Annual Report 2015
FINANCIAL CALENDAR
12 November 2015 Meeting of securityholders
December 2015
Estimated interim distribution announcement and
securities trade ex-distribution
February 2016
Interim results announcement
March 2016
June 2016
Interim distribution payment
Estimated final distribution announcement
and securities trade ex-distribution
August 2016
Full-year results announcement
September 2016
Final distribution payment
September 2016
Annual tax statement
MEETING OF SECURITYHOLDERS
The meeting of securityholders will be held at 10.00am (Sydney time) at Computershare,
Level 4, 60 Carrington Street, Sydney, NSW 2000, on 12 November 2015.
Contents
Highlights
Chairman’s Message
CEO’s Message
Annual Financial Report
Remuneration Report
Corporate Governance Statement
Securityholder Analysis
Corporate Directory
Responsible Entity
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3
5
7
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88
97
IBC
Elanor Funds Management Limited ABN 39 125 903 031. ASFL 398 196.
Elanor Investors Group comprises Elanor Investors Limited
(ABN 33 169 308 187) and Elanor Investment Fund (ARSN 169 450 926).
1
Highlights
OUR 2015
PERFORMANCE
HIGHLIGHTS
(For period 11 July 2014 to 30 June 2015)
INCREASE ON
IPO FORECAST OR POSITION
14.1¢
Core Earnings
(per Security)
+8.2%
11.9¢
Distributions
(per Security)
+1.7%
$1.70
Security Price at
30 June 2015
+36.0%
GROWING OUR
FUNDS UNDER
MANAGEMENT
$346 m
at 30 June 2015
+$259m
STRONG
BALANCE
SHEET
$1.38
Net Asset Value
(per Security)
+24.3%
2
Elanor Annual Report 2015 Chairman’s Message
3
Chairman’s Message
Paul Bedbrook
Independent Chairman
On behalf of the Board, I am pleased to present Elanor Investors Group’s Annual Report, including its Financial Statements, for
the period ended 30 June 2015.
ACHIEVEMENTS
The period from listing on 11 July 2014 to 30 June 2015 represents our inaugural reporting period. It has been a successful year,
in terms of both achieving solid financial results for our securityholders and significantly growing our funds under management.
Key outcomes and achievements are highlighted below.
Financial Results
• Core earnings were 14.1 cents per stapled security. This exceeded our PDS and Prospectus forecast of 13.0 cents by 8.2%.
• Distributions for the period ended 30 June 2015 of 11.9 cents per stapled security exceeded our PDS and Prospectus forecast
of 11.7 cents by 1.7%.
• Net asset value per security at financial year end was $1.38, a 24.3% increase from listing.
Funds under Management
• We have increased funds under management by $259 million to $346 million since listing in July 2014.
• New syndicates were established during the year to acquire Auburn Central shopping centre in Auburn for $68 million, the
Bell City complex in Melbourne for $143 million and City Hotel in Clarence Street, Sydney for $21 million.
Acquisitions and Co-investments
• Albany Hotel was acquired for $5 million and in keeping with our strategy of co-investing alongside our capital partners,
co-investments were made in the Bell City Syndicates ($12 million, 17%), 193 Clarence Hotel Syndicate ($1.1 million, 10%)
and Auburn Central Syndicate ($0.6 million, 2%).
Capital Management
• ENN undertook an equity raising of $13.6 million in December 2014 via an institutional placement of $12.6 million and
a security purchase plan of $1.0 million. These funds, net of raising costs, were used to fund the co-investment in the
Bell City Syndicates.
• During the year we have maintained conservative gearing levels in line with PDS and Prospectus guidance.
GOVERNANCE AND STAKEHOLDER COMMUNICATIONS
The Board continues to focus on the Group’s corporate governance structure and processes, aligning with the strategic focus
and activities of the Group.
Communication with the market has been a focus following the release of our financial results. This will remain a focus as the
Group continues to grow.
ACKNOWLEDGEMENTS
I wish to thank my fellow Board members, our executive management team and our staff, both at Group level and at each of our
investments, for their hard work, dedication and enthusiasm.
Finally, thank you to all ENN securityholders for their continued support and confidence.
Yours sincerely,
Paul Bedbrook
Chairman, Elanor Investors Group
4
Elanor Annual Report 2015 CEO’s Message
5
CEO’s Message
Glenn Willis
Managing Director and Chief Executive Officer
I am pleased to present Elanor Investors Group’s annual report for its first reporting period.
We have exceeded our PDS and Prospectus forecasts for all key financial objectives. Our core earnings per security of 14.1 cents
exceeded our PDS and Prospectus forecast by 8.2%. Distributions per security were 11.9 cents for the period. Particularly pleasing
has been the growth in funds under management since listing by $259 million to $346 million as at 30 June 2015.
STRATEGY
The key strategic objective of the Group is to grow funds under management by identifying and originating investments that
deliver strong performance for both Elanor funds management capital partners and securityholders. We seek to co-invest
with our capital partners in funds managed by Elanor for both strategic and alignment purposes. We also originate and hold
investments on balance sheet for future co-investment by external capital partners.
FUNDS MANAGEMENT
Our key strategic objective is to grow funds under management. During the year we established new syndicates that acquired a
Melbourne hotel, budget accommodation and serviced office complex (Bell City Syndicates), a Sydney CBD hotel (193 Clarence
Hotel Syndicate) and a Sydney sub-regional shopping centre (Auburn Central Syndicate). Each of these assets are strongly cash
generative and provided opportunities for both operational improvement and capital uplift. ENN has co-invested alongside our
capital partners in each of these syndicates.
In August 2015 we exchanged an unconditional contract with a publicly listed REIT for the sale of the Griffin Plaza shopping
centre in Griffith, NSW, for $23.5 million. This transaction highlights our ability to produce strong returns for our managed fund
investors, with an IRR on Griffin Plaza Syndicate of 26%. As a result of this strong return, ENN will receive a performance fee upon
the completion of the sale of the investment.
We are well positioned for further growth, and whilst prevailing market conditions for “value” investors are more challenging, our
pipeline is encouraging.
INVESTMENT PORTFOLIO
Our investment portfolio consists of assets that provide opportunities for future co-investment by external capital partners and
co-investments in syndicates managed by the Group.
Since listing, our investment portfolio has increased by $32 million from $86 million to $118 million. This primarily reflects an
$11 million valuation uplift across our Hotel, Tourism and Leisure portfolio, co-investments during the period of $14 million and
the acquisition of Albany Hotel for $5 million in November 2014.
Our investment portfolio includes approximately 26,000 square metres of land located at Merrylands, NSW, the majority of
which was acquired as part of the John Cootes Furniture acquisition. We continue to be encouraged by the residential and mixed
use real estate development potential of this site. Considerable work has been undertaken to assess the most appropriate
options for the site to maximise value for ENN securityholders. We anticipate being able to report further progress in relation to
this asset during the current financial year.
CAPITAL MANAGEMENT
In December 2014 we strengthened our balance sheet with the issue of 9.8 million stapled securities at a issue price of
$1.38 under a Placement and Security Purchase Plan. The equity raised was used to fund our $12 million co-investment in the
Bell City Syndicates.
Gearing remains conservative at 18.8%. Our intention is to remain conservatively geared while maintaining borrowing capacity to
take advantage of asset valuation cycles.
OUTLOOK
We continue to be focussed on growing funds under management – our key strategic priority. Co-investment with our
capital partners in new funds management opportunities remains a priority for the Group. During the current year we will
continue to evaluate the opportunity to provide co-investment opportunities to external capital partners in certain investment
portfolio assets.
Based on the current operating performance of our assets and pipeline of potential funds management opportunities, we
anticipate continued growth in core earnings and distributions in the current financial year.
Kind Regards,
Glenn Willis
Managing Director and Chief Executive Officer
6
Elanor Annual Report 2015 Annual Financial Report
7
Annual Financial Report
Elanor Investors Group
elanorinvestors.com
Elanor Investors Group
(Comprising the stapling of units in Elanor Investment Fund (ARSN 169 450
926) and ordinary shares in Elanor Investors Limited (ABN 33 169 308 187))
Annual Financial Report
for the year ended 30 June 2015
8
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
TABLE OF CONTENTS
Directors Report to Stapled Security Holders
Auditors Independence Declaration
Consolidated Statements of Profit or Loss
Consolidated Statements of Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the financial statements
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3
4
5
6
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8
9
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Summary of significant accounting policies
Revenue from operating activities
Income tax expense
Distributions
Auditor's Remuneration
Earnings / (losses) per stapled security
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Deferred taxes
Property, plant and equipment
Investment properties
Inventories
Equity accounted investments
Goodwill and intangible assets
Provisions
Other current liabilities
Payables
Interest bearing liabilities
Contributed equity
Reserves
Retained profits / (accumulated losses)
Business combinations
Financial risk management
Fair value measurement
Net tangible assets
Segment information
Contingent liabilities and commitments
Related party disclosures
Share-based payments
Events occuring after reporting date
Notes to the consolidated statement of cash flows
Commitments
Parent entity
Subsidiaries
Directors' declaration to stapled security holders
Independent auditor's report to members of Elanor Investors Group
10
24
25
26
27
28
29
30
41
41
42
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43
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43
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9
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
Directors’ report
The Director's of Elanor Funds Management Limited (Responsible Entity or Manager), as responsible entity of
the Elanor Investment Fund and the Directors of Elanor Investors Limited (Company) present their report
together with the consolidated annual financial report of Elanor Investors Group (Group or Consolidated
Group) and the consolidated annual financial report of the Elanor Investment Fund (EIF Group) for the full year
ended 2015 (period).
The annual financial report of Elanor Investors Group comprises the Company and its controlled entities,
including Elanor Investment Fund (Trust) and its controlled entities. The annual financial report of the EIF
Group comprises Elanor Investment Fund and its controlled entities.
Elanor Investors Limited is a company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is Level 26, 135 King Street, Sydney NSW 2000.
The Trust was registered as a managed investment scheme on 21 May 2014 and the Company was
incorporated on 1 May 2014.
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the
Group. The Group's securities are traded on the Australian Securities Exchange (ASX: ENN), having listed on
11 July 2014. The units of the Trust and shares of the Company cannot be traded separately and can only be
traded as stapled securities. Although there is no ownership interest between the Trust and the Company, the
Company is deemed to be the parent entity of the Group under Australian Accounting Standards.
The Directors' report is a combined Directors' report that covers both the Company and the Trust. The
financial information for the Group is taken from the consolidated financial reports and notes.
1. Directors
The following persons have held office as Directors of the Responsible Entity and the Company during the
period and up to the date of this report:
Paul Bedbrook (Chairman)
Glenn Willis (Managing Director and Chief Executive Officer)
Nigel Ampherlaw (Director)
William Moss (Director)
2. Principal activities
The principal activities of the Group are the management of investment funds and syndicates and the
investment in, and operation of, a portfolio of investment assets and businesses.
3. Distributions
Distributions relating to the year ended 30 June 2015 comprise:
Distribution
Interim Distribution
Amount paid (cents per stapled security)
Payment Date
Final Distribution
Amount payable (cents per stapled
Payment Date
Year Ended 30
June 2015
5.20
27 February 2015
6.70
11 September 2015
10
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
3. Distributions (continued)
A provision for the Final Distribution has not been recognised in the consolidated financial statements at 30
June 2015 as the distribution had not been declared at the reporting date. The Final Distribution will bring
distributions in respect of the year ended 30 June 2015 to 11.90 cents per stapled security.
4. Operating and financial review
Overview and strategy
The key strategic objective of Elanor is to grow funds under management by identifying and originating
investments that deliver strong performance for both Elanor security holders and Elanor funds management
capital partners. Elanor seeks to co-invest with its capital partners in funds managed by Elanor for both
strategic and alignment purposes.
Investments are also originated and held on balance sheet where they provide opportunities for future co-
investment by external capital partners.
Elanor’s core sectors focus is in hotels, tourism and leisure and real estate. In addition, special situations
investments incorporate assets that are high yielding and exhibit strong real estate backing that may fall
outside of the sectors in which the Group currently focuses.
During the year Elanor increased assets under management from $86.9 million to $346.4 million. Co-
investments of $14.0 million were made in new funds under management and Ibis Styles Albany Hotel was
purchased for $5.0 million.
The Group strengthened its balance sheet during the year by an institutional placement and security purchase
plan that raised $13.2 million net of issue costs.
Elanor is well positioned for growth. Whilst prevailing market conditions for “value” investors are more
challenging, the Group's pipeline is encouraging.
Managed Funds and Investment Portfolio
The following tables show the Group's managed funds and investment portfolio
Managed Funds
Funds
Location
Type
Manning Mall Syndicate
Taree, NSW
Sub-regional shopping centre
Gross Asset
Value
$'m
38.0
Griffin Plaza Syndicate
Super A Mart Auburn
Syndicate
John Cootes Diversified
Property Fund
Griffith, NSW
Neighbourhood shopping centre
18.2
Auburn NSW
Penrith, Yennora and
Tuggerah, NSW
Retail warehouse
Two retail showrooms and one
warehouse
21.1
12.4
Additions since Initial Public Offering
193 Clarence Hotel Syndicate
Sydney, NSW
Hotel
23.4
Bell City Syndicates (4)
Preston, VIC
Hotel, budget accommodation and
commercial complex
159.3
Auburn Central Syndicate
Auburn NSW
Sub-regional shopping centre
74.0
Total Managed Funds
346.4
11
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Investment Portfolio
Asset
Location
Type of
Operating
Business
Valuation
$'m
Hotels Tourism and Leisure
Peppers Cradle Mountain Lodge
Cradle Mountain National
Park, TAS
Hotel
37.0
Featherdale Wildlife Park
Sydney, NSW
Wildlife Park
15.0
Hotel Ibis Styles Canberra Eaglehawk
Canberra, ACT
Mantra Wollongong Hotel
Wollongong, NSW
Additions since Initial Public Offering
Hotel
Hotel
17.7
8.5
Hotel Ibis Styles Albany
Albany, WA
Hotel
5.3
Special Situations Investments
Costs $'m
John Cootes Furniture
Operates from 4 sites;
Merrylands, Penrith,
Yennora and Tuggerah (all
NSW)
Merrylands Property
Merrylands, NSW
Furniture retailer
Property
associated with
John Cootes
7.0
13.7
Additions since Initial Public Offering
Managed Fund Co -Investments
193 Clarence Hotel Syndicate
Bell City Syndicates (4)
Auburn Central Syndicate
Total Investment Portfolio
Sydney, NSW
Preston, VIC
Equity
Accounted
$'m
1.2
12.2
0.6
118.2
Note 1: All owner occupied properties in the Hotel, Tourism and Leisure business are held for use by the
Group for the supply of services and are classified as land and buildings and stated at fair value.
Note 2: The John Cootes Furniture business is a wholly owned subsidiary of the Company and accounted for
using the basis of consolidation.
Note 3: The Merrylands property is stated at cost.
Note 4: Managed Fund Co-Investments are associated and accounted for using the equity method.
Review of financial results
The Group recorded a statutory profit after tax of $2.7 million for the year ended 30 June 2015, after $4.8
million of transaction and establishment costs associated with the establishment and listing of ENN in July
2014.
Core or Distributable earnings were $9.3 million or 13.23 cents per stapled security and 14.07 cents per
weighted average stapled security on issue during the year. A Final Distribution of 6.70 cents per stapled
security has been declared for the six months ended 30 June 2015 (90% pay-out ratio on Core Earnings).
Core Earnings is considered more relevant than statutory profit as it represents an estimate of the underlying
recurring cash earnings of the Group, and has been determined in accordance with ASIC Regulatory Guide
230.
12
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Review of financial results (continued)
A summary of the Group and EIF Group's results for the half year period is set out below:
Net profit/(loss) after tax ($'000)
Core Earnings ($'000)
Distributions payable to security holders ($'000)
Core Earnings per stapled security (cents)
Core Earnings per weighted average stapled security (cents)
Distributions (cents per unit)
Net tangible assets ($ per stapled security)
Consolidated
Group
30 June
2015
EIF Group
30 June
2015
2,720
9,344
8,409
13.23
14.07
11.90
1.27
15,061
7,116
6,404
10.07
10.72
9.07
0.82
The table below provides a reconciliation from statutory net profit / (loss) after tax to distributable Core Earnings:
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
Note
Net profit/(loss) after tax (statutory)
2,720
15,061
Adjustments for items included in statutory
profit/(loss)
Transaction, establishment costs and fair
value decrements
Building depreciation expense
Fair value adjustments on investment property
Increase in equity accounted investments to reflect
distributions received/receivable
Amortisation of intangibles
Tax adjustments
Core Earnings
5
4
3
2
1
4,843
1,063
-
461
150
107
9,344
1,297
-
(9,703)
461
-
-
7,116
Note 1: Core Earnings has been determined in accordance with ASIC RG230 and represents the Directors
view of underlying earnings from ongoing operating activities for the period, being net profit / (loss) after tax,
adjusting for one-off realised items (being formation or other transaction costs that occur infrequently or are
outside the course of ongoing business activities), non-cash items (being fair value movements, depreciation
charges on the buildings held by the Trust and amortisation of intangibles) and restating share of profit from
equity accounted investments to reflect distributions received / receivable in respect of those investments and
for a one-off tax charge not related to the reporting period.
Note 2: Income tax expense for the period has been adjusted for a one-off item relating to the write-off of a
deferred tax asset of a subsidiary at acquisition.
13
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Review of financial results (continued)
Note 3: Share of profit from equity accounted investments includes depreciation and amortisation that were
added back in the determination of distributable earnings from those managed funds. The Group’s share of
those adjustments to distributable earnings in the relevant managed funds have been added back for the
purposes of calculating Core Earnings so that the Group’s Core Earnings reflects the distributions received /
receivable by the Group from those investments in Elanor managed funds.
Note 4: During the period the Group incurred total depreciation charges of $2.303 million, however only the
depreciation expense on buildings of $1.063 million has been added back for the purposes of calculating Core
Earnings.
Note 5: Transaction and establishment costs incurred by the Group through profit and loss relate to the
establishment and listing of the Group in July 2014, and are adjusted for subsequent revaluation increments
during the period through profit and loss. These costs are:
Consolidated
Group
30 June
2015
$'000
1,356
2,232
2,528
(1,273)
4,843
EIF Group
30 June
2015
$'000
783
1,569
1,324
(2,379)
1,297
Stamp duty and registration costs
Acquisition costs including advisers and consultants fees
Listing related costs
Revaluation adjustments
Transaction and establishment costs
Review of operational results
The Group is organised into four divisions by business type.
Funds Management manages third party owned investment funds and syndicates.
Hotel, Tourism and Leisure originates investment and fund management assets. The current investment
portfolio includes Peppers Cradle Mountain Lodge, Featherdale Wildlife Park, Ibis Styles Canberra Eaglehawk
Hotel, Mantra Wollongong Hotel and Ibis Styles Albany Hotel along with co-investment in 193 Clarence Hotel
syndicate and four Bell City syndicates. Hotel, Tourism and Leisure also manages these syndicates.
Real Estate originates investment and fund management assets. The current investment portfolio comprises
an investment in Auburn Central syndicate. Real Estate manages Manning Mall, Griffin Plaza, Super A Mart
Auburn, John Cootes Diversified Property and Auburn Central syndicates.
Special Situations Investments contains the John Cootes Furniture business and the property associated with
John Cootes Furniture business at Merrylands, NSW.
14
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Review of operational results (continued)
The performance of the Group, as represented by the aggregate results of its operations for the period, was as
follows:
Consolidated Consolidated
Group
Segment
EBITDA
30 June
2015
$'000
Group
Segment
Revenues
30 June
2015
$'000
4,902
32,871
6
19,653
748
58,180
Funds Management
Hotels, Tourism and Leisure
Real Estate
Special Situations Investments
Other
Total Segment Revenue and EBITDA
Unallocated Corporate Costs
Group EBITDA
Depreciation and amortisation
Group EBIT
Borrowing Costs
Group EBT and Extraordinary Items
Transaction and establishment costs
Group Net profit / (loss) before income tax
Income tax benefit
Group Net profit / (loss) after income tax
Core Earnings
For further information on the segment performance, please see Note 27 to the consolidated financial
statements.
