast Plastop Australia Pty Ltd, Steri-Plas Pty Ltd, Ruffgar Holdings Pty Ltd, Plastop Asia Inc, and the 50% investment in Weener Plastop Asia Inc, have been recorded at their net asset book values, and the difference between their net asset book values and the consideration paid recognised provisionally as intangible assets. It is proposed that fair value accounting will be undertaken in relation to these acquisitions in accordance with AASB 3 Business Combinations which may give to rise to a different determination of intangible assets at 30 June These adjustments include assumptions relating to matters that are known as at the date of preparing this Prospectus. The Pro forma Statement of Financial Position is therefore provided for illustrative purposes only and is not represented as being necessarily indicative of Pact s view on its future financial position Expected post balance date movements Seasonality of working capital and debt balances Pact s working capital requirements vary across the financial year with seasonality typically leading to an increase in working capital in the July to December period and a reduction in working capital in the January to June period. Pact expects to make additional drawings against its Existing Term Loan Facility to fund seasonal working capital requirements between 30 June 2013 and Listing. Pact estimates that immediately following Listing these seasonal drawings will contribute approximately $86.0 million of additional Net Debt compared with pro forma 30 June 2013 balances. These seasonal drawings will be reflected in the 31 December 2013 balance sheet and are expected to reverse in line with historical working capital trends during the January to June 2014 period. PACT GROUP PROSPECTUS 55

58 4. FINANCIAL INFORMATION (continued) Mark to market of Existing Term Loan Facility There will likely be mark to market revaluation adjustments on the Existing Term Loan Facility and associated cross currency and interest rate swaps given the likelihood of movements in the AUD/USD and AUD/NZD exchange rates between 30 June 2013 and Listing. Pact has not estimated mark to market movements in its statutory forecast FY2014 NPAT, other than the mark to market balance that exists at 30 June 2013 Accounting for Acquisitions Pact has determined that the acquisition of each of the Acquisitions will be accounted for as a business combination under the AASB 3 Business Combinations, except for when the common control exemption is adopted. The common control exemption is being applied for the acquisition of Viscount Plastics (China) Pty Ltd and Asia Peak Pte Ltd. The entities currently not fully owned and controlled by Pact and its associates will be accounted for at fair value, being: Ruffgar Holdings Pty Ltd and its controlled entity Plastop Asia Inc and its associated entity Weener Plastop Asia Inc; and the remaining 49% shareholding in Cinqplast Plastop Australia Pty Ltd and its fully controlled entity Steri-Plas Pty Ltd. The assets and liabilities of these entities will be fair valued as at the date of their acquisition. The purchase consideration is expected to be the entity s value based on each entity s forecast FY2014 EBITDA, on a consistent basis to the IPO proceeds determination. These acquisitions are expected to generate additional intangible assets of $63.1 million, which is reflected in the consolidated pro forma statement of financial position, on a provisional basis until the acquisition accounting is completed. This intangible may become goodwill upon completion of the acquisition accounting. The pro forma statement of financial position is therefore provided for illustrative purposes only and is not represented as being necessarily indicative of Pact s view on its future financial position Intangible assets PGH had $250.0 million of goodwill as at 30 June 2013 primarily relating to acquisitions completed prior to 30 June Pro forma for the Acquisitions, Pact will have goodwill of $313.1 million. Goodwill is tested for impairment annually as at 30 June and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each Cash Generating Unit (CGU) or group of CGUs to which the goodwill relates. Carrying value assessments reflect the higher of an asset s fair value less costs to sell and its value in use. 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 assessments of value and risk. Significant judgements and estimates are applied in estimating the future cash flows including the key assumptions adopted. The key estimates and assumptions used to determine the value in use of an asset or CGU are based on Pact s current expectations and are considered to be reasonably achievable. Refer to Section 10 for further detail on the key assumptions. 56

59 4.5 LIQUIDITY AND CAPITAL RESOURCES General Pact s principal sources of funds are cash flows from operations and borrowings under its credit facilities. Pact expects that it will finance its ongoing operations with a combination of operating cash flows and bank borrowings. Section provides an overview of Pact s intended financing facilities that will be in place on Listing. Pact s cash position as outlined in the consolidated pro forma statement of financial position (refer to Table 4.5) and anticipated cash flows from operations are expected to provide sufficient liquidity to meet Pact s currently anticipated cash requirements. Pact s ability to generate sufficient cash depends on its future performance which, to a certain extent, is subject to a number of factors beyond its control including general economic, financial and competitive conditions. Over time, Pact may seek additional debt funding from a range of sources to diversify its funding base to reduce reliance on the bank finance market and to manage its exposure to interest rate risk on long-term borrowings. Quantitative and qualitative disclosures about market risk sensitive instruments are included in Section Investors should also refer to funding related risks described in Section of this Prospectus Working capital Pact s working capital requirements vary throughout the course of the year. Seasonality typically leads to an increase in working capital prior to the December period which then reduces as inventory converts to cash and working capital demands reduce through the six month period prior to the financial year end. These seasonal variations have been historically funded by operating cash flows and through revolving credit facilities (refer to Section for a description of Pact s intended financing facilities following Listing). Working capital balances have also historically been impacted as a result of management actions to reduce working capital prior to the June year end. Whilst management focuses on working capital throughout the year, there is a specific drive to reduce working capital each June ahead of year end close Capital expenditure Pact maintains a disciplined approach to capital expenditure, with all key capital projects subject to strict approval protocols and targeted returns hurdles. Pro forma capital expenditure in FY2013 for Pact was $48.6 million and covered expenditure on business expansion, cost saving initiatives, profit and efficiency improvement initiatives, occupational health and safety upgrades, and general maintenance projects. Capital expenditure is typically funded through Pact s operating cash flows and bank borrowings. Pact has historically targeted capital expenditure of approximately 20% of EBITDA Capitalisation and indebtedness Table 4.6 sets out the capitalisation and indebtedness of PGH as at 30 June 2013 as reported in its statutory accounts and for Pact as adjusted after giving pro forma effect to the impact of the Offer, the Acquisitions, and the New Bank Facilities (as defined below) as if the transactions had occurred on 30 June PACT GROUP PROSPECTUS 57

60 4. FINANCIAL INFORMATION (continued) Table 4.6: Capitalisation and indebtedness (As at 30 June 2013, $ in millions) Notes PGH Statutory (before Completion of the Offer and Acquisitions) Pro forma Pact (following Completion of the Offer and Acquisitions) Cash and cash equivalents 22.9 Financial instruments Current interest bearing liabilities 2 (1.1) (0.3) Non-current debt payable to related party 3 (1,069.4) Non-current interest bearing liabilities 4 (1.0) (602.7) Relates to Existing Term Loan Facility Financial instruments Current interest bearing liabilities 6 (6.4) Non-current interest bearing liabilities 7 (931.4) Net total indebtedness (1,926.9) (599.8) Total equity (1,076.7) Capital employed Notes: 1 Financial instruments Revaluation of foreign exchange forward contracts relating to the hedging of highly probable forecasted purchases or payment obligations. 2 Current interest bearing liabilities Represents current portion of finance lease liabilities, net of capitalised borrowing costs. 3 Non-current debt payable to related party (statutory) Related party debt (Promissory Note) to be paid at Listing as described in Section Non-current interest bearing liabilities (pro forma) Represents balance of the New Bank Facility (net of capitalised costs) and finance leases of $1.0 million. 5 Financial instruments (statutory) Value of derivatives associated with the Existing Term Loan Facility. 6 Current interest bearing liabilities (statutory) Represents current portion of the Existing Term Loan Facility net of capitalised borrowing costs. 7 Non-current interest bearing liabilities (statutory) Represents non-current portion of the Existing Term Loan Facility net of capitalised borrowing costs. Net Debt as at 30 June 2013 (pro forma for the Offer and the Acquisitions) is $603.0 million and reflects current and non-current interest bearing liabilities including finance leases net of cash and cash equivalents Financing facilities Pact s intended credit facilities following Listing are summarised in Table 4.7. Table 4.7: Credit facilities following Listing Key credit facilities after IPO Notes Commitment Pro forma utilisation as at 30 June 2013 New Bank Facilities 1, 2 $590 million and NZ$180 million $605.7 million Working Capital Facility 1 $75 million Nil Notes: 1 Refer to Section for further details. 2 NZ$ facilities converted at AUD/NZD Existing Term Loan Facility In May 2013, Pact Group Industries (ANZ) Pty Ltd (PGI) (a wholly owned subsidiary of the Company) entered into two secured facilities being a US$885m US Term Loan B (TLB) and a Revolving Credit Facility (RCF) comprising committed lines of $75m and NZ$30m (together, the Existing Term Loan Facility). Key terms of the TLB included a seven year tenor, 1.0% per annum amortisation, a minimum 1.0% LIBOR base rate and financial covenant ratios relating to levels of leverage and cash interest coverage. PGI entered into cross currency interest rate swaps in connection with the TLB. Key terms of the RCF included a five year tenor, no amortisation and the same covenant ratios as the TLB. The Existing Term Loan Facility will be repaid at Listing using proceeds from the Offer and drawdown of the New Bank Facilities. 58

61 New Bank Facilities The Company has received binding commitment letters in relation to new 3 and 5 year syndicated debt facilities (the New Bank Facilities) comprising: a $295 million three year term revolving cash advance facility; a $295 million five year term revolving cash advance facility; a NZ$90 million three year term revolving cash advance facility; and a NZ$90 million five year term revolving cash advance facility. The New Bank Facilities will have the benefit of a security package under which the Company and various of its Subsidiaries will grant cross guarantees and first ranking security over all of their assets to a security trustee, who will hold that security for the benefit of the new financiers, certain hedge providers and providers of working capital facilities. The New Bank Facilities require that the guarantees and security be given by the Company and sufficient of its Subsidiaries so that 85% of Pact s total EBITDA and tangible assets are subject to these obligations. The availability of the New Bank Facilities is subject to satisfaction of various conditions precedent, including Listing and other conditions precedent usual for a facility of this nature. Interest on the New Bank Facilities will be a variable rate based on the relevant Australian or New Zealand bank bill rate (being BBSY and BKBM), plus a margin. The margins will be determined against a pricing grid by reference to Pact s leverage and the term of the relevant tranche of the facilities. If any facility is not fully drawn, it will attract a commitment fee equal to 50% of the applicable margin on the committed but undrawn funds under that facility. The New Bank Facilities contain certain representations, undertakings and events of default which are usual for facilities of this nature. Any breach of the representations or undertakings, or the occurrence of an event of default, may lead to the funds borrowed becoming due and the facilities being cancelled. The Company expects to remain in compliance with the terms and conditions of the New Bank Facilities. In addition, the New Bank Facilities include a review event, which will occur if any person acquires control, whether direct or indirect, of more than 50% of the issued share capital of the Company or otherwise gains control within the meaning of the Australian Corporations Act, in each case without the consent of the financiers. If a review event occurs, the parties will be required to try and negotiate revised terms for the New Bank Facilities. If agreement cannot be reached within a certain period, then it may lead to some or all of the funds borrowed becoming due and the New Bank Facilities being cancelled. The New Bank Facilities will also contain financial undertakings usual for facilities of this nature, including ensuring that: the Earnings Gearing Ratio does not exceed 3.75 times until 31 March 2014 and 3.50 times thereafter (the Earnings Gearing Ratio is the ratio of Net Debt to EBITDA); and the Interest Cover Ratio is at least 3.5 times (the Interest Cover Ratio is the ratio of EBITDA to Senior Interest). Senior Interest means interest expense in respect of all financial indebtedness of Pact, other than subordinated debt. The Company expects to remain in compliance with the financial undertakings of the New Bank Facilities. Various adjustments will be made to Pact s EBITDA and interest expense for the purposes of determining compliance with the financial undertakings. In addition to the New Bank Facilities, Pact has an existing bilateral Working Capital Facility (the Working Capital Facility) comprising a variety of lines including: overdrafts; trade finance; letters of credit; bank guarantees; and other transactional banking services. The total limit under the various lines is approximately $75 million. PACT GROUP PROSPECTUS 59

62 4. FINANCIAL INFORMATION (continued) Contractual obligations and commercial commitments Table 4.8 summarises Pact s contractual obligations and commitments pro forma for completion of the Acquisitions and Listing. Table 4.8: Contractual obligations and commercial commitments Payments due by period Pro forma (As at 30 June 2013, $ in millions) Notes Total <1 year 1-5 year(s) >5 years New Bank Facilities Finance lease obligations Operating lease commitments Capital expenditure obligations Total Notes: 1 Finance lease obligations Reflects Pact s finance leases and hire purchase agreements for various items. 2 Operating lease commitments Reflects leases for buildings, plant and equipment. Rental payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. Property leases generally provide Pact with a right of renewal at which time all terms are renegotiated. 3 Capital expenditure obligations Reflects contracted capital projects at year end that were not recognised on balance sheet Off-balance sheet arrangements From time to time Pact has in place various parent and bank guarantees as off-balance sheet arrangements. Historically, Pact has not used special purpose vehicles or similar financing arrangements. Pact does not have any off balance sheet financing arrangements with any of its affiliates or with unconsolidated related entities or other related entities Contingent liabilities From time to time, Pact may be involved in litigation relating to claims arising out of its operations. Pact is not a party to any legal proceedings that are expected, individually or in aggregate, to have a material adverse effect on its business, financial conditions or operating results in the current or prior years Quantitative and qualitative disclosures about market risk Pact s activities expose it to a variety of financial risks, including market risk (including foreign currency risk, interest rate risk, and commodity price risk), liquidity risk and credit risk. This section describes information about Pact s exposure to these risks as well as the objectives, policies and processes for measuring and managing the risks. Primary responsibility for identification and control of financial risks rests with the Treasury Risk Management Committee operating within an approved policy under the authority of the Board. The policy provides for Pact to enter into derivative transactions, principally forward currency contracts, cross currency interest rate swaps and interest rate swaps as appropriate to manage the interest rate and currency risks arising from Pact s operations and its financing activities. Trading of a speculative nature is prohibited. Pact uses various methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to foreign exchange and interest rate risk and assessments of existing market positions and market forecasts for interest and foreign exchange rates. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts. Market risk: Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise interest rate risk, currency risk and commodity price risk. Financial instruments affected by market risk include cash, loans and borrowings and derivative financial instruments. Interest rate risk: Pact is exposed to interest rate risk as it borrows funds at floating rates. Interest rate risk is the risk that Pact will be adversely affected by movements in floating interest rates that will increase the cost of floating rate debt. Pact s exposure to market interest rates relates primarily to its long-term debt obligations. 60

63 Pact constantly monitors and analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative financing options, alternative hedging strategies and the mix of fixed and variable interest rates. Pact seeks to manage its finance costs by assessing and, where appropriate, utilising a mix of fixed and variable rate debt. Borrowings at fixed rates are carried at amortised cost and it is acknowledged that fair value exposure is a by-product of Pact s attempt to manage its cash flow volatility arising from interest rate changes. To manage this mix in a cost-efficient manner, Pact may enter into interest rate swaps or options, in which Pact agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps or options are designated to hedge underlying debt obligations. Foreign currency risk: Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Pact s exposure to the risk of changes in foreign exchange rates relates to Pact s (i) financing activities; (ii) operating activities (when revenue, expense or capital items are denominated in a currency different from Pact s presentation currency) and (iii) net investments in foreign subsidiaries. Pact s predominant foreign exchange exposures are to the United States Dollar (US$) and New Zealand Dollar (NZ$). Pact utilises forward foreign currency contracts to eliminate or reduce currency exposures of individual transactions once Pact has entered into a firm commitment for a sale or purchase. In respect of raw materials, Pact will take forward cover at the earlier of when the commitment arises and three months prior to when the obligation falls due for payment. This ensures greater alignment between the price paid for raw materials and general market conditions. Commodity price risk: Pact is exposed to price risk in relation to a number of raw materials. Pact seeks to mitigate this risk by incorporating rise and fall clauses or other price review mechanisms in contracts with customers where possible. Counterparty credit risk: Credit risk arises from the potential failure of counterparties to meet their obligations at the maturity of contracts. Pact is exposed to credit risk arising from its operating activities (primarily from customer receivables) and financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The maximum exposure to credit risk arising from potential default of the counterparty is equal to the carrying amount of the financial assets. Credit risks related to balances with banks and financial institutions are managed by Treasury in accordance with the approved policies. Such policies only allow financial derivative instruments to be entered into with high credit quality financial institutions. The maximum exposure to credit risk (by class of recognised financial assets at the end of the reporting period) is equivalent to the carrying amount as presented in the statement of financial position. Liquidity risk: Liquidity risk arises from the financial liabilities of Pact and Pact s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due. Liquidity risk management involves maintaining available funding and ensuring the consolidated entity has access to an adequate amount of committed credit facilities. Pact s objective is to maintain a balance between continuity of funding and flexibility through the use of loans, bank overdrafts and finance leases. Pact manages its liquidity risk by monitoring the total cash inflows and outflows expected on an ongoing basis. 4.6 CONSOLIDATED PRO FORMA HISTORICAL AND FORECAST STATEMENTS OF CASH FLOWS Table 4.9 presents the consolidated pro forma historical statements of cash flows for FY2011, FY2012 and FY2013 and the consolidated pro forma and statutory forecast statements of cash flows for FY2014. The forecast statement of cash flows for FY2014 has been presented on both a pro forma and statutory basis. The consolidated pro forma forecast statement of cash flows for FY2014 is based on the consolidated statutory forecast statement of cash flows after adjusting for certain significant and pro forma items. The consolidated statutory forecast statement of cash flows for FY2014 is the best estimate of the cash flows that the Directors expect to report in Pact s audited statutory consolidated general purpose financial report for FY2014. Refer to Section for a reconciliation between the consolidated pro forma forecast statement of cash flows and the consolidated statutory forecast statement of cash flows for FY2014. PACT GROUP PROSPECTUS 61

64 4. FINANCIAL INFORMATION (continued) Table 4.9: Consolidated pro forma historical and forecast statement of cash flows Pro forma Pro forma Historical Forecast (Year ended 30 June, $ in millions) Notes PGH FY2011 PGH FY2012 PGH FY2013 Acquisitions FY2013 Pact FY2013 Pact FY2014 Statutory Fore cast Pact FY2014 EBITDA Change in net working capital (5.2) 10.2 (13.7) 0.7 (13.0) Change to other assets and liabilities 9.5 (13.6) (8.7) 0.9 (7.8) (0.5) (0.4) Non-cash items in EBITDA (0.5) (0.8) (1.2) (1.2) Net cash inflow from operating activities before interest and tax Proceeds for sale of plant and equipment Business reorganisation programs (8.4) (5.3) (16.3) Purchase of businesses and subsidiaries (14.0) (8.7) (109.0) (2.8) (111.8) (0.2) (2.7) Proceeds on disposal of businesses and subsidiaries Dividends received Capital expenditure (32.9) (36.7) (43.8) (4.8) (48.6) (36.0) (35.4) Net cash inflow before interest, tax and financing activities Net interest paid (29.7) (55.6) Income tax paid (24.5) (22.4) Proceeds from issue of shares to Geminder Holdings Offer related items Proceeds from the Offer Payment for businesses acquired in IPO and repayment of Promissory Note (613.6) Net reduction of debt facilities from IPO proceeds (290.2) Swap break costs (9.6) IPO transaction costs (26.5) FX translation difference on foreign debt (5.8) Net cash flow before dividends Illustrative Dividends 3 (55.9) Net cash flow Notes: 1 Summary of significant and pro forma items is provided in Table Net cash flow before dividends is available for further debt repayment. It has been assumed for the purpose of the interest calculation in Table 4.2 that net cash flow before dividends has been used to repay debt and there is no dividend payment made in FY Dividends are presented for illustrative purposes only. Pact s dividend policy is set out in Section

65 4.6.1 Pro forma adjustments to the historical consolidated statement of cash flows Table 4.10 sets out the pro forma adjustments to the historical statement of cash flows for FY2013. Table 4.10: Pro forma adjustments to the statutory consolidated statement of cash flows for FY2013 Pro forma Historical (Year ended 30 June, $ in millions) Notes PGH FY2013 Acquisitions FY2013 Pact FY2013 Statutory operating cash inflow before interest, tax and financing activities 64.5 (0.4) 64.1 Pro forma adjustments Pro forma impact of public company costs 1 (1.8) (1.8) Pro forma impact of holding company recharges 2 (7.4) (7.4) Business reorganisation programs Pro forma net cash inflow before interest, tax and financing activities Notes: 1 Pro forma impact of public company costs An adjustment has been made to the FY2013 PGH financials to include an estimate of the public company costs that would have been incurred by Pact based on pro forma forecast FY2014 public company costs. 2 Pro forma impact of holding company recharges An adjustment has been made to the FY2013 PGH cash flow to reflect the recoupment of costs incurred by PGH in FY2013 relating to Geminder Holdings. 3 Business reorganisation programs Relate to costs incurred to optimise manufacturing operations principally relating to restructuring, relocation of equipment and property lease restructuring costs Reconciliation of consolidated statutory to pro forma forecast consolidated statement of cash flows Table 4.11 sets out the pro forma adjustments to the consolidated statutory forecast statement of cash flows for FY2014 to reflect the full year impact of the capital structure that will be in place following Listing. These also include the removal of certain one-off transaction costs incurred in respect of the Offer. PACT GROUP PROSPECTUS 63

66 4. FINANCIAL INFORMATION (continued) Table 4.11: Reconciliation of consolidated statutory to pro forma adjustments to the forecast consolidated statement of cash flows (Year ended 30 June, $ in millions) Notes FY2014 Statutory net cash flow 28.0 Capital expenditure 1 (0.6) Business reorganisation programs Purchase of businesses and subsidiaries Dividends received 4 (0.8) Net interest paid Income tax paid 1 (2.1) Full year effect of the Acquisitions Phasing of public company costs 1 (0.4) Phasing of holding company recharges 6 (0.2) Proceeds from issue of shares to Geminder Holdings 7 (255.0) Offer related items Proceeds from the Offer 8 (648.8) Payment for businesses acquired in IPO and repayment of the Promissory Note Net reduction of debt facilities from IPO proceeds Swap break costs IPO transaction costs FX translation difference on foreign debt Pro forma net cash flow before dividends Notes: 1 Phasing of public company costs, net interest paid, income tax paid and capital expenditure Payments have been adjusted to reflect the pro forma adjustments to listed entity costs, net interest expense, income tax and capital expenditure noted in the consolidated pro forma forecast statements of income and cash flows. 2 Business reorganisation programs Relates to costs incurred to optimise manufacturing operations principally relating to restructuring, relocation of equipment and property lease restructuring costs. 3 Purchase of business and subsidiaries Reflects expected one off $2 million outflow relating to a deferred acquisition payment expected in December Dividends received Represents Pact s share of forecast dividends to be received in respect of its 50% shareholding in Weener Plastop Asia Inc. 5 Full year effect of the Acquisitions An adjustment has been made to the historical reporting periods to reflect a full year of operating cash flows from the Acquisitions as if these transactions had taken place on 30 June Phasing of holding company recharges Holding company recharges reflect the recoupment of costs incurred by PGH relating to Geminder Holdings prior to the IPO. Minor services will continue to be provided, as described in Section Proceeds from issue of shares to Geminder Holdings Reflects the cash proceeds from the issue of shares prior to the Offer as discussed in Section Proceeds from the Offer and net reduction in debt facilities The Offer is assumed to raise funds of $648.8 million, of which $290.2 million will be used to pay down the Existing Term Loan Facility. 9 Payment for businesses acquired in IPO and repayment of Promissory Note In connection with the Offer, Pact has entered into conditional share purchase agreements to acquire, subject to Shares being allotted to successful Applicants under the Offer, interests in certain entities in which it, Geminder Holdings or related entities of Geminder Holdings already have an interest. Part of the proceeds from the Offer will be applied to settle the net balance of the Promissory Note. 10 IPO transaction costs and swap break costs Reflects the expected one-off cash transaction costs and swap break costs relating to the Offer of $36.1 million. 11 FX translation difference on foreign debt Represents the cash difference arising as a result of outgoing NZD denominated debt valued at 30 June 2013 versus incoming NZD denominated debt valued at forecast foreign exchange assumptions as shown in Table

67 4.7 MANAGEMENT S DISCUSSION AND ANALYSIS OF THE PRO FORMA HISTORICAL FINANCIAL INFORMATION Set out below is a discussion of the general factors affecting Pact s operating results and management s discussion and analysis of the Pro forma Historical Financial Information for the historical periods included in this Section Significant factors affecting the operating results of Pact Below is a brief outline of the main factors which affected PGH s operating and financial performance in FY2011, FY2012 and FY2013 and which the Directors expect may continue to affect Pact s operating and financial performance in the future. The outline of these general factors is intended to provide a summary only and does not intend to identify all factors that affected PGH s historical operating and financial performance, nor all aspects that may impact Pact s future performance. The information in this Section should also be read in conjunction with the risk factors set out in Section 5 and other information contained in this Prospectus. Macroeconomic conditions Historical demand for Pact s products has been driven by a number of economic factors including economic growth and growth in retail markets in each of the countries where Pact operates, and rising disposable incomes and consumer consumption generally. See Sections and for further detail on these macroeconomic drivers. Pact s operations were impacted by a softening in general demand from customers as a result of a subdued consumer demand in the post Global Financial Crisis (GFC) environment in FY2012 and FY2013 in Australia and New Zealand. Packaging industry trends Historical demand for Pact s products has been driven by increased demand for rigid plastics packaging products as rigid plastics packaging has replaced traditional glass, metal and paper packaging. Increasingly a focus on research and development and innovation has positioned Pact to capitalise on this trend as customers increasingly demand more attractive modern packaging as a way to differentiate products in the market. Sales growth Pact has increased revenue and market share across its targeted markets through both organic growth and acquisitions. As a result of this activity during the historical period, Pact has expanded its customer base, geographical presence and products lines. During the period from FY2011 to FY2013, Pact completed five acquisitions and consolidated its market position by focusing on providing customers with high levels of quality and service to continue to drive demand. Customer wins and losses Pact historically has had customer wins and losses as part of normal business; however, Pact has generally experienced long term relationships with key clients and a strong history of regular contract renewals. Business re-organisation programs Pact s earnings historically have been impacted by acquisition related business reorganisation programs that have led to improved operating performance of the business through investment of capital, manufacturing cost reductions and productivity improvements. Pact s acquisitions over the historical period have provided opportunities for these programs to be implemented to drive synergy benefits and achieve economies of scale. Raw material prices To manufacture its products, Pact uses large quantities of raw materials, particularly plastic resins. Plastic resins are subject to price fluctuations, including those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which resins are produced. Resin prices are denominated in USD and fluctuations in AUD/USD or NZD/USD exchange rates may also impact the cost of resin purchased by Pact. PACT GROUP PROSPECTUS 65

68 4. FINANCIAL INFORMATION (continued) Over the historical period, there have been movements in resin prices which have impacted Pact s profitability. Margins are negatively impacted in the short term when plastic resin costs increase and are positively impacted when plastic resin costs decrease. Pact works to ensure any major fluctuations are managed through regular sale price reviews. Pact s ability to manage volatility in resin prices and other variable costs including labour, energy and freight has enabled it to maintain relatively stable gross margins over time as shown in the chart below. Pact s gross margin percentage (indexed) vs. resin price index from FY2011 to September Resin price index (3 month rolling average) Gross margin index (3 month rolling average) Sep10A Dec10A Mar11A Jun11A Sep11A Dec11A Mar12A Jun12A Sep12A Dec12A Mar13A Jun13A Sep13A Labour costs Labour costs represent a significant proportion of Pact s historical cost structure. Pact employs approximately 3,500 employees with the majority covered by Enterprise Bargaining Agreements. During the period FY2011 to FY2013, Pact s employee costs as a percentage of total revenue have remained constant in the range of 24% to 25%. Pact s relations with employees remain stable and there have been no significant work stoppages or other labour disputes during the past three years Year-on-year management discussion and analysis The following management discussion of the Pro forma Historical Financial Information in Section and Section discusses the year on year movements in Pro forma PGH Historical Results. Management discussion and analysis of the Pro Forma Pact Historical Results is not possible given that there is no financial information for Pact prior to FY Pro forma FY2013 compared to pro forma FY2012 Table 4.12: Selected pro forma statement of income and cash flow items: FY2012 and FY2013 Selected Income Statement Items (Year ended 30 June, $ in millions) PGH FY2012 PGH FY2013 Change (%) Sales Revenue , % EBITDA (before significant items) % EBITDA Margin 19.1% 17.1% EBIT (before significant items) (1.3%) EBIT Margin 13.7% 11.9% 66

