Eildon Capital Fund Annual Report 2021

Plain-text annual report

Eildon Capital Group 2021 ANNUAL REPORT Consolidated Financial Reports of Eildon Capital Limited (ABN 11 059 092 198) and Eildon Capital Trust (ARSN 635 077 753) 2021Contents 01 | Group Particulars 02 | Chairman's Report 04 | The Year in Review 08 | Directors’ Report 20 | Auditor's Independence Declaration 21 | Consolidated Statement of Profit or Loss 22 | Consolidated Statement of Comprehensive Income 23 | Consolidated Statement of Financial Position 24 | Consolidated Statement of Changes in Equity 26 | Consolidated Statement of Cash Flows 27 | Notes to the Financial Statements 63 | Directors' Declaration 64 | Independent Auditor's Report 67 | Corporate Governance Statement 75 | Additional Information EILDON CAPITAL GROUP | ANNUAL REPORT 2021Group Particulars REGISTERED OFFICE Suite 4, Level 6 330 Collins Street Melbourne VIC 3000 Tel: (03) 7003 7622 RESPONSIBLE ENTITY Eildon Funds Management Limited ABN 72 066 092 028 AFSL 229 809 Suite 4, Level 6 330 Collins Street Melbourne VIC 3000 DIRECTORS Eildon Capital Limited - Mark A Avery (Managing Director) James R Davies Michelle E Harpur SECRETARY Eildon Capital Limited - Tiffany L McLean (Appointed 14 January 2021) John A Hunter (Resigned 29 June 2021) Eildon Funds Management Limited as Responsible Entity for Eildon Capital Trust - Tiffany L McLean (Appointed 14 January 2021) John A Hunter (Resigned 29 June 2021) BANKERS Westpac Banking Corporation Limited AUDITORS Pitcher Partners Sydney Level 16, Tower 2 Darling Park 201 Sussex Street Sydney NSW 2000 Craig G Treasure (Resigned 29 June 2021) SHARE REGISTRY Eildon Funds Management Limited as Responsible Entity for Eildon Capital Trust - Mark A Avery (Managing Director) James R Davies (Appointed 17 November 2020) Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Sydney NSW 2000 Michelle E Harpur (Appointed 17 November 2020) Craig G Treasure ( Appointed 17 November 2020 DOMICILE Australia and resigned 29 June 2021) John A Hunter (Resigned 17 November 2020) Jonathan T M Sim (Resigned 17 November 2020) STOCK EXCHANGE LISTING ASX Limited 1 2021 ANNUAL REPORT | EILDON CAPITAL GROUPChairman’s Report Dear Securityholder, I am pleased to introduce these annual accounts and report for the year ended 30 June 2021. The year has been one of transformation for Eildon Capital Group (EDC or Group) with the internalisation of the investment management function through the acquisition of Eildon Funds Management Limited (EFM), expansion of the balance sheet via a placement in March 2021 and growth in Assets Under Management (AUM). HIGHLIGHTS The Group delivered a net profit after tax of $4.9 million (2020: $4.7 million), representing a 4.3% increase over the prior corresponding period. Following the acquisition of EFM during the financial year, EDC now has two primary lines of business: balance sheet investments and the management of third party capital through EFM. Balance Sheet Investments $8.5 million of co-investment into EFM funds to support alignment of EDC with external investors. Eildon Funds Management The Group acquired Eildon Funds Management Limited at a cost of $4.0 million in November 2020. EFM delivered a pre-tax contribution of $0.6 million to the Group’s result in the 8 month period post acquisition as well as saving management fees that were previously paid to manage the business. EFM currently has over $265 million of Assets Under Management and is well positioned for further growth. EFM launched two unlisted income producing property funds with an on-completion value of $71 million in addition to funding over $90 million of real estate credit investments, post internalisation. Post 30 June 2021, EFM has launched the EAM Caboolture Property Fund, a $55 million new unlisted, seven-year, fixed term direct property fund. Demand for high quality income producing investment products remains strong and Eildon remains well positioned to capitalise on investor demand. Eildon Capital Group’s investment portfolio of $39 million includes 8 debt positions and 5 equity investments as at 30 June 2021, diversified across Victoria, Queensland and New South Wales. Debt investments represent 77% of the portfolio by value and equity 23%. These investments include The Fund is raising capital from wholesale investors to invest in a new convenience Retail Shopping Centre and Large Format Retail Centre. The Property is strategically located in the emerging residential suburb of Caboolture, approximately 52km north of the Brisbane CBD. Assuming the successful completion 2 EILDON CAPITAL GROUP | ANNUAL REPORT 2021Demand for high quality income producing investment products remains strong and EDC is well positioned to capitalise on investor demand for both these strategies. of the capital raising, Eildon Funds Management Limited would be entitled to receive fee income commencing in November 2022. EFM has an identified pipeline for a further $70 million of convenience retail and essential service, targeting 2H22. EFM operates two core investments strategies, the first being income producing unlisted property funds, which offer investor exposure to income producing real estate. The second strategy is the Eildon Debt Fund (EDF) platform which is a single platform that offers third party investors exposure to real estate credit investments. These transactions provide both fee income to the Group and co-investment opportunities for the EDC balance sheet. EDF has funded over $260 million across 25 debt investments since inception. Demand for high quality income producing investment products remains strong and EDC is well positioned to capitalise on investor demand for both these strategies. OUTLOOK The Directors believe the internalisation of EFM has increased alignment of management staff and Eildon, simplified the corporate governance and has provided a growth angle to the business which has the potential to add to security value over time. Balance Sheet investments that have driven strong returns since listing in 2017 are anticipated to continue to support quarterly distributions while the Group’s cash reserve provides the ability to fund growth initiatives and new strategies for Eildon Funds Management. The internalisation of the funds management function has meant the Group is able to better match investment opportunities with investor funds, in addition to providing product pipeline for the balance sheet. The Directors remain confident that the Group will continue to see strong deal flow which will assist with AUM growth across the platform throughout FY22. I would like to acknowledge and thank my fellow Directors, including Craig Treasure who stepped off the Board during the period. We acknowledge the challenging circumstances being experienced throughout this pandemic and being locked-down for extended periods of time and wish to thank the management team for their efforts during the year. I would also like to thank you, our securityholders, for your continued support. James Davies Chairman 3 2021 ANNUAL REPORT | EILDON CAPITAL GROUPThe year in review INTRODUCTION Eildon Capital Group (ASX: EDC) is pleased to report a full year net profit after tax of $4.9 million (2020: $4.7 million), representing a 4.3% increase over the prior corresponding period. Net Assets per security was $1.11 as at 30 June 2021 (2020: $1.09 per security). During the year, distributions of 8.0 cents per security were paid to securityholders. INVESTMENT HIGHLIGHTS Eildon Capital Group’s investment portfolio totalled $39 million as at 30 June 2021. In addition, the Group has $11.1 million of cash reserves, representing 21% of net assets, of which $3.6 million is committed to portfolio investments. In addition, subsequent to year end, Eildon Capital Group has invested $3.5 million in a loan opportunity. Group Assets Under Management (AUM) totalled $267 million as at 30 June 2021, which included balance sheet and third-party assets. A strong pipeline of opportunities in place should see the AUM of the Group increase materially over the FY2022 period. Eildon Asset Management (EAM) (50% owned by EFM in partnership with Strategic Property Partners Investment Pty Limited) successfully closed two new unlisted property funds in the period, the EAM Elara Village Property Fund and EAM Berwick Motor Trust Funds raised for these two products were $38.6 million and included 150 new wholesale investors to the Group’s funds management platform. EFM currently manages $118 million across 13 projects which includes the Group’s balance sheet co-investment of circa $7.0 million. Since the internalisation in November 2020 to 30 June 2021, EFM has negotiated and funded over $80 million of new loans. Eildon Capital Group’s investment portfolio includes 8 debt positions and 5 equity investments as at 30 June 2021, diversified across Victoria, Queensland and New South Wales. Debt investments represent 77% of the portfolio by value and equity 23%. Eildon Capital Group remains focused on our set objectives, and will continue to deliver consistent distributions to securityholders, enhance earnings in-line with funds management business growth and grow net assets and share price. Net Profit after Tax $4.9m (2020: $4.7 million) 4.3% over the prior corresponding period Net Tangible Assets $1.11 per security $39m Investment Portfolio Note: All figures as at 30 June 2021. 4 EILDON CAPITAL GROUP | ANNUAL REPORT 2021EDC Geographic Diversification EFM Profit Before Tax 3% 71% 26% VIC NSW QLD 38% 11% 51% Eildon Real Estate Credit Eildon Property Income Funds Eildon Development Funds EDC Balance Sheet Investments EDC Group Revenue 23% 77% Property Equity Property Debt 37% Eildon Capital Group 63% Eildon Funds Management 5 2021 ANNUAL REPORT | EILDON CAPITAL GROUPThe year in review CAPITAL MANAGEMENT A distribution of 2.0 cents per stapled security was paid on 23 July 2021. The anticipated distribution/dividend payment calendar for the next 12 months is outlined below: PERIOD September 2021 December 2021 March 2022 June 2022 PAYMENT DATE 22 October 2021 24 January 2022 22 April 2022 22 July 2022 As part of the Group’s focus on building and retaining a highly skilled management team, and their alignment to the performance of the Group, a total of 409,300 performance rights have been issued to certain employees under the Long Term Incentive Plan (LTIP) that was approved by securityholders at the meeting on 13 November 2020. The Group also successfully undertook a placement of 6.14 million securities in March 2021 to raise an additional $6.3 million in capital to assist in the growth of the Group. MARKET CONDITIONS AND OUTLOOK Eildon Capital Group is a unique ASX offering as it provides The Distribution/Dividend Reinvestment Plan will be exposure to a pure play property funds management platform reactivated for the September 2021 distribution/dividend. which covers both debt and equity investment. The aim of Further details will be provided regarding the operation of the Group is to provide income yield through its balance the Plan when the distribution/dividends are announced. sheet investments while also generating fees from its funds zero Balance Sheet Gearing $267m Group Assets Under Management $218m Third Party Assets Under Management 2 Locations across Australia Note: All figures as at 30 June 2021. 6 6 EILDON CAPITAL GROUP | ANNUAL REPORT 2021 management platform, which over time has the ability to management initiatives. The Directors and Management scale and be valued on an earnings multiple. continually undertake a disciplined review of new As a result of the internalisation of EFM, the Group has the flexibility and capacity to take advantage of attractive opportunities when they emerge. This can be achieved by undertaking a combination of either direct investment utilising the Group’s balance sheet or third-party investor capital via the Funds Management platform. The Group is cautious but optimistic about the investment environment leading into FY2022 as historically low interest rates and investor appetite for income focused risk appropriate investments underpin the Group’s growth aspirations. EDC offers strong asset backed income returns with opportunity for earnings growth through scalable funds opportunities and evaluate the allocation of capital between new and strategic Funds Management growth initiatives and balance sheet investment. EDC offers strong asset backed income returns with opportunity for earnings growth through scalable funds management initiatives. 77 2021 ANNUAL REPORT | EILDON CAPITAL GROUPDirectors’ Report The Directors of Eildon Capital Limited and Eildon Funds Management Limited as Responsible Entity for Eildon Capital Trust (collectively referred to as the Directors) present their report together with the consolidated financial statements for the year ended 30 June 2021 for both: – Eildon Capital Group (“EDC”) consisting of Eildon Capital Limited (the “Company”) and its controlled entities and Eildon Capital Trust (the “Trust”) and its controlled entities; and – the Trust and its controlled entities (“ECT”). The shares of the Company and units of the Trust are combined and issued as stapled securities in EDC. The shares of the Company and units of the Trust cannot be traded separately and can only be traded as stapled securities. DIRECTORS The Directors of the Company and Eildon Funds Management Limited as Responsible Entity in office during the whole of the financial year and up to the date of this report, unless otherwise stated, are: Name: Title: Mark A Avery Managing Director of Eildon Capital Limited Managing Director of Eildon Funds Management Limited Member of the audit committee Qualifications: B.Com.Pl.Ds. (UOM) Experience and expertise: Listed company directorships: (held within the last three years) Interests as at the date of this report: 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 ultimate 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. Managing director of CVC Limited (Since July 2019) – Stapled securities: 53,402 – Performance rights: None Name: Title: James R Davies Non-executive Chairman of Eildon Capital Limited Director of Eildon Funds Management Limited from 17 November 2020 Member of the audit committee Qualifications: BSC (Comp) (UNE), MBA (LBS), GAICD Experience and expertise: Listed company directorships: (held within the last three years) Interests as at the date of this report: 8 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. Independent Non-executive director of New Energy Solar (Since October 2017) – Stapled securities: 27,016 – Performance rights: None FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Report DIRECTORS (CONT.) Name: Title: Michelle E Harpur Non-executive Director of Eildon Capital Limited Director of Eildon Funds Management Limited from 17 November 2020 Chairman of the audit committee Qualifications: B.A. (UNSW), L.L.B. (UNSW), GAICD Experience and expertise: Mrs Harpur has been a partner in mid-size, large and international law firms since 1992, and is principal 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. She is a director of lifeline Australia, and sits on its Governance and Services Committees. Listed company directorships: (held within the last three years) None Interests as at the date of this report: – Stapled securities: 19,523 – Performance rights: None Name: Title: Craig G Treasure Non-executive Director of Eildon Capital Limited until 29 June 2021 Director of Eildon Funds Management Limited from 17 November 2020 to 29 June 2021 Member of the audit committee Qualifications: BASc (Surveying) (QUT), FDIA Experience and expertise: Listed company directorships: (held within the last three years) 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. Executive Chairman of CVC Limited (Since June 21) Director and Non-executive Chairman of TasFoods Limited (Since June 2020) Executive Director of Villa World Limited (From February 2012 to October 2012) Managing director of Villa World Limited (From October 2012 to October 2019) Interests as at the date of this report: – Stapled securities: None – Performance rights: None 9 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Directors’ Report DIRECTORS (CONT.) Name: Title: John A Hunter Executive Director of Eildon Funds Management Limited until 17 November 2020 Company secretary of Eildon Capital Limited until 29 June 2021 Company secretary of Eildon Funds Management Limited until 29 June 2021 Chief Financial Officer Qualifications: B.Com. (ANU), MBA (MGSM), MAppFin (MAFC), CA Experience and expertise: 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. Listed company directorships: (held within the last three years) None Interests as at the date of this report: – Stapled securities: None – Performance rights: None Name: Title: Jonathan Teck Meng Sim Executive Director of Eildon Funds Management Limited until 17 November 2020 Qualifications: B.Com. Dip M.L. (UOM), CA Experience and expertise: Mr Sim has over 15 years’ banking and finance experience, primarily as a real estate finance professional, with extensive experience in real estate debt and equity investment. Beginning his career at KPMG, Mr Sim has since held a number of management positions at Australian banks including ANZ, NAB and Commonwealth Bank. Subsequently, he was involved as a principal investor and financier at a private real estate investment group. Mr Sim is responsible for the real estate investment activities of Eildon Funds Management Limited and the Eildon Debt Fund. Listed company directorships: (held within the last three years) None Interests as at the date of this report: – Stapled securities: None – Performance rights: None COMPANY SECRETARIES Name: Title: Tiffany L McLean Company Secretary of Eildon Capital Limited from 14 January 2021 Company Secretary of Eildon Funds Management Limited from 14 January 2021 Qualifications: L.L.B (Bond University), GDLP (GU) Experience and expertise: Ms McLean is a corporate lawyer with 15 years’ experience in corporate governance, compliance and capital raisings and has held roles in private practice in Australia and in-house legal in the UK. She has provided legal services to EDC since 2018, including investments made by EDC and the successful implementation of the internalisation of Eildon Funds Management Limited. Interests as at the date of this report: – Stapled securities: None – Performance rights: None In additional to being a Director of Eildon Funds Management Limited, John A Hunter was also a company secretary of Eildon Capital Limited and Eildon Funds Management Limited until 29 June 2021. 