Funds Management
The performance of the Funds Management business is summarised as follows:
Operating Performance
Total Revenue
EBITDA
Operating margin
Funds under Management
Funds under Management at listing
Increase in value of funds under management at listing
New funds
Total
4,478
9,068
6
1,843
-
15,395
(3,405)
11,990
(2,453)
9,537
(1,397)
8,140
(4,843)
3,297
(577)
2,720
9,344
2015
$'000
4,902
4,478
91.4%
2015
$'m
86.7
3.0
256.7
346.4
15
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Review of operational results (continued)
The level of growth in funds under management during the year has been positive. The Group established
three new syndicates or syndicate groups during the year being 193 Clarence Hotel (Sydney CBD hotel), Bell
City (hotel, budget accommodation and commercial complex in Preston, VIC) and Auburn Central (sub-
regional shopping centre in Auburn, NSW).
During the year the Group strengthened its internal asset management and investment management
capabilities and deepened its capital partner base to support the Group’s strategic focus to deliver growth in
funds under management and the performance of assets under management.
Hotel, Tourism and Leisure
The performance of the Hotels, Tourism and Leisure business is summarised as follows:
Total Revenue
EBITDA
Operating margin
2015
$'000
32,871
9,068
27.6%
Hotel, Tourism and Leisure contains a portfolio of hotel and leisure properties including Peppers Cradle
Mountain Lodge, Featherdale Wildlife Park, Ibis Styles Canberra Eaglehawk Hotel, Mantra Wollongong Hotel
and Ibis Styles Albany Hotel. Ibis Styles Albany Hotel was acquired during the year.
The Directors have determined to obtain external valuations for most of the property portfolio as at 30 June
2015. The table below sets out the assessed value of each property at 30 June 2015 compared to the
assessed value at the date of listing, or subsequent date of acquisition. This shows that the Group’s Hotel,
Tourism and Leisure properties have increased in value during the year by $11.4m to $83.5m.
Valuation of Properties
Peppers Cradle Mountain Lodge
Featherdale Wildlife Park
Ibis Styles Canberra Eaglehawk Hotel
Mantra Wollongong
Ibis Styles Albany Hotel
Total
Listing or
subsequent
value
$'m
29.0
13.0
17.7
7.1
5.3
72.1
2015
$'m
37.0
15.0
17.7
8.5
5.3
83.5
The Hotels, Tourism and Leisure business also includes equity accounted investments reflecting the Group’s
co-investment with its capital partners in 193 Clarence Hotel syndicate (October 2014) and Bell City
syndicates (December 2014). The equity accounted share of profit of these investments was $0.1 million with
distributions received or receivable for the year totalling $0.6 million.
Real Estate
Real Estate comprises an equity accounted investment in the Auburn Central syndicate. This investment was
made in May 2015.
16
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
4. Operating and financial review (continued)
Review of operational results (continued)
Special Situations Investments
The performance of the Special Situations Investments business is summarised as follows:
Total Revenue
EBITDA
Operating margin
2015
$'m
19,653
1,843
9.4%
Special Situations Investments contains the John Cootes Furniture business and the property associated with
John Cootes Furniture business at Merrylands.
During the first half of the year the John Cootes Furniture business experienced some challenges related to
the transitioning of the business. In the later part of the year new stores were opened in Bathurst,
Campbelltown and Taree. Trading at each of these locations has been promising and they are expected to
make a positive contribution to the future performance of the business.
On 27 July 2015 the John Cootes Furniture warehouse in Orchardleigh Street, Yennora sustained major
damage as a result of a fire. The entire contents of the building, primarily stock and plant and equipment of the
John Cootes Furniture business were destroyed and the building was unable to be recovered. The warehouse
building is owned by the John Cootes Diversified Property Syndicate, a managed investment scheme
managed by the Group. The property is fully insured, and the required business interruption insurances are
also in place. The Group is actively working with the insurers in relation to the claims, however, the financial
impact of the fire is yet to be determined. The insurers have provided a progress payment of $2.5 million in
respect of the loss of stock, plant & equipment and business interruption. Operationally, the John Cootes
Furniture business has obtained temporary warehouse facilities, and significant re-ordering of stock has also
occurred.
Substantial work has been carried out in exploring the significant development potential for the Merrylands
site. This work is continuing.
Summary and Outlook
The Group's core strategy will remain focussed on growing earnings from the funds management business
and actively managing its investment portfolio. The Group has a number of funds management opportunities
under consideration, with a particular focus on the real estate and hotels, tourism and leisure sectors. The
Group will look to increase income from managed funds, seed new managed funds with Group owned
investments, and continue to co-invest with external capital partners.
Risks to the Group in the coming year primarily comprise potential earnings variability associated with general
economic and market conditions including inbound tourism and domestic retail spending, the availability of
capital for funds management opportunities, and any movement in property valuations. The Group manages
these risks through its active asset management approach across its investment portfolio, continuing to focus
on broadening the Group's capital partner base, and through the active management of the Group's capital
structure.
Based on the current operating performance of the investment portfolio and the pipeline of potential funds
management opportunities, the Group anticipates continued growth in Core Earnings in the year ahead.
17
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
5. Value of assets
Value of total assets
Value of net assets
6. Interests in the Group
Group
30 June
2015
$'000
135,650
97,437
EIF Group
30 June
2015
$'000
91,100
57,884
During the year the Group conducted an institutional placement of 15% (9.12 million) of securities on issue
and issued a securities purchase plan (0.725 million securities). The net proceeds, after capitalised issue
costs, of $13.2 million were primarily utilised to fund the Group’s $12.0 million co-investment in the Bell City
syndicates. The remainder of the proceeds were used to retire debt.
The movement in stapled securities of the Group during the period is set out below:
Stapled securities on issue at the beginning of the period
Stapled securities issued for business acquisitions through Institutional Placement
Stapled securities issued for Security Purchase Plan
Stapled securities on issue at the end of the period
Group
30 June
2015
$'000
60,800
9,120
725
70,645
7. Directors
The following persons have held office as Directors of the Responsible Entity and the Company during the
period and up to the date of this report:
Name
Paul Bedbrook
Particulars
Independent Non-Executive Chairman
Paul was appointed a Director of both the Company and the Manager in June
2014. Paul has had a career of over 30 years in financial services, originally
as an analyst, fund manager and then the GM & Chief Investment Officer for
Mercantile Mutual Investment Management Ltd (ING owned) from 1987 to
1995. Paul was an executive for 26 years with the Dutch global banking,
insurance and investment group, ING, retiring in 2010. Paul’s career included
the roles of: President and CEO of ING Direct Bank, Canada (2000 – 2003)
and Regional CEO, ING Asia Pacific, Hong Kong (2008 – 2010). Paul is
currently the Chairman of Zurich Financial Services Australia and its Life,
General and Investment Companies, a non-executive director of Credit Union
Australia, and the National Blood Authority. He is also Chairman of Disability
Sports Australia.
Former listed directorships in the last three years: None
Interest in stapled securities: 254,847
Qualifications: B.Sc, F FIN, FAICD
18
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
7. Directors (Continued)
Glenn Willis
Managing Director and Chief Executive Officer
Glenn was appointed a Director of both the Company and the Manager in
June 2014. Glenn has extensive industry knowledge with over 25 years’
experience in the Australian and international capital markets.
Glenn was most recently co-founder and Chief Executive Officer of Moss
Capital. Prior to Moss Capital, Glenn co-founded Grange Securities and led
the team in his role as Managing Director and CEO. Grange Securities was a
pre-eminent Australian owned investment bank with businesses in fixed
income, equities, corporate finance and funds management. Grange
Securities grew to be Australia’s major independent fixed income house.
After 12 years of growth, Grange Securities, a business with approximately
150 personnel, was acquired by Lehman Brothers International in 2007, as the
platform for Lehman’s Australian investment banking and funds management
operations. Glenn was appointed Managing Director and Country Head in
March 2007. In 2008, Glenn was appointed executive Vice Chairman of
Lehman Brothers Australia.
Glenn previously held senior positions at Fay Richwhite and Challenge Bank.
Former listed directorships in the last three years: None
Interest in stapled securities: 5,600,002
Qualifications: B.Bus (Econ & Fin)
Nigel Ampherlaw
Independent Non-Executive Director
Chairman, Audit Risk and Compliance Committee
Nigel was appointed a Director of both the Company and the Manager in June
2014. Nigel was a Partner of PricewaterhouseCoopers for 22 years where he
held a number of leadership positions, including heading the financial services
audit, business advisory services and consulting businesses. He also held a
number of senior client Lead Partner roles. Nigel has extensive experience in
risk management, technology, consulting and auditing in Australia and the
Asia-Pacific region.
Nigel’s current Directorships include a non-executive Director with Credit
Union Australia, where he is Chair of the Audit Committee and a member of
the Risk and Remunertion Committees, non executive director of Quickstep
Holdings Ltd where he is Chair of the Audit and Risk Committee and non-
executive Director of the Australia Red Cross Blood Service, where he is a
member of the Finance and Audit Committee and a member of the Risk
Committee. Nigel has also been a member of the Grameen Foundation
Australia charity board since 2012.
Former listed directorships in the last three years: None
Interest in stapled securities: 159,694
Qualifications: B.Com, FCA, MAICD
19
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
7. Directors (Continued)
William (Bill) Moss AO
Non-Executive Director
Chairman, Remuneration and Nominations Committee
Bill was appointed a Director of both the Company and the Manger in June
2014. Bill is an Australian businessman and philanthropist with expertise in
real estate, banking, funds and asset management.
Bill spent 23 years as a senior executive and Executive Director with
Macquarie Group, the pre-eminent Australian investment bank, where Bill
managed the Global Banking and Real Estate businesses. Bill founded, grew
and led Macquarie Real Estate Group to a point where it managed over $23
billion worth of investments around the world.
Bill is Chairman of Moss Capital and Chairman and Founder of The FSHD
Global Research Foundation.
Bill is a commentator on the Australian finance and banking sectors, the global
economy and the ongoing need for Australia to do more to advance the
interests of the country’s disabled and disadvantaged.
In 2015, Bill was awarded one of Australia’s highest honours, Office of the
Order of Australia (AO), for services to the banking, charity, and finance
sectors.
Former listed directorships in the last three years:
Energy Action Limited – Non Executive Director (Resigned 30 June 2012)
Exalt Resources Limited – Non Executive Director (Resigned 2 September
2013)
Interest in stapled securities: 4,620,051
Qualifications: B.Ec
8. Directors' relevant interests
Name
Number of
stapled securities
at 1 July 2014
Net movement
Number of stapled
securities at the date
of this report
Paul Bedbrook
Glenn Willis
Nigel Ampherlaw
William (Bill) Moss AO
0
0
0
0
254,847
1,200,002
159,694
4,620,051
254,847
1,200,002(1)
159,694
4,620,051
1. Glenn Willis has an entitlement to an additional 4,400,000 securities under equity based executive incentive
plans.
Other than as disclosed in the Annual Financial Report, no contracts exist where a director is entitled to a
benefit.
20
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
9 Meetings of Directors
The attendance at meetings of Directors of the Manager and the Company during the year is set out in the
Elanor Board
(Responsible Entity &
the Company)
Name
Paul Bedbrook
Glenn Willis
Nigel Ampherlaw
William (Bill)
Moss AO
Held
11
11
11
11
Attended
11
11
10
11
10. Company Secretary
Audit, Risk & Compliance
Committee
Remuneration and Nominations
Committee
Held
4
4
4
Attended
4
4
4
Held
1
1
1
Attended
1
1
1
Symon Simmons held the position of company secretary of the Manager and the Company during the period.
Symon is the Chief Financial Officer of the Group, and has extensive experience as a company secretary, is a
Justice of the Peace in NSW and is a Responsible Manager on the Australian Financial Services Licence held
by the Responsible Entity.
11. Indemnification and insurance of officers and auditors
During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the
Group (as named above), the company secretary, and all executive officers of the Company and of any
related body corporate against a liability incurred in their capacity as Directors and officers of the Company to
the extent permitted by the Corporations Act 2001 (Cth). The contract of insurance prohibits disclosure of the
nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted
by law, indemnified or agreed to indemnify an officer of the Company or of any related body corporate against
a liability incurred in their capacity as an officer.
The auditor of the Group is not indemnified out of the assets of the Group.
12. Environmental regulation
To the best of their knowledge and belief after making due enquiry, the Directors have determined that the
Group has complied with all significant environmental regulations applicable to its operations in the
jurisdictions in which it operates.
13. Significant changes in state of affairs
There was no significant change in the state of affairs of the Group during the period.
14. Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
(Cth) is included on the page following the Directors' Report.
21
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
15. Non audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor
are outlined in Note 5 to the financial statements.
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by
another person or firm on the auditor’s behalf) is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001 (Cth).
The Directors are of the opinion that the services as disclosed in Note 5 to the financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit Risk and
Compliance Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES
110 ‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Group, acting as advocate for the group or jointly sharing economic risks and rewards.
16. Fees paid to and interests held in the Trust by the Manager or its associates
The interest in the Trust held by the Manager or its related entities as at 30 June 2015 and fees paid to and
expenses reimbursed by its related entities during the financial year are disclosed in Note 29 to the
consolidated financial statements.
17. Events occurring after reporting date
On 27 July 2015 the John Cootes Furniture warehouse in Orchardleigh Street, Yennora sustained major
damage as a result of a fire. The entire contents of the building, primarily stock and plant and equipment of the
John Cootes Furniture business were destroyed and the building was unable to be recovered. The warehouse
building is owned by the John Cootes Diversified Property Syndicate, a managed investment scheme
managed by the Group. The property is fully insured and appropriate business interruption policies are in
place. The Group is actively working with the insurers in relation to the claims, however, the financial impact of
the fire is yet to be determined. The insurers have provided a progress payment of $2.5 million in respect of
the loss of stock, plant & equipment and business interruption. Operationally, the John Cootes Furniture
business has obtained temporary warehouse facilities, and significant re-ordering of stock has also occurred.
Subsequent to 30 June 2015, a distribution of 6.70 cents per stapled security has been declared by the Board
of Directors. The total distribution amount of $4.7 million will be paid on or before 11 September 2015 in
respect of the half year ended 30 June 2015.
Since the end of the financial year, the Directors of the Manager and the Company are not aware of any other
matter or circumstance not otherwise dealt with in this report or the financial report that has significantly or
may significantly affect the operations of the Group, the results of those operations, or the state of the Group's
affairs in future financial periods.
18. Likely developments and expected results of operations
The financial statements have been prepared on the basis of the current known market conditions. The extent
of any potential deterioration in either the capital or physical property markets on the future results of the
Group is unknown. Such results could include property market valuations, the ability of borrowers, including
the Group, to raise or refinance debt, and the cost of such debt and the ability to raise equity.
At the date of this report and to the best of the Directors’ knowledge and belief, there are no other anticipated
changes in the operations of the Group which would have a material impact on the future results of the Group.
22
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
DIRECTORS' REPORT TO STAPLED SECURITY HOLDERS
FOR THE YEAR ENDED 30 JUNE 2015
19. Proceedings on behalf of the Group
No proceedings have been brought, or intervened in, on behalf of the Group.
20. Rounding of amounts to the nearest thousand dollars
The Group and the EIF Group are registered entities of a kind referred to in Class Order 98/100 (as amended)
issued by the Australian Securities and Investments Commission relating to the "rounding off" of amounts in
the Directors' report and financial report. Amounts in the Directors' report and financial report have been
rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.
This report is made in accordance with a resolution of the Boards of Directors of Elanor Funds Management
Limited and Elanor Investors Limited.
Signed in accordance with a resolution of the Directors pursuant to section 298(2) of the Corporations Act
2001 (Cth).
Paul Bedbrook
Chairman
Glenn Willis
CEO and Managing Director
Paul Bedbrook
Chairman
Sydney, 27 August 2015
Glenn Willis
CEO and Managing Director
23
Annual Financial Report continued
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Directors
Elanor Investors Limited and
Elanor Funds Management Limited
(as responsible entity for Elanor Investment Fund)
Level 26, 135 King Street
Sydney NSW 2000
27 August 2015
Dear Directors
Elanor Investors Limited and Elanor Investment Fund
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Elanor Investors Limited and Elanor
Funds Management Limited in its capacity as responsible entity for Elanor Investment Fund.
As lead audit partner for the audit of the financial statements of Elanor Investors Limited and
Elanor Investment Fund for the year ended 30 June 2015, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
AG Collinson
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
24
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2015
Income
Revenue from operating activities
Interest income
Rental income
Share of profit / (loss) from equity accounted investments
Fair value gain on revaluation of investment properties
Other income
Total income
Expenses
Changes in inventories of finished goods
Salary and employee benefits
Property expenses
Operator management fees
Borrowing costs
Depreciation
Amortisation
Marketing and promotion
Repairs, maintenance and technology
Transaction, establishment costs and fair value decrements
Other expenses
Total expenses
Net profit/(loss) before income tax expense
Income tax expense/(benefit)
Net profit/(loss) for the year
Attributable to security holders of:
- Elanor Investors Limited
- Elanor Investment Fund (non-controlling interest)
Net profit/(loss) for the year
Basic earnings / (loss) per stapled security (cents)
Diluted earnings / (loss) per stapled security (cents)
Note
2
12
3
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
55,936
165
57
93
-
1,929
58,180
12,959
20,191
4,486
1,787
1,259
2,303
289
2,859
705
4,843
3,202
54,883
3,297
577
2,720
(2,637)
5,357
2,720
4.10
3.74
-
27
8,132
93
9,703
-
17,955
-
174
-
-
1,144
-
113
-
-
1,297
166
2,894
15,061
-
15,061
-
15,061
15,061
22.68
20.69
The above Consolidated Statements of Profit or Loss should be read in conjunction with the accompanying notes
25
Annual Financial Report continued
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2015
Net profit/(loss) for the year
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Consolidated
Group
30 June
2015
$'000
2,720
EIF Group
30 June
2015
$'000
15,061
Note
Gain/(loss) on revaluation of cash flow hedge
21
(172)
(172)
Items that may not be reclassified to profit and loss
Share of asset revaluation reserve from equity accounted investments
Gain/(loss) on revaluation of property, plant and equipment
21
21
Income tax relating to these items
Other comprehensive income/(loss) for the year, net of tax
450
10,805
-
11,083
450
-
-
278
Total comprehensive income/(loss) for the year, net of tax
13,803
15,339
Attributable to security holders of:
- Elanor Investors Limited
- Elanor Investment Fund (non-controlling interest)
8,168
5,635
-
15,339
Total comprehensive income/(loss) for the year, net of tax
13,803
15,339
The above Consolidated Statements of Comprehensive Income should be read with the accompanying notes
26
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS AT 30 JUNE 2015
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
Note
Current assets
Cash and cash equivalents
Receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Investment properties
Non-current inventories
Equity accounted investments
Goodwill and intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Derivative financial instruments
Interest bearing liabilities
Current provisions
Other current liabilities
Income tax payable
Loan from the Company
Total current liabilities
Non-current liabilities
Derivative financial instruments
Interest bearing liabilities
Non-current provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity Holders of Elanor Investors Limited
Contributed equity
Reserves
Retained profits/(accumulated losses)
Parent entity interest
Equity Holders of Elanor Investment Fund
Contributed equity
Reserves
Retained profits/(accumulated losses)
Non-controlling interest
Total equity attributable to stapled security holders:
- Elanor Investors Limited
- Elanor Investment Fund
Total equity
7
8
13
11
12
13
14
15
10
18
9
19
16
17
19
9
19
16
20
21
22
20
21
22
7,488
3,355
3,765
439
15,047
86,048
-
11,781
14,002
7,820
952
120,603
135,650
4,250
86
8,541
824
1,148
199
-
15,048
86
22,178
901
23,165
38,213
97,437
41,589
10,929
(3,261)
49,257
45,460
414
2,306
48,180
49,257
48,180
97,437
3,437
753
-
-
4,190
-
72,908
-
14,002
-
-
86,910
91,100
577
86
8,541
37
-
-
4,052
13,293
86
19,837
-
19,923
33,216
57,884
-
-
-
-
45,460
414
12,010
57,884
-
57,884
57,884
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
27
Annual Financial Report continued
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28
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015
Note
Consolidated
Group
30 June
2015
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Rent receipts from the Company
Net cash flows from operating activities
32
Cash flows from investing activities
Payments for business and asset acquisitions
Payments for property, plant and equipment
Payment for management rights
Loans to associates
Payments for equity accounted investments
Distributions received from equity accounted investments
Loans from Company
Net cash flows from investing activities
Cash flows from financing activities
Net proceeds from borrowings
Proceeds from equity raisings
Costs associated with equity raisings
Distributions paid to unit holders
Net cash flows from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
61,931
(54,379)
160
(1,130)
-
6,582
(90,808)
(2,725)
(1,650)
(177)
(13,752)
293
-
(108,819)
30,581
89,586
(6,767)
(3,675)
109,725
7,488
-
EIF Group
30 June
2015
$'000
-
(162)
26
(1,144)
8,073
6,793
(63,178)
-
-
(121)
(13,752)
293
4,052
(72,706)
28,265
46,955
(2,819)
(3,051)
69,350
3,437
-
Cash at the end of the period
7,488
3,437
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes
29
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies
Elanor Investors Group (Group or Consolidated Group) is a 'stapled' entity comprising of Elanor Investment Fund (Trust) and
its controlled entities (EIF Group), and Elanor Investors Limited (EIL or Company) and its controlled entities (EIL Group). The
units in the Trust are stapled to shares in the Company. The stapled securities cannot be traded or dealt with separately. The
stapled securities of the Group are listed on the Australian Securities Exchange (ASX: ENN).
