More annual reports from Eildon Capital Fund:
2021 ReportEildon Capital Limited &
its Stapled Entity
2020
ANNUAL REPORT
2020
1
Contents
01
| Company Particulars
02
| Chairman's Report
04
| The Year in Review
08
| Directors’ Report
15
|
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
16
17
18
19
40
41
43
|
|
|
|
|
|
|
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Auditor's Report
Corporate Governance Statement
51
| Additional Information
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY 2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Company Particulars
REGISTERED OFFICE
Suite 4, Level 6
330 Collins Street,
Melbourne VIC 3000
Tel: (03) 7003 7066
DIRECTORS
James R Davies - Chairman
Mark A Avery
Michelle E Harpur
Craig G Treasure (Appointed 1 May 2020)
Alexander D H Beard (Resigned 20 January 2020)
SECRETARY
John A Hunter
BANKERS
Westpac Banking Corporation Limited
AUDITORS
HLB Mann Judd Chartered Accountants
Level 19
207 Kent Street
Sydney NSW 2000
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
DOMICILE
Australia
STOCK EXCHANGE LISTING
Australian Securities Exchange Limited
1
Chairman’s Report
FOR THE YEAR ENDED 30 JUNE 2020
Dear Securityholder,
I am pleased to introduce these annual accounts and report
for the year ended 30 June 2020. The year has been one
that has provided both challenges and opportunities which I
believe have been navigated well and now see Eildon Capital
Eildon completed its restructure to a stapled entity which,
over time, we believe will be a benefit to investors. It will allow
benchmarking of returns from investments to other similar
entities and therefore should highlight the strong performance
of the Group against its peers.
Group (the Group or Eildon) well positioned for future growth.
Eildon also distributed 7.33 cents in distributions during
The impact of the COVID-19 pandemic was not only a factor
in determining the composition of the investment portfolio
but impacted the very nature of how the Group could work
the period, taking total distributions to 29.3 cents since
listing. Eildon Capital Group remains focused on consistent
distributions to investors in the range of 7.0-8.0% of net assets.
together in the face of social distancing. It also caused
Recently, the Group has announced a proposal to internalise
dislocation to the bank lending markets although this stabilised
the manager which the Directors believe will increase
reasonably quickly. COVID-19’s effect on the economy is still
alignment of management staff and Eildon, simplify corporate
ongoing and will likely last for some time. There will also be
governance and allow a growth angle to the business which
long-term effects to the property market due to COVID-related
has the potential to add to security value over time. We look
phenomena such as working-from-home and a change in
forward to completing this transaction, which is subject to
immigration trends. Given this upheaval it is particularly
securityholder approval, after the EGM in November. Your
pleasing to provide a set of results for the period that continue
Board encourages all securityholders to review the proposal
the strong performance of the Group since listing in 2017.
and to vote in favour of the resolution.
HIGHLIGHTS
OUTLOOK
The Group delivered a net profit of $4.7 million, representing
Given the heightened level of uncertainty in the Australian real
an increase of 7.8% over the prior corresponding period.
These returns were achieved via a portfolio of property backed
investments largely concentrated in registered mortgages. This
conservatism has been a positive in recent times given market
estate sector, the Board and management of the Group will
remain cautious and invest only where we believe there are
sound fundamentals to transactions. Strong due diligence and
a rigorous investment process will remain the foundation of
volatility in the real estate market.
our actions.
Eildon currently has 8 investments, with 83% in debt with a
weighted average loan to value ratio of 66% providing strong
headroom in case of any further market decline.
We expect that opportunities will emerge in the real estate
capital market as financial institutions reposition their balance
sheets to account for the impact of the COVID-19 pandemic.
2
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY 2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
3
It is noted however, that any pullback from major institutions
in this segment may also affect the wider property market, so
patience will be important.
We remain confident that the Group will continue to
see excellent deal flow and quality of transactions. The
internalisation of the group will also mean that, with the
capability thereafter to manage third party capital, Eildon can
move forward in the knowledge that when good opportunities
emerge, that they can be acted on, either with balance sheet
capital or external investor funds.
I would like to acknowledge and thank my fellow Directors,
including Sandy Beard who stepped off the Board during
the period, as well as the management team for their efforts
during the year and beyond. I would also like to thank you, our
security holders, for your continued support.
James Davies
Chairman
The Year in Review
FOR THE YEAR ENDED 30 JUNE 2020
INTRODUCTION
Eildon Capital Group (ASX: EDC) is pleased to report a full
year net profit after tax of $4.7 million (2019: $4.4 million)
representing a 7.8% increase over the prior corresponding
period. Net tangible Assets (NTA) was $1.09 per security as
at 30 June 2020. During the year, distributions of 7.33 cents
per security were paid to securityholders, which represents a
weighted average distribution yield of 7.2% based on a security
price of 99.5 cents as at 30 June 2020.
In addition to the distributions paid during the year, Eildon
Capital Group provided liquidity to investors by completing
a 10% buyback of securities at NTA of $1.09 per security.
This resulted in the return of approximately $5.0 million to
securityholders.
INVESTMENT PORTFOLIO UPDATE
Eildon Capital Group’s investment portfolio totalled $37.3 million
as at 30 June 2020. In addition, the group has $8.5 million
of cash reserves, representing 19% of net assets, of which
$1.3 million is committed to fund existing investments. In
addition, subsequent to year end Eildon Capital Group has
committed to invest $2.9 million in a loan opportunity.
Eildon Capital Group’s investment portfolio includes 5
debt positions and 3 equity investments diversified across
Queensland, Victoria and New South Wales. The investment
portfolio remains 83% invested in debt positions and 17% in
equity by value.
Although COVID-19 has created a significant amount of
uncertainty in the property market, Eildon Capital Group is
pleased to report all investments are performing as expected
and are forecast to deliver returns consistent with original
investment assumptions. There are currently no investments
in the loan portfolio that is in arrears and all covenants are
being maintained. However, we are cognisant there is likely to
be increased volatility in the short-medium term as the overall
impact of COVID-19 is unknown at this point.
Since inception, the investment process has remained
unchanged, with transactions sourced through a variety
of channels including direct relationships with developers,
projects regularly monitored and reviewed to ensure that
they remain in accordance with the original investment thesis.
The investment and philosophy has also not changed and
remains focused on delivering shareholder returns by choosing
investments that have both attractive risk-adjusted returns and
a focus on capital protection.
4
Net Profit after tax
$4.7m
(2019: $4.4 million)
7.8%
over the prior
corresponding period
EDC Portfolio Composition
19%
14%
67%
Equity
Debt
Cash
EDC Sector Diversification
12%
88%
Residential
Commercial
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY 2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
PERFORMANCE SINCE ASX LISTING
Since listing on the ASX in February 2017, Eildon Capital Group has delivered total distributions of 29.3 cents per security.
NTA & ACCUMULATED DIVIDENDS SINCE ASX LISTING
EDC Geographic Diversification
1%
28%
71%
VIC
NSW
QLD
EDC Investment Type
7%
93%
Eildon Funds
Direct Investment
5
The Year in Review
FOR THE YEAR ENDED 30 JUNE 2020
CAPITAL MANAGEMENT
MARKET CONDITIONS AND OUTLOOK
Eildon Capital Group completed the successful restructure
of the Group during the year which enabled the group to
transition from a company to a stapled company and a trust
structure. This new structure will:
• Enable pre-tax distributions;
• Enable pre-tax reporting of income which is consistent
with peers. This will improve investors’ ability to
benchmark performance; and
• Improve prospects for NTA growth while maintaining
historical levels of distribution.
As part of the restructure, Eildon Capital Group completed a
buyback of approximately 10% of securities at $1.09 each.
Despite significant economic uncertainty, the Australian non-
bank commercial real estate (CRE) market exhibits positive
signs with many reputable sponsors looking to progress high
quality projects. Eildon Capital Group continues to engage
with market participants as an active capital partner despite
the current market conditions. The group is seeing a high
number of quality projects across many real estate sectors
offering attractive returns in an environment of record low
interest rates.
Eildon Capital Group does not anticipate traditional Bank CRE
appetite and liquidity will improve in the short term which is
likely to increase the necessity for alternative capital providers
to fill the void. As such, the group is in a strong position to
capitalise on the current circumstances, by leveraging the long-
standing relationships with high quality sponsors and a track
record as a lender of choice. Furthermore, the group’s ability
to remain flexible on Loan-to-Value Ratios (LVR) and structure
terms whilst offering certainty on timely capital availability,
provides sponsors with surety around financial solutions.
The board remains disciplined when assessing opportunities
and allocating capital in line with the proven investment
process, while focusing on maintaining a distribution yield in
the range of 7.0-8.0% of NTA.
10
Years of
Operation
$730m
Transaction
Experience
65+
Real Estate
Transactions
2
Locations across
Australia
6
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
ABOUT THE MANAGER
Eildon Capital Group is managed by Eildon
Funds Management (EFM), a leading
arranger, investor and manager of real estate
development, credit and equity investments
within Australia’s CRE market.
• Since 2009 the management team of Eildon
Funds Management has been responsible
for approximately $730 million in
investments, representing 65 opportunities.
• EFM has delivered investment performance
that is relied upon by Sophisticated, Family
Offices and Institutional investors globally.
• EFM has seven full-time executives with
offices located in Melbourne and Sydney.
5
3
Debt
Investments
Equity
Investments
83%
Portfolio Debt
Investment
12%
Portfolio Delivering
Rental Income
$37.3m
$4.1m
Current Portfolio Value
Future Committed Investments
$41.4m1
Total Deployed/Committed Investments
2
17%
weighted average forecast return
from current investments
1 Portfolio status as at 30 June 2020, includes commitments made post year end. 2 As at 30 June 2020.
7
Directors’ Report
FOR THE YEAR ENDED 30 JUNE 2020
Your Directors present the Financial Report of Eildon Capital
Limited (the “Company”) and its stapled entity (collectively
referred to as “EDC”), for the year ended 30 June 2020 together
with the Auditors’ Report thereon.
Directors
The Directors in office at the date of this report and at all times
during the year are:
MARK ANTHONY AVERY (Managing Director)
B.Com.Pl.Ds. (UOM)
Mr Avery began his professional career at Macquarie Group
in 2002 in the property finance and residential development
divisions. Mr Avery also worked for private and listed property
development and investment groups. Mr Avery commenced
at CVC Limited, the former parent of the Company, in 2010,
and has been responsible for all of the group’s real estate
investment activities. He was appointed as Managing Director
of the Company in 2015. He is managing director and Chief
Executive Officer of CVC Limited and director of Eildon Funds
Management Limited.
CRAIG G TREASURE (Non-executive Director)
(Appointed 1 May 2020)
BASc (Surveying) (QUT). FDIA
Craig has more than 30 years’ experience in property
development, specifically in the residential land and housing
sectors along the eastern seaboard of Australia. As a licensed
surveyor and licenced property developer, Craig has previously
held a number of senior executive roles and directorships
within the property industry. His experience is both as a
business proprietor and at an executive level with publicly
listed entities. He is managing director and Chief Executive
Officer of Villa World Limited.
ALEXANDER DAMIEN HARRY BEARD
(Non-Executive Director) (Resigned 20 January 2020)
B.Com. (UNSW) FCA AICD
Mr Beard is a Chartered Accountant with extensive experience
in private equity investing. He is director of Probiotec Limited,
Tasfoods Limited and Shellfish Culture Limited. He is also
formerly a director of US Residential Fund, Cellnet Group
Limited, CVC Limited and Eildon Funds Management Limited.
JAMES R DAVIES (Non-Executive Chairman)
Bachelor of Computing Science (University of New England)
MBA (London Business School)
Company Secretary
JOHN ANDREW HUNTER
Graduate of the Australian Institute of Company Directors
and member of the audit committee of the Company.
Mr Davies has over 30 years’ experience in investment
management across real estate, private equity, infrastructure,
natural resources and distressed asset management. Most
recently he was Head of Funds Management at New Forests
Asset Management. Prior to that he held Director roles
at Hastings Funds Management Limited and Royal Bank
of Scotland’s Strategic Investments Group. He has been
appointed on numerous Investment Committees and Boards
including as Chairman of Timberlink Australia, Forico and
Airport Rail Link.