69 Selected Cash Flow Items (Year ended 30 June, $ in millions) PGH FY2012 PGH FY2013 Change (%) EBITDA % Change in net working capital 10.2 (13.7) n.m. Proceeds from sale of plant and equipment n.m. Capital expenditure (36.7) (43.8) 19.3% Net cash inflow before interest, tax and financing activities (46.1%) Note: n.m. denotes a percentage movement not considered meaningful. Sales Revenue Sales revenue increased by 13.9% ($134.4 million) from $969.3 million in FY2012 to $1,103.7 million in FY2013. The increase was primarily due to revenue contribution from acquisitions completed during FY2013, including the acquisition of a large rigid plastics packaging and material handling company operating in Australia, New Zealand and Asia. The increase in revenue was also driven by the commissioning of a new thin wall injection moulding facility to support a major customer, and increased sale prices as higher input costs were recovered from customers. This was offset in part by a reduction in volumes from a large customer. EBITDA and EBITDA margin EBITDA for FY2013 increased 1.6% ($2.9 million), from $185.3 million in FY2012 to $188.2 million in FY2013. This represented a decrease in EBITDA margin from 19.1% in FY2012 to 17.1% in FY2013. The increase in EBITDA was due to the acquisitions and new business described above, the year on year effect of net customer movements and the impact of cost savings associated with business reorganisation programs. The decrease in EBITDA margin was primarily due to the contribution from businesses acquired during the period which were operating at lower EBITDA margins. EBIT EBIT for FY2013 decreased 1.3% ($1.7 million), from $132.8 million in FY2012 to $131.1 million in FY2013 primarily due to a $4.6 million increase in depreciation and amortisation from $52.5 million in FY2012 to $57.1 million in FY2013 that offset the increases in EBITDA described above. This increase in depreciation and amortisation was due to the increased level of capital expenditure throughout FY2012 and FY2013 to support growth and additional depreciation associated with assets acquired during the period. Working capital Movements in working capital generated a cash outflow of $13.7 million in FY2013 compared with a net inflow of $10.2 million in FY2012. The primary reasons for this movement were slower payments by customers and strategic early buying of materials ahead of an expected cost increase. Capital expenditure Gross capital expenditure increased from $36.7 million in FY2012 to $43.8 million in FY2013. The higher capital expenditure in FY2013 was driven by investment to support new product volumes for a major New Zealand customer, and investment in the commissioning of a new thin wall injection facility in Victoria, Australia to support new customer contracts. PACT GROUP PROSPECTUS 67

70 4. FINANCIAL INFORMATION (continued) Pro forma FY2012 compared to pro forma FY2011 Table 4.13: Selected pro forma statement of income and cash flow items: FY2011 and FY2012 Selected Income Statement Items (Year ended 30 June, $ in millions) PGH FY2011 PGH FY2012 Change (%) Sales Revenue (1.0%) EBITDA (before significant items) % EBITDA Margin 18.6% 19.1% EBIT (before significant items) % EBIT Margin 13.4% 13.7% Selected Cash Flow Items (Year ended 30 June, $ in millions) PGH FY2011 PGH FY2012 Change (%) EBITDA % Change in net working capital (5.2) 10.2 n.m. Proceeds from sale of plant and equipment n.m. Capital expenditure (32.9) (36.7) 11.6% Net cash inflow before interest, tax and financing activities (0.2%) Note: n.m. denotes a percentage movement not considered meaningful. Sales Revenue Revenue decreased by 1.0% ($9.4 million) from $978.7 million in FY2011 to $969.3 million in FY2012. The decrease was primarily due to softer market and trading conditions for customers in Australia contributing to lower volumes and lower average selling prices for rigid plastic packaging products as lower input costs were passed through to customers. These factors were largely offset by revenue from a small acquisition in FY2012 and increased demand from customers in the New Zealand dairy sector. EBITDA and EBITDA margin EBITDA for FY2012 increased 1.9% ($3.5 million), from $181.8 million in FY2011 to $185.3 million in FY2012. This represented an increase in EBITDA margin from 18.6% in FY2011 to 19.1% in FY2012. This increase in EBITDA and EBITDA margin was primarily due to the realisation of integration benefits and efficiency gains from recent acquisitions and NZD/AUD exchange rate movements positively impacting the translation of New Zealand earnings. EBIT EBIT for FY2012 increased 1.5% ($1.9 million), from $130.9 million in FY2011 to $132.8 million in FY2012 primarily due to the reasons outlined above. This represented an increase in EBIT margin from 13.4% in FY2011 to 13.7% in FY2012. Depreciation and amortisation increased by $1.6 million from $50.9 million in FY2011 to $52.5 million in FY2012 due to the full year effect of acquisitions and associated increase in depreciation resulting from higher plant and equipment values. Working capital Movements in working capital generated a cash inflow of $10.2 million in FY2012 compared with an outflow of $5.2 million in FY2011. This movement was principally due to a decrease in trade receivables and an increase in trade and other payables in FY2012 compared to FY2011 as a result of improved working capital control associated with recently acquired businesses. This was partially offset by the additional working capital requirements resulting from an acquisition made during the period. 68

71 Capital expenditure Capital expenditure increased from $32.9 million in FY2011 to $36.7 million in FY2012, driven by several large projects commencing in FY2012 including the commencement of expenditure on a new thin wall injection moulding facility in Victoria, Australia, and to increase the automation of selected production lines Operating Segment financial performance Pact s primary operating segments are described in Section 4.2. Table 4.14 sets out pro forma historical and pro forma and statutory forecast revenue and EBIT for these operating segments. Table 4.14: Segment financial performance Pro forma Historical Pro forma Forecast Statutory Fore cast (Year ended 30 June, $ in millions) Notes PGH FY2011 PGH FY2012 PGH FY2013 Acquisitions FY2013 Pact FY2013 Pact FY2014 Pact FY2014 Sales Revenue Pact Australia Pact International Sales revenue , , , ,151.6 EBIT (before significant items) Pact Australia Pact International EBIT (before significant items) Notes: 1 Including corporate costs. 4.8 MANAGEMENT S DISCUSSION AND ANALYSIS OF AND ASSUMPTIONS UNDERLYING THE FORECAST FINANCIAL INFORMATION The Forecast Financial Information is based on various best estimate assumptions concerning future events, including those set out below, which should be read in conjunction with the Independent Limited Assurance Report in Section 8, the risk factors set out in Section 5, the sensitivity analysis set out in Section 4.9 and all other information set out in this Prospectus. The Forecast Financial Information has been prepared based on the significant accounting policies adopted by Pact, which are in accordance with the Australian Accounting Standards and International Financial Reporting Standards and are disclosed in Section 10. It is assumed that there will be no changes to Australian Accounting Standards and International Financial Reporting Standards, the Corporations Act or other financial reporting requirements that may have a material effect on Pact s accounting policies during the forecast period. Pact believes the best estimate assumptions when taken as a whole to be reasonable at the time of preparing this Prospectus. However, this information is not fact and investors are cautioned not to place undue reliance on the Forecast Financial Information. The actual results are likely to vary from the Forecast Financial Information and any variation may be materially positive or negative. The assumptions upon which the Forecast Financial Information is based are by their nature subject to significant uncertainties and contingencies, many of which are outside the control of Pact and its Directors, and are not reliably predictable. PACT GROUP PROSPECTUS 69

72 4. FINANCIAL INFORMATION (continued) Accordingly, none of Pact, its Directors, or any other person can give any assurance that the Forecast Financial Information or any prospective statement contained in this Prospectus will be achieved. Events and outcomes might differ in amount and timing from the assumptions, with a material consequential impact on the Forecast Financial Information General assumptions In preparing the Forecast Financial Information, the following general assumptions have been adopted for the forecast period: no significant change in the economic conditions (including financial market stability) prevailing in Australia, New Zealand or the other markets in which Pact operates other than those changes reflected in the key revenue assumptions set out in Section ; no significant deviation from current market expectations of broader economic conditions relevant to the packaging industry and to Pact s key customers; no significant change in the legislative regimes (including tax) and regulatory environments in the jurisdictions in which Pact operates that would have a material impact on Pact s financial performance or cash flows, financial position, accounting policies, financial reporting or disclosures; no change in applicable accounting standards, other mandatory professional reporting requirements or the Corporations Act that would have a material impact on Pact s consolidated financial performance, cash flows, financial position, accounting policies, financial reporting or disclosures; no material industrial or employee relations disputes, litigation, strikes, acts of terrorism or force majeure which have a material impact on the operations of Pact; no material change in capital expenditure requirements from those included in the Forecast Financial Information caused by factors outside Pact s control; no material environmental losses or material legal claims; no adverse change to the availability and supply of raw materials required for normal operations including resin and metal (tinplate and steel); no unexpected beneficial or adverse outcomes as a result of completing the Acquisitions; no material beneficial or adverse effects arising from the actions of competitors; no significant amendment to any material contract relating to Pact s business; no significant delays in the performance of any material contracts and parties to those contracts will continue to comply with the contracts terms and maintain all relevant licences and approvals; no material customer or material contract losses; no material impact on Pact s ability to achieve its current earnings margin; no material acquisitions, disposals or investments other than disclosed; no impairment of goodwill or other identifiable intangible assets; key personnel, particularly the senior management team, are retained and Pact maintains its ability to recruit and retain required personnel; none of the risks listed in Section 5 have a material adverse impact on the operations of Pact; and the Offer and the Acquisitions proceed in accordance with the timetable set out in this Prospectus Specific assumptions The Forecast Financial Information has been prepared by Pact based on a detailed bottom-up assessment by customer and by manufacturing site, consistent with its prior period budgeting processes. In preparing the Forecast Financial Information, Pact has taken into account the current year to date trading performance and market conditions. The Forecast Financial Information assumes that no material acquisitions or divestments are undertaken during the forecast period other than the Acquisitions. 70

73 The specific best estimate assumptions applied by Pact in preparing the Forecast Financial Information for the year ending 30 June 2014 are described below: Revenue assumptions Pact has estimated the revenue component of the Forecast Financial Information based on a detailed analysis of: anticipated customer demand and volumes during the forecast period. The forecast assumes that customer demand and volumes for FY2014 are consistent with recent market conditions and the year to date trading performance; projected changes in selling prices associated with formal and informal rise and fall arrangements with customers. The forecast assumes that Pact is able to manage cost changes through these rise and fall arrangements with customers and that no unexpected material cost changes occur that are not able to be addressed in a quantum and timing that is consistent with Pact s historical record; and likelihood of customer wins and losses. The forecast assumes no material customer wins or losses during the period with the exception of a part year impact from prior year net customer wins and losses Margin and Expense assumptions Expenses Pact has estimated the expenses component of the Forecast Financial Information based on a site by site analysis taking into account the recent trading performance, expected customer activity and expected future business requirements including known and expected cost changes. raw material and consumables expense relates to the costs of materials used in manufacturing (predominantly comprised of resin costs). These costs have been forecast based on detailed analysis of the customer demand outlined above and anticipated movements in the underlying input prices. The forecast assumes that there are no unexpected, large or rapid movements in raw material costs that are unable to be managed consistent with Pact s historical experience. employee benefits expense is forecast based on projected demand and includes an allowance for increases under existing Enterprise Bargaining Agreements in place. other direct and indirect expenses are forecast based on expectations of future business requirements and known forecast cost changes. An allowance has also been made for incremental costs associated with Pact being a listed company of $1.8 million per annum. Depreciation and Amortisation Depreciation and amortisation charges are forecast based on existing asset base and depreciation and amortisation rates and expected capital expenditure for the forecast period. Refer to Section for additional detail on Pact s depreciation policy. Interest expense The interest expense is based on the term sheet pricing on the New Bank Facilities agreed by the banks as described in Section and assumes no interest rate hedge coverage during FY2014. Interest expense includes amortisation of upfront fees over the term of the respective facilities. A base interest rate of 2.61% per annum has been assumed by reference to current prevailing BBSY rate on AUD denominated debt and a base interest rate of 2.96% based on the prevailing BKBM rate inclusive of a forecast 25bps increase on the NZD denominated debt. The assumed all-in rate for the New Bank Facilities is 4.8% for FY2014, following Listing. Sensitivity analysis on the impact of a 100 basis point movement has been provided in Table Taxation Pact, together with its eligible Australian subsidiaries, elects to form an Australian income tax consolidated group effective shortly after Listing. Australian corporate tax rate assumed to remain at 30%. New Zealand corporate tax rate assumed to remain at 28%. Other relevant tax rates assumed to remain at current statutory rates. PACT GROUP PROSPECTUS 71

74 4. FINANCIAL INFORMATION (continued) Working capital Working capital is forecast at a business level based on management forecasts of customer demand and forecast sales Foreign exchange Pact is exposed to exchange rate movements and, in particular, movements in the AUD/NZD, AUD/USD and NZD/USD. Movements in the relevant exchange rates can impact the financial results of Pact. The foreign currency denominated results of Pact will be impacted by movements in the exchange rates used to translate these results into Australian dollars. For example, an appreciating Australian dollar against the New Zealand dollar would reduce the reported profitability of Pact s New Zealand operations in Australian dollar terms. If no other factors were to change, including the AUD/USD and NZD/USD exchange rates, this would result in Pact achieving a lower net profit from New Zealand operations. Pact s key inputs of plastic resin and metal (tinplate and steel) are impacted by underlying movements in key commodity price indices which are generally US dollar denominated. For the Australian portion of the business which generates net profit in Australian dollars, if the Australian dollar appreciates against the USD and no other factors change, Pact is likely to record a higher net profit across its businesses. Although Pact is exposed to changes in foreign currency through input commodity prices based in USD, these are generally managed through customer sale price rise and fall mechanisms where contracts exist. These and other factors regularly change, sometimes as a direct result of the movement in the exchange rate. The net effect of a change in exchange rates is unpredictable and in practice is unlikely to be consistent for small changes versus large changes, for temporary movements versus sustained changes, for rapid changes and for appreciations versus depreciations. For further information regarding Pact s hedging policy, as it relates to foreign exchange rates, please refer to Section Set out below are the exchange rates used to generate the Forecast Financial Information for FY2014, with a comparison to the actual average foreign exchange rates recorded by Pact in compiling its FY2013 financial results. Table 4.15: Foreign exchange assumptions used to generate the Forecast Financial Information (Year ended 30 June) FY2013 (actual average) FY2014 AUD/NZD AUD/USD NZD/USD AUD/THB AUD/PHP AUD/CNY AUD/SGD

75 4.8.3 Pro forma forecast statement of income and cash flow items: pro forma FY2014 compared to pro forma FY2013 Table 4.16: Selected pro forma statement of income and cash flow items: FY2013 and FY2014 Selected Income Statement Items (Year ended 30 June, $ in millions) Pro forma FY2013 Pro forma FY2014 Change (%) Sales revenue 1, , % EBITDA (before significant items) % EBITDA Margin 16.9% 16.9% EBIT (before significant items) % EBIT Margin 11.7% 12.5% Selected Cash Flow Items (Year ended 30 June, $ in millions) Pro forma FY2013 Pro forma FY2014 Change (%) EBITDA % Change in net working capital (13.0) 1.8 n.m. Total capital expenditure (48.6) (36.0) (25.9%) Purchase of businesses and subsidiaries (111.8) (0.2) n.m. Net cash inflow before interest, tax and financing activities % Net interest paid (29.7) Income tax paid (24.5) Net cash flow before dividends Note: n.m. denotes a percentage movement not considered meaningful. Revenue Sales revenue is forecast to increase by 3.2% ($37.4 million, from $1,159.9 million in FY2013 to $1,197.3 million in FY2014. This increase is driven by a full year contribution from acquisitions completed in FY2013, as well as forecast additional volume growth from contracted customer sales relating to the new thin wall injection moulding facility in Victoria, Australia, due to this facility becoming fully operational in FY2014. Consistent with general market trends, Pact is also forecasting additional volume growth from a number of major customers. The increase in revenue is expected to be supported by increased average sale prices as forecast increases in the cost base are recovered and favourable foreign exchange rate movements. The above drivers of revenue growth are partially offset by net customer changes impacting year on year results. EBITDA and EBITDA margin EBITDA is forecast to increase by 3.0% ($5.8 million), from $196.1 million in FY2013 to $201.9 million, in FY2014. EBITDA margin is forecast to remain constant at 16.9% in FY2014. This increase in EBITDA reflects the growth in revenue discussed above and the impact of efficiency initiatives (including capital expenditure and business reorganisation programs) which were implemented in FY2013 or are currently in progress. These increases are expected to offset variations attributable to net customer movements. PACT GROUP PROSPECTUS 73

76 4. FINANCIAL INFORMATION (continued) EBIT EBIT is forecast to increase 9.5% ($12.9 million), from $136.2 million in FY2013 to $149.1 million in FY2014 due to the reasons described above and a reduction in depreciation expense. Depreciation and amortisation is forecast to reduce as a result of a periodic review of asset useful lives in FY2013 (where a number of assets reached their end of useful life) and a reduction in fixed assets as a result of historical business reorganisation programs and asset disposals in FY2013. Net interest expense Pro forma net interest expense in FY2014 is forecast to be $31.2 million based on a pro forma Net Debt of $603.0 million at Listing (refer to Section 4.5.4) and expected fluctuations in Pact s monthly Net Debt during FY2014 due to seasonal working capital movements and other cash flows. Pro forma net interest expense includes the amortisation of capitalised borrowing costs of $1.5 million in FY2014. Income tax expense Pro forma income tax expense of $34.2 million is forecast for FY2014 which implies an effective tax rate of 29% for Pact. The majority of Pact s profit before tax is generated in Australia, where the corporate tax rate is 30%. The effective tax rate is lower than the Australian corporate tax rate due to the contribution of earnings from New Zealand where the corporate tax rate is 28%. Working capital Pro forma net working capital is forecast to decrease by $1.8 million between FY2013 and FY2014, compared with an increase in pro forma net working capital of $13 million between FY2012 and FY2013. This movement reflects a forecast decrease in working capital as a result of targeted working capital reduction initiatives, particularly relating to businesses acquired during FY2013. Other assets and liabilities are forecast to increase by $0.5 million between FY2013 and FY2014. As noted in Section 4.5.2, Pact s working capital requirements typically vary throughout the course of each financial year. Capital expenditure Pro forma capital expenditure is forecast at $36.0 million in FY2014, compared with $48.6 million in FY2013. The decrease in pro forma capital expenditure in FY2014 is due to the completion a number of projects in FY2013 including the new thin walled injection moulding facility in Victoria, and completion of a major project with a key dairy customer in New Zealand. A number of planned capital expenditure projects in FY2014 relate to specific customer opportunities to support contracted revenue growth. Income tax paid Pro forma cash tax payments for FY2014 are forecast based on the remaining tax instalments in respect of FY2013, the final tax payment for PGH for FY2013 and the expected tax instalments in respect of FY2014, which have been estimated based on the forecast tax expense as set out in the consolidated pro forma forecast statement of income and adjusted for expected deductions for tax purposes. Illustrative Dividends Full year pro forma dividends in FY2014 represent a dividend payout ratio of 66.9% of FY2014 pro forma NPAT which is in line with the dividend policy described in Section 4.10 below. The statutory forecast for FY2014 does not include a dividend payment because the first dividend relating to the six month financial period ending 30 June 2014 is expected to be paid in October

77 4.9 SENSITIVITY ANALYSIS The Forecast Financial Information is based on a number of key assumptions which have been outlined above. These estimates and assumptions are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, its Directors and management, and based upon assumptions with respect to future business decisions or actions which are subject to change. The Forecast Financial Information is also subject to a number of risks as outlined in Section 5. Investors should be aware that future events cannot be predicted with certainty and as a result, deviations from the figures forecast in this Prospectus are to be expected. To assist investors in assessing the impact of these assumptions on the Forecast Financial Information, the sensitivity of the consolidated forecast pro forma NPAT attributable to Shareholders for FY2014 to changes in certain key assumptions is set out below. The sensitivity analysis is intended to provide a guide only and variations in actual performance could exceed the ranges shown. Table 4.17: Sensitivity analysis on consolidated forecast pro forma NPAT attributable to shareholders for FY2014 Assumption Increase/decrease Impact on consolidated pro forma NPAT attributable to shareholders for FY2014 Change in sales prices +/ 1% $8.5 million/$(8.5) million Change in salaries and wages expense +/ 1% $(2.1) million/$2.1 million Change in resin prices +/ 1% $(2.4) million/$2.4 million Change in metal prices +/ 1% $(0.3) million/$0.3 million Change in A$:NZ$ +/ 1c $(0.3) million/$0.3 million Change in A$:US$ +/ 1c $1.9 million/$(2.0) million Change in NZ$:US$ +/ 1c $0.7 million/$(0.7) million Change in interest rates +/ 100 basis points $(4.6) million/$4.5 million Care should be taken in interpreting these sensitivities. The estimated impact of changes in each of the variables has been calculated in isolation from changes in other variables, in order to illustrate the likely impact on pro forma forecast FY2014 consolidated pro forma NPAT attributable to shareholders of the Company. In practice, changes in variables may offset each other or may be additive DIVIDEND POLICY The payment of dividends by the Company is at the complete discretion of the Directors. The decision as to whether or not a dividend will be paid will be subject to a number of considerations including the general business environment, the operating results, cash flows and financial position of Pact, capital requirements, regulatory restrictions and any other factors the Directors may consider relevant including any acquisitions which the Directors determine to undertake in the future. It is the Directors current intention to pay interim dividends in respect of half years ending 31 December and final dividends in respect of full years ending 30 June each year. The Directors have forecast that the Company s first dividend for the six months to 30 June 2014 will be 9.5 cents per Share and is expected to be 65% franked. It is expected to be paid in October Subject to the considerations outlined above, beyond the forecast period the Directors current intention is to pay out approximately 65% to 75% of the Company s NPAT attributable to shareholders in dividends. In future years, an interim dividend is expected to be payable in April, with a final dividend payable annually in October. It is intended that dividends will be franked to the extent possible. PACT GROUP PROSPECTUS 75

78 5. KEY RISKS

79 5. KEY RISKS 5.1 INTRODUCTION Section 5 describes potential risks associated with Pact s business. It does not list every risk that may be associated with Pact and the occurrence or consequences of some of the risks described in this section are partially or completely outside the control of Pact, its Directors and senior management. The selection of risks has been based on an assessment of a combination of the probability of the risk occurring and the impact if it did occur. This assessment is based on the knowledge of the Directors as at the Prospectus Date. There is no guarantee or assurance that the risks will not change or that other risks will not emerge. There can be no guarantee that the Company will deliver on its business strategy, or that the forecasts or any forward looking statement contained in this Prospectus will be achieved or realised. Investors should note that past performance is not a reliable indicator of future performance. Before applying for Shares, any prospective investor should be satisfied that they have a sufficient understanding of the risks involved in making an investment in the Company and whether it is a suitable investment, having regard to their own investment objectives, financial circumstances and taxation position. If you do not understand any part of this Prospectus or are in any doubt as to whether to invest in Shares, it is recommended that you seek professional guidance from your stockbroker, solicitor, accountant or other independent and qualified professional adviser before deciding whether to invest. 5.2 SPECIFIC RISKS TO AN INVESTMENT IN PACT Competitive position may deteriorate The sectors in which Pact operates are subject to vigorous competition, based on factors including price, service, product selection and quality, manufacturing capability, innovation and the ability to provide the customer with an appropriate range of products and services in a timely manner. Pact faces competition from sources including: manufacturers of steel and plastic packaging products such as those manufactured by Pact; manufacturers of alternative packaging products such as glass and paper which may be used as a substitute for Pact s products; local and imported products; customers and potential customers electing to manufacture products supplied by Pact in-house or offshore; and the potential reduction of import duties or tariffs in the end markets in which Pact sells its products. Competitors (including overseas manufacturers) may have different quality, price and operational structures to Pact or may price uneconomically, which could lead to a deterioration in Pact s sales and profitability. Pact s competitive position may deteriorate as a result of factors including actions by existing competitors, the entry of new competitors, or a failure by Pact to continue to position itself successfully to meet changing market conditions, customer demands and technology. Pact s competitive position may also be impacted by competition from, and contractual arrangements with, other businesses in which Geminder Holdings or a related entity of Geminder Holdings has an interest. Any deterioration in Pact s competitive position may result in a decline in sales revenue and margins, which may have a material adverse effect on Pact s future financial performance and position. PACT GROUP PROSPECTUS 77

80 5. KEY RISKS (continued) Relationships with key customers may deteriorate or customers may reduce their demand for Pact s products Pact relies on various key customer relationships. Pact s top 20 customers represented approximately 42% of sales revenue for the 12 months to 30 June The key risks associated with Pact s key customer relationships are summarised below: some key customer relationships are governed by binding written contracts, others are governed by informal arrangements such as an order by order basis subject to standard terms. Where no binding written contract exists, these arrangements can be terminated or varied by the customer without incurring significant penalties; even where there is a binding written contract, depending on the nature of the contract, the customer may be under no obligation to continue to purchase, or to purchase a particular volume of, Pact s products. Factors which may lead to a decrease in customer demand include customers products being delisted from supermarkets or customers building up too much inventory as a result of a temporary or permanent decline in end user demand; key customer relationships may be lost or impaired due to customer financial difficulty or insolvency. As a result Pact s customers may not be able to honour existing contracts or Pact may not be able to renew certain customers contracts; a number of Pact s key customer contracts allow customers to require Pact to adopt or offer a new technology. If Pact does not meet these requirements, the customer may have the right to seek alternative supply; Pact s key customer contracts may require Pact to match a lower price offered by a competitor or risk losing the contract; some of Pact s sites predominantly service only one customer, the loss of which could result in the closure of a site; customers may reduce their demand for Pact s products in the event that they insource their packaging needs by producing their packaging internally rather than contracting with Pact; several of Pact s customers have experienced increased consolidation through mergers, demergers and acquisitions in recent years, and this trend may continue. Pact may lose customers if its existing customers are not the surviving entity in future mergers and acquisitions. Also, a smaller number of larger customers may exert pressure on Pact with respect to pricing and payment terms; and key customer relationships may be lost or impaired, Pact may fail to renew key customer contracts on terms which are no less favourable to Pact or key customers may cease or reduce their operations either temporarily (for example, as a result of accidents or natural disasters) or permanently (for example, by closing down operations in Australia, New Zealand or Asia). Any of the above factors, either individually or in combination, could have a material adverse effect on Pact s future financial performance and position Activity in key industry sectors may decline or consumer preferences may change Pact and its customers service end user markets in the consumer sector (eg food, dairy, beverages, personal care and other household consumables) and the industrial sector (eg surface coatings, petrochemical, agricultural and chemicals). Demand for Pact s products is impacted by factors including: climatic conditions, e.g. drought and unseasonably warm or cold weather; seasonality of foods and edible oil production; increased focus by the major Australian and New Zealand supermarket chains on the sale of private label products, which may result in a decrease in demand for the products produced by Pact s customers; unpredictable changes in consumer preferences, which can result in some of Pact s existing product range becoming obsolete; the volume of Australian and New Zealand products exported in drums and barrels by customers in the industrial sector; 78

81 the level of activity in the housing and commercial building sectors, which affects the level of demand for products such as surface coatings and paint produced by Pact s customers; and national and international economic conditions. Any of the above factors, either individually or in combination, may materially reduce demand for Pact s products, which could have a material adverse effect on Pact s future financial performance and position Pact may be exposed to risks relating to strategic acquisitions, including the Acquisitions Pact has grown over time through acquisitions of a number of businesses and assets, as well as through organic growth. Pact s growth has placed, and may continue to place, significant demands on management, information reporting resources, and financial and internal controls systems. Effective management of Pact s growth will require, among other things, continued development and appropriate resourcing of its management information reporting systems and financial and internal controls. The risks associated with strategic acquisitions (including the Acquisitions), by Pact include: Pact may not be able to identify suitable acquisition candidates at attractive cash flow multiples and obtain financing to fund such acquisitions; one or more past or future acquisitions may result in Pact incurring significant debt and unknown or contingent liabilities, being or becoming liable for unforeseen costs or incurring damage to its reputation or being unable to realise the anticipated benefits from the acquisition (for example, as a result of transactions effected by acquired businesses prior to their acquisition, litigation commenced against acquired businesses or costs incurred in integrating acquired businesses and due to the fact that reasonable enquiries may not identify all issues in relation to acquired businesses); Pact could suffer a loss in relation to an acquisition for which it cannot recover under the relevant acquisition agreement (refer to Section 9.3 for further details on the Acquisitions), for example if no warranty or indemnity protection was provided, the basis of a claim does not fall within any of the warranties contained in the agreement, or the time period for bringing a claim has expired or if the relevant seller does not have the funds to satisfy a claim which Pact has made; legal restrictions or regulatory intervention may limit the ability of Pact to complete such acquisitions in a timely manner; demands on management related to the significant increase in size after the acquisitions; the diversion of management s attention from the management of daily operations of the business to the integration of operations; higher integration costs than anticipated; failure to achieve expected synergies and costs savings; regulatory and business restrictions imposing a constraint on optimal designs for integration of operations support systems; Pact may be required to comply with laws and regulations of a jurisdiction it is unfamiliar with, which may differ from the laws and regulations of Australia and New Zealand; difficulties in the assimilation of different corporate cultures and practices, as well as in the assimilation and retention of broad and geographically dispersed personnel and operations; difficulties in the integration of departments, systems (including accounting systems) technologies, books and records and procedures, as well as in maintaining uniform standards, controls (including internal controls over financial reporting), procedures and policies; customers of acquired companies may not be retained post acquisition completion; and the employees and management team may not be retained post acquisition completion. Any of the above factors, either individually or in combination, may have a material adverse effect on Pact s future financial performance and position. There can be no guarantee that any of Pact s investments or acquisitions, including the Acquisitions, made by Pact will ultimately be profitable. PACT GROUP PROSPECTUS 79

