Clime Capital Limited
Annual Report 2022

Plain-text annual report

Clime Capital Limited Annual Report For the year ended 30 June 2022 Clime Capital Limited Level 12, 20 Hunter Street Sydney NSW 2000 Australia | PO Box H90 Australia Square NSW 1215 ACN 106 282 777 ABN 99 106 282 777 P 1300 788 568 www.climecapital.com.au ABN 99 106 282 777 Photography by Harry Cordaiy Associate Analyst Harry’s images have been used throughout the Annual Report. 3 Clime Capital Limited ABN: 99 106 282 777 CLIME CAPITAL LIMITED ABN: 99 106 282 777 2022 Annual Report Contents Chairman’s Letter 4 Corporate Directory 6 Directors’ Report 7 Auditor’s Independence Declaration 20 Statement of Profit or Loss and Other Comprehensive Income 21 Statement of Financial Position 22 Statement of Changes in Equity 23 Statement of Cash Flows 24 Notes to the Financial Statements 25 Directors’ Declaration 52 Independent Auditor’s Report 53 ASX Additional Information 58 Clime Capital Limited Page No. 4 Clime Capital Limited ABN: 99 106 282 777 Clime Capital Limited Dear Fellow Shareholder, It is well recorded that world equity markets suffered dramatic declines in the second half of financial year 2022. The declines were most notable in the US with both the S&P500 and Nasdaq indices declining by 21% and 30% respectively in the 6 months to 30 June. These represented the worst performance in the June half for US equity markets over the last 50 years. The resultant effect on the Australian market was significant and worked against Clime Capital Limited’s (CAM) reported results which are significantly driven by “marked to market” asset or portfolio pricing. In Australia, the All Ordinaries Price Index, declined by 13.2%. As a result, CAM reported a loss for FY22 of $11.8 million compared to the record profit of FY21 of $22.9 million. Despite this, it is pleasing to report that over FY22 CAM declared fully franked ordinary dividends to shareholders of $7.5 million, which was a substantial increase on the dividends declared in FY21 of $5.9 million. This increase reflected the benefits of increased dividend income over FY22 from listed investee companies and increased income from CAM’s unlisted income portfolio ($8.5 million from $3.7 million). Dividends per share therefore rose from 4.75 cents fully franked to 5.36 cents fully franked. The FY22 dividend included a special dividend of 0.25 cents per share fully franked. To explain the reported loss in greater detail, the following is presented to shareholders. These are the key balance sheet and profit movements that occurred over FY22 when the books were closed on 30 June. • Investment revenue increased from $3.7 million to $8.5 million • Net realised capital gains on the portfolio decreased from $11.5 million to $5.6 million • Net unrealised gains (losses) from “marked to market” went from $21.6 million profit to a loss of $29.6 million. CAM net assets declined over the financial year from $128.7 million to $115.1 million due to the reasons noted above. In December 2021, CAM successfully closed a listed Convertible Note roll and new issue (CAMG). In summary and after conversions of old notes into CAM shares, rolling of old notes into new notes and the issue of a new series notes, CAM increased its Convertible Notes on issue by approximately $8.5 million. At 30 June CAM had 36.49 million $1.00 notes on issue. These notes pay 5.25% p.a. interest on a quarterly basis which is 1% lower than the first series. The notes can be converted into CAM shares on a 1 for 1 basis until 30 November 2025 or redeemed on that date. The Board believes the notes provides an attractive investment opportunity for investors and have increased the portfolio for the company’s shareholders. The new series convertible debt maintains a modest position of leverage into the company’s portfolio, which is serviced by tax deductible interest payments. Over FY22 issued capital increased by approximately $5.7 million through the convertible note conversions noted above, dividend reinvestment ($1 million), offset by shares purchased back through CAM’s ongoing on market buyback ($0.9 million) scheme. Over the year, 1.05 million shares were bought back at an average price of 88 cents per share. The buybacks were undertaken at a discount to pre-tax Net Tangible Asset (NTA) per share and generally at a discount of approximately 8%. CAM Portfolio Management review and outlook Over FY22 the Manager rebalanced and reset CAM’s portfolio so that at 30 June the following was evident: a. The Australian listed equity allocation was tactically structured to increase the portfolio weighting to larger, more liquid, and higher yielding equity positions. In retrospect and reviewing FY22 the manager acknowledges that an overweight position to smaller industrials and IT companies affected the portfolio return in the June half. Chairman’s Letter 5 Clime Capital Limited ABN: 99 106 282 777 Clime Capital Limited b. The portfolio is positioned to receive substantial dividend inflows throughout FY23 with positions in major resource companies and major banks expected to deliver dividends larger than FY22. c. The unlisted Income Sleeve allocation has been maintained and tactically added to. It is comprised of syndicated unlisted funds focused on high quality property and select agriculture-based assets. As at 30 June 2022, approximately 10% of the portfolio is in high yielding unlisted property trusts. Importantly, the yields generated from this Income Sleeve meaningfully exceeds the pretax cost of the convertible debt and creates a positive yield spread, thus benefiting company shareholders. We believe the portfolio process and management has therefore created a unique style (compared to other Listed Investment Companies (LICs) for our investment company. The targeting of Australian equity yield in well managed companies and holding of direct syndicated properties present a diversity for investors that has many of the attributes of a well-constructed pension portfolio. The active management style and ability to dynamically adjust portfolio positioning based on prevailing market and macro conditions enables the Manager to adjust the asset allocations with the aim of generating a consistent and steadily growing income return. The payment of quarterly fully franked dividends at a rate that is superior to the share market dividend yield is a unique feature of CAM that I believe is being increasingly acknowledged in our share price. On your behalf, I thank the staff of the Manager for their work during the year. I also thank shareholders for their support of the Company over financial year 2022.   John Abernethy Chairman 6 Clime Capital Limited ABN: 99 106 282 777 Corporate Directory Clime Capital Limited ABN 99 106 282 777 Clime Capital Limited Clime Capital Limited is a listed investment company and is a reporting entity. It is primarily an investor in securities listed on the Australian Securities Exchange. Directors John Abernethy (Chairman) Julian Gosse Ronni Chalmers Marc Schwartz Company Secretaries Biju Vikraman Andrew Metcalfe (appointed on 11 August 2022) Investment Manager Clime Asset Management Pty Limited Level 12 20 Hunter Street Sydney NSW 2000 Registered Office Level 12 20 Hunter Street Sydney NSW 2000 Contact Details Postal Address: P.O. Box H90 Australia Square Sydney, NSW 1215 P: 1300 788 568 E: www.climecapital.com.au Share Registry Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 P: 1300 737 760 F: 1300 653 459 W: www.boardroomlimited.com.au For enquiries relating to shareholdings, dividends (in- cluding participation in the dividend reinvestment plan) and related matters, please contact the share registry. Auditor Pitcher Partners Level 16, Tower 2 Darling Park 201 Sussex Street Sydney NSW 2000 Trustee for Convertible Notes Equity Trustees Limited Level 19, 56 Pitt Street Sydney NSW 2000 www.eqt.com.au Stock Exchange Listing Clime Capital Limited securities are listed on the Aus- tralian Securities Exchange under the following ex- change code: Fully Paid Ordinary Shares CAM Convertible Notes CAMG 7 Clime Capital Limited ABN: 99 106 282 777 Your Directors present their report on Clime Capital Limited (“the Company” or “CAM”) for the financial year ended 30 June 2022. Directors The following persons were directors of the Company during the whole of the financial year and up to the date of this report unless otherwise stated: Mr. John Abernethy - Chairman (Non-Independent) Mr. Julian Gosse - Independent Director Mr. Ronni Chalmers - Non-Independent Director Mr. Marc Schwartz - Independent Director Information on Directors Directors’ Report Mr. John Abernethy Chairman - Non-Independent Experience and expertise Mr. John Abernethy was appointed Director on 31 July 2009. Mr. Abernethy has over 35 years’ funds management experience in Australia having been General Manager Investments for NRMA. Mr. Abernethy holds a Bachelor of Commerce (Economics)/LLB from the University of New South Wales. Other current directorships in listed companies WAM Research Limited and Clime Investment Management Ltd. Former directorships in last 3 years Watermark Market Neutral Fund Limited, Watermark Global Limited, Australian Leaders Fund Limited and CBG Capital Limited. Special responsibilities Member of Remuneration Committee. Member of Nomination Committee. Interests in shares 1,720,000 ordinary shares in Clime Capital Limited. Interests in convertible notes 122,093 convertible notes in Clime Capital Limited. 8 Clime Capital Limited ABN: 99 106 282 777 Mr. Julian Gosse Independent Director Experience and expertise Mr. Julian Gosse was appointed Independent Director in September 2003. Mr. Gosse has extensive experience in banking and broking both in Australia and overseas, having worked in London for Rowe and Pitman, in the United States for Janney Montgomery and Scott and in Canada for Wood Gundy. Mr. Gosse has also been involved in the establishment, operation and ownership of several small businesses. Other current directorships in listed companies WAM Research Limited. Former directorships in last 3 years Australian Leaders Fund Limited and Greenvale Mining Limited. Special responsibilities Chairman of Audit Committee. Chairman of Remuneration Committee. Chairman of Nomination Committee. Interests in shares None. Interests in convertible notes None. Mr. Ronni Chalmers Non-Independent Director Experience and expertise Mr. Ronni Chalmers has over 40 years of Australian equities investment management experience. Mr. Chalmers began his career as a graduate at Bankers Trust Australia rising to being an Associate Director during its rapid growth in the 1980s. After a decade at Bankers Trust, Mr. Chalmers left and subsequently held senior Portfolio Manager / Investment Manager roles with several funds management and insurance companies before founding CBG Asset Management Limited in 2001. Mr. Chalmers has a Bachelor of Commerce degree from the University of New South Wales and is a Fellow of the Financial Services Institute of Australasia. Other current directorships in listed companies Clime Investment Management Limited. Former directorships in last 3 years CBG Capital Limited. Special responsibilities None. Interests in shares 719,042 ordinary shares in Clime Capital Limited. Interests in convertible notes 975,000 convertible notes in Clime Capital Limited. 