Pyne Gould : Annual Report and Consolidated Financial Systems

Pyne Gould Corporation Limited

ANNUAL REPORT AND

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 June 2016

PYNE GOULD CORPORATION LIMITED Contents For the year ended 30 June 2016

Company Report 4-7

Board of Directors 8

Corporate Governance 9-12

Directors' Responsibility Statement 13

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income 14

Consolidated Statement of Changes in Equity 15-16

Consolidated Statement of Financial Position 17

Consolidated Statement of Cash Flows 18

Notes to the Consolidated Financial Statements 19-64

Independent Auditor's Report 65-66

Statutory Disclosures 67-70

Shareholder Information 70-71

Directory 72-73

PYNE GOULD CORPORATION !LIMITED COMPANY REPORT

Directors' Report

Pyne Gould Corporation limiled's ("PGC" or "the Company") financial results for the 2016 fiscal year saw Net Tangible Assets (NTA) end at £54.2 million (down from £55.2 million last year ) or NZD102.5 million (NZD128.4 million last year). On a per share basis this was down in GBP terms from 26.61p per share at 30 June 2015 to 26.11p per share at 30 June 2016 (in NZD terms 61.90 cents per share to 49.40 cents per share).

The NTA impact was predominantly due to the negative impact that accepting Torchlight Fund LP Limited ("TFLP") Partnership interests in exchange for the Residential Communities Limited ("RCL") Participations and satisfaction of loan amounts owing by TFLP had on the balance sheet. This is reflected in the increase in Non-controlling interests from £39.7m to £47.2m .

We remain confident in our core long term strategy of patiently executing the exit and realisation of non-core assets and building a sustainable long term business. As we have previously outlined, the commitment to the growth of TFLP is central to this strategy and is expected to deliver significant long term value to our shareholders.

Variance against preliminary f ull year announcement

The material variances from the preliminary full year announcement predominantly related to a change in accounting treatment for listed equity investments . Consistent with prior reporting periods the quoted price was not considered to

be reflective of the appropriate basis for determining fair value of the investment.

Following further discussions and deliberation with Grant Thornton, the Directors concluded that an active trading market exists in the current year as there were sufficient volumes traded at levels that would meet the definition of an active market in accordance with NZ IFRS 13. As a result the Company adopted the traded market price as at 30 June 2016 .

The variance between the preliminary full year announcement and these consolidated financial statements is a decrease of GBP3.0 million in NTA from £104 .4 million to £101.4 million, before accounting for Non-controlling interests, at 30 June 2016. Losses for the financial year increased from £0.007 million to £2.556 million for the year ended 30 June 2016.

Long Term Focus

Our long term focus remains unchanged, as is the patience and discipline required to successfully execute this strategy.

The near term focus is on finalising the successful exit of the remaining non-core assets, including the realisation of the outstanding receivable from the sale of Perpetual Trust Limited ("PTL").

We recently announced that PGC and Bath Street Capital rssC") have agreed to the immediate. and unconditional. discontinuance of their respective High Court claims, without costs, concerning PGC's demand for payment of further consideration due to PGC from its sale of PTL to BSC in January 2014. BSC is currently proceeding towards a float of Complectus, which owns PTL. The agreement means court action has been withdrawn , and the parties are in the process of finalising the terms of a settlement. Once those terms have been finalised, a further announcement will be

made.

Operating Performance

At an operating level PGC delivered a Loss after tax of £2.556 million for the 2016 financial year. This compares with a Loss after tax of £6.789 million for the same period last year.

After allowing for non-cash items , Total Comprehensive Income for the 2016 financial year was £6.464 million. This compares with a Total Comprehensive Loss of £22 .216 million for the 2015 financial year .

The result was dominated by non-cash movements in foreign currency reserves. In the 2016 financial year, PGC recorded a £9.158 million unrealised gain from the foreign exchange translation of foreign associates and subsidiaries (compared with a £15 .028 million unrealised loss from foreign exchange translations for the 2015 financial year).

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