10 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Report KEY MANAGEMENT PERSONNEL Key management personnel during the financial year includes the Directors, Company Secretaries and Laurence Parisi who is the Chief Operating Officer of EDC. MEETINGS OF DIRECTORS The numbers of meetings of EDC’s board of directors and of each board committee held during the year ended 30 June 2021, and the numbers of meetings attended by each director were: Full Board No. of meetings No. of meetings eligible to attend attended Audit Committee No. of meetings No. of meetings eligible to attend attended Independent Board Committee No. of meetings No. of meetings eligible to attend attended M A Avery J R Davies C G Treasure M E Harpur 9 9 8 9 SHARE OPTION 9 9 9 9 2 2 2 2 2 2 2 2 0 5 5 5 0 5 5 5 There were no options issued by the Company during the year or to the date of this report. PRINCIPAL ACTIVITIES EDC is an active property investment group which participates in retail, industrial, residential and commercial opportunities. Following the acquisition of Eildon Funds Management Limited on 17 November 2020, this resulted in the internalisation of the investment function, with the Group now providing funds management services in addition to the existing investment operations. DIVIDENDS AND DISTRIBUTIONS Dividends and distributions proposed or paid during the year and included within the statement of changes in equity by EDC are: 2021 June quarter 2021 March quarter 2020 December quarter 2020 September quarter 2020 June quarter - - - - - Company Dividend (cents) Trust Distribution (cents) Total Per Security (cents) 2.023 2.000 2.000 1.925 2.023 2.000 2.000 1.925 Total $ Date of Payment 952,329 23-Jul-21 941,502 23-Apr-21 818,702 22-Jan-21 788,021 23-Oct-20 1.5569 1.5569 637,298 24-Jul-20 Franked Amount per Security - - - - - 11 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Directors’ Report REVIEW OF OPERATIONS EDC recorded an after tax profit to securityholders of $4,894,024 (2020: $4,730,453). The profit for the year is comprised as follows: Net profit after income tax attributable to: - Eildon Capital Limited - Eildon Capital Trust Net profit to securityholders Non-controlling interest Net profit after income tax 2021 $ 1,006,181 3,887,843 4,894,024 33,159 2020 $ 4,091,672 638,781 4,730,453 - 4,927,183 4,730,453 EDC’s investment portfolio totalled $39.2 million as at 30 June 2021. In addition, the group has $11.1 million of cash reserves, representing 21% of net assets, of which $3.6 million is committed to fund existing investments. The investment portfolio includes 5 debt positions and 7 equity investments diversified across Queensland, Victoria and New South Wales. The investment portfolio remains 71% invested in debt positions and 29% in equity by value. During the financial year, EDC generated $4.4 million (2020: $6.0 million) of interest income from property loans, and is holding loan investments totalling $27.8 million (2020: $30.9 million). On 17 November 2020, the Company completed the acquisition of Eildon Funds Management Limited and its controlled entities (“EFM”) for a consideration of $4,000,000, resulting in the internalisation its investment management function. EFM is a leading arranger, investor and manager of real estate credit and equity investments, and currently has approximately $267 million of Assets Under Management (“AUM”). During the period two new unlisted property funds were successfully closed with total AUM of $71 million and EFM has increased its lending portfolio to approximately $118 million under management. For the period from acquisition to the end of the period, EFM contributed $0.7m after tax profit to EDC. EDC has successfully completed a placement on 22 March 2021, which resulted in 6,140,000 stapled securities being issued, raising approximately $6.3 million. 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. Key management personnel 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 securityholders. Remuneration structure In accordance with best practice corporate governance, the structure of Non-executive Director and remuneration for all other key management personnel is separate and distinct. Non-executive Director’s remuneration is solely in the form of fees and has been set by stapled securityholders at a maximum aggregate amount of $300,000, which was approved at the Annual General Meeting held on 13 November 2020, to be allocated amongst the Directors. 12 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Report REMUNERATION REPORT (AUDITED) (CONT.) Remuneration structure (cont.) Other key management personnel remuneration consists of: base salary, fees, superannuation contributions, short term discretionary performance bonuses and Long-Term Incentive Plan (LTIP). Under LTIP, performance rights were issued for a vesting period of three years. The vesting conditions include achievement of a target growth in Total Securityholder Return (TSR) or Return on Assets (ROA). EDC does not have a remuneration committee with the remuneration of the Non-executive directors determined by the Board of the Company. The remuneration of key management personnel other than the Managing Director are determined following discussion with the Board of the Company. Short term discretionary performance bonuses permit EDC to reward individuals for superior personal performance or contribution towards components of EDC’s performance for which they have direct responsibility and are determined at the end of the financial year. Executive contractual arrangements It is EDC’s policy that service contracts for key management personnel are unlimited in term but capable of termination as per the relevant period of notice and that EDC retains the right to terminate the contract immediately, by making payment that is commensurate with pay in lieu of notice. The service contract outlines the components of remuneration paid to the key management personnel but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account any change in the scope of the role performed by the key management personnel and any changes to the principles of the remuneration policy. Standard key management personnel termination payment provisions apply to all other key management personnel. The standard key management personnel provisions are as follows: Details Notice Period Payment in Lieu of Notice Treatment of STI on Termination Treatment of LTI on Termination Employer initiated termination 1 month 1 month Termination for serious misconduct None None Employee initiated termination 1 month 1 month Unvested awards forfeited Unvested awards forfeited Unvested awards forfeited Unvested awards determined by Directors’ discretion Unvested awards forfeited Unvested awards determined by Directors’ discretion 13 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Directors’ Report REMUNERATION REPORT (AUDITED) (CONT.) Remuneration of key management personnel The following table provides details of the remuneration expense of EDC’s key management personnel for the current and previous financial year measured in accordance with the requirements of applicable accounting standards. Short-term Employee Benefits Post-Employment Benefits Bonus (g) $ Superannuation $ Share-based Payment (h) $ Total $ Base % (i) Base Salary $ - - 64,688 45,662 53,653 38,052 53,653 6,088 - - - - - - Directors Mark Avery (a) (Managing Director) James Davies (Non-executive Chairman) Michelle Harpur (Non-executive Director) Craig Treasure (b) (Non-executive Director) Jonathan Sim (c) (Executive Director of EFM) 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Other Key Management Personnel Tiffany McLean (d) (Company Secretary) 2021 2020 John Hunter (e) (Chief Financial Officer) Laurence Parisi (f) (Chief Operating Officer) 2021 2020 2021 2020 147,945 - 85,000 - 2021 319,939 85,000 2020 89,802 - - - - - - - - - - - - - - - - - 6,145 4,338 5,097 3,615 5,097 578 - - - - - - 14,055 - 30,394 8,531 - - - - - - - - - - - - - - - - 70,833 50,000 58,750 41,667 58,750 6,666 - - - - - - - - 100 100 100 100 100 100 - - - - - - 16,603 - 263,603 - 61 - 16,603 451,936 - 98,333 Notes: (a) The remuneration of Mr Avery is paid by CVC Managers Pty Limited, a subsidiary of CVC Limited which is the ultimate parent of EDC. (b) Mr Treasure resigned from the board of the Company and Eildon Funds Management Limited on 29 June 2021. (c) Mr Sim resigned from the board of Eildon Funds Management Limited on 17 November 2020 when the internalisation of EFM was completed. Disclosure of remuneration is not required for periods of 1 July 2020 to 17 November 2020 and the 2020 financial year when Eildon Funds Management Limited was a Responsible Entity of the Trust but not a subsidiary of EDC. (d) Ms McLean was appointed as company secretary on 14 January 2021. The remuneration of Ms McLean is paid by CVC Managers Pty Limited, a subsidiary of CVC Limited which is the ultimate parent of EDC. (e) Mr Hunter resigned as the director of Eildon Funds Management Limited on 17 November 2020 and resigned as the company secretary of the Company and Eildon Funds Management Limited on 29 June 2021. Following the resignation of Mr Hunter as company secretary, he is no longer considered to be a key management personnel of EDC. The remuneration of Mr Hunter is paid by CVC Managers Pty Limited, a subsidiary of CVC Limited which is the ultimate parent of EDC. Mr Parisi became a key management personnel of EDC on 17 November 2020 when the internalisation of EFM was finalised. The amount paid to Mr Parisi in 2021 relates to the period of 17 November 2020 to 30 June 2021. (f) (g) The Short Term Incentive Bonus represents discretionary bonuses as determined by the Directors of EDC, based on their performance during the year. (h) Share-based payment is in relation to performance rights issued. Refer note 19. (i) Base % reflects the amount of base level remuneration that is not dependent on individual or EDC’s performance. 14 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Report REMUNERATION REPORT (AUDITED) (CONT.) Key management personnel holding of stapled securities The relevant security holding interests of key management personnel in the capital of EDC as at 30 June 2021 is as follows: Stapled Securities Opening Purchases Sales Mr M. A. Avery Mr J. R. Davies Ms M. E. Harpur Mr C. G. Treasure (a) Ms T. McLean (b) Mr J. A. H. Hunter (c) Mr L. B. Parisi (d) Mr J. T. M. Sim (e) Notes: 41,285 27,016 19,523 40,570 - 8,300 - - 12,117 - - - - 10,000 5,000 - - - - - - - - - Other Changes During the Year - - - (40,570) - (18,300) Closing 53,402 27,016 19,523 - - - 20,810 25,810 - - (a) Mr Treasure resigned from the board of the Company and Eildon Funds Management Limited on 29 June 2021. (b) Ms McLean was appointed as a company secretary of the Company and Eildon Funds Management Limited on 14 January 2021. (c) Mr Hunter resigned as the director of Eildon Funds Management Limited on 17 November 2020 and resigned as the company secretary of the Company and Eildon Funds Management Limited on 29 June 2021. (d) Mr Parisi became a key management personnel of EDC on 17 November 2020 when the internalisation of EFM was finalised. (e) Mr Sim resigned from the board of Eildon Funds Management Limited on 17 November 2020. Disclosure is not required for the period of 1 July 2020 to 17 November 2020 when Eildon Funds Management Limited was a Responsible Entity of the Trust but not a subsidiary of EDC. Share option There were no options issued by the Company during the year or to the date of this report. 15 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Directors’ Report REMUNERATION REPORT (AUDITED) (CONT.) Performance rights On 1 February 2021, EDC issued employees performance rights under the Employee Incentive Plan for a vesting period of 3 years. The rights deliver ordinary stapled securities to employees (at no cost) where the performance hurdles in relation to those performance rights are met. Performance rights carry no dividend or voting rights or rights to participate in any other share issue of EDC or any other entity. When exercisable, each performance right is entitled to receive one stapled security. If an employee is determined to be a Good leaver then unvested securities continue to be unvested until the end of vesting period with Board discretion. If an employee is determined to be a Bad leaver, unvested securities are forfeited. A total of 409,300 performance rights have been issued with a three year term with the terms summarised as follows: 50% Subject to a Total Security Holders Return Hurdle Return (p.a.) Vesting Amount < 8% 8% - 10% 10% - 12% >12% nil 50% 75% 100% 50% Subject to a Return on Assets Hurdle Return (p.a.) Vesting Amount < 12% 12% nil 50% 12% - 13.5% 50% - 100% >13.5% 100% The fair value of the rights at grant date was based on the following inputs: – Share price of $1.09 at grant date; – Share price of $1.03 which is based on placement in March 2021; – 2 cps distribution paid on a quarterly basis; – Net assets of $1.11 as at 31 January 2021; and – Vesting date of 31 January 2024. The table below provides a reconciliation of performance rights held by Laurence Parisi. No performance rights have been issued to other key management personnel. Year ended 30 June 2021 Grant Date Vesting Date Exercise Price (cents) Balance at Start of the Year Granted During the Year Balance at End of the Year Value per Right 1 Feb 2021 31 Jan 2024 - - 139,800 139,800 $0.87 16 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Report REMUNERATION REPORT (AUDITED) (CONT.) Consequences of performance on stapled securityholder wealth In considering EDC’s performance and benefits for stapled securityholder wealth, the Directors have regard to the following indicators in respect of the current financial year and previous financial years. 2021 $ 2020 $ 2019 $ 2018 $ 2017 $ Net profit after tax attributable to ordinary securityholders of EDC (a) Total comprehensive income attributable to ordinary securityholders of EDC (a) 4,894,024 4,730,453 4,386,508 3,006,055 3,659,218 4,894,024 4,730,453 4,386,508 3,006,055 3,610,914 Dividends and distributions paid Securities issued/(bought back) on market Security price 3,500,555 5,984,375 1.08 9,445,158 1,124,089 1.00 3,525,499 (609,994) 1.02 3,197,311 - 1.04 2,012,822 - 1.05 Net assets per security (b) Change in net assets per security (b) Total KMP incentives as percentage of profit for the year (%) 1.11 0.02 0.99 1.09 0.03 - 1.06 0.02 - 1.04 (0.01) - 1.05 0.06 - (a) Although net profit and total comprehensive income of Eildon Capital Trust, the stapled entity, and its subsidiaries 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 attributable to ordinary securityholders of EDC for the 30 June 2021 and 30 June 2020 financial years refer to profit after tax and total comprehensive income attributable to owners of the Company and owners of the Trust which represents the actual earnings for the stapled securityholders 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 2021 and 30 June 2020 financial years refers to net assets attributable to owners of the Company and owners of the Trust which represents the actual value attributable to stapled securityholders of EDC. Refer note 17. We aim to align executive remuneration to our business objectives and the creation of securityholder wealth. Although the Directors have regard to the financial performance when setting remuneration, these are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to key management personnel. As a consequence, there may not be a direct correlation between the statutory key performance measures and the variable remuneration awarded. This concludes the remuneration report, which has been audited. 