9 Clime Capital Limited ABN: 99 106 282 777 Mr. Marc Schwartz Independent Director Experience and expertise Mr. Marc Schwartz has had a very successful business career from being Manager of Structured Finance Products at Macquarie Bank in 2007, to being Managing Director of Pascoes Pty Ltd from 2008 to 2018, which employed 150 people across two manufacturing sites and manufactured or distributed over 400 items to retailers. Mr. Schwartz is currently a Director of Gelflex Laboratories which is the largest manufacturer of contact lenses in the Southern Hemisphere. Mr. Schwartz is also Director of Blackfox Property – a property syndication company and current chair of YPO Sydney Pacific. Mr. Schwartz’s specialisation has been in operational and financial efficiency, investment and strategy. Mr. Schwartz holds a Bachelor of Computer Science and Mathematics (majoring in Finance) from the University of Western Australia and is a fellow of the Australian Institute of Company Directors. Other current directorships in listed companies None. Former directorships in last 3 years Intra Energy Corporation Limited. Special responsibilities Member of Audit Committee. Member of Remuneration Committee. Member of Nomination Committee. Interests in shares 17,000 ordinary shares in Clime Capital Limited. Interests in convertible notes None. Mr. Biju Vikraman Joint Company Secretary Mr. Biju Vikraman was appointed to the position of Company Secretary on 28 September 2015. Mr. Vikraman holds a Bachelor of Commerce from the University of Mumbai, India and is an Australian and Indian Chartered Accountant. Mr. Vikraman has more than 20 years experience in accounting, audit, finance and governance and had held senior roles with big 4 accounting firms and listed entities within Australia, India and Africa. Mr. Vikraman also holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia. Mr. Andrew Metcalfe Joint Company Secretary Mr. Andrew Metcalfe was appointed to the position of Joint Company Secretary on 11 August 2022. Mr. Metcalfe (CPA, FGIA, GAICD) is an experienced Chartered Secretary and Governance Adviser with more than 25 years’ experience across a broad industry base, having worked with a variety of Board and senior management team of ASX listed companies. Information on Company Secretaries 10 Clime Capital Limited ABN: 99 106 282 777 Meetings of Directors The number of meetings of the Company’s Board of Directors, and of each board committee held during the year ended 30 June 2022, and the number of meetings attended by each Director were: Director Board Meetings Audit Committee Meetings A B A B Mr. John Abernethy 8 8 - - Mr. Julian Gosse 8 7 2 2 Mr. Ronni Chalmers 8 8 - - Mr. Marc Schwartz 8 8 2 2 Director Remuneration Committee Meetings Nomination Committee Meetings A B A B Mr. John Abernethy 1 1 - - Mr. Julian Gosse 1 1 - - Mr. Ronni Chalmers - - - - Mr. Marc Schwartz 1 1 - - A - Number of meetings eligible to attend B - Number of meetings attended Rotation and election of Directors The Company’s Constitution requires directors to retire every three years. Julian Gosse retires by rotation and, being eligible offers himself for re-election. 11 Clime Capital Limited ABN: 99 106 282 777 Principal activities The principal activity of the Company during the financial year was investing in domestic securities and unlisted unit trusts. There were no significant changes in these activities during the current financial year. Review of operations Investment income from ordinary activities Investment loss for the year was $15,432,557 (2021: profit of $37,533,808). This was primarily due to an increase in unrealised loss on financial assets during the year ended 30 June 2022. Net profit attributable to members of the Company Loss from ordinary activities after tax attributable to members was $11,824,831 (2021: profit of $22,960,875). Further information on the operating and financial review of the Company is contained in the Chairman’s Letter on pages 4 to 5 of the Annual Report. 2022 $ 2021 $ Total dividends paid Final quarter dividend paid during the year in respect of the prior financial year 1,678,130 1,188,964 First quarter ordinary dividend paid in respect of the September 2021 and 2020 quarter 2,126,088 1,270,525 Second quarter dividend paid in respect of the December 2021 and 2020 quarter 1,796,961 1,377,510 Third quarter dividend paid in respect of the March 2022 and 2021 quarter 1,795,609 1,589,089 Total dividends paid 7,396,788 5,426,088 Total dividends declared not paid Final quarter ordinary dividend in respect of the current financial year 1,794,917 1,678,130 Total dividends declared not paid 1,794,917 1,678,130 Total dividends paid or recommended 9,191,705 7,104,218 Dividends paid or recommended Dividends paid or recommended during the financial year are as follows: Prior to the end of the financial year, the Directors declared a fully franked dividend of 1.28 cents per share payable on 28 July 2022 on ordinary shares as at record date 6 July 2022. 12 Clime Capital Limited ABN: 99 106 282 777 Significant changes in state of affairs 1. On 18 November 2021 at a meeting of Noteholders, Noteholders approved amendments to the terms of the Company’s existing unsecured, redeemable, convertible Notes and trust deed governing the Notes. Pursuant to its prospectus dated 27 October 2021 and supplementary prospectus dated 24 November 2021 (Note Prospectus), the Company issued 16,268,995 new Notes, each with a face value of $1.00 per Note on 1 December 2021. A total of 1,239,792 Notes (each with a face value of $0.96) were redeemed on 30 November 2021. 21,066,125 Notes (each with a face value of $0.96) were converted into 20,223,593 Notes (each with a face value of $1.00) on 1 December 2021. Following the respective conversions, redemptions, consolidation and the new note issue pursuant to the Note Prospectus, the Company has on issue a total of 36,492,588 Notes, each with a face value of $1.00, an interest rate of 5.25% per annum, with a term expiring on 30 November 2025. Noteholders have the right to convert some or all of their notes to shares at any time before the maturity date upon which it will be redeemed. 2. On 31 January 2022, the Company announced its intention to refresh its ability to implement an on-market buy-back (within the 10/12 limit) for a further 12-month period which commenced from 15 February 2022 and ends on 14 February 2023. During this period, the Company has the ability to buy a maximum of 14,043,193 fully paid ordinary shares. During the 2022 financial year, 1,049,753 ordinary shares were bought back and cancelled. 3. On 10 June 2022, the Company announced its intention to refresh its ability to implement an on-market buy-back of Convertible Notes on issue for the period which commenced from 10 June 2022 to 9 June 2023. During this period, the Company has the ability to buy a maximum of 5,000,000 Convertible Notes on issue. During the 2022 financial year, no Convertible Notes were bought back and cancelled. No other significant changes in the Company’s state of affairs occurred during the year. After balance date events On 28 July 2022, a fully franked dividend for the quarter ending 30 June 2022 of 1.28 cents per share was paid on ordinary shares. No other matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. Future developments The Company’s future performance is dependent on the performance of the Company’s investments. In turn, the performance of these investments is impacted by investee Company - specific factors and prevailing industry conditions. In addition, a range of external factors including the impact of COVID-19, economic growth rates, interest rates, exchange rates and macro-economic conditions impact the overall equity market and these investments. As such, we do not believe it is possible or appropriate to accurately predict the future performance of the Company’s investments and, therefore, the Company’s performance. 13 Clime Capital Limited ABN: 99 106 282 777 Environmental issues The Company’s operations are not regulated by any significant law of the Commonwealth or of a State or Territory relating to the environment. Insurance of officers During the financial year, the Company paid a premium for an insurance policy insuring all directors and officers against liabilities for costs and expenses incurred in defending any legal proceedings arising out of their conduct while acting in their capacity as director or officer of the Company, other than conduct involving a willful breach of duty in relation to the Company. In accordance with common commercial practice, the insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory duties where the auditor’s expertise and experience with the Company is important. During the year, Pitcher Partners Sydney, the Company’s auditor, did not perform any other non-assurance services in addition to their statutory duties for the Company. PPNSW Services Pty Limited and Pitcher Partners Legal NSW Pty Ltd, related parties of the Company’s auditor, performed taxation and corporate finance services for the Company. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in Note 3 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Details of the amounts paid to the auditors and their related parties are disclosed in Note 3 to the financial statements. Unissued shares There are 36,492,588 (2021: 28,748,232) unissued ordinary shares of Clime Capital in the form of convertible notes as at 30 June 2022. Convertible note holders are entitled to convert their CAMG in to CAM shares on the ratio of 1 CAM shares for each note held. As at the date of this report, there are 36,202,872 notes on issue. 14 Clime Capital Limited ABN: 99 106 282 777 Remuneration Report - Audited The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The remuneration report is set out in the following sections: A. Directors and other key management personnel details B. Principles used to determine the nature and amount of remuneration C. Details of remuneration D. Service agreements E. Related party transactions F. Additional information The information provided in section A-E includes remuneration disclosures that are required under section 300A of the Corporations Act 2001. A. Directors and other key management personnel details The following persons acted as directors and key management personnel of the Company during or since the end of the financial year. John Abernethy Chairman (Non-Independent) Julian Gosse Independent Director Ronni Chalmers Non-Independent Director Marc Schwartz Independent Director There are no other key management personnel apart from the Directors. B. Principles used to determine the nature and amount of remuneration The Remuneration Committee is responsible for making recommendations to the Board on remuneration policies and packages applicable to the board members and executives of the Company. The Board’s remuneration policy is to ensure the remuneration package properly reflects the person’s duties, responsibilities and the level of performance, and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. Non-executive Directors Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Remuneration of non-executive directors is determined by the full Board within the maximum amount approved by the shareholders from time to time. The payments to non- executive directors do not include retirement benefits other than statutory superannuation. Consultation with non-executive directors outside their duties as directors is treated as external consultation and is subject to additional fees by consent of the Board. The Company has a policy that non-executive directors are not entitled to retirement benefits and may not participate in any bonus scheme (where applicable). Directors’ fees The current base remuneration was last reviewed in November 2021. The non-executive directors’ fees are inclusive of committee fees. Non-executive directors’ fees are determined within a non-executive directors’ base remuneration pool, which is periodically recommended for approval by shareholders. The non-executive directors’ base remuneration pool currently stands at $200,000 per annum. 15 Clime Capital Limited ABN: 99 106 282 777 C. Details of Remuneration The Company’s Chairman, Mr. John Abernethy provides consulting services to Clime Investment Management Limited (CIW) (the parent company of the Investment Manager). Mr. Abernethy is also the current Non-Executive Chairman of CIW. Mr. Ronni Chalmers is employed by CIW and is also a Non-Executive Director in CIW. Both Mr. Abernethy and Mr. Chalmers did not receive any form of direct remuneration from the Company. Instead, CIW received fees from Clime Capital Limited designed to cover the cost of provision of these services. The Company had no other employees and no other Key Management Personnel. Amounts of remuneration Details of the remuneration of the Directors of Clime Capital Limited for services rendered to the Company are set out below. With the exception of the Company’s Directors, there are no Key Management Personnel (as defined in AASB 124 Related Party Disclosures) employed by the Company. Directors and other Key Management Personnel of Clime Capital Limited 2022 SHORT-TERM EMPLOYEE BENEFITS POST-EMPLOYMENT BENEFITS TOTAL ($) CASH SALARY AND FEES ($) SUPERANNUATION ($) John Abernethy * 40,000 - 40,000 Julian Gosse 36,364 3,636 40,000 Ronni Chalmers* 40,000 - 40,000 Marc Schwartz 36,364 3,636 40,000 Total Key Management Personnel 152,728 7,272 160,000 2021 SHORT-TERM EMPLOYEE BENEFITS POST-EMPLOYMENT BENEFITS TOTAL ($) CASH SALARY AND FEES ($) SUPERANNUATION ($) John Abernethy * 30,000 - 30,000 Julian Gosse 36,530 3,470 40,000 Brett Spork (resigned 23 October 2020) 12,391 - 12,391 Ronni Chalmers* 30,000 - 30,000 Marc Schwartz (appointed 21 October 2020) 26,405 2,508 28,913 Total Key Management Personnel 135,326 5,978 141,304 *Paid to Clime Investment Management Ltd and not to Mr. John Abernethy or Mr. Ronni Chalmers. 