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rhipe Annual Report 2016

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Annual Report 2016

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ContentsChairman’s Report 3

Managing Director’s Report 4

2016 Financial Report 6

Operating and Financial Review 6

Directors’ Report 8

Remuneration Report 14

Auditor’s Independence Declaration 28

Consolidated Statement of Profit or Loss and Other Comprehensive Income 29

Consolidated Statement of Financial Position 30

Consolidated Statement of Changes in Equity 31

Consolidated Statement of Cash Flows 32

Notes to the Financial Statements 33

Directors’ Declaration 72

Independent Auditor’s Report 73

Additional Information for Listed Public Companies 75For

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Mike Hill, Executive ChairmanFor

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I am pleased to report that rhipe continues to deliver on its strategy in line with its stated growth objectives.

The over-arching objective from the board and executive team is to create long term shareholder value by growing revenue streams in cloud licensing subscription programs and building on an already impressive suite of global software vendor partners.

On a foundation created 13 years ago, the business has again achieved growth in revenues by adding new vendor programs and expanding into new regions in Asia Pacific.

The substantial progress achieved in the 2016 financial year was in part due to the launch of and momentum gained from various public cloud subscription licensing programs such as Microsoft 2 Tier CSP, VMware vCloud Air and IBM Softlayer.

Our strategy to build a footprint in key fast developing Asian markets continues to hold true. rhipe has achieved high growth in these regions adding a number of new markets with the support of our global vendor partners. We continue to strive to be the leading Cloud Subscription aggregator in the Asia Pacific region and feedback from our partners and vendors suggests that we are well on our way to achieving this goal.

The 2016 financial year marked another strong year in investment in this strategy and we have now begun to see the benefits of this early investment as we approach:

Chairman’s Report

1. Positive contributions in many of these high growth markets; and

2. Operational leverage across the foundation of the business in Australia and New Zealand.

rhipe has achieved many new milestones in 2016. The market opportunity for rhipe to continue to aggregate subscription licenses remains buoyant and large. The business has successfully expanded revenue stream opportunities to more regions, more vendors and more licensing types. Whilst continuing its efforts in private and hybrid cloud licensing, rhipe has rapidly begun to capitalise on the public cloud market and believes this will continue to grow at high double digit growth into the future.

The Company increased its operating revenue for the year to 30 June 2016 from $108.8 million to $143 million representing a growth of 32%. Excluding rebates and non-licensing revenues, the core sales of software licensing grew 32% in FY 16. Service provider partners exceeded 1,800 at 30 June 2016, up from 1,600 same time last year. The business is well funded with $13.8m of cash and cash equivalents at year end.

With a recurring revenue model, rhipe commences the 2017 financial year strongly, leveraging ongoing monthly subscription revenue, high growth rates compounded by new vendors, new public cloud licensing programs, new partners and new geographies.

We would like to thank our vendor partners for their continued support and collaborative partnership in meeting our mutual growth objectives. In particular, rhipe maintains strong relationships with Microsoft, VMware, Citrix, Veeam, RedHat, Trend Micro, Zimbra, LiveTiles, Skykick, IBM Softlayer and others.

I would like to take this opportunity to thank the executive team and staff of rhipe for their hard work in achieving this year’s growth and for building a solid platform that bodes well for the future of private, hybrid and public cloud licensing and services. I would also like to commend the management team for continuing to strive for growth, maintaining vendor relationships at the highest levels, building the service provider channel and taking advantage of new cloud market opportunities.

Yours Sincerely,

Mike HillExecutive Chairman

The strategy to build a footprint in key fast developing Asian markets continues to hold true.

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W e drive the consumption of Cloud software subscriptions and services via a growing

channel of I.T. service provider partners. By providing these partners with marketing, training, consulting, support and subscription billing services, rhipe has become the leading APAC based wholesale cloud platform for software vendors such as Microsoft, VMware, Citrix, RedHat, Veeam and Zimbra.

Over the past 12 months rhipe has invested in people, programs and systems to launch our “Whole of Cloud” future. rhipe now offers private, public and hybrid cloud solutions that include software licensing, infrastructure and implementation services. In particular, rhipe’s investment in Microsoft’s Cloud Solutions Provider (CSP) program has positioned rhipe as one of Microsoft’s key strategic cloud partners in the APAC region. During FY2016 rhipe was appointed as a CSP wholesaler by Microsoft in 15 countries including nine emerging economies. These CSP appointments have significantly expanded rhipe’s addressable market by adding Public Cloud to rhipe’s pre-existing Private Cloud subscription business. Industry analyst IDC predicts that the Public Cloud market will reach a projected spend of USD $127 billion by 20181 and Microsoft believes that their own cloud business will reach USD $20 billion during this same time period. Although rhipe is a relatively small company compared to these projections, we believe that rhipe’s 13 year focus of driving Private Cloud subscriptions now positions us as the go-to partner for Public Cloud consumption

Managing Director’s Report

programs. Our Intellectual Property, our relationships and our go-to-market model is perfectly suited to give rhipe a first mover advantage in the shift towards Public Cloud.

I would like to highlight a number of significant achievements from the 2016 Financial Year:

- Exceeding $136m in software license revenue with Gross Margin of $19.95m. This represents a year over year growth in Gross Margin of 21%;

- Achieving an 87% growth in local Asian sales with a 95% growth in local partner agreements (this excludes arbitrage sales from ANZ customer buying through Asia);

- Appointment by Microsoft as a Public cloud wholesaler under its 2-Tier Cloud Solutions Provider Program (CSP) in Australia, Singapore, Thailand, Malaysia, Indonesia, The Philippines, Sri Lanka, Bangladesh, Cambodia, Laos, Myanmar, Nepal, Brunei, Bhutan, and The Maldives;

- Driving the adoption of more than 43,000 Office365 seats under the CSP program. These are billed on a monthly subscription basis with an average revenue of $13 per user. This equates to an annual run rate business for CSP of $6.7m from a standing start in FY2016. The growth in CSP is accelerating. During the first five months since launch, rhipe’s partners consumed 11,510 seats of CSP. Over this next seven months, an additional 31,599 seats were added, Accelerated growth is expected to continue into FY2017;

- Divesting 83% of rhipe’s 6.52% stake in Microsoft SharePoint partner, LiveTiles with a net profit to rhipe of $2.384m;

- Successfully turning rhipe’s pilot Licensing Solutions Provider (LSP) program in Australia into a profitable business with over 170 new customer agreements signed; and

- Launching new vendor programs from Veaam and Sinefa.

In 2017, I am looking forward to the operating leverage that will come as our investments stabilise and our Gross Margin dollars continue to grow. If FY2016 was a year of significant investment in Public Cloud then I expect FY2017 to be the year in which we see rewards in terms of business profitability from this investment.

On behalf of the Board and the Executive team, we thank our staff, vendors, partners and shareholders for their belief and commitment to our vision.

Dominic O’HanlonManaging Director

rhipe is The Cloud Channel Company.

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Dominic O’Hanlon, Managing Director and CEO

1IDC #251730, Microsoft WPC 2015 Keynote

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Operating and Financial Reviewrhipe Limited and Controlled Entities

Principal Activities and Significant Changes in Nature of Activities

The principal activity of the consolidated Group during the financial year was the wholesale of subscription software licenses to a growing number of technology service provider resellers. Most of these software subscriptions are for products from world leading software vendors such as Microsoft, VMware and Citrix. In addition, the Group provides value-added consulting and support to assist service provider resellers transition their own clients to cloud and subscription centric business environments.

Operating Results and Review of Operations for the Year

The results presented in this financial report reflect the operations of rhipe Limited and all subsidiaries from 1 July 2015 to 30 June 2016 (together the “Group”).

For the full year ended 30 June 2016, Group Revenue was $143m with Group Gross Margin of $25.7m. These results represent respective growth of 32% and 28% compared to the prior year comparative period. Group earnings prior to growth investments, non-cash share based payments, non-recurring due diligence costs and non-recurring one off costs was $5.2m, up 5% on a like-for-like basis compared to the prior year comparative period. Licensing revenue was $136.8m, up 30% and license gross margin was $19.9m, up 21% compared to the prior year comparative period. The licensing gross margin % for the financial year to 30 June 2016 was 14.59%.

Financial Summary ($’000) FY16 FY15 Change

Licensing Revenue (Annuity Subscription)

136,780 105,052 + 30%

Services Revenue 6,263 3,717 +68%

Total Revenue 143,043 108,769 + 32%

Gross Margin Licensing 19,950 16,452 + 21%

Gross Margin Services 5,817 3,631 +60%

Total Gross Margin 25,767 20,083 + 28%

Profit/(Loss) before Income Tax 1,168 (1,535) +176%

Reported EBITDA 1,466 (1,353) +208%

Underlying EBITDA pre growth investment & non-cash or non-recurring1

5,160 4,896 + 5%

1Underlying EBITDA pre Growth excludes Net Investment in SEA and New Programs after gross margin contributions and Investment in New Systems.2It also excludes non-cash expenses relating to share based payments for executive options issued and non-recurring expenses such as transaction costs associated with nSynergy acquisition (Dec14), executive team recruitment and impairment write down for assets held for re-sale and the profit on the sale of LiveTiles shares.

During the 12-month period to 30 June 2016, rhipe continued to invest heavily in the transition to a “Whole of Cloud” business model with integrated divisions focused on cloud licensing (private, public and hybrid), cloud solutions (consulting services), and cloud operations (billing, provisioning, support, marketing). rhipe’s investment in these operating divisions led to a number of significant achievements that have set the foundation for rhipe’s ongoing growth.

2016 Financial Report

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Operating and Financial Review (continued)

The table below outlines the underlying EBITDA contribution from the Group for the year ending June 30, 2016:

$’000

Underlying EBITDA pre growth investment and non-cash and non-recurring1 5,160

GROWTH INVESTMENT EXPENSED:

Investment in South East Asia (3,031)

Investment in New Program and Systems (1,650)

Underlying EBITDA pre non-cash or non-recurring costs2 479

NON-CASH OR NON-RECURRING EXPENSES:

Non-recurring transaction costs, integration and restructuring costs expensed (306)

Non-cash share-based payments expensed in accordance with accounting standards (963)

Non-recurring impairment write-down (Mine Camp) (128)

Profit on Sale of LiveTiles shares 2,384

EBITDA Reported 1,466

Depreciation and amortisation (365)

Net interest income 67

Profit/(Loss) before Income Tax 1,168

The directors believe that the Group is in a strong and stable financial position to continue to expand and grow the business. As at 30 June 2016, the Group had $13.8m in cash (and cash equivalents) at bank (2015: $12.4m).

1 Underlying EBITDA pre Growth excludes Net Investment in SEA and New Programs (including CSP and LSP) after gross margin contributions and Investment in New Systems.

2 Underlying EBITDA excludes non-cash expenses relating to share based payments for executive options issued and non-recurring expenses such as transaction costs associated with nSynergy acquisition (Dec14), executive team recruitment and impairment write down for assets held for re-sale and the profit on the sale of LiveTiles shares.

In July 2015 rhipe launched its Microsoft Indirect Cloud Solutions Program (CSP) program for Australia. This program allows rhipe to wholesale Microsoft’s public cloud offerings such as Office365, Azure and Enterprise Mobility Suite (EMS) to rhipe’s reseller channel on a monthly subscription “pay-as-you-use” basis. From September 2015 to May 2016 rhipe also launched this program across South East Asia, first with Singapore, then Malaysia, Thailand, Philippines, and lastly Indonesia. In May 2016 rhipe also launched the sale of Microsoft’s Public Cloud Platform (Microsoft Azure) in Australia via the Indirect CSP program.

In the first five months following the launch of CSP in Australia, rhipe’s partners consumed 11,510 seats of Office365. This run rate increased to over 20,000 seats in the following five months. During May 2016 rhipe’s partners consumed an additional 7,000 seats in a single month and by June 30, 2016 rhipe had provisioned more than 43,000 seats on Office365. This represents an annualised run rate of approximately $7m in licenses as at the end of rhipe’s first financial year as an Indirect CSP provider.

In addition to the launch of CSP, rhipe launched a new program for IBM SoftLayer during the 2016 Financial Year. Due to delays in the launch of this program, rhipe does not expect to see any revenue from IBM SoftLayer until the 2017 Financial Year. rhipe’s key software vendor relationships now include those with Microsoft, VMware, Citrix, IBM SoftLayer, Datacore, Red Hat, Trend Micro, Veeam, Zimbra, LiveTiles and SkyKick.

rhipe solutions’ consulting services (resulting from the acquisition of nSynergy in December 2014) are focused on Microsoft technologies such as Office365 and Azure. During the 2016 Financial Year rhipe commenced the transition of these offerings away from a direct-only sales model to a more channel-friendly indirect model. As a result, rhipe decided to close the small operation that rhipe solutions had in the UK, reduce the size of the operation that rhipe solutions has in the US, and to terminate the relationship that rhipe solutions had with a Chinese contract organisation.