The financial year is defined as from 1 July 2014 to 30 June 2015, however operations commenced on 11 July 2014 when
the Group listed on the ASX.
The significant policies which have been adopted in the preparation of these consolidated financial statements for the period
ended 30 June 2015 are set out below.
The financial statements were authorised for issue by the Directors on 27 August 2015.
(a)
Basis of preparation
As permitted by Class Order 05/642 issued by the Australian Securities and Investments Commission (ASIC), this report is a
combined report that presents the consolidated financial statements and accompanying notes of both Elanor Investors Group
and the Elanor Investment Fund (EIF Group).
The financial report of Elanor Investors Group comprises the consolidated financial report of Elanor Investors Limited and its
controlled entities, including Elanor Investment Fund and its controlled entities.
The financial report of the EIF Group comprises the consolidated financial report of Elanor Investment Fund and its controlled
entities.
These financial statements are to be read in conjunction with public announcements made by the Group during the reporting
period in accordance with the continuous disclosure requirements of the ASX Listing Rules.
Historical cost convention
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of
investment properties, property, plant and equipment and derivative financial instruments held at fair value.
Statement of Compliance
The annual financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001, the
Trust Constitution and Australian Accounting Standards. Compliance with Australian Accounting Standards ensures
compliance with International Financial Reporting Standards ('IFRS').
For the purposes of preparing the financial statements, the Consolidated Group and the EIF Group are for-profit entities. The
financial report is presented in Australian dollars.
Critical accounting judgement and estimates
The preparation of financial statements in conformity with Australian Accounting Standards may require the use of certain
critical accounting estimates, and management to exercise its judgement in the process of applying the Group's accounting
policies. The critical accounting estimates made include the estimation of the fair value of the Group's assets and
assumptions related to deferred tax assets and liabilities, impairment testing of goodwill, Director valuations for some
property, plant and equipment and investment properties. Judgement was made in the determination of control with respect
to equity accounted investments and subsidiaries. No other key assumptions concerning the future, or other estimates of
uncertainty at the reporting date, have a significant risk of causing material adjustments to the financial statements in the
next reporting period.
30
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
Going concern
Consolidated Group
The Group’s current liabilities exceeded its current assets by $1,000 as at 30 June 2015. In addition, the Group is in
advanced discussions to extend its facility of $8.6m, which matures on 30 September 2015. Please refer to Note 19 for
further details. Therefore management has continued to prepare the financial statements on a going concern basis.
EIF Group
The directors of Elanor Funds Management Limited, in its capacity as Responsible Entity of EIF Group, have received a letter
of loan subordination from the Company indicating that it confirms its intention to not require repayment of the loan owed by
EIF Group of $4.1m to enable EIF Group to continue as a going concern and meet its financial obligations as and when they
fall due, for at least 12 months from the date of signing of the Group’s financial statements for the year ended 30 June 2015.
EIF Group’s current liabilities exceeded its current assets by $9.1m as at 30 June 2015. In addition, the Group is in advanced
discussions to extend its facility of $8.6m, which matures on 30 September 2015. Please refer to Note 19 for further details.
(b)
New accounting standards and interpretations not yet effective
Certain new standards and amendments and interpretations to existing standards have been published that are mandatory
for the Group and the EIF Group for accounting periods beginning on or after 30 June 2015, which the Group and the EIF
Group have not yet adopted. Based on a review of these standards, the majority of the standards yet to be adopted are not
expected to have significant impact on the financial statements of the Group or the EIF Group. The Group's and the EIF
Group's assessment of the impact of those new and amended standards and interpretations which may be relavant are set
out below:
AASB 15 Revenue from Contracts with Customers; AASB 2014-5 Amendments to Australian Accounting Standards arising
from AASB 15; AASB 9 Financial Instruments; AASB 2014-7 Amendments to Australian Accounting Standards arising from
AASB 9 (December 2014); and AASB 2014-8 Amendments to Australian Accounting Standards arising from AASB 9
(December 2014) – Application of AASB 9 (December 2009) and AASB 9 (December 2010).
AASB 15 establishes principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. AASB 15 and AASB 2014-
5 apply to annual reporting periods beginning on or after 1 January 2017. Early application is permitted for annual reporting
periods beginning on or after 1 January 2015 but before 1 January 2017. The Group is yet to assess its full impact. The
Group does not intend to adopt AASB15 before its operative date, which means it would be first applied in the annual
reporting period ending 30 June 2018.
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and may affect the Group's
accounting for its financial assets. The standard is not applicable until periods beginning on or after 1 January 2018 but is
available for early adoption. The Group is yet to assess its full impact. The Group does not intend to adopt AASB 9 before its
operative date, which means it would be first applied in the annual reporting period ending 30 June 2019.
(c)
Basis of consolidation
The consolidated Financial Statements of the Group incorporate the assets and liabilities of Elanor Investors Limited (the
Parent) and all of its subsidiaries, including Elanor Investment Fund and its subsidiaries as at 30 June 2015. Elanor
Investors Limited is the parent entity in relation to the stapling. The results and equity of Elanor Investment Fund (which is
not directly owned by Elanor Investors Limited) have been treated and disclosed as a non-controlling interest. Whilst the
results and equity of Elanor Investment Fund are disclosed as a non-controlling interest, the stapled security holders of
Elanor Investment Fund are the same as the stapled security holders of Elanor Investors Limited.
These Financial Statements also include a separate column representing the Financial Statements of Elanor Investment
Fund, incorporating the assets and liabilities of Elanor Investment Fund and all of its subsidiaries, as at 30 June 2015.
31
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
Subsidiaries are all entities over which the Group has control. Control is defined as having rights to variable returns from
involvement in the investee and having the ability to affect those returns through its power over the investee.
Where an entity began or ceased to be a controlled entity during the reporting period, the assets, liabilities and results are
consolidated only from the date control commenced or up to the date control ceased.
In preparing the consolidated Financial Statements, all intra-group transactions and balances, including unrealised profits
arising thereon, have been eliminated in full.
(d)
Business combination
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value and comprises the assets transferred, the liabilities incurred and the equity interests
issued. Acquisition-related costs are recongnised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except
that:
• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and
measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;
• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in
accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and
• assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for
Sale and Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held
interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests'
proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is
made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another Standard.
Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is
remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts
arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were
disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected
the amounts recognised as of that date.
32
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
(e)
Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control or joint control over those policy decisions.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these financial statements using the
equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it
is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is
initially recognised in the statement of financial position at cost and adjusted thereafter to recognise the Group's share of the
profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of losses of an
associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes any long-term
interests that, in substance, form part of the Group's net investment in the associate or joint venture), the Group discontinues
recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate or joint venture.
The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment loss with
respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with AASB 136 'Impairment of Assets' as a single
asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount.
Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is
recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently
increases.
When a company entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the
transactions with the associate or joint venture are recognised in the Group's financial statements only to the extent of
interests in the associate or joint venture that are not related to the Group.
(f)
Revenue recognition
Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of Elanor’s activities as described below.
Hotel and wildlife park revenue
Revenue is recognised when goods and services have been provided to the customer and the outcome can be reliably
measured. Revenue from sale of food and beverage items is recognised when the risks and rewards of
ownership have passed to the buyer.
Sale of furniture and other goods
Sales are recognised as revenue only when the risks and rewards of ownership have passed to the buyer. This is when
the sale becomes unconditional and ownership of a product has passed to the customer, after delivery.
Funds management fee revenue
Funds management fee revenue is recognised on an accruals basis as the services are performed, in accordance with
the terms of the relevant contracts. Where fees are subject to meeting certain performance hurdles, they are recognised
as income at the point when those conditions have been met.
Rental income from investment properties, received by the EIF Group is accounted for on a straight-line basis over the term
of the lease.
If not received at balance sheet date, revenue is reflected in the balance sheet as a receivable and carried at its recoverable
value.
33
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
Where revenue is received from the sale of properties, it is recognised when the significant risks and rewards have
transferred to the buyer. This will normally take place on unconditional exchange of contracts except where payment on
completion is expected to occur significantly after exchange. For conditional exchanges, sales are recognised when the
conditions are satisfied.
(g)
Expenses
Expenses are brought to account on an accruals basis.
(h)
Finance costs
Finance costs include interest payable on bank overdrafts and short-term and long-term borrowings, payments on derivatives
and amortisation of ancillary costs incurred in connection with arrangement of borrowings.
Finance costs are expensed as incurred using the effective interest rate method, except to the extent that they are directly
attributable to the acquisition of a qualifying asset. In these circumstances, borrowing costs are capitalised to the cost of the
assets until the assets are ready for their intended use or sale.
(i)
Goods and Services Tax (GST)
Revenues, expenses and assets (with the exception of receivables) are recognised net of the amount of GST, to the extent
that the GST is recoverable from the taxation authority. Where GST is not recoverable, it is recognised as part of the cost of
acquisition, or as an expense.
Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation
authority is included in the statement of financial position as receivable or payable.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating
cash flows.
(j)
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, and short term deposits with an original maturity of 90 days
or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value.
(k)
Receivables
Trade and other receivables are initially recognised at fair value and subsequently accounted for at amortised cost.
Collectability of trade receivables is reviewed on a regular basis and bad debts are written off when identified. A specific
provision is made for any doubtful debts where objective evidence exists that the receivables will not be recoverable. The
amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated
future cash flows.
All receivables with maturities greater than 12 months after reporting date are classified as non-current assets.
(l)
Inventories
Inventories are assets held for sale or consumables held in the ordinary course of operations and recognised at the lower of
cost or net realisable value.
The cost of the inventory comprises costs of purchase, cost of conversion and other costs incurred in bringing the inventories
to their present location and condition. A provision is raised when it is believed that the costs incurred will not be recovered
on the ultimate sale of the inventory. Cost for all inventories is determined using the first-in, first-out (FIFO) method.
The Group holds certain landholdings that are intended solely for sale, and not for long term appreciation or the derivation of
rental income. These landholdings are carried as non-current inventory.
34
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
(m)
Investment property
Investment property relates to the land and buildings owned by the EIF Group (being the Elanor Investment Fund and its
controlled entities) only, in which rental income is earned from entities within the EIL Group.
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction
for such purposes). Investment properties are measured initially at its cost, including transaction costs. Subsequent to initial
recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair value of
investment properties are included in profit or loss in the period in which they arise.
At each reporting date, the carrying values of the investment properties are assessed by the Directors' and where the
carrying value differs materially from the Directors' assessment of fair value, an adjustment to the carrying value is recorded
as appropriate.
The Directors' assessment of fair value of each investment property takes into account latest independent valuations, with
updates taking into account any changes in estimated yield, underlying income and valuations of comparable properties. In
determining the fair value, the capitalisation of net income method and/or the discounting of future net cash flows to their
present value have been used, which are based upon assumptions and judgements in relation to future rental income,
property capitalisation rate or estimated yield and make reference to market evidence of transaction prices for similar
properties.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use
and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or
loss in the period in which the property is derecognised.
(n)
Property, plant and equipment
Land and Buildings
All owner occupied properties in the Hotel, Tourism & Leisure class are held for use by the Group for the supply of services
and are classified as land and buildings and stated at their revalued amounts under the revaluation model, being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment
losses. Fair value is the amount for which the land and buildings could be exchanged between knowledgeable, willing parties
in an arm's length transaction.
Revaluation increases arising from changes in the fair value of land and buildings are recognised in other comprehensive
income and accumulated within equity, except to the extent that it reverses a revaluation decrease for the same asset
previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease
previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognised in
profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous
revaluation of that asset.
The land and buildings owned by Wiltex Wholesale are classified as Inventory, other than the proportion of the property which
is classified as owner occupied as a result of being used by the John Cootes Furniture business for the supply of services.
Owner occupied land and buildings owned by Wiltex Wholesale is stated at cost less accumulated depreciation.
Furniture, fittings and equipment
Furniture, fittings and equipment are stated at cost less accumulated depreciation.
Livestock
Livestock are stated at cost, less accumulated depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of the animals. Depreciation on livestock is calculated using the straight-line method, over the useful lives of
the assets which range from 5 - 50 years.
35
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
Depreciation
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or
revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements
and certain leased plant and equipment, the shorter lease term as follows:
Buildings
Computer Equipment
Vehicles
40 years
3 - 5 years
8 years
Furniture, fittings and equipment
3 - 10 years
(o)
Intangible assets
Funds management rights
Funds management rights have a finite useful life and are carried at cost less accumulated amortisation and impairment
losses. Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful
lives of 10 years.
Brands
Brands acquired are carried at cost as established at the date of acquisition less accumulated impairment losses, if any.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business
less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the
Group's cash generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the
combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is
less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed
in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
(p)
Impairment of assets
All assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Where objective evidence or an indicator of impairment exists, an estimate of the asset's recoverable
amount is made. An impairment loss is recognised in the statement of profit or loss and other comprehensive income 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 cost of disposal and value in use.
(q)
Payables
Payables represent liabilities and accrued expenses owing at year end which are unpaid. The amounts are unsecured and
usually paid within 30 days of recognition. Payables are recognised at amortised cost and normal commercial terms and
conditions apply to payables.
A distribution and or dividend payable to Securityholders is recognised for the amount of any distribution and or dividend
approved on or before reporting date but not paid at reporting date.
All payables with maturities greater than 12 months after the reporting date are classified as non current liabilities.
36
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
(r)
Summary of significant accounting policies (continued)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
(s)
Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future
cash outflows, using a high quality Corporate Bond rate as the discount rate, to be made in respect of services provided by
employees up to reporting date.
(t)
Interest bearing liabilities
Interest bearing liabilities are recognised initially at cost, being the fair value of the consideration received net of transaction
costs associated with the borrowing. Subsequent to initial recognition, interest bearing liabilities are recognised at amortised
cost using the effective interest method. Under the effective interest method, any transaction fees, costs, discounts and
premiums directly related to the borrowings are recognised in the statement of profit or loss and other comprehensive income
over the expected life of the borrowings.
Interest bearing liabilities are classified as current liabilities where the liability has been drawn under a financing facility which
expires within 12 months. Amounts drawn under financial facilities which expire after 12 months are classified as non-current.
37
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
(u)
Derivative and other financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate risk.
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.
Hedge accounting
The Group designates its hedging instruments, which include derivatives, as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is
highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or
loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and
losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the
forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously recognised in other comprehensive income and accumulated in equity are transferred from equity and
included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or
is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other
comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or
loss accumulated in equity is recognised immediately in profit or loss.
(v)
Security based payments
Equity-settled security-based payments to employees and others providing similar services are measured at the fair value of
the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled security-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding
increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits
reserve.
38
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
(w)
Income tax
Trust
Under current tax legislation, the Trust is not liable for income tax, provided the Security holders are presently entitled to the
taxable income of the Trust including realised capital gains each financial year.
Company and other taxable entities
Income tax expense comprises current and deferred tax and is recognised in the statement of profit or loss and other
comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting date and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at
the reporting date.
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group, formed on 11 July 2014,
and are therefore taxed as a single entity, with any deferred tax assets and liabilities of these entities set off in the
consolidated financial statements. The head entity within the tax-consolidated group is Elanor Investors Limited.
(x)
Contributed equity
Ordinary units and shares are classified as equity and recognised at the fair value of the consideration received. Any
transaction costs arising on the issue of ordinary securities are recognised directly in equity as a reduction, net of tax, of the
proceeds received.
(y)
Earnings per stapled security
Basic earnings per stapled security is calculated as profit after tax attributable to Security holders divided by the weighted
average number of ordinary stapled securities issued.
Diluted earnings per stapled security is calculated as profit after tax attributable to Security holders adjusted for any profit
recognised in the period in relation to dilutive potential stapled securities divided by the weighted average number of stapled
securities and dilutive stapled securities.
(z)
Segment reporting
Segment information is presented on the same basis as that used for internal reporting purposes. The segments are
reported in a manner that is consistent with internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the Board of Directors of Elanor Investors Limited and the Responsible
Entity.
39
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1.
Summary of significant accounting policies (continued)
(aa)
Comparatives
The Trust was registered as a managed investment scheme on 21 May 2014 and the Company was incorporated on 1 May
2014. Units in the Trust and shares in the Company were stapled together and listed on the Australian Securities Exchange
on 11 July 2014. The Group did not trade prior to 11 July 2014, and therefore there are no comparatives presented for the
year ended 30 June 2015.
(ab) Use of estimates and judgement
The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
The areas where a higher degree of judgement or complexity arise, or areas where assumptions and estimates are
significant to the Group's financial statements, are detailed below:
Fair value of Property, Plant and Equipment
Land and Buildings are carried at fair value with changes in fair value recognised in other comprehensive income in the
statement of comprehensive income. Fair value is defined as the price at which an asset or liability could be exchanged in an
arm's length transaction between knowledgeable, willing parties, other than in a forced or liquidation sale.
In reaching estimates of fair value, management judgment needs to be exercised. The level of management judgment
required in establishing fair value of the land and buildings for which there is no quoted price in an active market is reduced
through the use of external valuations.
Fair value of Investment Properties
Land and Buildings are carried at fair value with changes in fair value recognised through profit or loss in the statement of
comprehensive income. Fair value is defined as the price at which an asset or liability could be exchanged in an arm's length
transaction between knowledgeable, willing parties, other than in a forced or liquidation sale.
In reaching estimates of fair value, management judgment needs to be exercised. The level of management judgment
required in establishing fair value of the land and buildings for which there is no quoted price in an active market is reduced
through the use of external valuations.
Goodwill
Management judgement is required in reviewing and impairment testing goodwill balances carried by the Group, which
invloves estimates of key assumption including cash flow projection, growth rates and discount rates.
Deferred Tax Assets
Management judgement is required in reviewing the recoverability of deferred tax assets carried by the Group, which invloves
estimates of key assumptions including cash flow projection, growth rates and discount rates.
40
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
2.
Revenue from operating activities
Revenue from hotels
Revenue from wildlife parks
Revenue from sale of furniture
Funds management fee income
Revenue from operating activities
3.
Income tax expense
Income tax expense
(a)
Current tax expense
Deferred tax expense
Reconciliation of income tax expense to prima facie tax expense
(b)
Profit / (loss) from continuing operations before income tax expense:
Less: Profit / (loss) from the Trust (which is not taxable)
Prima facie profit / (loss)
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not
deductible/(taxable) in calculating taxable income:
Entertainment
Non-deductible depreciation and amortisation
Fair value adjustments to investment property in the Trust
Non-deductible costs on acquisitions
Income tax expense / (benefit)1
Consolidated
Group
30 June
2015
$'000
21,955
10,166
18,927
4,888
55,936
Consolidated
Group
30 June
2015
$'000
199
378
577
3,297
15,061
(11,764)
(3,529)
11
364
3,242
489
577
EIF Group
30 June
2015
$'000
-
-
-
-
-
EIF Group
30 June
2015
$'000
-
-
-
15,061
15,061
-
-
-
-
-
-
-
1 A component of the deferred tax balances have been recongnised in equity, in relation to capitalised equity raising
costs. Refer to Note 20 for further details.