16 Clime Capital Limited ABN: 99 106 282 777 D. Service agreements There are no other Key Management Personnel apart from the Directors. E. Related party transactions All transactions with related entities were made on normal commercial terms and conditions no more favourable than transactions with other parties unless otherwise stated. (a) Management, performance and other fees 2022 $ 2021 $ Clime Asset Management Pty Limited - Note (c) (i) 1,625,516 2,520,023 Clime Investment Management Ltd - Note (c) (ii) 156,160 162,867 CBG Asset Management Limited - 533,520 1,781,676 3,216,410 As at 30 June 2022, $122,291 (2021: $1,246,742) of the Company’s management fees and performance fees remain unpaid and within payables. (b) Dividends All dividends paid and payable by the Company to Directors and Director related entities are on the same basis as to other shareholders. (c) Nature of Relationships (i) Clime Asset Management Pty Limited Mr. John Abernethy and Mr. Ronni Chalmers are Directors of the Investment Manager, Clime Asset Management Pty Limited (a wholly-owned subsidiary of ASX listed company Clime Investment Management Ltd). Clime Asset Management Pty Limited receives management and performance fee as remuneration for managing the Company’s investment portfolio. Management and performance fees paid and payable are determined by the underlying Investment Management Agreement, the terms of which entitle the Investment Manager to a management fee, calculated as a percentage of funds under management, and a performance fee, should performance targets outlined in the Investment Management Agreement be achieved. (ii) Clime Investment Management Ltd Mr. John Abernethy and Mr. Ronni Chalmers are Directors of Clime Investment Management Limited (CIW) and did not receive any form of remuneration from the Company. As detailed in Note 14, Clime Investment Management Ltd received management fees as remuneration for the employment of the Chairman, a Director and the Company Secretary as well as reimbursement for marketing fees. Clime Investment Management Ltd directly owns 4.44% (2021: 4.38%) of the share capital of the Company as at 30 June 2022. Clime Investment Management Ltd, through the Investment Manager, has the indirect power to dispose 2.98% (2021: 2.94%) of the Company’s shares and has the indirect power to dispose 9.17% (2021: 10.12%) of the Company’s Convertible Notes held by the Investment Manager’s Individually Managed Accounts (IMAs) and other managed funds. 17 Clime Capital Limited ABN: 99 106 282 777 (d) Shareholdings of Directors and Key Management Personnel 2022 Balance at 1 July 2021 Shares acquired Shares disposed Other changes Balance at 30 June 2022 Ordinary Shares (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 1,540,000 180,000 - - 1,720,000 Ronni Chalmers 719,042 - - - 719,042 Julian Gosse - - - - - Marc Schwartz 17,000 - - - 17,000 2,276,042 180,000 - - 2,456,042 Shareholdings 2021 Balance at 1 July 2020 Shares acquired Shares disposed Other changes Balance at 30 June 2021 Ordinary Shares (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 1,012,000 528,000 - - 1,540,000 Brett Spork (resigned 23 October 2020) 102,500 - (7,012) (95,488) - Ronni Chalmers 650,078 68,964 - - 719,042 Julian Gosse - - - - - Marc Schwartz (appointed 21 October 2020) - 17,000 - - 17,000 1,764,578 613,964 (7,012) (95,488) 2,276,042 2022 Balance at 1 July 2021 Convertible Notes acquired Convertible Notes disposed Other changes Balance at 30 June 2022 Convertible Notes (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 2,850 119,243 - - 122,093 Ronni Chalmers 805,000 170,000 - - 975,000 Julian Gosse - - - - - Marc Schwartz - - - - - 807,850 289,243 - - 1,097,093 18 Clime Capital Limited ABN: 99 106 282 777 F. Additional information Performance of Clime Capital Limited The tables below set out the summary information regarding the Company’s earnings and movements in shareholder wealth for the five years to 30 June 2022: Performance result - historical analysis 30 June 2022 $ 30 June 2021 $ 30 June 2020 $ 30 June 2019 $ 30 June 2018 $ Net investment income/(loss) (15,432,557) 37,533,808 (6,576,155) 11,976,963 12,952,194 Profit/(Loss) for the year before income tax expense (19,811,179) 31,279,576 (10,819,064) 8,480,647 10,509,665 Profit/(Loss) for the year (11,824,831) 22,960,875 (6,394,085) 6,601,175 7,952,336 Dividends paid/provided for 7,513,575 5,915,254 5,495,165 4,575,684 4,484,548 30 June 2022 30 June 2021 30 June 2020 30 June 2019 30 June 2018 Adjusted NTA cum dividend - pre tax1 $0.78 $0.99 $0.80 $0.97 $0.94 Adjusted NTA cum dividend - post tax1 $0.80 $0.96 $0.82 $0.94 $0.92 Share price at financial year end $0.82 $0.96 $0.79 $0.97 $0.84 Interim dividends - ordinary shares2 4.08cps 3.50cps 3.80cps 3.75cps 3.75cps Final dividend - ordinary shares2 1.28cps 1.25cps 1.05cps 1.25cps 1.25cps Bonus share issue - ord. shares - - - 1 for 40 - Basic EPS1,2 (8.52)cps 19.10cps (5.85cps) 7.21cps 8.64cps Diluted EPS1,2 (8.52)cps 16.34cps (5.85cps) 6.71cps 8.17cps Movements in shareholder wealth - historical analysis Please note there is no direct relationship between Company performance and Directors fees. END OF AUDITED REMUNERATION REPORT (d) Shareholdings of Directors and Key Management Personnel (continued) ¹ Taking into account the dilutive effect of bonus share issue ² Fully franked dividends 2021 Balance at 1 July 2020 Convertible Notes acquired Convertible Notes disposed Other changes Balance at 30 June 2021 Convertible Notes (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 47,850 - (45,000) - 2,850 Brett Spork (resigned 23 October 2020) 16,667 - (16,667) - - Ronni Chalmers 805,000 - - - 805,000 Julian Gosse - - - - - Marc Schwartz (appointed 21 October 2020) - - - - - 869,517 - (61,667) - 807,850 19 Clime Capital Limited ABN: 99 106 282 777 Proceedings on behalf of the Company As at the date of this report, no person has applied for leave of Court to bring proceedings on behalf of the Company or to 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. Contingent assets and liabilities As at 30 June 2022, the Company has no contingent liabilities or commitments (2021: $Nil). Rounding off of amounts In accordance with ASIC Corporations (Rounding in Financial/Director’s report) Instrument 2016/191, the amounts in the Directors’ Report have been rounded to the nearest dollar, unless otherwise stated. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 20. Signed in accordance with a resolution of the Directors. John Abernethy Chairman Sydney, 19 August 2022 20 Clime Capital Limited ABN: 99 106 282 777 Auditor’s Independence Declaration | Annual Report for the year ended 30 June 2022 Level 16, Tower 2 Darling Park 201 Sussex Street Sydney NSW 2000 Postal Address GPO Box 1615 Sydney NSW 2001 p. +61 2 9221 2099 e. sydneypartners@pitcher.com.au AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF CLIME CAPITAL LIMITED ABN 99 106 282 777 In relation to the independent audit for the year ended 30 June 2022, to the best of my knowledge and belief there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and b) no contraventions of APES 110 Code of Ethics or Professional Accountants (including Independence Standards). Mark Godlewski Partner Pitcher Partners Sydney 19 August 2022 Adelaide Brisbane Melbourne Newcastle Perth Sydney Pitcher Partners is an association of independent firms. An independent New South Wales Partnership. ABN 17 795 780 962. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. pitcher.com.au 21 Clime Capital Limited ABN: 99 106 282 777 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Note 2022 $ 2021 $ Investment income Investment revenue 2 8,513,409 3,792,650 Net realised gain/(loss) on disposal of financial assets at fair value through profit or loss 5,634,871 11,546,376 Net unrealised gain/(loss) on financial assets at fair value through profit or loss (29,580,837) 21,660,862 CBG termination cost recovered - 533,520 Gain on cancellation of convertible notes bought back - 400 Net investment income/(loss) (15,432,557) 37,533,808 Other income Government grant received - 10,010 Total other income - 10,010 Expenses Management fees (1,625,516) (1,409,267) Performance fees - (1,110,756) Brokerage costs (320,764) (426,070) Accounting fees (43,323) (58,312) Custody fees (25,001) (28,180) ASX fees (52,456) (69,733) Share registry fees (89,293) (104,262) Directors and company secretarial fees (184,000) (165,304) Legal and professional fees (19,751) (34,371) CBG termination cost paid - (533,520) Other administrative expenses (217,353) (429,204) Total expenses before finance costs (2,577,457) (4,368,979) Finance costs 10 (1,801,165) (1,895,263) Profit/(Loss) for the year before income tax expense (19,811,179) 31,279,576 Income tax (expense)/benefit 4(a) 7,986,348 (8,318,701) Profit/(Loss) for the year (11,824,831) 22,960,875 Other comprehensive income for the year - - Total comprehensive income/(loss) for the year (11,824,831) 22,960,875 Basic earnings/(losses) per share 6 (8.52)cps 19.10cps Diluted earnings/(losses) per share 6 (8.52)cps 16.34cps The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the Financial Statements which follow. 22 Clime Capital Limited ABN: 99 106 282 777 Note 2022 $ 2021 $ ASSETS Cash and cash equivalents 13(a) 8,362,862 6,615,753 Trade and other receivables 7 899,285 1,013,672 Financial assets at fair value through profit or loss 8 135,857,818 155,730,657 Current tax benefit 4(b) 2,735,963 886,729 Prepayments 92,029 43,713 Net deferred tax assets 4(c) 4,981,648 - Total assets 152,929,605 164,290,524 Liabilities Trade and other payables 9 176,063 3,240,376 Dividends payable 5(b) 1,794,917 1,678,130 Convertible notes 10 35,770,969 27,211,011 Net deferred tax liabilities 4(c) - 3,464,040 Total liabilities 37,741,949 35,593,557 Net assets 115,187,656 128,696,967 Equity Issued capital 11 125,062,312 119,394,527 Option premium on convertible notes 10 161,310 227,904 Accumulated losses 12(a) (38,182,846) (24,185,919) Profit reserve 12(b) 28,146,880 33,260,455 Total equity 115,187,656 128,696,967 STATEMENT OF FINANCIAL POSITION As at 30 June 2022 The above Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements which follow. 23 Clime Capital Limited ABN: 99 106 282 777 Note Issued capital Accumulated Losses Profit Reserve Option Premium on Convertible Notes Total Equity $ $ $ $ $ Balance at 1 July 2020 101,441,905 (24,189,794) 16,218,709 227,904 93,698,724 Profit for the year - 22,960,875 - - 22,960,875 Other comprehensive income - - - - - Total comprehensive loss for the year - 22,960,875 - - 22,960,875 Transactions with owners in their capacity as owners Issue of ordinary shares 11(a) 16,416,487 - - - 16,416,487 Transaction costs on issue of ordinary shares 11(a) (211,146) - - - (211,146) Shares acquired under buy-back 11(a) (567,476) - - - (567,476) Conversion of convertible notes into ordinary shares 11(a) 1,504,123 - - - 1,504,123 Dividend reinvestment plan 11(a) 747,699 - - - 747,699 Transaction costs on shares acquired under buy-back 11(a) (584) - - - (584) Income tax on transaction costs 11(a) 63,519 - - - 63,519 Dividends provided for or paid 5 - - (5,915,254) - (5,915,254) 17,952,622 - (5,915,254) - 12,037,368 Transfer to profit reserve 12 - (22,957,000) 22,957,000 - - 17,952,622 (22,957,000) 17,041,746 - 12,037,368 Balance at 30 June 2021 119,394,527 (24,185,919) 33,260,455 227,904 128,696,967 Loss for the year - (11,824,831) - - (11,824,831) Other comprehensive income for the year - - - - - Total comprehensive income for the year - (11,824,831) - - (11,824,831) Transactions with owners in their capacity as owners Issue of ordinary shares 11(a) - - - - - Convertible notes issued - - - 230,443 230,443 Deferred tax on issue of convertible notes - - - (69,133) (69,133) Conversion of convertible notes into ordinary shares 11(a) 5,548,913 - - - 5,548,913 Dividend reinvestment plan 11(a) 1,041,306 - - - 1,041,306 Shares acquired under buy-back 11(a) (922,068) - - - (922,068) Transaction costs on shares acquired under on-market buy- back 11(a) (523) - - - (523) Income tax on transaction costs 11(a) 157 - - - 157 Dividends provided for or paid 5 - - (7,513,575) - (7,513,575) 5,667,785 - (7,513,575) 161,310 (1,684,480) Transfer of option premium on matured