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2023 ReportANNUAL REPORT 2022 ABN 85 003 622 866 TABLE OF CONTENTS Chairman’s Report Managing Director’s Report About Clover Directors’ Report Corporate Governance Statement Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Audit Report Auditors’ Independence Declaration Additional ASX Information 4 5 7 8 18 25 26 27 28 29 48 49 52 53 TO OPTIMISE THE HEALTH AND DEVELOPMENT OF ADULTS, INFANTS AND CHILDREN. 2 VISION IN COLLABORATION WITH KEY MARKET PARTICIPANTS, CLOVER DEVELOPS CUSTOMISED HIGH VALUE NUTRITIONAL INGREDIENTS THAT ENHANCE THE WELLBEING AND DIETARY NEEDS OF THEIR CUSTOMERS. 3 PURPOSE STATEMENT C H A I R M A N ’ S R E P O R T Dear Shareholders On behalf of the Board of Directors of Clover Corporation Ltd (“Clover” or “Company”) I am pleased to present our Annual Report for FY2022. Our employees returned to their work places under controlled conditions during the year where they have shown significant care and responsibility managing their health and the health of their co-workers, self-isolating when required and maintaining their vaccination status in line with Government direction. I am happy to report an improved annual revenue of $70.6m (FY21 $60.5m) and a net profit after tax of $7.1m (FY21 $6.0m). Management is to be congratulated on navigating the ongoing challenges of a pandemic impacting supply chains at the same time dealing with the geo-political tensions which have driving inflationary cost pressures over the course of the year. The outcome for FY22 is consistent with the top end of guidance provided in the half year announcement in March 2022. The Company has maintained a strong cash position as at 31 July 2022 at $10.1m (2021: $9.1m). The focus on this holding was to ensure we retained flexibility to respond to supply chain challenges. The Board and Management have a strong focus on seeking to drive growth by accelerating commercialisation of R&D, expanding international sales support, identifying market adjacency opportunities, including licensing and possible strategic acquisitions. Research and Development is fundamental to the strategic growth of the business. In March 2022, Clover announced the successful outcome of a long-term clinical trial (5 years) with Pre-term infants being fed with Clover’s unique Omega 3 emulsion. The result of the clinical trial showed an improved IQ amongst babies fed this emulsion. Clover has branded the product Premneo and is now working toward ways in which the product can support families through these critical days of their child’s development. The Company has also launched Gelphorm, a product which allows customers to fortify UHT drinks with Omega 3. The product having been trialled in FY22 will support the future growth of the business, aligned with international borders opening and our staff being able to attend trade shows and ensure more timely execution on agreed projects. I am also pleased that we have satisfactorily concluded our legal defence of our IP against Pharmamark. The 3-year action has resulted with the court awarding compensation and party to party costs as well as orders to ensure that the Company’s IP remains protected. Based on the performance of Clover in FY22 the Directors have declared a fully franked final dividend for FY22 of 1.0 cent per share making the total dividend payable for the year ending 31 July 2022 1.5 cents (2021: 1.0c). On behalf of the Board of Directors, I would like to thank our shareholders for their continued support. I would also like to acknowledge and thank our CEO and employees for their continued hard work, dedication and commitment to Clover. Mr Rupert A Harrington Chairman Date: 13 September 2022 4 CLOVER CORPORATION :: ANNUAL REPORT 2022 M A N A G I N G D I R E C T O R ’ S R E P O R T I am pleased to report an improved result for Clover corporation in FY22 with revenue at $70.6 million a 16.8% improvement on the $60.5 million in FY21. Overall, the Company has seen improved demand across its full customer base in the second half of FY22. The revenue result translated into a $7.1 million net profit after tax which is a 19% improvement on the FY21 result of $6.0 million. The result was improved $0.2m by the positive impact of the settlement of the legal defence of our IP against Pharmamark, offset by the related legal expenses and the consolidation of the trading loss at Melody Dairies. Our operating expenses at $10.4 million are up 11.8% on the FY21 result of $9.3 million. The NPAT in FY22 has been impacted by inflation across all areas, increased legal costs and travel, as our team re-engages with customers after two years of little to limited international travel. Overall new customers and product diversification helped drive the improved revenue base year on year for Clover. Clover’s inventory position stands at $36 million which is an increase of $5.2 million on the FY21 full year. Clover maintains a relatively high inventory position to act as a buffer to insufficient shipping availability. As a result of extended customer delivery times due to freight constraints the Company now holds significantly higher finished goods and raw materials to meet customer requirements as raw materials become more difficult to source. Clover’s employees have worked through COVID-19 conditions by managing to our COVID-19 safe plan and operating through the year without incident in our operations. Whilst customer demand in the first half of the year was stable at $29.7 million, the Company has seen an improved order position in the second half delivering $40.9 million. Inflationary pressures across raw materials, energy, freight and people have impacted the gross margin of the business. Milk derivative raw material products have seen exponential cost increases due to shortage of supply and their own cost pressures. As Clover holds long-term contracts with many customers, cost recovery by way of price increases are delayed. Many of the projects that were started pre-COVID-19 have been revisited with customers and work commenced in the second half of the year. International travel has been possible in the second half allowing business development to connect with new and existing customers. Revenue has improved from customers across all market segments. Europe Whilst Europe has its challenges with the geopolitical situation, Clover have been able to engage with customers resulting in improved sales results across both the infant formula and food sectors. Clover has added additional business development staff and positioned itself in a new warehouse to provide just in time inventory to support customers in the European market. ASEAN The Asian, Australia and NZ markets have been impacted by changing Chinese government legislation and the reduced Daigou and grey markets servicing the China infant formula market. Whilst sales into these territories have not improved to pre-COVID-19 numbers, Clover has seen an improvement across the board with infant formula customers navigating their way back into China and establishing new territories for their products. Americas The Americas have shown improved results on the prior year reflecting much of the work done by our business development and R&D people into the nutraceutical and food markets, as customers seek to fortify food products with Docosahexaenoic acid (DHA is a type of Omega3 Lipid) as an alternative to consumers taking tablets. Melody Dairies in NZ For much of FY22, the NZ Government maintained lockdowns restricting access for our Australian team to visit the site. The delay in access severely hampered the Company’s ability to utilise the spray dryer. Accordingly, Clover has recognised a loss associated with the dryer of $700,000 in the FY22 results. Pleasingly, all customer audits have now been completed and Melody is now being used on a weekly basis with three Clover operations staff employed on site to oversee production alleviating previous financial pressures. Growth Clover pursues three key growth platforms for its business; new product development, focus on infant formula and new market development. The Company’s Brisbane R&D facilities with newly installed pilot spray drying equipment will be commissioned in the 1st quarter of FY23. The new facility and spray dryer will allow the R&D team to fast-track new product development. Whilst infant formula is a key plank in the Company’s growth strategy the business is pursuing general food applications, sports nutrition, pharmaceuticals, supplements and plant-based milks. All these areas have provided new product opportunities and growth of new customers in segments driven by trends across global markets. Research & Development In March of 2022, Clover announced the successful clinical trial results of our branded product Premneo. The product will be positioned as a medical food, prescription only product and sold through hospital pharmacies for use in preterm neonatal units. The Company is exploring a commercialisation path for the sale of Premneo. Clover has also developed a product capable of allowing UHT drinks to be fortified with Omega 3. The product is called Gelphorm and is now on trial with customers across Asia, Europe and America. Clover has a range of R&D projects focused on the micro-encapsulation of high value ingredients targeting nutraceutical, pharmaceuticals and food which will go into customer trials over the next 12- 24 months. 5 MANAGING DIRECTOR’S REPORT continued Infant formula Infant formula continues to provide new opportunities for the Company. The Chinese government legislated in 2021 that infant formula sold in China from February 2023, must contain a minimum of 15 milligrams per 100Kcal of DHA and Arachidonic acid (ARA is a type of Omega6 Lipid). Manufacturers of infant formula in both China and Western countries must apply for a SAMAR licence to sell infant formula through the retail sales channel in mainland China. Clover has supported customers in China and globally in their application process and many customers have submitted their applications incorporating Clover’s DHA and ARA powdered products. Few customers have achieved a SAMAR license as COVID-19 restrictions have delayed the audit and certification process. The licensing process has provided Clover the opportunity to develop the relationships and establish new business with Chinese and European infant formula manufacturers in the FY22 year. Clover is developing products to enter new markets and the Company has achieved 125 milligrams of DHA in a 3 gram gummy. This is the highest in the world. The Company is now supplying manufacturers in the USA and Europe who have commercialised the product with expectations for additional growth in the near future. Clover recently launched a high Eicosapentaenoic acid (EPA is a type of Omega3 Lipid) vegan powder product targeting the medical food and nutraceutical markets. This product is on trial with prospective customers. Outlook As the Company looks forward to FY23 it has several priorities the first being to manage the risk of ongoing COVID-19 conditions with our employees, our customers and the markets we serve. Supply chain challenges are a focus on obtaining raw materials and ensuring our customers are served well. Clover will continue to re-engage with customers and new opportunities through market visits and the opening of trade shows in FY23. The Company will seek to develop the Premneo and Gelphorm products to expand the markets served. The business will look to further vertically integrate into its supply chain, establish new partnerships with raw material and logistics suppliers to shore up future capabilities and add value through strategic acquisitions and partnerships. Despite inflationary and logistics pressures, Clover has experienced a welcome return to stronger customer demand. Mr Peter J Davey Managing Director & CEO Date: 13 September 2022 6 CLOVER CORPORATION :: ANNUAL REPORT 2022 A B O U T C L O V E R Company Focus Clover seeks to improve human nutrition and quality of life by developing value-added nutrients for use in foods or as nutritional supplements. In doing so, Clover provides a competitive advantage for its customers, value to shareholders and a working environment in which employees can fully utilise and develop their respective skills. Company History Clover was formed in 1988 as a family-owned Australian Company providing lipid-based ingredients for the food industry. Clover was listed on the ASX in November 1999. In November 2002, Clover entered a joint venture with the Queensland-based Food Spectrum Group of companies. The incorporated joint venture, Nu-Mega Ingredients Pty Limited (Nu-Mega), was 70% owned by Clover. The joint venture ceased in November 2007 when Clover acquired the remaining 30% of Nu-Mega to make it a wholly owned subsidiary. Nu-Mega has significantly expanded its markets, introducing new products with a focus on encapsulation technology and the delivery of bioactive nutritional ingredients. Company Operations Clover operates from two Australian controlled sites and one 41.9% owned New Zealand location: • The Company’s registered office and manufacturing plant for tuna oils and related products, Head Office, Customer Service, Quality Assurance, and Sales and Marketing departments are in Altona, Victoria. • Innovation, Research & Development, Product Development, Technical Support departments are in Brisbane, Queensland. • Melody Dairies Spray Drying facility which is managed and run by New Zealand Food Innovation Waikato located in Hamilton, New Zealand. Company Technology and Products The major focus of the Company is on the delivery of bioactive ingredients using proprietary encapsulation technology to produce ready-to-blend products containing tuna oil and/or other nutritional lipids. The health benefits of omega-3 fatty acids in the diet have been well documented and this has assisted in developing the expanding global market for products containing these nutritionally important dietary components. One material that Clover uses is tuna oil, which is high in DHA (docosahexaenoic acid), an essential fatty acid, which is recognized for its importance in brain, nerve and eye tissue development in babies and infants. Clover, through its subsidiary Nu-Mega, supplies refined Omega 3 oils and a range of other encapsulated ingredients for use in infant formula, nutraceuticals, pharmaceuticals, and sports nutrition markets. In addition to its own internally developed intellectual property, Clover has licensed patented technology from the Commonwealth Scientific Industrial Research Organisation (CSIRO) for the encapsulation of marine and algal oils to protect them from oxidation and degradation. Nu-Mega’s Driphorm® range of microencapsulated powders enables the addition of Hi-DHA® tuna and/or algal oils to a broad spectrum of products in a convenient and stable dry powder form. These ingredients are marketed globally. Clover continues to seek other nutritional and medical applications for its products, as well as developing new types of products, often in conjunction with customers. 