41
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
4. Distributions
(a)
Consolidated Group
The following distributions were declared by the Consolidated Group either during the year or post balance date:
Interim distribution (1)
Final distribution (2)
Distribution
cents per
stapled security
5.20
6.70
Total
amount
$'000
3,675
4,734
(1) The interim distribution of 5.20 cents per stapled security was declared on 24 February 2015 and paid on 27 February 2015.
(2) The final distribution of 6.70 cents per stapled security was not declared prior to 30 June 2015. Please refer to the Directors' Report for the
calculation of Core Earnings and the Distribution.
(b)
EIF Group
The following distributions were declared by the EIF Group either during the year or post balance date:
Interim distribution (1)
Final distribution (2)
Distribution
cents per
unit
4.32
4.75
Total
amount
$'000
3,051
3,353
(1) The interim distribution of 4.32 cents per stapled security was declared on 24 February 2015 and paid on 27 February 2015.
(2) The final distribution of 4.75 cents per stapled security was not declared prior to 30 June 2015. Please refer to the Directors' Report for the
calculation of Core Earnings and the Distribution.
5.
Auditor's remuneration
Audit services:
Auditors of the Elanor Investors Group
Deloitte Touche Tohmatsu Australia:
Audit and review of financial reports
Australian financial services license audit
Other services:
Auditors of the Elanor Investors Group
Deloitte Touche Tohmatsu Australia:
Taxation advisory services
Taxation compliance services
Transaction services
Total
All Audit fees for the Consolidated Group are borne by Elanor Investors Limited.
Consolidated
Group
30 June
2015
$
105,000
5,000
110,000
27,740
35,000
248,500
311,240
421,240
42
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
6.
Earnings / (losses) per stapled security
Consolidated
Group
30 June
2015
EIF Group
30 June
2015
The earnings / (losses) per stapled security measure shown below is based upon the profit/(loss) attributable to
Securityholders:
Basic (cents)
Diluted (cents)
Profit/(loss) attributable to Securityholders used in calculating basic and
diluted earnings per stapled security ($'000)
Weighted average number of stapled securities used as denominator in
calculating basic earnings per stapled security
4.10
3.74
2,720
66,402
22.68
20.69
15,061
66,402
Weighted average number of stapled securities used as denominator in
calculating diluted earnings per stapled security 1
72,802
72,802
1. The weighted average number of stapled securities and options granted used as denominator in calculating basic and diluted earnings/(losses)
per stapled securities shown above is based on the number of stapled securities on issue and options granted during the period.
The earnings / (losses) per stapled security measure shown below is based upon the profit/(loss) attributable to
Securityholders for Elanor Investors Limited:
EIL Group
30 June
2015
Basic (cents)
Diluted (cents)
Profit/(loss) attributable to Securityholders used in calculating basic and
diluted earnings per stapled security ($'000)
Weighted average number of stapled securities used as denominator in
calculating basic earnings per stapled security
Weighted average number of stapled securities used as denominator in
calculating diluted earnings per stapled security
7.
Cash and cash equivalents
Cash at bank
8.
Trade and other receivables
Current
Trade Receivables
Other Receivables
(3.97)
(3.97)
(2,637)
66,402
66,402
EIF Group
30 June
2015
$'000
3,437
3,437
EIF Group
30 June
2015
$'000
753
-
753
Consolidated
Group
30 June
2015
$'000
7,488
7,488
Consolidated
Group
30 June
2015
$'000
3,188
167
3,355
43
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
9.
Derivative financial instruments
Current liabilities
Interest rate swaps
Non-current liabilities
Interest rate swaps
Total Derivative financial instruments
Interest rate swaps
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
86
86
86
86
172
86
86
86
86
172
The Group has entered into an interest rate swap agreement with a notional principal amount totalling $10 million
that entitles it to receive interest, at quarterly intervals, at a floating rate on the notional principal and oblige it to pay
interest at a fixed rate. The interest rate swap agreements allow the Group to raise long term borrowings at a floating
rate and effectively swap them into a fixed rate.
10.
Deferred taxes
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
Deferred tax assets
(a)
The balance comprises temporary differences attributable to:
Employee entitlements
Audit accrual
Business acquisitions blackhole expenses
Other
Movements:
Opening balance at beginning of year
Business combinations
Debited to the Consolidated Statements of Profit or Loss
Credited to Equity
Closing balance at the end of the year
Deferred tax expected to be recovered within 12 months
Deferred tax expected to be recovered after more than 12 months
Deferred tax liabilities
(b)
The balance comprises temporary differences attributable to:
Business acquisitions
Other
Movements:
Opening balance at beginning of year
Business combinations
Credited to the Consolidated Statements of Profit or Loss
Closing balance at the end of the year
Deferred tax expected to be settled within 12 months
Deferred tax expected to be settled after more than 12 months
495
34
835
73
1,437
-
1,443
(445)
439
1,437
574
863
285
200
485
-
552
(67)
485
239
246
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44
Elanor Annual Report 2015
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A
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
13.
Inventories
Current
Goods held for resale
Total current
Non-current
Property Inventory
Total Non-current
Consolidated
Group
30 June
2015
$'000
3,765
3,765
EIF Group
30 June
2015
$'000
-
-
11,781
11,781
-
-
The cost of inventories recognised as an expense during the year in respect of continuing operations was $13m.
Inventory is carried at the lower of cost or net realisable value. The directors have assessed the carrying value of the Property
Inventory, and have not recognised any impairment during the period. This assessment is supported by an independent
valuation performed on 30 June 2015, by Urbis of $16.3m. Please refer to Note 31 for further details on the furniture inventory
subsequent to year end.
14.
Equity accounted investments
Principal activity
Percentage
Ownership
193 Clarence Hotel Fund
Bell City Fund
Auburn Central Fund
Total equity accounted investments
Accommodation
Accommodation
Shopping Centre
10.00%
17.47%
1.85%
Consolidated
Group
30 June
2015
$'000
1,160
12,222
620
14,002
EIF Group
30 June
2015
$'000
1,160
12,222
620
14,002
All of the above associates are accounted for using the equity method in these consolidated financial statements.
Details of Material Associates
Summarised financial information in respect of each of the Group's material associates is set out below. The summarised
financial information below represents amounts shown in the associate's financial statements prepared in accordance with
accounting standards, adjusted by the Group for equity accounting purposes.
Bell City Fund
The Bell City Fund comprises the aggregated investment in six entities being, Bell City Accommodation Management Pty
Limited, Bell City Accommodation Syndicate, Bell City Hotel Management Pty Limited, Bell City Hotel Syndicate, Bell City
Office Syndicate and Bell City Residential Development Syndicate.
Although the Group has less than 20% of the equity in the fund, the Group has significant influence by virtue of its role as
Trustee and Manager of the Fund and its ability to participate in the financial and operating policy decisions of the Fund.
The following information represents the aggregated financial position and financial performance of the Bell City Fund. This
summarised financial information represents amounts shown in the associate's financial statements prepared in accordance
with AASBs, adjusted by the Group for equity accounting purposes.
49
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
14.
Equity accounted investments (continued)
Bell City Fund (continued)
Financial Position
Current assets
Non - current assets
Total Assets
Current liabilities
Non - current liabilities
Total Liabilities
Contributed Equity
Reserves
Retained profits / (accumulated losses)
Total Equity
Financial performance
Profit / (loss) for the period
Other comprehensive income for the period
Total comprehensive income for the period
Distributions received from the associate during the period
30 June 2015
$'000
6,175
153,193
159,368
3,919
85,477
89,396
67,278
2,326
368
69,972
Period ended
30 June 2015
$'000
368
2,326
2,694
248
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
recognised in the consolidated financial statements:
Net assets of the associate
Proportion of the Group's ownership interest in the Bell City Fund
Carrying amount of the Group's interest in the Bell City Fund
Aggregate information of associates that are not individually material
Profit / (loss) for the period
Other comprehensive income for the period
Total comprehensive income for the period
Aggregate carrying amount of the Group's interests in these associates
30 June 2015
$'000
69,972
17.47%
12,222
Period ended
30 June 2015
$'000
554
-
554
1,780
50
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
15.
Goodwill and intangible assets
Management Rights
Accumulated amortisation
Total Management Rights
Brands
Accumulated impairment charge
Total Brands
Goodwill at cost
Accumulated impairment charge
Total Goodwill
Total intangible assets
Management Rights
Opening net book amount
Additions from business combinations
Amortisation
Closing net book amount
Brands
Opening net book amount
Additions from business combinations
Accumulated impairment charge
Closing net book amount
Goodwill
Opening net book amount
Additions from business combinations
Accumulated impairment charge
Closing net book amount
Total intangible assets
Consolidated
Group
30 June
2015
$'000
1,500
(150)
1,350
EIF Group
30 June
2015
$'000
-
-
-
1,660
-
1,660
4,810
-
4,810
7,820
-
-
-
-
-
-
-
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
-
1,500
(150)
1,350
-
1,660
-
1,660
-
4,810
-
4,810
7,820
-
-
-
-
-
-
-
-
-
-
-
-
-
51
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
15.
Goodwill and intangible assets (continued)
Management Rights
Management Rights represent the acquisition of funds management rights and associated licences from Moss Capital Pty
Limited at IPO for $1.5m. At IPO, the estimated useful life of the acquired funds management rights was 10 years.
Brands
Brands represent the acquisition of the John Cootes Furniture brand upon the acquisition of the John Cootes Furniture
business by JCF Management Pty Limited on 11 July 2014.
Impairment test for brands
Brands are allocated to the Group's cash-generating units (CGU's) identified. All of the brands carried at 30 June 2015 are
attributable to the Group's investment in the John Cootes Furniture business.
The Directors have deemed there should be no impairment to the carrying value of brand due to the calculated recoverable
amount of the brand being in excess of the carrying value.
The recoverable amount of the brand is based on value in use calculated on a net present value basis.
The period over which management has projected the CGU cash flows is based upon a 10 year operating forecast. The
average growth rates used (6%) and royalty rates (1.65%) are consistent with forecasts included in industry reports. The
discount rates used (18.25%) are pre-tax and reflect specific risks relating to the relevant CGU.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow
projections based on the 2016 financial year budget. Cash flows beyond the budget period are extrapolated using the growth
rates stated above. The growth rate does not exceed the long term average growth rate for the business in which the CGU
operates.
Goodwill
Goodwill represents goodwill acquired by the Group upon the acquisition of the John Cootes Furniture business by JCF
Management Pty Limited on 11 July 2014.
Impairment test for goodwill
Goodwill is allocated to the CGU's identified. All of the goodwill carried at 30 June 2015 is attributable to the Group's
investment in the John Cootes Furniture business.
The Directors have deemed there should be no impairment to the carrying value of goodwill due to the calculated recoverable
amount of the goodwill being in excess of the carrying value.
The recoverable amount of the goodwill is based on value in use calculated on a net present value basis.
The period over which management has projected the CGU cash flows is based upon a 5 year operating forecast. The
average growth rates used (6%) are consistent with forecasts included in industry reports. The discount rates used (18.25%)
are pre-tax and reflect specific risks relating to the relevant CGU.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow
projections based on the 2016 financial year budget. Cash flows beyond the budget period are extrapolated using the growth
rates stated above. The growth rate does not exceed the long term average growth rate for the business in which the CGU
operates.
52
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
15.
Goodwill and intangible assets (continued)
Sensitivity
Management recognises that the calculation of recoverable amount can vary based on the assumptions used to project or
discount cash flows and that changes to key assumptions can result in recoverable amounts falling below carrying amounts.
In relation to the CGUs above, the recoverable amounts are well in excess of the carrying amount associated with each
segment.
The Directors consider that the growth rates are appropriate, and that there is sufficient headroom such that a change in any
of the other key assumptions would not cause the CGUs’ carrying amount to exceed their recoverable amount.
16.
Provisions
Current
Provision for annual leave
Provision for long service leave
Provision for ESOP
Total current
Non-current
Provision for annual leave
Provision for long service leave
Total non-current
Total provisions
17.
Other current liabilities
Advance deposits
18.
Payables
Trade Creditors
Related party payables
Accrued Expenses
GST Payable
Tax payable
Total payables
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
615
138
71
824
248
653
901
1,725
Consolidated
Group
30 June
2015
$'000
1,148
1,148
Consolidated
Group
30 June
2015
$'000
1,265
-
2,148
570
267
4,250
-
-
37
37
-
-
-
37
EIF Group
30 June
2015
$'000
-
-
EIF Group
30 June
2015
$'000
-
171
236
170
-
577
53
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
19.
Interest bearing liabilities
Current
Bank loan - term debt
Borrowing Costs less amortisation
Loan from the Company (1)
Total current
Non-current
Bank loan - term debt
Borrowing Costs less amortisation
Total non-current
Total interest bearing liabilities
Consolidated
Group
30 June
2015
$'000
8,559
(18)
-
8,541
22,396
(218)
22,178
30,719
EIF Group
30 June
2015
$'000
8,559
(18)
4,052
12,593
20,000
(163)
19,837
32,430
(1) The Loan from the Company to the Trust was created as a result of the Company loaning an amount of the proceeds of the Placement in December 2014 to
the Trust for the acquisition of its share of the Bell City Fund. The loan is at call, with the current interest rate at 4.34% p.a.
The term debt is secured by registered mortgages over all freehold property and registered security interests over all present
and after acquired property of key Group companies. The terms of the debt also impose certain covenants on the Group
including Loan to Value ratio and Interest Cover covenants. The Group is currently meeting all its covenants.
Credit facilities
As at 30 June 2015, the Group had unrestricted access to the following credit facilities:
A$ trade credit facility
Amount used
Amount unused
Working Capital facility
Amount used
Amount unused
Term debt facility
Amount used
Amount unused
Total facility
Total amount used
Total amount unused
Consolidated Group
Consolidated
Group
30 June
2015
$'000
500
(396)
104
5,000
(2,000)
3,000
28,559
(28,559)
-
34,059
(30,955)
3,104
EIF Group
30 June
2015
$'000
-
-
-
5,000
(2,000)
3,000
28,559
(28,559)
-
33,559
(30,559)
3,000
The Group has access to a $34.1m facility, upon which both the Company and the Trust can draw. The drawn amount at 30
June 2015 of $8.6m of the AUD facility will mature on 30 September 2015 and $25m will mature on 11 July 2017. At 30 June
2015, the amount of drawn facilities is hedged to 32%.
All of the facilities have a variable interest rate. As detailed in Note 24, the interest rates on the loans are partially fixed using
interest rate swaps. The weighted average annual interest rates payable of the loans at 30 June 2015, including the impact of
the interest rate swaps, is 4.12% per annum.
54
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
19.
Interest bearing liabilities (continued)
EIF Group
The EIF Group has access to a $33.6m facility, upon which both the Company and the Trust can draw. The drawn amount at
30 June 2015 of $8.6m of the AUD facility will mature on 30 September 2015 and $25m will mature on 11 July 2017. At 30
June 2015, the amount of drawn facilities is hedged to 33%.
All of the facilities have a variable interest rate. As detailed in Note 24, the interest rates on the loans are partially fixed using
interest rate swaps. The weighted average annual interest rates payable of the loans at 30 June 2015, including the impact of
the interest rate swaps, is 4.12% per annum.
20.
Contributed equity
No. of
securities/
shares
60,800,000
9,120,000
724,752
70,644,752
Details
Date of
income
entitlement
Note
10 Jul 2014
Initial Public Offering (IPO)
Issue costs paid (net of tax)
Placement
Issue costs paid (net of tax)
Security Purchase Plan
Issue costs paid (net of tax)
Securities/shares on issue 30 Jun 2015
30 Dec 2014
9 Dec 2014
(i)
(ii)
(ii)
Total
Equity
30 June
2015
$'000
76,000
(2,146)
12,586
(346)
1,000
(45)
87,049
Consolidated
Group
30 June
2015
$'000
36,489
(888)
5,690
(127)
452
(27)
41,589
EIF Group
30 June
2015
$'000
39,511
(1,258)
6,896
(219)
548
(18)
45,460
(i)
Initial Public Offering (IPO)
On 10 July 2014, the Group completed an Initial Public Offering (IPO) of securities on the Australian Securities Exchange,
whereby all of the share capital of Elanor Investors Limited and all of the units in the Elanor Investment Fund were stapled
together and commenced trading. At allotment, 60,800,000 stapled securities were issued to the public, at a price of $1.25
per stapled security, raising $76m, before issue costs.
(ii)
Placement and Security Purchase Plan
On 9 December 2014 and 30 December 2014 the Group issued stapled securities under a Placement and a Security
Purchase Plan respectively to fund the acquisition of a co-investment in the Bell City Fund.
Securities issued under the Placement and the Share Purchase Plan rank equally with existing securities.
55
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
21.
Reserves
Asset revaluation reserve
Opening balance
Revaluation
Transfer to retained profits - realised items
Equity Accounted Investment Revaluation Reserve
Closing balance
Cash flow hedge reserve
Opening balance
Revaluation
Transfer to retained profits - realised items
Closing balance
Stapled security-based payment reserve
Opening balance
Loan Securities and Option expense
Closing balance
Total reserves
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
-
10,805
-
450
11,255
-
(172)
-
(172)
-
260
260
11,343
-
-
-
450
450
-
(172)
-
(172)
-
136
136
414
The asset revaluation reserve is used to record increments and decrements on the revaluation of property, plant and
equipment.
The cash flow hedge reserve is used to recognise increments and decrements in the fair value of cash flow hedges.
At IPO, as part of the Group's Deferred Short Term Incentive (DSTI) and Long Term Incentive (LTIP) remuneration plans, the
Group issued 6.4 million unquoted Loan Security Awards and 1.6 million Options to certain management and other personnel
within the Group as part of their remuneration arrangements. Please refer to Note 30 for more information. Upon vesting, the
Group issues stapled securities to those personnel.
The stapled security-based payment reserve is used to recognise the fair value of loan securities and options issued to
employees but not yet exercised under the Group's DSTI and LTIP.
22.
Retained profits / (Accumulated losses)
Opening balance
Profit / (loss) for the period
Available for distribution
Transfer from asset revaluation reserve
Distributions paid
Closing balance
Consolidated
Group
30 June
2015
$'000
-
2,720
2,720
-
(3,675)
(955)
EIF Group
30 June
2015
$'000
-
15,061
15,061
-
(3,051)
12,010
The final distribution of 6.70 cents per stapled security for the year ended 30 June 2015 totalling $4.7m had not been declared
at year end. This will be paid on or before 11 September 2015.
Distributions paid exceeded profit for the year as a result of the first year IPO costs. Distributions are paid out of Core
Earnings as calculated in the Directors' report.
56
Elanor Annual Report 2015
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Annual Financial Report continued
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Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24.
Financial risk management
The Group's principal financial instruments comprise cash, receivables, financial assets carried at fair value through profit
and loss, interest bearing loans, derivatives, payables and distributions payable.
The Group's activities are exposed to a variety of financial risks: market risk (including interest rate risk and equity price
risk), credit risk and liquidity risk.
This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk and the Group's management of capital. Further quantitative disclosures are
included through these consolidated financial statements.
The Group's Board of Directors (Board) has overall responsilibility for the establishment and oversight of the Group's risk
management framework. The Board has established an Audit & Risk Committee (ARC), which is responsible for
monitoring the identification and management of key risks to the business. The ARC meets regularly and reports to the
Board on its activities.
The Board has established Treasury Guidelines outlining principles for overall risk management and policies covering
specific areas, such as mitigating foreign exchange, interest rate and liquidity risks.
The Group's Treasury Guidelines provide a framework for managing the financial risks of the Group with a key philosophy
of risk mitigation. Derivatives are exclusively used for hedging purposes, not as trading or other speculative instruments.
The Group uses derivative financial instruments such as interest rate swaps where possible to hedge certain risk
exposures.
The Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate risk, ageing analysis for credit risk and cash flow forecasting for liquidity
risk.