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Directors’ ReportRhipe Limited And Controlled Entities

Your directors present their report on the consolidated entity (referred to herein as the Group) consisting of RHIPE LIMITED and its controlled entities for the financial year ended 30 June 2016. The information in the preceding Operating and Financial Review forms part of this Director’s Report for the financial year ended 30 June 2016 and is to be read in conjunction with the following information.

General Information Directors

The following persons were directors of rhipe Limited during or since the end of the financial year up to the date of this report:

- Mike Hill - Dominic O’Hanlon - Dawn Edmonds - Laurence Sellers - Mark Pierce - Michael Everett

Particulars of each Director’s experience and qualifications are set out below.

Mike HillExecutive Chairman

Experience and QualificationsAppointed 10 April 2014Mr Hill is a former Partner of Ernst & Young and has worked with the Ironbridge Capital investment team since 2004 and took on the role of Operational Partner for the firm in 2012. Ironbridge Capital is a leading domestic private equity firm with $1.5bn of funds under management.

Interest in Shares and Options1,046,290 ordinary shares and Nil options

Special ResponsibilitiesChairman, Remuneration Committee and Audit Committee

Directorships held in other listed entities during the three years prior to the current yearAHAlife Holdings Limited (Non-Executive Chairman) HJB Corporation Limited (Executive Chairman) LiveTiles Limited (Non-Executive Director) JustKapital Litigation Partners Limited (Executive Director) Prime Media Group Limited (Non-Executive Director) - (resigned on 22 August 2016) Noble Minerals Resources Limited (Executive Chairman)

Dominic O’HanlonManaging Director and Chief Executive Officer

Experience and QualificationsAppointed 15 June 2015 was Chief Executive Officer from 5 August 2014 until appointment as Managing Director on 15 June 2015.Mr O’Hanlon is a well-known and successful technology entrepreneur who has nearly 25 years’ experience in software development, marketing, sales, implementation and support. Dominic has served in prior roles as CEO, Chief Strategy Officer, Non-Executive Director and Chairman for numerous high growth technology companies.

Interest in Shares and Options3,357,840 ordinary shares, 1,000,000 performance rights and 600,000 options

Special ResponsibilitiesNone

Directorships held in other listed entities during the three years prior to the current yearNone

Information relating to Directors and Company Secretary

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Dawn EdmondsExecutive Director and Chief Operating Officer

Experience and QualificationsAppointed 10 April 2014. Ceased Interim Chief Executive Officer on 5 August 2014 upon appointment of Dominic O’HanlonMs Edmonds is one of the founders and the Chief Operating Officer and Executive Director of rhipe. With a strong understanding of the IT industry, Dawn has played an integral part in establishing the Company and its continuing success.

Responsible for the management of systems, process and performance as well as the day-to-day operations of the organisation Dawn has led the development and implementation of process and systems that have been recognised as best practice by vendors. Prior to starting NewLease in 2003, she was instrumental in building a successful start-up business in the temporary labour hire and IT outsourcing sectors.

Dawn was recognised by Smart Company as one of Australia’s top 40 female entrepreneurs for 2011, and in 2012 was awarded the ARN Women in ICT Entrepreneur Award. She is also a member of the Australian Institute of Management as well as the Australian Institute of Company Directors.

Interest in Shares and Options3,752,294 ordinary shares and 550,000 options

Special ResponsibilitiesChief Operating Officer, Risk Committee and Remuneration Committee


Laurence SellersNon-Executive Director

Experience and QualificationsAppointed 10 April 2014Mr Sellers is a Non-Executive Director of rhipe, having joined NewLease in 2013. Laurence (Laurie) has more than 40 years’ experience in the Australian IT Industry and has held roles in; Design and Development of hardware, Software Development, Technical Support, Customer Service Management, Marketing Management, Sales Management, and Country Management.

During the past 20 years Laurie has served as the Chief Executive Officer of ALSTOM Information Technology Australia, Managing Director of ITX Group Limited - listed on the ASX, and Vice President ANZ of Avnet Technology Solutions - one of the world’s largest distributors of IT hardware and software, listed on the New York Stock Exchange.

Interest in Shares and OptionsNil ordinary shares and 1,400,000 options

Special ResponsibilitiesRisk Committee and Remuneration Committee

Directorships held in other listed entities during the three years prior to the current yearNoneF

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Directors’ Report (continued)

Mark PierceNon-Executive Director

Experience and QualificationsAppointed 10 April 2014Mr Pierce has over 25 years’ corporate finance and underwriting experience gained from senior positions held at Credit Suisse, Rabobank, Macquarie Bank and Westpac. Since 2009, Mr Pierce has independently provided financial advisory and arranging services to a number of clients, including managing the treasury and funding for a large operating lease company in Australia and New Zealand.

Interest in Shares and Options20,000 ordinary shares and 500,000 options

Special ResponsibilitiesAudit Committee (Chair) and Risk Committee (Chair)


Michael EverettNon-Executive Director

Experience and QualificationsAppointed 10 April 2014 Mr Everett has more than 25 years of capital markets and advisory experience. Michael retired from Goldman Sachs in 2013 after 11 years where he was a Managing Director and Co-head of the Financing Group within the Investment Banking Division in Australia. Prior to joining Goldman Sachs, he also worked internationally for a large investment bank and has broad experience across the securities industry. During his career, he has advised a broad range of companies in a variety of industries. In late 2013, he established an independent capital markets advisory firm, Reunion Capital Partners.

Interest in Shares and Options821,579 ordinary shares and 625,000 options

Special ResponsibilitiesAudit Committee and Remuneration Committee

Directorships held in other listed entities during the three years prior to the current yearAHAlife Holdings Limited (Non-Executive Director) HJB Corporation Limited (Non-Executive Director) Noble Minerals Resources Limited (Non-Executive Director)

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Andrew Whitten Company Secretary

Andrew is an admitted solicitor with a specialty in Corporate Finance and Securities Law and is a Solicitor Director of Whittens & McKeough Pty Ltd. Andrew is currently the company secretary of a number of publicly listed companies. He has been involved in a number of corporate and investment transactions including IPOs on the ASX and NSX, corporate reconstructions, reverse mergers and takeovers.

Andrew holds a Bachelor of Arts (Economics, UNSW); Master of Laws and Legal Practice (Corporate Finance and Securities Law, UTS); Graduate Diploma in Applied Corporate Governance from the Governance Institute and is an elected Associate of that institute. Andrew is also a Public Notary.

Directors’ Meetings Audit Committee Remuneration Committee Risk Committee

Number eligible to

attend

Number attended

Number eligible to

attend

Number attended

Number eligible to

attend

Number attended

Number eligible to

attend

Number attended

Mike Hill 9 9 4 4 1 1 n/a n/a

Dominic O’Hanlon 9 9 n/a n/a n/a n/a n/a n/a

Dawn Edmonds 9 9 n/a n/a 1 1 2 2

Laurence Sellers 9 8 n/a n/a 1 1 2 2

Mark Pierce 9 9 4 4 n/a n/a 2 2

Michael Everett 9 7 4 4 1 1 n/a n/a

Company Secretary

The following person held the position of company secretary at the end of the financial year:

Meetings of Directors

During the financial year, nine meetings of directors were held. The audit committee, the remuneration committee and the risk committee met during the reporting period. Attendances by each director during the year were as follows:

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Dividends Paid or Recommended

No dividends have been paid or declared by rhipe Limited since the beginning of the financial year and none are recommended.

Indemnifying Officers or Auditor

During or since the end of the financial year, the Company has given an indemnity or entered into an agreement to indemnify or paid or agreed to pay insurance premiums as follows:

- The Company has paid premiums to insure each of the directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of directors of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

- No indemnity has been provided for the auditors

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Non-audit Services

The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

- All non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

- The nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

$

Taxation services 26,000

26,000

Significant Changes in State of Affairs

There were no significant changes in the state of affairs of the Group during the financial year.

Future Developments, Prospects and Business Strategies

The Group has strong existing relationships with a number of key software and technological partners and the Group will look to continue to build and nurture these relationships. The Group will also continue to explore opportunities to further expand its reach from its current bases in Australia, New Zealand, Singapore, Hong Kong, Thailand, Malaysia, Philippines, and Indonesia. However, rhipe intends to temper any such expansion in operations so that the business can generate a solid growth in earnings in 2017.

rhipe will continue to assess further acquisition opportunities that will complement, create synergies or bring scale and earnings growth to the Company’s existing business model.

Environmental Issues

The consolidated Group’s operations are not regulated by any significant regulations under a law of the Commonwealth or of a state or territory.

The following fees were paid or payable to ShineWing Australia for non-audit services provided during the year ended 30 June 2016:

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Management incentive options issued prior to completion of reverse takeover by NewLease Pty Ltd

Date Of Grant

Number Of Options

Date Of Expiry

Conversion Price ($)

26/06/2013 375,000 12/03/2018 0.20


Date Of Grant

Number Of Options

Date Of Expiry

Conversion Price ($)

10/04/2014 2,125,000 10/04/2017 0.20

10/04/2014 2,125,000 10/04/2019 0.20

27/07/2014 300,000 11/08/2018 0.75

27/07/2014 300,000 11/08/2020 0.75

27/02/2015 67,500 15/09/2018 0.75

27/02/2015 67,500 15/09/2021 0.75

27/02/2015 67,500 01/10/2018 0.75

27/02/2015 67,500 01/10/2021 0.75

27/02/2015 200,000 01/07/2018 0.75

27/02/2015 200,000 01/07/2021 0.75

18/03/2015 126,250 18/03/2017 1.25

18/03/2015 126,250 18/03/2018 1.25

07/06/2016 700,000 01/01/2019 1.25

6,847,500

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2016 has been received and can be found on page 28 of the Financial Report.

Rounding of Amounts

The Company is an entity to which ASIC Legislative Instrument 2016/191 applies and, accordingly, amounts in the financial statements and directors’ report have been rounded to the nearest thousand dollars.

Corporate Governance Statement

The Directors of the Group support and adhere to the principles of corporate governance, recognising the need for the highest standard of corporate behaviour and accountability. Please refer to the corporate governance statement dated 23 August 2016 released to ASX and posted on the Company’s website www.rhipe.com/about/investors/.

Events after the Reporting Period

There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Options

As at the date of signing this report, there were 6,847,500 unissued ordinary shares under option (30 June 2015: 8,397,500). These options are exercisable as follows:

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Remuneration Report (Audited)rhipe Limited and Controlled Entities

1. Key Management Personnel

The directors and other Key Management Personnel (KMP) of the consolidated entity during or since the end of the financial year were:

1. Key Management Personnel

2. Remuneration Policy

3. Elements of Remuneration

4. Relationship between Remuneration Policy and Company Performance

5. Remuneration of Key Management Personnel

6. Key Terms of Employment Contracts

7. Key Management Personal Equity Shareholdings

Position

EXECUTIVE DIRECTORS

Mike Hill Executive Chairman

Dominic O’Hanlon Managing Director and Chief Executive Officer (CEO)

Dawn Edmonds Executive Director and Chief Operating Officer (COO)

NON-EXECUTIVE DIRECTORS

Laurence Sellers Non-Executive Director

Mark Pierce Non-Executive Director

Michael Everett Non-Executive Director

OTHER EXECUTIVES

Chris Sharp Chief Strategy Officer (CSO)

Warren Nolan Chief Commercial Officer (CCO)

Ravi Samuel Chief Financial Officer (CFO)

Patara Yongvanich Managing Director of rhipe South East Asia

Athena Thompson Chief Marketing Officer (CMO)

Changes in Directors and Executives Subsequent to Year-end

There have not been any changes to Directors and KMP Executives subsequent to year-end.

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2. Remuneration Policy

The remuneration policy of rhipe Limited has been designed to align KMP objectives with shareholder and business objectives. The board of rhipe Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the high-quality KMP to run and manage the consolidated Group, as well as create goal congruence between directors, executives and shareholders.

The Board’s policy for determining the nature and amount of remuneration for KMP of the consolidated Group is as follows:

- The remuneration policy is developed by the remuneration committee and approved by the Board and has the option to seek professional advice from independent external consultants. No external advice was sought during the financial year.

- KMP receive a base salary, superannuation, allowances, short term incentives (“STI”) and long term incentives (“LTI”) which are paid in the form of options or rights to equity.

- The remuneration committee reviews KMP packages annually by reference to the consolidated Group’s performance, executive performance and comparable information from industry sectors.

- The performance of KMP is measured against criteria agreed annually with each executive and is based predominantly on the forecast growth of the consolidated Group’s profits and shareholders’ value.

- The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations.

The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth.

3. Elements of Remuneration

Fixed Remuneration

Fixed remuneration consists of base salary calculated on a total cost basis, including fringe benefits tax and superannuation contributions (or equivalent).

Other Remuneration

Other benefits comprise of car parking and travel allowance.

Post-Employment Benefits

KMP receive, at a minimum, a superannuation guarantee contribution required by the government, which is currently 9.5% of the individual’s average weekly ordinary time earnings (AWOTE) or its equivalent in other regions. Individuals can choose to sacrifice part of their salary to increase payments towards superannuation.