convertible notes 12 - 227,904 - (227,904) - Transfer to profit reserve 12 - (2,400,000) 2,400,000 - - 5,667,785 (2,172,096) (5,113,575) (66,594) (1,684,480) Balance at 30 June 2022 125,062,312 (38,182,846) 28,146,880 161,310 115,187,656 The above Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements which follow. STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 24 Clime Capital Limited ABN: 99 106 282 777 STATEMENT OF CASH FLOWS For the year ended 30 June 2022 Note 2022 $ 2021 $ Cash flows from operating activities Proceeds from sale of investments 106,376,655 101,014,014 Payments for purchase of investments (111,756,927) (111,817,789) (5,380,272) (10,803,775) Dividends and trust distributions received 7,982,819 3,538,564 Interest received 5,057 7,498 Other income received 56,484 547,026 Government grant received - 10,010 Payments for administrative, takeover and other expenses (1,049,538) (1,777,630) Investment manager's fees paid (1,639,211) (1,351,590) Performance fees paid (1,110,756) - Income tax paid (2,377,550) (2,164,901) Net cash inflow/(outflow) from operating activities 13(c) (3,512,967) (11,994,798) Cash flows from financing activities Dividends paid net of dividend reinvestment (6,355,482) (4,678,389) Proceeds from issue of convertible notes 15,483,102 1,128,912 Proceeds from issue of shares - 16,205,341 Payment for share buy-back including transaction costs (922,591) (568,060) Payments for buy-back of convertible notes including transaction costs - (24,030) Payments for convertible notes redeemed (1,190,200) - Finance costs paid on convertible notes (1,754,753) (1,721,921) Net cash inflow/(outflow) from financing activities 5,260,076 10,341,853 Net increase/(decrease) in cash held 1,747,109 (1,652,945) Effects of exchange rate movements on cash - - Cash and cash equivalents at beginning of the financial year 6,615,753 8,268,698 Cash and cash equivalents at end of the financial year 13(a) 8,362,862 6,615,753 Non-cash financing activities Dividends reinvested 13(d) 1,041,306 747,699 Conversion of convertible notes into ordinary shares 13(d) 5,548,913 1,504,123 The above Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements which follow. 25 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Significant accounting policies (a) Basis of preparation These financial statements are general purpose financial statements prepared in accordance with applicable Accounting Standards, including Australian Accounting Interpretations, the Corporations Act 2001 and other authoritative pronouncements of the Australian Accounting Standards Board. Clime Capital Limited is a publicly listed company, incorporated and domiciled in Australia. The Company is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected financial assets and financial liabilities. It is considered that the information needs of shareholders in a company of this type are better met by presenting the Statement of Financial Position on a liquidity basis. The presentation currency is Australian Dollars. All balances are expected to be recovered or settled within 12 months, except for financial assets at fair value through profit or loss, convertible notes and the net deferred tax liabilities. The Company manages financial assets at fair value through profit or loss based on the economic circumstances at any given point in time, as well as to meet liquidity requirements. As such, it is expected that a portion of the portfolio will be realised within 12 months, however, an estimate of that amount cannot be reliably determined as at reporting date. Key judgements and estimates The following are the key judgements and estimates adopted by the Company in the preparation of the financial report. i) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Company considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. (b) Financial instruments Investments i) Classification The Company’s investments are categorised at fair value through profit or loss. They comprise investments in publicly listed and unlisted companies. ii) Recognition/derecognition The Company recognises financial assets on the date it becomes party to the contractual agreement (trade date) and recognises changes in fair value of the financial assets from this date. Financial assets are derecognised when the right to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. iii) Measurement Financial assets at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset. Transaction costs on financial assets at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments at fair value through profit or loss are measured at fair value with changes in their fair value recognised in profit or loss. The fair value of financial assets traded in active markets is based on their quoted market prices at the reporting date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices. NOTE 1 26 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (b) Financial instruments (continued) Investments (continued) Convertible notes The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On issue of the convertible notes, the fair value of the liability component is determined using a market rate for an equivalent non- convertible bond and this amount is carried on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in statement of changes in equity as an option premium on convertible notes, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss. (c) Income tax The charge for current income tax expense is based on the taxable income for the year. It is calculated using the tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Current and deferred taxes are recognised in profit or loss except where they relate to items that may be recognised directly in equity, in which case they are adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in the income taxation legislation and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by law. Clime Capital Limited and its wholly owned subsidiary (for income tax purposes), CBG Capital Limited, have implemented the tax consolidation legislation from the acquisition date of 25 October 2019. Clime Capital Limited is the head entity in the tax consolidated group. These entities are taxed as a single entity. (d) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. (e) Trade and other receivables Receivables include amounts for dividends, interest and securities sold. Dividends are receivable when they have been declared and are legally payable. Interest is accrued at the balance date from the time of last payment. Amounts receivable for securities sold are recorded when a sale has occurred. Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within a few days. The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected credit loss allowance. To measure the expected credit losses, trade receivables have been grouped based on due date. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. 27 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (f) Trade and other payables These amounts represent liabilities for amounts owing by the Company at year end which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Amounts payable for securities purchased are recorded when the purchase has occurred. (g) 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). In these circumstances, the GST is recognised as being part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as an asset or liability in the statement of financial position. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (h) Revenue i) Investment income Dividend income is recognised in profit or loss on the day on which the relevant investment is first quoted on an “ex-dividend” basis. Interest revenue and distributions from unlisted funds are recognised as they accrue, taking into account the effective yield on the financial asset. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ are included in profit or loss in the period in which they arise. ii) Government grants Government grants are recognised as revenue where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. (i) Earnings per share i) Basic earnings per share Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Potential ordinary shares are anti-dilutive when their conversion to ordinary shares would increase earnings per share or decrease the loss per share from continuing operations. The calculation of diluted earnings per share does not assume conversion, exercise or other issue of potential ordinary shares that would have an anti-dilutive effect on earnings per share. (j) Dividends Provisions for dividends payable are recognised in the reporting period in which they are declared, for the entire undistributed amount, regardless of the extent to which they will be paid in cash. (k) Profit reserve The profits reserve is made up of amounts transferred from current and retained earnings/accumulated losses that are preserved for future dividend payments. (l) Issued capital Ordinary and preference shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 28 Clime Capital Limited ABN: 99 106 282 777 (m) New and amended accounting standards adopted by the Company There are no new accounting standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2021 that have a material impact on the Company. (n) New accounting standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 July 2022, and have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Company. (o) Rounding of amounts In accordance with ASIC Corporations (Rounding in Financial/Director’s report) Instrument 2016/191, the amounts in the financial statements have been rounded to the nearest dollar, unless otherwise stated. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 27 29 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Investment revenue NOTE 2 2022 $ 2021 $ Dividends and trust distributions 8,508,352 3,785,152 Interest 5,057 7,498 Total 8,513,409 3,792,650 Auditor’s renumeration NOTE 3 Remuneration of Pitcher Partners in relation to: Audit and review of the financial reports 53,827 42,103 Taxation 10,890 30,433 Corporate Finance 20,466 1,169 TOTAL 85,183 73,705 Taxation NOTE 4 The prima facie tax on profit before income tax is reconciled to income tax expense as follows: Prima facie tax expense/(benefit) on profit/(loss) before income tax at 30% Adjusted for tax effect of amounts which are not deductible / (taxable) in calculating taxable income: (5,943,354) 9,383,873 Imputation gross up on dividends received 780,228 271,092 Franking credits on dividends received (2,600,762) (903,640) Permanent differences (140,713) (61,684) Others - (3,000) Prior year under/(over) provision (81,747) (367,940) Income tax (benefit)/expense (7,986,348) 8,318,701 The applicable weighted average effective tax rates are as follows: (40.31%) 26.59% (a) Income tax expense/(benefit) 30 Clime Capital Limited ABN: 99 106 282 777 Taxation (continued) NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (b) Current tax benefit/(liability) 2022 $ 2021 $ Income Tax 2,735,963 886,729 (c) Net deferred tax assets/(liabilities) Deferred tax assets Deferred tax assets comprise the estimated tax deductible at the current income tax rate of 30% on the following items: Net unrealised losses on investment portfolio 2,278,061 - Carried forward tax losses 2,433,208 2,961,802 Other temporary differences 357,669 357,669 5,068,938 3,319,471 Deferred tax liabilities Deferred tax liabilities comprise the estimated tax payable at the current income tax rate of 30% on the following items: Net unrealised gains on investment portfolio - (6,767,471) Other temporary differences (87,290) (16,040) (87,290) (6,783,511) Net deferred tax assets/(liabilities) 4,981,648 (3,464,040) (d) Income tax (benefit)/expense recognised in the profit or loss Current income tax expense/(benefit) - 1,121,695 Deferred tax relating to the origination and reversal of temporary differences (7,904,601) 7,564,946 Prior year over provision (81,747) (367,940) Total income tax (benefit)/expense (7,986,348) 8,318,701 NOTE 4 31 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Dividends (a) Paid in the current year NOTE 5 2022 $ 2021 $ Dividends paid in the current year A fully franked final dividend on ordinary shares in respect of the 2021 financial year of 1.25 cents per share was paid on 28 July 2021 (2021: A fully franked final dividend on ordinary shares in respect of the 2020 financial year of 1.05 cents per share was paid on 30 July 2020) 1,678,130 1,188,964 A fully franked dividend on ordinary shares for the quarter ended 