17 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Directors’ Report SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS On 17 November 2020, the Company completed the acquisition of Eildon Funds Management Limited and its controlled entities (“EFM”) for a consideration of $4,000,000, resulting in the internalisation of its investment management function. EFM is a leading arranger, investor and manager of real estate credit and equity investments, and currently has approximately $267 million of Assets Under Management (“AUM”). 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 property 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. ENVIRONMENTAL REGULATION EDC’s operations are not subject to environmental regulations. EVENTS SUBSEQUENT TO REPORTING DATE The COVID-19 pandemic is still on-going, with asset markets experiencing significant volatility, as well as creating significant uncertainty regarding its economic impact. The increase in property prices have had a positive impact on the existing investment portfolio. 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 that the overall impact of COVID-19 is still unknown at this point. 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 2021. ECT DISCLOSURES Units issued in ECT during the year are set out in note 17. There were 47,075,102 (2020: 40,935,102) issued units in ECT at balance date. Fees paid to the Responsible Entity and its associates from the Trust during the financial year are disclosed in note 22(d) to the financial statements. The Responsible Entity or its associates do not hold any units in the Trust as at the end of the financial year. The total carrying value of ECT’s assets as at year end was $44,287,542 (2020: $38,181,204). Net assets attributable to unitholders of ECT were $43,123,127 (2020: $37,287,469) equalling to $0.92 per unit (2020: $0.91) ROUNDING OF AMOUNTS EDC is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest dollar unless otherwise stated. 18 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Directors’ Report INDEMNITY AND INSURANCE OF OFFICERS a) Indemnification During and since the end of the financial period EDC and ECT have provided an indemnity and entered into an agreement to indemnify Directors and Company Secretaries for liabilities that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. b) Insurance Premiums EDC and ECT have not, during the year or since the end of the financial year, paid or agreed to pay a premium for insuring any person who is or has been an auditor of the Company or a related body corporate for the costs or expenses of defending legal proceedings. The Company has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expense insurance for Directors and Officers of the Company. In accordance with s. 300(9) of the Corporations Act 2001 further details have not been disclosed due to confidentiality provisions contained in the insurance contract. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES EDC appointed Pitcher Partners Sydney as the auditors for the 2021 financial year. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the financial year are disclosed in note 4. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the audit independence requirements of the Corporations Act 2001 for the following reasons: – All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and – Non of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards). A copy of the Independence Declaration is included on page 20. Signed in accordance with a resolution of Directors. Dated at Sydney 24 August 2021 Mark Avery Director James Davies Director 19 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Auditor’s Independence Declaration To the Directors of Eildon Capital Limited and Eildon Capital Trust, together Eildon Capital Group In relation to the independent audit for the year ended 30 June 2021, to the best of my knowledge and belief there have been: (i) no contraventions of the auditor independence requirements of the Corporations Act 2001; and (ii) no contraventions of APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (“the Code”). This declaration is in respect of Eildon Capital Limited and Eildon Capital Trust, together Eildon Capital Group. John Gavljak Partner 24 August 2021 Pitch Partners Sydney 20 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Consolidated Statement of Profit or Loss INCOME Interest income Fee income Distribution income Total income EDC ECT Notes 2021 $ 2020 $ 2021 $ 2020 $ 4,358,780 3,422,941 212,097 4,530,468 95,976 1,513,573 4,503,580 13,967 - 212,097 755,159 25,717 7,993,818 6,140,017 4,729,644 780,876 Share of net profit of associate accounted for using the equity method 12 2,633,008 1,653,058 - - EXPENSES Accountancy Employee and director costs Insurance Interest expenses Net loss on financial assets at fair value through profit or loss Legal fees Management and consultancy fees Restructure cost Share registry Other expenses 6 340,147 1,508,025 79,126 42,119 49,218 1,311,401 138,354 64,950 354,931 10,411 98,333 47,046 - 1,351,145 10,329 797,416 136,031 62,876 146,605 11,509 - 40,373 - - - 1,559 - - 15,694 610,537 - - 55,062 102,067 5,000 - 7,500 102,516 3,403 28,676 Total expenses 5,239,416 1,309,047 841,801 142,095 Profit before income tax Income tax expense Net profit after tax Net profit after tax attributable to: Owners of the Company Owners of the Trust Non-controlling interests 5,387,410 6,484,028 3,887,843 638,781 5 460,227 1,753,575 - - 4,927,183 4,730,453 3,887,843 638,781 1,006,181 3,887,843 33,159 4,091,672 638,781 - - - 3,887,843 - - 638,781 Net profit after tax 4,927,183 4,730,453 3,887,843 638,781 Basic earnings per company share/ trust unit (cents) Diluted earnings per company share/ trust unit (cents) Basic earnings per stapled security (cents) Diluted earnings per stapled security (cents) 7(a) 7(a) 7(b) 7(b) 2.36 2.35 11.49 11.45 9.09 9.09 10.50 10.50 9.13 9.10 8.11 8.11 The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 21 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Consolidated Statement of Other Comprehensive Income EDC ECT Notes 2021 $ 2020 $ 2021 $ 2020 $ Profit for the year Other comprehensive income 4,927,183 4,730,453 3,887,843 638,781 - - - - Total comprehensive income for the year 4,927,183 4,730,453 3,887,843 638,781 Total comprehensive income attributable to: Owners of the Company Owners of the Trust Non-controlling interests 1,006,181 3,887,843 33,159 4,091,672 638,781 - - - 3,887,843 - - 638,781 Total comprehensive income for the year 4,927,183 4,730,453 3,887,843 638,781 The above consolidated statement of other comprehensive income should be read in conjunction with the accompanying notes. 22 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Consolidated Statement of Financial Position AS AT 30 JUNE 2021 CURRENT ASSETS Cash and cash equivalents Financial assets at amortised cost Financial assets at fair value through profit or loss Other assets Notes 9 10 11 EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ 11,100,354 27,659,310 1,133,708 65,540 8,486,029 19,967,106 - - 8,527,689 26,929,545 1,133,7081 - - - 7,308,276 19,923,488 Total current assets 39,958,912 28,453,135 36,590,942 27,231,764 NON-CURRENT ASSETS 10 Financial assets at amortised cost Financial assets at fair value through profit or loss 11 Investments accounted for using the equity method 12 13 Intangible assets 14 Right-of-use asses Plant and equipment Deferred tax assets 5 911,096 3,559,954 6,669,865 3,460,077 281,857 14,070 763,656 10,949,440 2,144,638 4,338,592 - - - 284,282 5,112,638 2,583,962 - - - - - - - - - - - 10,949,440 Total non-current assets 15,660,575 17,716,952 7,696,600 10,949,440 TOTAL ASSETS 55,619,487 46,170,087 44,287,542 38,181,204 CURRENT LIABILITIES Trade and other payables Lease liabilities Provisions Current tax liabilities Total current liabilities NON-CURRENT LIABILITIES Other liabilities Lease liabilities Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Retained earnings/(Accumulated losses) Other reserves Equity attributable to shareholders/unitholders Non-controlling interests Trust unitholders Other non-controlling interests 16 14 5 15 14 5 17 18 1,764,215 82,686 84,099 111,000 1,066,817 - - 31,667 1,027,369 - - - - - - 893,735 2,042,000 1,098,484 1,027,369 893,735 137,046 201,595 1,217,535 - - 476,649 1,556,176 476,649 137,046 - - - - - 137,046 - 3,598,176 1,575,133 1,164,415 893,735 52,021,311 44,594,954 43,123,127 37,287,469 8,210,699 679,345 8,237 8,898,281 7,634,321 (326,836) - 7,307,485 42,693,983 388,771 40,373 - 43,123,127 37,285,986 1,483 37,287,469 43,123,127 (97) 37,287,469 - 43,123,030 37,287,469 - - - - - - TOTAL EQUITY 52,021,311 44,594,954 43,123,127 37,287,469 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 23 2021 ANNUAL REPORT | EILDON CAPITAL GROUP Consolidated Statement of Changes in Equity EDC Contributed Equity $ Retained Earnings $ Other Reserves $ Owners of the Parent $ Non- controlling Interest $ Total $ At 1 July 2020 7,634,321 (326,836) - 7,307,485 37,287,469 44,594,954 Profit for the year Total comprehensive income for the year - - 1,006,181 1,006,181 Transactions with stapled securityholders: Stapled securities issued Transaction costs on stapled securities issued Tax on stapled securities issued transaction costs Transaction costs on stapled securities buyback Tax on stapled securities buyback transaction costs Acquisition of non-controlling interests Dividends provided or paid Share-based payment expenses 600,166 (33,807) 10,142 (176) 53 - - - - - - - - - - - - - - - - - 1,006,181 3,921,002 4,927,183 1,006,181 3,921,002 4,927,183 600,166 (33,807) 5,724,033 (315,136) 6,324,199 (348,943) 10,142 - 10,142 (176) (900) (1,076) - - - 8,237 53 - - 8,237 - (7,992) (3,525,819) 40,373 53 (7,992) (3,525,819) 48,610 At 30 June 2021 8,210,699 679,345 8,237 8,898,281 43,123,030 52,021,311 At 1 July 2019 43,796,218 (5,483,508) 9,872,860 48,185,570 - 48,185,570 - - - - - - 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) Profit for the year Total comprehensive income for the year - - 4,091,672 4,091,672 Transactions with stapled securityholders: Units issued Transaction costs on units issued Stapled securities bought back Transaction costs on stapled securities buyback Tax on stapled securities buyback transaction costs Return of capital Dividends/distributions provided or paid Transfers (to)/from reserve - - (804,593) (10,873) - - - - 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 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 24 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Consolidated Statement of Changes in Equity ECT Contributed Equity $ Retained Earnings $ Other Reserves $ At 1 July 2020 37,285,986 1,483 Profit for the year Total comprehensive income for the year - - 3,887,843 3,887,843 Transactions with unitholders: Units issued Transaction costs on units issued Transaction costs on units buyback Distributions provided or paid Share-based payment expenses 5,724,033 (315,136) (900) - - - - - (3,500,555) - At 30 June 2021 42,693,983 388,771 At 1 July 2019 Profit for the year Total comprehensive income for the year Transactions with unitholders: Units issued Transaction costs on units issued Units bought back Transaction costs on units buyback Distributions provided or paid - - - 41,530,887 (35,943) (4,153,043) (55,915) - - 638,781 638,781 - - - - (637,298) At 30 June 2020 37,285,986 1,483 - - - - - - - 40,373 40,373 - - - - - - - - - The above consolidated statement of changes in equity should be read in conjunction with accompanying notes. Total $ 37,287,469 3,887,843 3,887,843 5,724,033 (315,136) (900) (3,500,555) 40,373 43,123,127 - 638,781 638,781 41,530,887 (35,943) (4,153,043) (55,915) (637,298) 37,287,469 25 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Consolidated Statement of Cash Flows EDC ECT Notes 2021 $ 2020 $ 2021 $ 2020 $ 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 Interest paid Income tax paid 4,033,187 (4,251,478) 311,612 8,402,908 (2,511,034) 2,951,099 (108,361) (70,119) 104,251 (1,125,639) 520,994 5,841,865 (6,341,524) 2,138,002 - (1,663,322) 116,514 - (1,083,265) 148,223 - 7,080,408 (6,511,034) 2,793,872 - - - - 91,652 120,000 (37,500) 27,391 Net cash provided by/(used in) operating activities 9(b) 8,757,814 (525,373) 2,544,718 201,543 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 Payments for plant and equipment Payments for acquisition of subsidiary, net of cash acquired (6,042,500) (6,210,147) (5,865,000) (33,148,381) 2,320,171 (14,787) 16,842,355 - 2,181,735 - - 2,969,128 2 (3,877,681) - - - Net cash (used in)/provided by investing activities (7,614,797) 10,632,208 (3,683,265) (30,179,253) Cash flows from financing activities Dividends paid Proceeds for stapled security/unit issued Payment for stapled security/unit issue transaction costs Payment for stapled security/unit buyback Payment for stapled security/unit buyback transaction costs Proceeds from borrowings Payment of borrowings (3,187,117) 6,324,199 (348,943) - (1,076) 135,487 (1,451,242) (3,497,284) - (35,943) (4,957,636) (66,788) - - (3,185,524) - 5,724,033 (315,136) - (900) 135,487 - - - 41,530,887 (35,943) (4,153,043) (55,915) Net cash provided by/(used in) financing activities 1,471,308 (8,557,651) 2,357,960 37,285,986 Net increase in cash and cash equivalents 2,614,325 1,549,184 1,219,413 7,308,276 Cash and cash equivalents at the beginning of the financial year 8,486,029 6,936,845 7,308,276 - Cash and cash equivalents at the end of the financial year 9(a) 11,100,354 8,486,029 8,527,689 7,308,276 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 26 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements CONTENTS Note 1 | Statement of Accounting Policies ................................. 27 2 | Controlled Entities ..................................................................... 34 3 | Parent Entity Disclosure ........................................................ 36 4 | Auditor’s Remuneration ........................................................ 36 5 | Income Tax ...................................................................................... 37 6 | Employee and Director Costs ........................................... 38 7 | Earnings Per Share/Unit/Stapled Security ............. 38 8 | Dividends and Distributions .............................................. 39 9 | Notes to the Statement of Cash Flows ..................... 40 10 | Financial Assets at Amortised Cost .............................. 41 11 | Financial Assets at Fair Value through Profit or Loss .................................................................................. 42 12 | Investments Accounted for Using the Equity Method ............................................................................... 43 13 | Intangible Assets ......................................................................... 45 14 | Leases .................................................................................................. 45 15 | Other Liabilities ............................................................................ 46 16 | Trade and Other Payables .................................................. 46 17 | Contributed Equity .................................................................... 47 18 | Other Reserves ............................................................................. 49 19 | Share-based Payments .......................................................... 49 20 | Financial Risk Management ............................................... 50 21 | Segment Information .............................................................. 56 22 | Related Party Information ................................................... 60 23 | Commitments and Contingent Liabilities ............... 62 24 | Subsequent Events ................................................................... 