Upon retirement, KMP are paid employee benefit entitlements accrued to the date of retirement. Any vested options at retirement must be exercised within three months of retirement or they will lapse. All other options granted to the retiring participant not exercised before or on the date of termination will lapse.

Performance Based Remuneration

The Key Performance Indicators (KPIs) are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold the greatest potential for Group expansion and profit, covering financial and non-financial as well as short and long-term goals.

Performance in relation to KPIs is assessed annually, with cash bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before the KPIs are set for the following year.

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Remuneration (continued)

Short Term Incentives

The remuneration of the Executive KMP is linked to rhipe’s short term annual performance through a cash-based short term incentives (STI). Individuals may be paid an STI following an assessment of the performance of the Group in the financial year and the performance of the individual against agreed annual KPIs as set by the Managing Director. KMP have a target STI, which is subject to the rhipe Group’s performance and the achievement of the Executive KMPs KPIs established at the beginning of each financial year.

Appropriate non-financial performance objectives (such as those set out below) are also included in an Executive KMPs KPIs where they are within the Executive KMPs area of influence and are relevant to the Executive KMPs scope of work. These metrics are aligned with the achievement of rhipe’s annual business plan and budget and the board believes that the attainment of these individual and departmental KPIs is essential in delivering overall corporate objectives.

In summary, the KPI structure can include the following elements:

Financial Performance Objectives Performance against positive budgeted underlying EBITDA

General Non-Financial Objectives - Successful management of rhipe stakeholders, including investors, media, vendors, partners and employees to achieve targeted outcomes

- Reinforcement and delivery of consistent and excellent customer service in all areas through continuous improvement in rhipe’s service culture

- Achievement of successful expansion of partner base through marketing or other relevant activities.

- Growth in engagement levels of employees across rhipe

- Achievement of margin improvement targets through the implementation of approved programs aimed at reducing costs and increasing asset yield.

- Successful retention of partners, reduce customer churn and growth in market share

A failure to achieve relevant financial performance objectives will result in Executive KMPs receiving either, no STI bonus or, where relevant financial performance objectives are only partially met, a reduced STI bonus. The rhipe Board retains discretion to pay an STI bonus where financial performance objectives have not been met, but other objectives have been achieved.

The performance of each Executive KMP against financial and non-financial KPIs is reviewed on an annual basis. Whether KPIs have been achieved is reviewed by the Managing Director, having regard to the operational performance of the business or function in which the Executive KMP is involved and the Managing Director’s assessment of the attainment of the individual’s KPIs. The Managing Director reviews performance based remuneration entitlements and recommends the STI payments, subject to final approval by the Board.

The structure of these STI benefits as a percentage of total STI remuneration is as follows:

Managing Director Senior Executives

Target Meets performance objectives

60% 60%

Stretch Exceeds performance objectives

40% 40%

100% 100%

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The maximum STI is only payable if both the Company and individual performance has met or exceeded expectation. If the designated targets are not met after the bonus pools are accrued, then the Board will have discretion over the allocation of partial bonuses to individuals with respect to individual KPIs.

Managing Director KPIs

Each year, the Board sets corporate KPIs for the Managing Director which are based on overall Company performance targets. The rhipe Board retains discretion, however, to pay an STI bonus where financial performance objectives have not been met, but other objectives have been achieved. The Managing Director’s eligibility for an STI is reviewed by the Executive Chairman and determined by the Board.

The Board reviews the KPIs for the Managing Director annually and will amend the KPIs to reflect the strategic objectives of the Company, changing circumstances in the technology sector as well as other factors. The Board believes that the KPIs should be aligned to activities that will achieve short and long term sustainable shareholder returns.

Long Term Incentives

Long term incentive (LTI) “at risk” performance benefits are awarded in the form of unlisted and unvested Options with vesting conditions tied to continuous service with the Company from date of issue and when the 20 day volume weighted average price (VWAP) of the Company’s share price exceeds a specified price. The rationale for the choice of these criteria includes:

- To align employees with the commonly shared goals of delivering high returns for shareholders over the medium to long term;

- To encourage and assist employees to become shareholders of rhipe

- To provide a long term component of remuneration to enable rhipe to compete effectively for the calibre of talent required for the Company to be successful; and

- To help retain talented personnel and minimise employee turnover.

Options granted under the arrangement do not carry dividend or voting rights. Each option is entitled to be converted into one ordinary share once the interim or final financial report has been disclosed to the public and is measured using the Black- Scholes methodology or equivalent.

KMP or closely related parties of KMP are prohibited from entering into hedge arrangements that would have the effect of limiting the risk exposure relating to their remuneration.

Securities Received that are not Performance Related

No members of KMP are entitled to receive securities that are not performance-based as part of their remuneration package.

Non-Executive Director Remuneration

The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

In accordance with rhipe’s constitution, Non-Executive Directors’ fees are currently determined within an aggregate Non-Executive Directors’ fee cap of $500,000 per annum and may be varied by ordinary resolution of the Shareholders in General Meeting. Of this cap $180,000 has been utilised. Statutory contributions made on behalf of the non-executive directors in accordance with rhipe’s statutory superannuation obligations, are included in this aggregate fee pool.

Non-executive directors are entitled to be reimbursed for business-related expenses, including travel expenses, and also receive the benefit of coverage under a directors and officer insurance policy which is not included in the shareholder cap.

Non-executive directors are not paid additional fees for participating in rhipe’s Audit, Risk or Remuneration Committee’s.

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4. Relationship between Remuneration Policy and Company Performance

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based bonus based on KPI, and the second being the issue of options to the all of directors and KMP to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth.

The following table identifies the consolidated entity’s performance in respect of the current financial year and the previous two financial years.

2016 2015 20141

Revenue 143,043 108,769 74,548

Underlying EBITDA Pre-Growth 5,160 4,896 3,332

Underlying EBITDA Pre-Non-Cash and Non-Recurring Items 479 1,222 1,832

Profit/(Loss) before income tax ($’000’s) 1,168 (1,535) 1,370

Profit/(Loss) ($’000’s) (129) (2,321) 884

30 June Share Price ($) 0.90 1.47 0.80

Change in Share Price (cents) (0.57) 0.67 n/a

Basic (loss)/Earnings Per Share (cents) (0.10) (1.98) 0.51

Total Shareholder Return (%) (63%) 83% n/a

RHP Performance relative to ASX All Ords Index (36%) 82% n/a

1 The data in this table is presented from the financial year 2014 as the reverse acquisition of NewLease Pty Ltd was completed on the 10 April 2014.

KMP Executive Performance Measure

rhipe’s KMP Executives each have an annual bonus plan with group financial metrics and a discretionary component based on individual-specific reviews by the remuneration committee. The KMP Executives did not achieve the financial metrics set for the business during the Financial Year but were each paid a partial bonus at discretion of the remuneration committee.

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5. Remuneration of Key Management Personnel

Remuneration Expense Details for the Year Ended 30 June 2016

The following table of benefits and payments represents the components of the current year and comparative year remuneration expenses for each member of KMP of the consolidated Group. Such amounts have been calculated in accordance with Australian Accounting Standards:

Short-Term Benefits

Post Employment

Benefits

Equity Settled Share-Based

Payments

Salary, Fees And Leave

Profit Share And Bonuses Other Superannuation

Equity Remuneration Total Notes

$ $ $ $ $ $

2016 DIRECTORS

Dominic O’Hanlon 458,917 100,000 - 19,308 242,609 820,834

Dawn Edmonds 355,233 60,000 14,915 19,308 56,580 506,036

Mike Hill 182,648 - - 17,352 - 200,000

Laurence Sellers 55,046 - - 5,229 144,023 204,298

Mark Pierce 55,046 - - 5,229 51,437 111,712

Michael Everett 60,000 - - - 51,437 111,437 1

Total Directors 1,166,890 160,000 14,915 66,426 546,086 1,954,317

OTHER EXECUTIVES

Chris Sharp 371,112 60,000 - 14,240 99,210 544,562 2

Warren Nolan 242,644 100,000 13,043 19,308 126,796 501,791

Ravi Samuel 235,531 70,000 - 19,308 56,724 381,563

Patara Yongvanich 284,787 60,000 - 14,673 623 360,083 2

Athena Thompson 205,743 45,000 - 19,000 9,862 279,605

Total Executives 1,339,817 335,000 13,043 86,529 293,215 2,067,604

Grand Totals 2,506,707 495,000 27,958 152,955 839,301 4,021,921

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Short-Term Benefits

Post Employment

Benefits

Equity Settled Share-Based

Payments

Salary, Fees And Leave

Profit Share And Bonuses Other Superannuation

Equity Remuneration Total Notes

$ $ $ $ $ $

2015 DIRECTORS

Dominic O’Hanlon 382,499 258,750 - 18,783 296,704 956,736

Dawn Edmonds 336,883 112,500 6,366 36,404 156,474 648,627

Mike Hill 182,648 45,000 - 17,352 - 245,000

Laurence Sellers 55,046 - - 5,229 398,296 458,571

Mark Pierce 55,046 - - 5,229 142,249 202,524

Michael Everett 58,667 - - - 142,249 200,916 1

Philip Kapp 10,333 - - - - 10,333 3

Total Directors 1,081,122 416,250 6,366 82,997 1,135,972 2,722,707

OTHER EXECUTIVES

Chris Sharp 271,529 85,368 - 13,469 154,149 524,515

Warren Nolan 230,733 256,563 14,452 27,088 186,767 715,603

Ravi Samuel 172,273 93,750 - 14,388 42,851 323,262 4

Athena Thompson 82,603 37,500 - 7,847 2,625 130,575 5

Mark Carroll 44,272 15,981 - 4,531 - 64,784 6

Total Executives 801,410 489,162 14,452 67,323 386,392 1,758,739

Grand Totals 1,882,532 905,412 20,818 150,320 1,522,364 4,481,446

1 Invoice paid to Reunion Investment Pty Ltd, a company controlled by Michael Everett for his services as a Non-Executive Director

2 Chris Sharp and Patara Yongvanich are paid in SGD. Salary and superannuation was converted to AUD based on the Reserve Bank of Australia average rate for the financial year. Profit share and bonuses is accrued in AUD and will be paid in SGD on payment date. Share-based payments are in AUD as they are paid by the parent.

3 Resigned 2 September 2014

4 Appointed 7 January 2015 as Chief Marketing Officer

5 Appointed as Chief Marketing Officer on 7 January 2015

6 Resigned 18 August 2014


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Grant Date

Minimum Possible Bonus

$

Maximum Possible Bonus

$

Bonus Paid/Payable

$

Percentage Of Bonus Paid

%

Percentage Of Bonus Forfeited

%

2016 GROUP KMP

Mike Hill 28 July 2016 - 50,000 - - 100

Dominic O’Hanlon 28 July 2016 - 250,000 100,000 40 60

Dawn Edmonds 28 July 2016 - 120,000 60,000 50 50

Ravi Samuel 28 July 2016 - 100,000 70,000 70 30

Chris Sharp 28 July 2016 - 100,000 60,000 60 40

Warren Nolan 28 July 2016 - 275,000 100,000 36 64

Patara Yongvanich 28 July 2016 - 100,00 60,000 60 40

Athena Thompson 28 July 2016 - 75,000 45,000 60 40

Short Term Incentives

Details of Short Term Incentives payable in FY2017 for 2016 are set out below

Managing Director

For the June 2016 financial year the corporate KPIs for the Managing Director were based on metrics which are designed to deliver sustainable shareholder returns both in the short term and long term. These performance measures include specific targets with respect to delivery of a positive underlying EBITDA which is tied in with revenue growth, gross margin, capital expenditure, operating expenditure and team performance.

On an assessment of actual performance for the June 2016 financial year, the underlying profit target was not met. The Board has determined using its discretion that a total of 40% of the maximum STI will be awarded to the Managing Director reflecting that other non-financial KPIs have been achieved.

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Grant Date1,2

No. Of Options Issued3,4

Exercise Price

Value Per Option

Grant Value

Percentage Remaining As

Unvested

Expiry Date For Vesting Or

Payment

$ $ $ %

2016 GROUP KMP

Chris Sharp 7 Jun-2016 100,000 1.25 0.0989 9,888 100 1 Jan 2019

Warren Nolan 7 Jun-2016 100,000 1.25 0.0989 9,888 100 1 Jan 2019

Ravi Samuel 7 Jun-2016 100,000 1.25 0.0989 9,888 100 1 Jan 2019

Patara Yongvanich 7 Jun-2016 100,000 1.25 0.0989 9,888 100 1 Jan 2019

Athena Thompson 7 Jun-2016 100,000 1.25 0.0989 9,888 100 1 Jan 2019

Long Term Incentives

The terms and conditions relating to options granted as remuneration during the year to KMP are as follows:

1 The options were issued by rhipe Limited

2 The terms and conditions of the management incentive plan whereby unlisted and unvested options is they vest after 12 months’ continuous services with the Company from the date of issue and when the 20 day VWAP of the Company’s share price exceeds $1.75, There have not been any alterations to the terms or conditions of any share-based payments grants since grant date.