7 D I R E C T O R S ’ R E P O R T Your directors present their report on the consolidated entity consisting of Clover Corporation Limited (“the Company”) and the entities it controlled (“the consolidated entity”) at the end of, or during, the year ended 31 July 2022. Directors The following persons were directors of Clover Corporation Limited during the financial year and up to the date of this report: Mr Rupert A Harrington, BTech, MSc, CDipAF, MAICD. Non-Executive Director since 1 July 2015 Appointed Chairman 21 September 2017 Chair of the Nomination Committee Experience and special responsibilities Mr Harrington is an experienced company Director with over 30 years’ experience as a Non-Executive Director of companies operating in manufacturing, industrial services, health and technology. Mr Harrington’s earlier career was in operational management in the UK and Australia. His career since 1987 has been in Private Equity where he has an excellent track record of delivering results for investors. Mr Harrington is Non-Executive Director of Pro Pac Packaging Limited (ASX: PPG) and was previously a Director of Integral Diagnostics Limited (ASX: IDX) a Director of Bradken Limited, Advent Partners and others. Mr Graeme A Billings, BCom, FCA, MAICD Non-Executive Director since 14 May 2013 Chair of the Audit Committee Member of the Remuneration Committee Member of the Nomination Committee Experience and special responsibilities Mr Billings has been a Chartered Accountant since 1980. Mr Billings was a partner at Coopers and Lybrand and then PricewaterhouseCoopers (PwC) for 24 years. Mr Billings was head of PwC’s Melbourne Assurance practice for several years as well as Global Leader of PwC’s Industrial Products and Manufacturing industry group. Mr Billings brings a range of financial, corporate governance, internal control, commercial and corporate transactional skills to the Company. Other current non-executive Company directorships: GUD Holdings Limited, Appointed Non-Executive Director 2011 / Chairman appointed 2020 Austco Healthcare Limited, Chairman appointed 2015 Previously Graeme was Chairman of Korvest Ltd (resigned in August 2021) and a Non-Executive Director and Audit Committee Chair of DomaCom Ltd (resigned in June 2021). Mr Peter J Davey, MBA, GradDip Bus., Dip.Art (Design), GAICD. Managing Director since 11 November 2014 Experience and special responsibilities Mr Davey has a track record of building businesses across a diverse range of industry sectors. He has held senior management positions within a number of manufacturing and distribution companies operating in competitive and diverse markets. Mr Davey has particular strengths in sales and marketing, and development and implementation of strategies for growth. Mr Davey was formerly Executive Manager AgriProducts and a director of Viterra Australia Limited, responsible for the AgriProducts division that traded in agricultural inputs, fertilizer, seed and wool. In earlier roles, Mr Davey headed the Sales and Marketing divisions of FMP Products and Hi Fert Pty Ltd. During his career, Mr Davey has had a particular focus on marketing-based businesses operating in the Asia and Oceania regions. Other current Non-Executive Company directorships: Chairman Melody Dairies Ltd Partnership, appointed 30 October 2018. 8 CLOVER CORPORATION :: ANNUAL REPORT 2022 Mr Ian D Glasson BEng (Hons) MIE Aust, GAICD Non-Executive Director since 1 February 2017 Member of the Audit Committee Chair of the Remuneration Committee Member of the Nomination Committee Experience and special responsibilities Mr Glasson is former CEO of PGG Wrightson based in Christchurch, New Zealand. He was formerly CEO of Gold Coin Group / Zuellig Agriculture which managed a portfolio of animal feed operations and farming ventures throughout South East Asia. Prior to that he was CEO for seven years of Sucrogen (formerly the sugar business of listed entity CSR and now owned by Wilmar) which generated revenues of nearly $2 billion and had extensive contacts across the local and international food and beverage sector and retail market. He has also had extensive agribusiness experience with Goodman Fielder and Gresham Rabo, as well as spending the first sixteen years of his career in the oil and gas sector with Esso. Other current Company Non-Executive directorships: Ricegrowers Ltd, appointed 2016. Ms Toni L Brendish, B.Com, Grad Dip Business Admin, FAICD. Non-Executive Director since 20 October 2020 Member of the Audit Committee Member of the Remuneration Committee Member of the Nomination Committee Experience and special responsibilities Toni Brendish was most recently Chief Executive of Westland Milk Products in the South Island of New Zealand. Westland produces a range of Dairy products including Infant Formula base powder and was New Zealand’s second largest Co-operative prior to being acquired by the Chinese Multinational; Yili. Prior to joining Westland Ms. Brendish worked for the Danone Group for 11 years running their Infant Formula and Dairy businesses including Manufacturing sites across Australia and New Zealand, Malaysia and Indonesia. She has also worked for Kimberly-Clark, Colgate Palmolive and other Blue Chip FMCG organisations. Toni is currently on the Advisory Committee of Aurora Dairies; part of Warakirri Asset Management Ltd and a Non-Executive Director of Prolife Foods (NZ) Limited. Dr Simon P Green, BSc(Hons), PhD, GAICD Non-Executive Director since 20 October 2020 Member of the Audit Committee Member of the Remuneration Committee Member of the Nomination Committee Experience and special responsibilities Simon has 30 years of experience in the biotechnology industry focused on the discovery, development and commercialisation of life saving medicines. He was actively involved in CSL’s global expansion over a 17-year period and held roles as Senior Vice President, Global Plasma R&D and General Manager of CSL’s manufacturing plants in Germany and Australia. Simon is currently the founder and CEO of Immunosis Pty Ltd, a start-up diagnostics Company. He is also a Partner and investment advisor at BioScience Managers, a healthcare investment firm and serves on the scientific advisory board for Imunexus Pty Ltd. Simon previously served as a Non-Executive Director for Acrux Pty Ltd, an ASX listed Company from 2016-2019. Chief Financial Officer & Company Secretary Mr Andrew G M Allibon, B.Bus, CA Experience and special responsibilities Mr Allibon is a Chartered Accountant with over 26 years’ experience in executive finance roles across a range of industries. 9 DIRECTORS’ REPORT continued Principal Activities The principal activities of the consolidated entity during the financial year were the refining and sale of natural oils, the production of encapsulated powders and the research and product development of functional food and infant nutrition ingredients. There were no significant changes in the nature of the principal activities of the consolidated entity during the financial year. Operating Results The results for this report are for the financial year ended 31 July 2022, the comparative period being the financial year ended 31 July 2021. Total revenue from sale of goods increased 16.7% to $70,656,000. Net profit after tax is $7,171,000 (FY21: profit of $6,004,000). Review of Operations A full review of operations is included in the Chairman’s Report appearing on page 4 and the Managing Director’s report appearing on pages 5 to 6 of this Annual Report. Employees The consolidated entity had 48 employees as at 31 July 2022 (FY21: 53 employees). Events Subsequent to Reporting Date No matter or circumstance has arisen since 31 July 2022 that has significantly affected or may significantly affect the consolidated entity’s state of affairs in future financial years. Significant changes in the State of the Affairs Other than in the accompanying Financial Report, there were no significant changes in the state of the affairs of the consolidated entity during the financial year. Likely Developments The consolidated entity will continue to pursue its policy of increasing the profitability and market share of its operating businesses during the next financial year. Dividends A fully franked final dividend of 0.5 cent per share for the 12 months ended 31 July 2021 was paid on 16 November 2021. The total final FY21 dividend paid was $1,663,748. The Directors have declared a fully franked final dividend of 1.0 cent per share ($1,664,394) in respect of the year ended 31 July 2022. The record date for this dividend will be 26 October 2022 with payment due on 22 November 2022. An interim dividend of 0.5 cent per share was paid for FY22. The total dividend declared in respect to FY22 is 1.5 cents per share, an increase of 0.5 cent per share compared with the total dividend declared for FY21. 10 CLOVER CORPORATION :: ANNUAL REPORT 2022 Environmental Regulations The consolidated entity’s operations are subject to environmental regulations under the laws of the Commonwealth and State. The consolidated entity complies with all applicable environmental regulations. Directors’ Meetings The number of directors’ meetings (including meetings of sub-committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: Directors Meetings Nomination Committee Meetings Audit Committee Meetings Remuneration Committee Meetings Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended 15 14 15 13 13 13 15 14 15 13 13 13 2 2 - 2 2 2 2 2 - 2 2 2 - 3 - 3 3 3 - 3 - 3 3 3 - 5 - 5 5 5 - 5 - 5 5 5 Director Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms T L Brendish Dr S P Green Insurance of Directors and Officers During the financial year, the Company paid a premium in respect of a contract insuring its directors and officers against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving lack of good faith. The contract covers any past, present or future director, secretary, executive officer or employee of the Company and its controlled entities. Further details have not been disclosed due to confidentiality provisions of the contract of insurance. Rounding Off of Amounts The Company is of a kind referred to in ASIC Corporations Instrument (Rounding in Financial/ Directors’ Reports) 2016/191, and accordingly amounts in the Financial Report and the Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Proceedings on behalf of the Company The Company was awarded settlement monies during FY22 which have been paid in the proceedings against Pharmamark and an individual in relation to breaches of Intellectual Property. Excluding these proceedings, no person has applied for leave of the 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. Unissued shares or interests under option As of the date of this report there are 34,025 Performance Rights offers whose conditions have been met, entitling recipients to one share per right for issue in FY22. An additional 870,038 performance rights are available, subject to meeting relevant conditions. 11 DIRECTORS’ REPORT continued REMUNERATION REPORT (AUDITED) The Remuneration Report outlines the director and executive remuneration arrangements of the Company for the 2022 financial year in accordance with the requirements of the Corporations Act 2001 and its Regulations. It has been audited in accordance with section 300 of the Corporations Act 2001 (as amended). i. Key Management Personnel Key Management Personnel (KMP) in this report are those individuals having responsibility for planning, directing and controlling the major activities of the Company during the financial year. They include Non-Executive Directors, CEO and CFO. The Directors and Chief Executive Officer determined that those persons having authority and responsibility for planning, directing and controlling activities are as listed below. Directors Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms T L Brendish Dr S P Green Executive KMP Mr P J Davey Mr A G M Allibon Position Non-Executive Chairman Non-Executive Director Chief Executive Officer and Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer and Managing Director Chief Financial Officer and Company Secretary ii. Remuneration Policy The Company operates from two locations in Australia and markets its products internationally. All Executive KMP are based in Australia. Through an effective remuneration framework, the Company aims to: • Provide fair and equitable rewards; • Align rewards to business outcomes that are linked to creation of shareholder value; • Stimulate a high performance culture; • Encourage the teamwork required to achieve business and financial objectives; • Attract, retain and motivate high calibre employees; and • Ensure that remuneration is competitive in relation to peer companies in Australia. iii. Remuneration Framework Responsibilities The Board has established a Remuneration Committee to assist it in establishing a suitable remuneration framework for the Company. Responsibilities of the Remuneration Committee include reviewing and making recommendations to the Board on the following issues: • The structure of the total remuneration package (TRP) including base salary, other benefits, Short Term Incentive (STI) and share-based long-term incentive for the CEO; • The mechanism to be used to review and benchmark the competitiveness of this TRP; • Changes in the amounts of different components of the TRP following annual performance review of the CEO; • Review and consideration of the structure of incentive plans operating within the Company from time to time; • The Key Performance Indicators (KPIs) to be set for the CEO for each financial year; • Review of performance against these KPIs at the end of each financial year, and recommendation on the amount of STI to be paid to the CEO; • Decision on whether the Long-Term Incentive (LTI) Plan will be offered for any year; the number of performance rights to be awarded to the CEO and specified Executives under this plan when offered; and setting of associated performance indicators for future assessment; • Determination of the number of performance rights vesting at the end of each assessment period of the LTI Plan, based on financial performance and other strategic indicators previously established; and • The remuneration and any other benefits of the Non-Executive Directors. The Remuneration Committee consists of four independent Non-Executive directors, Mr Ian Glasson (Chair), Ms Toni Brendish, Dr Simon Green and Mr Graeme Billings. The Company Secretary or head of Human Resources may act as secretary of the Remuneration Committee. 12 CLOVER CORPORATION :: ANNUAL REPORT 2022 The Board Chairperson and any other Non-Executive Directors may attend committee meetings in an ex officio capacity. Executives including the CEO, and any advisors retained by the Committee may attend by invitation. More information on Remuneration Committee meetings held during the year and Directors’ attendance at these meetings can be found on page 11 of this report. The Board is responsible for reviewing and resolving on recommendations from the Remuneration Committee, including: • Considering matters relating to remuneration of Executives reporting to the CEO; • Approving the establishment of or amendment to employee share, performance rights and any other deferred incentive plan; and • Considering matters related to Executive succession planning. iv. Non-Executive Directors’ Remuneration Total Non-Executive Directors’ remuneration including superannuation paid at the statutory prescribed rate for the year ended 31 July 2022 was $436,771 which is within the approved amount. The Board believes that the remuneration approved for Non-Executive Directors must: • enable the Company to attract and retain suitably qualified directors with appropriate experience and expertise; and • be appropriate in the context of the overall financial performance of the Company. The Remuneration Committee reviews fees for Non-Executive directors regularly, utilising data on and trends in Director and Chairperson remuneration in the relevant group of the top 500 ASX-listed companies in Australia (from published reports), as well as data obtainable on director remuneration in a number of peer companies either from the same industry or with similar market capitalisation and financial performance. Remuneration consultants have been used to assist in this process. The Board has to date employed a simple remuneration policy whereby only fees and statutory superannuation benefits are payable. The table on page 16 of this report shows fees paid to Non-Executive Directors for the 2022 and 2021 financial years. Non-Executive Directors do not participate in any share or performance rights plans. Non-Executive Directors are entitled to reimbursement of travel or other reasonable expenses incurred by them while discharging their duties. v. Executive Remuneration and Link to Business Strategy The diagram below outlines components which may be included as part of the TRP for Executives. TOTAL REMUNERATION PACKAGE F I X E D I V A R A B L E I V A R A B L E Total fixed remuneration (cash salary, superannuation and non-monetary benefits) Short Term Incentive (cash payment) Long Term Incentive (performance rights) The Managing Director and specified Executives (Executives) are eligible