There have been no other significant changes in the types of financial risks or the Group's risk management program
(including methods used to measure the risks).
a)
Market risk
Market risk refers to the potential for changes in the value of the Group's financial instruments or revenue streams from
changes in market prices. There are various types of market risks to which the Group is exposed incuding those
associated with interest rates, currency rates and equity market price.
Interest rate risk
(i)
Interest rate risk refers to the potential fluctuations in the fair value or future cash flows of a financial instrument because
of changes in market interest rates.
As at reporting date, the Consolidated Group had the following interest bearing assets and liabilities:
Consolidated Group
30 June 2015
Assets
Cash and cash equivalents
Total Assets
Weighted average interest rate
Liabilities
Interest bearing loans
Derivative financial instruments
Total Liabilities
Weighted average interest rate
interest rate
Floating Fixed interest
Maturity
< 1 yr
$'000
$'000
Fixed interest Fixed interest
Maturity
> 5 yrs
$'000
Maturity
1 - 5 yrs
$'000
7,488
7,488
20,955
172
21,127
-
-
-
-
-
-
-
10,000
-
10,000
-
-
-
-
-
Total
$'000
-
7,488
7,488
4.12%
30,955
172
31,127
4.12%
59
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24.
Financial risk management (continued)
As at reporting date, the EIF Group had the following interest bearing assets and liabilities:
EIF Group
30 June 2015
Assets
Cash and cash equivalents
Total Assets
Weighted average interest rate
Liabilities
Interest bearing loans
Derivative financial instruments
Total Liabilities
Weighted average interest rate
Interest Rate Sensitivity
interest rate
Floating Fixed interest
Maturity
< 1 yr
$'000
$'000
Fixed interest Fixed interest
Maturity
> 5 yrs
$'000
Maturity
1 - 5 yrs
$'000
3,437
3,437
22,611
172
22,783
-
-
-
-
-
-
-
10,000
-
10,000
-
-
-
-
-
Total
$'000
-
3,437
3,437
4.12%
32,611
172
32,783
4.12%
At reporting date if Australian interest rates had been 1% higher/lower and all other variables were held constant, the
impact on the Group in relation to cash and cash equivalents, derivatives, interest bearing loans and the Group's profit
and equity would be:
Consolidated Group
30 June 2015
Cash and cash equivalents
Derivative financial instruments
Interest bearing loans
Total increase / (decrease)
EIF Group
30 June 2015
Cash and cash equivalents
Derivative financial instruments
Interest bearing loans
Total increase / (decrease)
Carrying
Amount
$'000
7,488
172
30,955
38,615
Carrying
Amount
$'000
3,437
172
32,611
36,220
Increase by 1%
Decrease by 1%
Profit
$'000
75
-
(210)
(135)
Equity
Profit
Equity
$'000
$'000
$'000
-
10
-
10
(75)
-
210
135
-
(10)
-
(10)
Increase by 1%
Decrease by 1%
Profit
$'000
34
-
(226)
(192)
Equity
Profit
Equity
$'000
$'000
$'000
-
10
-
10
(34)
-
226
192
-
(10)
-
(10)
60
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24.
Financial risk management (continued)
Credit risk
b)
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The Group manages credit risk on receivables by performing credit reviews of prospective debtors, obtaining collateral
where appropriate and performing detailed reviews on any debtor arrears. Credit risk on derivatives is managed through
limiting transactions to investment grade counterparties.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at
the reporting date was:
Cash and other cash equivalents
Trade and other receivables
Total
Consolidated
Group
30 June
2015
$'000
7,488
3,355
10,843
EIF Group
30 June
2015
$'000
3,437
753
4,190
Where entities have a right of set-off and intend to settle on a net basis under netting arrangements, this set-off has been
recognised in the consolidated financial statements on a net basis. Details of the Group's contingent liabilities are
disclosed in Note 28.
Trade and other receivables consist of GST, distributions and other receivables. At balance date 38% of the Group's
receivables were due from Australian tax authories in respect of GST.
The EIF Group is exposed to credit risk with respect to the letter of loan subordination from the Company (see Note 1(a)),
in respect of the Company's non-requirement of the repayment of the loan.
At balance date there were no other significant concentrations of credit risk.
No allowance has been recognised for the GST and distribution receivable from the taxation authorities and related parties
respectively. Based on historical experience, there is no evidence of default from these counterparties which would
indicate that an allowance was necessary.
Impairment losses
The ageing of trade and other receivables at reporting date is detailed below:
Current
Past due 31-60 days
Past due 61+ days
Total
Consolidated
Group
30 June
2015
$'000
EIF Group
30 June
2015
$'000
431
2,167
757
3,355
753
-
-
753
61
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24.
Financial risk management (continued)
Liquidity risk
c)
The Group manages liquidity risk by maintaining sufficient cash including working capital and other reserves, as well as
through securing appropriate committed credit facilities.
The following are the undiscounted contractual cash flows of derivatives and non derivative financial liabilities shown at
their nominal amount.
Consolidated Group
30 June 2015
Derivative financial
liabilities
Derivatives
Non derivative financial
liabilities
Payables
Interest bearing loans
Current tax liabilities
Total
EIF Group
30 June 2015
Derivative financial
liabilities
Derivatives
Non derivative financial
liabilities
Payables
Interest bearing loans
Current tax liabilities
Total
Less than
1 year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
More than
5 years
$'000
Contractual
cash flows
$'000
Carrying
amount
$'000
86
86
5,385
9,835
837
16,143
901
923
485
2,395
-
-
23,319
-
23,319
-
-
-
-
-
-
-
-
-
-
172
6,286
34,077
1,322
41,857
Less than
1 year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
More than
5 years
$'000
Contractual
cash flows
$'000
Carrying
amount
$'000
86
86
236
13,955
170
14,447
-
824
-
910
-
-
20,824
-
20,824
-
-
-
-
-
-
-
-
-
-
172
236
35,603
170
36,181
Capital risk management
d)
The Group maintains its capital structure with the objective to safeguard its ability to continue as a going concern, to
increase the returns for Securityholders and to maintain an optimal capital structure. The capital structure of the Group
consists of equity as listed in Note 20.
The Group assesses its capital management approach as a key part of the Group's overall strategy and it is continuously
reviewed by management and the Directors.
To achieve the optimal capital structure, the Board may use the following strategies: amend the distribution policy of the
Group; issue new securities through a private or public placement; activate the Distribution Reinvestment Plan (DRP);
issue securities under a Security Purchase Plan (SPP); conduct an on-market buyback of securities; acquire debt; or
dispose of investment properties.
62
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24.
Financial risk management (continued)
Australian Financial Services License
The Responsible Entity is licensed as an Australian Financial Services Licensee.
Under licence condition 9. the Responsible Entity must:
(a)
(b)
(c)
be able to pay its debts as and when they become due and payable; and
show in its most recent statement of financial position lodged with ASIC that its total (adjusted) assets exceed total
(adjusted) liabilities; and
have no reason to suspect that its total (adjusted) assets would not exceed total (adjusted) liabilities on a current
statement of financial position; and
(d)
meet the cash needs requirements by complying with Option 1
Under licence condition 10, the Responsible Entity must maintain net tangible assets (NTA) of not less than the greater of:
(a)
(b)
$150,000; or
0.5% of the value of Scheme Assets; or
(c)
10% of Average Responsible Entity revenue.
The Responsible Entity must also maintain Cash or Cash Equivalents of the greater of $150,000 or 50% of the required
NTA as well as Liquid Assets of greater than the required NTA.
The Responsible Entity had at all times a cash flow projection of at least 12 months, with assumptions, showing its ability
to meet debts as and when they fall due.
The Responsible Entity has not reported to ASIC any breaches of its financial requirements under its Australian Financial
Services Licence.
25.
Fair value measurement
The Group recognises the following assets and liabillities at fair value on a recurring basis:
* Investment Properties
* Property, plant and equipment
* Financial assets and liabilities carried at fair value through profit and loss or reserves
(a)
Fair value hierarchy
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy.
a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
b)
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly (Level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
c)
63
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
25.
Fair value measurement (continued)
The following table presents the Consolidated Group's assets and liabilities measured and recognised at fair value at 30
June 2015 on a recurring basis:
Consolidated Group
June 2015
Assets measured at fair value
Investment properties
Property, plant and equipment
Derivatives
Total assets
Liabilities measured at fair value
Derivatives
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
86,048
-
86,048
-
86,048
-
86,048
(172)
(172)
-
-
(172)
(172)
The following table presents the EIF Group's assets and liabilities measured and recognised at fair value at 30 June 2015
on a recurring basis:
EIF Group
June 2015
Assets measured at fair value
Investment properties
Property, plant and equipment
Derivatives
Total assets
Liabilities measured at fair value
Derivatives
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
-
72,908
72,908
-
72,908
-
-
72,908
(172)
(172)
-
-
(172)
(172)
(b)
Reconciliation of movements in fair value of level 3 assets and liabilities
Consolidated Group
Opening balance
Additions
Depreciation
Fair value gains / (losses)
Disposals
Closing balance
Property, plant and
equipment
(Level 3)
$'000
Investment
properties
(Level 3)
$'000
79,865
(2,303)
8,486
-
86,048
-
-
-
-
-
Total
$'000
-
79,865
(2,303)
8,486
-
86,048
64
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
25.
Fair value measurement (continued)
EIF Group
Opening balance
Additions
Fair value gains / (losses)
Disposals
Closing balance
Property, plant and
equipment
(Level 3)
$'000
-
-
-
-
-
Investment
properties
(Level 3)
$'000
-
63,205
9,703
-
72,908
Total
$'000
-
63,205
9,703
-
72,908
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June
2015.
(c)
Valuation techniques used to derive Level 2 and Level 3 fair values
Financial Instruments
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. These valuation techniques maximise the use of observable market data where it
is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This
is not applicable for the Group or the EIF Group.
Specific valuation techniques used to value financial instruments include:
-
-
The use of quoted market prices or dealer quotes for similar instruments;
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves; and
All of the resulting fair value estimates of financial instruments are included in level 2. There are no level 3 financial
instruments in either the Group or the EIF Group.
Property Assets
The aim of the valuation process is to ensure that assets are held at fair value and that the Group is compliant with
applicable Australian Accounting Standards, regulations, and the Trust's Constitution and Compliance Plan.
All properties are required to be internally valued every six months with the exception of those independently valued
during that six month period. The internal valuations are performed by utilising the information from a combination of
asset plans and forecasting tools perpared by the asset management team. Appropriate capitalisation rate, terminal yield
and discount rates based on comparable market evidence and recent external valuation parameters are used to produce
a capitalisation based valuation and a discounted cash flow valuation.
The internal valuations are reviewed by the Chief Operating Officer who recommends each property's valuation to the
Audit, Risk & Compliance Committee and the Board in accordance with the Group's internal valuation protocol.
The Group's valuation policy requires that each property in the portfolio is valued by an independent valuer at least every
three years. In practice, properties may be valued more frequently than every three years primarily where there may have
been a material movement in the market and where there is a significant variation betwen the carrying value and the
internal valuation.
Independent valuations are performed by independent and external valuers who hold a recognised relevant professional
qualification and have specialised expertise in the types of investment properties valued.
65
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
25.
Fair value measurement (continued)
Valuation technique and inputs
The key inputs used to measure fair values of investment properties are disclosed below along with their sensitivity to an
increase or decrease.
The investment properties fair values presented are based on market values, which are derived using the capitalisation
and the discounted cashflow methods. The Group's preferred or primary method is the capitalisation method.
Capitalisation method
Capitalisation rate (or cap rate) is an approximation of the ratio between the net operating income produced by an
investment property and its fair value. This excludes consideration of costs of acquisition or disposal. The net income is
capitalised in perpetuity from the valuation date at an appropriate investment yield. The adopted percentage rate
investment yield reflects the capitalisation rate (cap rate) and includes consideration of the property type, location,
comparable sales and whether the property is subject to vacant possession (in the case of hotel properties).
Discounted cash flows (DCF)
Under the DCF method, a property's fair value is estimated using explicit assumptions regarding the benefits and liabilities
of ownership over the asset's life including an exit or terminal value. The DCF method involves the projection of a series of
cash flows on a real property interest. To this projected cash flow series, an appropriate discount rate is applied to
establish the present value of the income stream associated with the property. The discount rate is the rate of return used
to convert a monetary sum, payable or receivable in the future, into present value. The rate is determined with regards to
market evidence and the prior independent valuation.
All property investments are categorised as level 3 in the fair value hierarchy. There were no transfers between the
hierarchies during the period.
The significant unobservable inputs associated with the valuation of the Group's property, plant and equipment are as
follows:
Consolidated Group
Book Value
30 June
2015
$'000
Assets measured at fair value
Property, plant and equipment
Total assets
86,048
86,048
Capitalisation Rate
%
Discount Rate
%
9.00% - 23.00%
9.00% - 13.00%
The significant unobservable inputs associated with the valuation of the Group's investment properties are as follows:
EIF Group
Assets measured at fair value
Investment properties
Total assets
Book Value
30 June
2015
$'000
72,908
72,908
Capitalisation Rate
%
Discount Rate
%
9.00% - 23.00%
9.00% - 13.00%
66
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
25.
Fair value measurement (continued)
Sensitivity Information
The key unobservable inputs to measure fair value of investment properties are disclosed below along with sensitivity to a
significant increase or decrease set out in the following table:
Fair value measurement sensitivity to significant increase in input
Fair value measurement sensitivity to significant decrease in input
Decrease
Increase
Capitalisation Rate
%
Discount Rate
%
Decrease
Increase
Sensitivity Analysis
When calculating the income capitalisation approach, the net property income has a strong inter-relationship with the
adopted capitalisation rate given the methodology involves assessing the total income receivable from the property and
capitalising this in perpetuity to derive a capital value. In theory, an increase in the income and an increase (softening) in
the adopted capitalisation rate could potentially offset the impact to the fair value. The same can be said for a decrease in
the income and a decrease (tightening) in the adopted capitalisation rate. A directionally opposite change in the income
and the adopted capitalisation rate could potentially magnify the impact to the fair value.
When assessing a discounted cash flow, the adopted discount rate and adopted terminal yield have a strong
interrelationship in deriving a fair value given the discount rate will determine the rate at which the terminal value is
discounted to the present value. The impact on the fair value of an increase (softening) in the adopted discount rate could
potentially offset the impact of a decrease (tightening) in the adopted terminal yield. The same can be said for a decrease
(tightening) in the adopted discount rate and an increase (softening) in the adopted terminal yield. A directionally similar
change in the adopted discount rate and adopted terminal yield could potentially magnify the impact to the fair value.
67
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
26.
Net tangible assets
Net tangible assets are calculated as follows:
Total assets
Less: Intangible assets
Less: Total liabilities
Net tangible assets
Total number of stapled securities on issue
Net tangible asset backing per stapled security / unit
27.
Segment information
Business segments
The Group is organised into the following divisions by business type:
Funds Management
Consolidated EIF Group
Group
30 June
2015
$'000
30 June
2015
$'000
135,650
(7,820)
(38,213)
91,100
-
(33,216)
89,617
57,884
70,645
1.27
70,645
0.82
The Funds Management division manages third party owned investment funds and syndicates. As at 30 June 2015, the Funds
Management division has approximately $346m of external investments under management, being the Managed Investments;
Hotels, Tourism and Leisure
Hotel, Tourism and Leisure originates investment and fund management assets. The current investment portfolio includes
Peppers Cradle Mountain Lodge, Featherdale Wildlife Park, Ibis Styles Canberra Eaglehawk Hotel, Mantra Wollongong Hotel
and Ibis Styles Albany Hotel along with co-investment in 193 Clarence Hotel syndicate and four Bell City syndicates. Hotel,
Tourism and Leisure also manages these syndicates;
Real Estate
Real Estate originates investment and fund management assets. The current investment portfolio comprises an investment in
Auburn Central syndicate. Real Estate manages Manning Mall, Griffin Plaza, Super A Mart Auburn, John Cootes Diversified
Property and Auburn Central syndicates; and
Special Situation Investments
Special Situations Investments contains the John Cootes Furniture business and the property associated with John Cootes
Furniture business at Merrylands, NSW.
The main income statement items used by management to assess each of the divisions are divisional revenue and divisional
EBITDA. In addition, depreciation and amortisation are analysed by division. Each of these income statement items is looked
at after adjusting for transaction and establishment costs, amortisation of intangible assets and impairment of goodwill.
68
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
27.
Segment information (continued)
Consolidated Group - 30 June 2015
Revenue from trading activities
Revenue from wildlife parks
Share of profit of equity accounted
investments
Operating expense
Divisional EBITDA
Depreciation and amortisation
Divisional EBIT
Funds
Management
$'000
4,902
-
-
(424)
4,478
(150)
4,328
Hotels,
Tourism
& Leisure
$'000
22,614
10,170
87
(23,803)
9,068
(2,211)
6,857
Real
Estate
$'000
Special
Situation
Investments
$'000
-
-
-
-
6
6
6
19,653
-
-
(17,810)
1,843
(58)
1,785
Transaction and establishment costs not included in divisional EBIT
Amortisation of Borrowing Costs
Borrowing costs
Unallocated
Corporate
Total
$'000
748
-
-
(4,153)
(3,405)
(34)
(3,439)
(4,843)
(138)
(1,259)
(577)
$'000
47,917
10,170
93
(46,190)
11,990
(2,453)
9,537
(4,843)
(138)
(1,259)
(577)
Net tax benefit / (expense)
Profit/(loss) for the year
Total assets
Total liabilities
EIF Group - 30 June 2015
4,328
4,565
326
6,857
103,455
3,762
6
620
-
1,785
24,685
2,699
(10,256)
2,720
2,325
135,650
31,426
38,213
Funds
Management
$'000
Hotels,
Tourism
& Leisure
$'000
Real
Estate
$'000
Special
Situation
Investment
$'000
Revenue from trading activities
Share of profit of equity accounted
investments
Operating expense
Divisional EBITDA
Depreciation and amortisation
Divisional EBIT
-
-
-
-
-
-
8,132
87
(10)
8,209
-
8,209
-
-
-
6
6
6
Transaction and establishment costs not included in divisional EBIT
Fair value adjustment on revaluation of investment property
Responsible Entity management fee expense
Amortisation of Borrowing Costs
Borrowing costs
Profit/(loss) for the year
Total assets
Total liabilities
-
-
-
8,209
76,616
222
6
620
-
28.
Contingent liabilities and commitments
-
-
-
-
-
-
-
-
-
Unallocated
Corporate
$'000
27
(200)
(173)
-
(173)
(1,297)
9,703
(130)
(113)
(1,144)
6,846
13,864
32,994
Total
$'000
8,159
93
(210)
8,042
-
8,042
(1,297)
9,703
(130)
(113)
(1,144)
15,061
91,100
33,216
Unless otherwise disclosed in the financial statements, there are no material contingent liabilities and commitments.
69
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
29.
Related party disclosures
Initial Public Offering (IPO)
On 11 July 2014 the Group completed its Initial Public Offering of securities on the Australian Securities Exchange. The IPO
involved a number of related party transactions with Moss Capital Pty Limited, of which Glenn Willis and William (Bill) Moss AO
are directors and shareholders.
Other than as disclosed elsewhere, the Group discloses the following related party transactions for the period to 30 June 2015.
Moss Capital received the following payments and fees out of the proceeds of the IPO, reflecting its role in managing the
acquired trusts and the managed funds prior to acquisition by the Group at IPO, as well as other IPO related costs:
-
-
-
-
A funds management rights fee of $1.5 million (plus GST) paid by Elanor Funds Management Limited as consideration for
the funds management rights of the Managed Investments and the third party owned investment funds and syndicates
under a Management Rights Deed;
An acquisition fee of $285,000 (plus GST) paid on completion of the purchase of John Cootes Furniture and Wiltex
Wholesale Pty Limited (the owner of the Merrylands Property) to be paid by Elanor Investors Limited;
An establishment and acquisition fee of $265,600 (plus GST) paid on completion of the acquisition of Hotel Ibis Styles
Canberra Eaglehawk payable out of the assets of the Eaglehawk Fund; and
The repayment of the loan of $885,000 from Moss Capital which was used to fund the deposit for the acquisition of Hotel
Ibis Styles Eaglehawk.