3 The recipients paid nil consideration. These Options will vest after 12 months’ continuous service with the Company (continuous period commencing from the date of issue of these Options); and when the 20 day (VWAP) exceeds a price of $1.75 per Company Share.

4 Option values at grant date were determined using the Black Scholes Model

No options that were granted to KMP Executive’s as remuneration during the year vested during the year. No options lapsed during the financial year that had been granted to KMP as part of their remuneration.

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This table illustrates the proportion of remuneration that was performance and non-performance based:

2016 2015

Fixed portions of elements of remuneration

Remuneration linked to performance

Fixed portions of elements of remuneration

Remuneration linked to performance

% % % %

Dominic O’Hanlon 88 12 73 27

Dawn Edmonds 88 12 83 17

Mike Hill 100 - 82 18

Laurence Sellers 100 - 100 -

Mark Pierce 100 - 100 -

Michael Everett 100 - 100 -

Philip Kapp - - 100 -

Total Directors 92 8 85 15

OTHER EXECUTIVES

Chris Sharp 89 11 84 16

Warren Nolan 80 20 64 36

Ravi Samuel 82 18 71 29

Patara Yongvanich 83 17 - -

Athena Thompson 84 16 71 29

Mark Carroll - - 75 25

Total Executives 84 16 72 28

Grand Totals 88 12 80 20

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Name And Position Held As At 30 June 2016 And Any Change During The Year

Contract Details (Duration & Termination)

EXECUTIVE DIRECTORS

Mike Hill Chairman and Executive Director

Executive Services agreement – Base Salary $82,648 plus statutory superannuationDirectors Fee $100,000 If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

Dominic O’Hanlon Managing Director and Chief Executive Officer

Executive Services agreement - Base Salary $450,000 plus statutory superannuation If terminated by Company without reason - six months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - six months’ notice or if the Company breaches the agreement and it is not remedied within 28 days of receipt of written notice, by giving notice effective immediately Restraint period of 12 months including non-compete and non-solicitation by participating in a business that competes in the countries that rhipe operates in.

Dawn Edmonds Executive Director and Chief Operating Officer

Executive Services agreement – Base Salary $289,328 plus statutory superannuationDirector’s Fee $60,000 If terminated by Company without reason - twelve months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 daysRestraint period of 12 months including non-compete and non-solicitation by participating in a business that competes in the countries that rhipe operates in.

6. Key Terms of Employment Contracts

Employment Details of Members of Key Management Personnel

The following table provides employment details of persons who were, during the financial year, members of KMP of the consolidated Group. Termination payments are at the discretion of the remuneration committee.

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Name And Position Held As At 30 June 2016 And Any Change During The Year

Contract Details (Duration & Termination)

NON-EXECUTIVE DIRECTORS

Laurence Sellers Non-Executive Director

Executive Services agreement – Director’s Fee $60,000 plus statutory superannuation If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

Mark Pierce Non-Executive Director

Executive Services agreement – Director’s Fee $60,000 plus statutory superannuation If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

Michael Everett Non-Executive Director

Executive Services agreement - Director’s Fee $60,000 If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by director - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

OTHER EXECUTIVES

Chris Sharp Chief Strategy Officer (CSO)

NewLease Employment agreement - Base Salary $390,000 paid in Singapore Dollars plus contribution towards nominated Provident Fund One month’s notice required if terminated by Company or by employee.

Warren Nolan Chief Commercial (CCO)

Executive Services Agreement - Base Salary $237,650 plus statutory superannuation If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by executive - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

Ravi Samuel Chief Financial Officer (CFO)

Executive Services Agreement - Base Salary $230,692 plus statutory superannuation If terminated by Company without reason - three months’ noticeIf terminated by Company with reason - one months’ noticeIf terminated by executive - three months’ noticeIf Company breaches the agreement, the notice period from executive can be 28 days

Patara Yongvanich Managing Director rhipe South East Asia

rhipe Employee Agreement – Base Salary $285,000 paid in Singapore Dollars plus contribution towards nominated Provident Fund One month’s notice required if terminated by Company or by employee.

Athena Thompson Chief Marketing Officer (CMO)

rhipe Employee Agreement – Base Salary $200,000 plus statutory superannuation One month’s notice required if terminated by Company or by employee.F

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Ordinary Shares

Balance At Beginning Of

Year

Granted As Remuneration

During The Year

Issued On Exercise Of

Options During The Year

Other Changes During The Year

Balance At End Of Year Notes

Dominic O’Hanlon 3,266,428 - - 91,412 3,357,840 1

Dawn Edmonds 3,752,294 - - - 3,752,294

Mike Hill 322,790 - 625,000 98,500 1,046,290 1, 2

Laurence Sellers - - - - -

Mark Pierce - - - 20,000 20,000 1

Michael Everett 631,579 - 125,000 65,000 821,579 1, 2

Chris Sharp - - - - -

Warren Nolan 1,249,475 - - (390,000) 859,475 3

Ravi Samuel - - - - -

Patara Yongvanich 711,397 - - - 711,397

Athena Thompson - - - - -

9,933,963 - 750,000 (115,088) 10,568,875

OptionsBalance At 1 July 2015

Granted As Compen-

sation Exercised1

Other Changes

Balance At 30 June

2016

Blance Vested

At 30 June 2016

Exercisable

Vested But Not

Exercisable

Balance Not Vested

and Not Exercisable At 30 June

2016 Notes

No. No. No. No. No. No. No. No.

KMP

Mike Hill 2,125,000 - (625,000) (1,500,000) - - - - 1, 2

Dominic O’Hanlon 1,600,000 - - - 1,600,000 300,000 - 1,300,000

Dawn Edmonds 550,000 - - - 550,000 458,333 - 91,667

Laurence Sellers 1,400,000 - - - 1,400,000 1,166,667 - 233,333

Mark Pierce 500,000 - - - 500,000 416,667 - 83,333

Michael Everett 750,000 - (125,000) - 625,000 541,667 - 83,333 1

Chris Sharp 535,000 100,000 - - 635,000 400,833 - 234,167

Warren Nolan 400,000 100,000 - - 500,000 200,000 - 300,000

Ravi Samuel 135,000 100,000 - - 235,000 67,500 - 167,500

Patara Yongvanich - 100,000 - - 100,000 - - 100,000

Athena Thompson 60,000 100,000 - - 160,000 - - 160,000

8,055,000 500,000 750,000 (1,500,000) 6,305,000 3,551,667 - 2,753,333

7. KMP Equity Shareholdings and Option Holdings

The number of ordinary shares in rhipe Limited held by each KMP of the Group during the financial year is as follows:

1 The KMP purchased ordinary shares during the period.

2 Mike Hill and Michael Everett exercised options during the period. The options exercised were attached to a past capital raising and were not received as compensation.

3 Warren Nolan disposed of shares during the period.

1 Mike Hill and Michael Everett exercised options during the period which were granted prior to the reverse listing of rhipe and are not considered to be part of their compensation.

2 In other changes, Mike Hill disposed of 1,500,000 options

The number of options held by KMP of the Group during the year is as follows:

No options that were granted to KMP as part of their compensation were exercised.

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Shares Issued to Dominic O’Hanlon with Loan

Dominic O’Hanlon has 2,400,000 shares via a loan issued by the Company in July 2014.

Performance Rights granted to Dominic O’Hanlon

Dominic O’Hanlon has 1,000,000 performance rights that were granted in July 2014.

Other Equity-related KMP Transactions

There have been no other transactions involving equity instruments other than those described in the tables in this section relating to options, rights and shareholdings.

Other transactions with KMP and/or their related parties

There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above relating to equity, compensation and loans, that were conducted other than in accordance with normal employee, customer or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons.

This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.


Dated: 23 August 2016

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Auditor’s Independence Declaration

ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF RHIPE LIMITED AND CONTROLLED ENTITIES I declare that, to the best of my knowledge and belief, during the year ended 30 June 2016 there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit,

and

(ii) any applicable code of professional conduct in relation to the audit. ShineWing Australia Chartered Accountants Rami Eltchelebi Partner Melbourne, 23 August 2016

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Consolidated Statement of Profit or LossAnd Other Comprehensive Income For The Year Ended 30 June 2016

CONSOLIDATED GROUP Note2016

$’0002015

$’000

Sales Revenue 3(a) 143,043 108,769

Cost of Sales – licensing fees 4 (117,276) (88,686)

Gross Profit 25,767 20,083

Other income 3(b) 2,648 103

Employee benefits (18,343) (12,958)

Marketing (2,050) (1,254)

Office administration (3,283) (2,249)

IT systems & communications (494) (280)

Travel (1,297) (1,110)

Depreciation and amortisation 4 (365) (182)

Share-based payments (963) (1,787)

Write down for assets held for sale (128) (157)

Other expenses (324) (1,744)

Profit/(loss) before income tax 4 1,168 (1,535)

Tax expense 5 (1,297) (786)

Loss after tax for the year attributable to owners of the parent entity (129) (2,321)

OTHER COMPREHENSIVE INCOME

Items that will be reclassified subsequently to profit or loss when specific conditions are met:

Revaluation of investment in LiveTiles Limited (net of tax) 1,949 -

Reclassification adjustment on disposal of investment in LiveTiles Limited (net of tax) (1,669) -

Exchange differences on translating foreign operations (22) 66

Other comprehensive income for the year 258 66

Total comprehensive income/(loss) for the year attributable to owners of the parent entity 129 (2,255)

(LOSS)/EARNINGS PER SHARE

From continuing and discontinued operations:

Basic loss per share (cents) 6 (0.10) (1.98)

Diluted loss per share (cents) 6 (0.10) (1.98)

The accompanying notes form part of these financial statements.

rhipe Limited And Controlled Entities

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Consolidated Statement of Financial PositionAs at 30 June 2016


$’0002015

$’000

ASSETS

CURRENT ASSETS

Cash and cash equivalents 7 13,761 12,423

Trade and other receivables 8 28,754 27,332

Other assets 9 3,559 3,253

Non-current assets held-for-sale 10 - 350

Total Current Assets 46,074 43,358

NON-CURRENT ASSETS

Other financial assets 11 833 2,510

Property, plant and equipment 12 773 519

Deferred tax assets 16 828 770

Intangible assets 13 21,102 23,082

Total Non-Current Assets 23,536 26,881

Total Assets 69,610 70,239

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 14 25,295 23,860

Unearned revenue 15 2,302 2,715

Current tax liabilities 16 342 709

Deferred Consideration 28 - 3,000

Provisions 17 870 756

Liabilities associated with assets held for sale 10 - 158

Total Current Liabilities 28,809 31,198

NON-CURRENT LIABILITIES

Deferred tax liabilities 16 688 508

Provisions 17 116 73

Total Non-Current Liabilities 804 581

Total Liabilities 29,613 31,779

Net Assets 39,997 38,460

EQUITY

Issued capital 18 39,089 38,714

Reserves 3,246 1,955

Accumulated losses (2,338) (2,209)

Total Equity 39,997 38,460



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Consolidated Statement of Changes in EquityFor The Year Ended 30 June 2016

Share Capital Reserves

OrdinaryAccumulated

Losses

Foreign Currency

Translation Reserve

Investment Revaluation

Reserve Reserve

Equity Settled

Employee Benefits Reserve Total

CONSOLIDATED GROUP $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 2014 8,103 112 (69) - (27) 310 8,429

COMPREHENSIVE INCOME

Loss for the year - (2,321) - - - - (2,321)

Other comprehensive income for the year

Exchange differences on translation of subsidiaries

- - 66 - - - 66

Total comprehensive income for the year - (2,321) 66 - - - (2,255)

TRANSACTIONS WITH OWNERS, IN THEIR CAPACITY AS OWNERS, AND OTHER TRANSFERS

Shares issued during the year 31,364 - - - - (112) 31,252

Transaction costs, net of tax (753) - - - - - (753)

Share-based payments - - - - - 1,787 1,787

Total transactions with owners and other transfers

30,611 - - - - 1,675 32,286

Balance at 30 June 2015 38,714 (2,209) (3) - (27) 1,985 38,460

Balance at 1 July 2015 38,714 (2,209) (3) - (27) 1,985 38,460

COMPREHENSIVE INCOME

Loss for the year - (129) - - - - (129)

Other comprehensive income for the year

Revaluation of investments, net of tax - - - 280 - - 280

Exchange differences on translation of subsidiaries

- - (22) - - - (22)

Total comprehensive income for the year - (129) (22) 280 - - 129

Transactions with owners, in their capacity as owners, and other transfers

Shares issued during the year 380 - - - - 70 450

Transaction costs, net of tax (5) - - - - - (5)

Share-based payments - - - - - 963 963

Total transactions with owners and other transfers

375 - - - - 1,033 1,408

Balance at 30 June 2016 39,089 (2,338) (25) 280 (27) 3,018 39,997



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Consolidated Statement of Cash FlowsFor The Year Ended 30 June 2016


$’0002015

$’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 141,230 105,616

Payments to suppliers and employees (141,520) (110,118)

Interest received 107 103

Income tax paid (1,921) (768)

Net cash used in operating activities 21 (2,104) (5,167)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (443) (407)

Proceeds from sale of asset held for sale 83 -

Net cash outflow onfor acquisition of subsidiary 28(e) (320) (9,564)

Payments for intangibles (817) (346)

Proceeds from sale of investments 4,467 -

Payments for investments (6) (2,500)

Net cash provided / (used in) by investing activities 2,964 (12,817)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 450 26,904

Payment for share issue costs (5) (1,119)

Net cash provided by financing activities 445 25,785

Net increase in cash held 1,305 7,801

Cash and cash equivalents at beginning of financial year 12,423 4,457

Effect of exchange rates on cash holdings in foreign currencies 33 165

Cash and cash equivalents at end of financial year 7 13,761 12,423



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Notes to the Financial StatementsFor The Year Ended 30 June 2016

Note 1. Summary of Significant Accounting Policies

(a) Basis of Preparation

These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise.