82 5. KEY RISKS (continued) Pact may be required to compensate customers for non-performance or may be affected by product liability claims or product recall costs of Pact or its customers Pact s customers often seek to include compensation or indemnity regimes under which Pact is required to compensate the customer if Pact s products fail to comply with specified standards, warranties and delivery requirements. Pact is exposed to the risk of product liability and product recall claims if any of Pact s products are alleged to have resulted in personal injury or property damage based, for example, on alleged product defect. While Pact maintains product liability insurance, this may not be adequate to cover losses related to product liability claims brought against Pact. In the event of an uninsured loss or a loss in excess of Pact s insured limits, Pact could suffer damage to its reputation and/or lose all or a portion of its production capacity as well as future revenues expected to be generated by the relevant facilities. Any material loss not covered by insurance could adversely affect Pact s business, financial condition and results of operations. Key customers of Pact may also be exposed to material litigation, for example product liability claims against customers of Pact who manufacture food, dairy and beverage products sold in packaging supplied by Pact. If key customers of Pact are found to be liable under such claims, this could result in a reduction in Pact s sales revenue or counter-claims by the customer against Pact. Pact may also be joined as a co-defendant in a product liability claim, to the extent that packaging supplied by Pact contributed to the alleged injury or damage. Any of the above factors, either individually or in combination, could have a material adverse effect on Pact s future financial position and performance Relationships with key suppliers may deteriorate, raw materials may be subject to cost increases or supply interruptions or industry consolidation may affect supply of raw materials Pact relies on various key procurement relationships for the supply of raw materials including resin, cold rolled steel, tinplate, colour pigments and the supply of services including energy, machinery, equipment, storage and transportation. Pact consolidates the purchase of key raw materials such as resin and cold rolled steel among a limited group of key suppliers. Risks associated with Pact s key supplier relationships include: the availability and price of raw materials and services may be subject to shortages in supply, suppliers allocation to other purchasers, interruptions in production by suppliers (including due to operational, industrial relations or transportation difficulties, accidents or natural disasters affecting suppliers), worldwide pricing levels and new laws or regulations; input costs such as freight and electricity may be subject to inconsistent supply which may interrupt Pact s business operations, or price increases which Pact may not be able to recover through the price adjustment mechanisms which may be in its customer contracts either in a timely manner or at all; the written procurement contracts for resin and steel may allow for periodic increases in prices by reference to specified indices. Other materials are sourced at spot prices. While a number of Pact s customer contracts contain price review and adjustment mechanisms which may allow Pact to pass on increases in the price of raw materials to customers, other customer relationships are governed by informal arrangements which do not include these mechanisms. Even where customer contracts contain a price review and adjustment mechanism, there is a risk that customers will seek to renegotiate these provisions during the term of the existing contracts or on renewal. To the extent that Pact cannot pass on price increases to customers, Pact would be required to absorb such price increases; there is a risk of future consolidation in industry sectors which supply key raw materials to Pact, as a result of mergers and acquisitions. This could result in a decrease in the number of Pact s major suppliers or a decrease in the number of alternative supply sources available to Pact; and key supplier relationships may be lost or impaired, Pact may fail to renew key supplier contracts on terms which are no less favourable to Pact or key suppliers may cease or reduce their operations (including as a result of financial difficulty or insolvency). Any of the above factors, individually or in combination, may have a material adverse effect on Pact s future financial performance and position. 80

83 5.2.7 Adverse incidents resulting in serious injury or damage to property may occur Pact s operations involve the use of heavy machinery and hazardous materials, with resulting risk to both property and personnel. An incident may occur that results in serious injury or death, damage to property, contamination of the environment or business interruption, which may have a material adverse effect on Pact s financial performance and position. Given the nature of its operations, Pact faces the risk of workplace injuries which may result in operational or industrial stoppages, workers compensation claims, claims for additional contributions under the New Zealand Accident Compensation Corporation regime, common law claims and potential occupational health and safety prosecutions. Any failure by Pact to safely conduct its operations or to comply with the necessary occupational health and safety legislative requirements in the jurisdictions in which Pact operates could result in fines, penalties and compensation for damages as well as reputational damage. Any such consequences could have a material adverse effect on Pact s future financial performance and position Adverse movements in exchange rates may occur Pact s financial reports are prepared in Australian dollars. However, a substantial proportion of Pact s sales revenue, expenditures and cashflows are generated in, and assets and liabilities are denominated in, New Zealand dollars. Pact is also exposed to a range of other currencies including the US dollar, China s yuan, the Philippines peso and the Thai baht in relation to Pact s business operations. Any depreciation of the New Zealand dollar against the Australian dollar as well as other adverse exchange rate fluctuations or volatility would have an adverse effect on Pact s future financial performance and position. Pact does not hedge against adverse movements in the Australian dollar/new Zealand dollar or other exchange rates (except US). Pact also sources a significant proportion of raw materials internationally, particularly in US dollars. While Pact engages in foreign currency hedging which partially limits its exposure to the US dollar, an appreciation in the value of the US dollar against the Australian dollar or New Zealand dollar could have an adverse effect on Pact s future financial performance and position Loss of key personnel may occur The success of Pact depends to a significant extent on the ability and performance of its key personnel, in particular the senior management team discussed in Section 6.2. Key individuals within Pact have extensive experience in the Australian and New Zealand packaging industry and in Pact s businesses. The loss of key personnel, sustained underperformance by key personnel or an inability to recruit or retain suitable replacement or additional personnel may adversely affect Pact s future financial performance and position Pact may be unable to attract and retain staff Pact s business is dependent on attracting and retaining quality employees. Pact s ability to meet its labour needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment rates, prevailing wage legislation and changing demographics. Changes that adversely impact Pact s ability to attract and retain quality employees could materially adversely affect Pact s future financial performance and position Pact may suffer reputational damage or Pact s brand names may diminish in value The reputation of Pact could be adversely impacted by a number of factors including failure to provide customers with the quality of service they expect, product liability claims, disputes or litigation with third parties such as customers, landlords, employees or suppliers or adverse media coverage. Pact operates its business under a number of brand names which could also decline in value as a result of these factors. A significant decline in the reputation of Pact or the value associated with Pact s brands could have an adverse effect on Pact s future financial performance and position. PACT GROUP PROSPECTUS 81

84 5. KEY RISKS (continued) Pact s relationships with key intellectual property licensors and technology partners may deteriorate or intellectual property or technology owned or used by Pact may be subject to challenge Pact uses intellectual property and technology developed in the course of its business which is owned by Pact. Pact also relies on relationships with key intellectual property licensors and technology partners, from whom it licenses the right to use particular intellectual property and technology for the purpose of manufacturing Pact s products and developing new products to meet customer demands for value-added and innovative packaging solutions. The risks associated with the intellectual property and technology owned or licensed by Pact include: challenges by third parties of Pact s right to use its intellectual property or technology, or the right of a key intellectual property licensor or technology partner to use the license or technology; key intellectual property licensor and technology partner relationships may be lost or impaired, Pact may fail to meet minimum usage requirements underlying licences, Pact may fail to renew key intellectual property and technology licences on terms which are no less favourable to Pact if at all or key intellectual property licensor and technology partners may cease or reduce their operations; and a number of intellectual property and technology licence agreements, to which Pact is a party, require counterparty consent upon a change in control. If a consent is not granted, it may result in a termination of the relevant intellectual property or technology licence agreement. Pact s ability to manufacture certain of its products is dependent on its ability to use particular intellectual property and technology. Accordingly, any of the above factors, individually or in combination, may have a material adverse effect on Pact s future financial performance and position Regulatory matters may negatively affect Pact Pact is required to comply with a range of laws and regulations. Regulatory areas which are of particular significance to Pact include employment, occupational health and safety, property and environmental, customs and international trade, competition and taxation. Safety, environmental, noise, competition, employment and similar regulations also give rise to significant requirements and compliance costs for Pact. Non-compliance with such regulations, changes in the interpretation of current regulations, loss or failure to secure renewal of an accreditation, or the introduction of new laws or regulations may lead to fines imposed on Pact by the relevant regulatory authority or Governmental body, revocation of permits, or damage to Pact s reputation and may have a material adverse effect on Pact s costs, business model and competitive environment and therefore could materially adversely affect Pact s future financial performance and position. Additionally, new information becoming available to the Australian or relevant overseas competition authorities may result in a review of a decision for clearance previously granted. Tax law is complex and is subject to regular change. Changes in tax law, including various proposed but as yet not enacted changes in tax law may adversely impact Pact s future financial performance and position. Resulting changes in tax arrangements may adversely impact Pact s future financial performance and position. In addition, future changes to other laws and regulations or accounting standards which apply to Pact from time to time could materially adversely affect Pact s future financial performance and position Pact may be exposed to changes in tax legislation Pact Management proposes that the Company together with its eligible subsidiaries will elect to form an Australian income tax consolidated group effective from a date shortly after Listing. The rules applying to the formation of an income tax consolidated group are subject to various proposed changes announced by the former federal government at the time of delivering its federal budget in May In particular, one proposal could require additional amounts to be included in Pact s assessable Australian income in respect of future deductible liabilities. While the proposed changes in law were announced to apply from May 2013, limited information on their exact application is available. Depending on the final form of the proposed changes in law they could have a material negative impact on Pact s financial performance and position. Although limited information in respect to the application of the proposed changes is available, Pact estimates that if enacted, these changes could result in an increase in tax liability of approximately $18.5 million. As these changes in law are not currently substantially enacted, in accordance with IFRS the potential impact of this measure is not taken into account in the Forecast Financial Information contained in this document. 82

85 Pact may be exposed to risks relating to disposals or plant rationalisations Pact has previously disposed of non-core businesses and assets and consolidated its operations through the rationalisation of certain manufacturing plants. Pact will continue to review its operational requirements on an ongoing basis which may result in further rationalisation. Pact may have ongoing exposure to residual risks in respect of prior and future disposals and rationalisations (for example, under warranties and indemnities given to third party purchasers or directly as a result of activities while the businesses were owned or operated by Pact). Any claim against Pact relating to businesses which have previously been disposed of or closed by Pact may have a material adverse effect on Pact s future financial performance and position. Any delay in implementation, failure to implement or unintended consequences of implementing future disposals and rationalisations may also have a material adverse effect on Pact s future financial performance and position Impairment of intangible assets As a result of the Acquisitions and a number of acquisitions Pact has made in the past, Pact has a substantial value of intangible assets on its balance sheet relating to goodwill and identifiable intangible assets. Under accounting standards, goodwill and indefinite life intangible assets must be tested annually for impairment. Other identifiable intangible assets are amortised and assessed for any indicator of impairment in each reporting period. Impairment of any individual asset will result from a permanent diminution in value indicated by a decrease in profits below the level that supports the value of the asset. This may be caused by a range of factors, including a failure to achieve expected profit growth, higher than expected expenses, loss of customers, loss of key employees, or the impact of unforeseen events. In the event that the value of any of Pact s intangible assets is found to be impaired to a level below their carrying value, Pact would need to write down the value of the intangible asset. This will result in an expense in the income statement and reduced profit for Pact Pact may be affected by failure of information technology systems, a deterioration in relationships with key service providers or events affecting key service providers In order to manage its business, Pact relies on the capability and reliability of its information technology systems and those of its external providers such as communications carriers. It also relies on external providers of software support and maintenance services to provide support for Pact s information technology systems. Significant or sustained failure of the information technology systems of Pact and its external service providers, a deterioration in the relationship between Pact and its key external service providers, or events affecting Pact s external service providers would have a material adverse effect on Pact s ability to run its business and therefore on its future financial performance and position. Additionally, as a result of the historical relationship between Pact and Visy Group, Pact currently sources a limited range of goods and services under arrangements with Visy Group including certain electricity, gas and information technology services. In each case, it is expected that arrangements independent of the Visy Group will be established and operational by the end of March Risks associated with Pact s current arrangements with the Visy Group include: Pact may suffer adverse consequences of Visy Group failing to comply with obligations owed by Visy Group to third parties under such arrangements and Pact may not be entitled to recover the related loss from Visy Group or any third party service provider; Pact is exposed to risks arising from Visy Group s management of the relationship with third party suppliers and licensors whose services and products are provided for the benefit of Pact; the relationship between Pact and the Visy Group may deteriorate; when the existing arrangements with Visy Group expire, Pact may be unable to renew them on terms which are no less favourable to Pact; Pact may not be able to effectively enforce any contractual rights against the third party supplier under the arrangements and may have to rely on the Visy Group to do so. PACT GROUP PROSPECTUS 83

86 5. KEY RISKS (continued) Environmental breaches may adversely affect Pact Certain activities carried on in the course of Pact s business are subject to regulation by environmental and dangerous goods legislation. While Pact endeavours to ensure that its operations and activities comply with applicable environmental laws, failure to comply with such laws could result in penalties, other liabilities or a need to temporarily shut down operations, which could have a material adverse effect on Pact s financial performance, position and reputation. Environmental reports with respect to any of the properties on which Pact has operations, or properties acquired or used in the future, may not reveal (i) all environmental liabilities, (ii) whether any prior owner or user of Pact s properties caused any material environmental conditions not known to Pact, or (iii) whether a material environmental condition otherwise exists at any one or more of Pact s properties. There also exists the risk that material environmental conditions, liabilities or compliance concerns may have arisen after the review was completed or may arise in the future. Environmental laws and regulations are constantly changing and Pact cannot guarantee that it will always be in compliance with the applicable laws and regulations, or that Pact will not incur additional costs to comply with such laws and regulations. Moreover, Pact must take into account the applicable environmental laws and regulations in certain foreign jurisdictions in which the products are sold or Pact has operations. Failure to comply with any of these laws and regulations could result in a delay in the delivery of goods, delayed receipt of sales revenue, loss of income, the incurring of significant costs and fines, and the suspension or termination of contracts. Any limitations or costs incurred as a result of Pact s non-compliance with environmental laws and regulations may have a materially adverse effect on Pact s business, financial condition and results of operations. In addition, Pact must obtain or renew the appropriate permits, licences and certificates required to operate its business in the countries in which it operates. Pact is subject to regular inspections, examinations, inquiries and audits by governmental authorities to obtain or renew the various licenses, certificates and permits required for its operations. Pact is also subject to periodic and spot inspections conducted by governmental authorities at various levels in order to maintain its operating licenses, certificates and permits. A finding of non-compliance or failure to obtain, maintain or timely renew the necessary licenses, certificates, permits or approvals could have a negative impact on Pact s business operations and financial condition. Further, there is a risk that a change in the application of existing environmental laws or the adoption of new environmental laws could have a material adverse effect on Pact s future financial performance and position Interest rates may increase As a borrower of money, Pact is exposed to increases in interest rates which would increase the cost of servicing Pact s debt. Increases in interest rates may also affect the level of customer demand. Pact does not currently hedge against increases in interest rates. Accordingly, an increase in interest rates may have a materially adverse effect on Pact s future financial performance and position Interruptions to operations may occur Pact is exposed to short, medium or long-term interruptions to its operations arising from events including industrial disputes, electricity and gas interruptions, work stoppages, acts of terrorism, fires, floods, earthquakes, and other natural disasters. Pact is exposed to such events in relation to its own manufacturing plants and also in relation to its operations which are co-located on customers premises. Some of the countries in which Pact operates are also subject to natural disasters and geological events, including earthquakes, volcanoes, tsunamis, and typhoons. Such disasters and events may lead to widespread destruction of property and could significantly impact the economies of these countries or the countries in which Pact has operations or sells its products or in which its suppliers operate, which could materially and adversely affect Pact s business, financial condition, results of operations and prospects Employment costs may increase Pact currently has a number of individual workplace agreements, collective enterprise agreements and collective employment agreements in place covering its employees in Australia and New Zealand. Pact regularly renegotiates its collective enterprise agreements (Australia) and collective employment agreements (New Zealand). Some of these agreements have expired and are being renegotiated. Two agreements will 84

87 expire during the next 12 months and will be renegotiated at the relevant time prior to their expiration. Any failure to reach agreement on new collective enterprise agreements or collective employment agreements on acceptable terms could materially affect Pact s future financial performance and position. Any material increase in employment related costs resulting from any future changes to industrial relations legislation in the jurisdictions in which Pact operates may have a material adverse effect on Pact s future financial performance and position Industrial action may occur There is a risk that employees of Pact or employees of Pact s contractors could take industrial action, including as part of the renegotiation of the industrial agreements referred to in Section , which could disrupt Pact s operations or make compensation and working condition demands that would increase Pact s operating expenses. Sustained industrial action by employees would reduce Pact s sales revenue and damage the reputation of Pact. Any material reduction in sales revenue, increase in operating expenses or damage to Pact s reputation as a result of industrial action may have a material adverse effect on Pact s future financial performance and position Pact may be exposed to country-specific risks in respect of its foreign operations While a significant portion of Pact s operations are located in Australia and New Zealand, Pact also has operations in the Philippines, Thailand and China. Accordingly, Pact is exposed to risks relating to labour practices, environmental matters, difficulty in enforcing contracts, changes to or uncertainty in the relevant legal and regulatory regime (including in relation to taxation and foreign investment and practices of government and regulatory authorities) and other issues in foreign jurisdictions in which Pact operates. Some of these countries, including Thailand and the Philippines, have from time to time experienced severe political and social instability, including acts of political violence. These countries also have been subject to a number of terrorist attacks and other destabilising events, which have led to economic and social volatility. There can be no assurance that further destabilising events will not occur in the future and any destabilising event could interrupt or affect parts of Pact s business, the business of Pact s customers or the business of its suppliers, which may materially and adversely affect Pact s financial condition, results of operations and prospects. The outbreak of communicable disease in the countries in which Pact operates could have a negative impact on the economies and business activities in the affected countries and thereby adversely affect Pact s business, financial condition, results of operations and prospects. Some of the countries in which Pact is expanding including China, Singapore, Thailand and the Philippines have experienced outbreaks of communicable diseases such as SARS, Avian influenza, and the H1N1 virus, among others. An outbreak of contagious disease could interrupt the operations or the services or operations of Pact s suppliers and customers, which could adversely affect Pact s business, financial condition, results of operations and prospects Pact may be exposed to bribery and corruption in respect of its foreign operations Pact may incur fines or penalties, damage to its reputation or suffer other adverse consequences if its Directors, officers, employees, consultants, agents, service providers or business partners violate, or are alleged to have violated, anti-bribery and corruption laws in any of the jurisdictions in which it operates. Pact cannot guarantee that its internal policies and controls will be effective in each case to ensure that Pact is protected from reckless or criminal acts committed by its Directors, officers, employees, consultants, agents, service providers or business partners that would violate Australian laws or the laws of any other country in which Pact operates. Any such improper actions could subject Pact to civil or criminal investigations in Australia or overseas could lead to substantial civil or criminal monetary and non-monetary penalties against Pact, and could damage Pact s reputation. Even the allegation or appearance of improper or illegal actions could damage Pact s reputation and result in significant expenditures in investigating and responding to such actions and may in turn have an adverse effect on Pact s future financial performance and position Debt covenants may be breached if performance declines As discussed in Section 4.5.5, Pact will enter into new debt facilities pursuant to which Pact will be subject to various covenants. Factors such as a decline in Pact s operational and financial performance could lead PACT GROUP PROSPECTUS 85

88 5. KEY RISKS (continued) to a breach of its banking covenants. If a breach occurs, Pact s financiers may seek to exercise enforcement rights under the debt facilities, including requiring immediate repayment, which may have a materially adverse effect on Pact s future financial performance and position Pact may be unable to refinance debt or obtain capital or financing Pact s new syndicated debt facility includes tranches that expire in three years and five years respectively from the Listing. Pact s Working Capital Facility is subject to annual review and for certain credit lines, can be terminated at any time. There is a risk that Pact will be unable to refinance or renew its debt facilities following expiry, or will only be able to refinance or renew those debt facilities on terms which are less favourable to Pact than the existing terms. Any inability to refinance debt facilities or obtain capital or financing generally, on favourable terms or at all, may have a materially adverse effect on Pact s future financial performance and position Relationships with landlords may deteriorate Pact operates 66 manufacturing plants and offices leased from over 50 landlords. The most significant group of associated landlords are entities associated with Geminder Holdings, who own 17 manufacturing plants. See Section for further details. The leases typically contain a range of restrictions on Pact s activities at the relevant premises (such as restrictions on effecting structural changes or sub-leasing or licensing), which may restrict Pact s operating flexibility. The leases have a range of terms and option periods. Any default under a lease by Pact (which, under a number of leases, would be triggered if Pact does not satisfy its obligations under the relevant change of control provisions) or failure to renew existing leases on acceptable terms or an inability to negotiate alternative arrangements could materially adversely affect Pact s ability to carry out its activities, which may result in a reduction in sales revenue and have a material adverse effect on Pact s future financial performance and position Counterparties may not meet their obligations Third parties, such as customers, suppliers, landlords, contractors, intellectual property licensors, technology alliance partners, joint venture partners and other counterparties may not be willing or able to perform their obligations to Pact. Periods of economic uncertainty increase the risk of defaults by counterparties. If one or more key counterparties default on their obligations to Pact or encounter financial difficulties, this would have an adverse effect on Pact s future financial performance and position. Pact s insurance coverage may also be inadequate to cover losses it sustains. In the event of an uninsured loss or a loss in excess of Pact s insured limits, Pact could suffer damage to its reputation and/or lose future sales revenue. Any material loss not covered by insurance could adversely affect Pact s business, financial condition and results of operations Emissions Trading Scheme may adversely affect Pact Pact has obligations under the New Zealand Emissions Trading Scheme (NZ ETS). These obligations result in increased costs for Pact, including increased electricity and transport fuel costs. The NZ ETS is in a transitional phase whereby participants are only required to surrender one emission unit for every two tonnes of emissions. Emission units can be purchased on the market or from the New Zealand government (which are at a fixed price of $25 per tonne). The current New Zealand government has extended the transitional phase indefinitely with a review scheduled in The regulatory framework is subject to change, and those changes may be adverse. For example, the New Zealand government recently implemented further restrictions, through regulations, on certain types of international emission units that may be used for compliance purposes under the ETS. Although the intent of the NZ ETS is that businesses such as Pact would in turn pass through those costs to the end user, the pass-through of such costs (particularly at the conclusion of the transitional phase), along with the increased direct and indirect costs arising from the NZ ETS generally, may have a material adverse impact on some of Pact s key customers and cause them to modify their demand for Pact s services and may also result in Pact choosing to absorb some or all of the increased costs in order the minimise the reduction in demand from its customers. Either outcome could adversely affect Pact s business, financial condition or operational results. 86

89 Pact may be exposed to risks related to insurance Pact seeks to maintain appropriate policies of insurance consistent with those customarily carried by organisations in its industry sector. Any increase in the cost of insurance policies of Pact or the industry in which it operates could adversely affect Pact s business, financial condition and operational results Geminder Holdings will continue to hold significant interest in Pact Geminder Holdings will own approximately 40% of Shares following Listing which would make it the largest Shareholder. Consequently, Geminder Holdings may have the ability to influence the election of Directors, the appointment of new management and the potential outcome of matters submitted to the vote of Shareholders. The interests of Geminder Holdings may differ from the interests of Pact and other Shareholders and this may adversely affect the Company s share price and other Shareholders. The continued shareholding of Geminder Holdings, in particular until the end of the escrow period which will continue until after the release to the ASX of Pact s audited financial accounts for FY2014, may cause or contribute to a limited liquidity in the market for Shares, which could affect the market price at which other Shareholders are able to sell their Shares. A significant sale of Shares by Geminder Holdings after the end of the escrow period, or the perception that such a sale has or might occur, could adversely affect the price of Shares. The continued shareholding of Geminder Holdings may also negatively impact the timing and effectiveness of any capital raising activities of Pact, which could adversely affect Pact s cost of capital and financial position Sale of the China Premises to a related party on non-arm s length terms Each of Viscount China s wholly owned subsidiaries have entered into a call option and lease back deed in respect of the relevant China Premises over which it holds a granted land use right (which is a right similar to a long term leasehold and the closest property interest to freehold for commercial property in China). Under these deeds, each Viscount China subsidiary grants an option to Geminder Holdings (or its nominee) to acquire the relevant China Premise for book value as at 30 June 2013 plus any applicable purchase taxes or duties. The term of the option is three years from the Listing (being up to 20 December 2016). Upon exercise of the option, Geminder Holdings must lease back the relevant China Premise to Pact on armslength commercial terms (including as to rent). The effect of the call option is that any of the China Premises may be acquired by Geminder Holdings for its book value as at 30 June 2013, which may be less than its market value at the time of exercise of the option. As vendor, on exercise of the call option, Pact may be exposed to various taxes and duties in China which will be based on the market values of the relevant China Premise. These taxes and duties cannot be quantified at this stage. Pact will be compensated, to the extent Pact receives payment under an indemnity from Geminder Holdings, for any taxes and duties payable which exceed the taxes and duties that would have been payable by Pact had the acquisition been assessed by the relevant authorities at the 30 June 2013 book value. 5.3 GENERAL RISKS TO AN INVESTMENT IN THE OFFER Price of Shares may fluctuate The price at which Shares are quoted on the ASX may increase or decrease due to a number of factors. These factors may cause the Shares to trade below the Offer Price. There is no assurance that the price of the Shares will increase following the quotation on the ASX, even if the Company s earnings increase. Some of the factors which may affect the price of the Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, exchange rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, inclusion in or removal from market indices, the nature of the markets in which Pact operates and general operational and business risks. Other factors which may negatively affect investor sentiment and influence the Company specifically or the stock market more generally include acts of terrorism, an outbreak of international hostilities or fires, floods, earthquakes, labour strikes, civil wars and other natural disasters. PACT GROUP PROSPECTUS 87

90 5. KEY RISKS (continued) Trading in Shares may not be liquid There is currently no public market through which the Shares of the Company may be sold. There can be no guarantee that an active market in the Shares will develop or that the price of the Shares will increase. There may be relatively few potential buyers or sellers of the Shares on the ASX at any time. This may increase the volatility of the market price of the Shares. It may also affect the prevailing market price at which Shareholders are able to sell their Shares. This may result in Shareholders receiving a market price for their Shares that is less or more than the price that Shareholders paid. Following Listing, Geminder Holdings and the Escrowed Vendors will hold approximately 41.9% of the Shares, which may also have an impact on liquidity. Geminder Holdings and the Escrowed Vendors will each enter into voluntary escrow arrangements in relation to either all or the majority of the Shares they hold immediately following Listing, to the date that Pact s audited financial accounts for the year ending 30 June 2014 are released to the ASX, subject to certain exceptions set out in Section The absence of any sale of Shares by Geminder Holdings and the Escrowed Vendors during this period may cause, or at least contribute to, limited liquidity in the market for the Shares. This could affect the prevailing market price at which Shareholders are able to sell their Shares. Following release from escrow, Shares held by Geminder Holdings and the Escrowed Vendors will be able to be freely traded on the ASX. A significant sale of Shares by Geminder Holdings and the Escrowed Vendors, or the perception that such sale have occurred or might occur, could adversely affect the price of Shares Exposure to general economic conditions General economic conditions (both domestically and internationally), may adversely impact the price of Shares as well as Pact s ability to pay dividends. Pact is unable to forecast the market price for Shares and they may trade on the ASX at a price that is below the Offer Price Risk of shareholder dilution In the future, the Company may elect to issue shares to engage in fundraisings and also to fund, or raise proceeds, for acquisitions the Company may decide to make. While Pact will be subject to the constraints of the Listing Rules regarding the percentage of its capital it is able to issue within a 12 month period (other than where exceptions apply), Shareholders may be diluted as a result of such issues of shares and fundraisings Exposure to changes in tax rules or their interpretation Tax rules or their interpretation in relation to equity investments may change. In particular, both the level and basis of taxation may change. In addition, an investment in the Shares involves tax considerations which may differ for each Shareholder. Each prospective Shareholder is encouraged to seek professional tax advice in connection with any investment in Pact Tax implications of changes to the thin capitalisation rules In May 2013 the former Australian Federal Government announced as part of the Federal Budget various proposed changes to the thin capitalisation rules. The thin capitalisation rules can apply to deny tax deductions for interest expense where debt exceeds levels set by the law. The government announced a reduction in the safe harbour maximum allowable debt to a factor of 60% from the existing 75% effective from 1 July If this proposal is introduced into law the 60% safe harbour debt amount should apply to the PGH income tax consolidated group from FY2015. Although this measure is not yet enacted, the potential impact will need to continue to be monitored by Pact No guarantee in respect of investment The above list of risk factors should not be taken as an exhaustive list of the risks faced by Pact or by investors in Pact. The above factors, and others not specifically referred to above, may materially affect the financial performance of Pact and the value of the Shares under the Offer. The Shares issued under the Offer carry no guarantee in respect of profitability, dividends, return of capital or the price at which they may trade on the ASX. Furthermore, there is no guarantee that the Shares will remain continuously quoted on the ASX, which could impact the ability of prospective Shareholders to sell their Shares. Potential investors should consult their professional adviser before deciding whether to apply for Shares under the Offer. 88