Elanor Investors Group
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the Group. The
Group's securities are traded on the Australian Securities Exchange (ASX: ENN), having listed on 11 July 2014. The units of
the Trust and shares of the Company cannot be traded separately and can only be traded as stapled securities. Although there
is no ownership interest between the Trust and the Company, the Company is deemed to be the parent entity of the Group
under Australian Accounting Standards.
Elanor Funds Management Limited (EFML) is the Responsible Entity of the Elanor Investment Fund (EIF) (and a wholly owned
subsidiary of Elanor Investors Limited).
Responsible Entity fees
In accordance with the Constitution of Elanor Investment Fund (EIF), EFML is entitled to receive a management fee equal to its
reasonable costs in providing its services as Responsible Entity for which it is not otherwise reimbursed. For the year ending
30 June 2015, this amount is $130,000.
EFML makes payments for EIF from time to time. These payments are incurred by EFML in properly performing or exercising
its powers or duties in relation to EIF. EFML has a right of indemnity from EIF, for any liability incurred by EFML in properly
performing or exercising any of its powers or duties in relation to EIF. The amount reimbursed for the year ending 30 June
2015 was Nil.
EFML acted as Trustee and Manager and/or Custodian of a number of unregistered managed investment schemes, including
schemes where the Group also held an investment. EFML is entitled to fee income, as set out in the Constitution of each
scheme, including management fees, acquisition fees, equity raise fees and peformance fees. EFML is also entitled to be
reimbursed from each Scheme for costs incurred in properly performing or exercising any of its powers or duites in relation to
each Scheme.
70
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
29.
Related party disclosures (continued)
A summary of the fee income earned and expenses recovered during the year from these managed investment schemes is
provided below:
A summary of the fee income earned and expenses recovered during the year from these managed investment schemes is
provided below:
Manning Mall Syndicate
Griffin Plaza Syndicate
Super A Mart Auburn Syndicate
John Cootes Diversified Property Syndicate
193 Clarence Hotel Syndicate
Bell City Syndicates
Auburn Central Syndicate
Dee Why Syndicate
Marsden Park Syndicate
Total
Consolidated EIF Group
Group
30 June
2015
$'000
966
512
13
132
500
1,989
990
4
10
5,116
30 June
2015
$'000
-
-
-
-
-
-
-
-
-
-
Key Management Personnel (KMP)
The KMP of the Elanor Investors Group for the year ended 30 June 2015 were:
Executive
Mr Glenn Willis
Mr Paul Siviour
Ms Marianne Ossovani
Mr Symon Simmons
Non Executive
Mr Paul Bedbrook
Mr Nigel Ampherlaw
Mr William (Bill) Moss AO
Position
Managing Director and Chief Executive Officer
Chief Operating Officer (commenced 8 September 2014)
Chief Investment Officer and Head of Hotels, Tourism and Leisure
Chief Financial Officer and Company Secretary
Position
Independent Chairman and Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
The agggregate compensation made to the Key Management Personnel of the Group is set out below:
Short term benefits
Post employment benefits
Share-based payment
Total
30 June
2015
$
1,166,786
105,645
252,896
1,525,327
Details of the remuneration of the KMP's is provided in the Remuneration Report.
30.
Share-based payments
The Group has short term and long term ownership-based compensation schemes for executives and senior employees.
The Group has implemented an STI scheme (the STI Scheme), based on an annual profit share, which is available to all staff.
The STI Scheme is based on a profit share pool, to be calculated each year based on the Group's financial performance for the
relevant year.
The purpose of the STI Scheme is to provide an annual bonus arrangement that incentivises and rewards management for
achieving annual pre-tax ROE for Securityholders in excess of 10% per annum. The profit share pool is based on 20% of ROE
above 10%, 22.5% of the ROE above 15%, 25% of the ROE above 17.5% and 30% of the ROE above 20%. The Scheme
provides that 50% of any awards to individuals from the profit share pool be delivered in deferred securities, which vest two
years after award, provided that the employee remains with the Group and maintains minimum performance standards.
71
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Share-based payments (continued)
30.
The Elanor Investors Group Board monitors the appropriateness of the profit share scheme and any distribution of the profit
share pool will be at the Board's discretion, taking into consideration the forecast and actual financial performance and position
of the Group
The Group has implemented an LTI scheme (the LTI Scheme), based on an executive loan security plan and an executive
options plan.
Under the executive loan security plan awards (comprising the loan of funds to eligible Elanor employees to acquire Securities
which are subject to vesting conditions) have been issued to certain employees. Awards totalling 6.4 million Securities have
been made.
The limited recourse loan provided by the Group under the loan security plan carries interest of an amount equal to any cash
dividend or distribution but not including any dividend or distribution of capital, or an abnormal distribution.
In addition to the loan security plan, the Group has implemented an executive option plan comprising rights to acquire
Securities at a specified exercise price, subject to the achievement of vesting conditions, which may be offered to certain
eligible employees (including the Chief Executive Officer, direct reports to the Chief Executive Officer and other selected key
executives) as determined by the Board. Options have been issued to the Chief Executive Officer only, over 1.6 million
Securities.
The purpose of the LTI Scheme is to assist in attracting, motivating and retaining key management and employees. The LTI
Scheme operates by providing key management and employees with the opportunity to participate in the future performance of
Group Securities. The vesting conditions for the LTI plans and related awards include both a service based hurdle and an
absolute total security holder return (TSR) performance hurdle. The service based hurdle is 3 years in the case of both plans.
The TSR is 10% per annum in the case of the loan security plan and 15% per annum in the case of the options plan. The
option plan has an exercise price of $1.80 per security (44% premium to the $1.25 offer price at the time of the IPO).
TSR was selected as the LTI performance measure to ensure an alignment between the Securityholder return and reward for
executives.
The following share-based payment arrangements were in existence during the current reporting period:
Employee Loan Securities
Award Type
Number Granted Grant Date Vesting Date
Loan Securities
6,400,000 11/07/2014 10/07/2017
Vesting
Conditions1
Security Price
at Grant Date
Fair Value
at Grant
Date
Service & non-
market
$1.25
$0.10
Employee Options
Award Type
Number Granted Grant Date Vesting Date
Options
1,600,000 11/07/2014 10/07/2017
Vesting
Conditions1
Exercise Price
Fair Value
at Grant
Date2
Service & non-
market
$1.80
$0.03
1. Services and non-market conditions include financial and non-financial targets along with a deferred vesting period
2. Fair Value of Options granted is calculated at the grant date using a binomial pricing model
The Group recognises the fair value at the grant date of equity settled securities above as an employee benefit expense
proportionally over the vesting period with a corresponding increase in equity. Fair value of options is measured at grant date
using a Monte-Carlo Simulation and Binomial option pricing model, performed by an independent valuer, and models the future
price of the Group's stapled securities.
72
Elanor Annual Report 2015 ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
30.
Share-based payments (continued)
The total expense recognised during the year in relation to the Group's equity settled share-based payments was $260,000.
Key inputs to the pricing models include:
Volatility
Dividend Yield
Risk-free Interest Rate
25%
9%
3%
31.
Events occurring after reporting date
Subsequent to the period end, a distribution of 6.70 cents per stapled security has been declared by the Board of Directors.
The total distribution amount of $4.7m will be paid on or before 11 September 2015 in respect of the year ended 30 June 2015.
On 27 July 2015 the John Cootes Furniture warehouse in Orchardleigh Street, Yennora sustained major damage as a result of
a fire. The entire contents of the building, primarily stock and plant and equipment of the John Cootes Furniture business was
destroyed and the building was unable to be recovered. The warehouse building is owned by the John Cootes Diversified
Property Syndicate, a managed investment scheme managed by the Group. The property is fully insured, and the required
business interruption insurances are also in place. The Group is actively working with the insurers in relation to the claims,
however, the financial impact of the fire is yet to be determined. The insurers have provided a progress payment of $2.5m in
respect of the loss of stock, plant and equipment and business interruption. Operationally, the John Cootes Furniture business
has obtained temporary warehouse facilities which is both receiving stock and delivering that stock to our customers.
Significant re-ordering of stock has also occurred.
Other than the event disclosed above, the directors are not aware of any other matter or circumstance not otherwise dealt with
in the financial reports or the Directors' Report that has significantly affected or may significantly affect the operations of the
Group, the results of those operations or the state of affairs of the Group in financial period subsequent to the year ended 30
June 2015.
32.
Notes to the consolidated statements of cash flows
Reconciliation of profit after income tax to net cash flows from operating activities
Profit/(Loss) for the period
Depreciation and amortisation of non-current assets
Amortisation of borrowing costs
Fair value adjustment on revaluation of investment property
Net unrealised revenue from Equity Investments
Other non cash items
Transaction and IPO costs through P&L
Net cash provided by operating activities before changes in asset and liabilities
Movement in working capital
Decrease / (increase) in trade and other receivables
Decrease / (increase) in stock
Increase / (decrease) in prepayments
Decrease / (increase) in deferred tax
Increase / (decrease) in current tax liability
Increase / (decrease) in trade and other payables
Increase / (decrease) in other liabilities
Increase / (decrease) in other provision
Net cash from operating activities after changes in assets and liabilities
Consolidated EIF Group
Group
30 June
2015
$'000
2,720
2,453
139
-
(93)
331
4,980
10,530
(2,712)
(1,347)
(387)
378
198
(640)
226
336
6,582
30 June
2015
$'000
15,061
-
113
(10,805)
(93)
174
2,398
6,848
(97)
-
(24)
-
-
29
-
37
6,793
73
Annual Financial Report continued
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
33.
Commitments
Lease commitments: Elanor Group as lessee
The Elanor Group has non-cancellable leases in respect of premises. The lease is for a duration of between 1 to 5 years and is
classified as an operating lease. The minimum lease payments are as follows:
Within one year
Later than one year but not later than 5 years
Consolidated EIF Group
Group
30 June
2015
$'000
1,987
13,195
15,182
30 June
2015
$'000
-
-
-
In the opinion of the Directors of the Elanor Group, there were no other commitments at the end of the reporting period.
34.
Parent entity
Financial Position
Current assets
Non - current assets
Total Assets
Current liabilities
Non - current liabilities
Total Liabilities
Contributed Equity
Reserves
Retained profits / (accumulated losses)
Total Equity
Financial performance
Profit / (loss) for the period
Other comprehensive income for the period
Total comprehensive income for the period
Elanor
Investors
Limited 1
30 June
2015
$'000
9,138
35,508
44,646
Elanor
Investment
Fund 2
30 June
2015
$'000
796
76,173
76,969
4,427
(55)
4,372
41,589
124
(1,439)
40,274
6,564
28,464
35,028
45,460
(36)
(3,484)
41,940
(816)
-
(816)
(432)
(172)
(604)
The directors of the Elanor Funds Management Limited, in its capacity as Responsible Entity of EIF Group, have received a
letter of loan subordination from the Company indicating that it confirms its intention to not require repayment of the loan owed
by EIF Group of $4.1m to enable EIF Group to continue as a going concern and meet its financial obligations as and when they
fall due, for at least 12 months from the date of signing of the Group’s financial statements for the year ended 30 June 2015.
EIF Group’s current liabilities exceeded its current assets by $9.1m as at 30 June 2015. In addition, the Group is in advanced
discussions to extend its facility of $8.6m, which matures on 30 September 2015. Please refer to Note 19 for further details.
1. Elanor Investors Limited is the parent entity of the Consolidated Group.
2. Elanor Investment Fund is the parent entity of the EIF Group
74
Elanor Annual Report 2015
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
35.
Subsidiaries
Details of the Group's material subsidiaries at the end of the reporting period are as follows:
Elanor Investors Limited
Name of
Subsidiary
Principal activity
Place of
incorporation
and operation
Proportion of
ownership interest
and voting power
by the Group
30 June
2015
Elanor Funds Management Limited
Responsible entity
Elanor Operations Pty Limited
Operational services
Elanor Investment Nominees Pty
Limited
Trustee services
Elanor Management Pty Limited
Holding company
Featherdale Management Pty Limited Wildlife park operator
Wollongong Hotel Management Pty
Limited
Hotel operator
Eaglehawk Hotel Management Pty
Limited
Hotel operator
Cradle Mountain Lodge Management
Pty Limited
Hotel operator
JCF Management Pty Limited
Furniture retailer
Wiltex Wholesale Pty Limited
Landholder
Albany Hotel Management Pty Limited Hotel operator
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Elanor Investors Limited is the head entity within the tax-consolidated group. The companies listed above are members of the
tax-consolidated group.
Elanor Investment Fund
Name of
Subsidiary
Principal activity
Place of
incorporation
and operation
Elanor Investment Trust
Co-investment in Managed Funds
Australia
Featherdale Wildlife Park Syndicate
Wildlife Park landholder
Wollongong Hotel Syndicate
Hotel landholder
Eaglehawk Syndicate
Hotel landholder
Cradle Mountain Lodge Syndicate
Hotel landholder
Albany Hotel Syndicate
Hotel landholder
Australia
Australia
Australia
Australia
Australia
Proportion of
ownership interest
and voting power
by the Group
30 June
2015
100%
100%
100%
100%
100%
100%
75
Annual Financial Report continued
ELANOR INVESTORS GROUP
DIRECTORS' DECLARATION TO STAPLED SECURITY HOLDERS
In the opinion of the Directors of Elanor Investors Limited and Elanor Funds Management Limited as responsible entity
for the Elanor Investment Fund:
(a)
the financial statements and notes set out on pages 25 to 75 are in accordance with the Corporations Act 2001
(Cth) , including:
(i)
(ii)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
giving a true and fair view of the Group's and EIF's financial position as at 30 June 2015 and of their
performance, for the financial year ended on that date; and
(b)
(c)
(d)
there are reasonable grounds to believe that the Group and EIF will be able to pay their debts as and when they
become due and payable.
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by Section 295A of the Corporations Act 2001 (Cth) .
This declaration is made in accordance with a resolution of the Boards of Directors in accordance with Section 295(5)
of the Corporations Act 2001 (Cth).
Glenn Willis
CEO and Managing Director
Sydney
27 August 2015
76
Elanor Annual Report 2015 Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to Stapled Security
Holders of Elanor Investors Limited and Elanor
Investment Fund
We have audited the accompanying financial report of Elanor Investors Limited, and the accompanying
financial report of Elanor Investment Fund, which comprise the consolidated statements of financial position
as at 30 June 2015, the consolidated statements of comprehensive income, the consolidated statements of cash
flows and the consolidated statements of changes in equity for the year ended on that date, notes comprising a
summary of significant accounting policies and other explanatory information, and the directors’ declaration
of the consolidated entity Elanor Investors Group (“the consolidated stapled entity”) and Elanor Investment
Fund as set out on pages 25 to 76. The consolidated stapled entity, as described in Note 1 to the financial
report, comprises Elanor Investors Limited and the entities it controlled at the year’s end or from time to time
during the year, including Elanor Investment Fund and its controlled entities. Elanor Investment Fund, as
described in Note 1 to the financial report, comprises Elanor Investment Fund and the entities it controlled at
the year’s end or from time to time during the year.
Directors’ Responsibility for the Financial Report
The directors of Elanor Investors Limited and Elanor Funds Management Limited, as responsible entity of
Elanor Investment Fund, 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.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report
that gives a true and fair view, 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 entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
77
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of Elanor Investors Limited and Elanor Funds Management Limited, as responsible entity of
Elanor Investment Fund, would be in the same terms if given to the directors as at the time of this auditor’s
report.
Opinion
In our opinion, the financial report of Elanor Investors Limited and Elanor Investment Fund is in accordance
with the Corporations Act 2001, including:
(a) giving a true and fair view of the consolidated entities’ financial positions as at 30 June 2015 and of their
performance for the year ended on that date; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
DELOITTE TOUCHE TOHMATSU
AG Collinson
Partner
Chartered Accountants
Sydney, 27 August 2015
78
Elanor Annual Report 2015
Remuneration Report
79
Remuneration Report
(Audited)
The remuneration report for the year ended 30 June 2015 outlines the remuneration arrangements, philosophy and
framework of the Elanor Investors Group (Group) in accordance with the requirements of the Corporations Act 2001 (Cth) and
its regulations.
The remuneration report is set out under the following main headings:
(a). Remuneration Policy and Approach;
(b). Key Management Personnel
(c). Executive Remuneration Arrangements
(d). Executive Remuneration Outcomes
(e). Non-Executive Director Remuneration Arrangements and Outcomes
(f). Additional Disclosures Relating to Long Term Incentive Plans and Securities
(g). Loans to Key Management Personnel
(h). Other Transactions and Balances with Key Management Personnel and their Related Parties
The information provided in the remuneration report has been audited as required by section 308 (3C) of the Corporations Act
2001 (Cth).
A. Remuneration Policy and Approach
The Elanor Investors Group aims to attract, retain and motivate highly skilled people and therefore ensures its remuneration
is competitive with prevailing employment market conditions and also provides sufficient motivation by ensuring that
remuneration is aligned to the Group’s results.
The Group’s remuneration framework seeks to align executive reward with the achievement of strategic objectives and in
particular, the creation of sustainable value and earnings growth for investors. In addition, the Board seeks to have reference to
market best practice to ensure that executive remuneration remains competitive, fair and reasonable.
The Group has a formally constituted Remuneration and Nomination Committee which comprises three Non-Executive Director
(NED) members, Mr William Moss AO (Chair), Mr Paul Bedbrook and Mr Nigel Ampherlaw. The Remuneration and Nomination
Committee meets at least annually for the purposes of reviewing and making recommendations to the Elanor Investors Group
Board on the level of remuneration of the senior executives and the Directors.
Specifically, the Board approves the remuneration arrangements of the Managing Director and other executives and all
aggregate and individual awards made under the short term (STI) and long term incentive (LTI) plans, following recommendations
from the Remuneration and Nomination Committee. The Board also sets the aggregate remuneration of NEDs, which is then
subject to securityholder approval.
When the Remuneration and Nomination Committee meets the Managing Director is not present during any discussions related
to his own remuneration arrangements.
The Remuneration and Nomination Committee endeavours to ensure that the remuneration outcomes strike an appropriate
balance between the interests of the Group’s Securityholders, and rewarding, retaining and motivating the Group’s executives
and the Directors.
Further information on the Remuneration and Nomination Committee’s role and responsibilities can be viewed at
www.elanorinvestors.com.
B. Key Management Personnel
The remuneration report details the remuneration arrangements for Key Management Personnel (KMP), who are defined as
those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly
or indirectly, including the directors (whether executive or otherwise). The KMP of the Elanor Investors Group for the year ended
30 June 2015 were:
Executive
Mr Glenn Willis
Mr Paul Siviour
Ms Marianne Ossovani
Position
Managing Director and Chief Executive Officer
Chief Operating Officer (Commenced 8 September 2014)
Head of Hotel, Tourism and Leisure to 31 December 2014.
Chief Investment Officer and Head of Hotel, Tourism and Leisure from 1 January 2015.
Mr Symon Simmons
Chief Financial Officer and Company Secretary
Non Executive
Mr Paul Bedbrook
Position
Independent Chairman and Non-Executive Director
Mr Nigel Ampherlaw
Independent Non-Executive Director
Mr William (Bill) Moss AO
Non-Executive Director
80
Elanor Annual Report 2015 C. Executive Remuneration Arrangements
The Group’s executive remuneration framework has three components:
• Base pay, including superannuation;
• Short term incentives; and
• Long term incentives.
Remuneration levels are considered annually through an assessment of each executive based on the individual’s performance
and achievements during the financial year and taking into account the overall performance of the Elanor Investors Group and
prevailing remuneration rates of executives in similar positions.
Remuneration Structure
Base pay, including superannuation
Base pay is determined by reference to appropriate benchmark information, taking into account an individual’s responsibilities,
performance, qualifications and experience. There are no guaranteed base pay increases in any executive’s contracts.
Short term incentive
The Group has implemented an STI scheme (the STI Scheme), based on an annual profit share, which is available to all staff.
The STI Scheme is based on a profit share pool, to be calculated each year based on the Group’s financial performance for the
relevant year.