MICHELLE E HARPUR (Non-executive Director)
B.A. (UNSW) L.L.B. (UNSW)
Chairman of the audit committee of the Company. Ms Harpur
completed and passed the Company Directors Course with
the AICD in early 2016, and in 2010 also attended a Harvard
Business School Executive Education Program “Managing
Professional Services Firms”. Ms Harpur has been a partner
in mid-size, large and international law firms since 1992, and
is principle of Harpur Phillips. She was admitted as a solicitor
in 1986. Over many years, her clients have included listed
public companies and private companies involved in property
development, in addition to governance and risk management.
B.Com. (ANU), MBA (MGSM), MAppFin (MAFC), CA
Mr Hunter joined CVC in 2006 and has overseen the development
and management of a number of investment vehicles with his
core responsibility being management of financial and statutory
reporting and compliance. Mr Hunter has extensive experience
in ASX listed and unlisted public reporting and accounting for
property, equity trusts, managed investment companies and
schemes, due diligence and compliance.
Directors’ Meetings
The number of directors’ meetings attended, and the number
of directors’ meetings eligible to attend during their period in
office by each of the Directors during the financial year were as
follows:
Number of
meetings attended
Number of Meetings
eligible to held
M A Avery
A D H Beard
J R Davies
C G Treasure
M E Harpur
8
5
8
1
8
8
5
8
1
8
8
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
Audit Committee Meetings
The Company has an audit committee. The number of meetings and the number of meetings attended by each of the Directors on
the audit committee during the financial year were:
A D H Beard
J R Davies
M E Harpur
Directors’ Benefits
Number of meetings attended
Number of Meetings eligible to held
1
1
1
1
1
1
Information on Directors’ remuneration is included in the remuneration report in the financial statements.
Directors’ Interests in Shares of the Company
The relevant interest of each director in the ordinary share capital of the Company at the date of this report is included in the
remuneration report.
Principal Activities
EDC is an active property investment group which participates in retail, industrial, residential and commercial opportunities.
Operating Results
EDC recorded an after tax profit of $4,730,453 (2019: $4,386,508). The profit for the year is calculated as follows:
Net profit after income tax attributable to:
- Eildon Capital Limited
- Eildon Capital Trust
Net profit after income tax
2020
$
4,091,672
638,781
4,730,453
2019
$
4,386,508
-
4,386,508
9
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Directors’ Report
Dividends and Distributions
Dividends and distributions proposed or paid during the year and included within the statement of changes in equity by EDC are:
Cents Per
Share/Unit
Total
$
Date of
Payment
for Franking Percentage
Franked
Credits
Tax rate
2020 June quarter distribution on ordinary units
1.5569
637,298
24-Jul-20
Special dividend on ordinary shares
13.59
6,181,195
24-Apr-20
2020 March quarter dividend on ordinary shares
1.925
875,555
24-Apr-20
2019 December quarter dividend on ordinary shares
1.925
875,555
24-Jan-20
2019 September quarter dividend on ordinary shares
1.925
875,555
24-Oct-19
0%
30%
30%
30%
30%
0%
100%
100%
100%
100%
Review of Operations
EDC’s investment portfolio totalled $37.3 million as at 30 June 2020. In addition, the group has $8.5 million of cash reserves,
representing 19% of net assets, of which $1.3 million is committed to fund existing investments. The investment portfolio includes
5 debt positions and 3 equity investments diversified across Queensland, Victoria and New South Wales. The investment portfolio
remains 83% invested in debt positions and 17% in equity by value. During the financial year, EDC generated $6.0 million (2019:
$7.4 million) of interest income from property loans, and is holding loan investments totalling $30.9 million (2019: $37.8 million).
On 24 April 2020, a restructure was undertaken by the Company such that a distribution was completed which included a return
of capital and a fully franked dividend to the shareholders of the Company. The distribution was compulsorily applied to the
subscription for units in Eildon Capital Trust, an entity incorporated on 6 May 2019. An agreement was signed that has the effect of
stapling the shares of the Company to the units of Eildon Capital Trust, and although the two entities are separate legal entities, their
shares/units are not able to be separately traded. The restructure has no impact on the overall financial position of EDC.
As part of the restructure, a stapled security buy-back was completed to allow those stapled security holders who did not wish to
participate in the new investment approach to exit. This resulted in the buyback of 4,548,290 stapled securities on 25 May 2020.
Although the COVID-19 pandemic has created a significant amount of uncertainty in the property market, EDC is pleased to report all
investments are performing as expected and are forecast to deliver returns consistent with original investment assumptions. There
are currently no investments in the loan portfolio in arrears and all covenants are being maintained. However, we are cognisant
there is likely to be increased volatility in the short-medium term as the overall impact of COVID-19 is unknown at this point.
Remuneration Report (Audited)
This report outlines the remuneration arrangements in place for key management personnel of EDC in accordance with the
requirements of the Corporations Act 2001 and its regulations. This information has been audited as required by s. 308(3C) of the
Corporations Act 2001. The remuneration report details the remuneration arrangements for key management personnel who are
defined as those persons having authority and responsibility for planning, directing and controlling the major activities of EDC.
REMUNERATION PHILOSOPHY
The performance of EDC depends upon its ability to attract and retain quality people. EDC is committed to developing a
remuneration philosophy of paying sufficient competitive ‘base’ rewards to attract and retain high calibre personnel in order to
create value for stapled security holders.
10
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
REMUNERATION STRUCTURE
Non-Executive Director’s remuneration is solely in the form of fees and has been set by stapled security holders at a maximum
aggregate amount of $150,000, to be allocated amongst the Directors.
Other than the directors and company secretary employed by the Company, EDC does not employ any other key management
personnel.
EDC does not have a remuneration committee with the remuneration of the non-executive directors determined by the Board of
the Company.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
EDC has no employees and the only key management personnel are the Directors and company secretary of the Company. The
total income paid or payable or otherwise made available, to all key management personnel of EDC directly or indirectly from the
entity or any related party include:
DIRECTORS
Mark Avery (b)
(Managing Director)
James Davies
(Non-Executive Chairman)
Alexander Beard (b)
(Non-Executive Director)
Michelle Harpur
(Non-Executive Director)
Craig Treasure
(Non-Executive Director)
OTHER KEY MANAGEMENT PERSONNEL
John Hunter (b)
(Company Secretary)
Base Salary
Fees
$
-
-
45,662
45,662
-
-
38,052
45,662
6,088
-
-
-
89,802
91,324
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Post-Employment
Benefits
Superannuation
$
-
-
Total
$
Base %
(a)
-
-
4,338
4,338
50,000
50,000
-
-
3,615
4,338
578
-
-
-
8,531
8,676
-
-
41,667
50,000
6,666
-
-
-
98,333
100,000
-
-
100%
100%
-
-
100%
100%
100%
-
-
-
Notes:
(a) Base % reflects the amount of base level remuneration that is not dependent on individual or EDC’s performance.
(b) The remuneration of Messrs Avery, Beard, and Hunter are paid by an associate of the manager of EDC, Eildon Funds Management
Limited.
Except as detailed above, no other amount of remuneration is paid to key management personnel in connection with the
management of the affairs of EDC.
11
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Directors’ Report
KEY MANAGEMENT PERSONNEL HOLDING OF STAPLED SECURITIES
The relevant security holding interests of key management personnel in the capital of EDC as at the date of this report is as follows:
Stapled securities
Opening
Purchases
Sales
Other changes
during the year
Mr A.D.H. Beard (a)
Mr M. A. Avery
Ms M. E. Harpur
Mr J. R. Davies
Mr C. G. Treasure (b)
Mr J.A.H. Hunter
Notes:
709,570
36,285
19,523
27,016
-
6,000
100,000
5,000
-
-
-
2,300
-
-
-
-
-
-
-
-
-
40,570
-
Closing
(809,570) -
41,285
19,523
27,016
40,570
8,300
(a) Mr Beard resigned as director effective 20 January 2020.
(b) Mr Treasure became a director of the Company from 1 May 2020.
Consequences of Performance on Stapled Security Holder Wealth
In considering EDC’s performance and benefits for stapled security holder wealth, the Directors have regard to the following
indicators in respect of the current financial year and previous financial years.
Net profit after tax (a)
Total comprehensive income (a)
Dividends and distributions paid
Securities bought back on market
Security price
Net assets per security (b)
Change in net assets per security (b)
Notes:
2020
$
4,730,453
4,730,453
9,445,158
812,204
1.00
1.09
0.03
2019
$
4,386,508
4,386,508
3,525,499
609,994
1.02
1.06
0.02
2018
$
3,006,055
3,006,055
3,197,311
-
1.04
1.04
(0.01)
2017
$
3,659,218
3,610,914
2,012,822
-
1.05
1.05
0.06
(a) Although net profit and total comprehensive income of Eildon Capital Trust, the stapled entity, are identified as net profit and total
comprehensive income attributable to non-controlling interest, the shareholders of Eildon Capital Limited are also the unitholders of
Eildon Capital Trust by virtue of the stapling arrangement dated 18 March 2020. As such net profit after tax and total comprehensive
income for the 30 June 2020 financial year refer to profit after tax and total comprehensive income for the group which represents the
actual earnings for the stapled security holders of EDC.
(b) Although a non-controlling interest has been identified the shareholders of Eildon Capital Limited are also the unitholders of Eildon
Capital Trust by virtue of the stapling arrangement dated 18 March 2020. As such net assets per security for the 30 June 2020 financial
year refers to the group’s net assets which represents the actual value attributable to stapled security holders of EDC. Refer note 13.
Significant Changes in the State of Affairs
On 24 April 2020, a restructure was undertaken by the Company such that a distribution was completed which included a return
of capital and a fully franked dividend to the shareholders of the Company. The distribution was compulsorily applied to the
subscription for units in Eildon Capital Trust, an entity incorporated on 6 May 2019. An agreement was signed that has the effect of
12
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
stapling the shares of the Company to the units of Eildon Capital Trust, and although the two entities are separate legal entities, their
shares/units are not able to be separately traded. Following the restructure the principal activity of EDC continues to be an active
property investment group which participates in retail, industrial, residential and commercial opportunities. The restructure has no
impact on the overall financial position of EDC.
As part of the restructure, a stapled security buy-back was completed to allow those stapled security holders who did not wish to
participate in the new investment approach to exit. This resulted in the buyback of 4,548,290 stapled securities on 25 May 2020.
There were no other significant changes in the state of affairs of EDC that occurred during the year not otherwise disclosed in this
report or in the financial statements.
Likely Developments and Future Expectations
EDC will continue to assess Australian investment opportunities. As an investment group, the results of EDC are dependent on the
timing of and opportunities for the realisation of investments. Accordingly, it is not possible at this stage to predict the future results.
Events Subsequent to Reporting Date
A distribution of 1.5569 cents per share amounting to $637,298 was declared on 24 June 2020 and paid 24 July 2020.
Subsequent to year end EDC has made a commitment to make an investment of $2.9 million in a loan opportunity in JAK
Contributory Mortgage Fund, of which $1,674,819 has been transferred.
Other than as set out above, there are no matters or circumstances that have arisen since the end of the financial period which
significantly affected or may significantly affect the operations, the results of those operations or the state of affairs of EDC in
financial periods subsequent to 30 June 2020.
Insurance Premiums
EDC has not, during the year or since the end of the financial year, in respect of any person who is or has been an auditor or
a related body corporate paid or agreed to pay a premium in respect of a contract insuring against a liability for the costs or
expenses of defending legal proceedings.
Insurance premiums have been paid in respect of director’s and officer’s liability and legal expense insurance for directors
and officers of the Company. In accordance with subsection 300(9) of the Corporations Act 2001 further details have not been
disclosed due to confidentiality provisions contained in the insurance contract.
Auditor Independence and Non-audit Services
EDC appointed HLB Mann Judd (NSW Partnership) as the auditors for the 2020 financial year. During the financial year no non-
audit services were provided.
A copy of the Independence Declaration is included on page 14. Further information on Auditors’ Remuneration is included in note 3.
Signed in accordance with a resolution of Directors.