The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis.

(b) Principles of Consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of rhipe Limited and its subsidiaries. Subsidiaries are entities the Parent controls. The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 29.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as ‘Non-controlling Interests’. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets.

Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

These consolidated financial statements and notes represent those of rhipe Limited and Controlled Entities (the consolidated Group or Group).

The financial statements were authorised for issue on 23 August 2016 by the directors of the Company.


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(c) Business Combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred.

The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

(d) Goodwill

Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:

(i) the consideration transferred;

(ii) any non-controlling interest (determined under either the full goodwill or proportionate interest method); and

(iii) the acquisition date fair value of any previously held equity interest, over the acquisition date fair value of net identifiable assets acquired.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements.

The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination.

Notes to the Financial Statements (continued)

Goodwill is tested for impairment annually (refer to Note 1(j) for details of impairment) and is allocated to the Group’s cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored being not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of.

(e) Income Tax

The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax expense/(benefit).

Current income tax expense/(benefit) charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference cannot be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

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Tax consolidation

Relevance of tax consolidation to the Group

The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 2015 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is rhipe Limited. Tax expense/benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax consolidated group are recognised by the Company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, rhipe Limited and each of the entities in the tax-consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity.

The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.

(f) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of the recoverable amount is made when impairment indicators are present (refer to Note 1(j) for details of impairment of assets).

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the Company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Computer Equipment 25% - 33%

Furniture & Fittings 13% - 33%

Leasehold Improvements 20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise.

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(g) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term.

(h) Non-current assets held for sale

Non-current assets are classified as held for sale and measured at the lower of carrying amount and fair value less costs to sell where the carrying amount will be recovered principally through sale as opposed to continued use. No depreciation or amortisation is charged against assets classified as held for sale.

Classification as held for sale occurs when: management has committed to a plan for immediate sale; the sale is expected to occur within one year from the date of classification; and active marketing of the asset has commenced. Such assets are classified as current assets.

Impairment losses are recognised for any initial or subsequent write-down of an asset classified as held for sale to fair value less costs to sell. Any reversals of impairment recognised on classification as held for sale or prior to such classification are recognised as a gain in profit or loss in the period in which it occurs.

(i) Financial Instruments

Recognition and Initial Measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs.

Classification and Subsequent Measurement

Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.

Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

i. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

ii. Available for sale (AFS) financial assets

Listed shares that are traded in an active market are classified as AFS and stated at fair value. Shares in an unlisted company are stated at cost. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, are recognised in profit or loss.

Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.


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iii. Financial Liabilities

Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence that impairment as a result of one or more events (a ‘loss event’) has occurred, which has an impact on the estimated future cash flows of the financial asset(s).

For AFS equity instruments, including listed or unlisted shares, objective evidence of impairment includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered. A significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment for unlisted shares classified as available-for-sale.

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account.

When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

Impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve.

De-recognition

Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(j) Impairment of Assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use.


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(k) Intangibles Other than Goodwill

Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably.

Capitalised development costs have a finite useful life and are amortised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

The software development asset has a useful life of five years.

(l) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional currency.

Transaction and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity when the exchange difference arises on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation).

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

- Assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;

- Income and expenses are translated at average exchange rates for the period; and

- Retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than the Australian dollar are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of.

(m) Employee Benefits

Short-term employee benefits

Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.

The Group’s obligations for short-term employee benefits such as wages, salaries, employees’ annual leave and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for long service leave entitlements are recognised as provisions in the statement of financial position.

Other long-term employee benefits

Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees.

Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur.

The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions.


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Equity-settled compensation

The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. The corresponding amount is recorded to the equity-settled employee benefits reserve. The fair value of options is determined using the Black–Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

(n) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

(o) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position.

(p) Revenue and Other Income

Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

Interest revenue is recognised using the effective interest method.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

All revenue is stated net of the amount of goods and services tax.

(q) Trade and Other Receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(j) for further discussion on the determination of impairment losses.

(r) Trade and Other Payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

(s) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

(t) Rounding of Amounts

The parent entity has applied the relief available to it under ASIC Legislative Instrument 2016/191. Accordingly, amounts in the financial statements and directors’ report have been rounded off to the nearest $1,000.

(u) Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.


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Key Estimates

(i) Operating segments, cash-generating unit determination (note 2)

Goodwill is required to be allocated to cash-generating units and tested for impairment on an annual basis. Management apply judgement in determining cash-generating units and allocating the goodwill arising from business combinations to these cash-generating units.

(ii) Impairment of goodwill (note 13)

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

(iii) Recoverability of capitalised development (note 13)

Internally generated intangible assets are capitalised in accordance with AASB 138 Intangible Assets. Assumptions and judgements are made with regard to assessing the expected future economic benefits, the economic useful life and the level of completion. At the point where activities no longer relate to development but only to maintain the asset, capitalisation is discontinued.

(iv) Equity settled compensation (note 20)

The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the BlackScholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.

(v) New Accounting Standards for Application in Future Periods

Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below:

- AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting periods beginning on or after 1 January 2018).

The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting.

The key changes that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting requirements of the Standard, the application of such accounting would be largely prospective.

Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, including hedging activity, it is impracticable at this stage to provide a reasonable estimate of such impact.


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- AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after 1 January 2018 as further amended by AASB 2015-8).

When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:

- identify the contract(s) with a customer;

- identify the performance obligations in the contract(s);

- determine the transaction price;

- allocate the transaction price to the performance obligations in the contract; and

- recognise revenue when (or as) the performance obligation is satisfied.

The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior period presented as per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure requirements regarding revenue.

Although the directors anticipate that the adoption of AASB 15 may have an impact on the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact.

- AASB 16: Leases (applicable to annual reporting periods beginning on or after 1st January 2019)

When effective, this standard will replace the current accounting requirements applicable to leases in AASB 117 and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases.

The main changes introduced by the new standard include:

a. Recognition of a right-to-use asset and liability for all leases (excluding short term leases with less than 12 months of tenure and leases relating to low value assets);

b. Deprecation of right-to-use assets in-line with AASB 116 Property, plant and equipment in profit or loss and unwinding of the liability in principal and interest components;

c. Variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date;

d. By applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account all components as a lease; and

e. Additional disclosure requirements.

The transitional provisions of this standard allows a lessee to either retrospectively apply the standard to comparatives in line with AASB 108: Accounting Policies, Changes in Accounting Estimates and Error; or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application.

Although the directors anticipate that the adoption of AASB 16 will impact the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact.

- AASB 2014-4: Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation

This Standard (applicable to annual reporting periods beginning on or after 1 January 2016) an is only meant to clarify that using revenue-based methods to calculate the depreciation of an asset is not appropriate and hence not allowable. AASB 2014-4 is required to be prospectively applied and not expected to impact the Group’s financial statements.


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- AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle (applicable to annual reporting periods beginning on or after 1 January 2016)

Amends a number of pronouncements as a result of the IASBs 2012-2014 annual improvements cycle.

Key amendments include:

- AASB 5 – Change in methods of disposal

- AASB 7 – Servicing contracts and applicability of the amendments to AASB7 to condensed interim financial statements.

- AASB 119 – Discount rate: regional market issue; and

- AASB 134 – Disclosure of information ‘elsewhere in the interim financial report’

The adoption of this standard is not expected to significantly impact the financial statements of the Group.

- AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative

Amendments to AASB 101 makes amendments to AASB 101 Presentation of financial statements (applicable to annual reporting periods beginning on or after 1 January 2016).

The changes clarify that entities should not be disclosing immaterial information and that the presentation of information in notes can and should be tailored to provide investors and other users with the clearest story of an entity’s financial performance and financial position.

The adoption of this standard will change financial statement disclosure of the Group.


- AASB 2016-1: Amendments to Australian Accounting Standards- Recognition of Deferred tax Assets for Unrealised Losses (applicable to annual reporting periods beginning on or after 1 January 2017)

This standard makes amendments to AASB 112 Income Taxes to clarify that:

a. Restrictions in tax laws that do not permit the offset of deductible temporary difference reversals against a particular source of taxable profit should be considered;

b. An entity should compare the deductible temporary differences with future taxable profit that excludes tax deductions resulting from the reversal of those deductible temporary differences; and

c. The estimate of probable future taxable profit may include the recovery of some of an entity’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this.

The transitional provisions require the amendments to be retrospectively applied as per AASB 108 Accounting Policies, Changes in Accounting Estimates and Error.

The adoption of this standard is not expected to significantly impact the financial statements of the Group

- AASB 2016-2: Amendments to Australian Accounting Standards- Recognition of Deferred tax Assets for Unrealised Losses (applicable to annual reporting periods beginning on or after 1 January 2017)

This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require entities preparing financial statements to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The adoption of this standard is not expected to significantly impact the financial statements of the Group.

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Note 2. Operating Segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director (chief operating decision maker) in assessing performance and determining the allocation of resources.

The Managing Director manages the Group’s activities as one business segment providing cloud licensing and solutions for its key software vendors across the Asia Pacific region.

Revenue derived by country include:

CONSOLIDATED GROUP2016

$’0002015

$’000

Australia 87,466 64,438

Singapore 26,838 22,499

New Zealand 13,687 10,394

Philippines 7,986 6,166

Thailand 2,647 2,319

Other 4,419 2,953

143,043 108,769


$’0002015

$’000

(a) Revenue from continuing operations

Sales revenue

- Licensing revenue 136,780 105,052

- Service revenue 6,263 3,717

Total revenue 143,043 108,769

(b) Other income

Interest from

- other persons 107 103

Other gains

- Gain on disposal of LiveTiles Limited shares

2,384 -

- Foreign exchange gains 157 -

2,648 103

Information about major customers

No single customer contributed 10% or more to the Group’s revenue for both 2016 and 2015.

Information about major vendors

Included in revenues arising from sales of $143,043,000 (2015: $108,769,000) are revenues from two major vendors of $83,057,000 (2015:$67,170,000) and $27,123,000 (2015: $19,724,000). There are no other sales of a single vendor products which contributed 10% or more to the Group’s revenue for both 2016 and 2015.

Note 3. Revenue and Other Income


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Note 4. Profit for the Year


$’0002015

$’000

Profit before income tax from continuing operations includes the following specific expenses:

EXPENSES

Costs of sales – licensing fees 117,276 88,686

EMPLOYEE BENEFITS EXPENSE

- Defined contribution superannuation expense 904 865

Rental expense on operating leases 935 614

Depreciation of property, plant and equipment 189 73

Amortisation of intangible assets – capitalised development 176 109

365 182

Acquisition related costs - 441

Note 5. Tax Expense


$’0002015

$’000

(a) The components of tax (expense)/income comprise:

Current tax 1,296 933

Deferred tax 16 1 278

Under/(over) provision in respect of prior years - (425)

1,297 786

(b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows:

Prima facie tax payable on profit from ordinary activities before income tax at 30% (2015:30%)

- Consolidated Group 350 (461)

- Effect of tax rates of subsidiaries operating in other jurisdictions 106 156

Add tax effect of:

- Other non-allowable items 373 653

- Less tax effect of: 829 348

Under/(over) provision of prior year income tax - (425)

- Current year overseas subsidiaries revenue losses not recognised 468 927

- Research and development offset - (64)

1,297 786


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(c) Amounts recognised directly in equity:

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited to equity:


$’0002015

$’000

Transaction costs - 366

Revaluation of investment in LiveTiles Limited 835 -

Reclassification adjustment on disposal of investment in LiveTiles Limited (715) -

120 366

Note 6. Earnings per Share

CONSOLIDATED GROUP2016 cents

2015 cents

Basic EPS (0.10) (1.98)

Diluted EPS (0.10) (1.98)

NET PROFIT ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT: $000 $000

(a) Reconciliation of earnings to profit or loss

Loss (129) (2,321)

Earnings used to calculate basic EPS (129) (2,321)

Earnings used in the calculation of dilutive EPS (129) (2,321)

2016 No.of Shares

2015 No.of Shares

(b) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS

134,232,325 117,317,393

Weighted average number of dilutive options outstanding(i) - -

Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS

134,232,325 117,317,393

Unrecognised tax losses

Overseas revenue tax losses of $941,000 (2015: $473,000) are not being recognised as deferred tax assets as it is not considered probable that these will be recoverable.