for STI payments, while the Managing Director and Executives may also have access to an LTI in the form of Performance Rights. The most recent LTI Offer was made to the CEO and Executives in August 2022. The total fixed remuneration of the Managing Director is set against market benchmarks by use of a remuneration consultant. The Company seeks this benchmark information every 2-3 years. It was last reviewed in FY21 for setting remuneration from FY22. Non-Executive Directors are responsible for appointing, briefing external consultants and managing this process. At other times, increases in fixed remuneration are determined by consideration of CPI salary increases applied across the whole Company, and use of published information on CEO/MD salaries in the top 500 ASX-listed companies and in companies from related industries of similar market capitalisation and financial status, as described for review of fees for Non-Executive Directors. The Company’s Executive remuneration is directly linked to its business strategy. The Remuneration Committee engages in an annual strategy review with management, identifying key goals and challenges for the year and the longer term. Following this, business plans and an annual budget are prepared and approved, with KPIs (both financial and non-financial) established for the business. These are the basis for KPIs for the CEO, set by the Board, and for other Executives, set by the CEO. 13 DIRECTORS’ REPORT continued A formal review of the achievement of each Executive is conducted by the CEO annually and proposed changes in fixed remuneration and the STI to be paid are submitted to the Board for approval. As noted in section (iii) above, the performance of the CEO against agreed KPIs is reviewed by the Remuneration Committee, and recommendations on adjustment to total fixed remuneration and payment of the STI are made to the Board, for approval. The STI is a variable cash payment with the maximum payment based on a percentage of the Executive’s total fixed remuneration. For the Managing Director 50% applied in FY22 (50% in FY21), while for other Executives, 10-20% applied in FY22 (10-20% applied in FY21). The Company awards STI payments on evidence that the Executives have achieved stretching work plan objectives and dealt with unexpected challenges in a way that contributes to both short-term performance and long-term prospects of the Company. The Board retains discretion to vary STI payments outside of the set formula to recognise overall Company performance and changes in the Company’s circumstances during the year. KPIs set for the CEO and individual executives each year include financial, strategic and operational targets as summarised in the table below. The financial targets are set at two levels, with the initial target establishing a gateway to an entitlement to an STI payment. For FY22, the financial targets were partially achieved, which has meant that the ‘gateway’ was met. The Board whilst having discretion on changes in the Company circumstances has considered this position and confirmed that an STI has been awarded for the FY22 year. This is noted on page 16. KPI type Financial Percent contribution to STI 40-60% Environment, Social & Governance 20-40% Strategic 20-50% Description – Examples Link to Company Strategy Achievement of revenue, profit and free cash flow targets set for the year in the annual budget. Sets target for growth in sales and profits for each year, contributing to increasing shareholder value. Net free cash flow provides for further investment in the business and capacity to pay dividends each year. Establishment of agreed plans to secure the sustainability of the Company and progress towards their implementation. Establishment of agreed plans to continue developing the cultural & social behavioural norms of the Company. Commercial development of new products from the R&D team; expansion of sales – new products, new customers; meeting regulatory challenges; manufacturing efficiencies and cost effective sourcing of raw materials; effective management of inventory, debtors and creditors (working capital requirements). Sustainability KPIs address the medium to long term prospects for the Company, including developing new products, technologies, expanding markets, contracting with customers and suppliers, forming alliances, and contributing to mitigation of business risk. KPI’s that focus on a safe working environment, continual improvement in collaboration and addressing emerging governance issues. Strategic KPIs address key priorities for the Company to advance to the next stage of its planned strategic direction, in the key management areas of Sales and Marketing, R&D output, Manufacturing, Regulatory and Cash Management. Examples include fast-tracking the output from the R&D team into profitable products attracting new sales. Adjustment to the changing nature of the market, to raw material availability and to manufacturing efficiency are all required to maintain both short term performance of the Company, and longer term growth. vi. Long Term Incentive Plan An LTI may be offered each year to the CEO at the discretion of the Board. The incentive, when offered, is in the form of Performance Rights (rights to receive shares in the Company) which are delivered according to the terms of the Clover Corporation LTI Plan and a Letter of Invitation from the Board to the CEO, setting out the terms for vesting of Performance Rights at the end of an assessment period. Performance Rights are issued for nil consideration and entitle the recipient to receive one Clover Corporation share at no cost for each Performance Right that vests at the end of the assessment period. The number of Performance Rights offered for a financial year is determined from a percentage of the CEO’s total fixed remuneration for that year. This dollar value is converted into a number of Performance Rights based on the Volume Weighted Average Price of Clover Corporation shares on the ASX for the two-week period up to and including the last day of the previous financial year. Hurdles for vesting of Performance Rights reflect long term growth and financial performance of the Company relevant to current and future growth in shareholder value, including such parameters as Earnings per Share (EPS) growth over a three-year period, Return on Equity (ROE) over the same period, and achievements in building the Company’s product portfolio, as reflected in New Product Sales. 14 CLOVER CORPORATION :: ANNUAL REPORT 2022 Executives may also be invited to participate in the Company’s LTI Plan. Performance Rights offered are on the same basis as for the CEO with the number calculated by taking a percentage of the Executive’s total fixed remuneration for that year and converting this value to the number of Performance Rights granted using the same methodology as for the CEO, as described above. Shares underlying Performance Rights that vest as a result of achievement of performance hurdles are either purchased on-market by the Company on behalf of the CEO and Executives, or shares can be issued provided that in the case of the CEO (who is also a director of the Company) shareholder approval is obtained. Any Performance Rights not vesting at the end of the assessment period lapse. In the 2021 financial year the Company issued 129,207 shares to the Clover Corporation Ltd Employee Incentive Plans Trust (Clover EIPT). The Clover EIPT will issue shares to plan participants upon exercising of the approved Rights in accordance with the achievement of performance hurdles. During the FY22 year, 86,979 shares that had vested, were issued to the Employee Incentive Plan participants. The grants which were current during the financial year were: Year of Offer 2019 2020 2021 Performance conditions Target – EPS Max – EPS Target – EPS Max – EPS Target – EPS Max – EPS Targeted result for year ended 31 July 2022 Targeted result for year ended 31 July 2023 Targeted result for year ended 31 July 2024 9.50c 10.70c - - - - - - 9.84c 11.40c - - - - - - 5% compound growth on FY21 NPAT 15% compound growth on FY21 NPAT Note – 50% of the Performance Rights that are subject to a particular performance condition vest on achievement of the target, and a further 50% on achievement of the stretch goals. In relation to the 2018 and 2019 Performance Rights, the financial performance condition accounted for 50% of the total potential LTI and the other 50% is based upon achieving certain levels of New Product Sales and strategic goals. As at 31 July 2022 the following are the performance rights for KMP whose conditions have been met, and their vesting profile: Mr P Davey Mr A Allibon Balance at 31 July 2022 25,991 - 25,991 Rights granted plan dated 2019 - Rights exercisable after 31 July 2022 - The most recent performance assessment period of the above 2019 Performance Rights ended on 31 July 2022 and the board of directors of the Company determined that the relevant performance conditions had been satisfied for the FY22 period. In consequence, the 2019 Performance Rights that have vested can now be exercised. Rights whose conditions were fulfilled in years preceding 31 July 2020 # Rights whose conditions were fulfilled in year ending 31 July 2021 # Rights whose conditions were fulfilled in year ending 31 July 2022 # Sub total Rights whose conditions were fulfilled # Rights yet to be fulfilled, subject to achievement of targets and service conditions # Rights Exercised & Exercisable # Total open Rights # Mr P Davey Mr A Allibon 816,410 68,104 25,991 910,505 504,836 (910,505) 504,836 - - - - 85,855 - 85,855 816,410 68,104 25,991 910,505 590,691 (910,505) 590,691 15 DIRECTORS’ REPORT continued Mr P Davey Mr A Allibon 31 July 2022 Fair value of the rights as compensation $ 31 July 2021 Fair value of the rights as compensation $ 26,771 118,501 - - 26,771 118,501 * Note: The actual value of the Performance Rights will be dependent on the Clover share price at the time of vesting. Rights valued at 31 July 2022 are based on the VWAP price of the ASX market close price for the last 10 business days of the year ($1.03) vii. Remuneration of Non-Executive Directors and Executive KMP The following tables disclose details of the remuneration of the Directors and Executive KMP of the consolidated entity. Salary and Fees $ Superannuation Contributions $ STI Remuneration $ Non-cash Benefits $ LTI Remuneration $ 1 STI gateway achieved – accrual recognised in FY22 (payable FY23) 2 LTI consists of fair value of rights whose conditions were fulfilled in year ending 31 July 2022 3 ARC & Remuneration Committee Chair positions remuneration includes additional $5,000pa 2022 Directors Mr R A Harrington Mr G A Billings 3 Mr P J Davey 1,2 Mr I D Glasson 3 Ms T L Brendish Dr S P Green Executive KMP Mr A G M Allibon1 2021 Directors Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms C L Hayman Dr M J Sleigh Ms T L Brendish Dr S P Green Executive KMP Mr P A Sherman 118,601 71,967 475,857 71,967 67,189 67,189 872,770 243,781 243,781 11,910 7,227 28,073 7,227 6,747 6,747 67,931 23,902 23,902 - - - - - - 127,046 5,906 26,771 - - - - - - - - - 127,046 5,906 26,771 1,100,424 27,560 27,560 - - - - 295,243 295,243 Salary and Fees $ Superannuation Contributions $ STI Remuneration $ Non-cash Benefits $ LTI Remuneration $ 116,168 70,491 453,630 69,321 19,991 15,538 51,304 51,304 11,084 6,726 24,167 6,615 1,899 1,476 4,901 4,901 847,747 61,769 266,752 266,752 22,222 22,222 - - - - - - - - - - - - - - - 5,906 118,501 - - - - - - - - - - 5,906 118,501 1,033,923 - - - - 288,974 288,974 Total $ 130,511 79,194 663,653 79,194 73,936 73,936 Total $ 127,252 77,217 602,204 75,936 21,890 17,014 56,205 56,205 viii. Employment Contracts There are no specific employment contracts with Non-Executive Directors. Non-Executive Directors are appointed under a letter of appointment and are subject to election and rotation requirements as set out in the ASX listing rules and the Company’s constitution, per the ‘Board Nomination Policy and Procedure for Selection and Appointment of Directors’ policy, which can be viewed in the Corporate Governance section of the Company’s website at www.clovercorp.com.au. 16 CLOVER CORPORATION :: ANNUAL REPORT 2022 Managing Director Mr Peter Davey was employed by the Company under a contract of employment dated 24 October 2017. The contract provides for base salary and continuing access to incentive remuneration subject to Remuneration Committee approval, 6 months’ termination notice by either party, and non-solicitation and non-compete clauses. Other Executives (standard contract) All other Executives have rolling contracts. The Company may terminate the Executive’s employment agreement by providing between 1 and 3 months’ written notice or providing payment in lieu of the notice period (based on the fixed component of the executive’s remuneration), together with statutory termination entitlements. The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, the Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. Directors’ interests The relevant interest of each director in the share capital of the Company, as notified by the directors to the Australian Stock Exchange in accordance with section 205G(1) of the Corporations Act 2001, at the date of this report is as follows: Director Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms T L Brendish Dr S P Green Ordinary Shares 528,921 50,000 525,369 60,000 17,155 26,234 Performance Rights* - - 25,991 - - - 1,207,679 25,991 * There are an additional 249,637 performance rights available to Mr Davey subject to meeting relevant performance and employment conditions. Auditor’s Independence and Non-audit Services The Board of Directors is satisfied that the provision of non-audit services during the period is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: • all non-audit services are reviewed and approved by the Board of Directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and • the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the APES110 Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. The following fees for non-audit services were paid/payable to the external auditors during the year ended 31 July 2022: Taxation structural and compliance services Auditor’s Independence Declaration $ 15,486 15,486 A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 has been received by the Directors, and a copy is attached at page 52. Signed in accordance with a resolution of the Board of Directors. Mr Rupert A Harrington Chairman Melbourne Date: 13 September 2022 17 C O R P O R AT E G O V E R N A N C E The Board of Clover Corporation Limited is committed to ensuring its policies and practices reflect good corporate governance and recognises that for the success of the Company an appropriate culture needs to be nurtured and developed throughout all levels of the Company. This statement outlines the Company’s Corporate Governance practices in place throughout the year, unless otherwise stated, and has been summarised into sections in line with the 8 core principles set out in the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations – 4th Edition”. Principle 1 – Lay solid foundations for management and oversight The Board is ultimately responsible for the operations, management and performance of the Company. In discharging this responsibility, the Board delegates to senior management whose role it is to manage the Company in accordance with the directions and policies set by the Board. The Board monitors the activities of senior management in the performance of their delegated duties. It is the responsibility of the Board to determine policies, practices, management and the operations of the Company and to ensure that the Company is compliant with statutory, legal and other regulatory obligations. Responsibilities of the Board include the following: • Determining corporate strategies, policies and guidelines for the successful performance of the Company in the present and in the future; • Monitoring the performance and conduct of the Company; • Accountability to shareholders; • Ensuring that risk management procedures and compliance and control systems are