Dated at Sydney 31 August 2020
Mark Avery
Director
James Davies
Director
13
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Auditor’s Independence Declaration
To the directors of Eildon Capital Limited:
As lead auditor for the audit of the consolidated financial report of Eildon Capital Limited for the year ended 30 June 2020, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(a)
the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
This declaration is in relation to Eildon Capital Limited and its stapled entity.
HLB Mann Judd
Chartered Accountants
N J Guest
Partner
Sydney, NSW
31 August 2020
14
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
INCOME
Interest income
Fee income
Other income
Total income
Notes
2020
$
6,044,041
95,976
-
6,140,017
2019
$
7,355,087
208,602
2,858
7,566,547
Share of net profit of associate accounted for using the equity method
1,653,058
70,227
EXPENSES
Accountancy
Audit fees
Insurance
Legal fees
Directors fees
Management and consultancy fees
Share registry
Restructure cost
Other expenses
Total expenses
Profit before income tax
Income tax expense
Net profit after tax
Net profit attributable to non-controlling interest
Net profit attributable to members of the parent entity
3
19
4
16
10,411
51,894
47,046
10,329
98,333
797,416
62,876
136,031
94,711
14,410
44,642
62,416
1,449
100,000
818,873
64,752
171,493
92,298
1,309,047
1,370,333
6,484,028
1,753,575
4,730,453
638,781
4,091,672
6,266,441
1,879,933
4,386,508
-
4,386,508
Total comprehensive income for the year
4,730,453
4,386,508
Attributable to
Shareholders
Non-controlling interest
4,091,672
638,781
4,730,453
4,386,508
-
4,386,508
Basic and diluted earnings per stapled security (cents)
12
10.50
9.56
The above statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the
financial statements set out on pages 19 to 39.
15
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Consolidated Statement of Financial Position
AS AT 30 JUNE 2020
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets at amortised cost
Financial assets at fair value through profit or loss
Total current assets
NON-CURRENT ASSETS
Financial assets at amortised cost
Investments accounted for using the equity method
Financial assets at fair value through profit or loss
Deferred tax assets
Total non-current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Retained earnings
Profit distribution reserve
Total parent entity interest
Non-controlling interest
TOTAL EQUITY
Notes
2020
$
6
7
9
10
9
8
10
4
11
4
4
13
14
15
16
8,486,029
51,307
19,915,799
-
28,453,135
10,949,440
4,338,592
2,144,638
284,282
17,716,952
46,170,087
1,066,817
31,667
1,098,484
476,649
476,649
1,575,133
44,594,954
7,634,321
(326,836)
-
7,307,485
37,287,469
44,594,954
2019
$
6,936,845
44,693
15,547,239
10,716,096
33,244,873
11,514,784
2,893,434
1,771,712
356,718
16,536,648
49,781,521
1,102,190
493,761
1,595,951
-
-
1,595,951
48,185,570
43,796,218
(5,483,508)
9,872,860
48,185,570
-
48,185,570
The above statement of financial position should be read in conjunction with the notes to the financial statements set out on
pages 19 to 39.
16
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
Contributed
equity
$
Profit
Retained distribution
reserve
earnings
$
$
Owners of
the parent
$
Non-
controlling
interest
$
Total
$
At 1 July 2019
43,796,218
(5,483,508)
9,872,860
48,185,570
-
48,185,570
Profit for the year
Total comprehensive income for the year
-
-
4,091,672
4,091,672
Transactions with stapled security holders:
Units issued
Transaction costs on units issued
Stapled securities bought back
Transaction costs on stapled
security buyback
Tax on stapled security buyback
transaction costs
Return of capital
Dividends/distributions provided or paid
Transfers (to)/from reserve
-
-
(804,593)
(10,873)
-
-
-
-
-
-
4,091,672
638,781
4,730,453
4,091,672
638,781
4,730,453
-
-
(804,593)
41,530,887
(35,943)
(4,153,043)
41,530,887
(35,943)
(4,957,636)
(10,873)
(55,915)
(66,788)
-
-
-
-
3,262
(35,349,693)
-
-
-
-
-
1,065,000
-
-
(8,807,860)
(1,065,000)
3,262
(35,349,693)
(8,807,860)
-
-
-
(637,298)
-
3,262
(35,349,693)
(9,445,158)
-
At 30 June 2020
7,634,321
(326,836)
-
7,307,485
37,287,469
44,594,954
At 1 July 2018
44,344,011
(5,483,508)
9,011,851
47,872,354
Profit for the year
Total comprehensive income for the year
-
-
4,386,508
4,386,508
-
-
4,386,508
4,386,508
Transactions with stapled security holders:
Shares issued
Shares bought back
Transaction costs on share buyback
Tax on share buyback transaction costs
Dividends provided or paid
Transfers (to)/from reserve
62,201
(608,121)
(2,676)
803
-
-
-
-
-
-
-
(4,386,508)
-
-
-
-
(3,525,499)
4,386,508
62,201
(608,121)
(2,676)
803
(3,525,499)
-
At 30 June 2019
43,796,218
(5,483,508)
9,872,860
48,185,570
-
-
-
-
-
-
-
-
-
-
47,872,354
4,386,508
4,386,508
62,201
(608,121)
(2,676)
803
(3,525,499)
-
48,185,570
The above statement of changes in equity should be read in conjunction with the notes to the financial statements set out on
pages 19 to 39.
17
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2020
Notes
2020
$
2019
$
Cash flows from operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Distribution received
Loans repaid
Loans provided
Interest and fee income received
Income tax paid
104,251
(1,125,639)
520,994
5,841,865
(6,341,524)
2,138,002
(1,663,322)
Net cash (used in)/provided by operating activities
6(b)
(525,373)
Cash flows from investing activities
Payments for financial assets at fair value through profit or loss
Proceeds from financial assets at fair value through profit or loss
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Dividends paid
Payment for stapled security issue transaction costs
Payment for stapled security buyback
Payment for stapled security buyback transaction costs
Net cash used in financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
6(a)
(6,210,147)
16,842,355
10,632,208
(3,497,284)
(35,943)
(4,957,636)
(66,788)
(8,557,651)
1,549,184
6,936,845
8,486,029
169,270
(1,441,844)
-
24,413,444
(14,921,225)
5,813,974
(1,889,851)
12,143,768
(11,688,961)
204,400
(11,484,561)
(3,320,996)
-
(608,121)
(2,676)
(3,931,793)
(3,272,586)
10,209,431
6,936,845
The above statement of cash flows should be read in conjunction with the notes to the financial statements set out on
pages 19 to 39.
18
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Contents
Note
1 | Statement of Accounting Policies .........................19
2 | Parent Entity Financial Information ......................23
3 | Auditor’s Remuneration .........................................23
4 |
Income Tax ...............................................................24
5 | Dividends and Distributions ..................................25
6 | Notes to the Statement of Cash Flows .................26
7 | Trade and Other Receivables ................................27
8 |
Investments Accounted for Using the
Equity Method .........................................................27
9 |
Financial Assets at Amortised Cost .......................29
10 |
Financial Assets at Fair Value
through Profit or Loss.............................................29
Trade and Other Payables .....................................30
Earnings Per Share ..................................................30
Contributed Equity ..................................................31
Retained Earnings ...................................................32
Profit Distribution Reserve .....................................32
Non-Controlling Interest ........................................32
Financial Instruments .............................................33
Segmental Information ..........................................37
Note 1: Statement of Accounting
Policies
The significant policies which have been adopted in the
preparation of this financial report are:
a) Basis of Preparation
The financial report is a general-purpose financial report,
which has been prepared in accordance with the requirements
of the Corporations Act 2001 and Australian Accounting
Standards. The financial report has been prepared on a
historical cost basis, except for the measurement at fair value
of selected financial assets.
These accounting policies have been consistently applied
by each entity in EDC and are consistent with those of the
previous year. Management is required to make judgements,
estimates and assumptions in relation to the carrying value
of assets and liabilities, that have significant risk of material
adjustments in the next year and these have been disclosed in
the relevant notes to the financial statements.
EDC presents assets and liabilities in the statement of financial
position as current or non-current.
• Current assets include assets held primarily for trading
purposes, cash and cash equivalents, and assets expected
to be realised in, or intended for sale or use in, the course
of EDC’s operating cycle and within one year from the
reporting date. All other assets are classified as non-current.
• Current liabilities include liabilities held primarily for trading
purposes, liabilities expected to be settled in the course
of EDC’s operating cycle and those liabilities due within
one year from the reporting date. All other liabilities are
classified as non-current liabilities.
The financial report is presented in Australian dollars.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with
Australian Accounting Standards requires the use of certain
critical accounting estimates. It also requires management
to exercise its judgement in the process of applying EDC’s
accounting policies.
The key estimates and judgements that have a significant risk
of causing a material adjustment to the carrying amount of
certain assets and liabilities are:
Related Party Information ......................................37
• Valuation of investments accounted for using the equity
method (refer below);
Commitments and Contingent Liabilities ............38
• Fair value of financial assets at amortised cost (refer note 9);
Other Information ...................................................39
• Fair value of financial assets at fair value through profit or
and
Subsequent Events .................................................39
Stapled Entity ...........................................................39
loss (refer note 10).
Valuation of investments accounted for using the
equity method
The carrying value of investments have been valued based
19
11 |
12 |
13 |
14 |
15 |
16 |
17 |
18 |
19 |
20 |
21 |
22 |
23 |
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
on the net asset backing methodology, using the most recent
reports provided by the entity.
Net asset backing methodology
The net asset backing methodology considers that the net
assets of an entity reflects the future value of the business.
This is because:
• the underlying value of the business operations may be
focused specifically on increasing the value of its assets
base; or
• there is insufficient repetitive income or profits to justify the
use of different valuation techniques such as discounted
cash flows or multiple of earnings.
b) Statement of Compliance
The financial report complies with Australian Accounting
Standards, which include Australian equivalents to International
Financial Reporting Standards (AIFRS). The financial report also
complies with International Financial Reporting Standards (IFRS).
AASB 16 Leases is mandatory for the annual reporting period
commencing 1 July 2019. EDC does not have any leases. The
adoption of AASB 16 has not had any impact on the financial
performance or position of EDC. No adjustment was required
to be recognised as a result of the adoption of AASB 16 and
consequently no further disclosures have been included in this
financial report.
Certain new accounting standards and interpretations have
been published that are not mandatory for 30 June 2020
reporting periods and have not been early adopted by EDC.
These standards are not expected to have a material impact
on the entity in the current or future reporting periods and on
foreseeable future transactions.
c) Coronavirus (COVID-19) Impact
The World Health Organisation declared a global pandemic in
March 2020 as a result of COVID-19. The impact of the crisis
has had a significant economic impact. The critical accounting
estimates and judgements of EDC have required additional
consideration and analysis due to the impact of COVID-19.
Given the uncertainty of the extent of the impact of the
pandemic, changes to the estimates and outcomes that have
been applied in the measurement of EDC’s assets and liabilities
may arise in the future. Other than adjusting events that
provide evidence of conditions that existed at the end of the
financial year, the impact of events that arise after the reporting
period will be accounted for in future reporting periods.
The effect on the operations of EDC will be dependent on the
severity and duration of the pandemic, as well as the economic
support provided by the government. The processes applied in
the preparation of this Financial Report included a review of:
• all financial assets at amortised cost and associated
underlying security to determine if there has been a
significant increase in credit risk and determined the
expected credit loss on each financial asset. Refer note 9;
20
• unlisted financial assets at fair value through profit or loss
to determine if the investments’ carrying value included a
consideration of the impact of COVID-19. Refer note 10; and
• impairment of the carrying amount of each associate, by
comparing the investment’s recoverable amount with its
carrying value. Refer note 8.
d) Principles of Consolidation
(i) Stapled Entities
The consolidated financial statements comprise the financial
statements of Eildon Capital Limited and the stapled entity,
Eildon Capital Trust as at 30 June 2020 from the date it was
deemed that EDC has been constructed, 24 April 2020.
Although Eildon Capital Limited does not have an ownership
interest in Eildon Capital Trust, in accordance with AASB
3 Business Combinations, Eildon Capital Limited has been
identified as the acquirer and the parent entity for the purpose
of preparing the consolidated financial statements and Eildon
Capital Trust is deemed to be the acquiree.