(i) The Group is in a loss making position, accordingly options outstanding are not dilutive.


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Note 7. Cash and Cash Equivalents


$’0002015

$’000

Cash at bank and on hand 13,734 12,388

Short-term bank deposits 27 35

13,761 12,423

The effective interest rate on short-term bank deposits was 1.40% (2015: 1.90%); these deposits have an average maturity of 31 days (2015: 31 days).

Note 8. Trade and Other Receivables


$’0002015

$’000

CURRENT

Trade receivables 15,381 16,864

Provision for impairment 8(a) (248) (104)

Indirect taxes 658 -

Accrued revenue 12,963 10,572

28,754 27,332

Opening Balance 1 Jul 2014

Impairment For The Year

Amounts Written Off

30 Jun 2015Closing Balance 30

Jun 2015CONSOLIDATED GROUP $’000 $’000 $’000 $’000

(i) Current trade receivables - 143 (39) 104

- 143 (39) 104

Opening Balance 1 Jul 2015

Impairment For The Year

Amounts Written Off

30 Jun 2016Closing Balance 30

Jun 2016CONSOLIDATED GROUP $’000 $’000 $’000 $’000

(ii) Current trade receivables 104 200 (56) 248

104 200 (56) 248

No customers represent more than 5% of trade receivables (2015: one customer $2.8 million or 16.4%). The average credit period on sales is 30 days. Refer to Note 26(a) for further details on credit risk.


(a) Provision For Impairment of Receivables

Movement in provision for impairment of receivables is as follows:

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(b) Credit risk

The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties. Trade and Other Receivables is considered to be the main source of credit risk related to the Group.

On a geographic basis, the Group has significant credit risk exposures in its overseas operations. The Group’s exposure to credit risk for receivables at the end of the reporting period in those regions is as follows:


$’0002015

$’000

Australia 16,045 15,941

Singapore 5,283 5,243

New Zealand 2,674 2,995

Philippines 2,571 1,435

Thailand 1,092 713

Other 1,089 1,005

28,754 27,332

Gross AmountPast Due

and Impaired Past Due But Not Impaired (Days Overdue)Within Initial

Terms 2016 $’000 $’000

<30 $’000

31-60 $’000

>60 $’000 $’000

Trade and term receivables 15,381 (248) 2,783 1,627 3,251 7,720

Total 15,381 (248) 2,783 1,627 3,251 7,720

Gross AmountPast Due

and Impaired Past Due But Not Impaired (Days Overdue)Within Initial

Terms 2015 $’000 $’000

<30 $’000

31-60 $’000

>60 $’000 $’000

Trade and term receivables 16,864 (104) 5,681 1,598 2,248 7,337

Total 16,864 (104) 5,681 1,598 2,248 7,337

The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group.

The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality.


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Note 9. Other Assets


$’0002015

$’000

CURRENT

Prepayments 3,046 2,942

Bonds & deposits 513 311

3,559 3,253

Note 10. Assets Held for Sale


$’0002015

$’000

(a) Non-current Assets Held for Sale:

Property, plant & equipment - 507

Impairment for mine camp held for sale - (157)

- 350

(b) Liabilities associated with Assets Held for Sale

Trade and other payables - 58

Provisions - 100

- 158

(c) Net value of Assets Held for Sale - 192


$’0002015

$’000

TRADE AND OTHER RECEIVABLES

Total current 28,754 27,332

28,754 27,332

Less: Indirect taxes (658) -

Financial assets as trade and other receivables 26 28,096 27,332

In the prior year, the Group entered into a conditional sales agreement to sell the Mine Camp. This conditional sales agreement did not complete and the Group sold the Mine Camp at auction for $83,000, with the purchaser responsible for all removal costs. The Company recognised a further impairment of $128,000 during the current year to reflect the final consideration received.


(c) Financial Assets Classified as Loans and Receivables

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Note 11. Other Financial Assets


$’0002015

$’000

Investment at cost 16 2,510

Investment at fair value 817 -

833 2,510

Note 12. Property, Plant and Equipment


$’0002015

$’000

PLANT AND EQUIPMENT

At cost 1,181 777

Accumulated depreciation (408) (258)

773 519

The Group made a $2.5 million investment in LiveTiles Limited during the prior year. This company listed on the ASX during the current year. Due to the availability of quoted prices in active markets, the asset has been transferred to level 1 and revalued according to its fair value at reporting date.

Movements in Carrying Amounts

Movements in carrying amounts between the beginning and the end of the current financial year.

Computer Equipment Furniture & FittingsLeasehold

Improvements Total

CONSOLIDATED GROUP $’000 $’000 $’000 $’000

Balance at 30 June 2014 54 48 69 171

Additions 99 25 283 407

Acquisition of subsidiary 14 - - 14

Depreciation expense (40) (12) (21) (73)

Balance at 30 June 2015 127 61 331 519

Additions 362 - 81 443

Depreciation expense (91) (14) (84) (189)

Balance at 30 June 2016 398 47 328 773


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Note 13. Intangible Assets


$’0002015

$’000

GOODWILL

Cost 19,897 22,518

Accumulated impaired losses - -

Net carrying amount 19,897 22,518

TRADEMARKS AND LICENCES

Cost 10 10

Accumulated impaired losses - -

Net carrying amount 10 10

CAPITALISED DEVELOPMENT

Cost 1,519 702

Accumulated amortisation (324) (148)

Net carrying amount 1,195 554

Total intangibles 21,102 23,082


GoodwillTrademarks &

LicencesCapitalised

Development

CONSOLIDATED GROUP Note $’000 $’000 $’000

Year ended 30 June 2015

Balance at the beginning of the year 5,549 10 317

Additions - - 346

Acquisitions through business combinations (i) 28 16,969 - -

Amortisation charge - - (109)

Closing value at 30 June 2015 22,518 10 554

Year ended 30 June 2016

Balance at the beginning of the year 22,518 10 554

Additions - - 817

Adjustments due to finalisation of business combinations (i) 28 (2,621) - -

Amortisation charge - - (176)

Closing value at 30 June 2016 19,897 10 1,195

Intangible assets, other than goodwill and trademarks and licences, have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of profit or loss. Goodwill and trademarks and licences has an indefinite useful life.

(i) Comprises $3,000,000 reduction in deferred consideration which was reversed to reflect the amendment to the nSynergy acquisition agreement, less adjustments to assets and liabilities from finalising provisional accounting.F

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Impairment

Goodwill is allocated to cash-generating units which are based on the Group’s reporting segments.

2016 $’000

2015 $’000

Asia Pacific segment 19,897 22,518

Total 19,897 22,518

Goodwill impairment testing

The recoverable amount of the Asia Pacific segment, the only cash-generating unit to which goodwill is recognised at 30 June 2016, was calculated on the basis of value in use using a discounted cash flow model. Management has based the value-in-use calculations on board approved budgets for the 2017 financial year for the cash-generating unit. This budget is adjusted for future years and uses an initial growth rate of 35% decreasing over five years to a terminal growth of 5% and a real pre-tax discount rate of 13.25% (30 June 2015: 13.25%). The terminal growth rate is determined based on the long-term anticipated growth rate of the business. The forecast financial information is based on both past experience and future expectations of cash-generating unit performance. The major inputs and assumptions used in performing an impairment assessment that require judgement include revenue forecasts, operating cost projections, customer numbers, customer churn, discount rates and growth rates. During the year ended 30 June 2016, no impairment arose as a result of the review of goodwill. The recoverable amount of the Asia Pacific cash-generating unit is greater than the carrying amount and, based on sensitivity analysis performed, no foreseeable changes in the assumptions would cause the carrying amount of the cash-generating unit to exceed its recoverable amount.


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Note 14. Trade and Other Payables


$’0002015

$’000

CURRENT

Unsecured liabilities

Trade payables 12,372 12,222

Sundry payables and accrued expenses 12,923 11,183

Indirect taxes - 455

Total trade and other payables 25,295 23,860

(a) Financial liabilities at amortised cost classified as trade and other

Trade and other payables, unearned revenue and employee benefits

— Total current 25,295 23,860

— Total non-current - -

25,295 23,860

Less: Indirect taxes - (455)

Financial liabilities as trade and other payables 26 25,295 23,405

The average credit period on purchases is 30 days. No interest is charged on trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.


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Note 15. Unearned Revenue


$’0002015

$’000

CURRENT

Unearned revenue 2,302 2,715

Unearned revenue is for offerings for which we have been paid in advance. The revenue is recognised when the service is provided or otherwise meets the revenue recognition criteria.


Note 16. Tax


$’0002015

$’000

CURRENT

Income tax payable 342 709

342 709

Opening Balance

Recognised To Income

Recognised To Equity

Acquisition Of Subsidiary

Exchange Differences Closing Balance

CONSOLIDATED GROUP $’000 $’000 $’000 $’000 $’000 $’000

DEFERRED TAX ASSETS

Provisions - employee benefits 133 107 - - - 240

Provisions - doubtful debts - 30 - - - 30

Accrued COS 4 6 - - - 10

Other 192 (430) 366 362 - 490

Balance at 30 June 2015 329 (287) 366 362 - 770

Provisions - employee benefits 240 141 - - - 381

Provisions - doubtful debts 30 33 - - - 63

Accrued COS 10 11 - - - 21

Other 490 (127) - - - 363

Balance at 30 June 2016 770 58 - - - 828

DEFERRED TAX LIABILITY

Accrued revenue 186 156 - - 4 346

Other 19 143 - - - 162

Balance at 30 June 2015 205 299 - - 4 508

Accrued revenue 346 102 - - - 448

Other 162 (42) 120 - - 240

Balance at 30 June 2016 508 60 120 - - 688For

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Note 17. Provisions


$’0002015

$’000

CURRENTEmployee Benefits 870 756

NON CURRENTEmployee Benefits 116 73

Note 18. Issued Capital

RHIPE LIMITED2016

$’0002015

$’000

135,049,948 (2015: 132,799,948) fully paid ordinary shares 39,089 38,714

39,089 38,714

RHIPE LIMITED No.Value $’000

(a) Movement in ordinary shares on issue

rhipe Limited shares as at 30 June 2015 132,799,948 38,714

Shares issued upon exercise of $0.20 options 2,250,000 450

Transfer to equity settled employee benefits reserve - (70)

Share issue costs, net tax - (5)

Closing balance at 30 June 2016 135,049,948 39,089

Provision for Employee Benefits

Provision for employee benefits represents amounts accrued for annual leave and long service leave. The non-current portion of this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service.

The probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits has been included in Note 1(m).

Ordinary shares participate in dividends and the proceeds on winding-up of the parent entity in proportion to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.


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(b) Options

(i) For information relating to the rhipe Limited employee option plan, including details of options issued, exercised and lapsed during the financial year and the options outstanding at year-end. Refer to Note 20: Share-based Payments.

As at 30 June 2016, there were 6,847,500 options under issue (30 June 2015: 8,397,500) exercisable on a 1:1 basis for 6,847,500 ordinary shares in the Company (2015: 8,397,500). These options are exercisable as follows:

DetailsDate

Of GrantNumber

Of OptionsDate

Of ExpiryConversion

Price ($)


26/06/2013 375,000 12/03/2018 0.20

Management incentive options 10/04/2014 2,125,000 10/04/2017 0.20

10/04/2014 2,125,000 10/04/2019 0.20

27/07/2014 300,000 11/08/2018 0.75

27/07/2014 300,000 11/08/2020 0.75

27/02/2015 67,500 15/09/2018 0.75

27/02/2015 67,500 15/09/2021 0.75

27/02/2015 67,500 01/10/2018 0.75

27/02/2015 67,500 01/10/2021 0.75

27/02/2015 200,000 01/07/2018 0.75

27/02/2015 200,000 01/07/2021 0.75

18/03/2015 126,250 18/03/2017 1.25

18/03/2015 126,250 18/03/2018 1.25

07/06/2016 700,000 01/01/2019 1.25

6,847,500

The weighted average conversion price of the above options is $0.448 (2015: $0.315)

2016 No. Of Options

2015 No. Of Options

Balance at beginning of the year 8,397,500 10,751,427

Granted during the year 700,000 1,522,500

Exercised during the year (2,250,000) (3,870,177)

Expired during the year - (6,250)

Balance at end of year 6,847,500 8,397,500

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DetailsNumber

Of RightsDate

Of ExpiryConversion

Price ($)

Management performance rights 500,000 11/08/2017 Nil

500,000 11/08/2019 Nil

1,000,000

Details2016

No. Of Rights2015

No. Of Rights

Balance at beginning of the year 1,000,000 -

Granted during the year - 1,000,000

Exercised during the year - -

Expired during the year - -

Balance at end of year 1,000,000 1,000,000

(d) Capital Management

Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern.