The purpose of the STI Scheme is to provide an annual bonus arrangement that incentivises and rewards management for
achieving annual pre-tax ROE for Securityholders in excess of 10% per annum. The profit share pool is based on 20% of ROE
above 10%, 22.5% of the ROE above 15%, 25% of the ROE above 17.5% and 30% of the ROE above 20%. The STI Scheme
provides that 50% of any awards to individuals from the profit share pool be delivered in deferred securities, which vest
two years after award, provided that the employee remains with the Group and maintains minimum performance standards.
The Elanor Investors Group Board monitors the appropriateness of the profit share scheme and any distribution of the profit
share pool will be at the Board’s discretion, taking into consideration the forecast and actual financial performance and position
of the Group.
Long term incentive
The Group has implemented an LTI scheme (the LTI Scheme), based on an executive loan security plan and an executive
options plan.
Under the executive loan security plan awards (comprising the loan of funds to eligible Elanor employees to acquire Securities
which are subject to vesting conditions) have been issued to certain employees. Awards totalling 6.4 million Securities have
been made.
The limited recourse loan provided by the Group under the loan security plan carries interest of an amount equal to any cash
dividend or distribution but not including any dividend or distribution of capital, or an abnormal distribution.
In addition to the loan security plan, the Group has implemented an executive option plan comprising rights to acquire
Securities at a specified exercise price, subject to the achievement of vesting conditions, which may be offered to certain eligible
employees (including the Chief Executive Officer, direct reports to the Chief Executive Officer and other selected key executives)
as determined by the Board. Options have been issued to the Chief Executive Officer only, over 1.6 million Securities.
The purpose of the LTI Scheme is to assist in attracting, motivating and retaining key management and employees. The LTI
Scheme operates by providing key management and employees with the opportunity to participate in the future performance
of Group Securities. The vesting conditions for the LTI plans and related awards include both a service based hurdle and an
absolute total security holder return (TSR) performance hurdle. The service based hurdle is 3 years in the case of both plans.
The TSR is 10% per annum in the case of the loan security plan and 15% per annum in the case of the options plan. The option
plan has an exercise price of $1.80 per security (44% premium to the $1.25 offer price at the time of the IPO).
TSR was selected as the LTI performance measure to ensure an alignment between the Securityholder return and reward
for executives.
81
Remuneration Report continued
D. Executive Remuneration Outcomes
The table below sets out summary information about the Group’s earnings and movements in shareholder wealth for the year
ended 30 June 2015:
Revenue
Net profit before tax
Net profit after tax
Core earnings
Security price at start of year1
Security price at end of year
Interim distribution
Final distribution
Total distributions
Basic earnings per security
Diluted earnings per security
Year Ended
30 June 2015 ($’000)
$58,180
$3,297
$2,720
$9,344
$1.25
$1.70
5.20 cents
6.70 cents
11.90 cents
4.10 cents
3.74 cents
Prospectus
($’000)
$56,743
$1,064
$664
$7,864
$1.25
-
-
-
11.70 cents
1.09 cents
0.99 cents
1. The Group listed on 11 July 2014. This was the issue price at listing.
The financial performance measure driving STI payment outcomes is pre-tax return on equity (ROE). Reported earnings before
tax for the year were $3.3 million or $2.7 million after tax and after adjusting for transaction, establishment costs and fair value
decrements. This reflects a 4.1 cents basic earnings per security based on average equity employed for the period.
For the year ended 30 June 2015 the Group achieved Core Earnings of $9.3 million against forecast Core Earnings of $7.9 million
as per the Prospectus dated 16 June 2014. Total distributions per security in respect of the period were 11.90 cents against
forecast distributions of 11.70 cents as per the Prospectus dated 16 June 2014.
The Group’s closing trading price on 30 June 2015 was $1.70 per security up from the $1.25 issue price at listing on 11 July 2014.
STI payments made or owing to executives for the year were $nil.
No LTI securities vested to executives during the year.
Table 1: Remuneration of Key Management Personnel
Short-term
employee benefits
Post
employment
benefits
Long-term
employee
benefits
Share-based payments
s
u
n
o
B
h
s
a
C
I
T
S
$
0
0
0
0
y
r
a
t
e
n
o
M
-
n
o
N
$
0
0
0
0
l
y
r
a
a
S
$
354,211
244,859
298,958
220,356
1
r
e
h
t
O
$
r
e
p
u
S
$
12,994
9,856
24,973
579
18,269
39,696
18,269
29,411
e
c
i
v
r
e
S
g
n
o
L
$
e
v
a
e
L
0
0
0
0
2
s
t
n
e
m
y
a
P
n
a
o
L
I
T
L
y
t
i
r
u
c
e
S
$
115,960
39,295
45,556
11,596
2015
Executive Officers
G. Willis
P. Siviour3
M. Ossovani
S. Simmons
d
e
r
r
e
f
e
D
I
T
S
$
y
t
i
r
u
c
e
S
2
s
t
n
e
m
y
a
P
n
o
i
t
p
O
I
T
L
$
0
0
0
0
17,333
0
0
0
Total
$
518,767
333,706
387,756
261,942
1. Includes other short-term employee benefits including annual leave and other short-term compensated absences.
2. The value of the loan securities and options granted to key management personnel as part of their remuneration is calculated as at the grant date using a binomial
pricing model. The amounts disclosed as part of remuneration for the financial year have been determined by allocating the grant date value on a straight-line basis
over the period from grant date to vesting date.
3. Paul Siviour commenced employment with Elanor Investors Group on 8 September 2014.
82
Elanor Annual Report 2015
Table 2: Remuneration components as a proportion of total remuneration on an annualised basis
Fixed remuneration Remuneration linked to performance
2015
Executive Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
(%)
74.17
89.91
88.48
95.95
(%)
25.83
10.09
11.52
4.05
Total
(%)
100.00
100.00
100.00
100.00
No key management personnel appointed during the period received a payment as part of his or her consideration for agreeing
to hold the position.
Remuneration and other terms of employment for the key management personnel are formalised in employment contracts.
The key provisions of the employment contracts for key management personal are set out below.
Table 3: Employment contracts of key management personnel
Executive
Position
G. Willis
P. Siviour
M. Ossovani
S. Simmons
Managing Director and
Chief Executive Officer
Chief Operating Officer Chief Investment
Officer and Head
of Hotels, Tourism
and Leisure
Chief Financial
Officer and
Company Secretary
Term
No fixed term
No fixed term
No fixed term
No fixed term
Salary (including
Superannuation)
Incentive
remuneration
Benefits
Termination
$382,750
$350,000
$350,000
$275,000
Eligible for an award
of short term and
long term incentive
remuneration (if any)
as described above.
Eligible for an award
of short term and
long term incentive
remuneration (if any)
as described above.
Eligible for an award
of short term and
long term incentive
remuneration (if any)
as described above.
Eligible for an award
of short term and
long term incentive
remuneration (if any)
as described above.
Entitled to participate in
Elanor Investors Group
benefit plans that are
made available.
Entitled to participate in
Elanor Investors Group
benefit plans that are
made available.
Entitled to participate in
Elanor Investors Group
benefit plans that are
made available.
Entitled to participate in
Elanor Investors Group
benefit plans that are
made available.
Employment shall
continue with the
Group unless either
party gives 12 month’s
notice in writing.
Employment shall
continue with the
Group unless either
party gives 9 month’s
notice in writing.
Employment shall
continue with the
Group unless either
party gives 4 weeks
notice in writing.
Employment shall
continue with the
Group unless either
party gives 4 weeks
notice in writing.
Restraint
12 months from the
time of Termination.
N/A
N/A
N/A
E. Non-Executive Director Remuneration Arrangements and Outcomes
The Elanor Board determines the remuneration structure for NEDs based on recommendations from the Remuneration and
Nomination Committee. The NEDs individual fees are annually reviewed by the Remuneration and Nomination Committee taking
into consideration the level of fees paid to NEDs by companies of similar size and stature.
The NEDs receive a fixed remuneration amount, in respect of their services provided to the Responsible Entity and Elanor
Investors Limited. They do not receive any performance based remuneration or any retirement benefits other than
statutory superannuation.
83
Remuneration Report continued
Table 4: Remuneration of Non-Executive Directors
2015
Non-Executive Directors
P. Bedbrook
N. Ampherlaw
W. Moss
Salary (including
Superannuation)
Committee Fees
Total (including
Superannuation)
$
100,000
55,000
55,000
$
10,000
10,000
10,000
$
110,000
65,000
65,000
Remuneration and other terms of appointment of the NEDs are formalised in contracts.
The NEDs are employed on employment contracts with no fixed term. The NEDs employment is subject to the Constitutions of
the Group, the Corporations Act, and the 3 year cycle of the rotation and election of Directors.
F. Additional Disclosures Relating to Long Term Incentive Plans and Securities
Details of Long Term Incentive Plan payments granted as Loan Security compensation to key management personnel during the
current financial year:
During the financial year
Name
G. Willis
P. Siviour
M. Ossovani
S. Simmons
Award Type
Number
Granted
Number
Vested
Loan Securities
2,800,000
Loan Securities
1,100,000
Loan Securities
1,100,000
Loan Securities
280,000
0
0
0
0
% of
Grant
Vested
0%
0%
0%
0%
Number
Forfeited
% of Grant
Forfeited
0
0
0
0
N/A
N/A
N/A
N/A
% of the actual
compensation for
the year consisting
of awards
22%
12%
12%
4%
The Loan Security plan has been accounted for as ‘in-substance’ options. The fair value at grant date of each Loan Security
option was $0.10.
Details of Long Term Incentive Plan payments granted as Option compensation to key management personnel during the
current financial year:
Award Type
Number
Granted
Number
Vested
During the financial year
% of
Grant
Vested
Number
Forfeited
% of Grant
Forfeited
% of the actual
compensation for
the year consisting
of awards
Options
1,600,000
0
0%
0
N/A
3%
Name
G. Willis
The following table summarises the value of options granted and exercised during the financial year, in relation to options
granted to key management personnel as part of the remuneration:
Value of options granted at the grant date1
Value of options exercised at the exercise date2
Name
G. Willis
$
52,000
$
0
1. The value of options granted during the financial year is calculated as at the grant date using a binomial pricing model. This grant date value is allocated to
remuneration of key management personnel on a straight-line basis over the period from grant date to vesting date.
2. The value of options exercised during the financial year is calculated as at the exercise date using a binomial pricing model. No options were exercised in the
period to 30 June 2015.
84
Elanor Annual Report 2015 254,847
159,694
4,620,051
1,200,002
300,000
0
36,232
Options
vested
during
the year
Key management personnel equity holdings
Changes to the interests of key management personnel in the Group’s Securities are set out below:
Elanor Investors Group – Stapled Securities
Name
Opening Balance
Acquired
Disposed
Closing Balance
Non-Executive Directors
P. Bedbrook
N. Ampherlaw
W. Moss AO
Executive Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
0
0
0
0
0
0
0
254,847
159,694
4,620,051
1,200,002
300,000
0
36,232
0
0
0
0
0
0
0
Options over Elanor Investors Group – Stapled Securities
Acquired
under the
Group’s
incentive
plans
Opening
Balance
Exercised
Closing
Balance
Balance
vested at
Closing
Vested
but not
exercisable
Vested and
exercisable
Name
G. Willis
0
1,600,000
0
1,600,000
0
0
0
0
All options issued to key management personnel were made in accordance with the provisions of the employee share
option plan.
During the financial year, no options were exercised by key management personnel.
G. Loans to Key Management Personnel
No loans have been provided to Key Management Personnel of the Group.
H. Other Transactions and Balances with Key Management Personnel and their Related Parties
On 11 July 2014 the Group completed its Initial Public Offering (IPO) of securities on the Australian Securities Exchange. The IPO
involved a number of related party transactions with Moss Capital Pty Limited, of which Glenn Willis and William (Bill) Moss AO
are directors and shareholders.
Moss Capital received the following payments and fees out of the proceeds of the IPO, reflecting its role in managing the
acquired trusts and the managed funds prior to acquisition by the Group at IPO, as well as other IPO related costs:
• A funds management rights fee of $1.5 million payable by Elanor Funds Management Limited as consideration for the
funds management rights of the Managed Investments and the third party owned investment funds and syndicates under a
Management Rights Deed;
• An acquisition fee of $285,000 (plus GST) paid on completion of the purchase of John Cootes Furniture and Wiltex Wholesale
Pty Limited (the owner of the Merrylands Property) by Elanor Investors Limited;
• An establishment and acquisition fee of $265,600 (plus GST) paid on completion of the acquisition of Hotel Ibis Styles
Canberra Eaglehawk payable out of the assets of the Eaglehawk Fund; and
• The repayment of the loan of $885,000 from Moss Capital which was used to fund the deposit for the acquisition of Hotel Ibis
Styles Eaglehawk.
This report is made in accordance with a resolution of the Directors.
Glenn Willis
Managing Director and Chief Executive Officer
85
Remuneration Report continued
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to Stapled Security
Holders of Elanor Investors Limited and Elanor
Investment Fund
We have audited the accompanying remuneration report of Elanor Investors Group comprising Elanor
Investors Limited and Elanor Investment Fund and their controlled entities for the year ended 30 June
2015 as set out on pages 80 to 85.
Director’s Responsibility for the remuneration report
The directors of Elanor Investors Limited and Elanor Funds Management Limited, as responsible
entity of Elanor Investment Fund, are responsible for the preparation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. The directors’ responsibility also
includes such internal control as the directors determine is necessary to enable the preparation of the
remuneration report that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the remuneration report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those standards require that
we comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the remuneration report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the remuneration report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the remuneration report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the remuneration report, 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 entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
86
Elanor Annual Report 2015
Opinion
In our opinion, the financial information in the remuneration report of Elanor Investors Group for the
year ended 30 June 2015 is prepared, in all material respects, in accordance with section 300A of the
Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
AG Collinson
Partner
Chartered Accountants
Sydney, 22 September 2015
87
Corporate
Governance
Statement
88
Elanor Annual Report 2015 Corporate Governance Statement
This statement has been approved by the Board of Directors of Elanor Funds Management Limited (Responsible Entity or
Manager), as responsible entity of the Elanor Investment Fund and Elanor Investors Limited (Company) and prepared as at
30 June 2015.
Elanor Investors Group (Group) comprises the Company and its controlled entities, including Elanor Investment Fund (Trust) and
its controlled entities. The units of the Trust and the shares of the Company are combined and issued as stapled securities in
the Group.
Principle 1 – Lay solid foundations for management and oversight
Board Charter
The Directors of the Group have adopted a Board Charter that sets out the respective roles and responsibilities of the Board
and senior executives. The Board is accountable to securityholders for the performance of the Group. A copy of the Board
Charter is available at www.elanorinvestors.com.
Specifically, the Board is responsible for:
• Developing and approving the corporate strategy and monitoring implementation of strategy.
• Evaluating, approving and monitoring the strategic and financial plans of the Group.
• Evaluating, approving and monitoring the annual budgets (including financial and other reporting) and business plans.
• Evaluating, approving and monitoring the progress of major capital expenditure, capital management and all major corporate
transactions, including the issue of securities of the Group.
• Appointing, monitoring and managing the performance of the Chief Executive Officer and Senior Executives as decided from
time to time.
• Reviewing, ratifying and monitoring the Group’s risk and audit framework, (including but not limited to) systems of risk
management and internal control.
• Reviewing, ratifying and monitoring the Group’s operations in relation to, and compliance with relevant regulatory and
legal requirements.
The Board Charter separately sets out the responsibilities of the Chair.
The Board Charter also sets out the role and responsibilities of the Chief Executive Officer and the roles and responsibilities of
management more broadly.
The Chief Executive Officer has primary responsibility to the Board for the affairs of the Group including:
• Developing with the Board, implementing and monitoring the strategic and financial plans for the Group, its policies, the
annual budgets and business plans, major capital expenditure, capital management and all major corporate transactions,
including the issue of any securities of the Group.
• Managing the appointment of senior executive positions.
• Developing, implementing and monitoring the Group’s risk and audit management framework.
• Providing strong leadership to, and effective management of, the Group.
The Board will ordinarily meet not less than 11 times each year in the ordinary course of business, with additional meetings held
as required. The Board met 11 times during the period from listing to 30 June 2015 and each Director’s attendance at those
meetings is set out in the Director’s Report included in this Annual Report.
Directors’ Information
In considering any selection, appointment or re-appointment to the Board, the Board considers the necessary and desirable
competencies of any Directors or proposed Directors.
The Board ensures that the Group undertakes appropriate checks before appointing a person, or putting forward to
securityholders a candidate for election, as a Director. The Board will ensure that the Group provides securityholders all material
information in its possession relevant to a decision on whether or not to elect or re-elect a Director.
Agreements with Directors and Key Management Personnel
Each Director enters into an agreement with the Company setting out the Terms and Conditions of their appointment including
their roles and responsibilities.
Each of the Key Management Personnel enters into a Service Agreement which sets out their position description, duties
and responsibilities, reporting lines, remuneration entitlements, ongoing confidentiality, obligation to comply with all
corporate policies, the circumstances in which their service may be terminated (with or without notice) and any entitlements
on termination.
89
Corporate Governance Statement continued
Details on the remuneration of Directors and Key Management Personnel are set out in the Remuneration Report for the period
ended 30 June 2015 included in this Annual Report.
Company Secretary
In accordance with the Board Charter, the Company Secretary is appointed and if necessary removed by the Board and is
therefore accountable directly to the Board on all matters to do with the proper functioning of the Board. Each Director also has
direct access to the Company Secretary.
The Company Secretary’s role includes:
• Advising the Board and its committees on governance matters.
• Monitoring that board and committee policy and procedures are followed.
• Co-ordinating the timely completion and despatch of Board and committee papers.
• Ensuring that the business at Board and committee meetings is accurately captured in the minutes.
• Helping to organise and facilitate the induction and professional development of Directors.
Diversity Policy
The Board has adopted a Diversity Policy that aims to promote diversity across the Group through a number of strategies
and initiatives.
A copy of the Diversity Policy is available at www.elanorinvestors.com.
At this stage of the Group’s development, specific measurable objectives for achieving gender diversity have not been established.
Set out below is a summary of female participation rates across the Group as at 30 June 2015.
2015
Board of Directors
Key Management Personnel
All Employees
Female
0%
25%
53%
Male
100%
75%
47%
Director, Board and Committee Evaluation
The Board Charter requires that the Board undertake an ongoing self assessment and review of the performance of the Board,
Committees and individual Directors annually. The process for conducting Board and Director evaluations is similar to that
adopted for the review of the Chief Executive Officer and is conducted in a confidential manner by the Chair of the Board.
Key Management Personnel Performance Evaluation
The Group’s goals are used as the basis for evaluating performance of Key Management Personnel. Performance evaluations
are undertaken annually, in June, by the Chief Executive Officer. The Chief Executive Officer’s performance evaluation is also
undertaken annually, by the Board.
Principle 2 – Structure the board to add value
Remuneration and Nomination Committee
The Directors have established a Remuneration and Nomination Committee. A copy of the Remuneration and Nomination
Committee Charter is available at www.elanorinvestors.com.
The Remuneration and Nomination Committee has three members. Two members are independent non-executive directors
(Paul Bedbrook (Chairman of the Board) and Nigel Ampherlaw) and one member is a non-independent non-executive director
(William (Bill) Moss AO). The Committee is chaired by William (Bill) Moss AO.
The Remuneration and Nomination Committee is not chaired by an independent director. The Board, having regard to the
Group’s stage of development as a listed entity and the collective experience and expertise of the members of the Remuneration
and Nomination Committee as well as there being a majority of independent directors, considers the current composition of the
Remuneration and Nomination Committee is appropriate.
During the period from listing to 30 June 2015 the Remuneration and Nomination Committee formally met once with all
members attending.
90
Elanor Annual Report 2015 The Remuneration and Nomination Committee is responsible for:
• Supporting and advising the Board in fulfilling its responsibilities to securityholders and employees of the Group, by
endeavouring to ensure that the directors and senior executives of the Group are remunerated fairly and appropriately.
• Reviewing and advising the Board on the composition of the Board and its Committees and the necessary and desirable
competencies of Board members.
• Developing a process for the evaluation of the performance of the Board, its Committees and individual executive and
non-executive directors.
• Ensuring that proper succession plans are in place for consideration by the Board.
• Advising the Board on governance standards and appropriate corporate governance policies for the Group.
• Critically reviewing the Group’s performance against its corporate governance policies.