In preparing the consolidated financial statements, all inter
company balances and transactions, income and expenses
and profits and losses resulting from intra-group transactions
have been eliminated in full and the reporting period and
accounting policies of subsidiaries are consistent with those of
the parent entity.
The consolidation of the stapled entity is accounted for using
the purchase method of accounting which allocates the cost
of the business combination to the fair value of the assets
acquired and the liabilities assumed at the date of acquisition.
The net assets not held by Eildon Capital Limited are identified
as non-controlling interests and presented in the consolidated
balance sheet within equity, separately from the Company’s
equity holders’ equity. The profit of Eildon Capital Trust is
also separately disclosed as a non-controlling interest in the
profit of EDC. Although a non-controlling interest has been
identified the shareholders of Eildon Capital Limited are also
the unitholders of Eildon Capital Trust by virtue of the stapling
arrangement dated 18 March 2020.
(ii) Associates
Associates are those entities, other than partnerships, over
which EDC exercises significant influence but not control.
In the consolidated financial statements investments in
associates are accounted for using equity accounting
principles. 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.
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY Note 1: Statement of Accounting
Policies (Cont.)
d) Principles of Consolidation (Cont.)
(ii) Associates (Cont.)
Dividends received or receivable from associates reduce the
carrying amount of the investment. Investments in associates
are carried at the lower of the equity accounted amount and
recoverable amount. EDC’s equity accounted share of the
associates’ net profit or loss is recognised in the consolidated
statement of profit or loss and other comprehensive income
from the date significant influence commences until the date
significant influence ceases.
e) Cash and Cash Equivalents
Cash includes cash on hand and short-term deposits with an
original maturity of three months or less.
f) Revenue Recognition
Interest Income
Revenue is recognised as interest accrues using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net
carrying amount as at the end of the financial year.
Fee Income
EDC provides services to parties which is measured at
the amount in accordance with the agreement. Revenue
is recognised in the accounting period which the services
provided are matched with the use of the benefits by the
client. A receivable is recognised at the same time as this is the
point in time that consideration is unconditional because only
the passage of time is required before the payment is due.
Dividends and Distribution Income
Revenue from dividends and distributions is recognised when
the right to receive payment is established. Dividends received
out of pre-acquisition reserves are recognised in revenue and
the investment is also assessed for impairment.
g) Trade and Other Payables
Trade and other payables are carried at amortised cost and
represent liabilities for goods and services provided to EDC prior
to the end of the financial year that are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition.
h) Trade and Other Receivables
Trade and other receivables, which generally have 30 day
terms, are stated at their amortised cost less any allowance
for expected credit losses. Individual debts that are known to
be uncollectible are written off when identified. EDC applies
the AASB 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade
and other receivables. The measurement of expected loss is
based on EDC’s historical credit losses experienced and then
adjusted for current and forward-looking information affecting
EDC’s debtors.
i) Financial Assets
(i) Classification
Financial assets in the scope of AASB 9 Financial Instruments
are classified in the following measurement categories:
• those to be measured subsequently at fair value (either
through other comprehensive income (OCI), or through
profit or loss), and
• those to be measured at amortised cost.
The classification depends on EDC’s business model for
managing the financial assets and the contractual terms of the
cash flows.
For assets measured at fair value, gains and losses will either
be recorded in financial performance or OCI.
EDC reclassifies debt investments when and only when its
business model for managing those assets changes.
(ii) Measurement
At initial recognition, EDC measures a financial asset at its
fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset.
Financial Assets at Amortised Cost
Financial assets at amortised cost are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest. Interest income
from these financial assets is included in finance income using
the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in financial performance
and presented in other gains/(losses), together with foreign
exchange gains and losses. Impairment losses are presented
as a separate line item in the statement of profit or loss and
other comprehensive income.
Financial Asset at Fair Value through Profit or Loss (FVPL)
Equity investments that do not meet the criteria for amortised
cost or have not been elected to present as financial assets at
fair value through other comprehensive income are measured
at FVPL. Changes in the fair value of financial assets at FVPL
are recognised in other gains/(losses) in the statement of profit
or loss and other comprehensive income as applicable.
(iii) Impairment
EDC assesses on a forward looking basis the expected
credit losses associated with its debt instruments carried at
amortised cost. The expected credit loss is determined based
on changes in the financial asset’s underlying credit risk and
includes forward-looking information. Where there has been
a significant increase in credit risk since initial recognition,
21
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED Notes to the Financial Statements
the expected credit loss is determined with reference to
the probability of default. EDC applies its judgement in
determining whether there has been a significant increase
in credit risk since initial recognition based on qualitative,
quantitative, and reasonable and supportable information that
includes forward-looking information.
Expected credit loss is generally determined based on the
contractual maturity of the financial asset and an assessment
of the underlying security provided by the counterparty. The
expected credit loss is measured as the product of probability
of default, loss given default and exposure at default,
with increases and decreases in the measured expected
credit loss from the date of origination being recognised
in the consolidated statement of profit or loss and other
comprehensive income as either an impairment loss or gain.
Outcomes within the next financial period that are different
from assumptions and estimates could result in changes to the
timing and amount of expected credit losses to be recognised.
The loss allowances for expected credit loss are presented in
the statement of financial position as a deduction to the gross
carrying amount.
Income taxes relating to items recognised directly in equity are
recognised in equity and not in comprehensive income.
Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of Goods and Services Tax (GST), except:
• when the GST incurred on a purchase of goods and services
is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition
of the asset or as part of an item of the expense item as
applicable; and
• receivables and payables, which are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a
gross basis and the GST component of cash flows arising from
investing and financing activities which are recoverable from, or
payable to, the taxation authority are classified as operating cash
flows.
j) Income Tax and Other Taxes
k) Contributed Equity
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered
from or paid to the taxation authorities on the current period’s
taxable income at the tax rates enacted by the reporting date.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred income tax is provided on all temporary differences at
the reporting date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences and the carry-forward of unused tax credits and tax
losses can be utilised. Unrecognised deferred income tax assets
are reassessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.
The carrying amount of deferred income tax assets is reviewed
at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and deferred tax liabilities are offset only
if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets
and liabilities relate to the same taxable entity and the same
taxation authority.
Issued capital is recognised at the fair value of the
consideration received by the Company. Incremental costs
directly attributable to the issue or cancellation of shares are
shown in equity as a deduction, net of tax, from proceeds.
l) Segment Reporting
A business segment is a distinguishable component of the
entity that is engaged in providing differentiated products or
services.
m) Impairment
Assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset’s fair
value less costs of disposal and value-in-use. The value-in-
use is the present value of the estimated future cash flows
relating to the asset using a pre-tax discount rate specific to
the asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped
together to form a cash-generating unit. Non-financial assets
that suffered an impairment are tested for possible reversal of
the impairment whenever events or changes in circumstances
indicate that the impairment may have reversed.
n) Profit Distribution Reserve
Profits transferred to the profit distribution reserve are
segregated to facilitate potential future dividend payments
that may be declared by the directors.
22
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020 Note 2: Parent Entity Financial Information
a) Summary Financial Information
The individual financial statements for the parent entity, Eildon Capital Limited, show the following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Retained earnings
Profit distribution reserve
Total Equity
Profit for the period
Total comprehensive income
Notes
2020
$
1,325,284
8,092,796
308,663
785,311
7,634,321
(326,836)
-
7,307,485
4,091,672
4,091,672
2019
$
33,244,873
49,781,521
1,595,951
1,595,951
43,796,218
(5,483,508)
9,872,860
48,185,570
4,386,508
4,386,508
The financial information for the Company has been prepared on the same basis as the consolidated financial statements.
b) Commitments and Contingent Liabilities of the Parent Entity
The Company did not have any capital commitments as at 30 June 2020 and 30 June 2019. Refer note 20(b) for information about
contingent liabilities and note 20(c) for information about guarantees given by the Company.
Note 3: Auditor’s Remuneration
The auditor of EDC is HLB Mann Judd (NSW Partnership).
Amounts received or due and receivable by the auditors for:
Audit and review of financial report
HLB Mann Judd (NSW Partnership)
51,894
44,642
23
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 4: Income Tax
a) Income Tax Expense
Accounting profit before income tax
Income tax expense at the statutory income tax rate of 30%
Trust profit not assessable
Income tax expense
The major components of income tax expense are:
- Current income tax charge
- Deferred income tax
Income tax expense reported in the statement of profit or loss and
other comprehensive income
Deferred tax benefit relating to items credited directly to equity
b) Deferred Income Tax
Deferred income tax balances at 30 June relates to the following:
Notes
2020
$
2019
$
6,484,028
6,266,441
1,945,208
(191,633)
1,753,575
1,216,625
536,950
1,753,575
3,262
1,879,933
-
1,879,933
1,844,655
35,278
1,879,933
803
2020
Included in
income
$
Included in
equity
$
Total
$
Included in
income
$
2019
Included in
equity
$
Total
$
Deferred tax assets
Provisions and accrued expenses
Tax losses
Other
12,150
106,001
69,291
187,442
-
-
96,840
12,150
106,001
166,131
8,250
106,001
79,486
-
-
162,981
8,250
106,001
242,467
96,840
284,282
193,737
162,981
356,718
Deferred tax liabilities
Equity accounting income
476,649
-
476,649
-
-
-
c) Current Tax Liabilities
Income tax payable
Balance at the end of the year
24
2020
$
2019
$
31,667
493,761
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 5: Dividends and distributions
Dividends and distributions proposed or paid in previous years and included within the statement of changes in equity by EDC are:
Cents Per
Share/Unit
Total
$
Date of
Payment
for Franking Percentage
Franked
Credits
Tax rate
2020 June quarter distribution on ordinary units
1.5569
637,298
24-Jul-20
Special dividend on ordinary shares
13.59
6,181,195
24-Apr-20
2020 March quarter dividend on ordinary shares
1.925
875,555
24-Apr-20
2019 December quarter dividend on ordinary shares
1.925
875,555
24-Jan-20
2019 September quarter dividend on ordinary shares
1.925
875,555
24-Oct-19
2019 June quarter dividend on ordinary shares
1.925
875,555
24-Jul-19
2019 March quarter dividend on ordinary shares
1.925
876,961
24-Apr-19
2018 December quarter dividend on ordinary shares
1.925
886,693
24-Jan-19
2018 September quarter dividend on ordinary shares
1.925
886,290
24-Oct-18
0%
30%
30%
30%
30%
30%
30%
30%
30%
2020
$
0%
100%
100%
100%
100%
100%
100%
100%
100%
2019
$
Dividend franking account:
Franking credits available to stapled security holders for subsequent financial years
37,879
2,611,447
The franking account is stated on a tax paid basis. The balance comprises the franking account at year end adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the refund of overpaid tax instalments paid;
(c)
(d) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(e) franking credits that the entity may be prevented from distributing in subsequent years.
franking debits that will arise from the payment of dividends recognised as a liability at year end;
The ability to utilise the franking credits is dependent upon there being sufficient available equity to declare dividends.
25
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
2020
$
2019
$
Note 6: Notes to the Statement of Cash Flows
a) Reconciliation of Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash and cash equivalents
comprise the following at the end of the financial year:
Cash at bank
8,486,029
6,936,845
Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amount of cash and cash equivalents
represents fair value.
b) Reconciliation of Profit After Income Tax to Net Cash from Operations
Net profit after tax
Adjustments for:
Share of equity accounted profit
Change in operating assets and liabilities:
(Increase)/Decrease in other assets
(Increase)/Decrease in loans and financial assets
Decrease/(Increase) in GST
Increase/(Decrease) in payables
Increase in deferred tax assets and liabilities
Increase in sundry creditors and accruals
(Decrease) in tax payable
Net cash (used in)/provided by operating activities
4,730,453
4,386,508
(1,653,058)
(70,227)
(7,900)
(3,884,704)
1,283
152,611
552,347
45,689
(462,094)
(525,373)
17,470
7,875,166
(1,731)
(61,815)
35,126
8,313
(45,042)
12,143,768
26
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 7: Trade and Other Receivables
Current:
Goods and services tax
Prepayments and others
2020
$
13,977
37,330
51,307
2019
$
15,262
29,431
44,693
Trade and other receivables are non-interest bearing and are generally on 30 day terms. EDC applies the AASB 9 simplified
approach to measuring expected credit losses using a lifetime expected credit loss provision for trade and other receivables.