in place and operating effectively to ensure a safe operating and inclusive environment; • Monitoring the performance and conduct of senior management, and ensuring adequate succession plans are in place; and • Ensuring the Company continually builds an honest and ethical culture. The Board has delegated responsibility for the following to management: • Day to day management of the Company; • Production of performance measurement reports; • Managing the compliance and risk management systems; • Management of staff including, appointment, termination, staff development and performance measurement. The Company has a Board Charter which is disclosed on its website using the following address https://www.clovercorp.com.au/en/invest-our-business/governance/ that sets out the respective roles and responsibilities of its board and management, and those matters which are expressly reserved to the board and those which are delegated to management. The CEO is responsible for ensuring that the responsibilities delegated by the Board to management are properly discharged. The performance of the CEO is evaluated by the Board with reference to the overall performance of the Company, its subsidiaries and associates in which the CEO represents the Company. Both qualitative and quantitative measures are used to evaluate performance. The CEO evaluates the performance of the other senior executives and reports to the Board. The Board also reviews the performance of these executives via their attendance at Board meetings and the monthly Board reports. The performance of the senior executives of the Company was assessed, as set out above, during the reporting period. The Company conducts an annual evaluation of the performance of the Board, its Committees and individual Directors. The Board is responsible for evaluating candidates and recommending individuals for appointment as Directors. The Company undertakes appropriate background and screening checks prior to nominating a Director for election by shareholders. The Company maintains written agreements with each Director and senior Executives that sets out the terms of their appointment and outlines all relevant roles and obligations. The Company Secretary is accountable to the Board, through the Chairman, and is responsible for advising the Board and its Committees on governance matters, monitoring the Board and ensuring Committee policies and procedures are followed, and coordinating the timely completion of Board and Committee papers. 18 CLOVER CORPORATION :: ANNUAL REPORT 2022 Diversity The Company values and respects the skills that people with diverse backgrounds, experiences and perspectives bring to the organisation. The Company is committed to rewarding performance and providing opportunities that allow individuals to reach their full potential irrespective of background or difference. When appointing or promoting people within the organisation the most suitably qualified candidates are selected. As a result, diversity is promoted throughout the organisation. In March 2012, the Company established a Diversity Policy to formalise its commitment to providing equal access to opportunities irrespective of background, beliefs or other factors. The policy is regularly updated and may be viewed in the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. The policy governs the conduct of the Company, its wholly owned subsidiaries and all Directors and employees of those entities. As at 31 July 2022 the organisation had 53 employees. As the Company has less than 100 employees, it is not a relevant employer under the Workplace Gender Equality Act 2012, despite this the Company has adopted the ASX Corporate Governance Principles and Recommendations on diversity and works to the following principles: • Ensuring targets are based on current workforce data including growth, promotions and attrition, and that they are achievable and provide stretch goals Incorporating targets in leaders’ KPIs to improve accountability and sponsorship • • Sharing gender targets and updates on achievements, internally and externally, including reporting to the board on a regular basis. The proportion of women employees in the whole organisation was 38%. The Company’s objective is to incrementally grow this as vacancies allow and suitably qualified candidates are available. The aim is to achieve female representation at all levels of 40% or more. The Company will continue to ensure that neither gender or diversity differences interfere with the employment of individuals based on their suitability for the position available and aspires to achieve greater diversity. Principle 2 – Structure the Board to add value The Company’s constitution states that its Board is to comprise no less than three and no more than ten Directors. The names and details of the Directors of the Company at the date of this statement are set out in the Directors’ Report. At the date of this report the Board consisted of five Non-Executive Directors and one Executive Director. Each Director has undertaken to provide the Board with all information that is relevant to the assessment of his/her independence in a timely manner. The Board has assessed the independence of its members and is of the view that the following Directors are independent: Mr R A Harrington – Non-Executive Mr G A Billings – Non-Executive Mr I D Glasson – Non-Executive Ms T L Brendish – Non-Executive Dr S P Green – Non-Executive The Company has established a Nomination Committee which currently consists of four independent Non-Executive Directors and is chaired by one of the independent Non-Executive directors. The Committee periodically reviews the Board’s membership having regard to the Company’s particular needs, both present and future. Where a Board member is due for re-election at the next Annual General Meeting, that Director abstains from consideration of their nomination for re-election. The Company has a Nomination Committee Charter that sets out the process by which new Director candidates are identified and selected, the use of professional intermediaries and the requirement for a diverse range of candidates to be considered. This policy may be viewed in the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. The Nomination Committee considers the structure, balance and skills of the Board in making decisions regarding appointment, retirement and nominations for re-election. When a vacancy occurs, the necessary and desirable skills, expertise and experience required to complement the Board are identified and a process to identify the most appropriate candidates is implemented. The committee engages recruitment consultants and other independent experts to undertake research and assessment as required. Directors are initially appointed by the full Board, subject to election by the shareholders of the Company at the next Annual General Meeting. Under the Constitution, one third of the Board is required to retire from office each year. Retiring Directors may stand for re-election subject to approval by the Board. The Company has an established induction procedure which allows new Board appointees to participate fully and actively in Board decision making at the earliest opportunity. 19 CORPORATE GOVERNANCE continued The Board considers that the current Directors bring an appropriate mix of skills, breadth and depth of knowledge and experience and diversity to meet the Board’s responsibilities and objectives. The range of skills and experience possessed by the each of the Directors is set out in the Directors’ Report, and is summarised in the table below: Skill Category Description of Attribute Governance Board experience as a director of an ASX listed company, demonstrated commitment to highest standards of governance including experience with companies subject to rigorous governance standards and member of a governance body. Board Capability Adequate Risk and Compliance Experience with the establishment of risk and compliance frameworks and the identification and monitoring key risks to the Company. Significant Leadership R&D / Product Development Strategy Sustainable success in business at a Senior Executive level or practice leadership level in relevant sectors including manufacturing, finance, R&D and consumer products. Significant Knowledge and experience (local & international) of developing and commercialising new science-based products with health offerings. Adequate Experience in developing, implementing, and challenging a plan of action designed to achieve the long-term goals of the Company. Significant Financial and Accounting Experience in financial accounting and reporting, corporate finance and internal financial controls. Includes the ability to probe the adequacy of financial controls. Adequate Quality and Safety Experience related to work health and safety governance and/or quality governance. Significant Regulatory, Legal, and Public Policy Experience in Government relations, public and regulatory policy or qualified legal professional. Developing Business Acquisition and Integration People, Culture and Remuneration Experience in M&A and implementation / business integration. Significant Management experience in relation to workplace culture, remuneration, organisational development, succession, diversity, and human resource management and or ASX listed company Remuneration Committee membership. Significant Technology Strategy and Governance Knowledge and experience in IT including artificial intelligence (AI), privacy, data management, cyber security, document protection and Digital Experiences. Developing Environment and Social Experience in environmental and social governance. Global Experience Expertise in understanding the challenges of growing international trading and operational expansion. Adequate Significant In the discharge of their duties and responsibilities the Directors, either individually or jointly, have the right to seek independent professional advice at the Company’s expense. In respect of advice to individual Directors, the prior approval of the Chairman is required; such approval is not to be unreasonably withheld. The Chairman is entitled to receive a copy of any such advice obtained. The Chairman is responsible for monitoring and assessing the performance of individual Directors, each Board committee and the Board as a whole. The Chairman interviews each Director and provides feedback regarding their performance. In 2022 each Director independently completed an external confidential assessment of the performance of the Board. The results of the assessments are compiled into a written report which is presented to the Board and discussed. The performance of each Director of the Company was assessed during the reporting period. 20 CLOVER CORPORATION :: ANNUAL REPORT 2022 Principle 3 – Act lawfully, ethically and responsibly Code of Conduct The Company has an established code of conduct dealing with matters of integrity and ethical standards, which can be viewed at the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. The Board recognises the need for the Directors and employees to adhere to the highest standards of behaviour and business ethics. All Directors and employees are expected to abide by the code of conduct which covers a number of areas including the following: • Professional conduct and ethical standards; • Compliance with laws and regulations; • Relationships with shareholders, customers, suppliers and competitors; • Confidentiality and continuous disclosure; • Standards of workplace behaviour and equal opportunity; • Privacy and anti-discrimination; • Proper use of Company assets; • The environment; and • Investigation and reporting of breaches of the code. Share Trading The Company has established a share trading policy which may be viewed in the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. Whistle Blowing The Company has established a Whistleblower policy which can be viewed at the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. It is the responsibility of the Company Secretary and Managing Director to regularly update the board as to whether any material incidents have been reported under that policy. With respect to confidentiality, our employees have a range of options in respect of who they may contact including an Officer of Clover Corporation, ASIC, APRA, the Auditors, an Actuary or legal practitioner. Anti-bribery and Corruption The Company has established an Anti-bribery and Corruption policy which can be viewed at the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. It is the responsibility of the Company Secretary and Managing Director to regularly update the board as to whether any material incidents have been reported under that policy. Principle 4 – Safeguard integrity in financial reporting The Company has an established Audit Committee, which has a formal charter outlining the committee’s function, composition, authority, responsibility and reporting. The Audit Committee charter may be viewed in the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. There are currently four members of the Audit Committee, all of whom are non-executive Directors and are considered to be independent (refer to principle 2 on page 19). Mr Billings, who is the Chair of the Audit Committee, is not the Chairman of the Board. The Chairman of the Board is not a member of the Audit Committee (but may attend committee meetings in an ex officio capacity). The details of the Audit Committee members at the date of this statement and their attendance at meetings are set out in the Directors’ Report. The Non-Executive Chairman, CEO, and Company Secretary may attend Audit Committee meetings by invitation. The external auditors, PKF, are requested by the Audit Committee to attend appropriate meetings to report on the results of their half-year review and of their planning for and result of the full year audit. The function of the Audit Committee is to assist the Board in fulfilling its statutory and fiduciary responsibilities relating to: • The external reporting of financial information, including the selection and application of accounting policies; • The independence and effectiveness of the external auditors; • The effectiveness of internal control processes and management information systems; • Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements; • The application and adequacy of risk management systems within the Company. 