91 6. KEY PEOPLE, INTERESTS, BENEFITS For personal use only

92 6. KEY PEOPLE, INTERESTS, BENEFITS 6.1 BOARD OF DIRECTORS The Board of Directors has been appointed to ensure a highly experienced and complementary skill set exists for the benefit of Pact. The Board members have extensive relevant experience in operations, manufacturing, finance, information technology and public company experience. The Board comprises a Non-Executive Chairman, one Executive Director, and three Independent, Non-Executive Directors. Prior to Pact becoming a public company all three Independent, Non-Executive Directors were members of Pact s advisory board and therefore have a strong history and association with Pact. Raphael Geminder Non-Executive Chairman Background Raphael Geminder founded Pact in Prior to founding Pact, Raphael was the co-founder and Chairman of Visy Recycling, growing it into the largest recycling company in Australia. Raphael was appointed Victoria s first Honorary Consul to the Republic of South Africa in July He also holds a number of other advisory and Board positions. Education Raphael holds a Masters of Business Administration in Finance from Syracuse University, New York. Other current directorships Director of the Carlton Football Club and several other private companies. Lyndsey Cattermole AM Independent Non-Executive Director Background Lyndsey founded Aspect Computing Pty Limited, the largest Australian software and services company, going on to be a major company in Australian ICT with 1,300 employees. She remained as the Managing Director from 1974 to 2003, before selling the business to KAZ Group Limited, where she served as a Director from 2001 to Lyndsey has also held many board and other membership positions on a range of government, advisory, association and not for profit committees, including the Committee for Melbourne, the Australian Information Industries Association, the Victorian Premier s Round Table and the Woman s and Children s Health Care Network. Education Lyndsey holds a Bachelor of Science from the University of Melbourne and is a Fellow of the Australian Computer Society. Other current directorships Non-Executive Director of ASX listed companies Treasury Wine Estates Limited and Tatts Group Limited. She also holds directorships with the Victorian Major Events Company, Melbourne Rebels Rugby Union Limited and several other private companies. Former directorships Non-Executive Director of ASX listed company Foster s Group Limited ( ). Non-Executive Director of ASX listed company KAZ Group Limited ( ). 90

93 Anthony (Tony) G. Hodgson AM Independent Non-Executive Director Background Tony Hodgson was the co-founder and former Senior Partner of the chartered accounting firm Ferrier Hodgson from which he retired in 2000 after 24 years. Tony still serves as a consultant to BRIFerrier. Tony has extensive experience serving on various board committees including Audit, Nomination, Risk and Compliance committees. Education Tony holds a Certificate of Commerce, is a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Australian Institute of Company Directors. Other current directorships Tony is a Member of the Advisory Council of J.P. Morgan, a Non-Executive Director and Chair of the Audit & Risk Committee of Racing NSW and a Non-Executive Director of the Waubra Foundation. Former directorships Deputy Chairman and Chair of the Audit & Risk Committee of ASX listed Tabcorp Holdings Limited ( ). Non-Executive Director and Chair of the Audit & Risk Committee of ASX listed Coles Group Limited ( ). Non-Executive Director and Chair of the Audit & Risk Committee HSBC Bank Australia Limited ( ). Chairman of the Melbourne Port Corporation ( ). Peter Margin Independent Non-Executive Director Background Peter has many years of leadership experience in major Australian and international food companies. His most recent role was Chief Executive Officer of ASX listed company Goodman Fielder Limited and before that Peter was Chief Executive Officer and Chief Operating Officer of National Foods Limited. Peter has also held senior management roles in Simplot Australia Limited, Pacific Brands Limited (formerly known as Pacific Dunlop Limited), East Asiatic Company and HJ Heinz Company Australia Limited. Education Peter holds a Bachelor of Science from the University of New South Wales and a Master of Business Administration from Monash University. Other current directorships Peter is currently a Non-Executive Director of ASX listed companies Bega Cheese Limited, PMP Limited and Nufarm Limited; and of NSX listed company Ricegrowers Limited. Former directorships Executive Director of ASX Listed Goodman Fielder Limited ( ). Chief Executive Officer and Chief Operating Officer of National Foods Ltd ( ). PACT GROUP PROSPECTUS 91

94 6. KEY PEOPLE, INTERESTS, BENEFITS (continued) Brian Cridland Chief Executive Officer Background Brian Cridland is the Chief Executive Officer of Pact and has held that role with Pact since inception in Brian has been in the Manufacturing Industry for 41 years. He previously held senior roles including General Manager Visypak, Managing Director Rexel Australia, Managing Director GEC Australia, General Manager Rigid Packaging Southcorp and many senior roles in Rheem Australia Limited and other companies. Education Brian holds Bachelor of Chemical Engineering and Bachelor of Commerce from the University of Queensland. Other current directorships Brian holds no other directorships. 6.2 SENIOR MANAGEMENT The key senior management of Pact is as follows: Brian Cridland Chief Executive Officer See Section 6.1. Darren Brown Chief Financial Officer Role Darren has worked with Pact for 19 years, including the last 11 years as Chief Financial Officer. Darren is responsible for Pact s financial management which includes treasury management, financial regulatory compliance, and internal audit. Darren is also closely involved with Pact s commercial activities, M&A, strategic planning and execution as well as driving positive operational outcomes. Background Prior to joining Pact, Darren worked with a major international Chartered Accounting firm for 6 years where he obtained considerable experience in business re-organisation and audit. Education Darren is a Chartered Accountant with a Graduate Diploma in Applied Finance and Investment and a Bachelor of Business. 92

95 Pact s management structure is split into two areas, Functional General Managers and Operational General Managers, with all of its key management having significant experience in the packaging industry. Figure 17: Pact organisation structure 1 Pact Group Holdings Board of Directors Raphael Geminder Non-Executive Chairman Brian Cridland Chief Executive Officer Lyndsey Cattermole Non-Executive Director Tony Hodgson Non-Executive Director Peter Margin Non-Executive Director Brian Cridland Chief Executive Officer Years 41 Functional General Managers Operational General Managers Chief Financial Officer Years 23 GM Commercial Manufacturing Years 23 GM Food & Beverage Packaging Australia Years 26 GM Industrial Products New Zealand Years 46 GM Sales, Marketing, Innovation Years 21 GM Sourcing Years 36 GM Rigid Containers Years 23 GM Material Handling Years 33 GM Human Resources Years 23 GM Food Packaging New Zealand Years 31 GM Sustainability Years Years refers to years of experience in field of expertise. 6.3 INTERESTS AND BENEFITS Chief Executive Officer The Chief Executive Officer, Brian Cridland, is employed by Pact Group Holdings Ltd. The employment agreement recognises Brian s prior service since 12 June Brian is required to perform the duties reasonably associated with the position of Chief Executive Officer. He must perform his duties with the degree of competence and efficiency appropriate to his position and use all reasonable efforts to promote the interests of the employer and other companies within Pact. Brian s current base salary is $911,681 per annum, plus superannuation. His salary is subject to review annually on or around 1 July. Brian is also a participant in the Pact Group ( Pact ) Executive Bonus Plan 1 July June Under this plan, Brian is entitled to an incentive of up to 50% of his base salary if he achieves 110% of the target levels (which generally only relate to financial measures such as sales and EBITDA). Lower percentages (40% and 10%) are payable if 100% of, or 95% of, the target, respectively, are achieved. The incentive is calculated on a quarterly basis and is subject to other conditions. Brian was entitled to a sign on bonus of $500,000 (paid within five days of him signing the employment agreement). Brian is also entitled to receive $500,000 as a liquidity bonus on 31 December 2013 depending on, amongst other things, the value of the proceeds of the Offer. The employment agreement is for a fixed term of two years and will automatically terminate on 10 October As such, there is no notice period for termination prior to the expiry of the term. By operation of law, any termination by Pact Group Holdings Ltd, other than justified as summary termination under common law, PACT GROUP PROSPECTUS 93

96 6. KEY PEOPLE, INTERESTS, BENEFITS (continued) could constitute a breach of contract and, subject to the termination benefits provisions in the Corporations Act and relevant shareholder approval being sought, trigger an entitlement to payment for the balance of the term. The employer may, in its sole discretion and on one month s notice, extend the term by an additional year. Brian is also entitled to a retention award, on or around 1 July 2014 of $500,000 for remaining employed to 30 June He will be eligible for a further $500,000 Retention Award on or around 1 July 2015 for remaining employed to 30 June Brian s eligibility for the liquidity bonus and retention awards may continue beyond termination (if necessary, any payments will be subject to the termination benefits provisions in the Corporations Act and relevant shareholder approval) Non-Executive Directors Under the Constitution, the Directors decide the total amount paid to each Non-Executive Director as remuneration for their services as a Director of the Company. However, under the listing rules of the ASX (ASX Listing Rules), the total amount paid to all Non-Executive Directors for their services must not exceed in aggregate in any financial year the amount fixed by the Company s members at a general meeting. This amount has been fixed at $1,000,000. The annual Non-Executive Directors fees currently agreed to be paid by the Company to each of the Non-Executive Directors except for Raphael Geminder (see below) is $110,000. In addition, the chairman of the Audit, Business Risk and Compliance Committees will be paid $30,000 annually. The Chairman of the Remuneration Committee will be paid $20,000 annually. Each member of these committees will be paid $7,500 annually. Raphael Geminder will not receive a fee for his position as Chairman and a Non-Executive Director of the Company. The remuneration of Directors must not include a commission on, or a percentage of, profits or operating sales revenue. All Non-Executive Directors fees include superannuation at 9.25% of the respective amounts Other remuneration arrangements Directors may also be reimbursed for travel and other expenses incurred in attending to the Company s affairs. Non-Executive Directors may be paid such additional or special remuneration as the Directors decide is appropriate where a Non-Executive Director performs extra work or services which are not in the capacity as a Director of the Company or a subsidiary. There are no retirement benefit schemes for Non-Executive Directors, other than statutory superannuation contributions Directors shareholdings The Directors are not required to hold any Shares under the provisions of the Constitution. The Non-Executive Chairman (through his interests in Geminder Holdings) is the only Director with an interest in the Company s Shares (see Section 6.3.5). The Directors are entitled to participate in the Broker Firm Offer and may elect to subscribe for Shares in the Offer Existing Shareholder s interest in the Offer On Listing, Geminder Holdings will hold 117,036,546 Shares 53, which will equate to approximately 40% of the total issued capital of the Company. These Shares will comprise the Shares retained by Geminder Holdings and the Acquisitions Shares received by an entity associated with Geminder Holdings (being Salvage). All Shares in which Geminder Holdings will have an interest on Listing, including the Acquisition Shares, will be subject to voluntary escrow arrangements (see Section 9.4.2). Geminder Holdings will also receive $564.9 million out of the proceeds of the Offer in full satisfaction of the Promissory Note (see Section 9.2). On Listing, Geminder Holdings and its associated entities will be party to a number of related party arrangements with Pact, including supply agreements, property leases and support services arrangements (see Section 6.4). 53 This consists of 113,764,210 Shares held by Geminder Holdings and 3,272,336 Shares to be held by Salvage (an entity associated with Geminder Holdings). 94

97 6.4 RELATED PARTY TRANSACTIONS Centralbridge leases Pact leases 23 properties (20 in Australia and 3 in New Zealand) from Centralbridge Pty Ltd (as trustee for the Centralbridge Unit Trust), Centralbridge Two Pty Ltd, Centralbridge (NZ) Limited and Albury Property Holdings Pty Ltd, which are each controlled by entities associated with Raphael Geminder (the Non-Executive Chairman of Pact) and are therefore related parties of Pact (Centralbridge Leases) 54. The aggregate annual rent payable by Pact under the Centralbridge Leases is approximately $12,180,510. The rent payable under the leases was determined based on independent valuations and market conditions at the time the leases were entered into. Of the Centralbridge Leases in Australia: two of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of the 3rd (which has already passed), 6th and 9th years of the term; seven of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of the 6th and 9th term; six of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of the 8th term; and two of the leases do not contain standard default provisions which give the landlord the right to terminate the lease in the event of default. Except as set out above, the Centralbridge Leases in Australia are on arm s length terms. Of the Centralbridge Leases in New Zealand, three of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of the 6th and 9th term. With the exception of the early termination right, the Centralbridge Leases in New Zealand are on terms which are not uncommon for leases of commercial premises Agreement with Pro-Pac Packaging Pro-Pac Packaging (Aust) Pty Ltd, an entity controlled by Raphael Geminder, is the exclusive supplier of raw materials such as flexible film packaging, flexible plastic bags and tapes to Pact for an initial term that expires on 1 October Total annual fees under this arrangement are approximately $4.7 million per annum. The supply arrangement is on arm s length terms P Auer supply agreement Pact Group Holdings (Australia) Pty Ltd obtains printed plastic in mould labels, printed paper, board fins and other printed paper labels from P Auer Pty Ltd (P Auer), an entity controlled by Raphael Geminder. P Auer is Pact s preferred supplier of these products. The agreement is for an initial fixed term of five years, and then rolls over or renews automatically for further three year terms unless terminated upon six months written notice. The aggregate sales revenue forecast to be paid to P Auer in FY2014 is $7 million. This supply arrangement is on arm s length terms P Auer Support Services Agreement P Auer and Pact (through Pact Group Holdings (Australia) Pty Ltd) have entered into a Transitional Services and Support Agreement dated 1 November 2013 (P Auer TSSA). Under the P Auer TSSA, Pact is required to ensure that it possesses sufficient facilities, resources and appropriately skilled and experienced personnel to provide IT and administrative services to P Auer for a transitional period of up to two years post IPO. If requested by P Auer at least three months before the expiration of the initial term of the P Auer TSSA, the parties will enter into good faith negotiations to extend the term. 54 The 23 leases are in respect of 17 manufacturing plants and one office. There are a number of sites where multiple leases exist for that one site. PACT GROUP PROSPECTUS 95

98 6. KEY PEOPLE, INTERESTS, BENEFITS (continued) Consideration is provided by P Auer in the form of monthly payments in arrears, subject to the delivery of the services under the P Auer TSSA by Pact. The total amount payable by P Auer in FY2014 is $240,816. The fees payable by P Auer under the P Auer TSSA will be reviewed in July Should the parties be unable to agree on the fees payable by P Auer in respect of Pact s provision of services to P Auer, then the fees applicable in the prior month will continue to apply until an agreement is reached. Within 120 days of Listing, the parties must develop a disengagement plan to facilitate the orderly transfer of services provided under the P Auer TSSA to another provider. Upon the expiration or termination of the P Auer TSSA, each party will be subject to this disengagement regime. Each party s liability is limited to the amount paid or payable to that party under the P Auer TSSA, plus the projected fees payable to that party for the remainder of the P Auer TSSA s initial term. This limitation does not apply in cases of death or personal injury, fraud or wilful misconduct, or breaches of confidentiality obligations. Pact may terminate the P Auer TSSA if P Auer is in default of any payment due under, or material provision of, the P Auer TSSA, and that such default has not been cured during the 60 day cure period. P Auer may terminate the P Auer TSSA on 60 days written notice to Pact, or immediately by notice in writing if Pact breaches any material provision of the P Auer TSSA, and such breach continues for 30 days following Pact s receipt of a written demand from P Auer. Notwithstanding these termination rights, P Auer has a right to require the P Auer TSSA to continue for a further 120 days if immediate termination would cause a serious disruption to its business Geminder Holdings / Pact transitional arrangements Geminder Holdings and Pact (through Pact Group Holdings (Australia) Pty Ltd) have entered into a Transitional Services and Support Agreement dated 1 November 2013 (Geminder Holdings TSSA). The Geminder Holdings TSSA sets out the terms on which Geminder Holdings and Pact will continue to share common premises and services post IPO for a transitional period of up to two years. If requested by Geminder Holdings at least three months before the expiration of the initial term of the Geminder Holdings TSSA, the parties will enter into good faith negotiations to extend the term. Under the Geminder Holdings TSSA: Geminder Holdings will use reasonable endeavours to supply appropriately skilled and experienced personnel to provide some support services to Pact, subject to its capacity to supply these services; Geminder Holdings also licences the use and presence of various artworks located in the Como Towers premises at no cost. The licence for the use and presence of the artworks is revocable at will by Geminder Holdings; Pact will ensure that it possesses sufficient facilities, resources and appropriately skilled and experienced personnel to provide IT services, administrative services and a licence to use the Como Towers premises to Geminder Holdings; and each party will take steps to reduce their reliance on the respective services provided by the other party as described above. In addition to providing the above described services to Pact, Geminder Holdings also provides cash consideration under the Geminder Holdings TSSA in the form of monthly (in arrears) service fees initially in the amount of $41,667. This is subject to the delivery of services under the Geminder Holdings TSSA by Pact. The fees payable by Geminder Holdings under the Geminder Holdings TSSA will be reviewed in July Should the parties be unable to agree on the fees payable by Geminder Holdings in respect of Pact s provision of services to Geminder Holdings, then the fees applicable in the prior month will continue to apply until an agreement is reached. Within 120 days of Listing, the parties must develop a disengagement plan to facilitate the orderly transfer of services provided under the Geminder Holdings TSSA to another provider. Upon the expiration or termination of the Geminder Holdings TSSA, each party will be subject to this disengagement regime. Each party s liability is limited to the amount paid or payable to that party under the Geminder Holdings TSSA, plus the projected fees payable to that party for the remainder of the Geminder Holdings TSSA s initial term. This limitation does not apply in cases of death or personal injury, fraud or wilful misconduct, or breaches of confidentiality obligations. 96

99 Pact may terminate the Geminder Holdings TSSA if Geminder Holdings is in default of any payment due under, or material provision of, the Geminder Holdings TSSA, and that such default has not been cured during the 60 day cure period. Geminder Holdings may terminate the Geminder Holdings TSSA on 60 days written notice to Pact, or immediately by notice in writing if Pact breaches any material provision of the Geminder Holdings TSSA, and such breach continues for 30 days following Pact s receipt of a written demand from Geminder Holdings. Notwithstanding these termination rights, Geminder Holdings has a right to require the Geminder Holdings TSSA to continue for a further 120 days if immediate termination would cause a serious disruption to its business Call option and lease back of the China Premises Each of Viscount China s wholly owned subsidiaries have entered into a call option deed in respect of the relevant China Premises to which it holds a granted land use right (which is a right similar to a long term leasehold and the closest property interest to freehold for commercial property in China). Under these deeds, the Viscount China subsidiary grants an option to Geminder Holdings (or its nominee) to acquire the relevant China Premises for book value as at 30 June 2013 plus any applicable purchaser taxes or duties. The term of the option is approximately three years from Listing. Post acquisition of the relevant China Premise by Geminder Holdings (or its nominee), Geminder Holdings and the relevant Viscount China subsidiary will negotiate a lease for the premises on commercial terms. The effect of the call option is that any of the China Premises may be acquired by Geminder Holdings (or its nominee) for less than market value. As vendor, on exercise of the call option, Pact may be exposed to various taxes and duties in China which will be based on the market value of the relevant China Premises. These taxes and duties cannot be quantified at this stage. Pact will be compensated in respect of taxes and duties which are assessed by the relevant authorities on a value in excess of the 30 June 2013 book value to the extent it receives payment under an indemnity from Geminder Holdings. The indemnity applies to the extent that any taxes and duties payable to Pact exceed the taxes and duties that would have been payable had the acquisition been assessed by the relevant authorities at the 30 June 2013 book value. 6.5 CORPORATE GOVERNANCE Overview Section 6.5 explains how the Board will oversee the management of Pact s business. The Board is responsible for the overall corporate governance of Pact. The Board monitors the operational and financial position and performance of Pact and oversees its business strategy including approving the strategic goals of Pact and considering and approving Pact s annual business plan, including a budget. The Board is committed to maximising performance, generating appropriate levels of Shareholder value and financial return, and sustaining the growth and success of Pact. In conducting Pact s business with these objectives, the Board seeks to ensure that Pact is properly managed to protect and enhance Shareholder interests, and that Pact, its Directors, officers and personnel operate in an appropriate environment of corporate governance. Accordingly, the Board has created a framework for managing Pact, including adopting relevant internal controls, risk management processes and corporate governance policies and practices which it believes are appropriate for Pact s business and which are designed to promote the responsible management and conduct of Pact. The main policies and practices adopted by Pact, which will take effect from listing, are summarised below. In addition, many governance elements are contained in the Constitution. Details of Pact s key policies and practices and the charters for the Board and each of its committees are available at The Company is seeking a listing on the ASX. The ASX Corporate Governance Council has developed and released its ASX Corporate Governance Principles and Recommendations (ASX Recommendations) for Australian listed entities in order to promote investor confidence and to assist companies in meeting stakeholder expectations. The recommendations are not prescriptions, but guidelines. However, under the ASX Listing Rules, the Company will be required to provide a statement in its annual report disclosing the extent to which it has followed the recommendations during each reporting period. Where Pact does not follow a recommendation, it must identify the recommendation that has not been followed and give reasons for not following it. PACT GROUP PROSPECTUS 97

100 6. KEY PEOPLE, INTERESTS, BENEFITS (continued) Pact intends to comply with all of the ASX Recommendations from the time of its listing, with the exception of Recommendation 2.2, which provides that the Chair should be an Independent Director. In his position as Non-Executive Chairman, Mr Raphael Geminder, will, following Listing, hold approximately 40% of the issued capital of Pact. Accordingly, the Non-Executive Chairman is not an Independent Director. The Board believes that Mr Geminder is the most appropriate person to lead the Board as Non-Executive Chairman and that he is able to and does bring quality and judgment to all relevant issues falling within the scope of the role of Chairman and that Pact as a whole benefits from his long standing experience of its operations and business relationships. In accordance with ASX Recommendations 3.2 and 3.3, Pact has adopted a diversity policy which provides that the Board will set measurable objectives for achieving gender diversity and will include in the Company s annual report each year a summary of the Company s progress towards achieving the measureable objectives. The Board has yet to set measurable objectives for achieving gender diversity and intends to disclose its measurable objectives in accordance with ASX Recommendation 3.3 in future annual reports Board appointment and composition It is the Board s policy that there should be a majority of independent, Non-Executive Directors. That is, that the majority of Directors should be free from any business or other relationship that could materially compromise their independent judgement. The Board is currently made up of five Directors, four of whom are Non-Executive Directors (including the Non-Executive Chairman). Mr Tony Hodgson, Ms Lyndsey Cattermole and Mr Peter Margin have all been members of, and have received fees in respect of their participation on, an Advisory Board to Pact which met informally at quarterly intervals. Mr Hodgson was a member of the Advisory Board from September 2003 to November 2013, Ms Cattermole was a member of the Advisory Board from June 2005 to November 2013 and Mr Peter Margin was a member of the Advisory Board from August 2011 to November Having regard to the nature and extent of the work performed by Mr Hodgson, Ms Cattermole and Mr Margin as members of the Advisory Board, the Board has determined that Mr Hodgson, Ms Cattermole and Mr Margin are all independent Directors. The Board considers a Director to be independent where he or she is independent of management and is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment. The Board will consider the materiality of any given relationship on a case by case basis and has adopted materiality guidelines to assist it in this regard. The Board reviews the independence of each Director in light of interests disclosed to the Board from time to time Risk management Pact is committed to the proper identification and management of risk. Pact will put in place processes to identify and measure business risk, including regular review of results from its risk identification procedures. The Audit, Business Risk and Compliance Committee is charged with oversight of this process (see Section ). Pact regularly undertakes reviews of its risk management procedures which include implementation of internal control systems to ensure not only that Pact complies with its legal obligations but that the Board, and ultimately Shareholders, can take comfort that an appropriate system of checks and balances is in place regarding those areas of the business which present financial or operating risks. Pact has also adopted a Code of Conduct which sets out Pact s commitment to maintaining integrity and ethical standards in all business practices. The Code of Conduct sets out for all Directors, management and employees the standard of behaviour expected of them, and the steps that should be taken in the event of uncertainty or a suspected breach by a colleague. The Code is designed to: provide a benchmark for professional behaviour throughout Pact; support Pact s business reputation and corporate image within the community; and encourage reporting of unethical behaviour and breaches of the policy. 98

101 6.5.4 Board charter The Board has adopted a written charter to provide a framework for the effective operation of the Board, which sets out: the Board s composition and processes; the Board s role and responsibilities; the relationship and interaction between the Board and management; and the authority delegated by the Board to management and Board committees. The Board s role is to: represent and serve the interests of Shareholders by overseeing and appraising the Company s strategies, policies and performance; protect and optimise Pact s performance and build sustainable value for Shareholders; set, review and ensure compliance with Pact s values and governance framework; and ensure that Shareholders are kept informed of Pact s performance and major developments. Matters which are specifically reserved for the Board or its committees include: appointment of a chair; appointment and removal of the Chief Executive Officer / Managing Director and the CFO; appointment of Directors to fill a vacancy or as an additional Director; establishment of Board committees, their membership and delegated authorities; approval of dividends; approval of major capital expenditure, acquisitions and divestitures in excess of authority levels delegated to management; calling of meetings of Shareholders; and any other specific matters nominated by the Board from time to time. The management function is conducted by, or under the supervision of, the CEO as directed by the Board (and by officers to whom the management function is properly delegated by the CEO). Management must supply the Board with information in a form, timeframe and quality that will enable the Board to discharge its duties effectively. Directors are entitled to request additional information at any time they consider it appropriate. The Board collectively, and individual Directors, may seek independent professional advice at the Company s expense, subject to the approval of the Chairman or the Board as a whole. A copy of the Board Charter will be made available on Pact s website at Board committees The Board discharges its duties in relation to certain specific functions through the following committees of the Board: Audit, Business Risk and Compliance Committee; and Nomination and Remuneration Committee. PACT GROUP PROSPECTUS 99

102 6. KEY PEOPLE, INTERESTS, BENEFITS (continued) Audit, Business Risk and Compliance Committee The Audit, Business Risk and Compliance Committee will monitor and review the effectiveness of Pact s controls in the areas of operational and balance sheet risks, legal and regulatory compliance and financial reporting. The committee s charter provides that the committee will comprise only Non-Executive Directors, a majority of whom must also be independent Directors and chaired by an independent Chairman who is not Chairman of the Board. The Audit, Business Risk and Compliance Committee will comprise: Tony Hodgson (Chairman); Lyndsey Cattermole; and Peter Margin. The committee will discharge its responsibilities by: overseeing the Company s relationship with the external auditor and the external audit function generally; overseeing the Company s relationship with the internal auditor and the internal audit function generally; overseeing the preparation of the financial statements and reports; overseeing the Company s financial controls and systems; overseeing the Company s overall risk management program including: operational and environmental risk generally; the Company s workplace health and safety management, controls and systems; and the process of identification and management of financial risk, and overseeing the effectiveness of the compliance program to ensure that legal and regulatory requirements are met. Non-committee members, including senior executives, senior managers and the external auditors, can attend meetings of the committee by invitation of the Chairman. The committee may also have access to financial and legal advisers, in accordance with the Board s general policy. A copy of the committee s charter will be made available on Pact s website at Nomination and Remuneration Committee The Nomination and Remuneration Committee is responsible for matters relating to succession planning, recruitment and the appointment and remuneration of the Directors and the CEO. It is also responsible for overseeing remuneration packages for senior executives and senior managers of Pact. The objectives of the committee include to: review, assess and make recommendations to the Board on the desirable competencies and attributes of the Board; assist the Board to assess the performance of the Board, its committees and its members; oversee the selection and appointment practices for Directors of the Company; review succession plans for the Board and oversee the development of succession planning in relation to the Chairman and CEO; and assist the Board in determining appropriate remuneration policies including incentive plans for the CEO. In making recommendations to the Board regarding the appointment of Directors, the committee periodically assesses the appropriate mix of necessary and desirable competencies required on the Board and assesses the extent to which the required skills and experience are represented on the Board. The committee may consult with advisers as it considers appropriate. 100

103 The committee s charter provides that the committee will comprise of three Non-Executive Directors, consists of a majority independent Directors and is chaired by an independent Chairman. The current members of the committee are: Peter Margin (Chairman) Raphael Geminder; and Lyndsey Cattermole. A copy of the committee s charter will be made available on Pact s website at Corporate governance policies The Board has adopted the following corporate governance policies (which become effective upon commencement of trading on the ASX) Continuous disclosure policy Pact places a high priority on communication with Shareholders and is aware of the obligations it will have, once listed, under the Corporations Act and the ASX Listing Rules, to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company s securities. Pact has adopted a policy which establishes procedures to ensure that Directors and management are aware of and fulfil their obligations in relation to the timely disclosure of material price-sensitive information Policy for dealing in securities Pact has adopted a policy for dealing in securities which is intended to explain the prohibited type of conduct in relation to dealings in securities under the Corporations Act and establish a best practice procedure in relation to dealings in the Company s securities by Directors and employees. The policy provides that Directors, management and employees must not deal in Shares: while they are in possession of material price-sensitive information; on a short-term trading basis (except in exceptional circumstances); and during trading blackout periods (except in exceptional circumstances). Otherwise trading will only be permitted by: Directors with prior approval from the Chairman of the Board; the Chairman of the Board with prior approval from the Chairman of the Audit Business Risk and Compliance Committee; and senior executives and senior managers with prior approval from the CEO Deeds of indemnity, access and insurance The Company has entered into deeds of indemnity, access and insurance with each Director which confirm the Director s right of access to Board papers and require the Company to indemnify the Director to the full extent permitted by law for liability incurred as an officer of the Company or any of its subsidiaries. PACT GROUP PROSPECTUS 101