62 NOTE 1: STATEMENT OF ACCOUNTING POLICIES The significant policies which have been adopted in the preparation of this financial report are: 1.1 Basis of Preparation Eildon Capital Group (EDC) was formed by the stapling of Eildon Capital Limited (the “Company”) and its controlled entities, and Eildon Capital Trust (the “Trust”) and its controlled entities. The financial reports are general-purpose financial reports, which have been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards (including Australian Accounting Interpretations). The financial reports of Eildon Capital Group (“EDC”) and the Trust and its controlled entities (“ECT”) have been presented jointly in accordance with ASIC Corporations (Stapled Group Reports) instrument 2015/838 relating to combining accounts under stapling and for the purpose of fulfilling the requirements of the Australian Securities Exchange. The financial report has been prepared on a historical cost basis, except for the measurement at fair value of selected financial assets. EDC and ECT are for-profit entities for the purpose of preparing the financial report. These accounting policies have been consistently applied by each entity in EDC and are consistent with those of the previous year. 1.2 Current and Non-current Classification EDC and ECT present 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 and ECT’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 and ECT’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. 1.3 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 and ECT’s accounting policies. 27 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.3 Critical Accounting Estimates and Judgements (Cont.) 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: – Valuation of investments accounted for using the equity method (refer below); – Impairment of intangible assets (refer note 13); – Fair value of financial assets at amortised cost (refer note 10); – Fair value of financial assets at fair value through profit or loss (refer note 11); and – Fair value of performance rights (refer note 19). Valuation of investments accounted for using the equity method The carrying value of investments have been valued based 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. 1.4 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). EDC and ECT have adopted all of the applicable new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Adoption of the applicable new or amended standards does not have a material impact on EDC and ECT. Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by EDC and ECT. 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. 1.5 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 and ECT 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 and ECT’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 and ECT will be dependent on the severity and duration of the pandemic, as well as any further 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 10; – 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 11; and – impairment of the carrying amount of associates, by comparing the investment’s recoverable amount with its carrying value. Refer note 12. 1.6 Principles of Consolidation Controlled entities The consolidated financial statements comprise the financial statements for the year ended 30 June 2021 for both: – Eildon Capital Limited (the “Company”) and its controlled entities, Eildon Capital Trust (the “Trust”) and its controlled entities, together being the stapled entity, Eildon Capital Group (“EDC”); and – The Trust and its controlled entities (“ECT”). The financial statements of controlled entities are included in the results only from the date control commences until the date control ceases. Control is achieved when EDC/ECT is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, EDC/ECT controls an investee if and only if EDC/ECT has: – Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); 28 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.6 Principles of Consolidation (Cont.) Controlled entities (cont.) – Exposure, or rights, to variable returns from its involvement with the investee; and – The ability to use its power over the investee to affect its returns. When EDC/ECT has less than a majority of the voting or similar rights of an investee, EDC/ECT considers all relevant facts and circumstances in assessing whether it has power over an investee, including: – The contractual arrangement with the other vote holders of the investee; – Rights arising from other contractual arrangements; and – EDC’s and ECT’s voting rights and potential voting rights. EDC and ECT re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. In preparing the consolidated financial statements, all intercompany 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 acquisition of subsidiaries 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. Non-controlling interests not held by EDC/ECT are allocated their share of net profit after tax in the statement of comprehensive income and are presented within equity in the consolidated statement of financial position, separately from parent shareholders’ equity. Increases in investments in existing controlled entities are recognised by EDC/ECT in equity with no impact on goodwill and the statement of financial performance. The difference between the consideration paid by EDC/ECT and the carrying amount of non-controlling interest has been included in asset revaluation reserve. The reporting date of the Company, the Trust and their subsidiaries is 30 June. The accounting policies have been consistently applied by each entity in EDC and ECT. Stapled entities 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. 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. The net assets held by Eildon Capital Trust and its controlled entities are identified as non-controlling interests and presented in EDC’s consolidated statement of financial position within equity, separately from the Company’s equity holders’ equity. The profit of Eildon Capital Trust and its controlled entities 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. 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. 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. Parent entity information The financial information of the Company and the Trust is disclosed in note 3 and has been prepared on the same basis as the consolidated financial statements with the exception of investments in associates and controlled entities which are accounted for as “fair value through profit or loss” investments. Goodwill Goodwill on acquisition of businesses is included in intangible assets. Goodwill is considered to have an indefinite life and represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Following initial recognition goodwill is measured at cost less any accumulated impairment losses. Impairment losses on goodwill are taken to the statement of financial performance and are not subsequently reversed. 29 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.7 Impairment Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other 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 other than goodwill that suffered impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. 1.8 Income Tax and Other Taxes 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. Income taxes relating to items recognised directly in equity are recognised in equity and not in comprehensive income. Under current Australian income tax legislation, the Trust and its subsidiaries are not liable for income tax on their taxable income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income of the Trust. Tax consolidation legislation The 100% owned subsidiaries of the Company formed a tax consolidation group on 17 November 2020. The entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The entities in the tax consolidated group have applied the “stand-alone taxpayer” approach in determining the appropriate amount of current taxes and deferred taxes to be allocated to members of the tax consolidated group. The Company recognises the current tax liabilities (or assets) from controlled entities in the tax consolidated group. To the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised the Company recognises the deferred tax assets from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement the allocation of tax within the group is calculated as if each entity was an individual entity for tax purposes. Unless agreed between the members the tax funding agreement requires payment as a result of the transfer of tax amounts. 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. 30 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.9 Business Combination The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: – fair values of the assets transferred; – liabilities incurred to the former owners of the acquired business; – equity interests issued by EDC; – fair value of any asset or liability resulting from a contingent consideration arrangement; and – fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. EDC recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the: – consideration transferred, – amount of any non-controlling interest in the acquired entity, and – acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. 1.10 Cash and Cash Equivalents Cash includes cash on hand and short-term deposits with an original maturity of three months or less. 1.11 Trade and Other Receivables Trade and other receivables 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 and ECT apply 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 and ECT’s historical credit losses experienced and then adjusted for current and forward-looking information affecting EDC’s debtors. 1.12 Plant and Equipment Items of plant and equipment are recorded at cost less depreciation and impairment. Depreciation Plant and equipment are depreciated using the straight line method over the estimated useful lives. Depreciation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. The current depreciation rates are as follows: Plant and equipment 33% Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amounts being estimated when events or changes in circumstances indicate that the carrying value may be impaired. 1.13 Leases Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by EDC. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: – fixed payments (including in-substance fixed payments), less any lease incentives receivable; – variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; – amounts expected to be payable by EDC under residual value guarantees; and – payments of penalties for terminating the lease, if the lease term reflects EDC exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in EDC, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of- use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. 31 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.13 Leases (Cont.) 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. Right-of-use assets are measured at cost comprising the following: – the amount of the initial measurement of lease liability; – any lease payments made at or before the commencement date less any lease incentives received; – any initial direct costs; and – restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. 1.14 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 and ECT’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 and ECT reclassify debt investments when and only when its business model for managing those assets changes. (ii) Measurement Initial measurement At initial recognition, EDC and ECT measure 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. Subsequent measurement 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 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 (iii) Impairment EDC and ECT assess 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, the expected credit loss is determined with reference to the probability of default. EDC and ECT apply 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. 1.15 Trade and Other Payables Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to EDC/ ECT prior to the end of the financial year that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. 1.16 Other Liabilities Other liabilities relate to non-controlling interests in contributory investment trusts that EDC/ECT has assessed that it controls and the units issued by these funds meet the definition of a liability in accordance with AASB 132 Financial Instruments: Presentation rather than classified as equity. 1.17 Revenue and 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 32 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Notes to the Financial Statements NOTE 1: STATEMENT OF ACCOUNTING POLICIES (CONT.) 1.17 Revenue and Revenue Recognition (Cont.) Interest income (cont.) 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 Fee income is recognised in respect to the following types of service contracts with customer: – Loan administration, fund administration and development administration services: these services are provided to customers as a series of distinct goods or services that are substantially the same and transferred over time, either separately or in combination as an integrated offering, and are treated as a single performance obligation. – Equity raising, loan establishment, acquisition and project management services: due to the specialised nature of these services, the customer does not benefit from the process undertaken, but rather the outcome. EDC is only entitled to payment for services upon the successful completion of the contract. Hence, revenue is recognised at a point in time, upon completion of the service. 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. 1.18 Employee Entitlements Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be wholly settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled including “on-costs”. Share-based payments EDC provides benefits to employees in the form of share- based payments, whereby employees render services in exchange for rights over securities (equity-settled transactions). The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. In respect of share-based payments that are dependent on the satisfaction of performance conditions, the number of shares expected to vest is reviewed and adjusted at each reporting date. The amount recognised for services received as consideration for these equity instruments granted is adjusted to reflect the best estimate of the number of equity instruments that eventually vest. 1.19 Contributed Equity 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. 1.20 Dividends and Distributions Provision is made for the amount of any dividend and distribution declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. 1.21 Earnings Per Share/Unit Basic earnings per share/unit is calculated as net profit/ (loss) attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends and distributions) and preference share dividends and distributions, divided by the weighted average number of ordinary shares/units, adjusted for any bonus element. 1.22 Comparative Figures Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current year. 1.23 Segment Reporting A business segment is a distinguishable component of the entity that is engaged in providing differentiated products or services. Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 1.24 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. 1.25 Rounding of Amount EDC and ECT of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest dollar unless otherwise stated. 33 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021Notes to the Financial Statements NOTE 2: CONTROLLED ENTITIES 2.1 Composition of Consolidated Group The consolidated financial statements include the following controlled entities, the stapled entity, Eildon Capital Trust and its controlled entities. The financial years of all controlled entities, stapled entity and its controlled entities are the same as that of the parent entity. Companies incorporated in Australia: Interest Held by Consolidated Entity Jun 2020 % Jun 2021 % Interest Held by Non-controlling Interests Jun 2021 % Jun 2020 % Eildon Capital Limited Direct Controlled Entities: Eildon Funds Management Limited (a) 100 (a) Eildon Funds Management Limited is the Responsible Entity of Eildon Capital Trust. Controlled Entities owned by Eildon Funds Management Limited: Eildon Investments Services Pty Limited Eildon Asset Management Pty Limited Eildon Asset Management Trust EFM Nominee Services Pty Limited Controlled Entities owned by stapled entity, Eildon Capital Trust: Eildon Debt Fund (b) - P Class - U Class 100 50 50 100 85 100 - - - - - - - - - 50 50 - 15 - - - - - - - - (b) Units issued in the fund meet the definition of a liability under AASB 132 Financial Instruments: Presentation rather than equity. As such, the units in the funds not eliminated on consolidation are recognised as Other Liabilities in the statement of financial position. Refer note 15. Although the net assets and profit of Eildon Capital Trust and its controlled entities have been identified as 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. 