21 CORPORATE GOVERNANCE continued The CEO and the Chief Financial Officer are required to state in writing to the Board, by submission to the Audit Committee, that the Company’s financial statements present a true and fair view, in all material respects, of the Company’s financial position and operational results and that they are in accordance with relevant accounting standards. A declaration under Section 295A of the Corporations Act from the CEO and Chief Financial Officer has been received in respect of the current reporting period. Before it is released to the market, the Chairman reviews any periodic corporate report that is not reviewed by an external auditor. Principle 5 – Make timely and balanced disclosure The Board recognises the need to ensure that all investors have equal and timely access to material information regarding the Company and for announcements to be factual, clear, balanced and complete. The Company has established a Continuous Disclosure Policy to ensure compliance with the ASX and Corporations Act continuous disclosure requirements which can be viewed at the Corporate Governance section of the Company’s web site at www.clovercorp.com.au. The policy requires timely disclosure through the ASX Company announcements platform of information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities, or which would materially influence the decision making of investors. Internal procedures are in place to ensure that relevant information is communicated promptly. The Company Secretary is the nominated continuous disclosure officer for the Company. It is the responsibility of the Company Secretary to ensure the board receives copies of all market announcements promptly after they have been made. The Company will not release any information publicly, including any new and substantive investor or analyst presentation, that is required to be disclosed through the ASX, until the Company has received formal confirmation of its release to the market by the ASX. Principle 6 – Respect the rights of security holders The Board is committed to ensuring that shareholders are fully informed of all material matters affecting the Company in a timely manner. The dissemination of information is mainly achieved as follows: • An Annual Report is distributed (electronically if preferred) to shareholders in November each year; • A newsletter is periodically distributed to shareholders; • Announcements to the ASX and press releases advising of events which are of particular significance to the progress and prospects of the Company; and • Significant information is also posted on the Company’s website. In addition, shareholders are encouraged to attend and participate in the Annual General Meeting (AGM) of the Company. The external auditor attends the AGM to answer shareholders’ questions with regard to the conduct of the audit and the content of the Auditor’s Report. The Company ensures that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands. The Company’s shareholders may elect to receive information from the Company and its registry electronically. Otherwise the Company and its registry will communicate by post with shareholders who have not elected to receive information electronically. The Company’s share registry helps to manage these shareholder communication preferences. The Company’s share registry is Computershare Investor Services Pty Ltd; https://www.computershare.com.au Principle 7 – Recognise and manage risk The Company is committed to identifying and managing areas of significant business risk to protect shareholders, employees, earnings and the environment. Arrangements in place include: • Regular detailed financial, budgetary and management reporting; • Procedures to manage financial and operational risks; • Established organisational structures, procedures and policies dealing with the areas of health and safety, environmental issues, industrial relations and legal and regulatory matters; • Comprehensive insurance and risk management programs; • Procedures requiring Board approval for all borrowings, guarantees and capital expenditure beyond minor levels; • Where applicable, the utilisation of specialised staff and external advisors; and • Regular operational audits undertaken by major customers. Management is responsible for the design and implementation of a risk management and internal control system which manages the material business risks of the Company and reporting to the Board on whether those risks are being managed efficiently. Management reported to the Board on an ongoing basis during the current reporting period. The Board of Directors regularly reviews the external risks to the Company and confirms it has conducted such a review this financial period. The Board reviews and approves management’s plans to reduce the impact of potential risks and monitors progress against these plans. 22 CLOVER CORPORATION :: ANNUAL REPORT 2022 The Company does not have an internal audit function. Management is responsible for the design and implementation of a risk management and internal control system which manages the material business risks of the Company and reporting to the Board on whether those risks are being managed efficiently. Management reported to the Board on an ongoing basis. The Board of Directors regularly reviews the external risks of the Company. The Board reviews and approves management’s plans to reduce the impact of potential risks and monitors progress against these plans. Other than as disclosed, the Company does not have any exposure to economic, environmental and social sustainability risks to disclose during the reporting period. The CEO and the Chief Financial Officer are required to state in writing to the Board, by submission to the Audit Committee, that the risk management and internal control compliance systems are operating efficiently and effectively. In their declaration under section 295A of the Corporations Act the CEO and Chief Financial Officer have made this statement in respect of the current reporting period. Principle 8 – Remunerate fairly and responsibly The Company has established a Remuneration Committee which currently consists of four independent, non-executive Directors. Mr Ian Glasson is the Chair of the Audit & Risk Committee. The Committee makes recommendations to the full Board on remuneration matters and other terms of employment for Executive Directors and Non-Executive Directors. Senior executive performance is continually monitored by the CEO and the CEO’s performance is subject to continuous monitoring by the full Board. The remuneration of the CEO is reviewed annually by the Remuneration Committee, which consists of only Non-Executive Directors. The remuneration of the senior executive staff is reviewed annually by the full Board after taking into consideration the recommendations of the Remuneration Committee and the CEO. The CEO and senior executive staff are remunerated by way of salary, performance incentive payments, non-monetary benefits, and superannuation contributions. Non-Executive Director’s fees are reviewed periodically by the full Board after taking into consideration the Company’s performance, market rates, level of responsibility and the recommendations of the Remuneration Committee. Non-Executive Directors are remunerated by way of fees in the form of cash and superannuation contributions and are not entitled to receive bonus payments or any equity based remuneration. Remuneration is set so as to attract and retain suitable personnel and to motivate them to pursue the long term growth and success of the Company. Further information of Directors’ and Executive remuneration is set out in the Remuneration Report. For further information concerning the corporate governance practices of the Company refer to the corporate governance section of the Company’s web site at www.clovercorp.com.au. 23 FINANCIAL STATEMENTS 24 CLOVER CORPORATION :: ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JULY 2022 Revenue Net Exchange Losses Net Interest expense Raw materials, consumables & conversion costs Marketing and sales expenses Administration and corporate expenses Research and development expenses Share of net profit of investments accounted for under the equity method Profit before income tax Income tax (expense) Profit after tax for the period attributable to members of the parent entity Other comprehensive profit/(loss) Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustments Total comprehensive profit for the year Earnings per share (EPS) Basic earnings per share (cent per share) Diluted earnings per share (cent per share) Notes 2 3 3 3 4 21 21 2022 $’000 2021 $’000 70,660 60,505 (168) (455) (180) (401) (49,128) (41,731) (4,002) (4,557) (1,857) (653) 9,840 (2,707) 7,133 (845) 6,288 4.29 4.29 (2,842) (4,742) (1,670) (764) 8,175 (2,171) 6,004 (14) 5,990 3.61 3.61 This Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 2525 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2022 2022 $’000 2021 $’000 Notes Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax asset Other current assets - prepayments Non-current assets Property, plant and equipment Right of use assets Investments in associates Deferred tax assets Intangible assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Lease liability Current tax liabilities Short-term provisions Non-current liabilities Interest bearing liabilities Lease liability Long-term provisions Total liabilities Net assets Equity Issued capital Reserves Retained profits Total equity 6 7 8 4 9 10 11 4 12 13 14 15 16 14 15 16 17 18 10,111 19,562 35,965 - 1,222 66,860 8,027 1,150 11,816 844 1,907 23,744 90,604 13,560 1,668 113 1,039 867 17,247 9,243 1,054 20 10,317 27,564 63,040 35,603 (1,011) 28,448 63,040 9,091 13,265 30,777 431 1,173 54,737 6,994 1,108 13,072 914 1,907 23,995 78,732 5,295 1,623 113 - 807 7,838 11,454 996 28 12,478 20,316 58,416 35,603 (166) 22,979 58,416 This Statement of Financial Position should be read in conjunction with the accompanying notes. 26 CLOVER CORPORATION :: ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JULY 2022 Retained profits $’000 21,964 Share-based payment reserve $’000 389 Foreign currency translation reserve $’000 (152) Balance at 1 August 2020 Share issue for period Profit attributable to members of the entity Dividend paid Share-based payment reserve Foreign currency translation reserve Issued capital $’000 35,368 235 - - - - - 6,004 (4,989) - - Balance at 31 July 2021 35,603 22,979 Balance at 1 August 2021 35,603 22,979 Share issue for period Profit attributable to members of the entity Dividend paid Share-based payment reserve Foreign currency translation reserve - - - - - - 7,133 (1,664) - - Balance at 31 July 2022 35,603 28,448 Total $’000 57,569 235 6,004 (4,989) (389) (14) 58,416 58,416 - 7,133 (1,664) - (845) - - - - (14) (166) (166) - - - - (845) (1,011) 63,040 - - - (389) - - - - - - - - - This Statement of Changes in Equity should be read in conjunction with the accompanying notes. 2727 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JULY 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Net Interest paid Income tax paid Notes 2022 $‘000 64,362 (56,157) (456) (1,167) Net cash inflow from operating activities 20 6,582 2021 $‘000 63,821 (52,333) (401) (2,859) 8,228 Cash flows from investing activities Acquisition of plant and equipment Proceeds from sale of financial assets Investment in Associates Net cash outflow on investing activities Cash flows from financing activities Dividends paid Repayment of interest-bearing liabilities Lease payments Share based payments Net cash outflow on financing activities 5 (a) Net increase / (decrease) in cash held Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 6 (1,598) (1,831) - - - - (1,598) (1,831) (1,664) (2,166) (134) - (3,964) 1,020 9,091 10,111 (4,989) (1,443) (115) - (6,547) (150) 9,241 9,091 This Statement of Cash Flows should be read in conjunction with the accompanying notes. 28 CLOVER CORPORATION :: ANNUAL REPORT 2022 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report covers Clover Corporation Limited (“the Company”) and controlled entities (“the consolidated entity“ or “the Group”). Clover Corporation Limited is a listed public Company, incorporated and domiciled in Australia. Basis of preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the consolidated entity takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 or value in use in AASB 136. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. • The consolidated entity has applied the relief available to it in ASIC Corporations Instrument (Rounding in Financial/ Directors’ Reports) 2016/191 and accordingly amounts in the financial report and the directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. The financial report was authorised for issue on 13 September 2022 by the Board of Directors. This Note 1 details the material accounting policies adopted by the consolidated entity in the preparation of the financial report. A. (i) Changes in accounting policy and disclosures, standards and interpretations The consolidated entity has adopted all amendments to Australian Accounting Standards which became applicable for the consolidated entity from 1 August 2021. No significant impact has arisen on recognition, measurement, or disclosure in the financial report from application of these standards. A. (ii) New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 31 July 2022. The consolidated entity has assessed that there will not be a significant impact arising on adoption of these new or amended Accounting Standards and Interpretations. B. Principles of consolidation and investment in associates Investment in controlled entities The consolidated financial statements incorporate the financial statements of Clover Corporation Limited and entities controlled by the Company and its subsidiaries. Control is achieved when the Company is exposed or has rights to variable returns for its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 31 July. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control listed above. 2929 NOTES TO THE FINANCIAL STATEMENTS continued When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including: the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; • • potential voting rights held by the Company, other vote holders or other parties; • • any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. rights arising from other contractual arrangements; and Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the consolidated entity’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the consolidated entity are eliminated in full on consolidation. Investment in associates Associates are entities over which the consolidated entity has significant influence but not control or joint control. Investments in associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in associates are carried in the statement of financial position at cost plus post acquisition changes in the consolidated entity’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from associates reduce the carrying amount of the investment. The consolidated entity discontinues the use of the equity method upon the loss of significant influence over the associate and recognises any retained investment at its fair value. Any difference between the associate’s carrying amount, fair value of the retained investment and proceeds from disposal is recognised in profit or loss. C. Income tax The income tax expense (credit) for the period comprises current income tax expense (credit) and deferred tax expense (credit). Current income tax expense (credit) charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. In determining the current tax position, Research and Development incentive allowances are accounted as tax credits, reducing income tax payable and current tax expense. Deferred income tax expense (credit) reflects movements in deferred tax asset and deferred tax liability balances during the period as well as unused tax losses. Current and deferred income tax expense (credit) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. 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 assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. 30 CLOVER CORPORATION :: ANNUAL REPORT 2022 Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation Clover Corporation Limited and its wholly-owned Australian subsidiaries have not formed an income tax consolidated group under tax consolidation legislation. D. Inventories Raw materials, work in progress and finished goods are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. E. Property, plant and equipment Each class of property, plant and equipment is carried at cost, less where applicable any accumulated depreciation and impairment losses. The cost of fixed assets constructed within the consolidated entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the operating profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including capitalised lease assets, are depreciated on a straight-line basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of asset Buildings, at cost Plant and equipment, at cost Furniture and equipment, at cost Depreciation Rates 4.00% 5.00% 10.00% - - - 15.00% 33.33% 33.00% The residual values, useful lives and methods of depreciation or property plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any indication of impairment exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognised in the statement of comprehensive income. De-recognition An item of plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in operating profit or loss. 3131 NOTES TO THE FINANCIAL STATEMENTS continued F. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. G. Leases A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts of lease liabilities are remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. H. Financial instruments Financial instruments are recognised initially on the date that the consolidated entity becomes party to the contractual provisions of the instrument. On initial recognition, all financial instruments are measured at fair value plus transaction costs, except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred. Financial assets All recognised financial assets are subsequently measured at either amortised cost using the effective interest rate method or fair value depending on their classification. The consolidated entity’s financial assets are measured at amortised cost and comprise trade and other receivables and cash and cash equivalents. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Allowance for expected credit losses (ECL) For trade receivables and contract assets, the consolidated entity applies a simplified approach in calculation of ECLs. Thus, the consolidated entity does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The consolidated entity’s current impairment allowance has been based on historical credit loss experience, adjusted for forward looking factors specific to the debtors and the economic environment. The loss allowance is recognised in profit or loss. Financial liabilities The consolidated entity measures all financial liabilities initially at fair value less transaction costs, subsequently financial liabilities are measured at amortised cost using the effective interest rate method. The financial liabilities of the consolidated entity comprise trade payables, bank and other loans and lease liabilities. I. Impairment of assets At each reporting date, the consolidated entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. 32 CLOVER CORPORATION :: ANNUAL REPORT 2022 J. Intangibles Goodwill Goodwill is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess of the sum of the consideration transferred and the acquisition date fair value of any previously held equity interest, over the acquisition date fair value of net identifiable assets acquired. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested for impairment annually and is allocated to the consolidated entity’s cash generating units or groups of cash generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold. Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do not affect the carrying values of goodwill. K. Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the consolidated entity’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Company’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income. L. Cash and cash equivalents For the purpose of the cash flow statement, cash includes cash on hand and in at-call deposits with banks or financial institutions, net of bank overdrafts, and investments in money market instruments with less than 14 days to maturity. M. Revenue Revenue is recognised and measured at the fair value of the consideration received or receivable, after taking into account any trade discounts and volume rebates allowed, to the extent that it is probable that economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract; identifies the performance obligations in the contract; and determines the transaction price; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Revenue from sale of inventory is recognised at the point in time when control of the assets are transferred to the customer, which is generally upon delivery. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates are accounted for in accordance with the equity method of accounting. All revenue is stated net of the amount of goods and services tax (GST). Contract assets A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Group performs by transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. 3333 NOTES TO THE FINANCIAL STATEMENTS continued Contract liabilities A contract liability is the obligation to transfer goods to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods to the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. N. Trade and other payables Trade and other payables represent liabilities outstanding at the end of the reporting period for goods and services received by the consolidated entity during the reporting period, which remain unpaid. Amounts are unsecured and are presented as current liabilities. They are normally settled in accordance with the terms agreed with the respective creditors. O. Employee benefits Provision is made for the consolidated entity’s liability for employee benefits arising from services rendered by employees to the reporting date. Employee benefits expected to be settled within one year together with entitlements arising from wages, salaries and annual leave which will be settled after one year, have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Contributions are made by the consolidated entity to employee superannuation funds and are charged as expenses when incurred P. Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, from which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Q. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards in respect of shares, in the form of performance rights, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Binomial option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost is recognised in employee benefits expense, together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the consolidated entity’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss. R. Goods & 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 Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. S. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than dividends, by the weighted average number of ordinary shares, adjusted for any bonus elements. 34 CLOVER CORPORATION :: ANNUAL REPORT 2022 Diluted earnings per share Diluted earnings per share is calculated as net profit attributable to members of the Company, adjusted for: • • costs of servicing equity (other than dividends); the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus elements. T. Operating segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. Operating segments have been identified based on the information provided to the chief operating decision makers. U. Comparative figures Where required by the Accounting Standards comparative figures have been adjusted to conform with changes in presentation in the current financial period. V. Critical accounting estimates and judgements The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data; obtained both externally and within the consolidated entity. Key estimate Impairment The consolidated entity assesses impairment at each reporting date by evaluating conditions and events specific to the consolidated entity that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations performed. In assessing recoverable amounts, several key estimates are made. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Key judgements Impairment of goodwill: Goodwill is allocated to the tuna oil cash-generation units which are based on the controlled entity’s’ principal activities. The Company assessed the recoverable amount of goodwill and determined that no impairment was required at reporting date. Recoverable amounts of relevant assets are reassessed using value-in-use calculations that incorporate various key assumptions. Refer to Note 12 for further details on the assumptions used in these calculations. Inventory realisation: The measurement of inventory at the lower of cost and net realisable value requires judgements to be made in respect of the forecast demand for the consolidated entity’s products and the matching of raw material purchasing and the manufacturing process to meet forecasts. The possibility that inventory lines may exceed optimum levels or be obsolete is factored into adjustments necessary to measure inventory at net realisable value, should it be determined to be lower than cost. Certain lines of inventory are carried at net realisable value, that being lower than cost (refer to Note 8). The impact of net realisable value adjustments on the financial result for the year is disclosed in Note 3. Income tax: Deferred tax assets are recognised for unused tax losses and tax offsets to the extent that it is probable that taxable profit will be available against which the losses and offsets can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. 3535 NOTES TO THE FINANCIAL STATEMENTS continued 2. REVENUE AND OTHER INCOME Operating activities: Sales of goods Other income: Interest revenue Total revenue The disaggregation of revenue from contracts with customers is as follows: Timing of revenue: Goods transferred at a point in time Geographical location: Australia / New Zealand Asia Europe Americas 3. EXPENSES Profit before income tax includes the following items: Employee benefits expense Share-based payments expense / (credit) Inventory Scrap / Impairment Melody Dairies contractual charges Depreciation and amortisation: – buildings – plant and equipment – office furniture and equipment – right-of-use assets Unrealised FX Realised FX Net exchange losses Interest expense Minimum lease payments: – short term leases Consolidated 2022 $’000 2021 $’000 70,660 60,505 - - 2 2 70,660 60,507 70,660 25,702 28,057 12,664 4,237 70,660 7,040 - 386 - 197 284 82 149 712 (78) 246 168 455 534 60,505 21,667 24,317 10,444 4,077 60,505 6,470 (154) 90 1,126 214 300 80 113 707 (487) 667 180 403 365 36 CLOVER CORPORATION :: ANNUAL REPORT 2022 4. INCOME TAX EXPENSE: A. The components of tax expense comprise: Current tax Deferred tax asset B. Reconciliation of income tax expense/(credit): The aggregated amount of income tax expense attributable to the period differs from the amounts prima facie payable on profits from ordinary activities. The difference is reconciled as follows: Prima facie tax payable on profit before income tax at 30% Tax effect amounts: – Research and development claim – Sundry other Income tax expense/(credit) attributable to profit C. Deferred tax assets Deferred tax asset The deferred tax assets balance comprises the following temporary differences: Impairment of inventory Provisions Unrealised foreign exchange Other temporary differences Reconciliation: Opening balance (Charges) / credits to income statement Closing balance D. Tax receivable 5. DIVIDENDS A. Dividend paid during the period Final dividend for the year ended 31 July 2021 of 0.5 cent per share (FY20: 2.5 cent per share) fully franked at the tax rate of 30%, paid 16 November 2021 Interim dividend for the year ended 31 July 2022 of 0.5 cent per share (FY21: 0.5 cent per share) Consolidated 2022 $’000 2,636 71 2,707 2,963 (459) 203 2,707 844 (7) (99) 45 905 844 914 (70) 844 - 832 832 1,664 2021 $’000 2,008 163 2,171 2,452 (363) 82 2,171 914 136 233 495 50 914 1,077 (163) 914 431 4,157 832 4,989 Franking account balance Franking credits available for subsequent financial years 13,450 13,137 The above available amounts are based on the balance of the dividend franking account at the period end adjusted for franking credits that will arise from the payment of the current tax liability; franking debits that will arise from payment of dividends recognised as a liability at period end; and franking credits that will arise from dividends recognised as a receivable at period end. There were no dividend or distribution reinvestment plans operating during the financial period. B. Dividends declared after reporting date The Directors have declared a final dividend for the financial year ended 31 July 2022 of 1.0 cent per share (FY21: final 0.5 cent per share) fully franked at 30%, payable on 22 November 2022, but not recognised as a liability at the end of the financial period. The record date for this dividend will be 26 October 2022. 3737 NOTES TO THE FINANCIAL STATEMENTS continued 6. CASH AND CASH EQUIVALENTS Cash at bank 7. TRADE AND OTHER RECEIVABLES Current Trade debtors Other debtors Total current trade and other receivables Provision for impairment of receivables Consolidated 2021 $’000 9,091 9,091 13,014 251 13,265 2022 $’000 10,111 10,111 17,806 1,756 19,562 Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement between 30 and 120 days and therefore are classified as current. Other receivables generally arise from transactions outside the usual operating activities of the consolidated entity. Settlement timeframes may vary, though their classification is current. Refer to Note 25 for more information on credit risk of trade and other receivables. 8. INVENTORIES Raw materials Goods in transit Finished goods Less: provision for inventory obsolescence Total inventories 9. PROPERTY, PLANT AND EQUIPMENT Land, at cost Buildings, at cost Less: accumulated depreciation Total Buildings Plant and equipment, at cost Less: accumulated depreciation Total plant and equipment Furniture and equipment, at cost Less: accumulated depreciation Total furniture and equipment Total property, plant and equipment Reconciliation of the carrying amounts of each class of asset at the beginning and the end of the current financial period: Land Balance at beginning of the period Carrying amount at the end of the period Buildings Balance at beginning of the period Additions Depreciation expense Carrying amount at the end of the period 38 19,928 1,512 14,721 36,161 (196) 35,965 2,000 5,524 (2,771) 2,753 3,903 (821) 3,082 352 (160) 192 8,027 2,000 2,000 2,482 468 (197) 2,753 18,743 1,677 10,500 30,920 (143) 30,777 2,000 4,029 (1,547) 2,482 6,209 (3,837) 2,372 500 (360) 140 6,994 2,000 2,000 2,670 26 (214) 2,482 CLOVER CORPORATION :: ANNUAL REPORT 2022 Plant and equipment Balance at beginning of the period Additions, net of disposals Foreign currency translation Depreciation expense Carrying amount at the end of the period Furniture and equipment Balance at the beginning of the period Additions, net of disposals Depreciation expense Carrying amount at the end of the period 10. RIGHT OF USE ASSETS Right of use assets – premises Less: accumulated depreciation Balance from prior year Balance recognised upon transition Additions to Right of use assets Depreciation expense Carrying amount at end of period 11. INVESTMENT IN ASSOCIATES Investment in Melody Dairies, at cost Total Investment in associates Consolidated 2021 $’000 921 1,750 1 (300) 2,372 165 55 (80) 140 1,129 (21) 1,108 93 - 1,128 (113) 1,108 2022 $’000 2,372 994 - (284) 3,082 140 134 (82) 192 1,319 (169) 1,150 1,108 - 191 (149) 1,150 11,816 11,816 13,072 13,072 Through an agreement with three other investing parties on 5 November 2018 the consolidated entity has a 41.9% (FY21: 41.9%) interest in Melody Dairies, a limited partnership established for the purpose of undertaking construction and operation of a manufacturing facility in New Zealand. The objective of the project is to enable expansion of the consolidated entity’s capacity to deliver its products to the market, through its equity interest in the project. The consolidated entity’s interest in Melody Dairies is accounted using the equity method in the consolidated financial statements. As of the reporting date, the consolidated entity’s investment is represented by its share of assets, cash and related working capital amounts to an equity accounted total of $13,274,000, net of $1,458,000 in equity accounted operating losses. During the year due to COVID-19 restrictions, access to Melody Dairies facility was delayed, impacting production throughput. There was breach of a covenant with the Bank of New Zealand (BNZ) loan agreement held by Melody Dairies. BNZ has acknowledged the breach and has not taken any action in relation to the breach at this time. The total value of the borrowings held by Melody Dairies is $NZ22.1m with BNZ. Subsequent to year end, shareholders have supported Melody Dairies with additional funds in the form of a loan. The presence of a covenant breach can lead to the total borrowings falling due within 12 months and were this to happen Clover and the other partners would be required to fund their share of these borrowings. 