104 7. DETAILS OF THE OFFER For personal use only

105 7. DETAILS OF THE OFFER 7.1 DESCRIPTION OF THE OFFER This Prospectus relates to an initial public offering of million shares in the Company at an Offer Price of $3.80 per Share. On Listing, million Shares will be held by Geminder Holdings 55 and will be subject to a voluntary escrow arrangement as described in Section The total number of Shares on issue on Listing will be million. All Shares will rank equally with each other. The Offer comprises the Broker Firm Offer (see Section 7.3) and the Institutional Offer (see Section 7.4). There is no general public offer of Shares. The allocation of Shares between the Broker Firm Offer and the Institutional Offer has been determined by the Joint Lead Managers and the Company, having regard to the allocation policies outlined in Sections and The Offer is fully underwritten by the Joint Lead Managers. A summary of the Underwriting Agreement, including the events which would entitle the Joint Lead Managers to terminate the Underwriting Agreement, is set out in Section 7.5 and Section The Offer is made on the terms, and is subject to the conditions, set out in this Prospectus Purpose of the Offer The purpose of the Offer is to: achieve a listing on the ASX to broaden the Company s shareholder base and provide a liquid market for the Shares; provide Pact with an appropriate capital structure with financial flexibility to pursue future growth opportunities including consolidating Geminder Holdings interests and acquiring external interests in certain assets at Listing; improve Pact s future on-going access to capital markets; and provide an opportunity for Geminder Holdings to realise a portion of its investment and maintain a significant ongoing interest in Pact. The Directors believe that following the Offer, Pact will have sufficient working capital to carry out its stated objectives Sources and uses of funds The Offer is expected to raise $648.8 million for the Company. Proceeds received by the Company will be applied as described in Table 7.1. Table 7.1: Sources and uses of funds Source of Funds $m % Uses of Funds $m % Drawdown of syndicated facility % Cash proceeds received for issue of Shares by Pact % Issue of Shares to Geminder Holdings for cash % Repay Existing Term Loan Facility % Repay Promissory Note to Geminder Holdings % Cash payments to vendors under the Acquisitions % Total sources 1, % Total uses 1, % 55 This consists of 113,764,210 Shares held by Geminder Holdings and 3,272,336 Shares to be held by Salvage (an entity associated with Geminder Holdings). PACT GROUP PROSPECTUS 103

106 7. DETAILS OF THE OFFER (continued) 7.2 TERMS OF THE OFFER Topic What is the type of security being offered? Summary Shares (being fully paid ordinary shares in the Company). What are the rights and liabilities attached to the security being offered? A description of the Shares, including the rights and liabilities attaching to them, is set out in Section 7.8 below. What is the consideration payable for each Share? The Offer Price is $3.80 per Share. What is the Broker Firm Offer period? The key dates, including details of the Broker Firm Offer period, are set out in Important Dates on page 4. No Shares will be issued on the basis of this Prospectus later than the expiry date of 27 December What are the cash proceeds to be raised? $648.8 million will be raised under the Institutional Offer and Broker Firm Offer. What is the minimum and maximum application size under the Broker Firm Offer? The minimum application under the Broker Firm Offer is $2,000. The Joint Lead Managers and the Company reserve the right to reject any Application or to allocate a lesser number of Shares than applied for. There is no maximum value of Shares that may be applied for under the Broker Firm Offer. What is the allocation policy? The allocation of Shares between the Broker Firm Offer and the Institutional Offer has been determined by the Joint Lead Managers and the Company, having regard to the allocation policies outlined in Sections and When will I receive confirmation whether my application has been successful? It is expected that initial holding statements will be despatched by standard post on or about 18 December

107 Topic Will the Shares be quoted? Summary The Company will apply for admission to the official list of the ASX and quotation of Shares on the ASX under the code PGH. Listing is conditional on the ASX approving this application. If approval is not given within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act. The Company will be required to comply with the ASX Listing Rules, subject to any waivers obtained by Pact from time to time. The ASX takes no responsibility for this Prospectus or the investment to which it relates. The fact that the ASX may admit the Company to the official list is not to be taken as an indication of the merits of the Company or the Shares offered for subscription. When are the Shares expected to commence trading? It is expected that trading of the Shares on the ASX will commence on or about 17 December 2013 on a deferred settlement basis. Trading will be on a deferred settlement basis until the Company has advised the ASX that holding statements have been despatched to Shareholders. It is the responsibility of each Applicant to confirm their holding before trading in Shares. Applicants who sell Shares before they receive an initial statement of holding do so at their own risk. The Company and the Joint Lead Managers disclaim all liability, whether in negligence or otherwise, to persons who sell Shares before receiving their initial statement of holding, whether on the basis of a confirmation of allocation provided by any of them, by the Pact Share Offer Information Line, by a Syndicate Broker or otherwise. Is the Offer underwritten? Yes. The Joint Lead Managers are fully underwriting the Offer. Details are provided in Sections 7.5 and Are there any escrow arrangements? Yes. Details are provided in Section Has any ASIC relief or the ASX waiver been obtained or been relied on? Yes. Details are provided in Section Are there any tax considerations? Yes. Refer to Sections 9.8, 9.9 and PACT GROUP PROSPECTUS 105

108 7. DETAILS OF THE OFFER (continued) Topic Are there any brokerage, commission or stamp duty considerations? Summary No brokerage, commission or stamp duty is payable by Applicants on the acquisition of Shares under the Offer. See Sections and for details of various fees payable by the Company to the Joint Lead Managers and by the Joint Lead Managers, on behalf of the Company, to certain Syndicate Brokers. What should I do with any enquiries? All enquiries in relation to this Prospectus should be directed to the Pact Share Offer Information Line on (within Australia) or (outside Australia) from 8:30am to 5:00pm (AEDST), Monday to Friday, during the Broker Firm Offer period. If you are unclear in relation to any matter in relation to this Prospectus or are uncertain as to whether the Company is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent and qualified professional adviser before deciding whether to invest. 7.3 BROKER FIRM OFFER Who can apply? The Broker Firm Offer is open to persons who have received an invitation to participate in the Offer from a Syndicate Broker and who have a registered address in Australia or in New Zealand. If you have been invited to participate by a Syndicate Broker, you will be treated as an Applicant under the Broker Firm Offer in respect of that allocation. You should contact your Syndicate Broker to determine whether they may allocate Shares to you under the Broker Firm Offer How to apply You should complete and lodge your Application Form with the Syndicate Broker who invited you to participate in the Offer. Application Forms must be completed in accordance with the instructions given to you by your Syndicate Broker and the instructions set out on the Application Form. Applications for Shares may only be made on an Application Form attached to or accompanying this Prospectus or in its paper copy form which may be downloaded in its entirety from By making an Application, you declare that you were given access to this Prospectus (and any supplementary or replacement prospectus), together with an Application Form. The Corporations Act prohibits any person from passing an Application Form to another person unless it is attached to, or accompanied by, a hard copy of this Prospectus or the complete and unaltered electronic version of this Prospectus. The minimum application under the Broker Firm Offer is $2,000 worth of Shares and in multiples of $500 thereafter. There is no maximum value of Shares that may be applied for under the Broker Firm Offer. The Company may determine a person to be eligible to participate in the Broker Firm Offer, and may amend or waive the Broker Firm Offer application procedures or requirements, in its discretion in compliance with applicable laws. The Broker Firm Offer opens at 8:30am on 5 December 2013 and is expected to close at 5:00pm on 13 December The Company and the Joint Lead Managers may elect to extend the Offer or any part of it, or accept late applications either generally or in particular cases. The Offer, or any part of it, may be closed at any earlier date and time, without further notice (subject to the ASX Listing Rules and the Corporations Act). Your Syndicate Broker may also impose an earlier closing date. Applicants are therefore encouraged to submit their applications as early as possible. Please contact your Syndicate Broker for instructions How to pay Applicants under the Broker Firm Offer must pay their Application Monies in accordance with instructions received from their Syndicate Broker. 106

109 7.3.4 Application Monies The Company reserves the right to decline any Application in whole or in part, without giving any reason. Applicants under the Broker Firm Offer whose applications are not accepted, or who are allocated a lesser number of Shares than the amount applied for, will receive a refund of all or part of their Application Monies, as applicable. Interest will not be paid on any monies refunded. Applicants whose applications are accepted in full will receive the whole number of Shares calculated by dividing the Application Amount by the Offer Price. Where the Offer Price does not divide evenly into the Application Amount, the number of Shares to be allocated will be determined by the Applicant s Syndicate Broker. Cheque(s) or bank draft(s) must be in Australian Dollars and drawn on an Australian branch of an Australian financial institution, must be crossed Not Negotiable and must be made payable in accordance with the directions of the Syndicate Broker from whom the Applicant received a firm allocation. Applicants should ensure that sufficient funds are held in the relevant account(s) to cover the amount of the cheque(s) or bank draft(s). If the amount of your cheque(s) or bank draft(s) for Application Monies (or the amount for which those cheque(s) or bank draft(s) clear in time for allocation) is less than the amount specified on your Application Form, you may be taken to have applied for such lower dollar amount of Shares as for which your cleared Application Monies will pay (and to have specified that amount on your Application Form) or your application may be rejected Acceptance of Applications An Application in the Broker Firm Offer is an offer by an Applicant to the Company to subscribe for Shares in the amount specified the Application Form at the Offer Price on the terms and conditions set out in this Prospectus (including any supplementary or replacement Prospectus) and the Application Form (including the conditions regarding quotation on the ASX in Section 7.7). To the extent permitted by law, an Application is irrevocable. An Application may be accepted by the Company and the Joint Lead Managers in respect of the full number of Shares specified in the Application Form or any of them, without further notice to the Applicant. Acceptance of an Application will give rise to a binding contract Broker Firm Offer allocation policy The allocation of firm shares to Syndicate Brokers has been determined by the Joint Lead Managers and the Company. Shares which have been allocated to Syndicate Brokers for allocation to their Australian and New Zealand resident clients will be issued or transferred to the Applicants who have received a valid allocation of Shares from those Syndicate Brokers. It will be a matter for those Syndicate Brokers how they allocate Shares among their clients, and they (and not the Company or the Joint Lead Managers) will be responsible for ensuring that their clients who have received an allocation from them, receive the relevant Shares. PACT GROUP PROSPECTUS 107

110 7. DETAILS OF THE OFFER (continued) Announcement of final allocation policy in the Broker Firm Offer The Company expects to announce the final allocation policy under the Broker Firm Offer on or about 17 December It is expected that this information will be advertised in The Sydney Morning Herald, The Age, The Australian and The Australian Financial Review on that same day. Applicants in the Broker Firm Offer will be able to call Pact Share Offer Information Line on (within Australia) (outside Australia) from 8:30am to 5:00pm AEDST, Monday to Friday after the allocation policy is announced to confirm their allocations. Applicants under the Broker Firm Offer will also be able to confirm their allocation through the Syndicate Broker from whom they received their allocation. However, if you sell Shares before receiving a holding statement, you do so at your own risk, even if you obtained details of your holding from Pact Share Offer Information Line or confirmed your allocation through a Syndicate Broker. 7.4 INSTITUTIONAL OFFER Invitations to Bid Pact and the Joint Lead Managers invited certain Institutional Investors to bid for Shares in the Institutional Offer. The Institutional Offer had two parts: an invitation to Australian resident Institutional Investors and other eligible Institutional Investors (including Eligible US Fund Managers) in jurisdictions outside the United States to bid for Shares made under this Prospectus; and an invitation to Institutional Investors in the United States who are reasonably believed to be qualified institutional buyers as defined in Rule 144A made under the International Offering Memorandum Institutional Offer allocation policy The allocation of Shares between the Institutional Offer and the Broker Firm Offer has been determined by the Joint Lead Managers and the Company. Participants in the Institutional Offer have been advised of their allocation of Shares by the Joint Lead Managers. The allocation policy was influenced by a number of factors including: number of Shares bid for by particular bidders; the timeliness of the bid by particular bidders; the Company s desire for an informed and active trading market following Listing on the ASX; the Company s desire to establish a wide spread of institutional shareholders; overall level of demand under the Broker Firm Offer, and Institutional Offer; the size and type of funds under management of particular bidders; the likelihood that particular bidders will be long-term shareholders; and other factors that the Company and the Joint Lead Managers considered appropriate. 108

111 7.5 UNDERWRITING ARRANGEMENTS The Offer is fully underwritten by Credit Suisse and Macquarie Capital. The Joint Lead Managers and the Company have entered into the Underwriting Agreement under which the Joint Lead Managers agree, subject to certain conditions and termination events, to underwrite Applications for all Shares under the Offer. The Underwriting Agreement sets out a number of circumstances under which the Joint Lead Managers may terminate the agreement and the underwriting obligations. A summary of certain terms of the agreement and underwriting arrangements, including the termination provisions, is provided in Section DISCRETION REGARDING THE OFFER The Company may withdraw the Offer at any time before the issue of Shares to successful Applicants or bidders under the Broker Firm Offer and the Institutional Offer. If the Offer, or any part of it, does not proceed, all relevant Application Monies will be refunded (without interest) in accordance with the requirements of the Corporations Act. The Company and the Joint Lead Managers also reserve the right (subject to the ASX Listing Rules and the Corporations Act) to close the Offer or any part of it early, extend the Offer or any part of it, accept late Applications or bids either generally or in particular cases, reject any Application or bid, or allocate to any Applicant or bidder fewer Shares than the amount applied or bid for. Applications received under the Offer are irrevocable and may not be varied or withdrawn except as required by law. 7.7 ASX LISTING, REGISTERS AND HOLDING STATEMENTS DEFERRED SETTLEMENT TRADING Application to the ASX for listing of Pact and quotation of Shares The Company will apply for admission to the official list of ASX and quotation of the Shares on the ASX within seven days of the date of this Prospectus. The Company s expects the ASX code to be PGH. The ASX takes no responsibility for this Prospectus or the investment to which it relates. The fact that the ASX may admit the Company to the official list of the ASX is not to be taken as an indication of the merits of the Company or the Shares offered under this Prospectus. If permission is not granted for the official quotation of the Shares on the ASX within three months after the date of this Prospectus (or any later date permitted by law), all Application Monies received by the Company will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act. Subject to certain conditions (including any waivers obtained by the Company from time to time), the Company will be required to comply with the ASX Listing Rules. PACT GROUP PROSPECTUS 109

112 7. DETAILS OF THE OFFER (continued) CHESS and issuer sponsored holdings The Company will apply to participate in the ASX s Clearing House Electronic Sub-register System (CHESS) and will comply with the ASX Listing Rules and the ASX Settlement Operating Rules. CHESS is an electronic transfer and settlement system for transactions in securities quoted on the ASX under which transfers are effected in an electronic form. When the Shares become approved financial products (as defined in the ASX Settlement Operating Rules), holdings will be registered in one of two sub-registers, being an electronic CHESS sub-register or an issuer sponsored sub-register. For all successful Applicants, the Shares of a Shareholder who is a participant in CHESS or a Shareholder sponsored by a participant in CHESS will be registered on the CHESS sub-register. All other Shares will be registered on the issuer sponsored sub-register. Following Listing, Shareholders will be sent a holding statement that sets out the number of Shares that have been allocated to them. This statement will also provide details of a Shareholder s Holder Identification Number for CHESS holders or, where applicable, the Security Holder Reference Number of issuer sponsored holders. Shareholders will subsequently receive statements showing any changes to their Shareholding. Share certificates will not be issued. Shareholders will receive subsequent statements during the first week of the following month if there has been a change to their holding on the register and as otherwise required under the ASX Listing Rules and the Corporations Act. Additional statements may be requested at any other time either directly through the Shareholder s sponsoring Syndicate Broker in the case of a holding on the CHESS sub-register or through the Share Registry in the case of a holding on the issuer sponsored sub-register. Pact and the Share Registry may charge a fee for these additional issuer sponsored statements Deferred settlement trading and selling Shares on market It is expected that trading of the Shares on the ASX on a deferred settlement basis will commence on or about 17 December Trading on the ASX will be on a deferred settlement basis until the Company has advised the ASX that initial holding statements have been despatched to Shareholders. Trading on the ASX is expected to commence on a normal settlement basis (that is, on a T+3 basis) on or about 19 December Following the issue of Shares, successful Applicants will receive a holding statement setting out the number of Shares issued to them under the Offer. It is expected that holding statements will be despatched by standard post on or about 18 December If you sell Shares before receiving a holding statement, you do so at your own risk. It is the responsibility of each person who trades in Shares to confirm their holding before trading in Shares. The Company and the Joint Lead Managers disclaim all liability, whether in negligence or otherwise, if you sell Shares before receiving your holding statement, even if you obtained details of your holding from the Pact Share Offer Information Line or confirmed your firm allocation through a Syndicate Broker. 110

113 7.8 DESCRIPTION OF SHARES Introduction The rights and liabilities attaching to ownership of Shares arise from a combination of the Constitution, statute, the ASX Listing Rules and general law. A summary of the significant rights attaching to the Shares and a description of other material provisions of the Constitution are set out below. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of Shareholders. The summary assumes that the Company is admitted to the official list of the ASX Rights attaching to Shares The rights attaching to the Shares are set out in the Constitution and are in certain circumstances, regulated by the Corporations Act, the ASX Listing Rules, the ASX Settlement Rules and the general law. The principal rights, liabilities and obligations of the Shareholders are summarised below Voting At a general meeting, every member present in person or by proxy, attorney or representative has one vote on a show of hands (unless a Shareholder has appointed more than one proxy) and one vote on a poll for each fully paid Share held (with adjusted voting rights for partly paid shares). Where there are two or more joint holders of a Share and more than one joint holder tenders a vote, the vote of the holder named first in the register who tenders the vote will be accepted to the exclusion of the votes of the other joint holders. Voting at any meeting of Shareholders is by a show of hands unless a poll is demanded. The Constitution allows members to appoint a proxy and permits the Directors to implement direct voting if they so choose. A poll may be demanded by at least five Shareholders entitled to vote on the resolution, shareholders with at least 5% per cent of the votes that may be cast on the resolution on the poll, or the chairperson. If votes are equal on a proposed resolution, the chairperson has a casting vote on a show of hands or on a poll Dividends The Directors may, from time to time pay any interim or final dividends that, in their judgement, the financial position of the Company justifies. Such dividends are distributed among the members in proportion to the number of Shares held by them (except in the case of partly paid Shares, which receive dividends in proportion to the amount paid up), subject to the rights attaching to the Shares with special dividend rights. No Shares with special dividend rights are currently on issue Issue of further Shares The Directors may (subject to the restrictions on the issue of shares imposed by the Constitution, the ASX Listing Rules and the Corporations Act) issue, grant options in respect of, or otherwise dispose of further shares on terms and conditions (including preferential, deferred or special rights, privileges or conditions, or restrictions) as they see fit Variation of class rights The procedure set out in the Constitution must be followed for any variation of rights attached to the Shares. Under that section, with the: consent in writing of the holders of 75% of the issued Shares in the particular class; or the sanction of a special resolution passed at a separate meeting of the holders of Shares in that class, the rights attached to a class of Shares may be varied or cancelled. In either case, the holders of not less than 10% of the votes in the class of Shares whose rights have been varied or cancelled may apply to a court of competent jurisdiction to exercise its discretion to set aside such variation or cancellation. PACT GROUP PROSPECTUS 111

114 7. DETAILS OF THE OFFER (continued) Transfer of Shares Shareholders may transfer Shares by a written transfer instrument in the usual form or by a proper transfer effected in accordance with the ASX Settlement Rules and any other ASX requirements. The Directors may refuse to register a transfer of Shares in circumstances permitted by the ASX Listing Rules or the Corporations Act. The Directors must refuse to register a transfer of Shares where required to do so by the ASX Listing Rules. The Directors may suspend the registration of a transfer at any time, and for any period, as permitted by the ASX Settlement Rules General meeting and notices Each Shareholder is entitled to receive notice of, attend and vote at general meetings of the Company and to receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution or the Corporations Act. At least 28 days notice of a meeting must be given to Shareholders Winding up Subject to the Constitution, the Corporations Act and any preferential rights attaching to any class or classes of Shares, members will be entitled on a winding up to a share in any surplus assets of the Company in proportion to the Shares held by them Proportional takeover provisions The Constitution contains provisions for Shareholder approval in relation to any proportional takeover scheme. The provision will lapse three years from the date of its adoption unless renewed by a special resolution of Shareholders in a general meeting Directors appointment and removal The minimum number of Directors is three and the maximum is fixed by the Directors but may not be more than seven unless the Shareholders pass a resolution varying that number. Directors are elected at general meetings of the Company. The Directors may appoint a Director to fill a casual vacancy on the Board or in addition to the existing Directors, who will then hold office until the next annual general meeting of the Company (unless it is the CEO, who will continue to hold office). Directors, excluding the CEO, must retire at the end of the third annual general meeting after their election or re-election. Retiring Directors can stand for re-election. Where the ASX Listing Rules require an election of Directors to be held, but no Director is otherwise required to stand for election or wishes to stand for election, the Director to retire and stand for election will be the Director, excluding the CEO, who has been longest in office since their last election or appointment Directors voting Questions arising at a meeting of Directors will be decided by a majority of votes of the Directors present at the meeting and entitled to vote on the matter. In the case of a tied vote, the Chairman of the Board has a second or casting vote, unless there are only two Directors present or qualified to vote, in which case the proposed resolution is taken as having been lost Directors remuneration The Directors, other than the Executive Directors, shall be paid by way of fees for services, the maximum aggregate sum as may be approved from time to time by the Company in general meeting. The current maximum aggregate sum approved by Shareholders at a general meeting is $1,000,000. Any change to that aggregate sum needs to be approved by Shareholders. The Constitution also makes provision for the Company to pay all expenses of Directors in attending meetings and carrying out their duties. Remuneration of the Executive Directors shall be the amount that the Directors decide Powers and duties of Directors The Directors may exercise all powers and do all things that are within the Company s power and the powers are not expressly required by the Corporations Act or the Constitution to be exercised by the Company in a general meeting. 112

115 Capitalising profits Subject to the Constitution, the ASX Listing Rules, any rights or restrictions attached to any Shares or class of Shares and any special resolution of the Company, the Directors may capitalise and distribute profits or other amounts available for distribution among those Shareholders who would be entitled to receive dividends and in the same proportions Alteration of share capital Subject to the Corporations Act and the Constitution, the Company may alter its share capital Preference shares The Company may issue preference Shares including preference Shares which are liable to be redeemed or convertible to ordinary shares. The rights attaching to preference Shares are those set out in the Constitution Officers indemnity The Company, to the extent permitted by law, indemnifies each of its officers on a full indemnity basis against any losses, liability, costs, charges and expenses incurred by that person as an officer of the Company or one of its subsidiaries. The Company, to the extent permitted by law, may insure an officer of the Company or its subsidiaries against a liability incurred by such person as an officer of the Company or its subsidiaries to the extent permitted by law unless the liability arises out of conduct involving wilful breach of duty in relation to the Company or a contravention of sections 182 or 183 of the Corporations Act. The Company may also insure such person for costs and expenses incurred by that person in defending or resisting proceedings, whatever the outcome Amendment The Constitution may be amended only by a special resolution passed by at least three quarters of the votes cast by Shareholders present and entitled to vote on the resolution. At least 28 days written notice specifying the intention to propose the resolution must be given Share capital As at the date of this Prospectus, the only class of security on issue by the Company are fully-paid ordinary Shares Dividend Reinvestment Plan The Directors have approved a Dividend Reinvestment Plan (DRP) of the Company. The Directors have determined not to activate the DRP at the date of this Prospectus, and will monitor when it may be appropriate to activate the DRP. The rules of the DRP are typical of a dividend reinvestment plan operated by an ASX listed company. Shareholders who elect to participate in the DRP will be able to reinvest the dividends they are entitled to receive in Shares rather than receiving those dividends in cash. Shareholders may choose to participate in the DRP in respect of some or all of their Shares. The Board may choose to enter into underwriting arrangements from time to time for the partial or full underwriting of any shortfall in the DRP take-up with respect to a particular dividend. The DRP may be varied, terminated or suspended by the Board at any time, according to the rules of the DRP. A Shareholder resident in a country other than Australia or New Zealand may not participate in the DRP unless the Board is satisfied that such participation is lawful and practicable. If and when the DRP is activated, a copy of the rules of the DRP will be made available to Shareholders in advance of the record date for the first dividend payable by the Company after the activation of the DRP. Also, a copy of the rules of the DRP will be available on the Company s website. PACT GROUP PROSPECTUS 113

116 7. DETAILS OF THE OFFER (continued) 7.9 ADDITIONAL INFORMATION FOR NEW ZEALANDERS New Zealand mutual recognition This Offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act and Regulations. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings Australia) Regulations This Offer and the content of this Prospectus are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act and Regulations (Australia) set out how the Offer must be made. There are differences in how securities are regulated under Australian law. For example, the disclosure of fees for collective investment schemes is different under the Australian regime. The rights, remedies, and compensation arrangements available to New Zealand investors in Australian securities may differ from the rights, remedies, and compensation arrangements for New Zealand securities. Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to this Offer. If you need to make a complaint about this Offer, please contact the Financial Markets Authority, Wellington, New Zealand. The Australian and New Zealand regulators will work together to settle your complaint. The taxation treatment of Australian securities is not the same as for New Zealand securities. See Section 9.10 for more information regarding New Zealand tax considerations. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser Payments are not in New Zealand dollars The Offer may involve a currency exchange risk. The currency for the Shares is not New Zealand dollars. The value of the Shares will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the Shares to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars Securities that are able to be traded on a financial market If the Shares are able to be traded on a securities market and you wish to trade the Shares through that market, you will have to make arrangements for a participant in that market to sell the Shares on your behalf. If the securities market does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the Shares and trading may differ from securities markets that operate in New Zealand. 114

117 8. INVESTIGATING ACCOUNTANT S REPORT

118 8. INVESTIGATING ACCOUNTANT S REPORT Ernst & Young Transaction Advisory Services Limited 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: Fax: ey.com/au The Directors Pact Group Holdings Ltd Level Chapel Street South Yarra VIC November 2013 Dear Directors PART 1 INDEPENDENT LIMITED ASSURANCE REPORT ON PRO FORMA HISTORICAL FINANCIAL INFORMATION, STATUTORY AND PRO FORMA FORECAST FINANCIAL INFORMATION 1. Introduction We have been engaged by Pact Group Holdings Ltd to report on the pro forma historical financial information of Pact Group Holdings Limited ( PGH ) and the pro forma historical, statutory and pro forma forecast financial information of Pact Group Holdings Limited and subsidiaries (including the Acquisitions) ( Pact ) as if the Acquisitions have occurred on 1 July 2012 and Listing, for inclusion in the Initial Public Offering Prospectus ( Prospectus ) to be dated on or about 27 November 2013, and to be issued by Pact, in respect of the Initial Public Offer of Pact ordinary shares ( the Offer ). Expressions and terms defined in the Prospectus have the same meaning in this report. The nature of this report is such that it can only be issued by an entity which holds an Australian Financial Services Licence under the Corporations Act Ernst & Young Transaction Advisory Services Limited holds an appropriate Australian Financial Services Licence (AFS Licence Number ). Bryan Zekulich is a Director and Representative of Ernst & Young Transaction Advisory Services. We have included our Financial Services Guide as Part 2 of this report. 2. Scope Pro Forma PGH Historical Results You have requested Ernst & Young Transaction Advisory Services to review the following pro forma historical financial information of PGH included in the Prospectus: PGH consolidated pro forma historical statements of income for FY2011, FY2012 and FY2013; PGH consolidated pro forma historical statements of cash flows for FY2011, FY2012 and FY2013; and, PGH consolidated pro forma historical statement of financial position as at 30 June (Hereafter the Pro Forma PGH Historical Results.) The Pro Forma PGH Historical Results have been derived from the financial reports of Pact Group Holdings Ltd for FY2011, FY2012 and FY2013, which were audited by Ernst & Young in accordance with Australian Auditing Standards. Ernst & Young issued unmodified audit opinions on the financial reports. A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

119 Ernst & Young Transaction Advisory Services Limited The Pro Forma PGH Historical Results are presented in the Prospectus in an abbreviated form, insofar as they do not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports prepared in accordance with the Corporations Act Pro Forma Pact Historical Results You have requested Ernst & Young Transaction Advisory Services to review the following pro forma historical financial information of Pact included in the Prospectus: Pact consolidated pro forma historical statement of income for FY2013; Pact consolidated pro forma historical statement of cash flows for FY2013; and, Pact consolidated pro forma historical statement of financial position as at 30 June (Hereafter the Pro Forma Pact Historical Results) (Together the Pro Forma Historical Financial Information ) The Pro Forma Pact Historical Financial Information has been derived from the Pro Forma Historical Financial Information of PGH and the Acquisitions, after adjusting for the effects of pro forma adjustments described in Sections 4.3.2, 4.4 and of the Prospectus. The stated basis of preparation is set out in Section 4.2 and of the Prospectus. Due to its nature, the Pro Forma Historical Financial Information does not represent the company s actual or prospective financial position, financial performance, and/or cash flows. Statutory Forecast Financial Information You have requested Ernst & Young Transaction Advisory Services to review the following forecast financial information of Pact included in the Prospectus: consolidated statutory forecast statement of income for FY2014; and, consolidated statutory forecast statement of cashflows for FY2014. (Hereafter the Statutory Forecast Financial Information) The directors best-estimate assumptions underlying the Statutory Forecast Financial Information are described in Section and of the Prospectus. The stated basis of preparation used in preparation of the Statutory Forecast Financial Information is as disclosed in Sections 4.2 and of the Prospectus. Pro forma Forecast Financial Information You have requested Ernst & Young Transaction Advisory Services to review the following pro forma forecast financial information of Pact included in the Prospectus: consolidated pro forma forecast statement of income for the FY2014; and, consolidated pro forma forecast statement of cashflows for FY2014. (Hereafter the Pro Forma Forecast Financial Information ). (Collectively, the Forecast Financial Information ). A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No PACT GROUP PROSPECTUS 117