34 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 2: CONTROLLED ENTITIES (CONT.) 2.2 Business Combination On 17 November 2020, the Company acquired 100% of Eildon Funds Management Limited and its controlled entities (“EFM”) for a consideration of $4,000,000 at which time it became a 100% subsidiary of EDC. EFM is a fund manager and the holder of a financial services licence which provides management services to a range of funds. A summary of the acquisition is as follows: Purchase consideration: Cash paid Total purchase consideration Fair value of Assets and Liabilities of EFM at Acquisition: Cash Trade and other receivables (a) Other assets Plant and equipment Financial assets at amortised cost Deferred tax asset Trade and other payables Employee benefits Borrowings Current tax liability Total identifiable net assets at fair value Less: non-controlling interests Add: goodwill (b) Consideration for acquisition Cash outflow: Cash consideration Less: balances acquired Cash Net outflow of cash – investing activities $ 4,000,000 4,000,000 122,319 851,550 1,708 2,287 1,422,985 35,782 (345,125) (34,199) (1,507,605) (17,771) 531,931 7,992 3,460,077 4,000,000 4,000,000 (122,319) 3,877,681 (a) The fair value of acquired trade and other receivables is the gross contractual amount. (b) The goodwill is attributable to the value of EFM’s funds management business. It will not be deductible for tax purpose. For the period from acquisition to the end of the period, EFM recorded revenues of $3,869,910 and profit after tax of $691,436. If the acquisition had occurred on 1 July 2020, consolidated pro-forma revenue would have been $5,175,958 and profit after tax would have been $935,885. 35 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 3: PARENT ENTITY DISCLOSURE 3.1 Summary Financial Information The financial information for the Company and the Trust has been prepared on the same basis as the consolidated financial statements. Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Retained earnings Other reserve Total equity Company 2021 $ 2020 $ Trust 2021 $ 2020 $ 1,187,522 13,957,808 299,448 5,718,525 1,325,284 8,092,796 308,663 785,311 36,550,638 44,109,452 986,325 986,325 27,231,764 38,181,204 893,735 893,735 8,210,699 20,347 8,237 7,634,321 (326,836) - 42,693,983 388,771 40,373 - 37,285,986 1,483 8,239,283 7,307,485 43,123,127 37,287,469 Profit for the period 347,183 4,091,672 3,887,843 638,781 Total comprehensive income 347,183 4,091,672 3,887,843 638,781 3.2 Commitments and Financial Guarantees Amounts available to be called by investees for partially paid shares and units: Unrelated entity 1,235,654 - 1,983,487 - Refer note 23(b) for information about guarantees given by the Company. NOTE 4: AUDITOR’S REMUNERATION The auditor of EDC is Pitcher Partners Sydney (2020: HLB Mann Judd). Amounts received or due and receivable by the auditors for: EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ Audit and review of financial report Pitcher Partners Sydney HLB Mann Judd Other assurance services Pitcher Partners Sydney 74,624 9,931 84,557 - 51,894 51,894 29,312 - 1,940 31,252 10,000 10,000 1,000 - - - 36 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 5: INCOME TAX Under current Australian income tax legislation, the Trust and its subsidiaries are not liable for income tax on their taxable income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income of the Trust. Details of income tax of EDC have disclosed below: (a) Income tax expense Accounting profit before income tax Income tax expense at the statutory income tax rate of 30% Trust profit not assessable Sundry items Adjustment recognised for prior year Income tax expense The major components of income tax expense are: – Current income tax charge – Deferred income tax – Prior year provision EDC 2021 $ 2020 $ 5,387,410 6,484,028 1,616,223 (1,147,689) 3,338 - (11,645) 1,945,208 (191,633) 460,227 1,753,575 166,152 305,720 (11,645) - 1,216,625 536,950 Income tax expense reported in the statement of profit or loss and other comprehensive income 460,227 1,753,575 Deferred tax benefit relating to items credited directly to equity 10,195 3,262 (b) Deferred income tax Deferred income tax balances at 30 June relates to the following: EDC Deferred tax assets Provisions and accrued expenses Financial assets Tax losses Other 2021 Included in Income $ Included in Equity $ Total $ Included in Income $ 2020 Included in Equity $ Total $ 119,865 445,350 89,354 44,325 - - - 64,762 119,865 445,350 89,354 109,087 12,150 - 106,001 69,291 - - - 96,840 12,150 - 106,001 166,131 698,894 64,762 763,656 187,442 96,840 284,282 Deferred tax liabilities Equity accounting income 1,217,535 - 1,217,535 476,649 - 476,649 37 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 5: INCOME TAX (CONT.) (c) Current tax liabilities Income tax payable Balance at the end of the year EDC 2021 $ 2020 $ 111,000 31,667 EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 6: EMPLOYEE AND DIRECTOR COSTS Superannuation Share-based payments Non-executive director costs Other employee costs 55,513 48,610 188,333 1,215,569 - - - 98,333 1,508,025 98,333 - - 40,373 - - - - - 40,373 - Company 2021 $ 2020 $ Trust 2021 $ 2020 $ NOTE 7: EARNINGS PER SHARE/UNIT/STAPLED SECURITY (a) Earnings per share/unit Basic earnings per share/unit (cents) Diluted earnings per share/unit (cents) 2.36 2.35 9.09 9.09 9.13 9.10 8.11 8.11 Net profit attributable to ordinary equity holders of the Company/Trust 1,006,181 4,091,672 3,887,843 638,781 Weighted average number of shares/units Weighted average number of shares/units used in calculating basic earnings per company share/trust unit (number) Adjustment for calculation of diluted earnings per company share/trust unit: Performance rights (number) Weighted average number of ordinary shares/units and potential ordinary shares/units used in calculating earnings per company share/trust unit (number) 42,592,902 45,036,019 42,592,902 7,878,822 134,250 - 134,250 - 42,727,152 45,036,019 42,727,152 7,878,822 38 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 7: EARNINGS PER SHARE/UNIT/STAPLED SECURITY (CONT.) (b) Earnings per stapled security The total earning per stapled security for EDC is as follows: Basic earnings per stapled security (cents) Diluted earnings per stapled security (cents) EDC 2021 $ 11.49 11.45 2020 $ 10.50 10.50 Net profit attributable to securityholders of EDC 4,894,024 4,730,453 Weighted average number of securities Weighted average number of securities used in calculating basic earnings per stapled security (number) Adjustment for calculation of diluted earnings per stapled security: Performance rights (number) Weighted average number of ordinary securities and potential ordinary securities used in calculating earnings per stapled security (number) 42,592,902 45,036,019 134,250 - 42,727,152 45,036,019 Although net profit of Eildon Capital Trust, the stapled entity, and its controlled entities 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 refers to net profit after tax attributable to owners of both the Company and the Trust which represents the actual earnings for the stapled securityholders of EDC. NOTE 8: DIVIDENDS AND DISTRIBUTIONS (a) Dividends and distributions Dividends and distributions proposed or paid in current and previous year and included within the statement of changes in equity by EDC and ECT are: Company Dividend Paid (cents) Trust Distribution Paid (cents) Total Per Security (cents) Total $ Date of Payment Tax Rate for Franking Credits Percentage Franked 2021 June quarter 2021 March quarter 2020 December quarter 2020 September quarter 2020 June quarter Special dividend 2020 March quarter 2019 December quarter 2019 September quarter - - - - - 13.59 1.925 1.925 1.925 2.023 2.000 2.000 1.925 2.023 952,329 23-Jul-21 2.000 941,502 23-Apr-21 2.000 818,702 22-Jan-21 1.925 788,021 23-Oct-20 1.5569 1.5569 637,298 24-Jul-20 - - - - 13.59 6,181,195 24-Apr-20 1.925 875,555 24-Apr-20 1.925 875,555 24-Jan-20 1.925 875,555 24-Oct-19 0% 0% 0% 0% 0% 30% 30% 30% 30% 0 0 0 0 0 100 100 100 100 39 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 8: DIVIDENDS AND DISTRIBUTIONS (CONT.) (b) Franking credits Distributions paid by ECT do not attract franking credits. Franking credits are only available for future dividends paid by the Company. The Company’s franking account balance as at 30 Jun 2021 is $191,998 (2020: $37,879). 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. NOTE 9: 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: EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ Cash at bank 11,100,354 8,486,029 8,527,689 7,308,276 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 Depreciation and amortisation Performance rights Impairment of financial assets Facility fee Change in operating assets and liabilities: Decrease/(Increase) in financial assets at amortised cost Increase in other assets Increase in leave provisions Increase/(decrease) in payables Increase in deferred tax assets and liabilities Increase/(decrease) in tax payable 4,927,183 4,730,453 3,887,843 638,781 (2,633,008) 16,864 48,610 1,351,145 (831,952) 4,571,708 (28,223) 49,900 916,536 307,489 61,562 (1,653,058) - - - - (3,884,704) (7,900) - 199,583 552,347 (462,094) - - - - 40,373 - 5,000 - (13,967) - (1,204,208) - - - - (170,323) - - - - (670,986) 233,748 Net cash provided by/(used in) operating activities 8,757,814 (525,373) 2,544,718 201,543 40 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 9: NOTES TO THE STATEMENT OF CASH FLOWS (CONT.) (c) Changes in liabilities arising from financing activities Other Liabilities 2020 2021 $ $ Borrowings 2021 $ 2020 $ Leases 2021 $ 2020 $ Total 2021 $ 2020 $ EDC At the beginning of the year Acquisition of subsidiary Cash flows Other changes At the end of the year ECT At the beginning of the year Cash flows Other changes At the end of the year - - 135,487 1,559 137,046 - 135,487 1,559 137,046 - - - - - - - - - - 1,439,804 (1,439,804) - - - - - - - - 297,941 (11,438) (2,222) 284,281 - - - - - - - - - - - - EDC - - - - - - - - - - 1,737,745 (1,315,755) (663) 421,327 - 135,487 1,559 137,046 ECT - - - - - - - - - 2021 $ 2020 $ 2021 $ 2020 $ NOTE 10: FINANCIAL ASSETS AT AMORTISED COST Current: Trade and other receivables Secured loans to other entities Non-current: Secured loans to other entities Secured loan to stapled entity Trade and other receivables 766,376 26,892,934 51,307 19,915,799 36,611 26,892,934 7,689 19,915,799 27,659,310 19,967,106 26,929,545 19,923,488 911,096 - 10,949,440 - 911,096 4,201,542 - 10,949,440 911,096 10,949,440 5,112,638 10,949,440 Trade receivables are mainly related to management of relevant loans to various entities. EDC/ECT applies the AASB 9 simplified approach to measure 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 and ECT’s historical credit losses experienced and then adjusted for current and forward-looking information affecting the customers. 41 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 10: FINANCIAL ASSETS AT AMORTISED COST (CONT.) Secured loans In the event that a counterparty defaults on a loan, EDC and ECT may take possession of security provided. EDC and ECT have 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 and ECT regularly review 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. EDC and ECT regularly review their loans for a significant increase in credit risk and expected credit loss. The review considers the counterparty credit quality, the security held, exposure at default and the effect of repayment terms as at reporting date. The directors are of the opinion that securities provided are sufficient to cover relevant outstanding loans. As such no expected loss allowance on loan assets has been provided as at 30 June 2021 and 30 June 2020. For the majority of the non-current financial assets at amortised cost, the fair values are not significantly different from their carrying amounts as interest charged are at market rates. EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 11: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Current: Investments in unlisted entities Non-current: Investments in unlisted entities 1,133,708 - 1,133,708 - 3,559,954 2,144,638 2,583,962 - The carrying value of investments in unlisted entities 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 entities that hold property assets or hold property assets as security. A review has been undertaken of the underlying property assets held by the entities and the directors are of the opinion that the carrying value of the investment is reflective of the current underlying value of the property held. 42 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements EDC Ownership Interest 2020 2021 % % Investment Carrying Amount 2020 $ 2021 $ NOTE 12: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Associates of the Company have been disclosed below: Interest in ordinary shares of associate 79 Logan Road Trust (a) 79 Logan Road Pty Limited (b) 35 35 35 35 6,669,865 - 4,338,557 35 6,669,865 4,338,592 (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 $6,669,865 based on the net asset backing methodology, using the most recent financial reports provided by the company. (b) 79 Logan Road Pty Limited is the trustee of 79 Logan Road Trust. 43 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 12: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONT.) Summarised financial information The following table illustrates summarised financial information relating to EDC’s associate: 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 (a) EDC’s share - dollars Carrying amount Summarised statement of comprehensive income Revenue Net profit Total comprehensive income Dividends received 79 Logan Road Trust 2021 $ 2020 $ 138,578 159,227 (20,649) 123,356 85,122 38,234 32,500,000 11,490,000 23,847,641 11,490,000 21,010,000 12,357,641 20,989,351 12,395,875 12,395,875 9,455,476 (395,174) (466,826) 8,266,854 4,723,021 (410,490) (183,510) 20,989,351 12,395,875 32% 6,669,865 35% 4,338,557 6,669,865 4,338,557 10,372,206 9,455,476 5,676,177 4,723,021 9,455,476 4,723,021 163,389 64,229 (a) EDC has a unitholding of 35% in 79 Logan Road Trust. The unitholding entitles EDC to share 35% of lease income and 30% of the increase in value of the property. As such, EDC had a holding equivalent to 32% of the net assets of the trust as at 30 June 2021. 44 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 13: INTANGIBLE ASSETS Goodwill Reconciliations: Carrying amount at the beginning of the year Acquisition of subsidiary Carrying amount at the end of the year EDC 2021 $ 2020 $ 3,460,077 - - - 3,460,077 - 3,460,077 - The goodwill is attributable to the acquisition of the funds management business of Eildon Funds Management Limited on 17 November 2020. The acquisition price was based on an independent valuation prepared by Grant Thornton Australia Ltd on 8 October 2020. The recoverable amount of goodwill has been determined using the same metrics as the valuation report as following: – Discount cash flow model: growth rate 2.5% and discount rate 9.5% – 10.5%; – Earnings before interest and taxes multiple: 4.3 – 4.7x; and – Asset under management multiple: 1.7% – 2.3%. Directors are of the opinion that the relevant metrics are prudent and justified, given there was no significant change since the date of the valuation report. Goodwill is not deductible for tax purpose. NOTE 14: LEASES EDC currently leases the office it occupies. The lease agreement is for a fixed period of three and a half years, without any extension options. The lease agreement does not impose any covenants other than the security interest in the leased asset that is held by the lessor and the bank guarantee of $73,914 provided by EDC to the lender. Lease assets may not be used as security for borrowing purposes. Right-of-use assets Office lease Lease liabilities Current Non-current 281,857 - 82,686 - 201,595 - 284,281 - Additions to the right-of-use assets during the year ended 30 June 2021 were $295,719 and the total cash outflow for leases was $14,473. Depreciation charge of right-of-use assets Office lease 13,862 - No modification has been made to the lease for financial year 2021. 