12. INTANGIBLE ASSETS Goodwill on acquisition, at cost Total intangible assets There were no acquisitions of controlled entities in FY22 (FY21: None). A. Impairment assessment 1,907 1,907 1,907 1,907 Goodwill is allocated to the tuna oil cash-generating unit which is based on the controlled entities’ principal activities. During the 31 July 2022 financial year, the Company assessed the recoverable amount of goodwill relating to the tuna oil segment and determined that goodwill is not impaired. The recoverable amount of the cash-generating unit, being the assets of the cash-generating unit and goodwill, was assessed by reference to the cash-generating unit’s value-in-use. Value-in-use is calculated based on the present value of cash flow projections over a 5-year period approved by the Board of Directors. The cash flows are discounted using a 12% risk rate and 2% annual growth rate. Management believes that any reasonable possible change in key assumptions on which recoverable amount is based would not cause the aggregate carrying amount of the cash generating unit to exceed its recoverable amount. 3939 NOTES TO THE FINANCIAL STATEMENTS continued 13. TRADE AND OTHER PAYABLES Current Trade creditors Sundry creditors and other accruals 14. INTEREST BEARING LIABILITIES Current interest bearing liabilities Non-current interest bearing liabilities A. Assets pledged as security Consolidated 2021 $’000 4,921 374 5,295 1,623 11,454 13,077 2022 $’000 9,037 4,523 13,560 1,668 9,243 10,911 The interest-bearing liabilities are secured by a first mortgage over the investment in Melody Dairies (with a carrying value of $11.816m), land and buildings (with a carrying value of $4.753m), as well as a general charge over the consolidated entity’s assets. 15. LEASE LIABILITIES Current lease liabilities Non-current lease liabilities 2022 Lease Liabilities 2021 Lease Liabilities < 1 year $’000 1 -5 years $’000 > 5 years $’000 162 126 612 504 493 630 113 1,054 1,167 113 996 1,109 Total undiscounted lease liabilities Lease liabilities included in the Statement of Financial Position $’000 1,267 1,260 $’000 1,167 1,109 The Company is reasonably certain that the lease term (inclusive of options) of the newly occupied facility in Queensland will be exercised and have disclosed the lease term as 10 years. 16. PROVISIONS Aggregate employee entitlements: Current Non-current Total employee entitlements 17. ISSUED CAPITAL A. Issued and paid up capital Consolidated 2022 $’000 867 20 887 2021 $’000 807 28 835 166,439,311 (FY21: 166,439,311) fully paid ordinary shares Total contributed equity 35,603 35,603 35,603 35,603 The Company has issued share capital amounting to 166,439,311 ordinary shares of no-par value. Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. B. Movement in ordinary shares The Company issued nil shares during the financial period. 40 CLOVER CORPORATION :: ANNUAL REPORT 2022 Rights to capital At the reporting date there were 34,025 performance rights offers whose conditions had been met, entitling recipients to one share per right, which vest in 2022. In the case of the CEO / Managing Director’s 25,991 rights, these rights will require shareholder approval at the November 2022 Annual General Meeting for shares to be issued. There are an additional 870,038 performance rights available to entitling recipients that have been granted but are still subject to meeting conditions of achievement in future years. C. Capital management The Company’s objective in managing capital is to continue to provide shareholders with attractive investment returns and ensure that the Company can fund its operations and continue as a going concern. The Company’s capital consists of shareholders’ equity plus net debt. The movement in equity is shown in the Consolidated Statement of Changes in Equity. There are no externally imposed capital requirements. To maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or raise debt. 18. RESERVES Foreign currency translation Share-based payment reserve Total Consolidated 2022 $’000 (1,011) - (1,011) 2021 $’000 (166) - (166) The foreign currency translation reserve records exchange differences arising on translation of the financial statements of foreign subsidiaries. The Long-Term Incentive Plan grants shares in the Company to certain employees. The fair value of performance rights granted under the Long-Term Incentive Plan is recognised as an employee expense with a corresponding increase in the equity reserve. Share-based payments Certain employees (including key management personnel) have been granted performance rights under the consolidated entity’s Long Term Incentive Plan during the current and previous financial year. The performance rights do not give the holder a legal or beneficial interest in ordinary fully paid shares in the Company until those rights vest. Prior to vesting, performance rights do not carry a right to vote or receive dividends. When the performance rights have vested, ordinary fully paid shares will be allocated, and these shares will rank equally with existing shares. The following table summarises the performance conditions in respect of active grants for which 50% of the performance rights are subject to a NPAT achievements and a further 50% on achievement of stretch goals that are focussed on new product development and strategic goals. Issue date Vesting and test date Performance conditions Target – EPS Targeted result year ended 31 July 2022 Targeted result year ended 31 July 2023 Targeted result year ended 31 July 2024 August 2019 August 2020 August 2021 July 2022 9.50c July 2023 9.84c July 2024 5% compound growth on FY21 NPAT 15% compound growth on FY21 NPAT Max – EPS 10.70c 11.40c Targeted result year ended 31 July 2025 August 2022 July 2025 5% compound growth on FY22 NPAT 15% compound growth on FY22 NPAT 4141 NOTES TO THE FINANCIAL STATEMENTS continued The movement in the number of rights on issue is summarised in the following table. Number of rights 31 July 2021 Total rights 31 July 2022 Total rights Granted Opening balance Fulfilled / (Lapsed) (Vested) To be fulfilled Weighted average fair value of grants issued $’000 Closing balance 336,288 (101,888) (86,979) 389,410 536,831 $933 536,831 (360,037) (34,025) 727,269 870,038 $1,274 The weighted average fair value of the performance rights granted to employees was historically determined on the basis of the price paid by the Company to acquire the settlement shares on market. In the current financial year, the weighted average fair value of the rights granted has been calculated on the last 10 days VWAP share price relative to each year of issue. Consolidated 19. PARENT COMPANY INFORMATION Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets Equity Issued capital Accumulated gains Total equity Net profit for the period before other comprehensive income Total comprehensive income for the period Earnings per share (cents per share) 2022 $’000 1,555 39,900 41,455 229 229 41,226 35,603 5,623 41,226 553 553 0.3c 2021 $’000 90 43,456 43,546 1,074 1,074 42,472 35,603 6,869 42,472 19,912 19,912 12.0c In FY22 no dividend was received. The FY21 result includes a dividend issued by Nu-Mega Ingredients Pty Ltd on 13 April 2021 for $19,777,180. Percentage Owned Controlled entities: Country of Incorporation Clover Corporation Ltd Employee Incentive Plans Trust Nu-Mega Ingredients Pty Limited Subsidiaries: – Nu-Mega Ingredients Limited – Nu-Mega Ingredients (USA) Inc – Nu-Mega Ingredients (NZ) Limited – Nu-Mega Ingredients NL B.V. – Nu-Mega Ingredients Ecuador NMI S.A. – Prem Neo Pty Ltd Australia Australia United Kingdom United States of America New Zealand Netherlands Ecuador Australia 2022 % 100 100 100 100 100 100 100 100 2021 % 100 100 100 100 100 100 100 - 42 CLOVER CORPORATION :: ANNUAL REPORT 2022 20. RECONCILIATION OF CASH FLOW Reconciliation of cash flow from operating activities to Operating Profit Profit for the period Non cash items: – Amortisation and depreciation – Foreign exchange on international assets & liabilities – Melody Dairies Limited Partnership Loss – Employee benefits not paid in cash Change in assets and liabilities, net of the effects of purchase of subsidiaries Decrease /(Increase) in receivables (Increase)/Decrease in other assets (Increase)/Decrease in inventories (Decrease)/Increase in payables (Decrease)/Increase in employee entitlements Decrease/(Increase) in deferred tax assets Decrease/(Increase) in current tax asset Net cash inflow from operating activities 21. EARNINGS PER SHARE Consolidated 2022 $’000 2021 $’000 7,133 6,004 712 (238) 653 - (6,297) (48) (5,188) 8,266 51 70 1,468 6,582 707 (272) 764 (154) 3,516 (55) 1,156 (2,714) 128 163 (1,015) 8,228 The following reflects the income and share data used in the calculation of basic and diluted earnings per share: A. Reconciliation of earnings to net profit or loss Profit attributable to members of the parent entity Earnings used to calculate basic and diluted EPS 7,133 7,133 6,004 6,004 B. Weighted average number of ordinary shares outstanding during the period used in the calculation of basic earnings per share 166,439,311 166,310,104 C. Weighted average number of ordinary shares outstanding during the period used in the calculation diluted earnings per share 166,439,311 166,439,311 D. Basic earnings per share (cents per share) E. Diluted earnings per share (cents per share) The weighted average number of potential dilutive ordinary shares in FY22 is accounted for by: – Shares Issued on 31 July 2022 22. AUDITOR’S REMUNERATION Remuneration of the auditor of the parent entity in respect of: – Auditing and reviewing the financial reports of the Company and the controlled entities – Taxation structuring and compliance services 23. RELATED PARTY TRANSACTIONS A. Ultimate parent entity: Clover Corporation Limited is the ultimate parent entity of the consolidated entity. B. Ownership interests: Information in relation to ownership interest in controlled entities is provided in Note 19. 4.29c 4.29c Nil 2022 $ 3.61c 3.61c 2021 $ 100,000 15,486 115,486 97,500 13,046 110,546 4343 NOTES TO THE FINANCIAL STATEMENTS continued 24. KEY MANAGEMENT PERSONNEL COMPENSATION A. Names and positions held in the consolidated entity of key management personnel in office at any time during the period were: Name Directors Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms T L Brendish Dr S P Green Executive KMP Mr A G M Allibon Position Non-Executive Chairman Non-Executive Director Chief Executive Officer and Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Chief Financial Officer and Company Secretary Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report. Short-term benefits Long-term benefits B. Performance rights: 2022 $ 1,368,896 26,771 1,395,667 2021 $ 1,204,396 118,501 1,322,897 There were 25,991 Performance Rights offers available to Key management personnel whose conditions have been met as at 31 July 2022. There were an additional 280,132 Performance Rights offers available to key management personnel, subject to meeting relevant conditions. The right to convert 25,991 Performance Rights to key management personnel was satisfied in financial year ending 31 July 2022. C. Shareholding: Directors Mr R A Harrington Mr G A Billings Mr P J Davey Mr I D Glasson Ms T L Brendish Dr S P Green Balance 31 July 2021 Shares Purchased & (Sold) Retirement Balance 31 July 2022 528,921 50,000 457,265 60,000 17,155 11,834 1,125,175 - - 68,104 - - 14,400 82,504 - - - - - - - 528,921 50,000 525,369 60,000 17,155 26,234 1,207,679 25. MANAGEMENT OF FINANCIAL RISK The consolidated entity’s principal financial instruments consist of cash, deposits with bank, accounts receivable, payables and borrowings. Financial risk management policies The consolidated entity manages its exposure to key financial risks, including interest rate and currency risk in accordance with the consolidated entity’s financial risk management policies. The majority of sales are transacted in US dollars and Australian dollars. The objective of the policies is to support the delivery of the consolidated entity’s financial targets whilst protecting future financial security. Primary responsibility for identification and control of financial risks rests with the audit and risk committee under the authority of the board. The board reviews and agrees policies for managing each of the risks identified below, including the review of credit risk policies and future cash flow requirements. 44 CLOVER CORPORATION :: ANNUAL REPORT 2022 Specific financial risk exposures and management The main risks arising from the consolidated entity’s financial instruments are interest rate risk, foreign currency risk, price risk, credit risk and liquidity risk. Interest rate risk is not significant given the consolidated entity has minimal borrowings. The consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to foreign exchange risk and assessments of market forecasts for foreign exchange rates. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk and liquidity risk is monitored through the development of future rolling cash flow forecasts. A. Foreign currency risk As a result of the consolidated entity having cash balances, trade receivables and trade payables denoted in foreign currency, the consolidated entity’s statement of financial position can be affected by movements in the relevant exchange rates relative to the Australian dollar. The consolidated entity utilises foreign exchange hedges to manage its exposure to currency fluctuations arising from the purchase of goods and services in foreign currency. At 31 July 2022, the consolidated entity had the following financial assets and liabilities denominated in foreign currency. Financial assets Cash and cash equivalents Trade and other receivable Total financial assets Financial liabilities Trade and other payables Total financial liabilities 2022 $’000 4,116 7,086 11,202 (11,345) (11,345) 2021 $’000 989 9,989 10,978 (12,753) (12,753) At 31 July 2022, had the Australian Dollar moved as illustrated in the table below with all other variables held constant, profit after tax and equity would have been affected as follows: Foreign exchange movement Post Tax Profit Higher/(Lower) Change in Equity Higher/(Lower) Change in Profit AUD:USD + 5% AUD:USD - 5% AUD:EUR + 5% AUD:EUR - 5% AUD/NZD + 5% AUD/NZD - 5% 2022 $’000 (286) 259 (344) 377 (547) 604 2021 $’000 (185) 205 (127) 141 (10) 11 2022 $’000 (286) 259 (344) 377 (547) 604 2021 $’000 (185) 205 (127) 141 494 (518) Significant assumptions used in the foreign currency exposure sensitivity analysis include: • Reasonable estimates of movements in foreign exchange rates were determined based on a review of the last two years’ historical movements and economic forecasters’ expectations. • The reasonable movement of 5% was calculated by taking the spot rates for each currency as at reporting date, moving this spot rate by 5% and then re-converting the foreign currency into Australian dollars at the revised spot rate. • The net exposure at reporting date is representative of what the consolidated entity was, and is expecting, to be exposed to in the next twelve months from reporting date. B. Price risk The consolidated entity’s exposure to commodity and price risk is considered minimal. There are annual fixed price purchase contracts in place for forecast raw material requirements. From time to time it may be necessary to purchase raw materials from outside of the agreements. 