120 8. INVESTIGATING ACCOUNTANT S REPORT (continued) Ernst & Young Transaction Advisory Services Limited The directors best-estimate assumptions underlying the Pro Forma Forecast Financial Information are described in Section and of the Prospectus. The Pro Forma Forecast Financial Information has been adjusted for the effects of the significant items and pro forma adjustments described in Section and Section of the Prospectus. The stated basis of preparation used in the preparation of the Pro Forma Forecast Financial Information is as set out in Sections 4.2 and of the Prospectus and the events or transactions to which the pro forma adjustments relate, as described in Section and Section of the Prospectus. Due to its nature, the Pro Forma Forecast Financial Information does not represent the company s actual prospective financial performance and cash flows for the year ending 30 June Directors Responsibility Pro Forma PGH and Pro Forma Pact Historical Results The directors of Pact are responsible for the preparation and presentation of the Pro Forma PGH and Pro Forma Pact Historical Results, including the selection and determination of pro forma adjustments made to the Pro Forma Historical Financial Information and included in the Pro Forma Historical Financial Information. This includes responsibility for such internal controls as the directors determine are necessary to enable the preparation of Pro Forma Historical Financial Information and Pro Forma PGH and Pro Forma Pact Historical Results that are free from material misstatement, whether due to fraud or error. Forecast Financial Information The directors of Pact are responsible for the preparation and presentation of the Forecast Financial Information for FY2014, including the best-estimate assumptions underlying the Forecast Financial Information and the selection and determination of the pro forma adjustments made and included in the Pro Forma Forecast Financial Information. This includes responsibility for such internal controls as the directors determine are necessary to enable the preparation of Forecast Financial Information that is free from material misstatement, whether due to fraud or error. 4. Our Responsibility Pro Forma PGH and Pro Forma Pact Historical Results Our responsibility is to express limited assurance conclusions on the Pro Forma PGH and Pro Forma Pact Historical Results based on the procedures performed and the evidence we have obtained. We have conducted our engagement in accordance with the Standard on Assurance Engagements ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information. A limited assurance engagement consists of making enquiries, primarily of persons responsible for financial and accounting matters and applying analytical and other limited assurance procedures. It is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Forecast Financial Information Our responsibility is to express limited assurance conclusions on the Forecast Financial Information, the best-estimate assumptions underlying Forecast Financial Information, and the reasonableness of the Forecast Financial Information itself, based on our limited assurance engagement. We have conducted our engagement in accordance with the Standard on Assurance Engagements ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information. Our limited assurance procedures consisted of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other limited assurance procedures. A limited assurance engagement is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

121 Ernst & Young Transaction Advisory Services Limited become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express an audit opinion. Our engagement did not involve updating or re-issuing any previously issued audit or limited assurance reports on any financial information used as a source of the Historical Financial Information. 5. Conclusions Pro Forma PGH Historical Results Based on our limited assurance engagement, which is not an audit, nothing has come to our attention that causes us to believe that the Pro Forma PGH Historical Results, in Tables 4.2, 4.5 and 4.9 of the Prospectus and comprising: PGH consolidated pro forma historical statements of income for FY2011, FY2012 and FY2013; PGH consolidated pro forma historical statements of cash flows for FY2011, FY2012 and FY2013; and, PGH consolidated pro forma historical statement of financial position as at 30 June is not presented fairly, in all material respects, in accordance with the stated basis of preparation, as described in Section 4.2 of the Prospectus. Pro Forma Pact Historical Results Based on our limited assurance engagement, which is not an audit, nothing has come to our attention that causes us to believe that the Pro Forma Pact Historical Results, in Tables 4.2, 4.5 and 4.9 of the Prospectus and comprising: Pact consolidated pro forma historical statement of income for FY2013; Pact consolidated pro forma historical statement of cash flows for FY2013; and, Pact consolidated pro forma historical statement of financial position as at 30 June 2013 is not presented fairly, in all material respects, in accordance with the stated basis of preparation, as described in Sections 4.2 and of the Prospectus. Statutory Forecast Financial Information Based on our limited assurance engagement, which is not an audit, nothing has come to our attention that causes us to believe that: the directors best-estimate assumptions used in the preparation of the consolidated statutory forecast statement of income and the consolidated statutory forecast statement of cash flows for FY2014 in Tables 4.2 and 4.9 of the Prospectus do not provide reasonable grounds for the Statutory Forecast Financial Information; and in all material respects, the Statutory Forecast Financial Information: is not prepared on the basis of the directors best estimate assumptions as described in Sections and of the Prospectus; and is not presented fairly in all material respects, in accordance with the stated basis of preparation, as described in Sections 4.2 and of the Prospectus.; and the Statutory Forecast Financial Information itself is unreasonable. A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No PACT GROUP PROSPECTUS 119

122 8. INVESTIGATING ACCOUNTANT S REPORT (continued) Ernst & Young Transaction Advisory Services Limited Pro Forma Forecast Financial Information Based on our limited assurance engagement, which is not an audit, nothing has come to our attention that causes us to believe that: the directors best-estimate assumptions used in the preparation of the consolidated pro forma forecast statement of income and consolidated pro forma forecast statement of cash flows for FY2014 in Tables 4.2 and 4.9 of the Prospectus do not provide reasonable grounds for the Pro Forma Forecast Financial Information; and in all material respects, the Pro Forma Forecast Financial Information: is not prepared on the basis of the directors best estimate assumptions as described in Sections and of the Prospectus; and is not presented fairly in all material respects, in accordance with the stated basis of preparation, as described in Sections 4.2 and of the Prospectus.; and the Pro Forma Forecast Financial Information itself is unreasonable. Forecast Financial Information Forecast Financial Information has been prepared by management and adopted by the directors in order to provide prospective investors with a guide to the potential financial performance of Pact for FY2014. There is a considerable degree of subjective judgement involved in preparing forecasts since they relate to events and transactions that have not yet occurred and may not occur. Actual results are likely to be different from the Forecast Financial Information since anticipated events or transactions frequently do not occur as expected and the variation may be material. The directors best-estimate assumptions on which the Forecast Financial Information is based relate to future events and/or transactions that management expect to occur and actions that management expect to take and are also subject to uncertainties and contingencies, which are often outside the control of Pact. Evidence may be available to support the directors best-estimate assumptions on which the Forecast Financial Information is based however such evidence is generally future-oriented and therefore speculative in nature. We are therefore not in a position to express a reasonable assurance conclusion on those best-estimate assumptions, and accordingly, provide a lesser level of assurance on the reasonableness of the directors best-estimate assumptions. The limited assurance conclusion expressed in this report has been formed on the above basis. Prospective investors should be aware of the material risks and uncertainties in relation to an investment in Pact, which are detailed in the Prospectus and the inherent uncertainty relating to the Forecast Financial Information. Accordingly, prospective investors should have regard to the investment risks as described in Section 5 of the Prospectus. The sensitivity analysis described in Section 4.9 of the Prospectus demonstrates the impact on the Pro Forma Forecast Financial Information of changes in key best-estimate assumptions. We express no opinion as to whether the statutory forecast or pro forma forecast will be achieved. Forecast Financial Information has been prepared by the directors for the purpose of providing investors with a guide to Pact potential future performance for FY2014 based on the achievement of certain economic, operating, developmental and trading assumptions about future events that have not occurred and may not necessarily occur. We disclaim any assumption of responsibility for any reliance on this report, or on the Forecast Financial Information to which it relates, for any purpose other than that for which it was prepared. We have assumed, and relied on representations from certain members of management of Pact, that all material information concerning the prospects and proposed operations of Pact has been disclosed to us and that the information provided to us for the purpose of our work is true, complete and accurate in all respects. We have no reason to believe that those representations are false. A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

123 Ernst & Young Transaction Advisory Services Limited 6. Restriction on Use Without modifying our conclusions, we draw attention to Section 4 of the Prospectus, which describes the purpose of the Financial Information, being for inclusion in the Prospectus. As a result, the Financial Information may not be suitable for use for another purpose. 7. Consent Ernst & Young Transaction Advisory Services Limited has consented (via a separate letter) to the inclusion of this assurance report in the Prospectus in the form and context in which it is included. 8. Independence or Disclosure of Interest Ernst & Young Transaction Advisory Services does not have any interests in the outcome of this Initial Public Offer of ordinary shares by Pact other than in the preparation of this report for which normal professional fees will be received. Ernst & Young are auditors to PGH. Yours faithfully Ernst & Young Transaction Advisory Services Limited Bryan Zekulich Director and Representative A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No PACT GROUP PROSPECTUS 121

124 8. INVESTIGATING ACCOUNTANT S REPORT (continued) Ernst & Young Transaction Advisory Services Limited THIS FINANCIAL SERVICES GUIDE FORMS PART OF THE INDEPENDENT LIMITED ASSURANCE REPORT PART 2 FINANCIAL SERVICES GUIDE 1. Ernst & Young Transaction Advisory Services Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services or we, or us or our ) has been engaged to provide general financial product advice in the form of an Independent Limited Assurance Report ( Report ) in connection with a financial product of another person. The Report is to be included in documentation being sent to you by that person. 2. Financial Services Guide This Financial Services Guide ( FSG ) provides important information to help retail clients make a decision as to their use of the general financial product advice in a Report, information about us, the financial services we offer, our dispute resolution process and how we are remunerated. 3. Financial services we offer We hold an Australian Financial Services Licence which authorises us to provide the following services: financial product advice in relation to securities, derivatives, general insurance, life insurance, managed investments, superannuation, and government debentures, stocks and bonds; and arranging to deal in securities. 4. General financial product advice In our Report we provide general financial product advice. The advice in a Report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of a Report having regard to your own objectives, financial situation and needs before you act on the advice in a Report. Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain an offer document relating to the financial product and consider that document before making any decision about whether to acquire the financial product. We have been engaged to issue a Report in connection with a financial product of another person. Our Report will include a description of the circumstances of our engagement and identify the person who has engaged us. Although you have not engaged us directly, a copy of the Report will be provided to you as a retail client because of your connection to the matters on which we have been engaged to report. 5. Remuneration for our services We charge fees for providing Reports. These fees have been agreed with, and will be paid by, the person who engaged us to provide a Report. Our fees for Reports are based on a time cost or fixed fee basis. Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority. The estimated fee for this Report is $90,000 (inclusive of GST). Ernst & Young Transaction Advisory Services is ultimately owned by Ernst & Young, which is a professional advisory and accounting practice. Ernst & Young may provide professional services, including audit, tax and financial advisory services, to the person who engaged us and receive fees for those services. A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

125 Ernst & Young Transaction Advisory Services Limited Except for the fees and benefits referred to above, Ernst & Young Transaction Advisory Services, including any of its directors, employees or associated entities should not receive any fees or other benefits, directly or indirectly, for or in connection with the provision of a Report. 6. Associations with product issuers Ernst & Young Transaction Advisory Services and any of its associated entities may at any time provide professional services to financial product issuers in the ordinary course of business. 7. Responsibility The liability of Ernst & Young Transaction Advisory Services is limited to the contents of this Financial Services Guide and the Report. 8. Complaints process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial services. All complaints must be in writing and addressed to the AFS Compliance Manager or the Chief Complaints Officer and sent to the address below. We will make every effort to resolve a complaint within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service Limited. 9. Compensation Arrangements The Company and its related entities hold Professional Indemnity insurance for the purpose of compensation should this become relevant. Representatives who have left the Company s employment are covered by our insurances in respect of events occurring during their employment. These arrangements and the level of cover held by the Company satisfy the requirements of section 912B of the Corporations Act Contacting Ernst & Young Transaction Advisory Services AFS Compliance Manager Ernst & Young 680 George Street Contacting the Independent Dispute Resolution Scheme: Financial Ombudsman Service Limited PO Box 3 Melbourne VIC 3001 Telephone: Sydney NSW 2000 Telephone: (02) This Financial Services Guide has been issued in accordance with ASIC Class Order CO 04/1572. A member firm of Ernst & Young Global Limited Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No PACT GROUP PROSPECTUS 123

126 9. ADDITIONAL INFORMATION For personal use only

127 9. ADDITIONAL INFORMATION 9.1 INCORPORATION The Company was incorporated in Victoria on 19 October 2010 as a private company and converted into a public company on 15 November REPAYMENT OF PROMISSORY NOTE BY THE COMPANY The Company previously issued a promissory note (Promissory Note) to Geminder Holdings as consideration for transactions between the Company and Geminder Holdings pursuant to which the Company became the holding company of Pact Group Industries (ANZ) Pty Ltd. Prior to the Offer, the Company issued 10 Shares to Geminder Holdings for $255 million cash and partially redeemed the Promissory Note from the proceeds from an issue of Shares by the Company to Geminder Holdings. Following Listing, $564.9 million of the proceeds of the Offer will be paid by the Company to Geminder Holdings in full satisfaction of the remaining balance of the Promissory Note, and the Promissory Note will be extinguished. 9.3 THE ACQUISITIONS In connection with the IPO, Pact has entered into conditional share purchase agreements to acquire interests in certain entities in which Pact, Geminder Holdings or related entities of Geminder Holdings already have an interest. The Acquisitions are described in Table 9.1 below. Table 9.1: Details of the Acquisitions Entity Acquisition businesses Year of original investment 1 Pact interest upon Listing Description Cinqplast Ruffgar Two manufacturing plants in New South Wales, Australia. One manufacturing plant in the Philippines % Pact is acquiring the 49% of the business it does not own from partner S&J Capital for cash and Acquisition Shares 2. Pact s existing interest in the business is 51% % Ruffgar was established in 2007 by Salvage (50%, an entity associated with Geminder Holdings) and Gaja (50%, an entity associated by Gary Wolman). Ruffgar established Plastop Asia in the same year and a joint venture with Weener called Weener Plastop. Ruffgar owns 100% of Plastop Asia and holds a 50% interest in Weener Plastop. The Weener Plastop business is carried out in the same integrated manufacturing plant as Plastop Asia. Pact is acquiring 100% of Ruffgar from Salvage and Gaja for a combination of cash and Acquisition Shares 2. Weener will continue to hold its 50% interest in Weener Plastop. Gary Wolman is a key person within the Ruffgar business and will be employed by Pact following completion of the Ruffgar Acquisition Agreement. Notes: 1 Refers to year of original investment made by PGH, Geminder Holdings or related entities of Geminder Holdings. 2 These Acquisition Shares will be subject to voluntary escrow arrangements (see Section for further details). PACT GROUP PROSPECTUS 125

128 9. ADDITIONAL INFORMATION (continued) Entity Acquisition businesses Year of original investment 1 Pact interest upon Listing Description Viscount China Three manufacturing plants in China % Bennamon, an entity associated with Geminder Holdings, has an existing interest of 100%. Pact is acquiring 100% of the business from Bennamon for cash. Asia Peak One office in Singapore, acting as the procurement office for Pact % Ruby Park, an entity associated with Raphael Geminder, has an existing interest of 100%. Pact is acquiring 100% of the business from Ruby Park for cash. Notes: 1 Refers to year of original investment made by PGH, Geminder Holdings or related entities of Geminder Holdings Summary of the Acquisition agreements Viscount China Acquisition and Asia Peak Acquisition Under the terms of: the Viscount China Acquisition Agreement, Bennamon has agreed to sell 100% of its shareholding in Viscount; and the Asia Peak Acquisition Agreement, Ruby Park has agreed to sell 100% of its shareholding in Asia Peak, to Pact Group Industries Asia for cash out of proceeds of the Offer. Bennamon will receive $18 million and Ruby Park will receive $500,000. Completion of both agreements is conditional upon: the satisfactory completion of Pact Group Industries Asia s due diligence; all necessary regulatory, third party and change in control approvals being granted; no material acquisitions, disposals or litigation taking place; and Shares being issued to successful Applicants under the Offer. Both Bennamon and Ruby Park are providing representations and warranties as to the ownership of their shares, their power and authority to enter into and perform their obligations under the agreements, solvency, and that the information they have disclosed to Pact Group Industries Asia and Pact is accurate, not misleading and does not omit any material information. The warranties and indemnities in both agreements are subject to the same qualifications and limitations including: inability to claim in respect of known matters and awareness based warranties; cap and collar amounts (including that all claims, other than those relating to warranties of ownership, power and authority, are limited to 15% of the relevant purchase price); and other general limitations. Further, Bennamon and Ruby Park will not be liable for any claims made by Pact Group Industries Asia after 18 months from completion. The parties have also agreed to standard confidentiality arrangements Cinqplast Acquisition and Ruffgar Acquisition Under the terms of: the Cinqplast Acquisition Agreement, S&J Capital has agreed to sell its remaining 49% shareholding in Cinqplast to Pact Group Holdings (Australia) Pty Ltd so that Pact Group Holdings (Australia) Pty Ltd will own 100% of Cinqplast; and the Ruffgar Acquisition Agreement, Salvage and Gaja have each agreed to sell 100% of their shareholding in Ruffgar to Pact Group Industries Asia. 126

129 Consideration under these agreements is being provided by Pact Group Holdings (Australia) Pty Ltd and Pact Group Industries Asia, respectively, in the form of a combination of cash out of the proceeds of the Offer ($30.2 million in total), and $36.2 million worth of Shares. The Shares provided as consideration are subject to a voluntary escrow arrangement, as set out in Section Completion of both agreements is subject to a number of conditions including: the satisfactory completion of the respective buyers due diligence; all necessary regulatory, third party and change in control approvals being granted; voluntary escrow deeds being entered into in relation to the Shares being issued as consideration; Gary Wolman entering into an employment agreement with Pact Group Holdings (Australia) Pty Ltd and Shares being issued to successful Applicants under the Offer. The Ruffgar Acquisition Agreement is also conditional on Weener s consent under the Weener shareholders agreement. Both S&J Capital, and Salvage and Gaja, respectively, are providing similar representations and warranties as those provided by the sellers under the Viscount China Acquisition Agreement and the Asia Peak Acquisition Agreement. In addition, under the Ruffgar Acquisition Agreement, Salvage and Gaja are also providing warranties in relation to the accounts, corporate records, contracts and assets, financing arrangements, intellectual property and information technology, litigation and compliance, insurance, taxes and duties, and employees, of Ruffgar and its subsidiaries. The warranties and indemnities in both agreements are subject to the same qualifications and limitations as those set out in the Viscount China Acquisition Agreement and the Asia Peak Acquisition Agreement. The parties have also agreed to cost sharing arrangements in relation to the cost of the Offer and this Prospectus, as well as standard confidentiality arrangements. 9.4 CONTRACT SUMMARIES The Directors consider that there are a number of contracts which are significant or material to Pact or of such a nature that an investor may wish to have details of them when making an assessment of whether to apply for Shares. The main provisions of these contracts are summarised below. These summaries do not purport to be complete and are qualified by the text of the contracts themselves Underwriting Agreement summary The Offer is underwritten by the Joint Lead Managers pursuant to an underwriting agreement dated 27 November 2013 between Pact and the Joint Lead Managers (Underwriting Agreement). Under the Underwriting Agreement, the Joint Lead Managers have agreed to arrange, manage and underwrite the Offer Commission, fees and expenses Pact must pay the Joint Lead Managers (in equal proportions): an underwriting fee equal to 1.0%; and a management fee equal to 1.0%, in each case, of the gross proceeds of the Offer. In addition, Pact may pay the Joint Lead Managers: an incentive fee of up to 0.75% (in such proportions between the Joint Lead Managers as Pact may determine); and an outperformance fee of up to 0.25%, in each case, out of the gross proceeds of the Offer and in Pact s complete discretion. The above fees are exclusive of GST and will become payable by Pact on the Offer settlement date. Pact has also agreed to reimburse the Joint Lead Managers for certain reasonable costs and expenses incidental to the Offer. The Joint Lead Managers must pay, on behalf of the Company, any broker firm fees due to any co-managers, co-lead managers and brokers appointed by them under the Underwriting Agreement. PACT GROUP PROSPECTUS 127

130 9. ADDITIONAL INFORMATION (continued) Warranties, undertakings and other terms The Underwriting Agreement contains certain common representations, warranties and undertakings provided by Pact to the Joint Lead Managers (as well as common conditions precedent, including entry into a voluntary restriction agreement by the Existing Shareholder and the Escrowed Vendors that imposes a holding lock in respect of their interests in escrowed Shares). The representations and warranties relate to matters such as the conduct of Pact (including in respect of the due diligence process, the conduct of Pact s business and compliance with applicable laws and the ASX Listing Rules), information provided to the Joint Lead Managers, accounting controls, material contracts, licences, litigation, insurance, information in this Prospectus and the conduct of the Offer. Pact s undertakings include that it will not, during the period following the date of the Underwriting Agreement until 90 days after the allotment and issue of Shares under the Offer, allot or agree to allot any equity securities or securities that are convertible into equity without the prior written consent of the Joint Lead Managers (subject to certain limited exceptions, including issuing securities pursuant to an employee or director incentive scheme, converting any options on issue at the date of the Underwriting Agreement or any securities issued in connection with the acquisition of all or party of the shares of Dynapack Asia Pte Ltd) Indemnity Subject to certain exclusions relating to, among other things, recklessness, fraud, wilful default or negligence of an indemnified party or an indemnified party that is associated with the same Joint Lead Manager as the first indemnified party, Pact agrees to keep the Joint Lead Managers and certain affiliated parties indemnified from losses suffered in connection with the bookbuild or the Offer including losses arising from claims relating to the content of the Offer Documents, any public and other media statements made by or on behalf of Pact in relation to Pact or the Offer, or any review, inquiry or investigation undertaken by ASIC, ASX, the Australian Taxation Office, any state or territory regulatory office, New Zealand Financial Markets Authority or the United States Securities Exchange Commission or any other regulatory or governmental agency in relation to the bookbuild, the Offer or the Offer Documents Termination events If any of the following events occurs at any time from the date of execution of the Underwriting Agreement until the issue and allotment of Shares under the Offer or such other time as specified below, each Joint Lead Manager may terminate their obligations under the Underwriting Agreement without cost or liability by notice to Pact and the other Joint Lead Manager. (a) a statement in any of the Offer Documents (other than the International Offering Memorandum and other documents used in connection with the offer of Shares into the United States) or public information is or becomes misleading or deceptive, or a material matter required to be included is omitted from an Offer Document (other than the International Offering Memorandum or documents used in connection with the offer of Shares into the United States and including, without limitation, having regard to the provisions of Part 6D.2 of the Corporations Act); (b) in the reasonable opinion of the Joint Lead Managers, the International Offering Memorandum or the pricing disclosure package includes an untrue statement of a material fact, omits a material fact, or includes any forecast, expression of opinion, intention or expectation which is not in all material respects fair and honest and based on reasonable assumptions when taken as a whole; (c) the Company issues or, in the reasonable opinion of the Joint Lead Managers, is required to issue, a supplementary prospectus to comply with section 719 of the Corporations Act or the Company lodges a supplementary prospectus that is in a form that has not been approved by the Joint Lead Managers; (d) the Company issues or, in the reasonable opinion of the Joint Lead Managers, becomes required to issue, a supplementary international offering memorandum that is in a form that has not been approved by the Joint Lead Managers; (e) there is or is likely to be, in the reasonable opinion of the Joint Lead managers, a material adverse change or effect, or any development involving a prospective material adverse change or effect, in or affecting the general affairs, business, operations, assets, liabilities, financial position or performance, profits, losses, prospects, earnings position, shareholder s equity, or results of operations of the Group when compared to the position disclosed in the Offer Documents; 128

131 (f) at any time either the S&P/ASX 200 Index falls to a level that is 90% or less of the level as at the close of trading on the day prior to the date of this agreement and remains at or below that level for at least 2 consecutive Business Days or until the Business Day immediately prior to the allotment under the Offer, whichever is shorter; (g) any of the escrow deeds entered into by the Existing Shareholder or the Escrowed Vendors is withdrawn, varied, terminated, rescinded, altered, amended or breached; (h) there are not, or there cease to be, reasonable grounds for any statement or estimate in the Offer Documents which relates to a future matter or any statement or estimate in the Offer Documents is unlikely to be met in the projected timeframe (including financial forecasts); (i) approval is refused or not granted, or approval is granted subject to conditions other than customary conditions, to: (1) the Company s admission to the official list of ASX on or before the listing approval date required under the Underwriting Agreement; or (2) the quotation of the Shares on ASX or for the Shares to be cleared through CHESS on or before the date on which the Shares are to be first quoted on ASX, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld; (j) any of the following notifications are made in respect of the Offer: (1) ASIC issues an order (including an interim order) under section 739 of the Corporations Act; (2) ASIC holds a hearing under section 739(2) of the Corporations Act; (3) an application is made by ASIC for an order under Part 9.5 in relation to the Offer or an Offer Document or ASIC commences any investigation or hearing under Part 3 of the ASIC Act in relation to the Offer or an Offer Document; (4) any person (other than the Joint Lead Managers) who has previously consented to the inclusion of its name in any Offer Document withdraws that consent; or (5) any person gives a notice under section 730 of the Corporations Act in relation to an Offer Document; (k) (l) Pact does not provide a certificate as and when required by the Underwriting Agreement or such a certificate is false, misleading or deceptive (including by omission); Pact fails to lodge the Prospectus by the date scheduled for lodgement; (m) Pact withdraws an Offer Document or the Offer; (n) (o) ASX withdraws, revokes or amends any waiver it issues to Pact, which Pact requires for the Offer; any person makes an application for an order under part 9.5 of the Corporations Act or to any government agency in relation to this Prospectus or the Offer or ASIC commences or gives notice of an intention to hold any investigation in relation to the Offer or the Prospectus or any government agency commences or gives notice of an intention to hold any enquiry; (p) any of: (1) a director of Pact is charged with an indictable offence; (2) any governmental agency commences any public action against Pact or any other group member or any directors of the Company or any group entity in their capacity as a director of such entity, or announces that it intends to take action; or (3) any director of Pact is disqualified from managing a corporation under Part 2D.6 of the Corporations Act; PACT GROUP PROSPECTUS 129

132 9. ADDITIONAL INFORMATION (continued) (q) any member of the Pact group is or becomes insolvent or there is an act or omission which may result in any member of the group becoming insolvent; (r) (s) (t) a change to the Company s chairman or chief executive officer occurs; the sale and purchase agreements for any of the Acquisitions are breached, rescinded, terminated, amended, varied, do not become unconditional before the settlement date with the result that completion under any of the agreements cannot be satisfied by 17 December 2013 (subject only to payment by the Pact of the consideration for the Acquisitions), or completion does not otherwise occur on 17 December 2013; New Zealand Financial Markets Authority or the New Zealand Registrar take action which is likely to materially adversely affect the Offer in New Zealand. If any of the following events occurs at any time from the date of execution of the Underwriting Agreement until the issue and allotment of Shares under the Offer or such other time as specified below, each Joint Lead Manager may terminate their obligations under the Underwriting Agreement without cost or liability by notice to Pact and the other Joint Lead Manager, except that a Joint Lead Manager may not terminate unless in the reasonable opinion of the Joint Lead Managers, the event has or is likely to have a material adverse effect on the marketing, outcome, success or settlement of the Offer, the ability of the Joint Lead Managers to market, promote or settle the Offer, the willingness of investors to subscribe for Shares or on the likely price at which the Shares will trade on ASX; or has given or would be likely to, give rise to a liability of the Joint Lead Managers or a contravention by the Joint Lead Managers of, any applicable law. (a) there occurs a new circumstance that arises after the initial draft of the pathfinder prospectus is initially distributed or after the Prospectus is lodged with ASIC that would have been required to be included in either document if it had arisen before the initial distribution or lodgement (as applicable); (b) Pact is prevented from allotting and issuing the Shares within the time required by the timetable for the Offer, the Offer Documents, the ASX Listing Rules, the ASX Settlement Operating Rules or by any other applicable laws, an order of a court of competent jurisdiction or a governmental agency; (c) the due diligence report or verification material or any other information supplied by or on behalf of Pact to the Joint Lead Managers in relation to the Group or the Offer is, or becomes, false or misleading or deceptive, including by way of omission; (d) hostilities not presently existing commence (whether war has been declared or not) or an escalation in existing hostilities occurs (whether war has been declared or not) involving any one or more of Australia, New Zealand, the United States, the United Kingdom, the People s Republic of China, Singapore, Indonesia or a member state of the European Union or any diplomatic, military, commercial or political establishment of any of those countries, or a major terrorist act is perpetrated anywhere in the world; (e) (f) there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia, New Zealand or the United States, Canada, Japan, Indonesia, Hong Kong or any member state of the European Union or any state or territory of Australia a new law, or the Reserve Bank of Australia or any Commonwealth or State authority, including ASIC adopts or announces a proposal to adopt a new policy (other than a law or policy which has been announced before the date of the Underwriting Agreement); a change in senior management or the Board (other than the chairman or chief executive officer) occurs; (g) any group entity contravenes the Corporations Act, the Competition and Consumer Act 2010, the ASIC Act, a term of the Company s constitution, the New Zealand Securities Act, the New Zealand Regulations or any Listing Rule or the Company commits a fraudulent act; 130