45 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 15: OTHER LIABILITIES Non-current 137,046 - 137,046 - The above liabilities relate to non-controlling interests in contributory investment trusts that EDC/ECT has assessed that they control and that the units issued in these funds meet the definition of a liability under AASB 132 Financial Instruments: Presentation rather than equity. NOTE 16: TRADE AND OTHER PAYABLES Current: Trade payables Sundry creditors and accruals Distribution payable 21,086 609,558 1,133,571 161,233 110,717 794,867 793 74,247 952,329 216,937 39,500 637,298 1,764,215 1,066,817 1,027,369 893,735 Trade and other payables are non-interest bearing and are generally on 30 day terms. 46 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 17: CONTRIBUTED EQUITY An agreement was signed on 18 March 2020 with 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. 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. Company Issued and paid up share capital: Ordinary shares fully paid Reconciliation: Balance at the beginning of the year Return of capital Issue of shares Transaction costs on share issued Shares bought back Transaction costs on share buyback Income tax on share transaction costs 2021 2020 Number of shares $ Number of shares $ 47,075,102 8,210,699 40,935,102 7,634,321 40,935,102 - 6,140,000 - - - - 7,634,321 - 600,166 (33,807) - (176) 10,195 45,483,392 - - - (4,548,290) - - 43,796,218 (35,349,693) - - (804,593) (10,873) 3,262 Balance at the end of the year 47,075,102 8,210,699 40,935,102 7,634,321 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. Trust Issued and paid up capital: Ordinary units fully paid Reconciliation: Balance at the beginning of the year Issue of units Transaction costs on units issued Units bought back Transaction costs on unit buyback 2021 2020 Number of units $ Number of units $ 47,075,102 42,693,983 40,935,102 37,285,986 40,935,102 6,140,000 - - - 37,285,986 5,724,033 (315,136) - (900) - 45,483,392 - (4,548,290) - - 41,530,887 (35,943) (4,153,043) (55,915) Balance at the end of the year 47,075,102 42,693,983 40,935,102 37,285,986 The Trust was incorporated on 6 May 2019. Foundation units were issued to Eildon Capital Limited for the purpose of settling the Trust, and were redeemed on 24 April 2020 as part of the restructure of the Trust. Ordinary units entitle the holder to participate in distributions and the proceeds on winding up the trust in proportion to the number of units held. 47 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements Company 2021 $ 2020 $ Trust 2021 $ 2020 $ NOTE 17: CONTRIBUTED EQUITY (CONT.) Net assets attributed to ordinary equity holder of the Company/Trust 8,898,281 7,307,485 43,123,127 37,287,469 Net assets per share attributed to ordinary equity holder of the Company/Trust 0.19 0.18 0.92 0.91 EDC 2021 $ 2020 $ Net assets attributed to stapled securityholders of EDC 52,021,408 44,594,954 Net assets per stapled security attributed to stapled securityholders of EDC (a) 1.11 1.09 (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 2021 financial year refers to net assets attributable to owners of the Company and owners of the Trust which represents the actual value attributable to stapled securityholders of EDC. EDC and ECT are not subject to any externally imposed capital requirements. Management’s objective is to achieve returns for stapled securityholders commensurate with the risks associated with making investments in Australia. Capital Risk Management EDC’s and ECT’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for securityholders/unitholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, EDC and ECT may adjust the amount of dividends/distributions paid to securityholders/unitholders, return capital to securityholders/unitholders, issue new stapled securities/units or sell assets to reduce debt. The capital risk management policy remains unchanged from the 30 June 2020 Annual Report. 48 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements Profit Distribution Reserve Company $ Trust $ Share-based Payment Reserve Company $ Trust $ Total Company $ Trust $ NOTE 18: OTHER RESERVES Balance as at 1 July 2019 9,872,860 Transfers (to)/from retained earnings Dividends/distributions paid (1,065,000) (8,807,860) Balance at 30 June 2020 Share-based payment expenses Balance at 30 June 2021 Profit Distribution Reserve - - - - - - - - - - - - - - - - - 9,872,860 (1,065,000) (8,807,860) - - - - - 8,237 40,373 8,237 40,373 8,237 40,373 8,237 40,373 Profits transferred to the profit distribution reserve are segregated to facilitate potential future dividend payments that may be declared by the directors. Share-based Payment Reserve Share-based payment reserve is used to recognise the value of equity settled share-based payments. NOTE 19: SHARE-BASED PAYMENTS On 1 February 2021, EDC issued employees performance rights under the EDC Employee Incentive Plan. The Employee Incentive Plan was approved by shareholders at the 2020 annual general meeting, and is designed to provide long-term incentives for senior managers and above to deliver long-term securityholder returns. Under the plan, participants are granted rights that deliver ordinary stapled securities to employees (at no cost) which only vest if certain performance hurdles are met. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Performance rights carry no dividend or voting rights or rights to participate in any other share/unit issue of EDC or any other entity. When exercisable, each performance right is entitled to receive one stapled security. The number of rights that vest depends on achieving certain performance hurdles in relation to: – Total Shareholder Return (TSR) TSR is calculated based on a combination of share price growth, dividends and distributions to securityholders. The percentage of Performance Rights subject to the TSR Hurdle that vest, if any, will be determined by the Director’s with reference to the below table. – Return on Assets (ROA) ROA is calculated on an annual basis, as earnings before interest and tax generated on average assets deployed. The percentage of Performance Rights subject to the TSR Hurdle that vest, if any, will be determined by the Director’s with reference to the below table. 50% Subject to a Total Security Holders Return Hurdle Return (p.a.) Vesting Amount < 8% 8% - 10% 10% - 12% >12% nil 50% 75% 100% 50% Subject to a Return on Assets Hurdle Return (p.a.) Vesting Amount < 12% 12% nil 50% 12% - 13.5% 50% - 100% >13.5% 100% 49 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 19: SHARE-BASED PAYMENTS (CONT.) The following table illustrates movements in the number of performance rights on issue during the year. Year ended 30 June 2021 Grant Date Vesting Date Exercise Price Balance at Start of the Year Granted During the Year Balance at End of the Year Value Per Right 1 Feb 2021 31 Jan 2024 - - 409,300 409,300 $0.87 The fair value of the rights at grant date was based on the following inputs: – Share price of $1.09 at grant date; – Share price of $1.03 which is based on placement in March 2021; – 2 cps distribution paid on a quarterly basis; – Net assets of $1.11 as at 31 January 2021; and – Vesting date of 31 January 2024. NOTE 20: FINANCIAL RISK MANAGEMENT EDC’s and ECT’s activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. EDC’s and ECT’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance. EDC and ECT use 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 and ECT. There have been no significant changes in the types of financial risks or EDC’s and ECT’s risk Management program (including methods used to measure the risks) since the prior year. 50 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 20: FINANCIAL RISK MANAGEMENT (CONT.) a) Interest rate risk EDC's and ECT’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date are as follows: EDC 2021 Financial assets Cash and cash equivalents Financial assets at amortised cost Financial liabilities Trade and other payables Other liabilities 2020 Financial assets Cash and cash equivalents Financial assets at amortised cost Financial liabilities Trade and other payables Weighted Average Interest Rate Note Floating Interest Rate $ Fixed Interest Rate 1 to 5 1 Year Years or Less $ $ Non- interest Bearing $ Total $ 9 10 16 15 9 10 16 0.1% 11,100,354 - 14.4% - 26,966,848 - 911,096 - 692,462 11,100,354 28,570,406 11,100,354 26,966,848 911,096 692,462 39,670,760 - 14% - - - - - - - 137,046 1,764,215 - 1,764,215 137,046 137,046 1,764,215 1,901,261 0.3% 14.4% 8,486,029 - - 19,915,799 - 10,949,440 - 51,307 8,486,029 30,916,546 8,486,029 19,915,799 10,949,440 51,307 39,402,575 - - - - 1,066,817 1,066,817 51 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 20: FINANCIAL RISK MANAGEMENT (CONT.) a) Interest rate risk (cont.) ECT 2021 Financial assets Cash and cash equivalents Financial assets at amortised cost Financial liabilities Trade and other payables Other liabilities 2020 Financial assets Cash and cash equivalents Financial assets at amortised cost Financial liabilities Trade and other payables Weighted Average Interest Rate Note Floating Interest Rate $ Fixed Interest Rate 1 to 5 1 Year Years or Less $ $ Non- interest Bearing $ Total $ 9 10 16 15 9 10 16 0.1% 13.6% 8,527,689 - - 26,892,934 - 5,112,638 - 36,611 8,527,689 32,042,183 8,527,689 26,892,934 5,112,638 36,611 40,569,872 - 14% - - - - - - - 137,046 1,027,369 - 1,027,369 137,046 137,046 1,027,369 1,164,415 0.3% 14.4% 7,308,276 - - 19,915,799 - 10,949,440 - 7,689 7,308,276 30,872,928 7,308,276 19,915,799 10,949,440 7,689 38,181,204 - - - - 893,735 893,735 EDC and ECT hold a significant amount of cash balances which are exposed to movements in interest rates. Given the low interest rate environment and the short-term funding requirements for investment opportunities, EDC/ECT accepts lower rates of interest in exchange for liquidity in relation to cash deposits. EDC/ECT typically deposits uncommitted cash with financial institutions with an “investment grade” credit rating of BBB or higher to maintain liquidity for any investment opportunity arises. EDC and ECT are not charged interest on outstanding trade and other payable balances. Sensitivity EDC and ECT expect that the Bank Bill Swap Rates (BBSW) to increase during the 2022 financial year by 0.5%. The impact at reporting date if interest rates increase by 0.5% (2021: interest rates stayed the same), whilst all other variables are held constant, is as follows: EDC Increase of 50 bp $ ECT Increase of 50 bp $ 34,296 34,296 29,523 29,523 2021 Net profit Equity movement 52 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements NOTE 20: FINANCIAL RISK MANAGEMENT (CONT.) (b) Credit risk exposure Credit risk refers to the loss that EDC and ECT would incur if a debtor or counterparty fails to perform under its obligations. EDC and ECT are 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 and ECT’s maximum exposure to credit risk at reporting date. EDC and ECT have a material credit risk exposure to the borrowers of funds, that represent the counterparties to financial instruments entered into by EDC and ECT. EDC and ECT manage the credit risk as follows: i) Cash deposits: This is mitigated by the requirement that deposits are only held with institutions with an “investment grade” credit rating of BBB or above. ii) Loans made to various entities: This is mitigated by collateral held with a value in excess of the counterparty’s obligations to EDC and ECT, providing a “margin of safety” against loss. In addition to mortgages being held, collateral includes guarantees, security deeds and undertakings which can be called if the counterparty is in default under the terms of the agreement. iii) Trade receivables: Trade receivables are mainly related to management of relevant loans to various entities. This is mitigated by collateral held with a value in excess of the counterparty’s obligations to EDC and ECT, providing a “margin of safety” against loss. (c) Liquidity risk Liquidity risk is the risk that EDC and ECT might be unable to meet its obligations. EDC and ECT manage liquidity risk by maintaining sufficient cash balances and holding liquid investments that could be realised to meet commitments. EDC and ECT continuously monitor actual and forecast cash flows and matches the maturity profiles of financial assets and liabilities. The following table details maturity profiles of EDC’s and ECT’s contractual liabilities. EDC ECT Less than 6 Months $ 6 Months to 1 Year $ 1 Year to 5 Years $ Total $ Less than 6 Months $ 6 Months to 1 Year $ 1 Year to 5 Years $ Total $ 2021 Trade and other payables 1,764,215 Lease liabilities 40,926 - 41,760 - 1,764,215 284,281 201,595 1,027,369 - Other liabilities (a) - - 137,046 137,046 - 2020 Trade and other payables 1,066,817 - - 1,066,817 893,735 - - - - - 1,027,369 - - 137,046 137,046 - 893,735 (a) Payments to unitholders of Eildon Debt Fund are matched with the cash flows of the repayment of specific loans classified as “Financial assets classified at amortised cost”. 53 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 20: FINANCIAL RISK MANAGEMENT (CONT.) (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 and ECT have 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. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Year ending 30 June 2021 Financial assets Financial assets at fair value through profit or loss Investments in unlisted entities Year ending 30 June 2020 Financial assets Financial assets at fair value through profit or loss Investments in unlisted entities EDC ECT Valuation Technique – Non Market Observable Inputs (Level 3) $ Valuation Technique – Non Market Observable Inputs (Level 3) $ 4,693,662 3,717,670 2,144,638 - 54 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 20: FINANCIAL RISK MANAGEMENT (CONT.) (d) Fair value of financial assets and liabilities (Cont.) Reconciliation of Level 3 fair value movements: Balance at the beginning of the year Purchases Sales Fair value movement 2,144,638 6,042,500 (2,181,736) (1,311,740) 12,487,808 6,201,397 (16,626,055) 81,488 - - 5,865,000 (2,181,735) 34,405 2,969,128 (2,994,845) 25,717 Balance at the end of the year 4,693,662 2,144,638 3,717,670 - Fair value movement attributable to assets held at the end of reporting period (1,311,740) 81,488 34,405 - 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 and recent arm’s length market transactions. Refer note 11. 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. Investments in unlisted entities EDC Favourable changes Unfavourable changes ECT Favourable changes Unfavourable changes Significant unobservable inputs Net Profit/(loss) 2020 $ 2021 $ Equity Increase/(Decrease) 2020 $ 2021 $ 469,366 (469,366) 214,464 (214,464) 469,366 (469,366) 214,464 (214,464) 371,767 (371,767) - - 371,767 - (371,767) - 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 Investments in unlisted entities Investments in unlisted entities Net asset backing Recent transactions Value per security Value per security Down 10% Down 10% Up 10% Up 10% 55 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 21: SEGMENTAL INFORMATION Information for each business segment of EDC and ECT is shown in the following tables. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. Description of each business segment is as follows: – Direct Property Investment involves direct exposure, including ordinary equity, preference equity, options to acquire an interest in direct property subject to planning outcomes; – Property backed lending comprises loans backed by underlying property assets; and – Funds Management includes activities that relate to the management of property investments, debt and unlisted funds. EDC and ECT operates predominantly in Australia. EDC 30 June 2021 Revenue Segment revenue Inter-segment revenue Corporate interest income Direct Property Investment $ Funds Management $ Property Backed Lending $ Eliminations $ Total $ 41,918 - 3,438,642 431,268 4,504,720 - - (431,268) 7,985,280 - 41,918 3,869,910 4,504,720 (431,268) 7,985,280 8,538 7,993,818 Share of profit of equity accounted associate 2,633,008 - - - 2,633,008 Results Segment profit Inter-segment profit Corporate expenses Income tax expenses Consolidated profit after tax Disaggregation of revenue Timing of revenue recognition At a point in time Over time Revenue from contracts with customers Other revenues 1,323,781 - 568,037 431,268 4,503,161 - - (431,268) 6,394,979 - 1,323,781 999,305 4,503,161 (431,268) 6,394,979 (1,007,569) (460,227) 4,927,183 - - - 41,918 2,548,393 833,556 3,381,949 56,693 - 40,992 40,992 4,463,728 - - - - - 2,548,393 874,548 3,422,941 4,562,339 7,985,280 Segment revenue 41,918 3,438,642 4,504,720 56 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements Direct Property Funds Investment Management $ $ Property Backed Lending $ Total $ EDC NOTE 21: SEGMENTAL INFORMATION (CONT.) 30 June 2020 Revenue Segment revenue Corporate interest income 520,994 Share of profit of equity accounted associate 1,653,058 Results Segment profit Corporate expenses Income tax expenses Profit after tax 2,174,052 - - - 5,546,525 6,067,519 72,498 6,140,017 - 1,653,058 5,546,525 7,720,577 (1,236,549) (1,753,575) 4,730,453 Revenue from contracts with customers was $95,976 for 2020 financial year and all of them were recognized over time. 57 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements Direct Property Funds Investment Management $ $ Property Backed Lending $ Total $ 9,145,857 3,460,077 30,021,700 42,627,634 11,100,354 1,891,499 55,619,487 - - 137,046 137,046 3,461,130 3,598,176 6,483,229 - 30,865,238 37,348,467 8,486,029 335,591 46,170,087 1,575,133 1,575,133 EDC NOTE 21: SEGMENTAL INFORMATION (CONT.) 30 June 2021 Assets Segment assets Unallocated amounts: Cash and cash equivalents Other assets Total assets Liabilities Segment liabilities Unallocated amounts: Other liabilities Total liabilities 30 June 2020 Assets Segment assets Unallocated amounts: Cash and cash equivalents Other assets Liabilities Unallocated amounts: Other liabilities Total liabilities 58 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements ECT NOTE 21: SEGMENTAL INFORMATION (CONT.) Direct Property Investment $ Property Backed Lending $ Total $ 30 June 2021 Revenue Segment revenue Corporate interest income Results Segment profit Corporate expenses Profit after tax Assets Segment assets Unallocated amounts: Cash and cash equivalents Other assets Total assets Liabilities Segment liabilities Unallocated amounts: Other liabilities Total liabilities 41,918 4,477,695 4,519,613 36,918 4,476,136 210,031 4,729,644 4,513,054 (625,211) 3,887,843 1,500,000 30,021,700 31,521,700 8,527,689 4,238,153 44,287,542 - 137,046 137,046 1,027,369 1,164,415 Revenue from contracts with customers was $13,967 for 2021 financial year and all of them were recognised over time. ECT operates in one business segment being property backed lending and in one geographical location being Australia during 2020 financial year. There was no revenue from contracts with customers during 2020 financial year. 59 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements NOTE 22: RELATED PARTY INFORMATION Parent entity CVC Limited is the ultimate parent entity. Subsidiaries Interest in subsidiaries are set out in note 2. Associates Interest in associates are set out in note 12. (a) Key management personnel Short-term employee benefits Post-employment benefits Share-based payments EDC 2021 $ 2020 $ 496,994 39,139 16,603 - 89,802 8,531 552,736 98,333 Details of remuneration disclosures are provided in the remuneration report. Key management personnel of ECT includes persons who were directors of Eildon Funds Management Limited at any time during the financial year. No remuneration was paid by ECT directly to key management personnel. (b) Performance rights On 1 February 2021, EDC issued employees performance rights under the Employee Incentive Plan. Refer note 19. The table below provides a reconciliation of performance rights held by Laurence Parisi. No performance rights have been issued to other key management personnel. Year ended 30 June 2021 Grant Date Vesting Date Exercise Price (cents) Balance at start of the year Granted during the year Balance at end of the year Value per right 1 Feb 2021 31 Jan 2024 - - 139,800 139,800 $0.87 Company 2021 $ 2020 $ Trust 2021 $ 2020 $ (c) Unsecured loan from/to stapled entity Loan from/(to) stapled entity Beginning of the year Loans advanced Interest charged End of the year - 4,000,000 201,542 4,201,542 - - - - - - (4,000,000) - (201,542) - (4,201,542) - The loan from/to stapled entity is for a period of 4 years. The loan attracts an interest rate of 8% per annum and is secured by all assets in the Company. 60 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Notes to the Financial Statements EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 22: RELATED PARTY INFORMATION (CONT.) (d) Transactions with related parties The following transactions occurred with related parties: Payment for management services provided by investment manager (a) Payment for services provided by subsidiary of the ultimate parent - Accounting fees - Key management personnel management fees (b) Received for services provided to subsidiaries of the ultimate parent - Loan management services - Project management services Distribution/Dividend paid to parent entity 301,578 783,116 610,537 102,516 310,597 201,771 - - 478,398 140,000 1,481,425 - - 4,252,098 - - - - - - - - 1,481,425 290,190 (a) On 17 November 2020, the Company acquired 100% of Eildon Funds Management Limited, the investment manager, and its controlled entities at which time it became a 100% subsidiary of EDC. Amounts disclosed for EDC 2021 financial year relates to the period of 1 July 2020 to 17 November 2020. (b) This relates to key management personnel services provided by Messer Avery, Hunter and Ms McLean. The following balances are outstanding at the reporting date in relation to transactions with related parties: Current receivables: Trade receivables from subsidiaries of the ultimate parent 248,108 - - - Current payables: Trade payables to investment manager (a) Distribution/dividend payables to parent entity (e) Performance fee - 377,066 135,128 290,190 - 377,066 102,516 290,190 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 total return to securityholders of EDC in excess of the 9% hurdle rate, after factoring in dividends and other distributions. Following the internalisation of Eildon Funds Management Limited on 17 November 2020, the performance fee (if any) is eliminated on consolidation. No performance fee is payable for 2021 and 2020 financial years. 61 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Notes to the Financial Statements EDC ECT 2021 $ 2020 $ 2021 $ 2020 $ NOTE 23: COMMITMENTS AND CONTINGENT LIABILITIES (a) Loans and other investments Amounts available to be drawn by borrowers under existing loan facility agreements: Unrelated entities 2,335,000 107,500 2,335,000 107,500 Amounts available to be called by investees for partially paid shares and units: Unrelated entities 1,235,654 1,235,654 - - (b) 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) Bank Guarantee (ii) EDC 2021 $ 869,400 73,914 - 2020 $ 869,400 (i) Guarantee provided by the Company to Australia and New Zealand Banking Group Limited as security for a loan facility in relation to a property held by one of the Company’s investment. (ii) Bank guarantee provided by a subsidiary of EDC to landlord for office lease. NOTE 24: SUBSEQUENT EVENTS The COVID-19 pandemic is still on-going, with asset markets experiencing significant volatility, as well as creating significant uncertainty regarding its economic impact. The increase in property prices have had a positive impact on the existing investment portfolio. 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 that the overall impact of Covid-19 is still unknown at this point. 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 2021. 62 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Directors’ Declaration In accordance with a resolution of the directors of Eildon Capital Limited and Eildon Funds Management Limited as Responsible Entity for Eildon Capital Trust (collectively referred to as the Directors), we state that: In the opinion of the Directors: (a) the financial statements and notes are in accordance with Corporations Act 2001, including: (i) giving a true and fair view of EDC’s and ECT’s financial position as at 30 June 2021 and of their 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 EDC and ECT 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 2021. Signed in accordance with a resolution of the Board of Directors. Dated at Sydney 24 August 2021. Mark Avery Director James Davies Director 63 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Independent Auditor’s Report To the Stapled Security holders of Eildon Capital Limited and Eildon Capital Trust, together Eildon Capital Group Report on the Audit of the Financial Report Opinion We have audited the financial report of the stapled entity Eildon Capital Group (“EDC” or the “Group”), comprised of Eildon Capital Limited “the Company” and Eildon Capital Trust “the Trust” and the entities they controlled, which comprises the consolidated statement of financial position as at 30 June 2021, 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 other explanatory information, and the director’s declaration on behalf of the Group. In our opinion, the accompanying financial report of the Group 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 2021 and of its financial performance for the year 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 Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those that, in our professional judgement, were of more 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, we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed the key audit matter Valuation of Financial Assets at Amortised Cost (Refer to Note 10 Financial Assets at Amortised Cost) Our procedures included, amongst others: – Obtaining and reviewing loan agreements and other supporting documentation to gain an understanding of the loans provided and any related secured assets provided as collateral; – Assessing compliance of management’s methodology for determining the provision for the allowance for expected credit losses with AASB 9; – Reviewing and challenging the key assumptions and significant estimates and judgements used by management in determining the recoverability of financial assets; and – Assessing the adequacy of disclosures in the financial statements. We focused our audit effort on the valuation of the Group’s Financial Assets at Amortised Cost as it is the largest asset of the Group and the assessment of recoverability requires significant judgement. As at 30 June 2021, the Group had Financial Assets at Amortised Cost of $28.6 million, including an allowance for expected credit losses of $nil. A significant portion of the balance relates to loans receivable provided to corporate entities associated with property development activities and asset backed finance lending. The Group applies the Expected Credit Loss (“ECL”) model under AASB 9 Financial Instruments. The assessment to determine the ECL for impairment of Financial Assets at Amortised Cost involves significant estimates and judgements by management, including both qualitative and quantitative assumptions. These include an assessment of the credit worthiness of the relevant counterparties, expected future collections, historical impairments and consideration of the estimated value of any secured assets provided as collateral. 64 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Valuation of Financial Assets at Amortised Cost (Refer to Note 10 Financial Assets at Amortised Cost) Independent Auditor’s Report Key Audit Matter How our audit addressed the key audit matter Acquisition of Eildon Funds Management (Refer to Note 2.2 Business Combination) During the year the Group acquired Eildon Funds Management (EFM) for an aggregate consideration of $4.0m. This was considered a significant transaction for the Group. Accounting for this transaction is a complex and judgemental exercise, requiring management to determine the fair value of acquired assets and liabilities, in particular determining the allocation of purchase consideration to goodwill and separately identifiable intangible assets. It is due to the relative size of the acquisition and the estimation process involved in accounting for it that this is a key audit matter. Our procedures included, amongst others: – Obtaining and reading the sale and purchase agreement to understand the key terms and conditions; – Assessing the scope, competence and objectivity of external valuation experts and management’s valuation assessments; – Assessing the accounting treatment of the transactions for compliance with AASB 3 Business Combinations; – Evaluating the appropriateness of assumptions and methodology in management’s calculations, including expert reports, used to determine the value of EFM’s identifiable intangible assets; and – Assessing the adequacy of disclosures in the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2021 but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially 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 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. 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. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: – Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 65 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021Independent Auditor’s Report Independent Auditor’s Report REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 17 of the Directors’ Report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Eildon Capital Group, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. John Gavljak Partner Pitch Partners Sydney 24 August 2021 Auditor’s Responsibilities for the Audit of the Financial Report (Cont.) – Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. – Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. – Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. – Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. – Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, 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. 66 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Corporate Governance Statement This Corporate Governance Statement, which has been approved by the Board, describes the corporate governance policies, framework and practices of Eildon Capital Group (ASX: EDC) (Group), which consists of Eildon Capital Limited (Company) and Eildon Capital Trust (Trust). Eildon Funds Management Limited (Manager) is a wholly-owned subsidiary of the Company and the responsible entity for the Trust. This Corporate Governance Statement is current as at 30 June 2021. 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 the Group is managed under the direction of the boards of the Company and the Manager (Board) which are responsible for its corporate governance. The Board comprises Mr Mark Avery, Mr James Davies and Ms Michelle Harpur. Mr Craig Treasure resigned from the Board on 29 June 2021. 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 the Group. The Board will seek to ensure that the investment strategy is aligned with the expectations of Securityholders and the Group 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: The Board has delegated responsibility for day-to-day management of the Group to the Managing Director and the Manager. Recommendation 1.2 - A listed entity should: (a) (b) undertake appropriate checks before appointing a person, or putting forward to securityholders a candidate for election as a director; and provide securityholders 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, the Group provides Securityholders 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 Group’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. – Set and review the strategic direction of the Group; Recommendation 1.5 - A listed entity should: – Approve all material transactions; (a) have and disclose a diversity policy; – Approve and monitor financial policies and financial (b) 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; and through its board or a committee of the board set measurable objectives for achieving gender diversity in the composition of its board, senior executives and workforce generally; (c) disclose in relation to each reporting period: (i) the measurable objectives set for that period to achieve gender diversity; (ii) the entity’s progress towards achieving those objectives; and – Ensure Securityholders receive high quality, relevant and (iii) either: accurate information on a timely manner. 67 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Corporate Governance Statement Principle 1 – Lay solid foundations for management and oversight (Cont.) – the Board to undertake a formal annual review of its overall effectiveness. Recommendation 1.5 (cont.): (A) the respective proportions of men and women on the board, in senior executive positions and across the whole workforce (including how the entity has defined “senior executive” for these purposes); or (B) 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. The Group’s approach to business promotes a culture of equal opportunity and has the core principles of meritocracy based on ability, fairness and equality. The Group does not discriminate on gender, race, religion or cultural grounds. The Board has adopted a diversity policy. The Board aims to: – promote the principles of merit and fairness when considering Board member appointments; and – recruit from a diverse pool of qualified candidates, seeking 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. The Board intends to set measurable objectives annually for achieving gender diversity, and will each year report the Group’s progress toward achieving them. Currently, 33% of the Board of EDC is represented by women. Further, EDC does not have any women appointed in senior management roles, and currently represent 14% of employees of the company. Recommendation 1.6 - A listed entity should: (a) (b) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and disclose for each reporting period whether a performance evaluation has been undertaken period in accordance with that process during or in respect of that period. 