The measurement of expected loss is based on EDC’s historical credit losses experienced and then adjusted for current and
forward-looking information affecting EDC’s debtors.
Due to the short-term nature of trade and other receivables, their carrying amount is considered to be the same as their fair value.
Note 8: Investments Accounted for Using the Equity Method
Interest in ordinary shares of associate
79 Logan Road Trust (a)
79 Logan Road Pty Limited (b)
Kingsgrove (Vanessa Road) Unit Trust (c)
Ownership Interest
2019
2020
%
%
Investment Carrying Amount
2020
$
2019
$
35
35
-
35
35
25
4,338,557
35
-
2,893,399
35
-
4,338,592
2,893,434
Notes:
(a) 79 Logan Road Trust is a commercial property in Woolloongabba, Queensland with a long term lease to an ASX listed entity, with
residential development approval. The carrying value of 79 Logan Road Trust has been calculated as $4,338,557 based on the net
asset backing methodology, using the most recent reports provided by the company.
(b) 79 Logan Road Pty Limited is the trustee of 79 Logan Road Trust.
(c) Kingsgrove (Vanessa Road) Unit Trust is a residential property development in Kingsgrove, New South Wales.
The carrying value of investments in associates has been reviewed for impairment, including considering the impact of COVID-19.
The carrying value of the investments in associates has not been impacted.
27
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 8: Investments Accounted for Using the Equity Method (Cont.)
Summarised Financial Information
The following table illustrates summarised financial information relating to EDC’s associate:
79 Logan Road Trust
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Reconciliation to carrying amounts:
Opening net assets 1 July
Profit for the period
Return of capital
Dividend paid
Closing net assets
EDC’s share - percentage
EDC’S share - dollars
Carrying amount
Summarised statement of comprehensive income
Revenue
Net profit
Total comprehensive income
Dividends received
2020
$
123,356
85,122
38,234
23,847,641
11,490,000
12,357,641
12,395,875
8,266,854
4,723,021
(410,490)
(183,510)
12,395,875
35%
4,338,557
4,338,557
5,676,177
4,723,021
4,723,021
64,229
2019
$
123,417
41,081
82,336
19,674,518
11,490,000
8,184,518
8,266,854
8,650,206
200,648
(383,352)
(200,648)
8,266,854
35%
2,893,399
2,893,399
1,205,229
200,648
200,648
70,227
Individually Immaterial Investments Accounted for Using the Equity Method
In addition to the interest in the investment accounted for using the equity method disclosed above, EDC also has an interest in
one immaterial investment that is accounted for using the equity method.
Aggregate carrying amount of individually immaterial investments accounted
for using the equity method
Aggregate amounts of EDC’s share of profit for the period
Total comprehensive income
2020
$
35
-
-
2019
$
35
-
-
28
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 9: Financial Assets at Amortised Cost
Current:
Secured loans to other corporations
Secured loans to related entity
Non-Current:
Secured loans to other corporations
2020
$
2019
$
19,915,799
-
19,915,799
15,394,144
153,095
15,547,239
10,949,440
11,514,784
Following the economic consequences of COVID-19 at the reporting date the timing of contractual recovery is subject to evolving
regulatory and industry support for counterparties requesting such support.
In the event that a counterparty default on a loan, EDC may take possession of security provided. EDC has not repossessed any
assets that have been provided as security.
Expected credit loss on loans are disclosed as a deduction against the gross carrying amount. EDC regularly reviews loans to
determine if there is a significant increase in credit risk, which may be evidenced by either qualitative or quantitative factors.
These factors include if a counterparty does not pay a scheduled payment of principal and interest, requests a variation to the
repayment terms, or management consider that there has been an adverse change in the underlying value of assets securing the
loan. The significant increase in credit risk methodology is based on an actual credit risk review approach which considers changes
in a counterparty’s credit risk since origination. The outcome of the review identifies the probability of default and the loss given
default of the loan, which are used to determine the impairment required to be made in relation to a loan.
A loss allowance is identified at the time that there is a significant increase in credit risk of the borrower, and the loan is impaired
once it is determined that an amount is not recoverable.
In response to COVID-19 EDC has reviewed its loans for a significant increase in credit risk and expected credit loss. The review
considered the counterparty credit quality, the security held, exposure at default and the effect of repayment terms as at
reporting date. No expected loss allowance on loan assets has been provided as at 30 June 2020 and 30 June 2019.
For the majority of the non-current financial assets at amortised cost, the fair values are not significantly different from their
carrying amounts.
Note 10: Financial Assets at Fair Value through Profit or Loss
Current:
Shares in unlisted corporations
Non-Current:
Shares in unlisted corporations
-
10,716,096
2,144,638
1,771,712
The carrying value of shares in unlisted corporations has been determined by using valuation techniques. Such techniques include
using recent arm’s length market transactions; net asset backing; reference to the current market value of another instrument
that is substantially the same and discounted cash flow analysis.
Unlisted investments for the current financial year comprise holdings in special purpose vehicles that hold property assets. A
review has been undertaken of the underlying property assets held by the entities regarding the impact of COVID-19 and EDC is of
the opinion that there has been no impact on underlying property assets and ultimately the carrying value of its investments.
29
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 11: Trade and Other Payables
Current:
Trade payables
Sundry creditors and accruals
Distribution/dividend payable
Trade and other payables are non-interest bearing and are generally on 30 day terms.
Note 12: Earnings Per Share
Basic and diluted earnings per share
Basic and diluted earnings per stapled security (a)
Net profit attributable to shareholders used in calculation of basic and
diluted earnings per share
Net profit used in calculation of basic and diluted earnings per stapled security
2020
$
2019
$
161,233
110,717
794,867
1,066,817
2020
Cents
9.09
10.50
$
4,091,672
4,730,453
Number
8,623
65,378
1,028,189
1,102,190
2019
Cents
9.56
9.56
$
4,386,508
n/a
Number
Weighted average number of shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
45,036,019
45,899,548
Notes:
(a) Although net profit of Eildon Capital Trust, the stapled entity, is identified as net profit attributable to non-controlling interests, the
shareholders of Eildon Capital Limited are also the unitholders of Eildon Capital Trust by virtue of the stapling arrangement dated
18 March 2020. As such earnings per stapled security for the 2020 financial year refers to the group’s net profit after tax which
represents the actual earnings for the stapled security holders of EDC.
30
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 13: Contributed Equity
Issued and paid up share capital:
Ordinary shares fully paid
Ordinary shares:
Balance at the beginning of the year
Return of capital
Issue of shares
Shares bought back
Transaction costs on share buyback
Income tax on share transaction costs
2020
Number of
shares
$
2019
Number of
shares
$
40,935,102
7,634,321
45,483,392
43,796,218
45,483,392
-
-
(4,548,290)
-
-
43,796,218
(35,349,693)
-
(804,593)
(10,873)
3,262
46,020,079
-
63,372
(600,059)
-
-
44,344,011
-
62,201
(608,121)
(2,676)
803
Balance at the end of the year
40,935,102
7,634,321
45,483,392
43,796,218
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the company in proportion to the
number of shares held.
Total capital of the Company is as follows:
Net assets attributed to members of the parent
Net assets per share attributed to members of the parent
Total capital of the stapled group is as follows:
Net assets
Net assets per stapled security (a)
Notes:
2020
$
7,307,485
0.18
2019
$
48,185,570
1.06
44,594,954
48,185,570
1.09
1.06
(a) Although a non-controlling interest has been identified, the shareholders of Eildon Capital Limited are also the unitholders of Eildon
Capital Trust by virtue of the stapling arrangement dated 18 March 2020. As such net assets per stapled security for the 2020 financial
year refers to the group’s net assets which represents the actual value attributable to stapled security holders of EDC.
EDC is not subject to any externally imposed capital requirements. Management’s objective is to achieve returns for stapled
security holders commensurate with the risks associated with making investments in Australia.
31
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 14: Retained Earnings
Retained earnings at the beginning of the year
Net profit attributable to members
Transfers from/(to) profit distribution reserve
Retained earnings at the end of the year
Note 15: Profit Distribution Reserve
Profit distribution reserve at the beginning of the year
Transfers (to)/from retained earnings
Dividends paid
Profit distribution reserve at the end of the year
2020
$
2019
$
(5,483,508)
4,091,672
1,065,000
(326,836)
9,872,860
(1,065,000)
(8,807,860)
-
(5,483,508)
4,386,508
(4,386,508)
(5,483,508)
9,011,851
4,386,508
(3,525,499)
9,872,860
Profits transferred to the profit distribution reserve are segregated to facilitate potential future dividend payments that may be
declared by the directors.
Note 16: Non-controlling Interest
Reconciliation of Non-controlling Interest in Stapled Entities
Balance at the beginning of the year
Share of net profit
Units issued
Transaction costs on units issued
Units bought back
Transaction costs on units buyback
Distributions provided or paid
Balance at the end of the year
The non-controlling interest at the end of the year comprises interests in:
Share capital
Retained profits
2020
$
-
638,781
41,530,887
(35,943)
(4,153,043)
(55,915)
(637,298)
37,287,469
37,285,986
1,483
37,287,469
The net assets not held by Eildon Capital Limited are identified as non-controlling interests. The equity of Eildon Capital
Trust is held directly by stapled security holders and is accounted for in accordance with AASB 3 Business combinations.
The non-controlling interest represents the equity held by unitholders of Eildon Capital Trust.
32
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 17: Financial Instruments
EDC’s activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. EDC’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial
performance.
EDC uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate risk.
The responsibility for operational risk management resides with the Board of Directors who seeks to manage the exposure of
EDC. There have been no significant changes in the types of financial risks or EDC’s risk Management program (including methods
used to measure the risks) since the prior year.
a) Interest Rate Risk
EDC’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date are as
follows:
Note
Weighted
average
interest rate
$
Floating
interest
rate
$
Fixed interest rate
1 to 5
1 year
years
or less
$
$
Non-
interest
bearing
$
Total
2020
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at amortised cost
6
7
9
0.3%
-
14.4%
8,486,029
-
-
-
-
19,915,799
-
-
10,949,440
-
51,307
-
8,486,029
51,307
30,865,239
8,486,029
19,915,799
10,949,440
51,307
39,402,575
Financial liabilities
Trade and other payables
11
-
-
-
-
1,066,817
1,066,817
2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at amortised cost
6
7
9
0.8%
-
15.8%
6,936,845
-
-
-
-
15,547,239
-
-
11,514,784
-
44,693
-
6,936,845
44,693
27,062,023
6,936,845
15,547,239
11,514,784
44,693
34,043,561
Financial liabilities
Trade and other payables
11
-
-
-
-
1,102,190
1,102,190
EDC holds a significant amount of cash balances which are exposed to movements in interest rates. To reduce the risk EDC
typically deposits uncommitted cash in high interest rate accounts with financial institutions. Interest bearing loans and
receivables are made at fixed rates. EDC is not charged interest on outstanding trade and other payable balances.
33
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 17: Financial Instruments (Cont.)
a) Interest Rate Risk (Cont.)
Sensitivity
As EDC expects interest rates to stay the same during the 2021 financial year (2020: decreased by 50 basis points), at reporting
date there would be no impact on EDC, with all other varieties held constant. The impact for the 2019 financial year was:
2019
Net loss
Equity movement
b) Credit Risk Exposure
Decrease of 50 bp
$
13,630
13,630
Credit risk refers to the loss that EDC would incur if a debtor or counterparty fails to perform under its obligations. EDC is exposed
to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables and loans to
various entities. The carrying amounts of financial assets recognised in the statement of financial position best represent EDC’s
maximum exposure to credit risk at reporting date.