133 (h) the Company defaults on one or more of its obligations under the Underwriting Agreement; (i) (j) (k) (l) a representation or warranty contained in the Underwriting Agreement on the part of the Company is breached, becomes not true or incorrect or is not performed; the Offer is not conducted in accordance with the timetable contained in the Underwriting Agreement or an event specified in that timetable is delayed by more than 2 business days without the consent of the Joint Lead Managers; Pact varies any term of its constitution without the prior written consent of the Joint Lead Managers; the Company charges or agrees to charge all or a substantial part of its business of property other than a charge over fees or commissions to which the Company is or will be entitled, as disclosed in the Offer Documents or as agreed by the Joint Lead Managers; (m) certain material contracts of Pact are varied, terminated, rescinded or altered without the prior consent of the Joint Lead Managers or certain material contracts are breached, void or voidable; (n) (n) (o) any information supplied by or on behalf of Pact to the Joint Lead Managers in respect of the Offer or Pact is, or is found to be, false or misleading or deceptive, or likely to mislead or deceive; a regulatory body withdraws, revokes or amends any regulatory approvals required for Pact to perform its obligations under the Underwriting Agreement; there is an event or occurrence, including any statute, order, rule, regulation, directive or request (including one the compliance with which is in accordance with the general practice of persons to whom the directive or request is addressed) of any governmental agency which makes it illegal for the Joint Lead Managers to satisfy an obligation under the Underwriting Agreement, or to market, promote or settle the Offer; (p) any of the following occurs: (1) a general moratorium on commercial banking activities in Australia, New Zealand, Canada, the United States, Japan, Hong Kong, Singapore or a member state of the European Union is declared by the relevant central banking authority in those countries, or there is a material disruption in commercial banking or security settlement or clearance services in any of those countries; (2) any adverse effect on the financial markets in Australia, New Zealand, the United States, Canada, Japan, Hong Kong, Singapore, or a member state of the European Union, or in foreign exchange rates or any development involving a prospective change in political, financial or economic conditions in any of those countries; or (3) trading in all securities quoted or listed on ASX, the New Zealand Stock Exchange, London Stock Exchange, Hong Kong Stock Exchange, Singapore Exchange or the Tokyo Stock Exchange is suspended or limited in a material respect for one day (or a substantial part of one day) on which that exchange is open for trading. In addition, if any of the conditions precedent are not satisfied by their respective deadlines, a Joint Lead Manager may (in its absolute and unfettered discretion) terminate its obligations under the Underwriting Agreement by written notice to Pact and the other Joint Lead Manager. PACT GROUP PROSPECTUS 131

134 9. ADDITIONAL INFORMATION (continued) Escrow arrangements Geminder Holdings has entered into a voluntary escrow arrangements in respect of the Shares it will hold on Listing. Each of the Escrowed Vendors have entered into voluntary escrow arrangements in respect of the Acquisition Shares they will each hold on Listing. The voluntary escrow arrangements are as follows: Escrow document/ Shareholder Escrowed Shares reason for escrow Geminder 113,764,210 Holdings 1 Shares Salvage (an entity associated with Geminder Holdings) 1 3,272,336 Acquisition Shares Gaja 3,272,336 Acquisition Shares S&J Capital 3,052,237 Acquisition Shares Geminder Holdings Escrow Deed Ruffgar Escrow Deed Ruffgar Escrow Deed Cinqplast Escrow Deed Escrow period From Listing until the Company has released its audited financial accounts for FY2014. From the date of issue until the Company has released its audited financial accounts for FY2014. From the date of issue until the Company has released its audited financial accounts for FY2014. From the date of issue until the Company has released its audited financial accounts for FY Total number of shares held 117,036,546. Under each escrow deed referred to in the table above, each restricted party (being the relevant Shareholder and its controller, if any) agrees, subject to certain limited exceptions, not to deal in any escrowed Shares until the Company has released its audited financial accounts for FY2014. Escrowed Shares will represent approximately 41.9% of the total Shares on issue immediately following Listing. 9.5 VISY ARRANGEMENTS Some of PGH s businesses were previously part of Visy Group. As a result, of this Pact still has certain arrangements with Visy Group which are referred to in Sections and Visy also supplies goods and services to Pact as detailed in Section Visy shared IT arrangements Visy Group currently provides information technology services to Pact under a memorandum of understanding. This agreement is on arm s length terms. This arrangement is due to terminate in early Pact is currently in negotiations with an independent third party service provider in relation to the provision of these services to Pact Visy shared services arrangements Visy Group has entered into agreements with Origin in Victoria and New South Wales under which it procures the supply of electricity to Pact entities. These agreements are on terms that are generally more favourable to Visy Group than Pact, for example Visy Group can terminate the arrangement without Pact s consent. If Origin terminates the agreement (for example for a Visy Group breach) it is not under any obligation to notify Pact. Pact has entered into its own direct arrangements with Origin which will commence from 1 January

135 Visy Group has an agreement with Energy Australia for the provision of gas in Australia. The agreement is between Visy and Energy Australia but Energy Australia also supplies Pact, which pays Energy Australia directly, under the terms of that agreement. Visy has also entered into an arrangement with Santos for the procurement of gas whereby Visy directly purchases from Santos and coordinates distribution to Pact. Pact pays Visy directly. Pact is in the process of opting out of the arrangement for the supply from Energy Australia and Santos and expects this process to be completed by 31 December From 1 January 2014 or soon thereafter Pact will have separate arrangements for the supply of gas Other Visy arrangements Various Visy Group entities supply Pact entities with additional services as follows: Visy Board Pty Ltd supplies corrugated packaging. Visy Logistics Pty Ltd supplies logistics services. Total fees under these arrangements are approximately $41 million per annum. These supply arrangements are both on arm s length terms. 9.6 OWNERSHIP RESTRICTIONS The sale and purchase of Shares in the Company is regulated by Australian and New Zealand laws that restrict the level of ownership or control by any one person (either alone or in combination with others). This section contains a general description of these laws Corporations Act The takeover provisions in Chapter 6 of the Corporations Act restrict acquisitions of shares in listed companies, and unlisted companies with more than 50 members, if the acquirer s (or another party s) voting power would increase to above 20%, or would increase from a starting point that is above 20% and below 90%, unless certain exceptions apply. The Corporations Act also imposes notification requirements on persons having voting power of 5% or more in the Company Foreign Acquisitions and Takeovers Act Generally, the Foreign Acquisitions and Takeovers Act applies to acquisitions of shares and voting power in a company of 15% or more by a single foreign person and its associates (substantial interest), or 40% or more by two or more unassociated foreign persons and their associates (aggregate substantial interest). Where an acquisition of a substantial interest meets certain criteria, the acquisition may not occur unless notice of it has been given to the Federal Treasurer and the Federal Treasurer has either stated that there is no objection to the proposed acquisition in terms of the Australian Federal Government s Foreign Investment Policy or a statutory period has expired without the Federal Treasurer objecting. An acquisition of a substantial interest or an aggregate substantial interest meeting certain criteria may also lead to divestment orders unless a process of notification, and either a statement of non-objection or expiry of a statutory period without objection, has occurred Overseas Investment Act 2005 (New Zealand) The Overseas Investment Act 2005 (New Zealand) (Overseas Investment Act) may require prior approval to be obtained from the Overseas Investment Office (New Zealand) for any transaction in which an overseas person (which includes a body corporate that is incorporated outside New Zealand or is 25% or more held by overseas persons), or an associate of an overseas person, within the meaning of the Overseas Investment Act, acquires (either alone or together with its associates) a 25% or more ownership or control interest in the Company, or increases an existing 25% or more ownership or control interest in the Company. Failure by an investor to obtain consent before acquiring interests in the Company where it is required under the Overseas Investment Act may result in penalties including monetary penalties and/or orders from a court to dispose of the investor s interests in the Company, or that the offending transaction be cancelled. PACT GROUP PROSPECTUS 133

136 9. ADDITIONAL INFORMATION (continued) 9.7 SELLING RESTRICTIONS No action has been taken to register or qualify this Prospectus, the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia and New Zealand. The Shares have not been, and will not be, registered under the US Securities Act or the securities laws of any state or other jurisdiction in the United States and may not be offered sold, pledged or transferred except: (i) outside the United States in offshore transactions in accordance with Regulation S; and (ii) in the United States to persons who are reasonably believed to be qualified institutional buyers as defined in Rule 144A in reliance on an exemption from registration under the US Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another available exemption from or in a transaction not subject to the registration requirements of the US Securities Act. This Prospectus may only be distributed in Australia and New Zealand and, outside of those jurisdictions, to persons to whom the Offer may be lawfully made in accordance with the laws of the applicable jurisdiction, provided that this Prospectus may not be distributed in the United States. The Offer is not an offer or invitation in any jurisdiction where, or to any person to whom, such an offer or invitation would be unlawful. Each Applicant will be taken to have represented, warranted and agreed as follows: it understands that the Shares have not been, and will not be, registered under the US Securities Act and may not be offered, sold or resold in the United States, except in a transaction exempt from, or not subject to, registration under the US Securities Act and any other applicable securities laws; it is not in the United States; it has not and will not send this Prospectus or any other material relating to the Offer to any person in the United States; and it will not offer or sell the Shares in the United States or in any other jurisdiction outside Australia and New Zealand except in transactions exempt from, or not subject to, registration under the US Securities Act and in compliance with all applicable laws in the jurisdiction in which the Shares are offered and sold. Each Applicant under the Institutional Offer will be required to make certain representations, warranties and covenants set out in the confirmation of allocation letter distributed to it. 9.8 TAX CONSIDERATIONS The comments in Section 9.9 below provide a general outline of Australian tax issues for Australian resident Shareholders that hold Shares in Pact on capital account for Australian income tax purposes (ie the comments do not apply to Shareholders who hold the Shares on revenue account or as trading shares, and non-australian resident Shareholders). They also do not apply to Shareholders that are companies, banks, insurance companies, taxpayers that carry on a business of trading in shares or that are subject to the Taxation of Financial Arrangement rules contained in Division 230 of the Income Tax Assessment Act The comments in Section 9.10 below provide a general summary of New Zealand tax issues for New Zealand resident individual Shareholders that will hold their Shares in the Company on capital account (ie the summary does not apply to Shareholders who hold the Shares on revenue account or as trading shares). The comments apply only to Shareholders that will hold less than 10% interest in the Company. The summaries in Sections 9.9 and 9.10 are general in nature and are not exhaustive of all income tax consequences that could apply in all circumstances of any given Shareholder. The individual circumstances of each Shareholder may affect the taxation implications of the investment of that Shareholder. It is recommended that all Shareholders consult their own independent tax advisers regarding the income tax, (including capital gains tax) stamp duty and GST consequences of acquiring, owning and disposing of Shares, having regard to their specific circumstances. 134

137 The summaries in Sections 9.9 and 9.10 are based on the relevant Australian and New Zealand tax law in force, established interpretations of that law and understanding of the practice of the tax authority at the time of issue of this Prospectus. Tax law is complex and subject to ongoing change. The tax consequences discussed in this summary do not take into account or anticipate any changes in law (by legislation or judicial decision) or any changes in administrative practice or interpretation by the relevant authorities. If there is a change, including a change having retrospective effect, the tax, stamp duty and GST consequences should be reconsidered by Shareholders in light of the changes. The precise implications will depend upon each Shareholder s specific circumstances. This summary does not constitute financial product advice as defined in the Corporations Act This summary is confined to taxation issues and is only one of the matters you need to consider when making a decision about your investments. You should consider taking advice from a licensed adviser, before making a decision about your investments. The Company and its advisers disclaim all liability to any Shareholder or other party for all costs, losses, damages and liabilities that the Shareholder or other party may suffer or incur arising from or relating to or in any way connected with the contents of this summary or the provision of this summary to the Shareholder or any other party of the reliance on it by the Shareholder or any other party. 9.9 AUSTRALIAN SHAREHOLDERS Company tax status PGH and its Australian resident subsidiaries will be taxed at the Australian corporate tax rate. Various of its non-australian resident subsidiaries should be taxed at corporate tax rates relevant to those jurisdictions Income tax treatment of dividends received for Australian resident Shareholders In the event that a Shareholder receives a dividend from Pact, the cash dividend will be included in the Shareholder s assessable income. In addition, to the extent that Pact franks the dividend, the franking credit attached to the dividend should generally also be included in the Shareholders assessable income. Where the franking credit is included in the Shareholder s assessable income, the Shareholder should generally be entitled to a corresponding tax offset against tax payable by the Shareholder. The tax offset can be applied to reduce the tax payable on the Shareholder s taxable income. Where the tax offset exceeds the tax payable on the Shareholder s taxable income, the shareholder may be entitled to a tax refund. To be eligible for the franking credit and tax offset, a Shareholder must satisfy the holding period rule and related payments rule. This requires that a Shareholder hold the Shares in Pact at risk for a period of not less than 45 days (not including the date of acquisition or the date of disposal). In addition, a Shareholder must not be obliged to make a related payment in respect of any dividend, unless they hold the Shares at risk for the required holding period around all dividend dates. Shareholders should seek professional advice to determine if these requirements, as they apply to them, have been satisfied. The holding period rule should not apply to a Shareholder who is an individual whose tax offset entitlement (for all franked distributions received in the income year) does not exceed $5,000 for the income year in which the franked dividend is received. However, this exemption does not apply to a dividend which is subject to the related payments rule. In May 2013 the former Government announced proposed changes that may apply to deny franking tax offsets to certain dividend washing arrangements. No legislation is respect to these proposed changes has been released at this time. Shareholders should have regard to these proposed changes in considering the tax implications of their personal circumstances. PACT GROUP PROSPECTUS 135

138 9. ADDITIONAL INFORMATION (continued) Capital gains tax (CGT) implications for Australian resident Shareholders Where an Australian resident Shareholder holds their Shares in Pact on capital account, the disposal of the Shares should be taxed under the CGT rules. For CGT purposes, the Shareholder will make a capital gain where the capital proceeds received for the disposal of their Shares exceeds the CGT cost base of their Shares. Similarly, the Shareholder will make a capital loss where the capital proceeds received for their Shares are less than the reduced cost base of their Shares. Broadly, the cost base and reduced cost base of the Shares should usually be equal to the amount paid to acquire the Shares. Certain other costs associated with holding the Shares, such as incidental costs of acquisition and disposal, may be added to the cost base and reduced cost base. Generally, all capital gains and losses made by a Shareholder for an income year will need to be aggregated to determine whether the Shareholder has made a net capital gain or a net capital loss for the year. A net capital gain is included in the Shareholder s assessable income whereas a net capital loss is carried forward and may be available to set off against capital gains of later years. Capital losses cannot be offset against other assessable income. If a Shareholder is an individual, complying superannuation entity or trust, and has held the Shares for 12 months or more before disposal of the Shares, the Shareholder will prima facie be entitled to a CGT discount for any capital gain made on the disposal of the Shares. Capital gains may be discounted by half in the case of individuals and trusts, and by one-third in the case of complying superannuation entities. Shareholders that are companies are generally not entitled to a CGT discount. Capital losses must be applied first to reduce a capital gain before applying the discount. Where the Shareholder is a trustee of a trust that has held the Shares for 12 months or more before disposal, the CGT discount may flow through to the beneficiaries of that trust if those beneficiaries are not companies. Shareholders that are trustees should seek specific advice regarding the tax consequences of distributions to beneficiaries who may qualify for discounted capital gains Tax File Numbers (TFN) A Shareholder is not required to quote their TFN, or where relevant, ABN, to Pact. However, if a Shareholder s TFN, ABN or exemption details are not provided, Australian tax may be required to be deducted by Pact from distribution and/or unfranked dividends at the maximum marginal tax rate plus the Medicare levy. An exemption from the requirement to withhold applies in respect of a fully franked dividend paid by Pact. A Shareholder that holds Shares as part of an enterprise may quote their Australian Business Number instead of their TFN Goods and Services Tax (GST) implications No GST should be payable by Shareholders in respect of the acquisition or disposal of their shares in Pact, regardless of whether or not the Shareholder is registered for GST. The extent to which each Shareholder is entitled to recover any GST incurred on costs relating to the acquisition or disposal of shares in Pact will depend on the individual circumstances of each Shareholder. No GST should be payable by Shareholders on receiving dividends distributed by Pact Stamp duty No Australian stamp duty should be payable by Shareholders in respect of the IPO or their acquisition or disposal of their Shares in Pact whilst it is a listed company. Individual Shareholders should obtain their own independent advice depending on their individual circumstances. 136

139 9.10 NEW ZEALAND SHAREHOLDERS Taxation of Dividends New Zealand tax resident Shareholders that are individuals and treated under New Zealand tax legislation as holding less than a 10% interest in the Company will be subject to New Zealand income tax on any dividends received from the Company. Shareholders should include in their assessable income the amount of the dividend received (before the deduction of any applicable withholding taxes), together with any New Zealand imputation credits attached to that dividend. Such Shareholders should be entitled to a tax credit equal to the imputation credits attached to the dividend. The tax credit can be applied to reduce the tax payable on the Shareholder s assessable income. Where the credit exceeds the tax payable on the Shareholder s assessable income, excess imputation credits can be carried forward by the Shareholder for utilisation in future income years (in the form of tax credits for individuals or losses for trustees). New Zealand tax resident Shareholders are not entitled to a New Zealand tax credit for any Australian franking credits attached to the dividends Trans-Tasman imputation New Zealand s tax legislation allows an Australian tax resident company, such as the Company, to elect to maintain a New Zealand imputation credit account. Consequently, New Zealand taxes paid by the Company, or by the Company s New Zealand subsidiaries, may result in New Zealand imputation credits being attached to dividends paid on the Shares. The imputation credits must be allocated to all Shareholders regardless of whether those Shareholders are tax resident in New Zealand or elsewhere. The Company and its relevant subsidiaries intend to investigate whether to elect into this regime, and where a decision to elect into the regime is made, they will maintain a New Zealand imputation credit account with respect to New Zealand taxes paid. These New Zealand imputation credits may be attached to dividends paid to the Shareholders by the Company. The New Zealand tax resident Shareholders may be entitled to use these imputation credits under New Zealand tax law as a credit against their New Zealand income tax liability (refer above). The level of New Zealand imputation credits available to be attached to the Shares will depend on the amount of New Zealand taxes paid and applicable credit ratio requirements under New Zealand law Withholding tax Should the Company be required to deduct Australian withholding tax from any dividend it pays, New Zealand tax legislation allows a foreign tax credit to be claimed by the Shareholder in respect of that amount of overseas tax paid. However, the amount of the credit for the foreign tax is restricted to the amount of the New Zealand tax payable calculated under certain rules. Foreign tax credits are non-refundable credits and, if not utilised in the income year to which they relate, will be forfeited Foreign Investment Fund (FIF) rules New Zealand s FIF rules require investors in certain companies to attribute and recognise income for tax purposes in respect of their investments regardless of distributions received. There are detailed rules that specify the circumstances in which an interest of a person in a foreign entity will constitute an interest in a FIF. A person may not have an interest which requires attribution of income if one of several possible exemptions applies. The FIF rules should not apply to require attribution of income in respect of Shares held by New Zealand residents on the basis that the Company: (1) will be tax resident in Australia and will not be tax resident in any other jurisdiction; (2) will be listed on an approved index under the operating rules of the Australian Stock Exchange; and (3) is required by Australian law to maintain a franking account. PACT GROUP PROSPECTUS 137

140 9. ADDITIONAL INFORMATION (continued) Because the FIF rules should not apply to require attribution, New Zealand resident Shareholders should only be taxed on dividends received (see above) and, in some cases, any gains derived on the disposal of the Shares (see below) Disposal of Shares New Zealand does not have a comprehensive capital gains tax but does tax any profits or gains derived from the disposition of property where that property is held on revenue account. New Zealand tax resident Shareholders should not be subject to tax on gains arising from the sale of Shares provided: (1) the Shareholder does not carry on a business of dealing in shares or other securities; (2) the Shares were not acquired for the dominant purpose of sale or other disposition; and (3) the gains on the sale of the Shares were not derived from the carrying on or carrying out of an undertaking or scheme entered into or devised for the purpose of making a profit. Each of these tests is highly dependent on the particular facts surrounding a disposition and their application will accordingly depend on the individual circumstances of a given Shareholder. Losses arising from the disposal of Shares will not be deductible in circumstances where the Shares are held on capital account Goods and Services Tax (GST) implications Under current New Zealand law, Shareholders will not be liable to pay New Zealand goods and services tax on the acquisition or disposal of Shares Stamp duty New Zealand does not have stamp duty INTERESTS OF DIRECTORS, ADVISERS AND PROMOTERS Sections 6.3 and outline the nature and extent of the interests and fees of certain persons involved in the Offer. Other than as set out in this Prospectus: No amount has been paid or agreed to be paid and no benefit has been given or agreed to be given to a Director, or proposed Director to induce them to become, or to qualify as, a Director of the Company. None of the following persons: a Director or proposed Director of the Company; each person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus; a promoter of the Company; or an underwriter to the issue of the Shares, holds or held at any time during the last two years an interest in: the formation or promotion of the Company; property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer of the Shares; or the Offer of the Shares, or was paid or given or agreed to be paid or given any amount or benefit for services provided by such persons in connection with the formation or promotion of the Company or the Offer of the Shares. 138

141 Interests of Advisers Credit Suisse and Macquarie Capital have acted as underwriters and Joint Lead Managers of the Offer. Pact has agreed to pay the Joint Lead Managers the amount in accordance with the Underwriting Agreement referred to in Section for these services. The Joint Lead Managers have agreed to pay Deutsche Bank as Co-Lead Manager to the Offer: a Co-Lead Manager fee of 0.14% of gross proceeds raised under the Offer; and an incentive fee of up to 0.05% of gross proceeds raised under the Offer, on behalf of the Company, out of the fees payable to them by the Company. Each of Morgans, Evans & Partners, Baillieu Holst and Macquarie Equities has acted as a Co-Manager to the Offer. They will each receive a fee of between 1.25% and 1.50% on their respective Bookbuild allocations. All of the amounts payable to the Co-Managers are payable by the Joint Lead Managers out of the fees payable to them by the Company. Herbert Smith Freehills and Herbert Smith Freehills LLP have acted as Australian and special United States legal advisers respectively to the Company in connection with the Offer (excluding in relation to taxation). The Company has paid or agreed to pay $1.5 million (not including GST) for such services to the date of this Prospectus. Further amounts may be paid to Herbert Smith Freehills or Herbert Smith Freehills LLP in accordance with their time-based charge-out rates. Russell McVeagh has acted as New Zealand legal adviser to the Company in connection with the Offer. The Company has paid or agreed to pay $0.1 million (not including GST) for such services to the date of this Prospectus. Further amounts may be paid to Russell McVeagh in accordance with their time-based charge-out rates. Ernst & Young has undertaken accounting and taxation due diligence in relation to the Company in connection with the Offer and Ernst & Young Transaction Advisory Services Limited have acted as Investigating Accountant and has prepared the Independent Limited Assurance Report included in this Prospectus. The Company has paid or agreed to pay approximately $1.7 million for such services to the date of this Prospectus. Further amounts may be paid to Ernst & Young and Ernst & Young Transaction Advisory Services Limited in accordance with their time-based charge-out rates. Unless stated otherwise, all such payments have been paid or are payable in cash CONSENTS TO BE NAMED AND TO INCLUSION OF STATEMENT AND DISCLAIMERS OF RESPONSIBILITY Written consents to the issue of this Prospectus have been given and, at the time of lodgement of this Prospectus with ASIC, had not been withdrawn by the following parties: Each of Credit Suisse and Macquarie Capital has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as the underwriter and Joint Lead Manager in the form and context it is so named. Each of Macquarie Capital and Credit Suisse takes no responsibility for any part of this Prospectus other than any reference to its name. Deutsche Bank has given, and has not withdrawn prior to lodgement of this Prospectus, its written consent to be named in this Prospectus as Co-Lead Manager to the Offer in the form and context it is so named. Deutsche Bank take no responsibility for any part of this Prospectus other than any reference to its name. Each of Morgans, Evans & Partners, Baillieu Holst and Macquarie Equities has given, and has not withdrawn prior to lodgement of this Prospectus, its written consent to be named in this Prospectus as a Co-Manager to the Offer in the form and context it is so named. Each of Morgans, Evans & Partners, Baillieu Holst and Macquarie Equities take no responsibility for any part of this Prospectus other than any reference to its name. PACT GROUP PROSPECTUS 139

142 9. ADDITIONAL INFORMATION (continued) Herbert Smith Freehills and Herbert Smith Freehills LLP have given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, their written consent to be named in this Prospectus as the Company s Australian and special United States legal advisers (respectively) in the form and context they are so named. Herbert Smith Freehills and Herbert Smith Freehills LLP take no responsibility for any part of this Prospectus other than any reference to their names. Russell McVeagh has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as the Company s New Zealand legal advisers in the form and context it is so named. Russell McVeagh takes no responsibility for any part of this Prospectus other than any reference to its name. Ernst & Young Transaction Advisory Services Limited has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as Investigating Accountant to the Company in the form and context it is so named and has not withdrawn its consent to the inclusion in this Prospectus of its Independent Limited Assurance Report in the form and context in which it is included. Ernst & Young has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its consent to be named in this Prospectus as Auditor, in the form and content it is so named. Each of Ernst & Young and Ernst & Young Transaction Advisory Services Limited takes no responsibility for any part of this Prospectus other than any reference to its name and the Independent Limited Assurance Report. Computershare Investor Services Pty Limited has given and has not withdrawn its written consent to be named as the Share Registry in the form and context in which it is named. Computershare Investor Services Pty Limited has not taken part in the preparation of any part of this Prospectus other than the recording of its name as Share Registry to the Company. Computershare Investor Services Pty Limited has not authorised or caused the issue of and expressly disclaims and takes no responsibility for any part of this Prospectus. Business Monitor International Limited has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to the inclusion in this Prospectus of parts of its reports Indonesia Food & Drink Report Q3 2013, China Food & Drink Report, Q4 2013, Vietnam Food & Drink Report, Q4 2013, Malaysia Food & Drink Report Q4 2013, Philippines Food & Drink Report 2013, Thailand Food & Drink Report, Q3 2013, Australia Food & Drink Report, Q and Industry Forecast Mass Grocery Retail United States Q in the form and context in which they are included. Smithers Pira has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to the inclusion in this Prospectus of parts of its reports The Future of Global Packaging to 2018 and The Future of Global Rigid Plastic Packaging to 2018 in the form and context in which they are included DESCRIPTION OF THE SYNDICATE Credit Suisse and Macquarie Capital are Joint Lead Managers to the Offer and Deutsche Bank is Co-Lead Manager to the Offer. Each of Morgans, Evans & Partners, Baillieu Holst and Macquarie Equities is a Co-Manager to the Offer COSTS OF THE OFFER The expenses connected with the Offer, which are payable by Pact, are estimated to be approximately $45.9 million. 140

143 9.15 ASIC RELIEF AND ASX CONFIRMATIONS AND WAIVERS Pact has received the following exemption and confirmation from ASIC in relation to the Company and the Offer: An exemption from the pre-prospectus advertising and publicity rules in section 734(2) of the Corporations Act to permit Pact to provide employees with certain information relating to the Offer. Confirmation that the Geminder Holdings Escrow Deed, Ruffgar Escrow Deed and the Cinqplast Escrow Deed do not give the Company a relevant interest in the Shares the subject of those deeds GOVERNING LAW This Prospectus and the contracts that arise from the acceptance of the Applications are governed by the law applicable in Victoria, Australia and each applicant for Shares under this Prospectus submits to the exclusive jurisdiction of the courts of Victoria, Australia STATEMENT OF DIRECTORS This Prospectus is authorised by each Director of the Company who consents to its lodgement with ASIC and its issue. PACT GROUP PROSPECTUS 141

144 10. ADDITIONAL FINANCIAL INFORMATION

145 10. ADDITIONAL FINANCIAL INFORMATION 10.1 KEY ACCOUNTING POLICIES Set out below are PGH s key accounting policies for the financial year ending These have been extracted from PGH s audited statutory financial report. References to the Group (Group) in Section 10 refer to PGH and its subsidiaries and is used in the audited statutory financial report Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for derivative financial instruments which have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost, are adjusted to record changes in fair values attributable to the risks that are being hedged in effective hedge relationships. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated. Going Concern The Group is in net deficiency position of $1,077 million (2012: $656 million) resulting from the following: (a) the Group reorganised its holding structure in 2011 and Pact Group Holdings Ltd was established as the new holding entity of the Group. The accounting treatment of the reorganisation resulted in the recognition of a common control reserve of $942 million which is recognised in equity. (b) the Group paid a special dividend of $400 million in 2013 which was funded by a new Term Loan B facility and was allowed under the provision of the syndicated facility agreement The financial statements have been prepared on a going concern basis, having regard to the following factors: (a) the Group is expected to remain profitable and cash flow positive over the next 12 months and currently there are no known events or circumstances which would materially impact this view, and full compliance with the finance facility covenants is expected; (b) the Group s major external finance facilities are all long dated with maturities of at least 5 years (approximately); and (c) the Group s major related party facility is long dated with maturity of at least a further 6 years Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board Basis of consolidation The consolidated financial statements comprise the financial statements of Pact Group Holdings Ltd and its subsidiaries. Interests in associates are equity accounted (see below). Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. PACT GROUP PROSPECTUS 143

146 10. ADDITIONAL FINANCIAL INFORMATION (continued) The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired, and the liabilities and contingent liabilities assumed at the date of acquisition. The identifiable assets acquired and the liabilities and contingent liabilities assumed are measured at their acquisition date fair values (see ). The difference between the net fair value of the Group s share of the identifiable net assets acquired and the cost of the business combination is goodwill or a discount on acquisition Business combinations The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Controlled entities are consolidated from the date control is transferred to the Group and are no longer consolidated from the date control ceases. The acquisition method of accounting is used to account for the acquisition of controlled entities by the Group. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net assets. However, acquisitions occurring while under common control are accounted at the carrying amount of assets and liabilities of the acquiree immediately before control over the acquiree is obtained. Any difference between the fair value of consideration and the net assets acquired is recognised in reserves. Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of the business combination over the net fair value of the Group s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value. The discount rate used is the entity s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions Significant accounting judgements, estimates and assumptions Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. (i) Significant accounting judgements In the process of applying the Group s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Taxation The consolidated entity is subject to income taxes in Australia and foreign jurisdictions and as a result significant judgement is required in determining the consolidated entity s provision for income tax. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. 144