30 September 2021 of 1.52 cents per share was paid on 28 October 2021 (2021: A fully franked dividend on ordinary shares for the quarter ended 30 September 2020 of 1.125 cents per share was paid on 30 October 2020) 2,126,088 1,270,525 A fully franked dividend on ordinary shares for the quarter ended 31 December 2021 of 1.28 cents per share was paid on 28 January 2022 (2021: A fully franked dividend on ordinary shares for the quarter ended 31 December 2020 of 1.175 cents per share was paid on 29 January 2021) 1,796,961 1,377,510 A fully franked dividend on ordinary shares for the quarter ended 31 March 2022 of 1.28 cents per share was paid on 28 April 2022 (2021: A fully franked dividend on ordinary shares for the quarter ended 31 March 2021 of 1.20 cents per share was paid on 29 April 2021) 1,795,609 1,589,089 7,396,788 5,426,088 (b) Provided for in the current year A fully franked dividend in respect of the June 2022 quarter of 1.28 cents per share was payable on ordinary shares as at 30 June 2022 (2021: A fully franked dividend in respect of the June 2021 quarter of 1.25 cents per share was payable on ordinary shares as at 30 June 2021) 1,794,917 1,678,130 1,794,917 1,678,130 (c) Dividend franking account Franking credits balance based on a tax rate of 30% 2,743,767 933,391 Impact on franking account balance of dividends payable on 28 July 2022 (2021: 28 July 2021) (769,250) (719,199) 1,974,517 214,192 32 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Earnings/(Losses) per share NOTE 6 2022 $ 2021 $ Basic earnings/(losses) per share (8.52)cps 19.10cps Diluted earnings/(losses) per share (8.52)cps 16.34cps Reconciliation of earnings/(losses) used in calculating basic and diluted earnings/(losses) per share: Basic earnings/(losses) per share Total comprehensive income/(loss) for the year $ (11,824,831) 22,960,875 Earnings/(Losses) used in calculating basic earnings per share $ (11,824,831) 22,960,875 Weighted average number of ordinary shares used in the calculation of basic earnings per share Nos 138,809,285 120,224,516 Diluted earnings/(losses) per share Earnings/(Losses) used in calculating basic earnings per share $ (11,824,831) 22,960,875 Add: interest expense on convertible notes (net of tax) $ 1,260,816 1,326,684 Earnings/(Losses) used in calculating diluted earnings per share $ (10,564,015) 24,287,559 Weighted average number of ordinary shares used in the calculation of basic earnings per share Nos 138,809,285 120,224,516 Adjustments for calculation of diluted earnings per share: - Convertible Notes Nos 29,600,350 28,413,818 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share Nos 168,409,635 148,638,334 The Convertible Notes issued by the Company are non-dilutive hence diluted earnings/(losses) per share is the same as basic earnings/(losses) per share. 33 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Trade and other receivables NOTE 7 2022 $ 2021 $ Unsettled trades - 574,184 Income receivable 858,992 389,943 Other debtors 40,293 49,545 899,285 1,013,672 Terms and conditions Income receivable represents dividends, distributions and interest accrued and receivable at reporting date. Unsettled trades are non-interest bearing and are secured by the Australian Securities Exchange - National Guarantee Fund. They are settled within 2 days of the sale being executed. Other debtors consist of GST receivables that can be recovered from the Australian Tax Office. No interest is applicable to these amounts. The maximum credit risk exposure in relation to receivables is the carrying amount. Financial assets at fair value through profit or loss NOTE 8 Listed equities - domestic 120,489,661 144,502,646 Unlisted unit trusts 15,368,157 11,228,011 135,857,818 155,730,657 Trade and other payables NOTE 9 Accrued expenses 53,772 112,305 Amount payable to related parties 122,291 1,246,742 Unsettled trades - 1,881,329 176,063 3,240,376 Terms and conditions Unsettled trades are non-interest bearing and are secured by the Australian Securities Exchange - National Guarantee Fund. They are settled within 2 days of the purchase being executed. 34 Clime Capital Limited ABN: 99 106 282 777 Convertible Notes Notes issued under Entitlement Offer and Placement On 18 November 2021 at a meeting of Noteholders, Noteholders approved amendments to the terms of the Company’s existing unsecured, redeemable, Convertible Notes and trust deed governing the Notes. Pursuant to its prospectus dated 27 October 2021 and supplementary prospectus dated 24 November 2021 (Note Prospectus), the Company issued 16,268,995 new Notes, each with a face value of $1.00 per Note on 1 December 2021. A total of 1,239,792 Notes (each with a face value of $0.96) were redeemed on 30 November 2021. 21,066,125 Notes (each with a face value of $0.96) were converted into 20,223,593 Notes (each with a face value of $1.00) on 1 December 2021. Following the respective conversions, redemptions, consolidation and the new note issue pursuant to the Note Prospectus, the Company has on issue a total of 36,492,588 Notes, each with a face value of $1.00, an interest rate of 5.25% per annum, with a term expiring on 30 November 2025. Noteholders have the right to convert some or all of their notes to shares at any time before the maturity date upon which it will be redeemed. The equity element is presented in equity, under the heading of “option premium on Convertible Notes”. The effective interest rate of the liability element on initial recognition is 5.98% per annum. NOTE 10 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 33 35 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 2022 $ 2021 $ Proceeds from issue of Convertible Notes (net of raising costs) 35,704,715 29,176,618 Liability component at the date of issue (35,474,272) (28,851,040) Equity component at the date of issue 230,443 325,578 Deferred tax on issue of Convertible Notes (69,133) (97,674) Equity component at the end of the year 161,310 227,904 Classification of liability component at the end of the year: - Current 157,468 27,211,011 - Non-current 35,613,501 - 35,770,969 27,211,011 Liability component at the beginning of the year 27,211,011 27,437,310 Net proceeds from issue of Convertible Notes during the year 15,483,102 1,128,912 Equity component at the date of issue (230,443) - Payments for Convertible Notes redeemed (1,190,200) - Interest expense for the year calculated at effective interest rates 1,801,165 1,895,263 Finance costs paid (1,754,753) (1,721,921) Convertible Notes (CAMG) bought back - (24,430) Conversion of Convertible Notes (CAMG) into ordinary shares (CAM) (5,548,913) (1,504,123) Liability component at the end of the year 35,770,969 27,211,011 Convertible Notes (continued) The Convertible Notes are presented in the statement of financial position as follows: NOTE 10 Fair value Fair value of the Convertible Notes as at 30 June 2022 amounting to $35,397,810 (30 June 2021: $27,243,454) was determined by reference to the published price quotation of $0.970 (30 June 2021: $0.970) on the Convertible Note ticker ASX:CAMG as at 30 June 2022. 36 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Issued capital NOTE 11 2022 $ 2021 $ Issued and paid-up capital 140,227,903 (2021: 134,210,421) ordinary fully paid shares 125,062,312 119,394,527 (a) Movements in ordinary share capital Notes Number of shares 2022 Number of shares 2021 2022 $ 2021 $ Balance at beginning of the year 134,210,421 113,234,687 119,394,527 101,441,905 Issue of ordinary shares - 19,209,765 - 16,416,487 Transaction costs on issue of ordinary shares - - - (211,146) Income tax on transactions costs - - 157 63,519 Shares acquired under buy-back (1,049,753) (726,926) (922,068) (567,476) Conversion of Convertible Notes into ordinary shares 11(b) 5,924,693 1,605,981 5,548,913 1,504,123 Transaction cost on shares acquired under buy-back - - (523) (584) Dividend reinvestment plan 1,142,542 886,914 1,041,306 747,699 Balance at the end of the year 140,227,903 134,210,421 125,062,312 119,394,527 37 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Issued capital (continued) Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote at shareholders meetings. In the event of winding up the Company, ordinary shareholders rank after noteholders and creditors and are fully entitled to any proceeds on liquidation. (b) On-market share buy-back - ordinary shares On 31 January 2022, the Company announced its intention to refresh its ability to implement an on-market buy-back (within the 10/12 limit) for a further 12-month period which commenced from 15 February 2022 and ends on 14 February 2023. During this period, the Company has the ability to buy a maximum of 14,043,192 fully paid ordinary shares. In accordance with its on-market share buy- back scheme, Clime Capital Limited bought back 1,049,753 (2021: 726,926) ordinary shares during the year. The number of shares bought back and cancelled during the 12 month period was within the ‘10/12 limit’ imposed by s257B of the Corporations Act 2001, and as such, shareholder approval was not required. The shares were acquired at an average price of $0.879 per share (2021: $0.781), with prices ranging from $0.830 to $0.955 (2021: $0.7623 to $0.900). An amount of $922,068 (2021: $567,746), plus $366 (2021: $409) transaction costs net of tax, was deducted from contributed equity. The shares bought back in the years ended 30 June 2022 and 30 June 2021 were cancelled immediately. (c) Conversion of Convertible Notes into Equity During the year, 5,780,118 Convertible Notes of face value $0.96 were converted to 5,924,693 equity shares in the ratio of 1.025 ordinary shares for every Convertible Note. (d) Capital risk management The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. NOTE 11 The Company’s capital structure currently consists of total equity, as recognised in the Statement of Financial Position, plus net debt. Net debt is calculated as Convertible Notes less cash and cash equivalents. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or securities, undertake on-market buy-back or sell financial assets to reduce debt. The Company would look to raise capital when an opportunity to invest in financial assets, business or company is seen as value adding relative to the current net tangible assets and Company’s share price at the time of investment. The Company is subject to certain financing covenants under the terms of the Convertible Notes issue and meeting these are given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. (e) Dividend reinvestment plan The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares are issued under the plan at a price determined by the Director from time to time in accordance with the Corporations Act 2001 and the ASX Listing Rules. 