• Supporting and advising the Board to fulfil its obligations in relation to safety and sustainability.
Board Skills and Competencies
The skills, experience and expertise relevant to the position of each Director are set out in the Directors’ Report included in
this Annual Report. The Remuneration and Nomination Committee considers the matrix of skills of the Directors standing on
the Board at least annually to identify gaps in their skills that may be addressed through professional development or by the
appointment of additional directors.
The Board comprises a diverse range of skills and understanding gained by Directors from their decades of experience in the
financial services, asset management, investment banking and property sectors. This expertise is supported by appropriate
accounting, banking & finance and risk management skills.
Director Independence
The Board recognises that independent directors are important in assuring investors that the Board is properly fulfilling its role
and is diligent in holding management accountable for its performance.
As at 30 June 2015, the Board comprises four directors, two of whom are independent. The Chair of the Board is an independent
director and does not occupy a joint position as Chief Executive Officer. Importantly, the Chair has the casting vote. Each
Independent Director was appointed in June 2014.
The Independent Directors are:
Paul Bedbrook
Nigel Ampherlaw
Independent Chair
Independent Director
As at 30 June 2015, Glenn Willis was the sole executive director on the Board having been formally appointed as Managing
Director and Chief Executive Officer in June 2014.
Mr William (Bill) Moss AO is a non-executive director of the Board.
The Board, having regard to the Group’s stage of development as a listed entity and the collective experience and expertise of
the Directors, considers that the current composition of the Board is appropriate.
The Board considers an independent director to be:
• A director who is not a substantial securityholder of the Group (being a securityholder who holds 5% or more of the issued
voting securities of the Group), or an officer of or otherwise associated directly with a substantial securityholder of the Group.
• A non-executive director who is not a member of management and who has not been employed in an executive capacity by
Elanor Investors Group in the last three years.
• A director who has not within the last three years been a principal of a material professional adviser or consultant to
the Group.
• A director who is not a material supplier, customer or other contractor of the Group nor has a material contractual
relationship with the Group other than as a director.
• A director who should not otherwise be considered by the Board to not be independent.
Details of the tenure, current position and previous offices held by each Director, which are relevant to the assessment of their
independence, are disclosed in their respective profiles, along with their interests in securities, and set out in the Directors’
Report included in this Annual Report.
Induction and Training
The Group ensures that new Directors gain an understanding of the Group (including its culture and values) and their rights,
duties and responsibilities, the roles and responsibilities of senior executives, the role of Board Committees, and meeting
arrangements and Director interaction.
91
Corporate Governance Statement continued
Directors are required to keep themselves adequately informed in respect of relevant industry and regulatory issues and changes.
The Group will provide appropriate professional development opportunities for Directors to develop and maintain the skills and
knowledge needed to perform their role as a Director effectively.
Principle 3 – Promote ethical and responsible decision-making
Code of Conduct
The Group has adopted a written Code of Conduct which applies to the Board, officers, senior executives and employees of
Elanor Investors Group. The objectives of this Code of Conduct are to ensure that high standards of corporate and individual
behaviour are observed by all those parties, including acting ethically and responsibly, in the context of their employment.
Employees, on joining, are required to confirm that they will comply with all Group policies including the Code of Conduct.
A copy of the Code of Conduct is available at www.elanorinvestors.com.
All Directors, officers, senior executives and employees of Elanor Investors Group are required to meet the following standards
of ethical behaviour:
• To conduct themselves with openness, honesty, fairness and integrity in business transactions and in dealings with others.
• To treat everyone else with whom they interact in their work with courtesy and respect.
• To act ethically in their approach to business decisions.
• To observe appropriate principles of behaviour when conducting Group business and interacting with others.
• To comply with all laws and regulations that govern the Group’s business and the policies that the Group adopts from time
to time.
• To act in compliance with all laws and regulations that apply to the Group’s business.
The Group aims to increase securityholder value within an appropriate framework which safeguards the rights and interests of
the Group’s securityholders and the community and complies with the systems of control and accountability which the Group
has in place as part of its corporate governance.
The Code of Conduct also requires that the Board, officers, senior executives and employees should request all key contractors
acting on behalf of Elanor Investors Group adhere to a similar set of ethical standards as set out in the Code of Conduct and
cease using any contractor who they consider is not adhering to an ethical standard at least as rigorous as the standard set
out above.
Confidentiality
Employees are required to safeguard confidential information of the Group by not transferring, publishing, using or disclosing
it other than when necessary in the ordinary course of business, or as specifically directed or authorised. All confidential or
proprietary information that has been entrusted to the Group by a third party is to be treated as if it was the Group’s
confidential information.
Conflicts of Interest
Employees have an obligation to seek to avoid financial, business or other relationships which might be opposed to the interests
of the Group or which may conflict with the performance of their duties.
Whistle-blowing
Elanor Investors Group has adopted a “Whistle-blower” procedure whereby employees are encouraged to report to either
their manager, a Director or the Company Secretary where they observe a serious matter not in securityholders or the public’s
interest including:
• financial malpractice, impropriety or fraud;
• unlawful activity;
•
improper conduct or unethical behaviour; and
• any breach of compliance of the Code of Conduct.
Securities Trading Policy
The Board has adopted a Securities Trading Policy. A copy of the Securities Trading Policy is available at www.elanorinvestors.com.
92
Elanor Annual Report 2015 Principle 4 – Safeguard integrity in financial reporting
Audit and Risk Committee
The Board has established an Audit and Risk Committee (the Committee) consisting of a minimum of two members with
the majority of members required to be independent directors. All members must be able to read and understand financial
statements, and at least one member, being the chairperson, must have financial expertise; that is the person must be either a
qualified accountant or other financial professional with experience of financial and accounting matters. A copy of the Audit and
Risk Committee Charter is available at www.elanorinvestors.com.
The Chair will be a non-executive independent director appointed by the Board who is not the Chair of the Board.
Any Director may attend a meeting of the Committee at any time. The Committee will meet at least twice per annum and more
often if deemed necessary. Meetings may be held by electronic means as allowed under the provisions of the Corporations
Act 2001.
The following Directors are members of the Committee.
Nigel Ampherlaw
Paul Bedbrook
Glenn Willis
Chair
Member
Member
Non-executive Independent Director
Non-executive Independent Director
Managing Director and Chief Executive Officer
The qualifications and experience of each of the members of the Committee are set out in the Directors Report included in this
Annual Report.
The Committee met four times during the period from listing to 30 June 2015 and all members attended all meetings.
The Committee does not consist only of non-executive directors. The Board, having regard to the Group’s stage of development
as a listed entity and the collective experience and expertise of the members of the Committee, considers the current
composition of the Committee is appropriate.
The primary role of the Committee is to:
• Satisfy itself that the Group has an adequate control framework for the oversight of the external audit and the internal
audit arrangements.
• Make recommendations to the Board in relation to:
-
-
-
The adequacy of the Group’s processes for identifying, measuring, monitoring and managing the material business risks
it faces.
Any incident involving fraud or other break down of the Group’s internal control policies and practices.
The Group’s insurance program.
Specifically, the Committee is responsible for:
• Reliable management and financial reporting
-
-
-
-
Assessing the adequacy of management reporting on the Group’s risks, operations, and financial condition to the Board.
Scrutinising the Group’s accounting policies and practices in the light of the Corporations Act and Australian
Accounting Standards.
Reviewing the half yearly and annual financial statements of the Group and recommending to the Board the signing of the
directors’ declaration.
Reviewing and discussing with the external auditor the quality and acceptability of the Group’s accounting principles as
applied in its financial reporting.
-
Supervising the implementation of the Australian Accounting Standards and other changes in regulatory requirements.
• Compliance with laws and regulations
-
-
Considering the plans and processes for the Group’s compliance activities.
Ensuring that the Group’s financial statements and reporting complies with the Corporations Act, accounting standards,
ASX Listing Rules and other relevant regulatory requirements.
- Monitoring the laws and the regulations that relate generally to the entity’s business operations and, review the Group’s
compliance with such laws.
-
Seeking advice of the Group’s legal advisers on any legal matters that could have significant impact on the Group’s
financial statements.
• Maintenance of an effective and efficient audit
-
-
-
Recommending to the Board the appointment of the external auditors.
Reviewing the plans of the external auditors, including any significant changes to the plans.
Reviewing the efficiency and effectiveness of the external auditors in relation to their responsibilities.
93
Corporate Governance Statement continued
Reviewing and discussing with the external auditor
professional and other significant relationships to
determine their independence.
Board has adopted a Continuous Disclosure Policy. A copy of
the Continuous Disclosure Policy is available at
www.elanorinvestors.com.
The Continuous Disclosure Policy aims to ensure that the
Group complies with the continuous disclosure requirements
contained in the Australian Stock Exchange (ASX) List
Rules (the Rules). The successful operation of the Group’s
continuous disclosure regime promotes investor confidence
by providing full, timely, accurate and relevant information
to the market about the activities of the Group and serves
to educate all relevant Group personnel on what continuous
disclosure is, and how they can ensure they meet their
individual responsibilities.
Subject to the exceptions contained in the Listing Rules, the
Group will immediately notify the market of any information
or matter related to the businesses or financial condition of
the Group which a reasonable person would expect to have
a material effect on the price or value of those securities.
Such notifications will be made by way of an announcement to
the ASX.
Reporting of Disclosable Information
The Company Secretary plays an important role in the Group’s
Continuous Disclosure Policy. The Company Secretary is the
person principally responsible for operating, overseeing and
maintaining this Policy. The Company Secretary is the liaison
between the Group’s employees and officers, its Board of
Directors, Responsible Managers and the ASX. The Company
Secretary is also responsible for co-ordinating education
within the Group about its disclosure obligations.
-
-
-
-
Reviewing the external auditor’s fees.
Ensuring there are no unjustified limitations placed
on the auditors and review any serious disputes with
management during the audits.
Ensuring the scopes of the audits are adequate,
with emphasis on matters where the Committee,
management or the auditors believe special attention
is necessary.
- Meeting with and assessing the findings of the external
auditors as well as management’s response to their
recommendations.
-
Ensuring compliance with the ASX principles of good
corporate governance related to external auditors.
• Risk management and internal control
-
-
-
In consultation with management, preparing and
regularly reviewing a risk profile which describes the
material business risks facing the Group.
Reviewing and reporting to the Board (at least annually)
on the effectiveness of the Group’s internal controls.
Reviewing and reporting to the Board (at least annually)
on the effectiveness of internal systems and processes
for identifying, managing and monitoring material
business risks, including breaches of contract or internal
controls, litigation and claims, fraud and theft and the
Group’s insurance program.
- Obtaining regular reports from management on the
occurrence and/or status of any material breaches of
internal controls or other material risk exposures.
-
-
Reviewing the scope of the external auditors’ review of
internal control and risk management, reviewing reports
on significant findings and recommendations, together
with management’s responses.
Recommending to the Board any changes to the
Group’s internal control and risk management
framework from time to time as appropriate.
Chief Executive Officer and Chief Financial
Officer Declarations
The Board has received confirmation from both the Chief
Executive Officer and Chief Financial Officer that their
declaration for both the interim and full year financial
reporting periods made in accordance with section 295A of
the Corporations Act 2001, were based upon sound system
of risk management and internal control and further that
the system is operating effectively in all material respects in
relation to financial reporting risk.
External Auditors
The external auditor is requested by the Board to attend each
AGM to answer questions about the conduct of the audit and
the preparation and contents of the Auditor’s Report.
Principle 5 – Make timely and balanced disclosure
Continuous Disclosure Policy
In order to regulate the continuous disclosure regime across
the Group in relation to any securities issued by the Group the
94
Elanor Annual Report 2015 The Company Secretary will work with the Chief Executive
Officer, and the members from time to time of any Continuous
Disclosure Committee, to determine whether any reported
information needs to be disclosed in accordance with the
Continuous Disclosure Policy.
Training and Development
Key employees are trained in the Group’s Continuous
Disclosure Policy to ensure all market sensitive information
is provided to senior executives.
Principle 6 – Respect the rights of securityholders
Corporate Governance
The Group’s website at www.elanorinvestors.com has a
corporate governance section from where all relevant
corporate governance information can be accessed, including
Board and Committee Charters and various corporate
governance policies.
Details on the Board of Directors, management team and
the Group’s operating divisions can be found in the “About”
section of the Group’s website.
Investors’ Reports
The Group prepares annual reports for investors for each
financial year ending 30 June and a half year report for the
period ending 31 December. These reports are posted on
the website. Investors may elect to receive a hard-copy of
the annual report or an email notification once they
become available.
General Meetings
The Group holds an annual general meeting (AGM) in October
or November each year. The date, time and venue of the
AGM are notified to the ASX when the annual report is lodged
with the ASX, generally in September each year. The Board of
Directors aim to choose a date, venue and time considered
convenient to the greatest number of our investors.
All notices of meetings will be accompanied by clear
explanatory notes on the items of business. A copy of any
such Notice of Meeting will be placed on the Group’s website.
Should an investor not be able to attend a general meeting
they are able to vote on the resolutions by appointing a proxy.
The proxy form included with the notice of meeting will clearly
explain how the proxy form is to be completed and submitted.
The Group has adopted a Securityholder Communications
Policy aimed at ensuring that trading in its securities takes
place in an efficient, competitive and informed market.
As previously stated, the external auditor attends each AGM
to answer questions about the conduct of the audit and the
preparation and contents of the Auditor’s Report.
The website also contains a feed from the ASX for the Group’s
security price information and a link to ASX announcements
released by the Group.
95
Corporate Governance Statement continued
Principle 7 – Recognise and manage risk
The Audit and Risk Committee has responsibility for overseeing risk management. Under the Committee Charter, the Committee is
responsible for the following functions to assist the Board in overseeing the Group’s system of risk management and internal control:
•
In consultation with management:
-
-
-
Preparing and regularly reviewing a risk profile which describes the material business risks facing the Group.
Regularly reviewing and updating the risk profile and providing copies to the Board.
Reviewing the risk profile at least annually to satisfy itself that it continues to be sound and disclose that such a review has
taken place in the Group’s annual report.
• Reviewing and reporting to the Board (at least annually) on the effectiveness of the Group’s internal controls regarding:
- Due diligence for acquisitions and other new projects.
-
-
Compliance with confidentiality obligations.
Information technology security.
• Reviewing and reporting to the Board (at least annually) on the effectiveness of internal systems and processes for identifying,
managing and monitoring material business risks, including breaches of contract or internal controls, litigation and claims,
fraud and theft and the Group’s insurance program.
• Obtaining regular reports from management on the occurrence and/or status of any material breaches of internal controls or
other material risk exposures.
• Reviewing the scope of the external auditors’ review of internal control and risk management, reviewing reports on significant
findings and recommendations, together with management’s responses.
• Recommending to the Board any changes to the Group’s internal control and risk management framework from time to time
as appropriate.
Risk Management Framework
The Group has prepared a Risk Management Framework which has been reviewed by management and the Board.
In the context of the Group’s strategy and activities, the Risk Management Framework identifies and assesses the key categories
of risk for the Group and summarises and evaluates the effectiveness of the risk control environment for each category of risk
identified for the Group.
Internal Audit
The Board has determined, having regard to the Group’s current stage of development not to establish a separate internal
audit function.
As set out above, the Committee has specific responsibilities in relation to risk management and internal control.
Safety and Sustainability
The Board has approved a recommendation from management to establish a workplace health and safety committee for the
Group as a whole. This committee will monitor the effectiveness of workplace health and safety management systems and
monitor the extent to which a safety culture exists within the Group. The work health and safety committee will formally report
to the Board.
Principle 8 – Remunerate fairly and responsibly
Remuneration and Nomination Committee
The Directors have established a Remuneration and Nomination Committee. Please refer to Principle 2 for commentary on the
structure and Charter of the Remuneration and Nomination Committee.
The role and objectives of the Remuneration and Nomination Committee include ensuring that the remuneration policies and
outcomes of the Group strike an appropriate balance between the interests of the Group’s securityholders, and rewarding and
motivating the executives and employees in order to secure the long term benefits of their performance and loyalty.
The Remuneration and Nomination Committee is responsible for reviewing and making recommendations to the Board on
the specific remuneration for the Managing Director and Chief Executive Officer and each senior executive of the Group
(including base pay, incentive payments, equity awards, termination payments and service contracts). The Remuneration and
Nomination Committee is also responsible for reviewing and establishing the level of remuneration, including superannuation,
for non-executive directors and the approval of any report on executive remuneration, which is required pursuant to any Listing
Rule or legislative requirement or which is proposed for inclusion in the Annual Report.
Further details of the Group’s remuneration policies are set out in the Remuneration Report for the period ended 30 June 2015
included in this Annual Report.
96
Elanor Annual Report 2015 Securityholder Analysis
97
Securityholder Analysis
(as at 31 August 2015)
Stapled Securities
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the Group. The Group’s
securities are traded on the Australian Securities Exchange (ASX: ENN), having listed on 11 July 2014. The units of the Trust
and shares of the Company cannot be traded separately and can only be traded as stapled securities. In accordance with the
ASX’s requirements for stapled securities, the ASX reserves the right (but without limiting its absolute discretion) to remove the
Company or the Trust or both from the ASX Official List if any of the units and the shares cease to be stapled together or any
equity securities issued by the Company or the Trust which are not stapled to equivalent securities in the other entity.
Top 20 Securityholders
Number
Securityholder
No. of Securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
RBC Investor Services Australia Nominees Pty Limited
National Nominees Limited
Aust Executor Trustees Ltd
National Nominees Limited
Citicorp Nominees Pty Limited
Armada Investments Pty Ltd
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia Nominees P/L
Boliber Pty Limited
Richjac Pty Ltd
UBS Nominees Pty Ltd
Citylight Asset Pty Ltd
J P Morgan Nominees Australia Limited
Chivan Investments Pty Ltd
Citano Pty Ltd
Armada Investments Pty Ltd
Citano Pty Ltd
8,569,320
7,837,026
6,235,524
4,028,394
3,489,008
3,488,473
2,793,125
1,306,376
1,191,194
1,107,593
888,856
800,000
800,000
623,190
604,967
593,701
590,000
516,359
500,000
467,031
%
12.13
11.09
8.83
5.70
4.94
4.94
3.95
1.85
1.69
1.57
1.26
1.13
1.13
0.88
0.86
0.84
0.84
0.73
0.71
0.66
Total
Balance of Register
Grand Total
Range Report
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
46,430,137
24,214,615
65.72
34.28
70,644,752
100.00
No. of Securities
%
No. of Holders
53,236,220
16,285,913
859,339
249,641
13,639
75.36
23.05
1.22
0.35
0.02
70,644,752
100.00
60
508
109
82
32
791
%
7.59
64.22
13.78
10.37
4.05
100.00
The total number of securityholders with an unmarketable parcel of securities was 13.
98
Elanor Annual Report 2015 Substantial Securityholder Notices Received
Securityholder
Airlie Funds Management Pty Ltd
Trustees Australia Limited as Responsible Entity for Lanyon Australian Value Fund
Discovery Asset Management Pty Ltd
No. of Securities
6,728,328
3,978,394
3,040,000
%
9.52
5.63
4.30
Voting rights
On a poll, each securityholder has, in relation to resolutions of the Trust, one vote for each dollar value of their total units held in
the Trust and in relation to resolutions of the Company, one vote for each share held in the Company.
On-Market Buy-back
There is no current on-market buy-back program in place.
99
100
Corporate Directory
Elanor Investors Group (ASX Code: ENN)
Elanor Investors Limited (ACN 169 308 187)
and Elanor Investment Fund (ARSN 169 450 926)
(Elanor Funds Management Limited (ACN 125 903 031)
is the Responsible Entity)
Level 38,
259 George Street
Sydney NSW 2000
T: +61 2 9239 8400
Directors of the Responsible Entity and
Elanor Investors Limited
Paul Bedbrook (Chair)
Glenn Willis (Managing Director and CEO)
Nigel Ampherlaw
William (Bill) Moss AO
Company Secretary of the Responsible Entity and
Elanor Investors Limited
Symon Simmons
Security Registry
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Auditors
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Custodian
The Trust Company (Australia) Limited
Level 15,
20 Bond Street,
Sydney NSW 2000
Website
www.elanorinvestors.com