EDC’s significant concentration of credit risk relates to deposits held with financial institutions, which is mitigated by the
requirement that deposits are only held with institutions with an “investment grade” credit rating, and loans made to various
entities, which are mitigated by collateral held with a value in excess of the counterparty’s obligations to EDC, providing a “margin
of safety” against loss.
EDC minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of
counterparties, and is managed through normal payment terms of 30 days.
The credit quality of financial assets that are neither past due nor impaired is as follows:
2020
$
2019
$
8,486,029
6,936,845
13,977
37,330
51,307
15,262
29,431
44,693
30,865,239
27,062,023
Cash and cash equivalents
Trade and other receivables
Government
Other – unrated
Financial assets at amortised cost
Other – unrated
34
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 17: Financial Instruments (Cont.)
c) Liquidity Risk
Liquidity risk is the risk that EDC might be unable to meet its obligations. EDC manages liquidity risk by maintaining sufficient cash
balances and holding liquid investments that could be realised to meet commitments. EDC continuously monitors forecast and
actual cash flows and matches the maturity profiles of financial assets and liabilities.
The following table details maturity profiles of EDC’s contractual liabilities.
2020
Trade and other payables
2019
Trade and other payables
Less than 6 months
$
Total
$
1,066,817
1,066,817
1,102,190
1,102,190
d) Fair Value of Financial Assets and Liabilities
Fair value reflects the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When an active market does not exist, fair values are estimated using
valuation techniques, based on market conditions prevailing at the measurement date. Such techniques include using recent
arm’s length market transactions; net asset backing and reference to current market value of another instrument that is
substantially the same.
The fair value of liquid assets maturing within three months are approximate to their carrying amounts. This assumption is
applied to liquid assets and the short-term portion of all other financial assets and financial liabilities.
Judgements and estimates were made in determining the fair values of certain financial instruments and non-financial assets that
are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs
used in determining fair value, EDC has classified its financial instruments and non-financial assets into three levels prescribed
under the accounting standards.
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset,
either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset that are not based on observable market data.
35
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 17: Financial Instruments (Cont.)
d) Fair Value of Financial Assets and Liabilities (Cont.)
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table
below.
Valuation technique – non market
observable inputs (Level 3)
$
Year ending 30 June 2020
Financial assets
Financial assets at fair value through profit or loss
Shares in unlisted corporations
Year ending 30 June 2019
Financial assets
Financial assets at fair value through profit or loss
Shares in unlisted corporations
Reconciliation of Level 3 fair value movements:
Balance at the beginning of the year
Purchases
Sales
Interest and fees
Balance at the end of the year
2,144,638
12,487,808
2020
$
2019
$
12,487,808
6,201,397
(16,626,055)
81,488
2,144,638
469,668
11,688,961
-
329,179
12,487,808
The fair value of Level 3 Financial assets at fair value through profit or loss has been determined with reference to valuation
techniques being net asset backing. Refer note 10.
Sensitivity analysis
The table below shows the pre-tax sensitivity to reasonable possible alternative assumptions for Level 3 assets whose fair values
are determined in whole or in part using unobservable inputs.
Net profit/(loss)
2019
$
2020
$
Equity increase/(decrease)
2019
$
2020
$
Shares in unlisted corporations
Favourable changes
Unfavourable changes
214,464
(214,464)
1,248,781
(1,248,781)
214,464
(214,464)
1,248,781
(1,248,781)
36
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 17: Financial Instruments (Cont.)
d) Fair Value of Financial Assets and Liabilities (Cont.)
Significant unobservable inputs
The following table contains information about the significant unobservable inputs used in Level 3 valuations, and the valuation
techniques used to measure fair value. The range of values represent the highest and lowest input used in the valuation
techniques. Therefore, the range does not reflect the level of uncertainty regarding a particular input, but rather the different
underlying characteristics of the relevant assets.
Valuation Techniques
Significant
Unobservable Inputs
Range of Inputs
Minimum
Maximum
Shares in unlisted corporations
Net asset backing
Value per security
Down 10%
Up 10%
Note 18: Segmental Information
EDC operates in one business segment being an investment group and in one geographical location being Australia.
Note 19: Related Party Information
a) Key Management Personnel
Salary based payment
Post-employment benefits – superannuation
2020
$
2019
$
89,802
8,531
98,333
91,324
8,676
100,000
The only key management personnel of EDC are the directors and company secretary. EDC does not have any other employees.
Detailed remuneration disclosures are provided in the remuneration report.
b) Transactions with Related Parties
EDC pays management fees to its investment manager, Eildon Funds Management Limited. Monthly management fees have been
calculated as one twelfth of 0.75% of the net asset value plus one twelfth of 1% of invested capital of EDC, calculated as at the last
day of the previous month, provided that each month the total management fees shall not be less than $15,000. Management
fees of $783,116 (2019: $818,873) were paid to Eildon Funds Management Limited of which $135,128 (2019: nil) is payable at year
end. During the year Messrs Avery and Hunter were directors of Eildon Funds Management Limited.
c) Loans to Key Management Personnel
There were no loans to key management personnel during the year or existing at the end of the financial year.
d) Loan with Related Party
$153,093 has been provided to Kingsgrove (Vanessa Road) Unit Trust during the 2019 financial year. The loan was fully repaid
during the year.
37
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Notes to the Financial Statements
Note 20: Commitments and Contingent Liabilities
a) Loans and Other Investments
Amounts available to be drawn by borrowers under existing loan facility agreements
Related entities
Unrelated entities
2020
$
2019
$
-
107,500
107,500
245,090
643,453
888,543
Amounts available to be called by investees for partially paid shares and units
Unrelated entities
1,235,654
7,246,014
b) Contingent Liabilities
Commencing 1 January 2016, a performance fee is payable to Eildon Funds Management Limited where EDC achieves an
annual return during the calculation period of greater than the hurdle rate of 9% per annum. The performance fee payable is
calculated as 20% of the increase in the share price of EDC in excess of the 9% hurdle rate, after factoring in dividends and other
distributions.
No performance fee is payable for the 2020 and 2019 financial years.
c) Financial Guarantees
Guarantees
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future
sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
Guarantee (i)
Notes:
869,400
869,400
(i) The guarantee provided by EDC to Australia and New Zealand Banking Group Limited is used as security for a loan facility in relation
to 33-45 Gibdon Street, Burnley, Victoria.
38
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Note 21: Other Information
The Company was incorporated on 23 February 1993. The Company is registered and domiciled in Australia. Its registered office
and principal place of business are at Suite 4, Level 6, 330 Collins Street, Melbourne Victoria 3000.
Note 22: Subsequent Events
A distribution of 1.5569 cents per unit amounting to $637,298 was declared on 24 June 2020 and paid 24 July 2020.
Subsequent to year end EDC has made a commitment to make an investment of $2.9 million in a loan opportunity in JAK
Contributory Mortgage Fund, of which $1,674,819 has been transferred.
Other than as set out above, there are no matters or circumstances that have arisen since the end of the financial period which
significantly affected or may significantly affect the operations of EDC, the results of those operations or the state of affairs of EDC
in financial periods subsequent to 30 June 2020.
Note 23: Stapled Entity
The consolidated financial statements include Eildon Capital Trust. On 24 April 2020, a restructure was undertaken by the
Company such that a distribution was completed, which included a return of capital and a fully franked dividend to shareholders
of the Company. The distribution was compulsorily applied to the subscription for units in Eildon Capital Trust. An agreement
was signed on 18 March 2020 that has the effect of stapling the shares of the Company to the units of Eildon Capital Trust, and
although the two entities are separate legal entities, their shares/units are not able to be separately traded. The restructure has no
impact on the overall financial position of EDC.
Although Eildon Capital Limited does not have an ownership interest in Eildon Capital Trust, the Company has been identified as
the acquirer and the parent entity for the purpose of preparing the consolidated financial statements and Eildon Capital Trust is
deemed to be the acquiree.
39
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED Directors’ Declaration
FOR THE YEAR ENDED 30 JUNE 2020
In accordance with a resolution of the directors of Eildon Capital Limited, we state that:
In the opinion of the Directors:
(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 30 June 2020 and of its performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporation Regulations 2001.
(b)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1;
and
(c)
there are reasonable grounds to believe that Eildon Capital Limited 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 s. 295A
of the Corporations Act 2001 for the financial period ended 30 June 2020.
Signed in accordance with a resolution of the Board of Directors.
Dated at Sydney 31 August 2020.
Mark Avery
Director
James Davies
Director
40
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
Independent Auditor’s Report
FOR THE YEAR ENDED 30 JUNE 2020
To the Members of Eildon Capital Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Eildon Capital Limited
("the Company") and its stapled entity Eildon Capital Trust
(together referred to as "the Group"), which comprises the
consolidated statement of financial position as at 30 June
2020, 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, and notes to the financial
statements, including a summary of significant accounting
policies, and the directors' declaration.
In our opinion, the accompanying financial report of the
Company is in accordance with the Corporations Act 2001,
including:
(a) giving a true and fair view of the Group's financial position
as at 30 June 2020 and of its financial performance for the
year then ended; 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 ("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 period. These matters were
addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed the key audit matter
Recoverability of Financial Assets at Amortised Cost (Note 9)
The Group has a material balance of loan receivable assets
as at 30 June 2020 which requires a significant amount of
judgement in assessing the recoverable values.
A large portion of the balance relates to loans provided to
corporate entities associated with property development
activities.
The Group assesses the recoverability of loans utilising an
Expected Credit Loss model. The Group applied judgement
in the determination of the expected loss rates in respect
of the loan balances. This included an assessment of
the creditworthiness of the relevant counterparty and
consideration of the estimated value of any secured assets
provided as collateral.
The expected loss rates included consideration of the
economic impacts and impact on property related asset
values due to the COVID-19 pandemic in Australia.
We reviewed loan agreements and other supporting
documentation to gain an understanding of the loan facilities
and any related secured assets provided as collateral by the
borrowers.
We obtained management's assessment of loan recoverability
and expected credit loss assessment. We discussed the
assessment methodology and assumptions and judgement
adopted with management.
We assessed the expected credit loss assessment for
reasonableness against our understanding of historical losses
experienced by the Group and the observed economic impact
of COVID-19 on the loan counterparties and the industries in
which they operate.
We considered and assessed the estimated value of a sample
of the secured assets provided as collateral for the loans.
41
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED Independent Auditor’s Report
Key Audit Matter
How our audit addressed the key audit matter
Investments Accounted for using the Equity Method (Note 8)
The Group accounts for investments held in entities
over which it has significant influence utilising the equity
method. The initial investments are recognised at cost and
subsequently adjusted to recognise the Group's share of
profit or loss of the investee. The Group assesses the carrying
value of the equity accounted investment for indicators of
impairment with reference to the estimated fair value of the
assets and liabilities held by the investee.
Given the material value of the Group's investments
accounted for using the equity method
and the degree of judgement and estimation required in
assessing any additional impairment loss, it is considered to
be a key audit matter.
We reviewed management's assessment and documented
considerations of significant influence over the investees for
which the equity method of accounting is applied.
We reviewed management's calculation of the Group's share
of the investees profit or loss for the year with reference to
the associate's recent financial statements and supporting
information. Recalculations of the movement for the period
were performed.
We assessed Management's application of judgement and
estimation in assessing the carrying value of investments
in associates for impairment with reference to external
valuations and other supporting documentation.
We have assessed the adequacy of the disclosures within the
financial statements as at 30 June 2020 for compliance with
Australian Accounting Standards.
Fair Value of Unlisted Investments (Note 10)
The Group holds interests in unlisted investments, held at
fair value. Management assess the fair value of unlisted
investments via the application of valuation techniques which
include recent arm's length transactions in the equity of the
investee, net asset backing, discounted cash flow analysis or
with reference to the market value of another instrument
that is substantially the same.
The value of these investments are material to the financial
statements and determining the fair value of the investments
requires a high degree of judgement and estimation.
Therefore, it is considered to be a key audit matter.
Our procedures in relation to the valuation of unlisted
investments included; A review of management's adopted
valuation methodologies and applied techniques; reviewing
valuation inputs including evidence of recent arm's length
transactions and agreeing these transactions to external
sources; assessing the relevance and sensitivity of various
inputs to the applied valuation techniques including reference
to market and economic trends and observations as applicable
to the industries and markets in which the investee operates.
