1. Guild Accountants is a member of RSM Bird Cameron Group. Productivity Commission Impacts on Funding & Finance Thursday 15 th March 2012

2. Forum – Productivity Commission Impacts on funding and finance 15 March 2012 Westpac Bank, 275 Kent St, Sydney ROD YOUNG CHIEF EXECUTIVE OFFICER AGED CARE ASSOCIATION AUSTRALIA

5. Productivity Commission Legislation changes

6. *Removal of the current restrictions on the number and type of residential and community aged care services *National system of care entitlements

7. * Seniors Gateway Centres * Consistent user co contributions across residential and community care

8. * Realistic revenue streams * Australian Aged Care Commission

9. * Financial instruments *Aged Care Home Credit Scheme

10. * Age Pensioners Savings Account * Rural and remote areas and other special needs groups

11. * Affordability for taxpayers * Quality assurance regulations

13. eHealth Record

17. Blueprint for reform priorities are: a simple entitlement-based system; a one stop shop for aged care information and assessment; greater choice and consistency for people to fund the care they need;

18. Continued: the Aged Care Commission to guarantee service quality; an independent cost of care study; dementia risk reduction and research; and a high-level Aged Care Reform Council to drive the reform process.

19. CONSUMERS RESPONSE Alzheimers Association COTA National Seniors Association of Independent Retirees

21. Guild Accountants is a member of RSM Bird Cameron Group. The Trojan War Aged Care’s battle for a sustainable operating model

22. Battlefield Noise

23. The Levers Model - Expectation Revenue Occupancy Efficiency Capital Model Facility Life

24. The average person

25. Bonds or Daily Charge Bond $100,000Operator Cash flow Operator Profit Resident Profit Resident Cash With Bond$4,600 $(3,800) Without Bond Interest$(6,700) $5,200 Accommodation charge$19,100$11,300$(11,300)$(19,100) Loan$(7,800) Net cash position$4,600$(3,000)$(6,100)$(15,300) Marginal Position Nil$(7,600)$(2,300)$(11,500)

26. Daily Impact Daily Accommodation feeMaintain CashMaintain Profit At $100,000 Bond$32.50$54.50 At $250,000 Bond$65.60$120.40

27. Sensitivities Bond level Liquidity Level Debt term Capital cost Tax Interest rate Vacancy

28. The battle for success Trojan War –10 years to victory –Novel strategy Aged Care Battle –2004 Hogan –What will it look like in 2014? –What Strategy will be successful?

29. Funding and Finance in a Post PC World with the Institutional Bank. March 2012 | Kevin Griffith and David Dixon Hughes

30. Agenda March 2012Page 30Corporate Business Group 1.Introduction – Who are we ? 2.Current Industry Characteristics 3.Funding - General Issues to consider 4.Funding – Construction 5.Funding – Core Debt 6.Potential Character of the Industry 7.Post PC Funding – Construction 8.Post PC Funding – Core Debt

31. Who Are We ? Page 31 Westpac Senior Care Living Teams Westpac (200 Years old in 2017) involvement with Aged Care goes back to the commencement of the industry. 15 – 20 years ago Westpac introduced Aged Care specialisation. 5 year ago this specialisation was taken a step further with all Aged Care specialists and clients brought within the Corporate Business Team in each state. Specialist teams with Aged Care Clients in each state. Kevin Griffith and David Dixon Hughes manage the relationships of a diverse range of NSW based Aged Care Group’s. Generally our customers have performed well despite the GFC and ongoing offshore issues. Corporate Business GroupMarch 2012

32. Character of the Industry March 2012Page 32Corporate Business Group A diverse range of Not for Profit and Private providers, with a small number of Public Companies involved. Diversity brings a wide variation between the financial strength, capacity, management, reporting systems (etc). High Barriers of entry; - Regulatory - Equity - Historic Financial Return on assets employed Government regulates both supply of Approvals and high percentage of income. Historically High Occupancy rates in facilities.

33. Funding Page 33 Key Issues to Consider in Assessing Funding. Stand alone construction, core debt or a mix. – Very Different characteristics. However clearly there are key components needed for both; - Management and structure - Strategic Plan including clear direction and target Market(s) - sufficient equity and cash flow to execute the Strategic Plan - Facility and Property mix and economic life - Experience - Board and Management succession - Profitability in comparison to peers - Occupancy - Staff Retention March 2012 Corporate Business Group

34. Funding March 2012Page 34Corporate Business Group Stand Alone Construction. Location Competition Facility Mix - Hi / Low / Extra Service Project Feasibilities Demographics Accommodation Bond Strategy including Marketing Plan Project Team Number of projects in train – capacity of management to ramp them all up without impacting existing operations or the other projects. How much debt required and can it be fully or majority cleared by inward Bonds – Expectation will be it can.

35. Funding March 2012Page 35Corporate Business Group Core Debt. Core Capabilities at the higher end. Current and ongoing strength of underlying operating cash flows. Quality and mix of facilities, Economic Life. Stand Alone Construction. Location

36. Potential Character of the Industry March 2012Page 36Corporate Business Group Deregulation of bed and Extra Service approvals, even staggered over 5 years, will have a major impact on the Industry and open up regions previously considered “over bedded”. Greater competition will likely result in lower occupancy but to what degree? Expect to see an acceleration of the pressure on older facilities and facilities that are performing poorly in comparison to their immediate geographic peer group. Challenge Management and Boards. Accommodation Bond changes resulting in a higher proportion of Periodic Payment residents. More informed residents and Families with a clearer financial plan (better financial planning). High Barriers of entry; - Regulatory - Equity

37. Post PC Funding March 2012Page 37Corporate Business Group. Stand Alone Construction. Location Competition Facility Mix - Hi / Low / Extra Service Project Feasibilities Demographics Accommodation Bond Strategy including Marketing Plan. Also including impact of Periodic Payments. Project Team Number of projects in train – capacity of management to ramp them all up without impacting existing operations or the other projects. How much debt required and can it be fully or majority cleared by inward Bonds – Expectation will be it can?, or is a larger debt being repaid with cash flow including periodic payments.

38. Post PC Funding March 2012Page 38Corporate Business Group Core Debt. Core Capabilities at the higher end Current and ongoing strength of underlying operating cash flows, how robust to decreased occupancy? Quality and mix of facilities, Economic Life.

39. Forum Bruce Bailey Kevin Griffith Rod Young

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