The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets.

The Group is not subject to any externally imposed capital requirements.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

(c) Performance rights

As at 30 June 2016, there were 1,000,000 performance rights to acquire shares (30 June 2015: 1,000,000). These performance rights are exercisable as follows:

RHIPE LIMITED2016

$’0002015

$’000

Adjusted franking account balance 3,524 2,339


(e) Franking Account

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Note 19. Reserves

(a) Equity-settled employee benefits reserve

Equity-settled employee benefits reserve relates to share options and rights granted by the Company to its employees under its employee share option plan. Further information about share-based payments to employees is set out in Note 20.

(b) Foreign Currency Translation Reserve

Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Gains and losses on hedging instruments that are designated as hedging instruments for hedges of net investments in foreign operations are included in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve (in respect of translating both the net assets of foreign operations and hedges of foreign operations) are reclassified to profit or loss on the disposal of the foreign operation.

(c) General Reserve

The general reserve is used from time to time to transfer profits from retained earnings for appropriation purpose. There is no policy of regular transfer. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.

(d) Investment Revaluation Reserve

The investment revaluation reserve represents the cumulative gains and losses arising on the revaluation of available-for-sale financial assets that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those assets have been disposed of or are determined to be impaired.

Note 20. Share-based Payments

The Group has an ownership-based compensation scheme for executives and senior employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, executives and senior employees of the Group may be granted options to purchase ordinary shares or rights to ordinary shares. Each employee share option converts into one ordinary share of rhipe Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. All share-based payments made include vesting conditions.

A summary of the movements of management incentive plan options issued is as follows:

CONSOLIDATED GROUP

Weighted Average

Exercise Price

Options outstanding as at 30 June 2014 8,256,250 $0.218

Granted 1,522,500 $0.833

Exercised (1,375,000) $0.200

Expired (6,250) $24.00


Granted 700,000 $1.25

Exercised (2,250,000) $0.20


Options exercisable as at 30 June 2016: 4,751,667 $0.297

Options exercisable as at 30 June 2015: 4,663,333 $0.232

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No. Of Options 700,000

Grant date 07/06/2016

Share price at grant date $0.97

Exercise price $1.25

Risk-free interest rate 1.61%

Expiry date 01/01/2019

Volatility 52%

Vesting conditions (a)

Weighted average value per option before discounting for market based vesting conditions 0.2472

Discount rate 50%

Weighted average value per option after discounting for market based vesting conditions 0.1236

Further discount as options unlisted and non-transferable 20%

Weighted average value per option 0.0989

As at the date of exercise, the weighted average share price of options exercised during the year was $0.20.

The weighted average remaining contractual life of options outstanding at year end was 2.12 years (2015: 2.26 years). The exercise price of outstanding options at the end of the reporting period was $0.20 - $1.25.

There has been no alteration to the terms and conditions of any share-based payments arrangements since the grant date.

On 7 June 2016, 700,000 share options were granted to employees under the rhipe Limited management incentive plan to take up ordinary shares at an exercise price of $1.25 each. The options vest after the Company’s share price has traded at $1.75 or above for 20 business days (using 20 day VWAP) and one year of service. The options expire on 1 January 2019. The options hold no voting or dividend rights and are transferable.

Options are forfeited after the holder ceases to be employed by the Group, unless the Board determines otherwise (this is usually only in the case of redundancy, death or disablement).

Fair value of share options granted in the year

The fair value of the options granted to employees is considered to represent the value of the employee services received over the vesting period.

The weighted average fair value of options granted during the year was $0.0989 (2015: $0.4713). These values were calculated using the Black Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted using management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations.

(a) The options vest only after the Company’s share price has traded at $1.75 or above for 20 business days (using 20 day VWAP) and one years’ service.

The last 12 months of historical share price volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future volatility.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.


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Note 21 Cash Flow Information


$’0002015

$’000

(a) Reconciliation of Cash Flow from Operating Activities with Profit after Income Tax

Loss after income tax (129) (2,321)

Cash flows excluded from profit attributable to operating activities

Non-cash flows in profit:

Share-based payments expense 963 1,787

Amortisation 176 109

Depreciation 189 73

Gain on sale of investment (2,384) -

Net foreign exchange gain/(loss) 157 (288)

Provision for doubtful debt 144 104

Impairment of asset held for sale 128 157

Others (212) 188

Changes in operating assets and liabilities:

Increase in trade and term receivables (1,957) (11,074)

Increase in other current assets (241) (2,964)

Increase in trade payables and accruals 1,643 9,182

Decrease in income taxes payable (368) (206)

Increase in deferred taxes payable 60 303

Increase in deferred taxes receivable (316) (79)

Increase/Decrease in provisions 43 (138)

(2,104) (5,167)

(b) Bank Facilities

The group has a Trade Finance Facility of $2,000,000 ($1,500,000) which can be drawn as a bank guarantee, overdraft or trade advance. In addition the group has a bank guarantee facility of US$712,000 ($1,000,000). The two facilities were undrawn at 30 June 2016 and 30 June 2015. The facilities require compliance with certain financial covenants, the group was in compliance with the covenants governing these facilities at year end.

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$’0002015

$’000

Short-term employee benefits 3,030 2,809

Post-employment benefits 153 150

Other long term benefits - -

Termination benefits - -

Share-based payments 839 1,522

Total KMP compensation 4,022 4,481


$’0002015

$’000

i. Other Related Parties

Purchase of services:

Arrangement fees paid to Kappfam Investment Pty Ltd, an entity related to Philip Kapp - 10

Recharge of services:

Director fees charged to LiveTiles Limited 8 27

Recharge of shared services from rhipe Solutions to LiveTiles Limited 94 298

Note 22. Related Party Transactions

Related Parties

(a) The Group’s main related parties are as follows

i. Key Management Personnel:

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel.

The totals of remuneration paid to key management personnel (KMP) of the Company and the Group during the year are as follows:

Further information in relation to KMP remuneration can be found in the Remuneration Report.

ii. Other Related Parties

Other related parties include entities controlled by the ultimate parent entity, entities over which key management personnel have joint control, and entities that directors are common directors of.

(b) Transactions with related parties:

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

The following transactions occurred with related parties:

ii. LiveTiles Limited

During the prior period, the Company, via a subsidiary, made a $2.5 million investment in LiveTiles Holdings Pty Ltd for a 12.5% interest. As part of this transaction, Mike Hill was appointed to the board of LiveTiles Holdings Pty Ltd. Subsequently, Modun Resources Limited, a Company related to Mike Hill, made a conditional offer to acquire 100% of the issued capital of LiveTiles Holdings Pty Ltd via the issue of 225,000,000 shares in Modun Resources Limited at $0.15 per share. The shares were consolidated and then relisted at $0.15 per share as LiveTiles Limited (ASX:LVT).

In May 2016, rhipe sold 20,383,844 shares in LiveTiles Limited for $4,484,445. It has retained an equity stake in LiveTiles Limited of 4,085,380 shares which remain subject to escrow expiring in September 2017.


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Note 23. Auditors’ Remuneration


$’0002015

$’000

Remuneration of the auditor for:

— auditing or reviewing the financial report 165 194

— taxation services 26 50

191 244

Remuneration of other auditors of subsidiaries for:

— auditing or reviewing the financial statements of subsidiaries 26 21

Note 24. Capital and Leasing Commitments


$’0002015

$’000

(a) Operating Lease Commitments

Non-cancellable operating leases contracted for but not recognised in the financial statements

Payable — minimum lease payments

— not later than 12 months 576 526

— between 12 months and five years 831 1,314

— greater than five years - -

1,407 1,840

The Group has leases in Sydney, Melbourne, Singapore, Philippines, Thailand, Malaysia and Indonesia

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Note 25. Contingent Liabilities and Contingent Assets

There were no contingent assets or liabilities as at 30 June 2016.

Note 26. Financial Risk Management

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:


$’0002015

$’000

FINANCIAL ASSETS

Cash and cash equivalents 7 13,761 12,423

Receivables 8c 28,096 27,332

Bonds & deposits 9 513 311

Available for sale equity investment 11 833 2,510

Total Financial Assets 43,203 42,576

FINANCIAL LIABILITIES

Financial liabilities at amortised cost

Trade and other payables 14a 25,295 23,405

Unearned revenue 15 2,302 2,715

Total Financial Liabilities 27,597 26,120

Financial Risk Management Policies

Specific Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period.

a. Credit risk

Although the Group’s clients are creditworthy, exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group.

Credit risk is managed through the maintenance of procedures (such procedures include the review of customer business activities, regular monitoring of exposures and monitoring of the financial stability of significant customers and counterparties), ensuring to the extent possible, that customers and counterparties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Depending on the division within the Group, credit terms are generally 14 to 30 days from the invoice date.

Risk is minimised through investing surplus funds in financial institutions that maintain a high credit rating.

The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, excluding the value of any collateral or other security held is equivalent to the carrying amount and classification of those financial assets (net of any provisions) as presented in the statement of financial position. Credit risk also arises through the provision of financial guarantees, as approved at Board level, given to parties securing the liabilities of certain subsidiaries (refer Note 29(c) for details).

The Group has no significant concentration of credit risk with any single counterparty or group of counterparties. However, on a geographic basis, the Group has significant credit risk exposures to Australia, New Zealand, Singapore, Thailand, Philippines and Malaysia given the substantial operations in those regions. Details with respect to credit risk of Trade and Other Receivables is provided in Note 8.Trade and other receivables that are neither past due or impaired are considered to be of high credit quality.


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Financial Assets - cash flows realisable

Cash and cash equivalents 13,761 12,423 - - - - 13,761 12,423

Trade and other receivables 28,096 27,332 - - 28,096 27,332

Bonds and deposits 513 311 - - 513 311

Other investments - - - - 833 2,510 833 2,510

Total anticipated inflows 42,370 40,066 - - 833 2,510 43,203 42,576

Net inflow on financial instruments 14,773 13,946 - - 833 2,510 15,606 16,456


b. Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:

- preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities;

- obtaining funding from a variety of sources;

- maintaining a reputable credit profile;

- managing credit risk related to financial assets;

- only investing surplus cash with major financial institutions; and

- comparing the maturity profile of financial liabilities with the realisation profile of financial assets

The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management’s expectations that banking facilities will be rolled forward.

CONSOLIDATED GROUP Within 1 Year Over 1 Year No Maturity Total

2016 $’000

2015 $’000

2016 $’000

2015 $’000

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Financial liabilities due for payment

Trade and other payables 25,295 23,405 - - - - 25,295 23,405

Unearned revenue 2,302 2,715 - - - - 2,302 2,715

Total expected outflows 27,597 26,120 - - - - 27,597 26,120

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c. Market Risk

i. Interest rate risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group’s exposure to the risk of changes in market interest rates related primarily to the Group’s cash at bank balances with floating interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 30 June 2016 would decrease/increase by $34,000 (2015: $31,000). This is mainly attributable to the Group’s exposure to interest rates on its cash and cash equivalents.

ii. Foreign exchange risk

The Group has invested in businesses in Australia, New Zealand, Singapore and other South East Asian countries. Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group.

With instruments being held by overseas operations, fluctuations in the Singapore Dollar and New Zealand Dollar may impact on the Group’s financial results unless those exposures are appropriately hedged. The Group has not hedged its exposure to the above currencies.

The following table shows the foreign currency risk on the financial assets and liabilities of the Group’s operations denominated in currencies other than the functional currency of the operations. The foreign currency risk in the books of the parent entity is considered immaterial and is therefore not shown.

NET FINANCIAL ASSETS IN CONSOLIDATED GROUP2016

$’0002015

$’000

Functional currency of entity

Australian Dollars 11,197 12,682

NZ Dollars 1,474 1,346

SG Dollars 753 1,204

Other 2,182 1,224

Statement of financial position exposure 15,606 16,456

Foreign currency sensitivity analysis

The Group is mainly exposed to the Singapore Dollar and New Zealand Dollar.

The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates.

NZD SGD

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Equity 36 (10) (102) (59)


There is no significant exposure to foreign currency that would impact the profit or loss.

d. Fair Value

The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values.

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$’0002015

$’000

Investment at Fair Value

Opening balance - -

Transfer 2,500 -

Fair value adjustment during the year 400 -

Disposal (2,083) -

Closing balance at fair value 817 -


Note 27. Fair Value Measurement

Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

The Group made a $2.5 million investment in LiveTiles Limited during the prior year. This company listed on the ASX during the current year. Due to the availability of quoted prices in active markets, the asset has been transferred to level 1 and revalued according to its fair value at reporting date. Any fair value uplift is recognised in equity. Based on the closing bid price per share of $0.20, the investment is now worth $817,000.