We have assessed the adequacy of the disclosures within the
financial statements as at 30 June 2020 for compliance with
Australian Accounting Standards.
Information Other than the Financial Report and
Auditor’s Report Thereon
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 30 June 2020, 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.
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 this other information, we
are required to report that fact. We have nothing to report in
this regard.
Responsibilities of the Directors 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.
42
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020 Responsibilities of the Directors for the Financial
Report (Cont.)
In preparing the financial report, the directors are responsible
for assessing the ability of the Group 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 to
cease operations, or have no realistic alternative but to do so.
• Evaluate the overall presentation, structure and content of
the financial report, including the disclosures, and whether
the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
Auditor’s Responsibilities for the Audit of the
Financial Report
Our objectives are to obtain reasonable assurance about
whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Australian Auditing
Standards will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the 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.
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,
related safeguards.
From the matters communicated with the directors, we
determine those matters that were of most significance in
the audit of the financial report of the current period and are
therefore the key audit matters. We describe these matters
in our auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should
not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the
directors' report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Eildon Capital
Limited for the year ended 30 June 2020 complies with section
300A of the Corporations Act 2001.
• Obtain an understanding of internal control relevant to the
Responsibilities
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 or conditions that may cast significant doubt
on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required
to draw attention in our auditor's report to the related
disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
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.
HLB Mann Judd
Chartered Accountants
N J Guest
Partner
Sydney, NSW
31 August 2020
43
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED Corporate Governance Statement
FOR THE YEAR ENDED 30 JUNE 2020
This Corporate Governance Statement, which has been
approved by the Board, describes Eildon Capital’s corporate
governance policies, framework and practices. This statement
is current as at 30 June 2020.
Principle 1 – Lay solid foundations for management
and oversight.
A listed entity should establish and disclose the respective
roles and responsibilities of board and management and
how their performance is monitored and evaluated.
Recommendation 1.1 - A listed entity should disclose
the respective roles and responsibilities of its board and
management, and those matters expressly reserved to the
board and those delegated to management.
The business of Eildon Capital is managed under the direction
of the Board which is responsible for its corporate governance.
The Board comprises Mr Mark Avery, Mr James Davies, Ms
Michelle Harpur and Mr Craig Treasure.
The Board meets on a regular basis and is required to discuss
pertinent business developments, investment decisions and
issues, and review the operations and performance of Eildon
Capital. The Board will seek to ensure that the investment
strategy is aligned with the expectations of Shareholders
and Eldon Capital is effectively managed in a manner that
is properly focused on its investment strategy as well as
conforming to regulatory and ethical requirements.
Provision is made at each regular meeting of the Board for
the consideration of critical compliance and risk management
issues as they arise.
The primary objectives of the Board will be to:
• Set and review the strategic direction of Eildon Capital;
• Approve all material transactions;
Recommendation 1.2 - A listed entity should:
(a)
(b)
undertake appropriate checks before appointing
a person, or putting forward to security holders a
candidate for election as a director; and
provide security holders with all material information
in its possession relevant to a decision on whether or
not to elect or re-elect a director.
Prior to appointing a director or putting forward a new
candidate for election, screening checks are undertaken as
to the person’s experience, education, criminal history and
bankruptcy history.
When presenting a director for re-election, Eildon Capital
provides shareholders with details of the directors skills
and experience, independence and current term served by the
director in office and whether the Board supports the
re-election.
Recommendation 1.3 - A listed entity should have
a written agreement with each director and senior
executive setting out the terms of their appointment.
The Company’s Non-Executive Directors have been engaged
according to Letters of Appointment.
Recommendation 1.4 - The company secretary of a listed
entity should be accountable directly to the board,
through the chair, on all matters to do with the proper
functioning of the board.
The Company Secretary is accountable to the Board, through
the Chairperson, for all governance matters.
Each Director has access to the Company Secretary.
The appointment and removal of the Company Secretary must
be determined by the Board as a whole.
Recommendation 1.5 - A listed entity should:
• Approve and monitor financial policies and financial
(a)
statements;
• Establish, promote and maintain proper processes and
controls to maintain the integrity of financial accounting,
financial records and reporting;
• Develop and implement key corporate policies, procedures
and controls as necessary to ensure appropriate standards
of accountability, risk management and corporate
governance and responsibility;
• Ensure Shareholders receive high quality, relevant and
accurate information on a timely manner;
The Board has delegated responsibility for day-to-day
management activities of Eildon Capital to the Managing
Director and the Manager under its AFSL.
44
have a diversity policy which includes requirements
for the board or a relevant committee of the board for
achieving gender diversity and to assess annually both
the objectives and the entity’s progress in achieving
them;
(b) disclose that policy or a summary of it; and
(c)
disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity
set by the board or a relevant committee of the board
in accordance with the entity’s diversity policy and its
progress towards achieving them, and either:
(i)
the respective proportions of men and women
on the board, in senior executive positions and
across the whole organisation (including how the
entity has defined “senior executive” for these
purposes); or
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITY
Principle 1 – Lay solid foundations for management
and oversight (Cont.)
Recommendation 1.5 (cont.):
(ii) if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s most
recent “Gender Equality Indicators”, as defined in
and published under that Act.
As a result of these performance reviews, the Board may
implement changes to improve the effectiveness of the Board
and corporate governance structures.
Independent professional advice may be sought as part of this
process.
The Board undertook a review of its performance, skills,
experience and expertise during the year.
The Company’s approach to business promotes a culture of
equal opportunity and has the core principles of meritocracy
based on ability, fairness and equality. Eildon Capital does not
discriminate on gender, race, religion or cultural grounds.
The Board has adopted a diversity policy, and although Eildon
Capital has no full time employees and the policy applies to
the appointment of directors and the company secretary, the
board aims to:
• promote the principles of merit and fairness when
considering Board member appointments; and
Recommendation 1.7 - A listed entity should:
(a)
(b)
have and disclose a process for periodically evaluating
the performance of its senior executives; and
disclose, in relation to each reporting period, whether
a performance evaluation was undertaken in the
reporting period in accordance with that process.
Not applicable – Eildon Capital does not have any senior
executives.
• recruit from a diverse pool of qualified candidates, seeking
Principle 2 – Structure the board to add value.
a diversity of skills and qualifications.
The Board’s composition is reviewed on an annual basis. In the
event a vacancy exists, the Board will include diversity in its
selection process.
As at 30 June 2020 the board of directors, including the
company secretary, comprised five members of which one
non-executive director is female.
A listed entity should have a board of an appropriate
size, composition, skills and commitment to enable it to
discharge its duties effectively.
Recommendation 2.1 - The board of a listed entity should:
(a) have a nomination committee which:
(i)
has at least three members, a majority of whom
are independent directors; and
Recommendation 1.6 - A listed entity should:
(ii) is chaired by an independent director; and
(a)
(b)
have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and
disclose, in relation to each reporting period, whether
a performance evaluation was undertaken in the
reporting period in accordance with that process.
The Board of Directors’ Charter requires:
• the Board to review its performance (at least annually)
against previously agreed measurable and qualitative
indicators;
• the Chairperson of the Board to review each Director’s
performance;
• a nominated Director to review the Chairperson’s
performance; and
• the Board to undertake a formal annual review of its overall
effectiveness.
The Board reviews its performance in terms of Eildon
Capital’s objectives, results and achievements of the Manager.
The Board ensures each Director has the necessary skills,
experience and expertise, and the mix remains appropriate for
the Board to function effectively.
disclose:
(A) the charter of the committee;
(B) the members of the committee; and
(C) as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
(b)
if it does not have a nomination committee, disclose
that fact and the processes it employs to address
board succession issues and to ensure that the board
has the appropriate balance of skills, knowledge,
experience, independence and diversity to enable it to
discharge its duties and responsibilities effectively.
Given the size, scale and nature of Eildon Capital, there is not
a separate nomination committee. The full Board considers
the issues that would otherwise be a function of a separate
nomination committee.
The Company’s policy is that the Board considers an
appropriate mix of skills, experience, expertise and diversity
(including gender diversity).
45
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Corporate Governance Statement
Principle 2 – Structure the board to
add value (Cont.)
• requirements of the Corporations Act 2001, ASX Listing
Rules, the Company’s Constitution and Board Charter.
Recommendation 2.1 (cont.):
The Board seeks to ensure that:
When evaluating, selecting and appointing Directors, the
Board considers:
• the candidate’s competencies, qualifications and expertise,
addition to diversity of the Board and his/her fit with the
current membership of the Board;
• its membership represents an appropriate balance between
Directors with investment management experience and
Directors with an alternative perspective; and
• the size of the Board is conducive to effective discussion and
efficient decision-making.
• the candidate’s knowledge of the industry in which Eildon
Under the terms of the Company’s Constitution:
Capital operates;
• directorships previously held by the candidate and his/her
current commitments to other boards and companies;
• existing and previous relationships with Eildon Capital and
Directors;
• the candidate’s independence status, including the term of
office currently served by the director;
• criminal record and bankruptcy history (for new candidates);
• the need for a majority or equal balance on the Board; and
Board of Directors’ Matrix
• an election of Directors must be held at each Annual
General Meeting and at least one Director must retire from
office; and
• each Director must retire from office at the third Annual
General Meeting following his/her last election.
Where eligible, a Director may stand for re-election.
Recommendation 2.2 - A listed entity should have and
disclose a board skills matrix setting out the mix of skills
and diversity that the board currently has or is looking to
achieve in its membership.
Directors
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Recommendation 2.3 - A listed entity should disclose:
• Craig Treasure (appointed 1 May 2020)
(a)
the names of the directors considered by the board to
be independent directors;
(b) if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the
board is of the opinion that it does not compromise
the independence of the director, the nature of the
interest, position, association or relationship in
question and an explanation of why the board is of
that opinion; and
(c) the length of service of each director.
The Board currently comprises three Independent Directors:
• James Davies (appointed 18 October 2016);
• Michelle Harpur (appointed 18 October 2016); and
Directors must disclose any material personal or family
contract or relationship in accordance with the Corporations
Act 2001. Directors also adhere to constraints on their
participation and voting in relation to matters in which they
may have an interest in accordance with the Corporations Act
2001 and Eildon Capital’s policies.
Details of offices held by Directors with other organisations
are set out in the Directors' Report. Full details of related party
dealings are set out in notes to Eildon Capital's accounts as
required by law.
If a Director’s independent status changes, this will be disclosed
and explained to the market in a timely manner.
46
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Principle 2 – Structure the board to
add value (Cont.)
Recommendation 2.4 - A majority of the board of a listed
entity should be independent directors.
The composition of the Board is as follows:
• James Davies – Independent Director;
• Michelle Harpur – Independent Director;
• Craig Treasure – Independent Director; and
• Mark Avery – Managing Director
Recommendation 2.5 - The chair of the board of a
listed entity should be an independent director and, in
particular, should not be the same person as the CEO of
the entity.
The Chairperson of the Board is an Independent Director.
James Davies has been appointed as Chairperson of Eildon
Capital.
Recommendation 2.6 - A listed entity should have
a program for inducting new directors and provide
appropriate professional development opportunities
for directors to develop and maintain the skills and
knowledge needed to perform their role as directors
effectively.
The annual performance assessment provides an opportunity
for all directors to identify required training although directors
can request professional development opportunities at any
time.
Principle 3 – Act ethically and responsibly.
A listed entity should act ethically and responsibly.
Recommendation 3.1 - A listed entity should:
(a)
have a code of conduct for its directors, senior
executives and employees; and
(b) disclose that code or a summary of it.
The Board has adopted a Directors’ Code of Conduct, which
is based upon the Australian Institute of Company Directors'
Code of Conduct. It requires the Directors to act honestly, in
good faith, and in the best interests of the Company as a whole,
whilst in accordance with the letter (and spirit) of the law.
Principle 4 – Safeguard integrity in corporate
reporting.
A listed entity should have formal and rigorous processes
that independently verify and safeguard the integrity of
its corporate reporting.