4545 NOTES TO THE FINANCIAL STATEMENTS continued C. Credit risk Credit risk arises from the financial assets of the consolidated entity, which comprise cash and cash equivalents, trade and other receivables. The consolidated entity’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of the financial assets. The consolidated entity trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the consolidated entity’s policy to securitize its trade and other receivables. It is the consolidated entity’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters monitored by the CEO. These risk limits are regularly monitored. A breakdown of receivables showing those within/out of terms is shown below. Receivable balances are monitored on an ongoing basis to minimize the occurrence of bad debts. Trade receivables as at 31 July 2022 Trade receivables: Within terms Over terms Total Consolidated 2022 $’000 16,828 978 17,806 2021 $’000 12,533 481 13,014 For the remaining financial assets there are no significant concentrations of credit risk within the consolidated entity and financial instruments are spread amongst a number of AAA rated financial institutions. D. Liquidity risk Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s subsequent ability to meet these obligations to repay their financial liabilities and other obligations as and when they fall due. The consolidated entity’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash balances, borrowings, working capital and leasing. Maturity analysis of financial assets and liability based on management’s expectations The risk implied from the values shown in the tables below, reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in the consolidated entity’s ongoing operations such as property, plant, equipment and investments in working capital. Consolidated Realisable cash flows from financial assets Cash and cash equivalents Trade and other receivables Anticipated cash inflows Financial liabilities and obligations due for payment Trade and other payables Interest bearing liabilities Leasing liabilities Anticipated cash outflows Net inflow/(outflow) E. Interest rate risk Balance as at 31 July 2022 $’000 Less than 1 year $’000 1-5 years $’000 Over 5 years $’000 10,111 19,562 29,673 13,560 10,911 1,167 25,638 4,035 10,111 19,562 29,673 13,560 1,668 113 15,341 14,332 - - - - 9,243 642 9,885 (9,885) - - - - - 412 412 (412) The consolidated entity’s primary interest rate risk arises from long-term borrowings. The consolidated entity’s bank loans outstanding, totalling $10,910,000 (FY21: $13,077,000) are principal and interest payment loans, bearing interest at a weighted average current annual rate of 3.80%. 46 CLOVER CORPORATION :: ANNUAL REPORT 2022 F. Fair value All assets and liabilities recognised in the statement of financial position, whether they are carried at cost or at fair value, are recognised at amounts that represent a reasonable approximation of fair value, unless otherwise stated in the applicable notes. The carrying amounts of cash and bank balances, other receivables and other payables approximate their fair values due to their short term nature. 26. OPERATING SEGMENTS Identification of reportable segments The consolidated entity operates in the industry of manufacturing tuna oil and encapsulated products in Australia. Financial information about the business is reported to and reviewed by the Chief Executive Officer and Board of Directors on a monthly basis, in order to assess performance and determine the allocation of resources. Geographical information Revenues from external customers by domestic and export location of operations and information about its non-current assets by location of assets is shown in the following table. Australia / New Zealand Asia Europe Americas Total Revenue from external customers Non-current assets 2022 $’000 25,702 28,057 12,664 4,237 70,660 2021 $’000 21,667 24,317 10,444 4,077 60,505 2022 $’000 21,837 - - - 2021 $’000 22,088 - - - 21,837 22,088 During the financial year there were 2 customers who represented 28% and 17% of total sales respectively (FY21: 38% and 11% respectively). Greater than 90% of total sales revenue is generated by the export market. 27. EVENTS SUBSEQUENT TO REPORTING DATE No matter or circumstance has arisen since 31 July 2022 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. 28. CONTINGENCIES There are no contingent liabilities at the reporting date. 4747 D I R E C T O R S ’ D E C L A R AT I O N The Directors of Clover Corporation Limited declare that in their opinion: a. the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the consolidated entity’s financial position as at 31 July 2022 and of its performance for the period ended on that date; and ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b. c. the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1; and there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 31 July 2022. This declaration is made in accordance with a resolution of the Board of Directors. Mr Rupert A Harrington Chairman Melbourne Date: 13 September 2022 48 CLOVER CORPORATION :: ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLOVER CORPORATION LIMITED REPORT ON THE FINANCIAL REPORT Auditor’s Opinion We have audited the accompanying financial report of Clover Corporation Limited (the Company) and its controlled entities (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2022, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity, and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the Directors’ Declaration of the Company and of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001, including: a. giving a true and fair view of the Group’s financial position as at 31 July 2022 and of its financial performance for the year ended on that date; and b. 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 Group 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. Key audit matter – Inventory existence and valuation How our audit addressed this matter As at 31 July 2022, the carrying value of inventory was $35,965,000 (2021: $30,777,000) as disclosed in note 8 of the financial report. The Group’s manufacturing planning processes consider forecast customer demand and access to materials from a range of suppliers. These factors impact on the quantity of raw material and finished goods inventory on hand, and necessitate minimum inventory levels to ensure that the Group’s sales objectives continue to be met. A standard cost system is used to account for inputs to inventory. Management conducts regular analysis to determine the cost of inventory, and whether adjustment to the carrying amount is required to reflect net realisable value, if that is lower than cost. Inventory is the most significant of the Group’s assets, and accordingly we considered it a Key Audit Matter. Our procedures included but were not limited to: • attending and observing year-end inventory counts performed by Management at locations of significance; • accessing and assessing information in support of inventory held at other locations; • testing the accuracy of perpetual inventory records for a sample of products to check descriptions, quantities and the recording of inventory movements; • evaluating the design of processes to capture the costs of purchase and conversion and those other costs incurred in bringing inventories to their present location and condition; • • • testing on a sample basis the reasonableness of standard costs compared to actual costs of purchase and production; considering the turnover cycle of inventory, assessing the allocation of purchase price and efficiency variances; and challenging the adequacy of adjustments made to inventory for it to be measured at the lower of cost and net realisable value on the basis of actual and forecast sales activity, and Management’s assessment of qualitative factors. PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au Liability limited by a scheme approved under Professional Standards Legislation PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. 49 INDEPENDENT AUDITOR’S REPORT continued Key audit matter – Revenue recognition How our audit addressed this matter The Group’s sales revenue amounted to $70,660,000 during the year (2021: $60,505,000). Note 1(m) Revenue describes the accounting policies applicable to distinct revenue streams, noting that revenue from the sale of goods, after adjusting for discounts or allowances, is recognised upon the delivery of goods to customers. Shipments dispatched but not yet delivered to customers are classified as goods in transit inventories. On the basis of the significance of the account and the processes used to determine the recognition point, we have considered revenue recognition as a Key Audit Matter. Our procedures included but were not limited to: • evaluating a sample of contracts, identifying contracted performance obligations, and agreeing revenue amounts to the records accumulated as inputs to the financial statements, including supporting billing systems and bank records; these procedures enabled our assessment of the values recorded and the timing of revenue recognition aligned to fulfilment of the Group’s performance obligations, transferred at a point in time; • evaluating the cut-off process and its reliability to fairly account for dispatches not yet transferred to customers at the reporting date and the recognition of revenue in accordance with the Group’s accounting policies; and • assessing the consistency of the Group’s accounting policies in respect of revenue recognition with the criteria prescribed by the applicable standard, AASB 15 Revenue from contracts with customers. Key audit matter - Banking arrangements in Investment in associate (Melody Dairies) Clover holds a 41.9% equity interest in Melody Dairies a New Zealand entity which is presented as an investment in an associate in the financial statements. The equity accounted carrying amount of the investment is disclosed in note 11 as $11,816,000 (2021: $13,072,000). How our audit addressed this matter Our procedures included but were not limited to: • Confirming our understanding of the terms and conditions of the banking facility agreement held by Melody Dairies including the potential consequences of a covenant breach; • Reviewing the financial performance and cashflow position of Melody Dairies as at 30 June 2022; During the year there was breach of a covenant within a banking facility agreement held by Melody Dairies. The total value of the borrowings held by Melody Dairies is $NZ22.1m with the bank of New Zealand. • Discussions with the Board and Management of Clover in relation to their understanding of the banking relationship Melody Dairies has and the consequences if these borrowings fell due within 12 months; The presence of a covenant breach can lead to the total borrowings falling due within 12 months and were this to happen Clover and the other partners would be required to fund their share of these borrowings. On the basis that this scenario would have cashflow implications for Clover as an equity owner of Melody Dairies we consider this a Key Audit Matter. • Noting that whilst the bank has not provided a formal written waiver at the date of this audit report, it is the view of the board that the banking relationship remains strong and there is no intention to action the consequences of this covenant breach; and • Assessing the appropriateness of the disclosures included in note 11. Other Information The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 31 July 2022 but does not include the financial report and our Auditor’s Report thereon. Our opinion on the financial report does not cover the other information and, accordingly, we do not express any form of assurance conclusion thereon, with the exception of our opinion on the Remuneration Report. 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 inconsistent 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 the other information we obtained prior the date of the Auditor’s Report, we are required to report that fact. We have nothing to report in this regard. Directors’ responsibility for the Financial Report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’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 Group or cease operations, or have no realistic alternative but to do so. 50 CLOVER CORPORATION :: ANNUAL REPORT 2022 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, individual or in 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 Group’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 and 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. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 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. 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 that were of most significance in the audit of the financial report of the current year 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 Auditor’s Opinion We have audited the Remuneration Report included in pages 12 to 16 of the Directors’ Report for the year ended 31 July 2022. In our opinion, the Remuneration Report of Clover Corporation Limited for the year then ended complies with Section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. PKF Melbourne, 13 September 2022 Kenneth Weldin Partner 51 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF CLOVER CORPORATION LIMITED In relation to our audit of the financial report of Clover Corporation Limited for the year ended 31 July 2022, I declare 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 any applicable code of professional conduct. PKF Melbourne, 13 September 2022 Kenneth Weldin Partner PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au Liability limited by a scheme approved under Professional Standards Legislation PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. 52 CLOVER CORPORATION :: ANNUAL REPORT 2022 A D D I T I O N A L A S X I N F O R M AT I O N Additional information required by the Australian Securities Exchange Listing Rules and not disclosed elsewhere in this report. Shareholdings as at 31 July 2022 Substantial shareholders The number of shares held by substantial shareholders and their associates is set out below: Washington H. Soul Pattinson and Company Limited 34,183,579 ordinary shares Distribution of shareholders as at 31 July 2022 Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of Holders Total number of holders of less than a marketable parcel, being 466 shares @ 1.38 Voting rights Number of holders of ordinary shares 1,124 1,540 675 812 100 4,251 473 On a show of hands every Shareholder present in person or by proxy at a general meeting shall have one vote. Where a poll is demanded, every Shareholder present in person or by proxy at a general meeting shall have one vote for every ordinary share held. 53 ADDITIONAL ASX INFORMATION continued Twenty largest shareholders as at 31 July 2022* Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 WASHINGTON H SOUL PATTINSON & COMPANY LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LTD UBS NOMINEES PTY LTD EVELIN INVESTMENTS PTY LIMITED HSBC CUSTODY NOMINEES (AUS) LIMITED NATIONAL NOMINEES LIMITED INCANI & PAPADOPPOULOS SUPER PTY LTD MR PETER HOWELLS CITICORP NOM PTY LTD CUSTODIAL SERVICES LIMITED MR GARRIE ELLICE MR PEI YIN FOO BAOBAB NOMINEES PTY LTD MS NINA TSCHERNYKOW WOODROSS NOMINEES PTY LTD GANESH SUPER FUND CONNAUGHT CONSULTANTS (FINANCE) PTY LTD NEWECONOMY COM AU NOMINEES PTY LTD BELLITE PTY LTD * As shown on the register, beneficial holdings may differ. Securities quoted by the ASX All of the Company’s issued ordinary shares are quoted by the ASX under the code CLV. Register of securities New South Wales Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000 Telephone: 1300 850 505 Number of Fully Paid Ordinary Shares 34,183,579 22,603,940 14,303,526 13,287,385 7,550,000 5,794,524 4,171,156 2,010,000 1,500,000 1,310,174 1,047,469 1,020,000 900,000 861,011 858,881 820,000 794,646 767,000 732,069 719,600 115,234,960 51,204,351 Percentage of Issued Ordinary Shares (%) 20.54 13.58 8.59 7.98 4.54 3.48 2.51 1.21 0.90 0.79 0.63 0.61 0.54 0.52 0.52 0.49 0.48 0.46 0.44 0.43 69.24 30.76 54 CLOVER CORPORATION :: ANNUAL REPORT 2022 N O T E S 55 2 2 0 2 T R O P E R L A U N N A : : I N O T A R O P R O C R E V O L C 5656 CLOVER CORPORATION :: ANNUAL REPORT 2022 CORPORATE DIRECTORY Directors Mr Rupert A Harrington Non-Executive Director and Chairman Mr Graeme A Billings Mr Peter J Davey Mr Ian D Glasson Ms Toni L Brendish Dr Simon P Green Non-Executive Director Chief Executive Officer and Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Secretary Mr Andrew G M Allibon Registered Office 39 Pinnacle Road Altona North VIC 3025 Telephone: Facsimile: (03) 8347 5000 (03) 8347 5055 Auditors PKF Melbourne Audit & Assurance Pty Ltd Level 12 440 Collins Street Melbourne VIC 3000 Share Registry Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000 Telephone: 1300 850 505 Australian Securities Exchange Code Ordinary Shares CLV Website http://www.clovercorp.com.au
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