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Note 28. Business Combinations

Country Of Incorporation Percentage Owned %

(a) Subsidiaries acquired

2015

rhipe Cloud Solutions Pty Ltd Australia 100%

Finalised Accounting Provisional Accounting

2016 $’000

2015 $’000

(b) Consideration transferred

Cash – initial consideration 10,000 9,609

Cash – retained sum (i) - 3,000

Shares issued 4,348 4,348

14,348 16,957

On 15 December 2014, rhipe Limited wholly acquired rhipe Cloud Solutions Pty Ltd (formerly nSynergy OSC Holdings Pty Ltd) and its subsidiaries. On 20th August 2015, the acquisition agreement was modified to eliminate contingent consideration and retained cash to be paid to the vendors.

(i) Retained by rhipe Limited to meet working capital requirements.

Acquisition related costs amounting to $Nil (2015: $440,955) have been excluded from the consideration transferred and have been recognised as an expense in profit or loss in the prior year, within the ‘other expenses’ line item.


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2016 $’000

2015 $’000

(c) Assets and liabilities assumed at date of acquisition

CURRENT ASSETS

Cash and cash equivalents 116 45

Trade and other receivables 1,323 1,301

Other assets 73 8

NON-CURRENT ASSETS

Plant, property and equipment 14 14

Deferred tax assets 104 362

CURRENT LIABILITIES

Trade and other payables (1,241) (1,354)

Current tax liabilities (389) (388)

Net liabilities assumed - (12)

(d) Goodwill on acquisition

Consideration transferred 14,348 16,957

Fair value of identifiable net liabilities acquired - 12

14,348 16,969


2016 $’000

2015 $’000

(e) Net cash outflow on acquisition of subsidiaries

Consideration paid in cash 10,000 12,609

Less: Cash – retained sum - (3,000)

Less: Cash and cash equivalent balance acquired (116) (45)

9,884 9,564

Goodwill arose in the acquisition of rhipe Cloud Solutions Pty Ltd (formerly nSynergy OSC Holdings Pty Ltd) because the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of rhipe Cloud Solutions Pty Ltd. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

The goodwill arising on acquisition is not expected to be deductible for tax purposes.

(f) Impact of acquisition on the results of the Group

Included in the loss for the period is a loss before tax of $1,868,000 (2015: profit $230,013) attributable to the additional business generated by rhipe Cloud Solutions Pty Ltd (formerly nSynergy OSC Holdings Pty Ltd) and its wholly owned subsidiaries. Revenue for the period included $6,263,000 (2015: $3,719,010) in respect of rhipe Cloud Solutions Pty Ltd (formerly nSynergy OSC Holdings Pty Ltd) and its wholly owned subsidiaries.


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Note 29. Interests in Subsidiaries

(a) Information about Principal Subsidiaries

The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by Group. Each subsidiary’s principal place of business is also its country of incorporation.

Ownership Interest Held By Group

Proportion Of Non-Controlling Interest

Name Of SubsidiaryPrincipal Place Of Business

2016 (%)

2015 (%)

2016 (%)

2015 (%)

rhipe Australia Pty Ltd (i)(iv) Australia 100% 100% - -

rhipe Dynamics Pty Ltd (iv) Australia 100% 100% - -

NewLease G2M Pty Ltd (iii) Australia 63% 63% 37% 37%

FRR Services Australia Pty Ltd (iv) Australia 100% 100% - -

rhipe Cloud Solutions Pty Ltd (iv) Australia 100% 100% - -

rhipe Solutions Australia Pty Ltd (iv) Australia 100% 100% - -

rhipe LiveTiles Pty Ltd Australia 100% 100% - -

rhipe New Zealand Limited New Zealand 100% 100% - -

rhipe Singapore Pte. Ltd Singapore 100% 100% - -

rhipe Technology (Thailand) Co., Ltd (ii) Thailand 100% 100% - -

rhipe Malaysia Sdn Bhd Malaysia 100% 100% - -

NewLease Hong Kong Limited (iii) Hong Kong 100% 100% - -

rhipe Philippines, Inc Philippines 100% 100% - -

PT rhipe International Indonesia Indonesia 100% 100% - -

rhipe UK Pty Ltd United Kingdom 100% - - -

rhipe Solutions LLC (formerly Online SC LLC) United States 100% 100% - -

Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements.

(i) This wholly-owned subsidiary has entered into a deed of cross guarantee with rhipe Limited pursuant to ASIC Class Order 98/1418 and is relieved from the requirement to prepareand lodge an audited financial report.

(ii) This wholly-owned subsidiary has entered into a deed of cross guarantee with rhipe Australia Pty Ltd

(iii) This company is dormant.

(iv) These companies are part of the Australian tax consolidated group.

(b) Significant Restrictions

There are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group.

(c) Deed of Cross Guarantee

The consolidated income statement and consolidated statement of financial position of the entities party to the deed of cross guarantee are:


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$’0002015

$’000

Financial information in relation to:i. Statement of Profit or Loss and Other Comprehensive Income:Profit/(Loss) before income tax 2,548 (443)

Income tax expense (1,313) (667)

Profit/(Loss) after income tax 1,235 (1,110)

Profit/(Loss) attributable to members of the parent entity 1,235 (1,110)

ii. Retained Earnings:

Retained losses at the beginning of the year (1,317) (207)

Profit after income tax 1,235 (1,110)

Retained losses at the end of the year (82) (1,317)

Statement of Financial Position:

CURRENT ASSETSCash and cash equivalents 9,594 11,010

Trade and other receivables 16,226 14,840

Other assets 2,158 3,207

Total Current Assets 27,978 29,057

NON-CURRENT ASSETSOther financial assets 15,502 19,770

Loans receivable 9,001 5,694

Property, plant and equipment 717 498

Deferred tax assets 625 626

Intangible assets 6,740 6,112

Total Non-Current Assets 32,585 32,700

Total Assets 60,563 61,757

CURRENT LIABILITIESTrade and other payables 15,198 15,832

Unearned revenue 825 2,675

Current tax liability 1,081 581

Provisions 553 -

Deferred settlement - 3,000

Total Current Liabilities 17,657 22,088

NON-CURRENT LIABILITIESDeferred tax liabilities 496 249

Other provisions 116 73

Total Non-Current Liabilities 612 322


Net Assets 42,294 39,347

EQUITYIssued capital 39,089 38,714


Retained earnings (82) (1,317)



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2016 $’000

2015 $’000

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Total loss (35) (2,788)

Total comprehensive income (35) (2,788)

Statement Of Financial Position

ASSETS

Current Assets 5,380 14,254

Non-current Assets 41,371 33,268

46,751 47,522

LIABILITIES

Current Liabilities 1,258 3,802

Non-current Liabilities 120 -


EQUITYIssued Capital 101,430 100,943

Retained Earnings (59,623) (59,588)



Note 30. Parent Information

The following information has been extracted from the books and records of rhipe Limited and has been prepared in accordance with Australian Accounting Standards.

Guarantees

During the prior reporting period, rhipe Limited entered into a deed of cross guarantee with its subsidiary rhipe Australia Pty Ltd. Refer to Note 29(c) for further details.

Contingent liabilities

At 30 June 2016, rhipe Limited had no contingent liabilities (2015: $Nil).

Contractual commitments

At 30 June 2016, rhipe Limited had not entered into any contractual commitments for the acquisition of property, plant and equipment (2015: $Nil).


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Note 31. Events After the Reporting Period

There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Note 32. Company Details

The registered office and principal place of business of the Company is:

rhipe Limited Level 2, 460 Bourke Street Melbourne VIC 3000


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Directors’ Declarationrhipe Limited And Controlled Entities

In accordance with a resolution of the directors of rhipe Limited, the directors of the Company declare that:

1. The financial statements and notes, as set out on pages 29 to 71, are in accordance with the Corporations Act 2001 and:

a. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and

b. give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on that date of the consolidated Group’s;

2. In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

3. The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer.

The Company and a wholly-owned subsidiary, rhipe Australia Pty Limited, have entered into a deed of cross guarantee under which the Company and its subsidiary guarantee the debts of each other.

At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the deed.


Dated: 23 August 2016

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Independent Auditor’s Report To the members of rhipe limited and controlled entities (formerly rhype limited)

ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RHIPE LIMITED AND CONTROLLED ENTITIES Report on the Financial Report We have audited the accompanying financial report of Rhipe Limited and controlled entities which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards (IFRS). Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

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Independent Auditor’s Report (continued)

Opinion In our opinion: a) the financial report of Rhipe Limited and controlled entities is in accordance with the Corporations Act

2001, including:

i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and

b) the financial report also complies with International Financial Reporting Standards as disclosed in Note

1.

Report on the Remuneration Report

We have audited the remuneration report included in pages 14 to 27 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the remuneration report of Rhipe Limited for the year ended 30 June 2016 complies with section 300A of the Corporations Act 2001. ShineWing Australia Chartered Accountants Rami Eltchelebi Partner Melbourne, 23 August 2016

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Additional Information for Listed Public CompaniesThe following information is current as at 17 August 2016

1. Shareholding

Distribution of Shareholders Ordinary Shares

Category (size of holding) Number of Holders Number of Shares % of Issued Capital

100,001 and Over 63 121,691,584 90.11

10,001 to 100,000 355 9,418,390 6.97

5,001 to 10,000 282 2,214,488 1.64

1,001 to 5,000 513 1,509,799 1.12

1 to 1,000 1,105 215,687 0.16

Total 2,318 135,049,948 100.00

Name Number of Ordinary Fully Paid Shares Held

% Held of Issued Ordinary Capital

1. TUTUS MCDONAGH PTY LTD 24,310,730 18.00

2. CITICORP NOMINEES PTY LIMITED 19,479,728 14.42

3. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 16,466,408 12.19

4. J P MORGAN NOMINEES AUSTRALIA LIMITED 11,171,012 8.27

5. UBS NOMINEES PTY LTD 5,405,939 4.00

6. RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED <VFA A/C> 5,346,258 3.96

7. BRISPOT NOMINEES PTY LTD <HOUSE HEAD NOMINEE NO 1 A/C> 3,613,096 2.68

8. CAMPSMOUNT PTY LTD 2,786,065 2.06

9. DAWN EDMONDS 2,776,822 2.06

10. PRM INVESTMENTS PTY LTD <PAUL MOSS INVESTMENT A/C> 2,707,191 2.00

11. MICHAEL TIERNEY 2,707,191 2.00

12. DOMINIC JOHN O’HANLON 2,400,000 1.78

13. ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD <CUSTODIAN A/C> 1,988,133 1.47

14. CS FOURTH NOMINEES PTY LIMITED <HSBC CUST NOM AU LTD 11 A/C> 1,883,061 1.39

15. ANTHONY BOUGHTON CANTON 1,243,949 0.92

16. LYNN O’NEIL & KIM ROCKMAN 1,181,800 0.88

17. NATIONAL NOMINEES LIMITED 1,137,225 0.84

18. EDMONDS WALLIS PTY LTD <EDMONDS WALLIS FAMILY A/C> 975,472 0.72

19. JOHN LEON SAYERS 900,000 0.67

20. MR WARREN NOLAN 859,475 0.64

109,339,555 80.96

Shareholder Number Ordinary

TUTUS MCDONAGH PTY LTD 24,310,730

CITICORP NOMINEES PTY LIMITED 19,479,728

HSBC CUSTODY NOMINEES (AUST) LTD 16,466,408

J P MORGAN NOMINEES AUSTRALIA LIMITED 11,171,012

b. The number of shareholdings held in less than marketable parcels is 998

c. The names of the substantial shareholders listed in the holding company’s register are:

a. Distribution of Shareholders

d. Voting RightsThe voting rights attached to each class of equity security are as follows: Ordinary shares - Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

e. 20 Largest Shareholders — Ordinary Shares

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Additional Information for Listed Public Companies (continued)

In addition to the registered holders of shares in RHP as shown above, rhipe Limited has current substantial shareholder notices, in 2016, from the following:

Date Holder pursuant to Notice % of voting power

10 February 2016 AMP Life Limited and AMP Capital Investors LimitedCredit Suisse Holdings (Australia) Limited (on behalf of Credit Suisse Group AG and its affiliates)

5.04%

22 February 2016 Regal Funds Management Pty Ltd 8.78%

11 July 2016 Bank of America Corporation and its related bodies corporate 6.47%

Please note the above is provided for information purposes only and is based on information filed with ASX by the above registered holders pursuant to s671B of the Corporations Act 2001.

2. The name of the company secretary is

Andrew Whitten.

3. The address of the principal registered office in Australia is

Level 2, 460 Bourke Street Melbourne Victoria, 3000. Telephone +61 3 9642 8695.

4. Registers of securities are held at the following addresses

Link Market Services Limited Level 1, 333 Collins Street Melbourne VIC 3000

Investor Enquiries: 1300 554 474 Facsimile: +61 2 9287 0303

5. Stock Exchange Listing

Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Securities Exchange Limited.

6. Unquoted Securities

Options over Unissued Shares A total of 6,847,500 options are on issue to 5 directors and 18 employees under the rhipe Limited employee option plan.

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