Recommendation 4.1 - The board of a listed entity should:
(a) have an audit committee which:
(i)
has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
(ii) is chaired by an independent director, who is not
the chair of the board, and disclose:
(A) the charter of the committee;
(B) the relevant qualifications and experience of
the members of the committee; and
(C) in relation to each reporting period, the
number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
(b)
if it does not have an audit committee, disclose that
fact and the processes it employs that independently
verify and safeguard the integrity of its corporate
reporting, including the processes for the
appointment and removal of the external auditor and
the rotation of the audit engagement partner.
The Board has established an Audit and Risk Committee.
The Audit and Risk Committee has three members: Michelle
Harpur (Chairperson), James Davies and Craig Treasure.
All members of the Audit and Risk Committee are Non-
Executive Directors. The majority of the Committee are
independent as is the Chairperson.
The Audit and Risk Committee operates under an approved
charter.
The Audit and Risk Committee has authority (within the scope
of its responsibilities) to seek any information it requires from
any employee of the Manager or external party. Members may
also meet with auditors (internal and/or external) without the
Manager present and consult independent experts, where the
Audit and Risk Committee considers it necessary to carry out
its duties.
All matters determined by the Audit and Risk Committee
are submitted to the full Board as recommendations for
Board decisions. Minutes of an Audit and Risk Committee
meeting are tabled at a subsequent Board meeting. Additional
requirements for specific reporting by the Audit and Risk
Committee to the Board are addressed in the Charter.
The purpose of the Audit and Risk Committee is to assist the
Board in fulfilling its responsibilities relating to the financial
reporting and accounting practices of Eildon Capital.
Its key responsibilities are to:
• review and recommend to the Board the financial
statements (including key financial and accounting
principles adopted by Eildon Capital);
• review and monitor risks and the implementation of
mitigation measures for those risks as appropriate;
47
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Corporate Governance Statement
Principle 4 – Safeguard integrity in corporate
reporting (Cont.)
Recommendation 4.1 (cont.):
• assess and recommend to the Board the appointment of
Recommendation 5.1 - A listed entity should:
(a)
have a written policy for complying with its
continuous disclosure obligations under the Listing
Rules; and
external auditors and monitor the conduct of audits;
(b)
disclose that policy or a summary of it.
• monitor Eildon Capital’s compliance with its statutory
obligations;
• review and monitor the adequacy of management
information and internal control systems; and
• ensure that any shareholder queries relating to such
matters are dealt with expeditiously.
Attendance record at Audit and Risk Committee meetings and
the experience of the members is provided in the Directors’
Report.
Recommendation 4.2 - The board of a listed entity should,
before it approves the entity’s financial statements
for a financial period, receive from its CEO and CFO a
declaration that, in their opinion, the financial records
of the entity have been properly maintained and that
the financial statements comply with the appropriate
accounting standards and give a true and fair view of
the financial position and performance of the entity and
that the opinion has been formed on the basis of a sound
system of risk management and internal control which is
operating effectively.
Eildon Capital does not have a CEO or CFO. Its investment
activities and day- to-day affairs are undertaken and managed
by the Manager.
Before the Board approves Eildon Capital’s financial
statements, it receives declarations of the CEO and the CFO
of the Manager that, in their opinion, the financial records of
Eildon Capital have been properly maintained and that the
financial statements comply with the appropriate accounting
standards and give a true and fair view of the financial position
and performance of the company, and that their opinion has
been formed on the basis of a sound risk management system
and internal controls which are operating effectively.
Recommendation 4.3 - A listed entity that has an AGM
should ensure that its external auditor attends its AGM
and is available to answer questions from security holders
relevant to the audit.
The Auditor is required to attend Eildon Capital’s Annual
General Meeting and be available to answer shareholder
questions about the conduct of the audit and the preparation
and content of the Auditor's Report.
Principle 5 – Make timely and balanced disclosure.
A listed entity should make timely and balanced
disclosure of all matters concerning it that a reasonable
person would expect to have a material effect on the price
or value of its securities.
48
The Company has a Disclosure and Communications Policy. The
Board is committed to:
• the promotion of investor confidence by ensuring that
trading Eildon Capital’s shares takes place in an efficient,
competitive and informed market;
• complying with Eildon Capital’s disclosure obligations under
the ASX Listing Rules and the Corporations Act 2001; and
• ensuring the stakeholders have the opportunity to access
externally available information issued by Eildon Capital.
The Company Secretary is responsible for coordinating the
disclosure of information to Regulators and shareholders and
ensuring that any notifications/reports to the ASX are promptly
posted on the Company’s website.
Principle 6 – Respect the rights of security holders.
A listed entity should respect the rights of its security
holders by providing them with appropriate information
and facilities to allow them to exercise those rights
effectively.
Recommendation 6.1 - A listed entity should provide
information about itself and its governance to investors
via its website.
Information about Eildon Capital and its corporate governance
items are posted on its website at www.eildoncapital.com/
investor-info.html
Recommendation 6.2 - A listed entity should design and
implement an investor relations program to facilitate
effective two-way communication with investors.
The Board has adopted a Disclosure and Communication
Policy that describes the Board’s policy for ensuring
shareholders and potential investors of Eildon Capital receive
or obtain access to information publicly released.
Eildon Capital’s primary portals are its website, Annual Report,
Annual General Meeting, Half-Yearly Report, and notices to the
ASX.
The Eildon Capital Secretary oversees and coordinates the
distribution of all information by Eildon Capital to the ASX,
shareholders, the media and the public.
All shareholders have the opportunity to attend the Annual
General Meeting and ask questions of the Board.
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020 Principle 6 – Respect the rights of security holders
(Cont.)
Recommendation 6.3 - A listed entity should disclose the
policies and processes it has in place to facilitate and
encourage participation at meetings of security holders.
Eildon Capital holds an Annual General Meeting (“AGM”) of
shareholders in November each year. The date, time and
venue of the AGM are notified to the ASX when the notice of
the AGM is circulated to shareholders and lodged with the ASX
each year.
The Board will choose a date, venue and time considered
convenient to the greatest number of its shareholders.
A notice of meeting will be accompanied by explanatory notes
on the items of business and together they will seek to clearly
and accurately explain the nature of the business of the
meeting.
Shareholders are encouraged to attend the meeting, or
if unable to attend, to vote on the motions proposed by
appointing a proxy. The proxy form included with the Notice of
Meeting will seek to explain clearly how the proxy form is to be
completed and submitted.
Recommendation 6.4 - A listed entity should give security
holders the option to receive communications from,
and send communications to, the entity and its security
registry electronically.
Eildon Capital provides its security holders with an electronic
communication option.
Principle 7 – Recognise and manage risk.
A listed entity should establish a sound risk management
framework and periodically review the effectiveness of
that framework.
Recommendation 7.1 - The board of a listed entity should:
(a)
have a committee or committees to oversee risk,
each of which:
(i)
has at least three members, all of whom are
independent directors; and
(ii) is chaired by an independent director, and
disclose:
(A) the charter of the committee;
(B) the members of the committee;
(C) as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
(b)
if it does not have a risk committee or committees
that satisfy (a) above, disclose that fact and the
processes it employs for overseeing the entity’s risk
management framework.
The Board of Eildon Capital, through the Audit and Risk
Committee, is responsible for ensuring that:
• there are adequate policies for the oversight and
management of material business risks;
• there are effective systems in place to identify, assess,
monitor and manage the risks and to identify material
changes to the risk profile; and
• arrangements are adequate for monitoring compliance with
laws and regulations applicable to Eildon Capital.
Recommendation 7.2 - The board or a committee of the
board should:
(a)
review the entity’s risk management framework at
least annually to satisfy itself that it continues to be
sound; and
(b) disclose, in relation to each reporting period, whether
such a review has taken place.
As the business strategy has remained consistent for the
last 12 months, a formal review has not been completed by
the Audit and Risk Committee during the last 12 months.
However, management is in the process of undertaking a full
review following the restructure of Eildon Capital into a stapled
company and trust on 24 April 2020, as well as assessing the
impact of COVID-19.
Recommendation 7.3 - A listed entity should disclose:
(a)
(b)
if it has an internal audit function, how the function
is structured and what role it performs; or
if it does not have an internal audit function, that
fact and the processes it employs for evaluating and
continually improving the effectiveness of its risk
management and internal control processes.
Given the size, scale and nature of Eildon Capital, and has no
full time employees it does not have an internal audit function.
Eildon Capital has an audit and risk committee which receives
and reviews reports from the Manager regarding material
business risks as part of the Manager’s management process.
Recommendation 7.4 - A listed entity should disclose
whether, and if so how, it has regard to economic,
environmental and social sustainability risks and, if it
does, how it manages or intends to manage those risks.
The Board has adopted a Risk Management Statement which
outlines the process for identifying, monitoring and mitigating
risks as well as generic sources of risk. This is reviewed on an
annual basis.
49
2020 ANNUAL REPORT | EILDON CAPITAL LIMITED
Corporate Governance Statement
Principle 8 – Remunerate fairly and responsibly.
A listed entity should pay director remuneration sufficient
to attract and retain high quality directors and design its
executive remuneration to attract, retain and motivate
high quality senior executives to align their interests with
the creation of value for security holders.
Recommendation 8.3 - A listed entity which has an equity-
based remuneration scheme should:
(a)
have a policy on whether participants are permitted
to enter into transactions (whether through the use
of derivatives or otherwise) which limit the economic
risk of participating in the scheme; and
Recommendation 8.1 - The board of a listed entity should:
(b)
disclose that policy or a summary of it.
Not applicable – Eildon Capital’s Directors do not receive any
equity-based remuneration.
(a) have a remuneration committee which:
(i)
has at least three members, a majority of whom
are independent directors; and
(ii) is chaired by an independent director, and
disclose:
(A) the charter of the committee;
(B) the members of the committee; and
(C) as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
(b)
if it does not have a remuneration committee,
disclose that fact and the processes it employs for
setting the level and composition of remuneration
for directors and senior executives and ensuring that
such remuneration is appropriate and not excessive.
Given the size, scale and nature of Eildon Capital, there is not
a separate remuneration committee. The full Board considers
the issues that would otherwise be a function of a separate
remuneration committee.
Remuneration for the Independent Directors is set at market
rates commensurate with the responsibilities borne by the
Independent Directors. Independent professional advice may
be sought. The Managing Director and any Non-Executive
Directors are not remunerated by Eildon Capital.
Eildon Capital has no other full time employees to consider the
level and composition of remuneration.
Recommendation 8.2 - A listed entity should separately
disclose its policies and practices regarding the
remuneration of non-executive directors and the
remuneration of executive directors.
Remuneration for the Independent Directors is set at market
rates commensurate with the responsibilities borne by the
Independent Directors. Independent professional advice may
be sought. The Managing Director and any Non-Executive
Directors are not remunerated by Eildon Capital.
Further information is provided in the Remuneration Report
set out in the Directors’ Report.
50
EILDON CAPITAL LIMITED AND ITS STAPLED ENTITYFOR THE YEAR ENDED 30 JUNE 2020
Additional Information
FOR THE YEAR ENDED 30 JUNE 2020
The following information was current as at 26 August 2020.
DISTRIBUTION SCHEDULE
The distribution of stapled security holders and their security
holdings was as follows:
Category
(size of holding)
Number of ordinary
stapled security shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – over
Total
43
102
80
170
28
423
Minimum Number of stapled
security holders
parcel size
UNMARKETABLE PARCELS
Minimum $500.00 parcel
at $0.935 per stapled security
535
32
SUBSTANTIAL HOLDERS
The names of the Company’s substantial holders and the
number of ordinary stapled securities in which each has a
relevant interest as disclosed in substantial holder notices
given to the Company are as follows:
Stapled security
holder
Number of ordinary stapled
securities in which interest held
CVC Limited
J P Morgan Nominees Australia Limited
Chemical Trustee Limited
18,638,972
3,459,696
3,069,377
20 LARGEST STAPLED SECURITY HOLDERS - ORDINARY STAPLED SECURITIES
As at 26 August 2020, the top 20 stapled security holders and their holdings were as follows:
Stapled security holder
Stapled securities held
% of issued capital held
CVC Limited
J P Morgan Nominees Australia Pty Limited
Chemical Trustee Limited
JKM Securities Pty Ltd
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