147 Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management s estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the profit or loss, or other comprehensive income. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits. Impairment of non-financial assets other than goodwill The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. These include product and manufacturing performance, technology, social, economic and political environments and future product expectations. If an impairment trigger exists the recoverable amount of the asset is determined. Impairment of net investment in associates The Group applies AASB 139 Financial Instruments: Recognition and Measurement to determine whether there is an indicator that the Group s net investment in associates are impaired, after first applying equity accounting in accordance with AASB 128 Investments in Associates. The Group must apply judgement to determine whether there is objective evidence that one or more events have had an impact on the estimated future cash flows of its associates. (ii) Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of cash-generating units, using a value in use discounted cash flow methodology, to which the goodwill is allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill is discussed in Make good provision on leased premises A provision has been made for the present value of anticipated costs of future restoration of leased premises. The provision includes future cost estimates associated with dismantling, closure and decontamination. The calculation of this provision requires assumptions such as contractual obligations, application of environmental legislation, plant closure dates, available technologies and engineering cost estimates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting both the expense and provision. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience and lease terms (for assets under finance leases). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. PACT GROUP PROSPECTUS 145

148 10. ADDITIONAL FINANCIAL INFORMATION (continued) Business reorganisation Business reorganisation provisions are only recognised when a detailed plan has been approved and the business reorganisation has either commenced or been publicly announced, or firm contracts related to the business reorganisation have been entered into. Costs related to ongoing activities are not provided for Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the customer (through the execution of a sales agreement at the time of delivery of the goods to the customer), no further work or processing is required, the quantity and quality of the goods has been determined, the price is determined and generally title has passed. Interest revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Dividend revenue Revenue is recognised when the Group s right to receive the payment is established Borrowing costs Leases Borrowing costs are recognised as an expense when incurred. Borrowing costs associated with qualifying assets are capitalised. The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Finance Leases Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the profit and loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating Lease Commitments The Group has entered into commercial property, office equipment and motor vehicles leases. The entity has determined that it does not obtain all the significant risks and rewards of the properties, office equipment and motor vehicles and has thus classified the leases as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. 146

149 Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of bank overdraft balances. Bank overdrafts are included within interestbearing loans and borrowings in current liabilities on the statement of financial position Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing major parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, the part s cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Where assets are in the course of construction at the reporting date they are classified as capital works in progress. All costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management are capitalised. Upon completion, capital works in progress are reclassified to plant and equipment and subject to fair value assessments and depreciation from this date. Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows: Buildings Building Services Plant and equipment 40 years years 3 20 years Trade and other receivables Trade receivables, generally have 30 day terms and are non-interest bearing. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade receivables is recognised to reduce the carrying amount of accounts receivable when there is objective evidence that the receivable will not be collected. Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment, subject to review of the particular debtor. Impairment losses specifically provided for in previous years are eliminated against provision for impairment. In all other cases, impairment losses are eliminated directly against the carrying amount and written off as an expense in the statement of comprehensive income Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group s interest in the net fair value of the acquired identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. PACT GROUP PROSPECTUS 147

150 10. ADDITIONAL FINANCIAL INFORMATION (continued) Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Recoverable amount is determined by using a value in use, discounted cash flow methodology. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating units retained. Impairment losses recognised for goodwill are not subsequently reversed Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset is reviewed at least at each financial year end. Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense for intangible assets with finite lives is recognised in the profit or loss Impairment of non-financial assets other than goodwill The Group assesses at each reporting date whether there is an indication that an asset with a finite life may be impaired. If any such indication exists, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset generates cash inflows that are largely dependent on those from other assets or groups of assets and the asset s value in use cannot be estimated to approximate its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. 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. Impairment losses relating to continuing operations are recognised in profit or loss unless the asset is carried at a revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amounts are estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 148

151 Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss, or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss, or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset to be realised or the liability to be settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority Interest bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method, which is calculated based on the principal borrowing amount less directly attributable transaction costs. The inter-entity subordinated loan was settled in full and closed out during the current year. In the prior year it could be classified as interest bearing borrowings in the financial report or non-current other receivables depending on the balance at the date of the report. The inter-entity subordinated loan bore interest with a fixed repayment term of 10 years and in the event of a winding up, ranked below the Syndicated Finance Facility. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. PACT GROUP PROSPECTUS 149

152 10. ADDITIONAL FINANCIAL INFORMATION (continued) Inventories Inventories have been classified as follows: Raw Materials: Work in Progress: Finished Goods: Steel, tinplate and plastic resins. Manufactured plastic, steel and tin packaging for the industrial and consumer packaging industries that have not yet reached a full stage of completion. Manufactured plastic, steel and tin packaging for the industrial and consumer packaging industries that are intended for sale to external customers. Inventories are valued at the lower of cost and net realisable value, with directly attributable costs incurred in bringing each product to its present location and condition being accounted for, on a full absorption basis, as follows: Raw Materials: Work in Progress & Finished Goods: Purchase cost of material, including discounts, rebates, duties, taxes and other inward transport costs, on a moving average cost basis. Cost of raw materials, direct labour and a proportion of manufacturing overheads based on a normal level of operating capacity, but excluding costs that relate to general administration, finance, marketing, selling and distribution. Costs are assigned on the basis of standard costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale Trade and other payables Trade and other payables are carried at amortised cost which due to the terms associated with these items equates to their principal amounts and are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make a future payment with respect to the purchase of these goods and services. The amounts are unsecured and are usually paid within days of recognition Contributed equity Issued and paid up capital is classified as equity and recognised at the fair value of the consideration received by the entity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds Derivatives The Group uses derivative financial instruments such as forward currency contracts, cross currency interest rate swaps, and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date at which the derivative contract is entered into and are subsequently remeasured to fair value at each reporting date. Derivatives are classified as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the year. The fair value of forward currency contracts is calculated by using valuation techniques such as present value techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation techniques use both observable and unobservable market inputs, which are not considered to be significant. There have been no transfers between categories at any time during the current or prior periods. The fair value of cross currency interest rate swaps and interest rate swap contracts is determined by reference to market values for similar instruments. 150

153 For the purposes of hedge accounting, hedges are classified as: fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; cash flow hedges when they hedge exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or a forecast transaction; or hedge of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument s effectiveness in offsetting the exposure to changes in the hedged item s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting period for which they were designated. Cash flow hedges are accounted for as follows: Cash flow hedges are hedges of the Group s exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in profit or loss. The Group has forward exchange contracts (FECs) to hedge foreign exchange purchases. The FECs are accounted for as cash flow hedges. In the prior year, the Group had interest rate swaps to hedge exposure against variable interest rates where there are none outstanding as at 30 June Amounts taken to equity are transferred to profit or loss when the hedge transaction affects profit or loss, such as when hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability. If the forecasted transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to the profit or loss. Derivatives not designated as hedges Cross currency swaps which are new in the financial year ended 30 June 2013 are to cover the exposure of the Group to USD interest rates. However, these are not classified as hedges and therefore any gains or losses arising from the changes in fair value are taken directly to profit or loss for the year Foreign currency translation Both the functional and presentation currency of Pact Group Holdings Ltd is Australian dollars (A$). The functional currency of foreign operations, Pact Group Holdings (NZ) Ltd, Pact Group (NZ) Limited, VIP Plastic Packaging (NZ) Ltd, VIP Steel Packaging (NZ) Ltd, Auckland Drum Corporation Limited, Alto Packaging Limited, Astron Plastics Limited, Viscount Plastics (NZ) Limited and Tecpak Industries Ltd is New Zealand dollars (NZ$). The functional currency of Gempack Asia Ltd is Thai Baht. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at reporting date. All exchange rate differences in the financial report are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. PACT GROUP PROSPECTUS 151

154 10. ADDITIONAL FINANCIAL INFORMATION (continued) Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. As at the reporting date the assets and liabilities of subsidiaries with non-australian dollar functional currency are translated into the presentation currency of Pact Group Holdings Ltd at the rate of exchange at the reporting date and their statements of comprehensive income are translated at the weighted average exchange rate for the year (where appropriate). The exchange rate differences arising on the translation to presentation currency are taken directly to the Foreign Currency Translation Reserve, in equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item to which it relates; and receivables and payables are stated as GST inclusive amounts. The net amount of GST recoverable from or payable to the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management s best estimate of the expenditure required to settle the present obligation at the reporting date. When the Group expects some or all of the provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. 152

155 (i) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits are recognised for employees services up to the reporting date. Benefits expected to be settled within twelve months of the reporting date are classified as current and are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows Investment in associates The Group s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements and at cost in the parent. The associates are entities over which the Group has significant influence and that are neither subsidiaries nor joint ventures. The Group generally deems they have significant influence if they have over 20% of the voting rights. Under the equity method, investments in the associates are carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Group s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group s net investment in associates. Goodwill included in the carrying amount of the investment in associate is not tested separately, rather the entire carrying amount of the investment is tested for impairment as a single asset. The Group s share of its associates post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity s statement of comprehensive income, while in the consolidated financial statements they reduce the carrying amount of the investment where they are paid from pre-acquisition retained earnings. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The reporting dates of the associates and the Group are identical and the associates accounting policies conform to those used by the Group for like transactions and events in similar circumstances. PACT GROUP PROSPECTUS 153

156 10. ADDITIONAL FINANCIAL INFORMATION (continued) 10.2 PGH STATUTORY FINANCIAL INFORMATION Set out below are PGH s consolidated statutory historical statements of income for FY2011, FY2012 and FY2013 extracted from the audited statutory financial reports of PGH. The consolidated statutory historical statements of income do not reflect any pro forma consolidation of the Acquisitions nor any pro forma adjustments relating to the Offer. Accordingly, the information (including the historical statutory interest expense and income tax expense) is not representative of Pact s expected earnings profile after Listing Consolidated historical statements of income Table 10.1: Consolidated historical statements of income (Year ended 30 June, $ in millions) PGH FY2011 PGH FY2012 PGH FY2013 Total revenue ,114.4 Raw materials and consumables used (388.1) (377.7) (444.8) Employee benefits expense (239.3) (248.6) (277.4) Occupancy, repair and maintenance, administration and selling expenses (174.8) (172.5) (168.8) Other gains/(losses) (21.2) Depreciation, amortisation and impairment (50.9) (52.5) (57.1) Finance costs expense (76.0) (95.8) (91.9) Profit before income tax expense Income tax expense (12.8) (11.2) (7.9) Net profit for the period Profit attributable to minority interests (0.1) (0.2) Net profit attributable to equity holders of the parent entity Reconciliation of Consolidated historical statements of income to Section 4 Table 10.2: Reconciliation of Consolidated historical statements of income to Section 4 (Year ended 30 June, $ in millions) EBIT reconciliation: PGH FY2011 PGH FY2012 PGH FY2013 Profit before income tax expense Finance costs expense EBIT Significant items (14.0) EBIT (before significant items) EBITDA reconciliation: EBIT Depreciation and Amortisation EBITDA Significant items (14.0) EBITDA (before significant items)

157 Consolidated historical statements of financial position Table 10.3: Consolidated historical statements of financial positions (As at 30 June, $ in millions) PGH FY2011 PGH FY2012 PGH FY2013 Current assets Cash and cash equivalents Trade and other receivables Inventories Derivatives 4.2 Prepayments Total current assets Non-current assets Other receivables Receivables from related parties 28.2 Property, plant & equipment Investments in associates Intangible assets and goodwill Derivatives 56.3 Deferred tax assets Total non-current assets Total assets ,228.3 Current liabilities Trade & other payables Interest bearing loans and borrowings Provisions Derivatives Total current liabilities Non-current liabilities Provisions Interest bearing loans and borrowings , ,001.8 Derivatives 0.7 Deferred tax liabilities Total non-current liabilities 1, , ,077.7 Total liabilities 1, , ,305.0 Net Assets/(Net Liabilities) (679.7) (655.6) (1,076.7) Equity Contributed equity Reserves (948.5) (950.1) (932.3) Retained profits (324.5) Non-controlling interests Total Equity/(Total Deficiency) (679.7) (655.6) (1,076.7) PACT GROUP PROSPECTUS 155

158 10. ADDITIONAL FINANCIAL INFORMATION (continued) Consolidated historical statements of cash flows Table 10.4: Consolidated historical statements of cash flows (Year ended 30 June, $ in millions) PGH FY2011 PGH FY2012 PGH FY2013 Cash Flow from Operating Activities Receipts from customers (inclusive of GST) 1, , ,210.3 Interest received Payments to suppliers and employees (inclusive of GST) (855.3) (904.2) (1,052.2) Income tax paid (12.0) (17.5) (27.5) Borrowing and other finance costs paid (30.3) (31.7) (42.5) Net cash provided by operating activities Cash Flow from Investing Activities Payments for property, plant and equipment (32.9) (36.7) (43.8) Proceeds on sale of property, plant and equipment Dividends received Proceeds on sale of businesses and subsidiaries 35.4 Purchase of shares in associates (4.7) Purchase of businesses and subsidiaries (14.0) (8.7) (104.3) Net cash used in investing activities (45.4) (44.2) (93.6) Cash Flow from Financing Activities Proceeds from borrowings net of borrowing costs Repayment of borrowings (83.1) (89.0) (374.8) Payment of dividend (72.0) (484.3) Equity contributed Repayment of related-entity subordinated loan (166.9) (89.3) (1.2) Net cash provided by/(used in) financing activities (101.6) (67.5) 26.4 Net (Decrease)/increase in cash and cash equivalents (11.9) Cash and cash equivalents/(overdrafts) at beginning of year (1.9) (13.7) 1.4 Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents/(overdraft) at end of year (13.7)

159 Reconciliation of Consolidated historical statements of cash flows to Section 4 Table 10.5: Reconciliation of Consolidated historical statements of cash flows to Section 4 (Year ended 30 June, $ in millions) Net cash flow before interest and tax reconciliation: PGH FY2011 PGH FY2012 PGH FY2013 Net cash provided by operating activities Net cash used in investing activities (45.4) (44.2) (93.6) Income tax paid Borrowing and other finance costs paid Interest received (0.3) (0.2) (0.1) Net cash flow before interest and tax Pro forma and significant items (as above) 6.5 Net cash inflow before interest, tax and financing activities IMPAIRMENT TESTS FOR GOODWILL For impairment testing purposes goodwill acquired through business combinations has been allocated to and tested at the level of their respective cash generating units in accordance with the level at which management monitors goodwill. The levels currently adopted by management are as follows: Pact Australia Pact International (i) (ii) Description of the cash generating units and other relevant information The recoverable amount of each of the cash generating units has been determined based on a Value in Use calculation using cash flow projections, continued within the current year s financial budget approved by the Directors. Carrying amount of goodwill allocated to each of the cash generating units The carrying amounts of goodwill allocated to the Pact Australia and Pact International segments. Pact Australia Pact International (Year ended 30 June, $ in millions) FY2012 FY2013 FY2012 FY2013 Carrying amount of goodwill (iii) Key assumptions used in Value in Use calculation The calculation of Value in Use for both Pact Australia and Pact International units is most sensitive to the following assumptions: gross margins discount rates raw materials price movement growth rates used to extrapolate cash flows beyond the forecast period Gross margins Gross margins are based on average values achieved in the years preceding the current budget period. These are increased over the budget period for any anticipated efficiency improvements. Cash flows beyond the one year period are extrapolated using growth rates which are a combination of volume growth and price growth. The long term growth rates are in the range of 2.0% 3.0% (2012: 2.0% 3.0%). PACT GROUP PROSPECTUS 157

160 10. ADDITIONAL FINANCIAL INFORMATION (continued) Discount rates Discount rates represent the current market assessment of the risk specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group s shareholders. The cost of debt is based on the cost of funds relating to the interest bearing loans of the Group. Segmentspecific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data, where applicable. Discount rates applied are based on the pre-tax weighted average cost of capital applicable to the relevant cash generating unit. The pre-tax risk adjusted discount rate applied to these cash flow projections is 12.0% (2012: 12.5%). Raw material price movements Estimates are obtained from published indices for the countries from which materials are sourced, as well as data relating to specific commodities. Forecast figures are used if data is publicly available, otherwise past actual raw material price movements are used as an indicator of future price movements. Growth rate estimates Rates are based on published industry research and economic forecasts relating to GDP growth rates. (iv) Sensitivity to changes in assumptions The key estimates and assumptions used to determine the value in use of a cash generating unit are based on management s current expectations and are considered to be reasonably achievable. With regard to the assessment of Value in Use of the Pact Australia and Pact International units, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. 158

161 GLOSSARY 76

162 11. GLOSSARY Term Acquisitions Acquisition Entities Acquisition Shares AEDST Application Application Form Application Monies Applicant Asia Peak Asia Peak Acquisition Agreement ASIC ASIC Act 1989 (Cth) ASX ASX Listing Rules ASX Settlement Rules AUD Auditor Meaning The acquisition of Shares in the following entities: Cinqplast; Viscount China; Asia Peak; and Ruffgar. Cinqplast, Viscount China, Asia Peak, Ruffgar and any of their respective subsidiaries. Shares issued as part consideration for the Acquisitions. Australian Eastern Daylight Savings Time. An application made to subscribe for Shares offered under this Prospectus. The application form attached to or accompanying this Prospectus (including the electronic form provided by an online application facility). The amount accompanying an Application Form submitted by an investor. A person who submits an Application. Asia Peak Pte Ltd, an entity incorporated in Singapore and associated with Geminder Holdings. The Asia Peak Share Purchase Agreement between Ruby Park and Pact Group Industries Asia. Australian Securities and Investments Commission. The Australian Securities and Investments Commission Act. Australian Securities Exchange. The listing rules of the ASX, with any modification or waivers which the ASX may grant to Pact from time to time. The settlement and operating rules of the ASX. Australian dollars. Ernst & Young. Baillieu Holst Baillieu Holst Ltd (ACN ). BBSY Bennamon BKBM Board Broker Firm Bank Bill Swap Bid Rate. Bennamon Pty Ltd (ABN ), an entity associated with Geminder Holdings. Bank Bill Bid Settlement Rate. The Board of Directors. A Syndicate Broker who is offered a firm allocation of Shares under the Broker Firm Offer. 160

163 Term Broker Firm Applicant Broker Firm Offer CAGR Centralbridge Leases CEO CFO CGT CGU CHESS China Premises Cinqplast Cinqplast Acquisition Agreement Cinqplast Escrow Deed CODM Co-Lead Manager Co-Managers Company Constitution Corporations Act Meaning A person who submits an Application under the Broker Firm Offer. The invitation to Australian and New Zealand resident investors from a Syndicate Broker to acquire Shares offered under this Prospectus. Compound Annual Growth Rate. Leases of properties granted by each of Centralbridge Pty Ltd (as trustee for the Centralbridge Unit Trust), Centralbridge Two Pty Ltd, Centralbridge (NZ) Limited, Centralbridge Pty Ltd and Albury Property Holdings Pty Ltd. Chief Executive Officer of the Company. Chief Financial Officer of the Company. Capital Gains Tax. Cash Generating Unit. Clearing House Electronic Sub-register System. The premises located at: No. 10 Yaohua Rd, Langfang, Hebei Province, China; 283 Hong Ming Rd Guangzhou, Guangdong Province, China; No. 5 Longwo Rd, Changzhou, Jiangsu Province, China, and China Premise is a reference to any one of the above premises. Cinqplast Plastop Australia Pty Ltd (ABN ), an entity associated with S&J Capital and Gaja. The Cinqplast Share Purchase Agreement between S&J Capital, Pact Group, the Company and Gary Wolman. The escrow deed under which S&J Capital voluntarily escrows its Acquisition Shares provided under the Cinqplast Acquisition Agreement. Chief Operating Decision Maker. Deutsche Bank. Morgans, Evans & Partners, Baillieu Holst and Macquarie Equities. Pact Group Holdings Ltd. The constitution of the Company as amended from time to time. Corporations Act 2001 (Cth). Credit Suisse Credit Suisse (Australia) Limited (ACN ). CRM Customer Relationship Management. Deutsche Bank Deutsche Bank AG, Sydney Branch (ABN ). Directors The Directors of the Company. PACT GROUP PROSPECTUS 161

164 11. GLOSSARY (continued) Term DPS DRP Dynapack EBIT EBITDA EPS Escrowed Vendors Meaning Dividends per Share. Dividend Reinvestment Plan. Dynapack Asia Pte. Ltd, an entity incorporated in Singapore, in which an entity associated with Geminder Holdings has a 50% interest. Earnings Before Interest and Tax. Earnings Before Interest, Tax, Depreciation and Amortisation. Earnings per Share. S&J Capital (pursuant to the Cinqplast Escrow Deed) and Gaja and Salvage (pursuant to the Ruffgar Escrow Deed). Evans & Partners Evans and Partners Pty Ltd (ACN ). Existing Term Loan Facility Existing secured term facilities comprising: a US$885 million US Term Loan B; and a $75 million and NZ$30 million Revolving Credit Facility. Financial Information The: Pro forma Historical Financial Information; and Forecast Financial Information. Forecast Financial Information The: Statutory Forecast Financial Information; and Pro forma Forecast Financial Information. Foreign Acquisitions and Takeovers Act Foreign Investment Policy FY Gaja GDP Geminder Holdings Geminder Holdings Escrow Deed Geminder Holdings TSSA GST Foreign Acquisitions and Takeovers Act 1975 (Cth). The Australian Foreign Investment Policy released by the Australian Treasurer. Financial year (ended 30 June). Gaja Consolidated Pty Ltd (ACN ), an entity associated with Gary Wolman. Gross Domestic Product. Geminder Holdings Pty Ltd (ACN ) (an entity associated with Raphael Geminder, the Non-Executive Chairman of Pact). The escrow deed under which Geminder Holdings voluntarily escrows the Shares it will hold on Listing. The Transitional Services and Support Agreement dated 1 November 2013 between Geminder Holdings and Pact Group Holdings (Australia) Pty Ltd. Goods and Services Tax as defined in A New Tax System (Goods and Services Tax) Act 1999 (Cth). 162

165 Term IASB IFRS Inpact Institutional Investor Institutional Offer International Offering Memorandum Investigating Accountant JLMs or Joint Lead Managers Listing LTIFR Meaning International Accounting Standards Board. International Financial Reporting Standards. Pact s innovation and design division. An investor to whom offers or invitations in respect of securities can be made without the need for a lodged Prospectus (or other formality, other than a formality with which Pact is willing to comply), including in Australia persons to whom offers or invitations in respect of securities can be made without the need for a lodged Prospectus under section 708 of the Corporations Act. The invitation to bid for Shares made to Institutional Investors in Australia, New Zealand, Singapore, Hong Kong, Japan, the United Kingdom, France, Germany, Switzerland, Norway, the Netherlands, Ireland, Italy, Canada, the United Arab Emirates, Indonesia, Malaysia and in the United States to persons who are reasonably believed to be qualified institutional buyers as defined in Rule 144A. The Offer document with respect to the Institutional Offer outside of Australia. Ernst & Young Transaction Advisory Services Limited. Credit Suisse and Macquarie Capital. The commencement of trading in shares on the Official List of the ASX. Lost Time Injury Frequency Rate. The number of lost-time injuries per 1,000,000 hours worked. Macquarie Capital Macquarie Capital (Australia) Limited (ABN ). Macquarie Equities Macquarie Equities Limited (ACN ). MGR Mass Grocery Retailing, organised retail, performed by companies with a network of modern grocery retail stores and modern distribution networks (such as supermarkets, hypermarkets and convenience stores). Morgans Morgans Corporate Limited (ACN ). Net Debt New Bank Facilities Current and non-current interest bearing liabilities including finance leases less cash and cash equivalents. 3 and 5 year syndicated debt facilities comprising: a $295 million 3 year term revolving cash advance facility; a $295 million 5 year term revolving cash advance facility; a NZ$90 million 3 year term revolving cash advance facility; and a NZ$90 million 5 year term revolving cash advance facility. NPAT Net Profit After Tax. PACT GROUP PROSPECTUS 163

166 11. GLOSSARY (continued) Term NZD Offer Offer Documents Offer Price Other Documents Overseas Investment Act Pact Pact Group Industries (ANZ) Pty Ltd Pact Group Industries Asia Pact Group Holdings (Australia) Pty Ltd Pact Share Offer Information Line P Auer Meaning New Zealand dollars. The invitation by the Company to subscribe for newly issued Shares under this Prospectus. Has the meaning given to that term in the Underwriting Agreement. $3.80 per Share, payable on application for the Shares. The pathfinder prospectus, Prospectus, any Application Form or supplemental prospectus, the International Offering Memorandum, the pricing disclosure package and any Company supplemental disclosure document and the investor presentation used in connection with the Institutional Offer and the Broker Firm Offer. Overseas Investment Act 2005 (New Zealand) Pact Group Holdings Ltd (ABN ) and its related bodies corporate after Listing which for this purpose includes the Acquisitions (formerly Pact Group Holdings Pty Ltd). Pact Group Industries (ANZ) Pty Ltd (ACN ) (formerly Pact Group Industries Pty Ltd). Pact Group Industries (Asia) Pty Ltd (ACN ). Pact Group Holdings (Australia) Pty Ltd (ACN ) (formerly Pact Group Pty Ltd) (within Australia) or (outside Australia). P Auer Pty Ltd (ACN ), an entity associated with Geminder Holdings. P Auer TSSA The Transitional Services and Support Agreement dated 1 November 2013 between Pact Group Holdings (Australia) Pty Ltd and P Auer. PE ratio PGH PGI Plastop Asia Pro forma Forecast Financial Information Price to earnings ratio, a company s share price divided by its earnings per share. Pact Group Holdings Ltd (ABN ) and its subsidiaries prior to Listing (i.e. excluding the Acquisition Entities). Pact Group Industries (ANZ) Pty Ltd. Plastop Asia Inc, an entity incorporated in the Philippines. The: Consolidated pro forma forecast statement of income for FY2014; and Consolidated pro forma forecast statement of cash flows for FY

167 Term Pro forma Historical Financial Information Pro forma Pact Historical Results Pro forma PGH Historical Results Promissory Note Prospectus Prospectus Date RCF Regulation S Ruby Park Meaning The: Pro forma PGH Historical Results; and Pro forma Pact Historical Results. The: Pact consolidated pro forma historical statements of income for FY2013; Pact consolidated pro forma historical statements of cash flows for FY2013; and Pact consolidated pro forma historical statement of financial position as at 30 June 2013 The: Consolidated pro forma historical statements of income for FY2011, FY2012 and FY2013; Consolidated pro forma historical statements of cash flows for FY2011, FY2012 and FY2013; and Consolidated pro forma historical statement of financial position as at 30 June Promissory Note to be paid to Geminder Holdings as consideration for a portion of its interest in Pact acquired as part of the Offer. This document dated 27 November 2013 (including the electronic form of this document), and any replacement or supplementary prospectus in relation to this document. The date on which a copy of this Prospectus was lodged with ASIC, being 27 November Revolving Credit Facility. Regulation S under the US Securities Act. Ruby Park Pty Ltd (ABN ), an entity associated with Geminder Holdings. Ruffgar Ruffgar Holdings Pty Ltd (ABN ), an entity owned by Gaja (50%) and Salvage (50%). Ruffgar Acquisition Agreement Ruffgar Escrow Deed Rule 144A S&J Capital Salvage Share The Ruffgar Share Purchase Agreement between Salvage, Gaja, Pact Group Industries Asia, the Company and Gary Wolman. The escrow deed under which Gaja and Salvage voluntarily escrow their respective Acquisition Shares provided under the Ruffgar Acquisition Agreement. Rule 144A under the US Securities Act. S&J Capital Pty Limited (ACN ), an entity associated with Gary Wolman. Salvage Pty Ltd (ACN ), an entity associated with Geminder Holdings. A fully paid ordinary share in the capital of Pact. PACT GROUP PROSPECTUS 165

168 11. GLOSSARY (continued) Term Shareholder Meaning A holder of Shares. Share Registry Computershare Investor Services Pty Limited (ABN ). SKU Statutory Forecast Financial Information Stock Keeping Unit. The: Consolidated statutory forecast statement of income for FY2014; and Consolidated statutory forecast statement of cash flows for FY2014. substrate Syndicate Broker A commonly used term in the packaging industry to denote a type of material used in the manufacturing process which could be any form of plastic, glass, wood, metal, paper or cardboard. A Joint Lead Manager, Co-Lead Manager or Co-Manager. TLB US Term Loan B. Underwriting Agreement USD US Securities Act Viscount China Viscount China Acquisition Agreement Visy Group Weener Weener Plastop Working Capital Facility An underwriting agreement dated 27 November 2013 between Pact and the Joint Lead Managers. US dollars. United States Securities Act of 1933, as amended. Viscount Plastics (China) Pty Ltd (ABN ), an entity associated with Geminder Holdings. The Viscount China Share Purchase Agreement between Bennamon and Pact Group Industries Asia. Visy Industries Australia Pty Ltd (ACN ) and its related bodies corporate. Weener Plastik AG, a company incorporated in Germany. Weener Plastop Asia, Inc., a company incorporated in the Philippines. Pact s existing bilateral facility comprising a variety of lines including: overdrafts; trade finance; letters of credit; bank guarantees; and other transactional banking services. 166

169 12. CORPORATE DIRECTORY