38 Clime Capital Limited ABN: 99 106 282 777 Reserves and accumulated losses (a) Accumulated losses NOTE 12 2022 $ 2021 $ Balance at the beginning of the year (24,185,919) (24,189,794) Net profit/(loss) attributable to members of the Company (11,824,831) 22,960,875 Transfer of option premium on matured Convertible Notes 227,904 - Transfer to profit reserve (2,400,000) (22,957,000) Balance at end of year (38,182,846) (24,185,919) (b) Profit reserve Balance at the beginning of the year 33,260,455 16,218,709 Transfer from accumulated losses 2,400,000 22,957,000 Dividends provided for or paid (7,513,575) (5,915,254) Balance at end of year 28,146,880 33,260,455 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 39 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Cash flow information (a) Reconciliation of cash NOTE 13 2022 $ 2021 $ For the purposes of the statement of financial position and statement of cash flows, cash and cash equivalents comprise: Cash at bank 8,362,862 6,615,753 Total cash and cash equivalents 8,362,862 6,615,753 (b) Reconciliation of liabilities arising from financing activities Liabilities arising from financing activities are liabilities for which cash flows are, or will be, classified as ‘cash flows from financing activities’ in the Statement of Cash Flows. Changes in the carrying amount of such liabilities, which comprise Convertible Notes, are summarised in Note 10. (c) Reconciliation of net profit/(loss) attributable to members of the Company to net cash inflow/(outflow) from operating activities 2022 $ 2021 $ Profit/(loss) attributable to members of the Company (11,824,831) 22,960,875 Adjustments: Finance costs 1,801,165 1,895,263 Gain on cancellation of Convertible Notes bought back - (400) Changes in assets and liabilities: (Increase)/decrease in trade and other receivables 114,387 (630,942) (Increase)/decrease in investments at fair value through profit or loss 19,872,839 (45,091,279) (Increase)/decrease in prepayments (48,316) 32,886 Increase/(decrease) in trade and other payables (3,064,313) 2,684,999 Increase/(decrease) in net deferred tax asset/liability (8,445,688) 6,047,508 Increase in deferred tax option premium on Convertible Notes (69,133) - Increase in income tax on transactions costs 157 63,519 (Increase)/decrease in current tax benefit (1,849,234) 42,773 Net cash inflow/(outflow) from operating activities (3,512,967) (11,994,798) 40 Clime Capital Limited ABN: 99 106 282 777 Cash flow information (continued) (d) Non-cash transactions 2022 $ 2021 $ During the year the Company entered into the following financing activities which were not reflected in the cash flows: Dividends reinvested 1,041,306 747,699 Conversion of Convertible Notes into ordinary shares 5,548,913 1,504,123 Total non-cash transactions 6,590,219 2,251,822 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Related party transactions All transactions with related entities were made on normal commercial terms and conditions no more favourable than transactions with other parties unless otherwise stated. (a) Management, performance and other fees Management, performance and other fees paid to companies related to the Directors were as follows: NOTE 14 Note 2022 $ 2021 $ Clime Asset Management Pty Limited (c) (i) 1,625,516 2,520,023 Clime Investment Management Ltd (c) (ii) 156,160 162,867 CBG Asset Management Limited - 533,520 1,781,676 3,216,410 As at 30 June 2022, $122,291 (2021: $1,246,742) of the Company’s management fees and performance fees re- main unpaid and within payables. NOTE 13 41 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Related party transactions (continued) (b) Dividends All dividends paid and payable by the Company to Directors and Director related entities are on the same basis as to other shareholders. (c) Nature of relationships (i) Clime Asset Management Pty Limited Mr. John Abernethy and Mr. Ronni Chalmers are Directors of the Investment Manager, Clime Asset Management Pty Limited (a wholly-owned subsidiary of ASX listed company Clime Investment Management Ltd). Clime Asset Management Pty Limited receives management and performance fee as remuneration for managing the Company’s investment portfolio. Management and performance fees paid and payable are determined by the underlying Investment Management Agreement, the terms of which entitle the Investment Manager to a management fee, calculated as a percentage of funds under management, and a performance fee, should performance targets outlined in the Investment Management Agreement be achieved. (ii) Clime Investment Management Ltd Mr. John Abernethy and Mr. Ronni Chalmers are Directors of Clime Investment Management Limited (CIW) and did not receive any form of remuneration from the Company. Clime Investment Management Ltd received management fees as remuneration for the employment of the Chairman, a Director and the Company Secretary as well as reimbursement for marketing fees. Clime Investment Management Ltd directly owns 4.44% (2021: 4.38%) of the share capital of the Company as at 30 June 2022. Clime Investment Management Ltd, through the Investment Manager, has the indirect power to dispose 2.98% (2021: 2.94%) of the Company’s shares and has the indirect power to dispose 9.17% (2021: 10.12%) of the Company’s Convertible Notes held by the Investment Manager’s Individually Managed Accounts (IMAs) and other managed funds. NOTE 14 42 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Key Management Personnel disclosure The Company has no employees and therefore has no Key Management Personnel other than the Directors. The names and position held of the Company’s Key Management Personnel (including Directors) in office at any time during the financial year are: John Abernethy Chairman - Non-Independent Julian Gosse Independent Director Ronni Chalmers Non-Independent Director Marc Schwartz Independent Director NOTE 15 Mona Vale Beach, New South Wales 42 43 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Key management personnel disclosure (continued) 2022 Balance at 1 July 2021 Shares acquired Shares disposed Other changes Balance at 30 June 2022 Ordinary Shares (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 1,540,000 180,000 - - 1,720,000 Ronni Chalmers 719,042 - - - 719,042 Julian Gosse - - - - - Marc Schwartz 17,000 - - - 17,000 2,276,042 180,000 - - 2,456,042 (b) Shareholdings 2022 $ 2021 $ Cash salary and fees* 152,728 135,326 Short-term employee benefits 152,728 135,326 Superannuation 7,272 5,978 Post-employment benefits 7,272 5,978 Total employment benefits 160,000 141,304 * Includes $80,000 (2021: $60,000) paid/payable to Clime Investment Management Ltd for the services rendered by the Chairman and one other Director. (a) Remuneration of Directors and Other Key Management Personnel A summary of the remuneration of Directors and other Key Management Personnel for the current and previous financial year is set out below: NOTE 15 44 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (b) Shareholdings (continued) (c) Options to acquire ordinary shares There were no shares or options granted during the reporting period as compensation. There were no un- exercised options relating to compensation at 30 June 2022 and 30 June 2021. 2022 Balance at 1 July 2021 Convertible Notes acquired Convertible Notes disposed Other changes Balance at 30 June 2022 Convertible Notes (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 2,850 119,243 - - 122,093 Ronni Chalmers 805,000 170,000 - - 975,000 Julian Gosse - - - - - Marc Schwartz - - - - - 807,850 289,243 - - 1,097,093 All acquisitions and disposals have been made on normal terms and conditions applicable to any equity/note holder. 2021 Balance at 1 July 2020 Shares acquired Shares disposed Other changes Balance at 30 June 2021 Ordinary Shares (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 1,012,000 528,000 - - 1,540,000 Brett Spork (resigned 23 October 2020) 102,500 - (7,012) (95,488) - Ronni Chalmers 650,078 68,964 - - 719,042 Julian Gosse - - - - - Marc Schwartz (appointed 21 October 2020) - 17,000 - - 17,000 1,764,578 613,964 (7,012) (95,488) 2,276,042 Balance at 1 July 2019 Convertible Notes acquired Convertible Notes disposed Other changes Balance at 30 June 2020 Convertible Notes (Number) (Number) (Number) (Number) (Number) John Abernethy (Chairman) 47,850 - (45,000) - 2,850 Brett Spork (resigned 23 October 2020) 16,667 - (16,667) - - Ronni Chalmers 805,000 - - - 805,000 Julian Gosse - - - - - Marc Schwartz (appointed 21 October 2020) - - - - - 869,517 - (61,667) - 807,850 45 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Financial instruments (a) Financial Risk Management Objectives, Policies and Procedures The Company’s accounting policies are included in Note 1, while the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at reporting date, are included under the appropriate note for that instrument. Risks arising from holding financial instruments are inherent in the Company’s activities, and are managed through a process of ongoing identification, measurement and monitoring. The Company is exposed to credit risk, liquidity risk and market risk. The Company is responsible for identifying and controlling the risks that arise from these financial instruments. The risks are measured using a method that reflects the expected impact on the results and equity of the Company from reasonably possible changes in the relevant risk variables. Information about these risk exposures at the reporting date, measured on this basis, is disclosed below. Information about the total fair value of financial instruments exposed to risk, as well as compliance with established investment mandate limits, is also monitored by the Company. These mandate limits reflect the investment strategy of the Company, as well as the level of risk that the Company is willing to accept, with additional emphasis on selected industries. This information is prepared and reported to relevant parties within the Company on a regular basis as deemed appropriate. Concentrations of risk arise when a number of financial instruments or contracts are entered into with the same counterparty, or where a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. NOTE 16 In order to avoid excessive concentrations of risk, the Company monitors its exposure to ensure concentrations of risk remain within acceptable levels and either reduces exposure or uses derivative instruments to manage the excessive risk concentrations when they arise. (b) Credit risk Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets, excluding investments, of the Company which have been recognised on the Statement of Financial Position, is the carrying amount. The Company is not materially exposed to any individual credit risk. Credit is not considered to be a material risk to the Company as any cash and fixed interest securities held by the Company or in its portfolios are invested with financial institutions that have a Standard and Poor’s long term rating AA-. Also the majority of maturities are within three months. None of the assets exposed to a credit risk are overdue or considered to be impaired. (c) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. This risk is controlled through the Company’s investment in financial instruments, which under market conditions are readily convertible to cash. In addition, the Company maintains sufficient cash and cash equivalents to meet normal operating requirements. Accordingly, the entity is not considered to be exposed to material liquidity risks in relation to its financial instruments. Maturity analysis for financial liabilities Financial liabilities of the Company comprise trade and other payables which have no contractual maturities but are typically settled within 30 days, except convertible notes which are settled on maturity. 46 Clime Capital Limited ABN: 99 106 282 777 Financial instruments (continued) (d) Market risk Market risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. By its nature, as a listed investment company that invests in tradeable securities in various securities exchanges, the Company will always be subject to market risk and risks of changes in foreign currency exchange rates as it invests its capital in securities which are not risk free. The market prices of these securities can and do fluctuate in accordance with multiple factors. The Company seeks to reduce market risk by attempting to invest in equity securities where there is a significant ‘margin of safety’ between the underlying companies’ value and share price. The Company does not have set parameters as to a minimum or maximum margin of safety. The Company does set broad parameters regarding the maximum amount of the portfolio that can be invested in a single company or sector to ensure an appropriate level of diversification. (i) Interest rate risk The Company’s interest bearing financial assets expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, the risk is measured using sensitivity analysis on Note 16(d) (iii). Interest rate risk is actively managed by the Investment Manager. The majority of the Company’s interest bearing assets are held with reputable banks to ensure the Company obtains competitive rates of return while providing sufficient liquidity to meet cash flow requirements. The table below summarises the Company’s exposure to interest rates risk. It includes the Company’s assets and liabilities at fair values, categorised by the earlier of contractual repricing or maturity date. 2022 Weighted Average Effective Interest Rate Floating Interest Rate Non Interest Bearing Fixed Interest Rate Total % $ $ $ $ Financial Assets Cash and cash equivalents 0.06% 8,362,862 - - 8,362,862 Trade and other receivables - 858,992 - 858,992 Financial assets at fair value through profit or loss - 135,857,818 - 135,857,818 Total Financial Assets 8,362,862 136,716,810 - 145,079,672 Financial Liabilities Management fee payable and unsettled trades - 122,291 - 122,291 Dividends payable - 1,794,917 - 1,794,917 Convertible notes 6.05% - - 35,770,969 35,770,969 Total Financial Liabilities - 1,917,208 35,770,969 37,688,177 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 NOTE 16 47 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (d) Market risk (continued) (i) Interest rate risk (continued) (ii) Other price risk Other price risk is the risk that fair value of equities decreases as a result of changes in market prices, whether those changes are caused by factors specific to the individual stock or factors affecting the broader market. Other price risk exposure arises from the Company’s investment portfolio. (iii) Summarised sensitivity analysis The following table summarises the sensitivity of the Company’s operating profit and equity to other price risk and interest rate risk. The reasonably possible movements in the risk variables have been determined based on management’s best estimate, having regard to a number of factors, including historical levels of changes in interest rates, historical correlation of the Company’s investments with the relevant benchmark and market volatility. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the performance of the securities in which the Company invests. As a result, historic variations in risk variables are not a definitive indicator of future variations in the risk variables. -10% +10% -100 bps +100 bps 30 June 2022 (13,585,782) 13,585,782 (82,369) 82,369 30 June 2021 (15,573,066) 15,573,066 (67,704) 67,704 Price risk Interest rate risk Impact on profit or loss/equity No effect on other comprehensive income would result from price or interest rate risk in 2022 or 2021. Financial instruments (continued) NOTE 16 2021 Weighted Average Effective Interest Rate Floating Interest Rate Non Interest Bearing Fixed Interest Rate Total % $ $ $ $ Financial Assets Cash and cash equivalents 0.11% 6,615,753 - - 6,615,753 Trade and other receivables - 964,127 - 964,127 Financial assets at fair value through profit or loss - 155,730,657 - 155,730,657 Total Financial Assets 6,615,753 156,694,784 - 163,310,537 Financial Liabilities Management fee payable, performance fee payable and unsettled trades - 3,128,071 - 3,128,071 Dividends payable - 1,678,130 - 1,678,130 Convertible Notes 7.14% - - 27,211,011 27,211,011 Total Financial Liabilities - 4,806,201 27,211,011 32,017,212 Impact on profit (pre-tax) 48 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Fair value measurement The Company measures and recognises financial assets at fair value through profit or loss on a recurring basis. The Company has no assets measured at fair value on a non-recurring basis in the current reporting period. AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); • Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and • Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). (a) Fair value in an active market (Level 1) The fair value of financial assets traded in active markets (such as publicly traded derivatives and listed equity securities) are based on quoted market prices at the close of trading at the end of the reporting period without any deduction for estimated future selling costs. The Company values its investments in accordance with the accounting policies set out in Note 1 of the financial statements. For the majority of its investments, the Company relies on information provided by independent pricing services for the valuation of its investments. The quoted market price used for financial assets held by the Company is the closing quoted last prices at the end of the reporting period. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. NOTE 17 (b) Fair value in an inactive or unquoted market (Level 2 and Level 3) The fair value of financial assets that are not traded in an active market is determined using valuation techniques. These include the use of recent arm’s length market transactions, reference to the current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Refer to Note 17(f) for valuation inputs. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate used is a market rate at the end of the reporting period applicable for an instrument with similar terms and conditions. For other pricing models, inputs are based on market data at the end of the reporting period. Fair values for unquoted equity investments are estimated, if possible, using applicable price/earnings ratios for similar listed companies adjusted to reflect the specific circumstances of the issuer. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Company holds. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk. 49 Clime Capital Limited ABN: 99 106 282 777 Fair value measurement (continued) NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (c) Recognised fair value measurements The table below presents the Company’s financial assets measured and recognised at fair value as at 30 June. Level 1 Level 2 Level 3 Total At 30 June 2022 $ $ $ $ Financial assets at fair value through profit or loss Listed equities - domestic 120,489,661 - - 120,489,661 Unlisted unit trusts - - 15,368,157 15,368,157 Total financial assets at fair value through profit or loss 120,489,661 - 15,368,157 135,857,818 At 30 June 2021 Financial assets at fair value through profit or loss Listed equities - domestic 144,502,646 - - 144,502,646 Unlisted unit trusts - - 11,228,011 11,228,011 Total financial assets at fair value through profit or loss 144,502,646 - 11,228,011 155,730,657 (d) Transfer between Levels Management’s policy is to recognise transfers into and transfers out of fair value hierarchy Levels as at the end of the reporting period. There were no transfers between Levels in the fair value hierarchy at the end of the reporting period. NOTE 17 50 Clime Capital Limited ABN: 99 106 282 777 Level 3 Unlisted unit trusts $ Opening balance - 1 July 2020 8,073,601 Purchases 2,512,813 Sales (125,000) Total gains recognised in profit or loss 766,597 Closing balance - 30 June 2021 11,228,011 Net transfers into/out of - Purchases 7,237,500 Sales (3,150,000) Total gains recognised in profit or loss 52,646 Closing balance - 30 June 2022 15,368,157 (e) Reconciliation of recurring level 3 fair value movements NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 $52,646 (30 June 2021: gains of $766,597) of the total gains and losses recognised in profit or loss in respect to Level 3 fair value measurements are unrealised as they are attributable to assets held at the end of the reporting period. (f) Valuation inputs and relationships to fair value Description Fair value Unobservable inputs Range of inputs (probability - weighted average) Relationships of unobservable inputs to fair value At 30 June 2022 Unlisted unit trusts 15,368,157 Reported net asset value by investment manager N/A Direct At 30 June 2021 Unlisted unit trusts 11,228,011 Reported net asset value by investment manager N/A Direct The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair value measurements. See (a) and (b) above for the valuation techniques adopted. Fair value measurement (continued) NOTE 17 51 Clime Capital Limited ABN: 99 106 282 777 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 Fair value measurement (continued) (g) Valuation processes used for Level 3 fair value measurements The Company’s Income Sleeve investments are typically unlisted syndicated investments with a medium term investment horizon. The value of investment was initially recorded at cost / acquisition price. The Manager of these unlisted funds issues periodic updates (quarterly or half yearly) to communicate the performance of underlying assets, summary financial information and periodically, independent valuation of the trust’s underlying assets. An independent external valuation is generally done annually and communicated to the investors through the regular fund update. The Company reviews these updates and will reflect the investment valuation based on the independent valuation if and when it changes. As observable prices are not available for these securities, the Company has relied on valuations provided by managers of the underlying funds, based on the net asset value per unit reported by those trusts, in order to derive the fair value of the units. (h) Sensitivity analysis for recurring Level 3 fair value measurements Significant observable and unobservable inputs which affect the valuation of the underlying business of the syndicated unlisted investments include interest rates and general economic conditions, including but not limited to level of economic growth, inflation, wage data, terms of trade, business activity and business and consumer confidence. To illustrate, when interest rates go up, all else being equal and in isolation, the value of the syndicated unlisted investment goes down. However, the interrelationship between key valuation inputs means individual measures do not generally move in isolation. For example, when general economic conditions such as the level of economic growth, business activity and consumer confidence improve, in isolation the value of the unlisted investment goes up. This may be offset by an accompanying increase in interest rates by Central Banks to moderate strong economic activity, which as outlined above would act to reduce the value of the syndicated unlisted investment. (i) Fair value of financial instruments not carried at fair value Receivables and payables are carried at amortised cost when the time value of money is material, otherwise they are carried at their nominal amounts. NOTE 17 Segment information The Company is organised into one segment which operates solely in the business of investment management within Australia. The Company operates in Australia and holds all assets through an Australian Custodian. The Company has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Directors are of the opinion that the current financial position and performance of the Company is equivalent to the operating segments identified above and as such no further disclosure has been provided. NOTE 18 Contingent assets and liabilities As at 30 June 2022, the Company has no contingent liabilities or commitments (2021: $Nil). NOTE 19 Events subsequent to reporting date No matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years. NOTE 20 Company details The registered office and principal place of business of the Company is: Level 12 20 Hunter Street Sydney NSW 2000 NOTE 21 Due to their short-term natures, the carrying amounts of receivables and payables approximate their fair values. 52 Clime Capital Limited ABN: 99 106 282 777 The Directors declare that: a. In the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with Accounting Standards, and giving a true and fair view of the financial position and performance of the Company; b. 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; c. In the Directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated on Note 1(a) of the financial statements; d. The Directors have been given the declarations required by S.295A of the Corporations Act 2001; and e. The remuneration disclosures contained in the Remuneration Report comply with S300A of the Corporations Act 2001. Signed in accordance with a resolution of the Directors made pursuant to S.295(5) of the Corporations Act 2001. On behalf of the Directors John Abernethy Chairman Sydney, 19 August 2022 Directors’ Declaration Directors’ Declaration | Annual Report for the year ended 30 June 2022 53 Clime Capital Limited ABN: 99 106 282 777 Independent Auditor’s Report | Annual Report for the year ended 30 June 2022 Level 16, Tower 2 Darling Park 201 Sussex Street Sydney NSW 2000 Postal Address GPO Box 1615 Sydney NSW 2001 p. +61 2 9221 2099 e. sydneypartners@pitcher.com.au Adelaide Brisbane Melbourne Newcastle Perth Sydney Pitcher Partners is an association of independent firms. An independent New South Wales Partnership. ABN 17 795 780 962. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. pitcher.