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 reviews its performance in terms of the Group’s objectives, results and achievements. The Board ensures each Director has the necessary skills, experience and expertise, and the mix remains appropriate for the Board to function effectively. 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, including as a result of the internalisation of the Manager and the additional responsibilities of the Board. 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 accordance with that process during or in respect of that period. Performance reviews for senior executives will take place at least annually. The Board intends to ensure the appropriate disclosures in the remuneration report are made in relation to each reporting period as to the performance evaluations that were undertaken and the process that was followed. Principle 2 – Structure the board to add value. The board of a listed entity should be of an appropriate size and collectively have the skills, commitment and knowledge of the entity and the industry in which it operates, to enable it to discharge its duties effectively and to add value 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 (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 68 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021 Corporate Governance Statement Principle 2 – Structure the board to add value (Cont.) – the candidate’s independence status, including the term of Recommendation 2.1 (cont.): (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 the Group, 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 Group’s policy is that the Board considers an appropriate mix of skills, experience, expertise and diversity (including gender diversity). 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; – the candidate’s knowledge of the industry in which the Group operates; – directorships previously held by the candidate and his/her current commitments to other boards and companies; – existing and previous relationships with the Group and Directors; Board of Directors’ Matrix 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 – requirements of the Corporations Act 2001, ASX Listing Rules, the Constitutions of the Company and the Trust and Board Charter. The Board seeks to ensure that: – its membership represents an appropriate balance between Directors with investment management and real estate industry experience and Directors with an alternative strategic perspective; and – the size of the Board is conducive to effective discussion and efficient decision-making. Under the terms of the Company’s Constitution: – 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 Finance Industry Knowledge Skill, Experience and Expertise g n i t n u o c c A l a i c n a n i F t i d u A & e e t t i m m o C t i d u A e c n e i r e p x E t n e m e g a n a M k s i R l a g e L y g e t a r t S e c n e i r e p x E d r a o B c i l b u P y c i l o P c i l b u P / y r o t a u g e R l s n o i t c a s n a r T y t r e p o r P t n e m e g a n a M y t r e p o r P e c n a i l p m o C l a g e L e c n a i l p m o C y r o t u t a t S 67% 67% 100% 100% 100% 100% 67% 100% 33% 100% 100% Recommendation 2.3 - A listed entity should disclose: (a) (b) the names of the directors considered by the board to be independent directors; 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 two Independent Directors: – James Davies; and – Michelle Harpur. 69 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Corporate Governance Statement Principle 3 – Instil a culture of acting lawfully, ethically and responsibly A listed entity should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly. Recommendation 3.1 - A listed entity should articulate and disclose its values. The Group’s values are: – integrity; – respect; – safe and non-discriminatory work environment; and – acting in a manner consistent with community standards. These values are set out in the Group’s Code of Conduct. Recommendation 3.2 - A listed entity should: (a) (b) have and disclose a code of conduct for its directors, senior executives and employees; and ensure that the board or a committee of the board is informed of any material breaches of that code. The Board has adopted a Code of Conduct which is disclosed on the Group’s website. It requires officers, employees, contractors, representatives, consultants and associates, and other persons that act on behalf of the Group to act honestly, in good faith, and in the best interests of the Group as a whole, whilst in accordance with the letter (and spirit) of the law. Recommendation 3.3 - A listed entity should: (a) have and disclose a whistleblower policy; and (b) ensure that the board or a committee of the board is informed of any material incidents reported under that policy. The Board has adopted a whistleblower policy which is disclosed on the Group’s website. Recommendation 3.4 - A listed entity should: (a) (b) have and disclose an anti-bribery and corruption policy; and ensure that the board or a committee of the board is informed of any material breaches of that policy The Board has adopted an anti-bribery and corruption policy which is disclosed on the Group’s website. Principle 2 – Structure the board to add value (Cont.) Recommendation 2.3 (cont.): James Davies and Michelle Harpur were appointed to the Board on 18 October 2016. Until his resignation on 29 June 2021, the Board had a third Independent Director, Mr Craig Treasure, who was appointed to the Board on 1 May 2020. 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 the Group’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 the Group’s accounts as required by law. If a Director’s independence status changes, this will be disclosed and explained to the market in a timely manner. 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; and – Mark Avery – Managing Director. The Board is currently considering future board composition and further recruitment in the short term, in light of the recent resignation of Independent Director, Mr Craig Treasure, on 29 June 2021. However, the Board continues to function with the current members, which comprises a majority of independent directors. 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 the Group. 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. 70 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Corporate Governance Statement Principle 4 – Safeguard the integrity of corporate reports A listed entity should have appropriate processes to verify the integrity of its corporate reports. 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; Its key responsibilities are to: – review and recommend to the Board the financial statements (including key financial and accounting principles adopted by the Group); – review and monitor risks and the implementation of mitigation measures for those risks as appropriate; – assess and recommend to the Board the appointment of external auditors and monitor the conduct of audits; – monitor the Group’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 (B) the relevant qualifications and experience of matters are dealt with expeditiously. 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: Ms Michelle Harpur (Chairperson), Mr James Davies and Mr Mark Avery. The majority of the Audit and Risk Committee are Non- executive Independent Directors, 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 Group employees or external party. Members may also meet with auditors (internal and/or external) without management 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 the Group. Attendance is recorded 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. Before the Board approves the Group’s financial statements, it receives declarations of the Managing Director and the CFO of the Manager that, in their opinion, the financial records of the Group 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 should disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor. The Group will disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor. 71 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Corporate Governance Statement 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. Recommendation 5.1 - A listed entity should have and disclose a written policy for complying with its continuous disclosure obligations under listing rule 3.1. The Board has adopted a Disclosure and Communications Policy which is disclosed on the Group’s website. The Board is committed to: – the promotion of investor confidence by ensuring that trading in the Group’s securities takes place in an efficient, competitive and informed market; – complying with the Group’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 the Group. The Company Secretary is responsible for coordinating the disclosure of information to Regulators and securityholders and ensuring that any notifications/reports to the ASX are promptly posted on the Group’s website. Recommendation 5.2 - A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made. The Group ensures that all Directors receive copies of all material market announcements promptly after they have been made. Recommendation 5.3 - A listed entity that gives a new and substantive investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation. The Group will ensure that if it gives a new and substantive investor or analyst presentation it will release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation. Principle 6 – Respect the rights of securityholders A listed entity should provide its securityholders with appropriate information and facilities to allow them to exercise their rights as securityholders effectively. Recommendation 6.1 - A listed entity should provide information about itself and its governance to investors via its website. Information about the Group and its corporate governance items are posted on its website at www.eildoncapital.com Recommendation 6.2 - A listed entity should have 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 the Group receive or obtain access to information publicly released. The Group’s primary portals are its website, Annual Report, Annual General Meeting, Half-Yearly Report, and notices to the ASX. The Board, with the assistance of the Company Secretary, oversees and coordinates the distribution of all information by the Group to the ASX, shareholders, the media and the public. All securityholders have the opportunity to attend the Annual General Meeting and ask questions of the Board. Recommendation 6.3 - A listed entity should disclose how it facilitates and encourages participation at meetings of securityholders. The Company holds an Annual General Meeting (“AGM”) of securityholders 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 securityholders 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. Securityholders 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 ensure that all substantive resolutions at a meeting of securityholders are decided by a poll rather than by a show of hands. The Group will ensure that all substantive securityholder resolutions are decided by poll. Recommendation 6.5 - A listed entity should give securityholders the option to receive communications from, and send communications to, the entity and its security registry electronically. The Group provides its securityholders with an electronic communication option. 72 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Corporate Governance Statement 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 the Group, 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 the Group. 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 that the entity is operating with due regard to the risk appetite set by the board; and (b) disclose, in relation to each reporting period, whether such a review has taken place. The Audit and Risk Committee reviews the Group’s risk management framework at least annually. 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 the Group, it does not have an internal audit function. The Group has an Audit and Risk Committee which considers material business risks. Recommendation 7.4 - A listed entity should disclose whether it has any material exposure to environmental or social 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. 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 securityholders. Recommendation 8.1 - The board of a listed entity should: (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 the Group, 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 is not remunerated by the Group. The Board also regularly considers the level and composition of remuneration of the Group’s employees. 73 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 Corporate Governance Statement Principle 8 – Remunerate fairly and responsibly (Cont.) 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 and other senior executives. 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 is not remunerated by the Group. Further information is provided in the Remuneration Report set out in the Directors’ Report. 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 (b) disclose that policy or a summary of it. The Group adopted an employee incentive plan at its 2020 annual general meeting. The Board has adopted a securities trading policy which restricts all directors, officers and employees of the Group from entering into hedging arrangements. 74 FOR THE YEAR ENDED 30 JUNE 2021EILDON CAPITAL GROUP | ANNUAL REPORT 2021Additional Information The following information was current as at 18 August 2021. Distribution schedule The distribution of stapled securityholders and their security holdings was as follows: Minimum Number of Stapled Security Holders Parcel Size Unmarketable parcels Minimum $500.00 parcel at $1.040 per stapled security 481 32 Category (Size of Holding) Number of Ordinary Stapled Security Shareholders Substantial holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – over Total 53 121 89 230 41 534 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 First Samuel Limited Chemical Overseas Limited 18,638,972 3,199,499 3,069,377 20 largest stapled securityholders - ordinary stapled securities As at 18 August 2021, the top 20 stapled securityholders and their holdings were as follows: Stapled Security Holder Stapled Securities Held % of Issued Capital Held CVC Limited First Samuel Limited Chemical Overseas Limited JKM Securities Pty Ltd Rubi Holdings Pty Ltd Miss Kate Imogen Leaver Fordholm Consultants Pty Ltd Buduva Pty Ltd Mr Hugh John Cameron + Mrs Heather Margaret Cameron Fifty-second Celebration Pty Ltd Geat Incorporated Buduva Pty Ltd Mr Robert Velletri + Mrs Francine Velletri Tyroc Pty Ltd JPR Holdings Pty Ltd Wilbow Group Pty Ltd Equitas Nominees Pty Limited Thirty-Fifth Celebration Pty Ltd T & M Properties Pty Limited Delta Asset Management Pty Ltd < Super Fund A/C> 18,638,972 3,199,499 3,069,377 2,046,500 2,000,000 662,026 500,000 490,000 484,861 450,000 400,000 350,000 337,676 324,570 308,144 300,000 297,753 295,395 288,144 260,000 34,702,917 39.59 6.80 6.52 4.35 4.25 1.41 1.06 1.04 1.03 0.96 0.85 0.74 0.72 0.69 0.65 0.64 0.63 0.63 0.61 0.55 73.72 Voting Rights The Company’s constitution details the voting rights of members and states that every member, present in person or by proxy, shall have one vote for every ordinary stapled security registered in his or her name. Registered Office 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 VIC 3000. 75 2021 ANNUAL REPORT | EILDON CAPITAL GROUPFOR THE YEAR ENDED 30 JUNE 2021 This page left blank intentionally. 76 EILDON CAPITAL GROUP | ANNUAL REPORT 2021PRINTED ON ECOSTAR 100% RECYCLED An environmentally responsible paper made Carbon Neutral and manufactured from 100% Post Consumer Recycled paper in a Process Chlorine Free environment under the ISO 14001 environmental management system. DESIGN - KETTLE OF FISH DESIGN MELBOURNE OFFICE Level 6 330 Collins Street Melbourne VIC 3000 P +61 3 7003 7622 SYDNEY OFFICE Level 40 1 Farrer Place Sydney NSW 2000 E info@eildoncapital.com W www.eildoncapital.com

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