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLIME CAPITAL LIMITED ABN 99 106 282 777 REPORT ON THE FINANCIAL REPORT Opinion We have audited the accompanying financial report of Clime Capital Limited (“the Company”), which comprises the statement of financial position as at 30 June 2022, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the 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. In our opinion a) the financial report of Clime Capital Limited is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Company’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the Directors of the Company, would be in the same terms if given to the Directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 54 Clime Capital Limited ABN: 99 106 282 777 Independent Auditor’s Report | Annual Report for the year ended 30 June 2022 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the matter Existence and Valuation of Financial Assets Refer to Note 8: Financial assets at fair value through profit or loss and Note 17: Fair value measurement The Company’s financial assets are its largest asset and represent the most significant driver of the Company’s Net Tangible Assets and operating result. The majority of the Company’s investments are considered to be non-complex in nature with fair value based on readily observable data from the ASX and are therefore classified as Level 1. The remaining investments are considered to be Level 3, where the investment is not traded in an active market and fair value is determined using valuation techniques where there are judgements involved in determining the fair value of the investments. The models used to value these investments include inputs which may not be market observable and are therefore estimated based on assumptions. Given the significance of the investments balance, the key audit matter for us was whether the Company has accurately recorded the fair value and has ownership at year end. Our procedures included, amongst others: ▪ Obtaining an understanding of and evaluating the investment management process and controls; ▪ Reviewing and evaluating the audit reports on internal controls (ASAE 3402 Assurance Reports on Controls at a Service Organisation) for the current financial year for the Administrator and Custodian; ▪ Making enquiries as to whether there have been any changes to these controls or their effectiveness from the periods to which the audit report relates to and where necessary obtaining bridging letters; ▪ Obtaining a confirmation of the investment holdings at balance date directly from the Custodian; ▪ Assessing and recalculating the Company’s valuation of individual investment holdings at balance date using independent pricing sources, or, if market prices aren’t available, with reference to independent sources such as investor quarterly reports from the Investment Manager; ▪ Evaluating the accounting treatment of revaluations of financial assets to ensure the correct recognition of current/deferred tax and unrealised gains or losses; and ▪ Assessing the adequacy of disclosures in the financial statements. Pitcher Partners is an association of independent firms. ABN 17 795 780 962. An independent New South Wales Partnership. 55 Clime Capital Limited ABN: 99 106 282 777 Independent Auditor’s Report | Annual Report for the year ended 30 June 2022 Other information The Directors are responsible for the other information. The other information comprises the information in the Company’s annual report for the year ended 30 June 2022 but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially consistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Pitcher Partners is an association of independent firms. ABN 17 795 780 962. An independent New South Wales Partnership. Accuracy of Management and Performance Fees Refer to Note 9: Trade and other payables and Note 14: Related party transactions Management and performance fees are significant expenses of the Company, and their calculation requires adjustments and key inputs. Adjustments include company dividends, tax payments, capital raisings, capital reductions and other relevant expenses. The calculation of management and performance fees includes key inputs such as portfolio movements, relevant index benchmarking and set percentages in accordance with the Investment Management Agreement between the Company and the Investment Manager. In addition to their quantum, as these transactions are made with related parties, there are additional inherent risks associated with these transactions, including the fees charged being in excess of those mandated under the Investment Management Agreement. Our procedures included, amongst others: ▪ Obtaining an understanding of and evaluating the processes and controls for calculating the management and performance fees; ▪ Making enquiries with the Investment Manager and those charged with governance with respect to any significant events during the period and associated adjustments made as a result, in addition to reviewing ASX announcements and Board meeting minutes; ▪ Testing of adjustments such as company dividends, tax payments, capital raisings, capital reductions as well as any other relevant expenses used in the calculation of management and performance fees; ▪ Testing of key inputs such as portfolio movements, application of the relevant index benchmarking, set percentage used in the calculation of management and performance fees, as well as performing a recalculation in accordance with our understanding of the Investment Management Agreement; and ▪ Assessing the adequacy of disclosures made in the financial statements. 56 Clime Capital Limited ABN: 99 106 282 777 Independent Auditor’s Report | Annual Report for the year ended 30 June 2022 Pitcher Partners is an association of independent firms. ABN 17 795 780 962. An independent New South Wales Partnership. Responsibilities of the Directors for the Financial Report The Directors of Clime Capital Limited 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 controls as the Directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 57 Clime Capital Limited ABN: 99 106 282 777 Independent Auditor’s Report | Annual Report for the year ended 30 June 2022 Pitcher Partners is an association of independent firms. ABN 17 795 780 962. An independent New South Wales Partnership. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 18 of the Directors’ Report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Clime Capital Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of Clime Capital Limited 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. Mark Godlewski Pitcher Partners Partner Sydney 19 August 2022 58 Clime Capital Limited ABN: 99 106 282 777 Additional information required by the Australian Securities Exchange Listing Rules and not disclosed elsewhere in this report. ASX Additional Information A. Distribution of Equity Shareholders and Convertible Noteholders (as at 4 August 2022) Analysis of numbers of equity security holders & convertible note holders by size of holding: No. of Holders Ordinary Shares Convertible Note 1 - 1,000 338 63 1,001 - 5,000 519 90 5,001 - 10,000 386 52 10,001 - 100,000 1,616 232 100,001 and over 274 58 3,133 495 59 Clime Capital Limited ABN: 99 106 282 777 B. Equity Share Holders & Convertible Note Holders The names of the twenty largest holders of quoted equity securities are listed below as at 4 August 2022. Ordinary Shares Name No. of shares % of issued shares CLIME INVESTMENT MANAGEMENT LTD 5,889,223 4.2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 4,840,390 3.4 GLEN RANELAGH PTY LTD 1,802,494 1.3 NORA GOODRIDGE INVESTMENTS PTY LIMITED 1,800,000 1.3 DOUBLE PTY LIMITED & ABERNETHY SMSF PTY LTD 1,720,000 1.2 JACQUELINE KAY PTY LTD 1,351,278 1.0 HEATHERS SUPER PTY LTD 1,191,982 0.9 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 1,175,414 0.8 JOHN E GILL OPERATIONS PTY LTD 1,151,340 0.8 ROPA PTY LIMITED 912,346 0.7 GREAT D PTY LTD 900,000 0.6 MR RICHARD MILLER 900,000 0.6 MR PAUL WILHELM MCCAULEY & MRS LISA-GAYE MCCAULEY 809,342 0.6 MR PETER MICHAEL ANTAW & MRS VICTORIA MARY ANTAW 798,960 0.6 HUDSON RETIREMENT PTY LTD 726,830 0.5 MR RONNI DAVID CHALMERS & SAVOIR SUPERANNUATION PTY LTD 719,042 0.5 MR MICHAEL ANTHONY FOX & MRS SUSAN ELIZABETH FOX 700,000 0.5 DI IULIO HOMES PTY LIMITED 669,727 0.5 SEAN FARMER GROUP PTY LTD 639,647 0.5 JENNIFER KALDOR & JONATHON ROSENBERG 618,647 0.4 29,316,662 20.7 60 Clime Capital Limited ABN: 99 106 282 777 The names of the twenty largest holders of quoted Convertible Notes are listed below as at 4 August 2022. Convertible note Name No. of notes % of issued notes J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 4,273,466 11.8 MUTUAL TRUST PTY LTD 2,248,858 6.2 NORA GOODRIDGE INVESTMENTS PTY LIMITED 2,000,000 5.5 MR COLIN JOHN VAUGHAN & MRS ROBIN VAUGHAN 1,308,319 3.6 TADMARO PTY LIMITED 1,285,088 3.5 DR GRAEME PETER DORAHY & MRS JEAN ELIZABETH DORAHY 1,014,936 2.8 SAVOIR SUPERANNUATION PTY LTD 975,000 2.7 JACQUELINE KAY PTY LTD 710,343 2.0 MR GRAHAM DENNEY & MRS ANGELA DENNEY 600,000 1.7 PHILIP HOLDINGS PTY LTD 600,000 1.7 CLENDON HOUSE INVESTMENTS PTY LTD 587,467 1.6 PRESS FORM HOLDINGS PTY LTD 500,000 1.4 MR ANTHONY MICHAEL GIUFFRE 490,847 1.4 CAPITOL SECURITIES PTY LTD 489,600 1.4 HARRINGTON PROVIDENT FUND PTY LTD 426,869 1.2 AUSTRALIAN EXECUTOR TRUSTEES LIMITED 400,200 1.1 MRS JEAN ELIZABETH DORAHY 396,480 1.1 MR REGINALD RAYMOND CALDWELL 391,192 1.1 NATIONAL NOMINEES LIMITED 368,591 1.0 THE CORPORATION OF THE TRUSTEES OF THE ORDER OF THE SISTERS OF MERCY IN QLD 349,256 1.0 19,416,512 53.8 Unquoted equity securities There are no unquoted equity securities on issue as at the date of this report. C. Substantial Holders Substantial holders in the company are set out below (based on voting interest in fully paid ordinary shares) as at 4 August 2022. Ordinary Shares Name No. of shares held % of issued shares Clime Investment Management Limited - Direct 5,889,223 4.2% Clime Investment Management Limited - Indirect 4,795,824 3.4% 61 Clime Capital Limited ABN: 99 106 282 777 D. Voting Rights The voting rights attaching to each class of equity securities are set out below: Fully Paid Ordinary Shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Listed domestic securities No. of shares held Fair value at 30 June 2022 Amcor Limited 170,681 3,079,085 APA Group 347,500 3,916,325 Aurizon Holdings Limited 1,038,423 3,946,007 Australia & New Zealand Banking Group Limited 193,500 4,262,805 BHP Billiton Limited 341,983 14,106,799 Brickworks Limited 203,228 3,767,847 Coles Group Ltd 312,165 5,559,659 Corporate Travel Management 92,259 1,708,637 Goodman Group 96,317 1,718,295 GPT Group Property Trust 639,000 2,696,580 Incitec Pivot Limited 1,434,067 4,746,762 James Hardie Industries SE 65,815 2,090,943 Jumbo Interactive Ltd 195,886 2,785,499 Lycopodium Limited 598,010 3,408,657 Mach7 Technologies 5,151,428 2,524,200 Macquarie Group Limited 22,200 3,652,122 Mineral Resources Ltd 74,533 3,597,708 National Australia Bank Limited 464,428 12,720,683 Navigator Global Investments Limited 2,771,279 3,450,242 New Hope Corporation 694,164 2,401,807 Northern Star Resources 635,584 4,347,395 Seven Group Holdings Ltd 234,243 3,890,776 Sonic Healthcare Limited 103,053 3,401,780 South32 Limited 595,000 2,344,300 Stanmore Resources Ltd 1,025,652 1,989,765 Straker Translations Limited 1,374,748 1,402,243 Westpac Banking Corporation 264,540 5,158,530 Woodside Energy Group Ltd 237,489 7,561,650 Worley Limited 298,635 4,252,560 120,489,661 E. Investments held at the balance date 62 Clime Capital Limited ABN: 99 106 282 777 F. During the year ended 30 June 2022, the Company recorded 721 transactions in securities. $320,764 (excluding GST) in brokerage was paid or accrued for the year. G. Investment Manager The Company has an Investment Management Agreement with the Investment Manager, Clime Asset Management Pty Limited, a 100% subsidiary of Clime Investment Management Limited (ASX:CIW). Base fee The Investment Manager is entitled to a monthly base fee calculated as 0.08334% (excluding GST) of the market value of all assets less total indebtedness of the Company. Performance fee The Investment Manager is entitled to a performance fee calculated as 20% (excluding GST) of the amount by which the absolute dollar value of the investment performance (after deducting the base fee) exceeds the All Ordinaries Accumulation Index for the annual period, provided that the performance is positive. E. Investments held at the balance date (continued) Income Sleeve - Syndicated listed/unlisted investments No. of shares held Fair value at 30 June 2022 Bluewater Square Syndicate 1,500,000 1,155,000 Burke Street Fund 1,227,813 1,227,813 Centuria Government Income Property Fund 1,000,000 1,000,000 Centuria Healthcare Property Fund 1,617,647 1,719,397 Dexus Regional Property Fund 348,529 621,567 Elanor Hotel Accommodation Fund 1,820,000 1,820,000 Elanor Waverly Gardens Syndicate 1,000,000 1,000,000 Hunters Plaza Syndicate 1,000,000 1,380,000 Northgate Geraldton Trust 1,250,000 1,245,000 Packform Unit Trust 687,500 687,500 Primewest Agricultural Trust No 1 1,160,000 1,151,880 Southern Cross Poultry Fund Investment 1,000,000 1,290,000 Southern Cross Poultry Fund Operating 1,000,000 70,000 St Georges Terrace Fund 257,732 1,000,000 15,368,157 135,857,818 www.climecapital.com.au

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